[Interim Results Announcement](index=1&type=section&id=Interim%20Results%20Announcement) [Financial Summary](index=1&type=section&id=Financial%20Summary) For the six months ended June 30, 2024, the Group's total revenue decreased by 17.6% to HKD 2,623.9 million, while net profit attributable to owners significantly increased by 186.6% to HKD 36.3 million, with an interim dividend of 2 HK cents per share declared Key Financial Data for H1 2024 | Indicator | June 30, 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 2,623.9 | 3,184.6 | -17.6% | | Gross Profit | 143.4 | 229.9 | -37.6% | | Net Profit Attributable to Owners | 36.3 | 12.7 | +186.6% | | Basic Earnings Per Share (HK cents) | 7.73 | 2.68 | +188.4% | | Diluted Earnings Per Share (HK cents) | 7.72 | 2.67 | +188.4% | | Interim Dividend (HK cents per share) | 2 | 0 | N/A | [Basis of Preparation for Interim Results](index=2&type=section&id=Interim%20Results) The interim results are prepared under HKAS 34 and Listing Rules, and have been reviewed by RSM Hong Kong - The interim financial statements are prepared in accordance with **HKAS 34** and the **Listing Rules**, and have been reviewed by independent auditor **RSM Hong Kong**[2](index=2&type=chunk) [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the Group reported revenue of HKD 2,623,869 thousand, gross profit of HKD 143,419 thousand, and profit attributable to owners of HKD 36,326 thousand Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (Summary) | Indicator | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Revenue | 2,623,869 | 3,184,637 | | Gross Profit | 143,419 | 229,876 | | Profit Before Tax | 45,229 | 28,378 | | Profit for the Period | 36,917 | 21,116 | | Profit Attributable to Owners of the Company | 36,326 | 12,674 | | Total Comprehensive Income for the Period | 32,089 | 13,030 | [Condensed Consolidated Statement of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the Group reported total non-current assets of HKD 344,736 thousand, total current assets of HKD 1,576,976 thousand, and equity attributable to owners of HKD 912,463 thousand Condensed Consolidated Statement of Financial Position (Summary) | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Total Non-Current Assets | 344,736 | 339,972 | | Total Current Assets | 1,576,976 | 1,400,325 | | Total Current Liabilities | 1,001,628 | 830,417 | | Net Assets | 912,661 | 904,413 | | Equity Attributable to Owners of the Company | 912,463 | 904,738 | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Preparation](index=7&type=section&id=1.%20Basis%20of%20Preparation) The condensed consolidated financial statements are prepared under HKAS 34 and Listing Rules, consistent with 2023 annual accounting policies - The interim statements are prepared in accordance with **HKAS 34** and the **Listing Rules**, with accounting policies consistent with the 2023 annual report[7](index=7&type=chunk) [2. New and Revised Hong Kong Financial Reporting Standards](index=7&type=section&id=2.%20New%20and%20Revised%20Hong%20Kong%20Financial%20Reporting%20Standards) The Group adopted new and revised HKFRS standards on January 1, 2024, with no significant impact on loan classification, and anticipates future HKFRS 18 amendments will alter financial performance presentation - The Group adopted several new and revised standards on **January 1, 2024**, including amendments to **HKAS 1**, **HK(IFRIC)-Int 5 (Revised)**, and **HKAS 7/HKFRS 7**, without resulting in changes to loan classification or retrospective adjustments[8](index=8&type=chunk) - Future **HKAS 21** amendments are expected to have no significant impact on financial statements, while **HKFRS 18** (effective from 2027) will significantly alter the presentation and disclosure of financial performance, with management currently assessing its impact[9](index=9&type=chunk) [3. Segment Information](index=8&type=section&id=3.%20Segment%20Information) The Board, as the chief operating decision maker, divides the business into "Authorized Distribution" and "Independent Distribution" segments, evaluating performance based on segment profit - The Group categorizes its business into two reportable segments, **"Authorized Distribution"** and **"Independent Distribution"**, with the Board allocating resources and assessing performance based on each segment's operating results[10](index=10&type=chunk) [Reportable Segment Profit or Loss](index=9&type=section&id=Reportable%20Segment%20Profit%20or%20Loss) For the six months ended June 30, 2024, authorized distribution revenue was HKD 2,597,847 thousand, independent distribution revenue was HKD 26,022 thousand, with total segment profit reaching HKD 33,565 thousand Reportable Segment Profit or Loss | Indicator | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | **Revenue from External Customers** | | | | Authorized Distribution | 2,597,847 | 2,648,007 | | Independent Distribution | 26,022 | 536,630 | | **Segment Profit/(Loss)** | | | | Authorized Distribution | 31,092 | 24,609 | | Independent Distribution | 2,473 | (2,205) | | Total Reportable Segment Profit | 33,565 | 22,404 | [Geographical Information](index=9&type=section&id=Geographical%20Information) The Group operates in Hong Kong, China, Singapore, and Japan, with Hong Kong revenue significantly decreasing while China and Singapore revenues grew substantially for the six months ended June 30, 2024 Revenue from External Customers (by Operating Location) | Region | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Hong Kong | 1,322,132 | 2,444,579 | | China | 879,383 | 652,901 | | Singapore | 416,603 | 65,858 | | Japan | 70 | 6,647 | | Other | 5,681 | 14,652 | | Consolidated Total | 2,623,869 | 3,184,637 | [4. Revenue from Customer Contracts Analysis](index=10&type=section&id=4.%20Revenue%20from%20Customer%20Contracts%20Analysis) The Group's revenue from electronic component sales is recognized immediately, with significant growth in storage products and optical communication, but substantial declines in smart display, integrated products, and independent distribution Revenue from Customer Contracts Analysis (by Sales Channel/Product Line) | Sales Channel/Product Line | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | Change (%) | | :--- | :--- | :--- | :--- | | **Authorized Distribution** | | | | | Optoelectronic Display | 329,107 | 422,227 | -22.1% | | Storage Products | 645,724 | 43,614 | +1380.5% | | Communication Products | 277,050 | 218,192 | +27.0% | | Smart Vision | 551,212 | 456,991 | +20.6% | | Smart Display | 444,514 | 1,168,405 | -62.0% | | Integrated Products | 68,839 | 197,709 | -65.2% | | Optical Communication | 170,966 | 430 | +39659.5% | | Other | 110,435 | 140,439 | -21.3% | | **Independent Distribution** | 26,022 | 536,630 | -95.2% | | **Total** | 2,623,869 | 3,184,637 | -17.6% | [4.b Performance Obligations from Customer Contracts](index=11&type=section&id=4.b%20Performance%20Obligations%20from%20Customer%20Contracts) Revenue from electronic component sales is recognized upon transfer of goods control, with prepayments recorded as contract liabilities, and all unfulfilled contracts expected to be completed within 12 months - Revenue is recognized upon the transfer of **control of goods**, prepayments are recognized as **contract liabilities**, and all unfulfilled contracts are expected to be performed within **12 months**[14](index=14&type=chunk) [5. Income Tax Expense](index=11&type=section&id=5.%20Income%20Tax%20Expense) For the six months ended June 30, 2024, total income tax expense increased to HKD 8,312 thousand, driven by higher corporate income tax in China and Singapore, despite a slight decrease in Hong Kong profits tax Income Tax Expense | Tax Category | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Hong Kong Profits Tax | 4,247 | 6,632 | | China Corporate Income Tax | 2,246 | 106 | | Singapore Corporate Income Tax | 507 | 117 | | Total Current Tax | 7,000 | 6,979 | | Deferred Tax | 1,312 | 283 | | **Total Income Tax Expense** | 8,312 | 7,262 | [6. Profit for the Period (Deductions/Credits)](index=12&type=section&id=6.%20Profit%20for%20the%20Period%20(Deductions%2FCredits)) For the six months ended June 30, 2024, total staff costs decreased to HKD 56,958 thousand, with reductions in amortization and depreciation, while inventory costs and provisions remained stable Profit for the Period Deductions/Credits | Item | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Total Staff Costs | 56,958 | 91,799 | | Amortization of Intangible Assets | 790 | 1,985 | | Depreciation of Property, Plant and Equipment | 1,047 | 2,040 | | Depreciation of Right-of-Use Assets | 4,747 | 7,579 | | Inventory Costs Recognized as Expenses | 2,474,796 | 2,949,159 | | Inventory Provisions | 5,654 | 5,602 | [7. Dividends](index=12&type=section&id=7.%20Dividends) During the interim period, a final dividend of 5 HK cents per share for 2023 was paid, and an interim dividend of 2 HK cents per share for 2024, totaling HKD 9,774 thousand, was declared Dividend Declaration Status | Dividend Type | 2024 (HK cents per share) | 2023 (HK cents per share) | Total Amount (thousand HKD) | | :--- | :--- | :--- | :--- | | 2023 Final Dividend | 5 | 6 (2022) | 23,469 | | 2024 Interim Dividend | 2 | 0 | 9,774 | [8. Earnings Per Share](index=13&type=section&id=8.%20Earnings%20Per%20Share) For the six months ended June 30, 2024, basic earnings per share were 7.73 HK cents and diluted earnings per share were 7.72 HK cents, both showing significant year-on-year growth Earnings Per Share Data | Indicator | June 30, 2024 (HK cents) | Prior Period (HK cents) | | :--- | :--- | :--- | | Basic Earnings Per Share | 7.73 | 2.68 | | Diluted Earnings Per Share | 7.72 | 2.67 | | **Number of Shares** | | | | Weighted Average Number of Ordinary Shares (Basic) | 469,780,068 | 472,827,991 | | Weighted Average Number of Ordinary Shares (Diluted) | 470,780,068 | 474,327,991 | [9. Trade and Bills Receivables](index=14&type=section&id=9.%20Trade%20and%20Bills%20Receivables) As of June 30, 2024, total trade receivables were HKD 846,547 thousand, with a notable increase in receivables aged 61-120 days and over 120 days, and some receivables discounted with full recourse Aging Analysis of Trade and Bills Receivables | Aging | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | **Trade Receivables** | | | | 0–60 Days | 654,012 | 635,356 | | 61–120 Days | 168,148 | 6,169 | | Over 120 Days | 24,387 | 4,250 | | **Bills Receivables** | | | | 0–60 Days | 16,420 | 10,768 | [10. Trade and Bills Payables](index=14&type=section&id=10.