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Financial Report

Full Year Financial Statement And Dividend Announcement for the Year Ended 31 December 2015

Financials Archive

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UNAUDITED FULL YEAR 2015 FINANCIAL STATEMENTS

Statements of Comprehensive Income (for the group)

Operating loss is arrived at after crediting and (charging) :



Review of Performance

Statement of comprehensive income

The following paragraphs should be read in conjunction with our statement of comprehensive income for year ended 31 December 2015.

Revenue

Overview

The Group recorded a 18.0% year-on-year ("yoy") decrease in revenue to US$103 million in FY2015. The reason for such decrease was a result of (1) the sharp decrease of "Digital Media" division, (2) the general trend of delaying "ICT" spending in matured markets, "China", "Korea", and "Malaysia" and (3) the slower growth in the expected "Indonesia" due to the economic uncertainty associated with the eventual fluctuation of its local currency.

ICT

The Group's "ICT" division decreased the revenue to US$94.8 million in FY2015 with -12.5% yoy, however, which accounts for most part (92.0%) of the Group's total revenue. While the "Services/Software" segment has also reduced at US$25.0 million associated with the decrease of "ICT Solutions" (Hardware) sales in "China", "Korea", and "Malaysia".

Digital Media & Mobile Solution Services

The Group's "Digital Media" division decreased the revenue to US$7.0 million in FY2015 with -56.3% yoy and the expected "Mobile Solution Services" could not be scaled up with -14.3% yoy. China business operation is shifting to "ICT" division and therefore the divisions of "Digital Media" and "Mobile Solution Services" shall be restructured for the overall Group's business optimization.

Revenue from "China" region declined -23.2% yoy to US$21.8 million in FY2015 mainly due to the sharp decline of "Digital Media" business partly due to the working capital issue. While "ICT" business in China increased its revenue by 28.6% yoy to US$12.6 million. As a result, China's contribution reduced to 21.2% of the Group's total revenue for FY2015.

Revenue from "Indonesia" made a moderate growth of 4.2% yoy to US$57.5 million in FY2015 supported by the demand for "Infrastructure Upgrade". Indonesia's contribution also increased to 55.8% in FY2015 of the Group's total revenue. The Group remains cautious for challenging business environment due to its capital intensive model for "Hardware" sales business.

Revenue from "Others" outside of "China" and "Indonesia" also recorded the sharp decrease of -43.7% yoy to US$23.7 million in FY2015 due to the declining "Korea" and "Malaysia" which are trying to make a rapid shift from revenue-focused capital intensive business model into higher margin service-oriented solution. As a result, revenue contribution from "Others" decreased to 23% of the Group's total revenue at US$103 million in FY2015.

Gross Margin

Gross margin declined by 0.57% to 22.24% in FY2015 due to the highly competitive "ICT" market environment in addition to the sharp decrease of revenue from higher margin divisions such as "Digital Media". The Group is going to slim down the operation of "Digital Media" due to its heavy overhead cost which resulted in loss making in China business operation.

Operating Expenses

The Group's total expenses decreased by -31.3% yoy to US$41.6 million in FY2015 mainly due to the impairment loss of US$21.5 million in FY2014 which reflected the fair value of the relevant CGU ("Cash Generating Unit").In FY2015, the "Other operating expenses" amounting US$7.1 million for the provision for bad debts and the obsolete stock in "Korea" and "Indonesia". The Group is going to streamline its resources for the overall Group's business optimization.

Loss Before Tax

The Group's loss before tax was US$18.3 million in FY2015 following the loss before tax of US$31.3 million in FY2014 as a result of (1) the downturn trend of "China", "Korea", and "Malaysia" and (2) the impact of "Other operating expenses" in FY2015 even though the Group started to streamline the business operation of China as well as other subsidiaries considering the challenging business environment.

Statement of financial position

The following paragraphs should be read in conjunction with our Statements of Financial Position as at 31 December 2015.

Total current assets decreased by US$30.9m to US$79.2m as at 31 December 2015 compared to the last year end unaudited figures. This was largely due to the net impact from:-

  • US$27.1 million decrease in cash and cash equivalents to US$10.8 million;

  • US$3.4 million decrease in pledged and structured deposits;

  • US$1.0 million increase in trade receivables to US$37.3 million;

  • US$6.0 million decrease in other receivables, deposits and prepayments to suppliers; and

  • US$7.4 million increase in inventories.

Aging of total trade receivables are as follows:-

Non-current assets were decreased by US$1.1 million to US$11.9 million as of 31 December 2015 as capital expenditure on property, plant and equipment and intangibles were less than the depreciation and amortization expenses during the year.

Total current liabilities have been also decreased by US$12.3 million to US$57.7 million as at 31 December 2015. This was due mainly to (1) a US$7.0 million decrease in "Bank loan" and "Trust Receipt loan", (2) a US$2.2 million decrease in "Other payables", and (3) a US$2.8 million decrease in "Tax payable".

As at 31 December 2015, the Group's equity attributable to shareholders decreased by US$18.8 million to US$28.5 million mainly due to the loss of US$19.2 million during FY2015.

Statement of cash flows

The following paragraphs should be read in conjunction with our Statements of Cash Flows as of 31 December 2015.

The Group utilized US$24.4 million of cash in operating activities in FY2015 compared to US$4.9 million generated in FY2014 mainly due to the following working capital requirement in FY2015. The Group had the increase of trade receivables at US$5.6 million in FY2015 compared to the decrease at US$6.9 million in FY2014 and also had the decrease in inventories by US$8.7 million compared to the increase of US$6.4 million in FY2014. The Group also paid the Income tax amounting US$4.0 million in FY2015.

The Group generated US$5.0 million of cash in investing activities for FY2015 as compared to US$2.0 million cash utilized in FY2014 mainly due to the decrease of the "Addition to intangible assets" and the "Purchase of plant and equipment" by US$4.5 million in FY2015. For FY2015, the withdrawal of deposits outweighs the spending for "Intangible assets" and "Property, plant and equipment" and caused the US$5.0 million cash generation in FY2015.

The Group had utilized the cash in financing activities amounting US$7.0 million in FY2015 compared to US$1.5 million in FY2014 due to that the "Repayment of bank loans" and "Decrease in trust receipt loans" outweighed the "New bank loan raised" much more in FY2015 compared to FY2014.

As a result of the above activities, the Group recorded a decrease in cash and cash equivalents at US$27.1 million in FY2015 compared to the increase of US$1.2 million in FY2014.

Commentary

The Group remains cautious and continues to exercise prudence in view of the slower growth and challenging ICT business environment. As such, the Group is focusing on ICT business while shifting away from capital intensive hardware systems integration business and slimming down the operation in matured markets; which may result in lower revenue from "ICT" division.

However, the Group will continue to pursue opportunities in niche markets comprising IT security solutions, managed services and cloud computing. Although these solutions are relatively lower in business volume and market opportunities, they yield higher profitability and are in line with the Group's focus to generate more recurring revenue in IT security solutions, managed services, and cloud computing in the ICT division.

The Group sees the limitation of fund as a major obstacle in order to expand the business especially in emerging markets where capital intensive hardware systems integration is the major market opportunity. Going forward, it is difficult for the Group to prospect for growth potential within the current "ICT" business division, while remaining vigilant due to the limitation of fund in undertaking projects with intensive working capital required.

Balance Sheet