%20Trade%20and%20Bills%20Payables) As of June 30, 2024, total trade and bills payables increased to HKD 392,457 thousand, with the largest increase observed in the 0-30 days aging category Aging Analysis of Trade and Bills Payables | Aging | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | 0–30 Days | 339,600 | 214,819 | | 31–60 Days | 33,474 | 22,240 | | 61–90 Days | 14,075 | 11,566 | | Over 90 Days | 5,308 | 16,935 | | **Total** | 392,457 | 265,560 | [11. Bank and Other Borrowings](index=15&type=section&id=11.%20Bank%20and%20Other%20Borrowings) As of June 30, 2024, total bank and other borrowings increased to HKD 516,589 thousand, with all borrowings secured and mostly classified as current liabilities due to demand clauses Bank and Other Borrowings | Borrowing Type | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Import/Export Loans | 287,035 | 172,669 | | Other Bank Borrowings | 213,450 | 208,518 | | Other Borrowings | 16,104 | 16,549 | | **Total** | 516,589 | 397,736 | | **Repayment Term** | | | | Within One Year | 68,121 | 25,837 | | Portion with Demand Clause | 445,389 | 368,304 | | Settled After 12 Months | 3,079 | 3,595 | [Interim Dividend and Closure of Register of Members](index=16&type=section&id=Interim%20Dividend%20and%20Closure%20of%20Register%20of%20Members) [Interim Dividend Declaration](index=16&type=section&id=Interim%20Dividend) The Board declared an interim dividend of 2 HK cents per share for the six months ended June 30, 2024, payable around September 27, 2024 - The Board declared an interim dividend of **2 HK cents per share**, a significant increase from the prior period (nil dividend), expected to be paid on **September 27, 2024**[22](index=22&type=chunk) [Suspension of Register of Members](index=16&type=section&id=Suspension%20of%20Register%20of%20Members) The company will suspend its register of members from September 11-13, 2024, requiring all transfer documents to be lodged by 4:30 p.m. on September 10, 2024, to qualify for the interim dividend - To facilitate interim dividend distribution, the company will suspend share transfer registration from **September 11 to 13, 2024**, with the registration deadline set for **4:30 p.m. on September 10**[23](index=23&type=chunk) [Management Discussion and Analysis](index=16&type=section&id=Management%20Discussion%20and%20Analysis) [Review: Global Economy and Semiconductor Industry](index=16&type=section&id=Review) Global economic growth forecasts for H1 2024 were revised upwards, with China's high-tech manufacturing outperforming GDP, while the semiconductor market entered an upturn driven by memory chips and AI technology, boosting AI phone and AIPC demand - The UN and World Bank revised **2024 global economic growth forecasts upwards to 2.6%-2.7%**, with China's H1 GDP growing **5.0%** year-on-year and high-tech manufacturing increasing by **8.7%**[24](index=24&type=chunk) - The global semiconductor market is in its **fifth upturn cycle**, with **Q1 2024 sales growing 15.2%** year-on-year, primarily driven by **memory chips**; the AI technology revolution is accelerating AI-driven upgrades in servers, PCs, and mobile phones, with AI phone and AIPC market shares projected to rapidly increase to **54% and 71%** respectively between 2024 and 2028[25](index=25&type=chunk) [Business Segment Performance Review](index=17&type=section&id=Business%20Segment%20Performance%20Review) In H1 2024, the Group optimized its business by increasing investment in AI-related products, leading to significant growth in storage, optical communication, smart vision, and communication products, while other segments experienced declines - In the first half of the year, the Group increased R&D investment in **AI-related products** (storage and optical communication chips) and **AI algorithms**, with all related business units achieving substantial growth[26](index=26&type=chunk) [Storage Products](index=17&type=section&id=Storage%20Products) Driven by global digital transformation and AIGC, the storage chip market entered a golden era of volume and price increases, with this business unit achieving **HKD 645.7 million** in H1 2024 sales, a **1,380.5%** year-on-year surge - The storage chip market entered a golden era of both volume and price increases, with **DRAM and NAND flash memory** achieving **Q1 growth rates of 20% and 23-28%** respectively[26](index=26&type=chunk) Storage Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 645.7 | 1,380.5% | [Smart Vision](index=18&type=section&id=Smart%20Vision) Driven by AI, big data, and IoT, the security industry is shifting towards intelligence, with this business unit achieving **HKD 551.2 million** in H1 2024 sales, a **20.6%** year-on-year increase, by integrating various AI algorithms - Global smart camera shipments in **Q1** increased by **10.3%** year-on-year, with rapid penetration in the **Chinese and US markets**[28](index=28&type=chunk) Smart Vision Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 551.2 | 20.6% | [Smart Display](index=19&type=section&id=Smart%20Display) Due to global economic weakness and declining TV market demand, this business unit's sales of SoC master control chips decreased significantly by **62.0%** to **HKD 444.5 million** in H1 2024 - Global TV shipments in **Q1** decreased by **0.9%** year-on-year, while mainland China's H1 TV brand complete machine shipments decreased by **4.2%** year-on-year[29](index=29&type=chunk) Smart Display Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 444.5 | 62.0% | [Optoelectronic Display](index=19&type=section&id=Optoelectronic%20Display) Global large-size LCD TV panel shipments saw slight growth, but this business unit's H1 2024 sales decreased by **22.1%** to **HKD 329.1 million** due to the divestment of its power product line - Global large-size LCD TV panel shipments in **Q1** increased by **1.3%** year-on-year, with notebook and monitor panel shipments expected to see slight growth[30](index=30&type=chunk) - The divestment of the power product line significantly impacted the business unit's total H1 performance[30](index=30&type=chunk) Optoelectronic Display Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 329.1 | 22.1% | [Communication Products](index=20&type=section&id=Communication%20Products) Global cellular IoT module and 5G smartphone shipments grew, leading this business unit's sales of MCP storage chips and 4G/5G RF PAs to **HKD 277.1 million** in H1 2024, a **27.0%** year-on-year increase - Global cellular IoT module shipments in **Q1** increased by **7%** year-on-year, and **5G smartphone shipments** grew by **20.3%** year-on-year[31](index=31&type=chunk) Communication Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 277.1 | 27.0% | [Optical Communication](index=20&type=section&id=Optical%20Communication) Rapid AI development drove a surge in computing power demand, boosting high-speed optical module needs, leading this business unit's optoelectronic device sales to **HKD 171.0 million** in H1 2024, a **39,659.5%** year-on-year increase - **AI development** fueled a surge in **AI server demand**, driving demand for **400G/800G high-speed optical modules**, with **Q1 optical communication component revenue growing 72%**[32](index=32&type=chunk) Optical Communication Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 171.0 | 39,659.5% | [Integrated Products](index=21&type=section&id=Integrated%20Products) This business unit, covering AIoT, MCU, and CE products, saw its H1 2024 sales decrease significantly by **65.2%** to **HKD 68.8 million** due to internal business and product line adjustments - The business unit underwent **business adjustments and optimization**, streamlining and reallocating product lines with lower sales volume and profit margins, with some product lines transferred to other business units for follow-up[33](index=33&type=chunk) Integrated Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 68.8 | 65.2% | [Independent Distribution](index=21&type=section&id=Independent%20Distribution) The independent distribution business, providing spot supply chain services, saw its H1 2024 sales plummet by **95.2%** to **HKD 26.0 million** due to global macroeconomic downturn and reduced demand for spot electronic components - The independent distribution business was significantly impacted by the **global macroeconomic downturn** and **weak market demand**, leading to an oversupply in the electronic components market and a substantial reduction in demand for spot purchases[34](index=34&type=chunk) Independent Distribution Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 26.0 | 95.2% | [Outlook](index=21&type=section&id=Outlook) For H2, global economic recovery is expected to be moderate, with central banks cutting rates, while China's economy maintains steady growth; the semiconductor industry's AI and memory chip-driven recovery faces uncertainties, and the Group will focus on AI dividends, expanding distribution, and improving profitability - The global economy is expected to experience a **moderate recovery**, with major central banks entering a **rate-cutting cycle**, though growth rates will remain below pre-pandemic levels[35](index=35&type=chunk)[36](index=36&type=chunk) - China's economy is projected to maintain **steady growth**, with the IMF revising its **2024 China economic growth forecast upwards to 5%**[36](index=36&type=chunk) - **WSTS** forecasts the **semiconductor market to achieve double-digit growth in 2024**, primarily driven by **memory (+76.8%)** and **logic devices (+10.7%)**, with significant growth in the Americas and Asia-Pacific regions[37](index=37&type=chunk) - The semiconductor industry's recovery is driven by **rising average chip prices** rather than significant increases in shipments; **AI application deployment faces challenges** such as high costs and data scarcity, posing a risk of an industry bubble[38](index=38&type=chunk) [Storage Products Outlook](index=23&type=section&id=Storage%20Products%20Outlook) AIGC is a key driver for storage chip market growth, with AI PCs, AI phones, and autonomous driving increasing memory demand, leading to a projected **45%** global market growth in 2024, and an optimistic outlook for this business unit - **AIGC** is driving storage chip market growth, with **AI PCs and AI phones** demanding high memory capacity, and the **autonomous driving vehicle market** projected to achieve a **CAGR of 28%**[39](index=39&type=chunk)[40](index=40&type=chunk) - **Morgan Stanley and Samsung** anticipate **Q3 DRAM and NAND chip prices to increase by 10-20%**[40](index=40&type=chunk) - **WSTS** forecasts the **global storage chip market size to grow substantially by 45% to USD 129.8 billion in 2024**[40](index=40&type=chunk) [Smart Vision Outlook](index=24&type=section&id=Smart%20Vision%20Outlook) The smart security market is large and growing, driven by AI, big data, and IoT, with widespread demand for smart cameras and a projected **13.8% CAGR** for IP cameras, leading to an optimistic H2 outlook for this business unit - The **smart security market** is large and growing, with widespread demand for **smart cameras**, and **Q1 global shipments increasing by 10.3%** year-on-year[41](index=41&type=chunk)[42](index=42&type=chunk) - **Bezges Consulting** projects the **global IP camera market CAGR to reach 13.8% from 2024-2029**[42](index=42&type=chunk) [Smart Display Outlook](index=25&type=section&id=Smart%20Display%20Outlook) Global TV market shipments continue to decline, with lower usage rates and longer replacement cycles; despite 2024 being a major sports year, early demand release leads this business unit to a cautious H2 performance outlook - Global TV market shipments continue to decline, with China's TV power-on rate dropping from **70% in 2016 to less than 30% in 2022**, and replacement cycles exceeding **10 years**[43](index=43&type=chunk) - **Sigmaintell** forecasts **global TV shipments to increase by only 0.6%** year-on-year in 2024[43](index=43&type=chunk) [Optoelectronic Display Outlook](index=26&type=section&id=Optoelectronic%20Display%20Outlook) Large-size display panel shipments are expected to grow, driven by new energy vehicles and the "large-screen" central control trend, with global automotive display panel shipments projected to reach **220 million units** in 2024, leading to a positive outlook for this business unit - **Omdia** forecasts **large-size display panel shipments to grow by 7.4% in 2024**[44](index=44&type=chunk) - The **new energy vehicle industry** is driving innovation in **automotive display technology**, with "large-screen" central controls becoming a new trend, and global automotive display panel shipments for the pre-installation market projected to reach **220 million units in 2024**[44](index=44&type=chunk) [Communication Products Outlook](index=26&type=section&id=Communication%20Products%20Outlook) The global cellular IoT module market is expected to recover in H2, driven by 5G-Advanced and RedCap modules, with IoT Analytics projecting a **22% CAGR** for IoT modules by 2027, leading this business unit to an optimistic H2 outlook - **Counterpoint** forecasts the **global cellular IoT module market to recover in H2**, with the **5G-Advanced standard freezing accelerating 5G-A commercialization**[45](index=45&type=chunk) - **IoT Analytics** projects the **IoT module CAGR to reach 22% by 2027**, with **high-AI capability modules achieving a CAGR of 128%**[45](index=45&type=chunk) - Data from the **Ministry of Industry and Information Technology** shows a **slowdown in net new cellular IoT connections from January to April 2024**, requiring close attention going forward[46](index=46&type=chunk) [Optical Communication Outlook](index=27&type=section&id=Optical%20Communication%20Outlook) AI development drives computing power demand, accelerating optical module iteration to 800G and beyond; Lightcounting projects 800G modules to be mainstream in 2024, with 1.6T scaling up, and overall market growth potentially exceeding **40%**, leading to an optimistic H2 outlook - **AIGC's urgent demand for computing power** is driving the rapid iteration of **optical modules towards 800G and higher specifications**, with **800G optical module production expected to double in H2**[47](index=47&type=chunk) - **Lightcounting** forecasts **800G optical modules to become mainstream in 2024**, with **1.6T also scaling up**, and overall market growth potentially exceeding **40%**[47](index=47&type=chunk) [Independent Distribution Outlook](index=28&type=section&id=Independent%20Distribution%20Outlook) Semiconductor inventory is healthy, and H2 peak season demand may trigger restocking; the Group will prioritize overseas markets and leverage its supplier database despite low global economic sentiment, maintaining a cautious H2 performance outlook - Semiconductor industry inventory has largely returned to **healthy levels**, with **H2 peak season demand potentially triggering a restocking cycle**, and **overseas markets** presenting significant business opportunities[48](index=48&type=chunk) - The independent distribution business will leverage its **robust supplier database** and **information matching transaction system** to expand operations[48](index=48&type=chunk) [Summary of Management Discussion](index=28&type=section&id=Summary%20of%20Management%20Discussion) The global economy faces uncertainties despite moderate recovery, while China's Q2 growth was below expectations; the semiconductor industry, driven by AI and new energy vehicles, is projected to exceed **USD 1 trillion** by 2030, and the Group will focus on AI dividends and comprehensive business development - The global economy is experiencing a **moderate recovery but still faces uncertainties**, with China's **Q2 economic growth below expectations**, making the **annual 5% growth target challenging**[49](index=49&type=chunk) - **AI and new energy vehicles** are jointly driving the development of the semiconductor industry, with the market size projected to exceed **USD 1 trillion by 2030**[49](index=49&type=chunk) - The Group will maintain its comprehensive strategy across **authorized distribution, independent distribution, value-added technology, and optical communication chip manufacturing**, continuously focusing on **AI industry dividends** to enhance business quality and profitability[50](index=50&type=chunk) [Financial Review](index=29&type=section&id=Financial%20Review) [Revenue](index=29&type=section&id=Revenue) For the six months ended June 30, 2024, the Group's revenue decreased by **17.6%** to **HKD 2,623.9 million**, primarily due to reduced sales in the independent distribution business Revenue Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 2,623.9 | 3,184.6 | -17.6% | - The decrease in revenue was primarily due to reduced sales in the **independent distribution business**[51](index=51&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) For the six months ended June 30, 2024, gross profit decreased by **37.6%** to **HKD 143.4 million**, with the gross profit margin declining by **1.7 percentage points to 5.5%**, mainly due to reduced independent distribution sales Gross Profit Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit | 143.4 | 229.9 | -37.6% | | Gross Profit Margin | 5.5% | 7.2% | -1.7pp | - The decline in gross profit margin was primarily due to reduced sales in the **independent distribution business**[52](index=52&type=chunk) [Research and Development Expenses](index=29&type=section&id=Research%20and%20Development%20Expenses) For the six months ended June 30, 2024, R&D expenses decreased by **1.8%** to **HKD 16.8 million**, mainly due to reduced staff costs for R&D personnel R&D Expenses Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | R&D Expenses | 16.8 | 17.1 | -1.8% | - The decrease in R&D expenses was primarily due to reduced **staff costs for R&D personnel**[53](index=53&type=chunk) [Administrative, Selling and Distribution Expenses](index=30&type=section&id=Administrative%2C%20Selling%20and%20Distribution%20Expenses) For the six months ended June 30, 2024, administrative, selling, and distribution expenses significantly decreased to **HKD 87.4 million**, representing **3.3% of revenue**, primarily due to reduced staff costs for sales and distribution personnel Administrative, Selling and Distribution Expenses Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Administrative, Selling and Distribution Expenses | 87.4 | 166.7 | -47.6% | | % of Revenue | 3.3% | 5.2% | -1.9pp | - The decrease in expenses was primarily due to reduced **staff costs for sales and distribution personnel**[54](index=54&type=chunk) [Finance Costs](index=30&type=section&id=Finance%20Costs) For the six months ended June 30, 2024, finance costs decreased to **HKD 15.7 million**, primarily due to a reduction in bank and other borrowings used for the Group's operations Finance Costs Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 15.7 | 31.6 | -50.3% | - The decrease in finance costs was primarily due to reduced **bank and other borrowings**[55](index=55&type=chunk) [Profit for the Period](index=30&type=section&id=Profit%20for%20the%20Period) For the six months ended June 30, 2024, the Group's profit increased by **74.8%** to **HKD 36.9 million**, with the net profit margin rising to approximately **1.4%** Profit for the Period Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Profit for the Period | 36.9 | 21.1 | +74.8% | | Net Profit Margin | 1.4% | 0.7% | +0.7pp | [Net Profit Attributable to Owners of the Company](index=30&type=section&id=Net%20Profit%20Attributable%20to%20Owners%20of%20the%20Company) For the six months ended June 30, 2024, net profit attributable to owners of the company significantly increased by **186.6%** to **HKD 36.3 million** Net Profit Attributable to Owners of the Company Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Net Profit Attributable to Owners of the Company | 36.3 | 12.7 | +186.6% | [Use of Proceeds from Global Offering](index=30&type=section&id=Use%20of%20Proceeds%20from%20Global%20Offering) The company, listed in 2016, utilized **HKD 181.4 million** of its **HKD 205.8 million** net proceeds by June 30, 2024, with the remaining **HKD 24.4 million** for e-commerce and tech infrastructure, expected to be fully used by December 31, 2025, despite past delays Use of Proceeds from Global Offering | Use Category | Net Proceeds (million HKD) | Utilized as of June 30, 2024 (million HKD) | Remaining Amount (million HKD) | Expected Utilization Timeline | | :--- | :--- | :--- | :--- | :--- | | Recruitment of New Staff and Warehouse Upgrades | 20.6 | 20.6 | 0.0 | – | | Promotion of E-commerce Platform and New Products | 41.2 | 41.2 | 0.0 | – | | Upgrading, Development, and Maintenance of E-commerce Platform and Improvement of Technical Infrastructure | 41.2 | 16.8 | 24.4 | By December 31, 2025 | | Research and Development | 20.6 | 20.6 | 0.0 | – | | Potential Acquisitions or Investments | 61.7 | 61.7 | 0.0 | – | | General Working Capital | 20.5 | 20.5 | 0.0 | – | | **Total** | 205.8 | 181.4 | 24.4 | | - The timeline for the use of proceeds was delayed due to recent **technological changes, US-China trade tensions, social unrest in Hong Kong, and the COVID-19 pandemic**[60](index=60&type=chunk) [Liquidity and Financial Resources](index=32&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2024, the Group's bank balances and cash totaled **HKD 435.8 million**, with outstanding borrowings of **HKD 516.6 million**, a gearing ratio of **56.6%**, and a current ratio of **1.57 times**, while turnover days remained reasonable Liquidity and Financial Resources Overview | Indicator | June 30, 2024 (million HKD) | December 31, 2023 (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Bank Balances and Cash | 435.8 | 395.3 | +10.2% | | Outstanding Bank and Other Borrowings | 516.6 | 397.7 | +29.9% | | Gearing Ratio | 56.6% | 44.0% | +12.6pp | | Current Assets | 1,577.0 | 1,400.3 | +12.6% | | Current Liabilities | 1,001.6 | 830.4 | +20.6% | | Current Ratio | 1.57 times | 1.69 times | -0.12 times | Turnover Days | Turnover Period | H1 2024 (days) | Prior Period (days) | | :--- | :--- | :--- | | Trade Receivables | 53 | 66 | | Trade Payables | 24 | 26 | | Inventory | 15 | 20 | [Foreign Exchange Risk](index=33&type=section&id=Foreign%20Exchange%20Risk) The Group's transactions are primarily in USD and RMB, recording a net exchange loss of **HKD 0.1 million** for the six months ended June 30, 2024, and will consider using forward exchange contracts to mitigate significant foreign exchange risks Net Exchange Loss | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | | :--- | :--- | :--- | | Net Exchange Loss | 0.1 | 6.2 | - The Group currently has no **foreign currency hedging policy** but will consider using **forward exchange contracts** to mitigate significant foreign exchange risks[63](index=63&type=chunk) [Pledged Assets, Capital Commitments, Significant Investments, Acquisitions/Disposals](index=33&type=section&id=Pledged%20Assets%2C%20Capital%20Commitments%2C%20Significant%20Investments%2C%20Acquisitions%2FDisposals) As of June 30, 2024, financial assets, factored trade receivables, and bank deposits were pledged as collateral for borrowings, with the Group having no significant capital commitments, contingent liabilities, or major investments/acquisitions/disposals - **Financial assets, trade receivables, and bank deposits** have been pledged as collateral for **bank borrowings and financing arrangements**[64](index=64&type=chunk) - The Group has **no significant capital commitments or contingent liabilities**, nor does it hold other significant investments or undertake major acquisitions and disposals[64](index=64&type=chunk) [Other Information](index=34&type=section&id=Other%20Information) [Purchase, Sale or Redemption of Listed Securities](index=34&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20Listed%20Securities) For the six months ended June 30, 2024, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities - Neither the company nor its subsidiaries engaged in any **purchase, sale, or redemption of listed securities** during the reporting period[65](index=65&type=chunk) [Events After June 30, 2024](index=34&type=section&id=Events%20After%20June%2030%2C%202024) As of this announcement date, no significant disclosable subsequent events occurred for the Group after June 30, 2024 - As of the announcement date, the Group had **no significant disclosable subsequent events** after June 30, 2024[66](index=66&type=chunk) [Compliance with Corporate Governance Code](index=34&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The company complied with all applicable Corporate Governance Code provisions, except for C.2.1 (separation of Chairman and CEO roles), which the Board believes ensures consistent leadership and efficient strategic planning - The company complied with all applicable provisions of the **Corporate Governance Code**, except for **C.2.1 (separation of Chairman and CEO roles)**, as **Mr. Tian Weidong** holds both positions[67](index=67&type=chunk) - The Board believes the current arrangement ensures **consistent internal leadership and efficient strategic planning**, and will continue to review this arrangement[67](index=67&type=chunk) [Standard Code for Securities Transactions](index=35&type=section&id=Standard%20Code%20for%20Securities%20Transactions) The company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, with all directors confirming full compliance during the reporting period - All directors confirmed full compliance with the **Standard Code for Securities Transactions by Directors of Listed Issuers** during the reporting period[68](index=68&type=chunk) [Audit Committee](index=35&type=section&id=Audit%20Committee) The Audit Committee, composed of three independent non-executive directors, reviews and monitors financial reporting and internal controls, and has discussed the interim results with auditors and management - The **Audit Committee**, comprising **three independent non-executive directors**, is responsible for reviewing and monitoring financial reporting and internal controls, and has reviewed the interim results[69](index=69&type=chunk) [Publication of Interim Results](index=35&type=section&id=Publication%20of%20Interim%20Results) The company's interim report for the six months ended June 30, 2024, will be dispatched to shareholders and published on the company and HKEX websites in due course - The interim report will be dispatched to shareholders in due course and published on the **company's website and the HKEX website**[70](index=70&type=chunk)

Financial Performance - The company achieved a sales revenue of HKD 5.6659 billion in 2023, despite a challenging economic environment[26] - The overall economic slowdown and industry downturn led to a noticeable decline in the company's performance for the fiscal year[28] - The company reported a significant drop in gross profit, with a decrease of 59.7% year-on-year[11] - In 2023, the company achieved a total sales revenue of HKD 5,665.9 million, representing a year-on-year decline of 43.4%[41] - The gross profit for 2023 was HKD 441.5 million, down 59.7% compared to the previous year[41] - The group's profit for the year ended December 31, 2023, was HKD 92.5 million, a decrease of HKD 287.2 million or 75.6% compared to HKD 379.7 million in 2022[73] - The net profit attributable to the owners of the company for the year ended December 31, 2023, was HKD 71.1 million, a decrease of 56.8% from HKD 164.7 million in 2022[74] - The revenue for the year ended December 31, 2023, was HKD 5,665.9 million, a decrease of HKD 4,340.2 million or 43.4% compared to HKD 10,006.1 million in 2022[66] Market Trends - The global semiconductor market size decreased by 11.1% in 2023 compared to 2022, amounting to approximately USD 533 billion[27] - The global top 25 semiconductor manufacturers saw an overall revenue decline of 14.1% in 2023[27] - The global semiconductor market is expected to grow by 13.1% in 2024, reaching USD 588.4 billion, driven by recovery in storage, AI, and consumer electronics demand[54] - The semiconductor market is expected to grow by 13.1% in 2024, reaching $588.4 billion, driven by strong demand for AI chips and a 44.8% increase in memory revenue[33] - The company anticipates a 25.6% growth in the AI chip market in 2024, reaching $67.1 billion, benefiting from the demand for data center-related industries[34] - The smartphone market in mainland China is projected to grow by 3.6% in 2024, reaching 287 million units, marking the first year-over-year increase since 2021[37] Business Segments - The company's independent distribution business experienced a significant revenue decline due to oversupply in the chip distribution market[28] - The authorized distribution business was also impacted, with various business units such as smart display and communication showing revenue decreases[28] - The optical communication segment benefited from increased demand in the AI sector, resulting in substantial growth[28] - The smart display business unit's sales revenue reached HKD 1,859.5 million, a significant decrease of 35.9% year-on-year[42] - The optoelectronic display business unit reported sales of HKD 794.5 million, down 26.4% year-on-year[43] - The smart vision business unit achieved sales of HKD 923.5 million, reflecting a decline of 35.3% year-on-year[44] - The communication products business unit's sales totaled HKD 427.0 million, a substantial decrease of 37.5% year-on-year[45] - In 2023, the storage product unit achieved sales of HKD 98.1 million, a significant decline of 67.5% year-on-year, due to reduced demand for storage chips amid a global economic slowdown[47] - The integrated products unit reported sales of HKD 343.1 million in 2023, reflecting a robust year-on-year growth of 28.5%, driven by the introduction of new product lines[48] - The optical communication unit experienced a remarkable sales increase to HKD 167.5 million in 2023, representing a year-on-year growth of 14,477.5%, fueled by the rising demand for high-speed optical connections in AI applications[49] - The independent distribution unit's sales fell to HKD 830.8 million in 2023, marking a substantial decline of 73.3% year-on-year, impacted by weak demand in the electronic components market[50] Strategic Initiatives - The company is focusing on expanding new product lines and new business areas to drive growth[28] - The company is preparing to address various challenges in 2024 and aims to achieve its annual operational goals[38] - The company is actively leveraging the AI wave in the semiconductor industry to lay a solid foundation for business development in 2024[38] - The company plans to expand its overseas business, having already established a presence in the Asia-Pacific region, to adapt to the global semiconductor supply chain dynamics[36] - The company is focusing on the development of smart hardware and AI applications, which will drive demand for storage chips and align with its business strategy[37] Economic Outlook - Consumer spending contributed 82.5% to GDP growth in 2023, indicating significant potential for the electronics industry in the domestic market[37] - The World Bank forecasts a global economic growth slowdown to 2.4% in 2024, with challenges such as geopolitical conflicts and weak international trade[52] - China's economic growth is projected to slow to 4.5% in 2024, with some analysts predicting a more optimistic growth of around 5.3%[52] Corporate Governance - The company has a diverse board of directors with extensive experience in finance, marketing, and technology[99][100][101] - The independent non-executive directors have confirmed their independence according to the listing rules, and the company considers all of them to be independent[128] - The board of directors includes a mix of executive and independent non-executive members, with specific terms for re-election at the upcoming annual general meeting[131] - The company has arranged insurance for directors and senior officers to protect against potential costs and liabilities arising from claims against them[137] Compliance and Sustainability - The company has complied with all relevant laws and regulations impacting its business operations during the fiscal year[106] - Environmental protection is recognized as crucial for the company's long-term development, with no penalties incurred for non-compliance with health, safety, or environmental regulations during the fiscal year[107] - The company has committed to sustainable development practices, integrating ESG strategies into its operations and regularly assessing potential ESG risks[194] - The company engages with stakeholders through various communication channels to enhance service quality and adapt internal strategies based on feedback[195] - A materiality assessment has been conducted to identify and prioritize significant issues related to the company's operations, reflecting stakeholder concerns[196] - The company has established specific ESG-related goals, which are reviewed by the board to ensure progress towards sustainability objectives[194] Employee and Shareholder Matters - The company has implemented a strict internal training program for new employees to ensure quality and promote internal advancement opportunities[109] - The company reported a proposed final dividend of HKD 0.05 per share for the year ending December 31, 2023, down from HKD 0.06 in 2022, with no interim dividend declared for the year[113] - As of December 31, 2023, the company's distributable reserves amounted to HKD 330.0 million, a decrease from HKD 368.9 million in 2022[121] - The employee incentive plan confirmed a total of 4,450,000 shares acquired under the share award plan, with no new shares granted to employees during the year[149] - The company has not granted or agreed to grant any stock options under the stock option plan as of December 31, 2023[157] Financial Management - The group's bank and other borrowing interest expenses for the year ended December 31, 2023, were HKD 57.0 million, a reduction of HKD 22.2 million from HKD 79.2 million in 2022[71] - As of December 31, 2023, the group's cash and bank balances totaled HKD 395.3 million, down from HKD 951.7 million as of December 31, 2022[79] - The group's capital debt ratio decreased from 85.8% as of December 31, 2022, to 44.0% as of December 31, 2023, due to reduced bank borrowings[79] - The group had a current ratio of 1.69 times as of December 31, 2023, compared to 1.57 times as of December 31, 2022[80] - The group recorded a net foreign exchange loss of approximately HKD 7.9 million for the year ended December 31, 2023, compared to a loss of HKD 41.0 million in 2022[81] Audit and Reporting - The audit committee has reviewed the audited consolidated financial statements for the year ending December 31, 2023, ensuring transparency and accuracy in financial reporting[186] - The company has appointed a new auditor, Roshan Mei, following the resignation of Deloitte, indicating a change in oversight for financial audits[187]

Financial Performance - The total revenue for the fiscal year ending December 31, 2023, was HKD 5,665.9 million, a decrease of 43.4% compared to HKD 10,006.1 million for the fiscal year ending December 31, 2022[20]. - The gross profit for the fiscal year ending December 31, 2023, was HKD 441.5 million, down 59.7% from HKD 1,094.7 million for the fiscal year ending December 31, 2022[20]. - The net profit attributable to shareholders for the fiscal year ending December 31, 2023, was HKD 71.1 million, a decline of 56.8% compared to HKD 164.7 million for the fiscal year ending December 31, 2022[20]. - Basic and diluted earnings per share for the fiscal year ending December 31, 2023, were HKD 0.1508 and HKD 0.1505, respectively, compared to HKD 0.3403 and HKD 0.3389 for the fiscal year ending December 31, 2022[20]. - The company reported a total comprehensive income of HKD 88,408 for 2023, down 76.1% from HKD 366,899 in 2022[24]. - The company’s net profit for the year has been impacted by various expenses, including a significant cost of goods sold amounting to HKD 5,254.6 million in 2023, compared to HKD 8,848.6 million in 2022[59]. - The group reported a gross profit of HKD 86,678,000 for 2023[37]. - The company's profit was HKD 92.5 million, a decrease of 75.6% compared to HKD 379.7 million in 2022, primarily due to a reduction in gross profit[162]. Assets and Liabilities - Total assets decreased from HKD 1,214,896,000 in 2022 to HKD 909,880,000 in 2023, representing a decline of approximately 25.1%[3]. - Current liabilities decreased from HKD 1,645,968,000 in 2022 to HKD 830,417,000 in 2023, a reduction of about 49.7%[5]. - The net asset value decreased from HKD 1,200,923,000 in 2022 to HKD 904,413,000 in 2023, indicating a decrease of approximately 24.7%[5]. - The total liabilities decreased from HKD 1,200,923,000 in 2022 to HKD 904,413,000 in 2023, indicating a decrease of approximately 24.7%[5]. - The company’s total liabilities decreased to HKD 368,304,000 in 2023 from HKD 973,006,000 in 2022[49]. - As of December 31, 2023, the group had outstanding bank borrowings of HKD 397.7 million, down from HKD 1,030.2 million on December 31, 2022[139]. - The group's capital debt ratio decreased from 85.8% on December 31, 2022, to 44.0% on December 31, 2023, due to a reduction in bank borrowings[139]. Revenue Breakdown - Revenue from external customers in the authorized distribution segment was HKD 4,835,050, down 29.8% from HKD 6,891,419 in 2022[35]. - The independent distribution segment generated revenue of HKD 830,835, an increase of 26.0% from HKD 3,114,659 in 2022[35]. - The sales revenue for the smart display business unit reached HKD 1,859.5 million in 2023, representing a substantial year-on-year decline of 35.9%[53]. - Major customer sales for the licensing division showed a decline, with Customer 1 generating HKD 698.1 million in 2023 compared to HKD 1,302.8 million in 2022, a drop of 46.4%[57]. - The sales revenue from the display-related business unit reached HKD 794.5 million, down 26.4% year-on-year due to a decrease in global shipments of PCs and smartphones[72]. - The smart vision business unit generated sales of HKD 923.5 million, reflecting a year-on-year decline of 35.3% despite an increase in chip shipments[73]. - The optical communication business unit saw significant growth, with sales reaching HKD 167.5 million, a remarkable increase of 14,477.5% year-on-year[78]. - The independent distribution business unit reported sales of HKD 830.8 million, down 73.3% year-on-year due to a significant drop in order volume and profit margins[79]. Expenses and Cost Management - Research and development expenses decreased to HKD 32,514 from HKD 39,562, a reduction of 18.5%[22]. - Administrative expenses were reduced to HKD 116,007 from HKD 144,732, a decrease of 19.9%[22]. - The total employee costs for the company in 2023 were HKD 190.1 million, significantly lower than HKD 337.6 million in 2022, reflecting a decrease of 43.7%[59]. - The administrative, sales, and distribution expenses for the year ended December 31, 2023, totaled HKD 292.6 million, a significant decrease from HKD 525.2 million in 2022[160]. - The company incurred current tax expenses of HKD 14,660,000 in 2023, significantly lower than HKD 75,819,000 in 2022[40]. - The group’s deferred tax expenses were HKD 2,076,000 in 2023, compared to HKD 2,734,000 in 2022[40]. Market Outlook and Economic Conditions - In 2023, the global TV shipment volume is expected to decline by 2.5% year-on-year, falling below 197 million units, marking a nearly ten-year low[53]. - The World Bank forecasts a global economic growth rate of only 2.6% for 2023, indicating the lowest growth since 1995, with economic weakness surpassing that of the 2008 subprime crisis[53]. - The overall market for consumer electronics is experiencing a downturn, with a notable decline in demand and inventory issues affecting the chip market[71]. - Global PC shipments are projected to decline by 13.8% in 2023, while smartphone shipments are expected to decrease by 5% to approximately 1.2 billion units, marking the lowest level in nearly a decade[70]. - The global semiconductor market size is projected to be $520.1 billion in 2023, a decrease of 9.4% compared to $574.1 billion in 2022[103]. - China's GDP grew by 5.2% year-on-year in 2023, reaching CNY 126 trillion, but faced significant pressure due to insufficient market demand and other economic challenges[102]. Future Projections and Strategies - The company plans to propose a final dividend of HKD 0.05 per share for the year ending December 31, 2023, down from HKD 0.06 per share in 2022, totaling approximately HKD 24.43 million[61]. - The company anticipates a recovery in revenue growth for its business unit in 2024, driven by the expected increase in demand for cellular IoT modules, with a projected annual growth rate of 12% until 2030[121]. - The company plans to continue expanding new product lines and customer bases in 2024, maintaining an optimistic outlook for sustained business growth[124]. - The company expects to achieve its annual targets in 2024 despite uncertainties in the market outlook[121]. - The group aims to maintain strict control over its receivables, with overdue balances reviewed regularly by the board[45]. Corporate Governance - The board of directors is committed to maintaining high standards of corporate governance and effective management accountability[182]. - The company has adopted the corporate governance code as its own governance guidelines, ensuring compliance with applicable rules[197]. - The audit committee, composed of three independent non-executive directors, reviewed the consolidated financial statements for the year ended December 31, 2023[200].

Financial Performance - Revenue for the first half of 2023 was HKD 3,184.6 million, a decrease of 43.7% compared to HKD 5,661.5 million in the same period of 2022[6] - Gross profit dropped to HKD 229.9 million, down 66.1% from HKD 677.1 million year-on-year[6] - Profit before tax fell to HKD 28.4 million, a decline of 92.2% from HKD 362.0 million in the previous year[6] - The company reported a net profit attributable to shareholders of HKD 12.7 million, down 91.3% from HKD 145.2 million in the same period last year[6] - Revenue for the six months ended June 30, 2023, was HKD 3,184,637, a decrease of 43.8% compared to HKD 5,661,548 for the same period in 2022[99] - Gross profit for the same period was HKD 229,876, down 66.0% from HKD 677,125 in 2022[99] - The company reported a profit before tax of HKD 28,378, a decline of 92.2% from HKD 362,033 in the previous year[99] - Net profit for the period was HKD 21,116, down 92.9% from HKD 299,766 in 2022[99] Segment Performance - Sales in the smart display segment reached HKD 1,168.4 million, a significant decline of 22.9% year-on-year[13] - The optoelectronic display segment reported sales of HKD 422.2 million, down 38.4% compared to the previous year[14] - The smart vision segment achieved sales of HKD 457.0 million, a decrease of 26.4% year-on-year[15] - The communication products segment saw sales drop to HKD 218.2 million, a decline of 49.7% compared to the same period last year[17] - The storage products segment reported a sales revenue of HKD 43.6 million in the first half of 2023, a significant decline of 78.5% year-on-year[18] - The integrated products segment achieved a sales revenue of HKD 197.7 million in the first half of 2023, marking a substantial increase of 84.7% year-on-year[19] - The independent distribution segment recorded a sales revenue of HKD 536.6 million in the first half of 2023, down 72.7% year-on-year[20] Economic Outlook - The company maintains a cautious outlook for the second half of 2023 due to ongoing global economic uncertainties and tightening liquidity conditions[23] - The company expects stable prices for storage chips in the second half of 2023, which will support the performance of the storage products segment[28] - The global semiconductor sales showed a slight month-on-month increase for three consecutive months as of May 2023, although year-on-year figures remain significantly down[24] - The global PC market is expected to see a slow recovery in the second half of 2023, with a 15.7% quarter-on-quarter increase in notebook shipments in Q2 2023[26] - The semiconductor industry is expected to enter a new growth cycle in 2024, with the company optimistic about the medium to long-term development of the sector[35] Cash Flow and Assets - As of June 30, 2023, the total cash and bank balances of the group amounted to HKD 919.1 million, a decrease from HKD 951.7 million as of December 31, 2022[50] - The group’s outstanding bank and other borrowings as of June 30, 2023, were HKD 1,000.5 million, down from HKD 1,030.2 million as of December 31, 2022[50] - The capital debt ratio increased from 87.7% as of December 31, 2022, to 88.0% as of June 30, 2023[50] - The group’s current assets were HKD 2,503.4 million, compared to HKD 2,581.8 million as of December 31, 2022[51] - The current ratio as of June 30, 2023, was 1.51, down from 1.57 as of December 31, 2022[51] - The group recorded a net exchange loss of approximately HKD 6.2 million for the six months ended June 30, 2023, an improvement from a net exchange loss of approximately HKD 16.7 million in the same period of 2022[53] - The total employee cost for the six months ended June 30, 2023, was approximately HKD 89.6 million, down from HKD 172.5 million in the same period of 2022[62] Corporate Governance - The board of directors is committed to maintaining high standards of corporate governance and has adopted the Corporate Governance Code as its governance framework[72] - The company has complied with the applicable code provisions of the Corporate Governance Code during the six months ended June 30, 2023, except for the separation of the roles of Chairman and CEO[73] - The company has not entered into any major transactions or contracts where directors or their related entities have a significant interest during the six months ended June 30, 2023[81] - There are no reported interests by directors in any business that competes directly or indirectly with the company's operations as of June 30, 2023[82] Shareholder Information - As of June 30, 2023, the company did not declare an interim dividend, compared to 0.04 HKD per share for the six months ended June 30, 2022[69] - The average closing price of shares for the period was 1.76 HKD, with a closing price of 1.35 HKD on June 30, 2023[65] - The company has not purchased, sold, or redeemed any of its listed securities during the six months ended June 30, 2023[67] - The company reported a total tax expense of HKD 7,262 for the six months ended June 30, 2023, down from HKD 62,267 in 2022, reflecting a significant reduction in taxable income[134] Research and Development - Research and development expenses for the six months ended June 30, 2023, were HKD 17.1 million, a decrease of 15.3% from HKD 20.2 million in the same period of 2022[38] - The company plans to enhance its e-commerce platform and operations to improve business efficiency through data matching and digital operations[33] - The company plans to continue its market expansion and product development strategies to enhance future growth prospects[104]

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告之內容 概不負責，對其準確性或完整性亦不發表任何聲明，並明確表示概不就 因本公告全部或任何部分內容而產生或因倚賴該等內容而引致之任何損 失承擔任何責任。 芯 智 控 股 有 限 公 司 Smart-Core Holdings Limited （於開曼群島註冊成立的有限公司） （股份代號：2166） 截 至2023年6月30日 止 六 個 月 之 中 期 業 績 財務摘要 • 本集團截至2023年6月30日止六個月的總收入為3,184.6百萬港元（2022 年：5,661.5百萬港元），較2022年同期減少43.7%。 • 本集團截至2023年6月30日止六個月的毛利為229.9百萬港元（2022年： 677.1百萬港元），較2022年同期減少66.0%。 • 截至2023年6月30日止六個月，本公司擁有人應佔淨利潤為12.7百萬 港元（2022年：145.2百萬港元），較2022年同期減少91.3%。 • 截至2023年6月30日止六個月，基本及攤薄每股盈利分別為2.68港仙（2022 年：29.78港仙）及2.67港仙（2022年：29.66港仙）。 ...

Financial Performance - The company achieved a sales revenue of HKD 10,006.1 million for the year ended December 31, 2022, despite facing a challenging economic environment [27]. - The company's total sales for 2022 reached HKD 10,006.1 million, a slight decrease of 3.7% year-on-year, while gross profit increased by 10.6% to HKD 1,094.7 million [47]. - The gross profit margin for the year was reported at 10.6% [12]. - The net profit margin for the year was 3.8% [13]. - Profit for the year ended December 31, 2022, was HKD 379.7 million, a decrease of 3.1% from HKD 391.9 million in 2021, with a net profit margin of 3.8% [89]. - Net profit attributable to owners for the year ended December 31, 2022, was HKD 164.7 million, a decrease of 23.1% from HKD 214.1 million in 2021 [90]. - The group's revenue for the year ended December 31, 2022, was HKD 10,006.1 million, a decrease of 3.7% from HKD 10,389.3 million in 2021 [80]. - The decline in revenue was primarily due to a reduction in sales of optoelectronic displays and storage products, which fell by approximately HKD 992.0 million [81]. Market Trends - The semiconductor industry experienced a significant downturn, with China's integrated circuit imports decreasing by approximately 5% in value and 15% in quantity compared to 2021 [30]. - The global semiconductor market is expected to decline by 4.1% in 2023, with key regions experiencing reduced growth rates [35]. - The global semiconductor market is projected to decline by an average of 6.9% in 2023, with a potential recovery in 2024 [61]. - The consumer electronics market saw a decline in demand, with global smartphone shipments dropping by 12% to under 1.2 billion units, and PC shipments decreasing by 16.2% to 286.2 million units [46]. - The global storage chip market is expected to decline by 17% in 2023, driven by decreasing demand for devices like PCs and smartphones [70]. - The global device shipment is forecasted to drop by 4.4% to 1.7 billion units in 2023, with PC shipments declining by 6.8% [64]. Business Strategy - The company plans to navigate the current downturn in the semiconductor industry by focusing on maintaining its distribution business and exploring new market opportunities [30]. - The group anticipates continued business growth in 2023, supported by the recovery of domestic demand and the expansion of independent distribution and technology value-added services [36]. - The company plans to enhance its overseas business layout and growth in 2023, leveraging its established presence in major countries across the Asia-Pacific and Europe [40]. - The company aims to expand new product lines and services in response to market uncertainties in 2023 [65]. - The company plans to strengthen its authorized distribution business and expand independent distribution globally in 2023 [79]. Operational Highlights - The independent distribution business accounted for approximately one-third of the group's total revenue in 2022, showing healthy growth in key business indicators such as sales performance and gross profit [31]. - The smart display business, which constitutes nearly 30% of total revenue, achieved sales of HKD 2,899.5 million, a slight increase of 4.4% year-on-year [50]. - The optoelectronic display business unit reported a significant decline in sales, achieving HKD 1,080.0 million in 2022, a year-on-year decrease of 41.9% due to a global downturn in electronic product demand [51]. - The independent distribution business unit achieved sales of HKD 3,114.7 million in 2022, reflecting a substantial year-on-year growth of 8.9%, bolstered by strong performance in overseas markets [58]. - The comprehensive products unit saw significant growth, achieving sales of HKD 267.0 million in 2022, a year-on-year increase of 76.4%, driven by the rapid expansion of IoT and software service markets [56]. Economic Outlook - The IMF projects a global economic growth rate of 2.9% for 2023, with expectations of acceleration to 3.1% in 2024, driven by China's reopening and increased domestic consumption [34]. - The global economic outlook for 2023 is cautious, with expected growth rates between 1.4% and 2.8%, and a forecasted growth rate of 4.8% for China, indicating potential recovery in the domestic market [60]. Financial Position - The company's total assets as of December 31, 2022, amounted to HKD 2,860.9 million [15]. - As of December 31, 2022, the group had cash and bank balances totaling HKD 951.7 million, an increase from HKD 711.8 million in 2021 [97]. - The current ratio as of December 31, 2022, was 1.57, up from 1.32 in 2021, indicating improved liquidity [98]. - The group’s total bank borrowings as of December 31, 2022, were HKD 1,030.2 million, down from HKD 1,638.1 million in 2021, resulting in a decrease in the debt-to-equity ratio from 159.8% to 87.7% [97]. Research and Development - Research and development expenses for the year ended December 31, 2022, were HKD 39.6 million, a decrease of 1.5% from HKD 40.2 million in 2021 [83]. Employee Relations - The company emphasizes employee relations, offering competitive compensation and implementing stock reward and stock option plans to incentivize senior management and employees [126]. - The total employee cost (excluding directors' remuneration) for the year ended December 31, 2022, was approximately HKD 331.2 million, an increase from HKD 279.7 million for the year ended December 31, 2021 [104]. - The group had 579 employees as of December 31, 2022, compared to 570 employees as of December 31, 2021 [104]. Compliance and Governance - The company has complied with all relevant laws and regulations impacting its business operations during the fiscal year [123]. - Environmental protection is recognized as crucial for the company's long-term development, with no penalties incurred for non-compliance with health, safety, or environmental regulations during the fiscal year [124].

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) The Group's total revenue decreased by 3.7% to HK$10,006.1 million in FY2022, while gross profit increased by 10.6% to HK$1,094.7 million 2022 Financial Year Key Financial Data | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 10,006.1 | 10,389.3 | -3.7% | | Gross Profit | 1,094.7 | 990.0 | +10.6% | | Net Profit Attributable to Owners of the Company | 164.7 | 214.1 | -23.1% | | Basic Earnings Per Share (HK cents) | 34.03 | 43.82 | -22.3% | | Diluted Earnings Per Share (HK cents) | 33.89 | N/A | - | - The Board recommended a final dividend of **HK 6 cents per share** for FY2022, a decrease from HK 8 cents per share in 2021[196](index=196&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In FY2022, Group revenue decreased by 3.7% to HK$10,006.1 million, while gross profit increased by 10.6% to HK$1,094.7 million, with net profit attributable to owners of the Company decreasing by 23.1% to HK$164.7 million due to increased expenses and exchange losses 2022 Financial Year Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary | Indicator | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 10,006,078 | 10,389,312 | | Cost of Sales | (8,911,337) | (9,399,359) | | Gross Profit | 1,094,741 | 989,953 | | Other Income | 21,289 | 11,374 | | Other Gains or (Losses) – Net | (44,142) | 2,229 | | Net Impairment Loss (Reversal) under Expected Credit Loss Model | 30,305 | (18,911) | | Research and Development Expenses | (39,562) | (40,172) | | Administrative Expenses | (144,732) | (113,604) | | Selling and Distribution Expenses | (380,454) | (300,642) | | Share of Results of an Associate | 32 | (4,837) | | Finance Costs | (79,179) | (53,769) | | Profit Before Tax | 458,298 | 471,621 | | Income Tax Expense | (78,553) | (79,720) | | Profit for the Year | 379,745 | 391,901 | | Profit for the Year Attributable to Owners of the Company | 164,736 | 214,061 | | Profit for the Year Attributable to Non-controlling Interests | 215,009 | 177,840 | | Basic Earnings Per Share (HK cents) | 34.03 | 43.82 | | Diluted Earnings Per Share (HK cents) | 33.89 | N/A | [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2022, the Group's net current assets increased to HK$935.9 million, with the current ratio improving to 1.57 times, and total assets less current liabilities rising to HK$1,215 million 2022 Financial Year Consolidated Statement of Financial Position Summary | Indicator | December 31, 2022 (HK$ thousand) | December 31, 2021 (HK$ thousand) | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment | 15,118 | 8,408 | | Right-of-use Assets | 21,728 | 26,689 | | Goodwill | 29,894 | 9,735 | | Intangible Assets | 9,888 | 4,384 | | Financial Assets at Fair Value Through Profit or Loss | 157,547 | 152,149 | | Deferred Tax Assets | 5,882 | 9,011 | | **Current Assets** | | | | Inventories | 288,388 | 606,026 | | Trade and Bills Receivables | 1,212,520 | 1,984,625 | | Pledged Bank Deposits | 457,286 | 420,830 | | Cash and Cash Equivalents | 494,405 | 290,931 | | **Current Liabilities** | | | | Trade Payables | 350,674 | 536,103 | | Bank and Other Borrowings | 1,025,519 | 1,628,565 | | **Non-current Liabilities** | | | | Bank and Other Borrowings | 4,707 | 9,567 | | **Equity** | | | | Total Equity | 1,200,923 | 1,042,875 | [Notes to the Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [General Information](index=6&type=section&id=General%20Information) The Company is an investment holding company incorporated in the Cayman Islands, with its subsidiaries primarily engaged in the trading of electronic components, and its shares listed on the Main Board of the Hong Kong Stock Exchange - The Company is an investment holding company, with its subsidiaries primarily engaged in the trading of electronic components[2](index=2&type=chunk) - The Company's shares are listed on the Main Board of the Hong Kong Stock Exchange, with its functional currency being USD and presentation currency being HKD[201](index=201&type=chunk)[213](index=213&type=chunk) [Application of Amended Hong Kong Financial Reporting Standards](index=6&type=section&id=Application%20of%20Amended%20Hong%20Kong%20Financial%20Reporting%20Standards) Several amended Hong Kong Financial Reporting Standards were first applied this year, with no material impact on the Group's financial position or performance - Several amended Hong Kong Financial Reporting Standards were first applied this year, but they had no material impact on the Group's financial position and performance[3](index=3&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[214](index=214&type=chunk) - Amendments to HKFRS 9 clarified the criteria for assessing the substantial modification of financial liability terms, including only fees paid or received between the borrower and the lender[203](index=203&type=chunk)[216](index=216&type=chunk) [Revenue](index=7&type=section&id=Revenue) The Group's revenue primarily derives from the sale of electronic components, totaling HK$10,006.1 million in 2022, a 3.7% year-on-year decrease, with product lines in authorized distribution reorganized into Smart Display and Smart Vision Revenue by Category of Goods or Services and Timing of Recognition | Category | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Sale of Electronic Components | 10,006,078 | 10,389,312 | | Recognized at a point in time | 10,006,078 | 10,389,312 | Revenue by Sales Channel/Product Line | Sales Channel/Product Line | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | **Authorized Distribution** | | | | Optoelectronic Display | 1,080,031 | 1,860,011 | | Storage Products | 301,608 | 513,578 | | Communication Products | 683,334 | 672,731 | | Smart Vision | 1,428,147 | 1,344,174 | | Smart Display | 2,899,524 | 2,776,541 | | Integrated Products | 266,953 | 151,334 | | Others | 231,822 | 209,733 | | **Total Authorized Distribution** | **6,891,419** | **7,528,102** | | **Independent Distribution** | **3,114,659** | **2,861,210** | | **Total** | **10,006,078** | **10,389,312** | - In 2022, the Group reorganized its authorized distribution sales channels/product lines, reclassifying most TV products and smart terminals into Smart Display, and most security monitoring and other product lines into Smart Vision[7](index=7&type=chunk) [Segment Information](index=8&type=section&id=Segment%20Information) The Group's reportable segments include authorized distribution and independent distribution, with Hong Kong remaining the largest market, while China and Singapore markets experienced significant revenue growth Segment Revenue and Profit (2022) | Segment | Revenue from External Customers (HK$ thousand) | Segment Profit (HK$ thousand) | | :--- | :--- | :--- | | Authorized Distribution | 6,891,419 | 89,051 | | Independent Distribution | 3,114,659 | 299,469 | | **Total Segments** | **10,006,078** | **388,520** | Segment Revenue and Profit (2021) | Segment | Revenue from External Customers (HK$ thousand) | Segment Profit (HK$ thousand) | | :--- | :--- | :--- | | Authorized Distribution | 7,528,102 | 143,486 | | Independent Distribution | 2,861,210 | 260,826 | | **Total Segments** | **10,389,312** | **404,312** | Sales Analysis by Geographical Market | Region | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Hong Kong | 7,323,814 | 8,336,444 | | China | 1,906,177 | 1,807,406 | | Singapore | 584,600 | 240,101 | | Japan | 161,527 | 2,080 | | Others | 29,960 | 3,281 | | **Total** | **10,006,078** | **10,389,312** | [Income Tax Expense](index=11&type=section&id=Income%20Tax%20Expense) Total income tax expense for 2022 was HK$78.553 million, a slight decrease from HK$79.720 million in 2021, primarily comprising China enterprise income tax, Hong Kong profits tax, and Singapore enterprise income tax Income Tax Expense Composition | Tax Category | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Current Tax: Hong Kong Profits Tax | 6,384 | 8,763 | | China Enterprise Income Tax | 56,084 | 68,511 | | Singapore Enterprise Income Tax | 13,351 | 6,148 | | Deferred Tax | 2,734 | (3,702) | | **Total** | **78,553** | **79,720** | [Dividends](index=12&type=section&id=Dividends) The Board recommended a final dividend of HK 6 cents per share for FY2022, totaling approximately HK$29.321 million, which is lower than the HK 8 cents per share (totaling HK$38.944 million) for FY2021 - The Board recommended a final dividend of **HK 6 cents per share** for FY2022, totaling approximately **HK$29.321 million**[33](index=33&type=chunk)[229](index=229&type=chunk) - The final dividend for FY2021 was **HK 8 cents per share**, totaling **HK$38.944 million**[33](index=33&type=chunk)[229](index=229&type=chunk) Dividends Declared and Paid to Ordinary Shareholders | Dividend Type | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | 2022 Interim Dividend (HK 4 cents per share) | 19,199 | 19,599 | | 2021 Final Dividend (HK 8 cents per share) | 38,944 | 19,547 | | **Total** | **58,143** | **39,146** | [Earnings Per Share](index=13&type=section&id=Earnings%20Per%20Share) In FY2022, profit for the year attributable to owners of the Company was HK$164.7 million, resulting in basic earnings per share of HK 34.03 cents and diluted earnings per share of HK 33.89 cents Earnings Per Share Calculation Data | Indicator | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Profit for the Year Attributable to Owners of the Company | 164,736 | 214,061 | | **Number of Ordinary Shares** | **2022** | **2021** | | Weighted Average for Basic EPS | 484,045,140 | 488,524,783 | | Effect of Dilutive Potential Ordinary Shares (Restricted Share Units) | 2,000,000 | – | | Weighted Average for Diluted EPS | 486,045,140 | 488,524,783 | - Basic earnings per share for 2022 was **HK 34.03 cents**, and diluted earnings per share was **HK 33.89 cents**[196](index=196&type=chunk)[198](index=198&type=chunk) [Trade and Bills Receivables](index=13&type=section&id=Trade%20and%20Bills%20Receivables) As of December 31, 2022, total trade and bills receivables significantly decreased to HK$1.213 billion from HK$1.985 billion in 2021, with the trade receivables turnover period increasing to 58 days due to delayed payments from some SME customers Trade and Bills Receivables | Indicator | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Trade Receivables | 1,212,970 | 1,932,795 | | Less: Provision for Credit Losses | (23,172) | (53,348) | | Bills Receivables | 23,278 | 105,344 | | Less: Provision for Credit Losses | (556) | (166) | | **Total** | **1,212,520** | **1,984,625** | Ageing Analysis of Trade Receivables (Net of Provision for Credit Losses) | Ageing | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | 0–60 Days | 823,528 | 1,307,653 | | 61–120 Days | 321,450 | 479,411 | | Over 120 Days | 44,820 | 92,383 | | **Total** | **1,189,798** | **1,879,447** | - The trade receivables turnover period increased from **54 days in 2021 to 58 days in 2022**, primarily due to delayed payments from some small and medium-sized enterprise customers[159](index=159&type=chunk) [Trade Payables](index=14&type=section&id=Trade%20Payables) As of December 31, 2022, trade payables significantly decreased to HK$351 million from HK$536 million in 2021, with the turnover period improving from 22 days to 18 days Ageing Analysis of Trade Payables | Ageing | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | 0–30 Days | 269,729 | 448,331 | | 31–60 Days | 19,174 | 56,621 | | 61–90 Days | 36,670 | 27,712 | | Over 90 Days | 25,101 | 3,439 | | **Total** | **350,674** | **536,103** | - The trade payables turnover period improved from **22 days in 2021 to 18 days in 2022**, primarily due to timely repayment of supplier accounts[160](index=160&type=chunk) [Bank and Other Borrowings](index=15&type=section&id=Bank%20and%20Other%20Borrowings) As of December 31, 2022, the Group's outstanding bank borrowings significantly decreased to HK$1.03 billion from HK$1.638 billion in 2021, with the gearing ratio falling from 159.8% to 87.7% Bank and Other Borrowings Composition | Borrowing Type | 2022 (HK$ thousand) | 2021 (HK$ thousand) | | :--- | :--- | :--- | | Import and Export Loans | 464,411 | 747,803 | | Other Bank Borrowings | 556,801 | 890,329 | | Other Borrowings | 9,014 | – | | **Total** | **1,030,226** | **1,638,132** | - The gearing ratio decreased from **159.8% as of December 31, 2021, to 87.7% as of December 31, 2022**, primarily due to a reduction in bank borrowings[128](index=128&type=chunk) - Certain bank facilities contain covenants such as financial ratios, and the Board confirmed no breaches occurred in either year[52](index=52&type=chunk) [Management Discussion and Analysis](index=16&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=16&type=section&id=Business%20Review) In 2022, despite global economic challenges and a downturn in the consumer electronics industry, the Group's authorized distribution business developed new product lines, and independent distribution achieved growth through scale expansion and efficiency improvements, resulting in a slight 3.7% decrease in total sales but a 10.6% increase in gross profit - The global economic recovery faced significant difficulties in 2022, with global economic growth sharply declining from **5.7% in 2021 to 3%**[34](index=34&type=chunk) - The consumer electronics industry was impacted by slowing global consumer demand, with significant declines in shipments of smartphones, tablets, PCs, and TVs[55](index=55&type=chunk) - Global semiconductor sales increased by **3.2% to US$573.5 billion in 2022**, falling short of expectations, primarily constrained by reduced demand for consumer electronic products[56](index=56&type=chunk) 2022 Group Overall Performance | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 10,006.1 | -3.7% | | Gross Profit | 1,094.7 | +10.6% | [Authorized Distribution Business](index=17&type=section&id=Authorized%20Distribution%20Business) The authorized distribution business faced market demand challenges in 2022 but achieved growth in some units by expanding new product lines and optimizing its business structure, with Smart Display and Smart Vision showing slight increases while Optoelectronic Display and Storage Products declined significantly - The authorized distribution business steadily served existing customer groups while actively exploring new product lines with growth potential[35](index=35&type=chunk) - The Group's invested optoelectronic device semiconductor business began mass shipments in 2022 and has achieved break-even[87](index=87&type=chunk) [Smart Display](index=18&type=section&id=Smart%20Display) The Smart Display business accounted for nearly 30% of Group revenue, with sales of HK$2,899.5 million in 2022, a 4.4% year-on-year increase, despite a decline in global TV shipments, driven by growth opportunities in smart home projectors and laser projection Smart Display Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 2,899.5 | +4.4% | - Global TV set shipments decreased by **3.9% year-on-year in 2022**, reaching a ten-year low, but shipments of smart home projectors increased by **51%**, and the laser projection market grew by **214%**[58](index=58&type=chunk) [Optoelectronic Display](index=18&type=section&id=Optoelectronic%20Display) The Optoelectronic Display business, focusing on display drivers, touch, and mobile TDDI chips, saw sales sharply decline by 41.9% to HK$1,080.0 million in 2022 due to the global slump in electronic product demand Optoelectronic Display Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 1,080.0 | -41.9% | - In 2022, smartphone and tablet sales both declined by approximately **12%**, the PC market by **16.2%**, and the laptop market by **22.8%**, significantly impacting shipments of Tcon, Driver, Power, Scaler, and CMOS image sensor chips[59](index=59&type=chunk) [Smart Vision](index=18&type=section&id=Smart%20Vision) The Smart Vision business, primarily involving camera-related equipment, achieved sales of HK$1,428.1 million in 2022, a 6.2% year-on-year increase, despite market challenges from the pandemic and supply chain instability, by actively expanding new product lines, application scenarios, and customer bases Smart Vision Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 1,428.1 | +6.2% | - Camera-related equipment accounts for nearly **50%** of China's security market, with consumer-grade product shipments reaching approximately **18.7 million units in 2022**, holding nearly **80%** market share[60](index=60&type=chunk) [Communication Products](index=19&type=section&id=Communication%20Products) The Communication Products business, selling MCP storage chips and RF PA chips for cellular IoT modules, achieved sales of HK$683.3 million in 2022, a 1.6% year-on-year increase, driven by the rapid growth of the IoT market, making China the first country to achieve "things outnumbering people" in mobile IoT connections Communication Products Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 683.3 | +1.6% | - As of the end of September 2022, China's mobile IoT connections totaled **1.75 billion**, accounting for over **70%** of the global total[92](index=92&type=chunk) [Storage Products](index=19&type=section&id=Storage%20Products) The Storage Products business experienced a sharp 41.3% decline in sales to HK$301.6 million in 2022, severely impacted by weak market demand for PCs, laptops, tablets, and smartphones, leading to halved storage chip prices and significant performance drops for major manufacturers Storage Products Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 301.6 | -41.3% | - Since the second half of 2021, market demand for PCs, laptops, tablets, and smartphones has remained weak, leading to a severe oversupply of storage chips, with prices and shipments continuously declining[93](index=93&type=chunk) [Integrated Products](index=19&type=section&id=Integrated%20Products) The Integrated Products division, including AIoT, MCU, CE, and software product groups, achieved a significant 76.4% increase in sales to HK$267.0 million in 2022, benefiting from the rapid growth of the IoT, smart hardware, and software services markets, with fast growth in WLAN and Bluetooth BLE IoT businesses Integrated Products Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 267.0 | +76.4% | - The Integrated Products division focuses on wireless interconnectivity in WLAN, LPWAN, and Bluetooth BLE, with the MCU product group expanding into smart hardware applications, the CE product group focusing on the consumer electronics market, and the software group based on SaaS cloud services[94](index=94&type=chunk) [Optoelectronic Products](index=20&type=section&id=Optoelectronic%20Products) The Optoelectronic Products business, promoting core optical components for 5G wireless optical communication modules and data center optical interconnect modules, saw sales decline by 18.8% to HK$93.7 million in 2022 due to slowing 5G infrastructure construction amid global economic inflation and recession expectations Optoelectronic Products Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 93.7 | -18.8% | - The slowdown in 5G infrastructure construction led to poor sales of optical modules for wireless access at the client end, and new generation technical solutions and chips have not yet generated revenue[65](index=65&type=chunk) [Independent Distribution Business](index=20&type=section&id=Independent%20Distribution%20Business) The independent distribution business maintained strong growth in 2022, with sales increasing by 8.9% to HK$3,114.7 million, achieving performance gains by expanding scale, improving efficiency, and making breakthroughs in overseas markets despite a decline in domestic demand Independent Distribution Business Sales Revenue | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 3,114.7 | +8.9% | - The independent distribution business maintained stability in the domestic market and achieved breakthroughs in overseas markets by expanding its business scale and improving operational efficiency[66](index=66&type=chunk) - Independent distribution business volume now accounts for **one-third** of the Group's total revenue[87](index=87&type=chunk) [Outlook for 2023](index=20&type=section&id=Outlook%20for%202023) In 2023, while the global economy is expected to slow and the semiconductor market faces downward pressure, China's economy is projected to accelerate, prompting the Group to continue diversifying its business and investing in overseas markets to seize new opportunities in the semiconductor downturn, particularly in AI applications and data centers - The UN predicts global economic growth will decrease from **3% in 2022 to 1.9% in 2023**, but China's economy is expected to accelerate to **4.8%**[67](index=67&type=chunk) - Industry research institutions generally predict a negative growth for the global semiconductor market in 2023, with an average decline of around **-6.9%**, expected to bottom out in the first half and recover in the second half[68](index=68&type=chunk) - The Group will continue to actively invest in business diversification and overseas markets, enhance its business resilience, and seize new opportunities during the semiconductor industry downturn[69](index=69&type=chunk)[144](index=144&type=chunk) [Authorized Distribution Business Outlook](index=21&type=section&id=Authorized%20Distribution%20Business%20Outlook) The authorized distribution business faces challenges in 2023, with a cautious outlook for Smart Display and Optoelectronic Display, but Smart Vision, Communication Products, and Integrated Products are expected to maintain good growth, while the storage market remains unfavorable, and Optoelectronic Products may benefit from accelerated 5G and AI infrastructure development - TrendForce predicts global TV panel shipments will slightly decrease by **2.8% year-on-year in 2023**, and global TV set shipments will continue to decline by **1.4% to 199 million units**[69](index=69&type=chunk) - Gartner predicts that PCs will be the category with the largest decline among all devices in 2023, expected to decrease by **6.8%**, with mobile phones declining by **4%**, but the rate of decline is expected to slow compared to 2022[71](index=71&type=chunk) - China's consumer-grade camera market size is expected to reach **51.2 million units in 2023**, a year-on-year increase of **8.5%**, and the security video surveillance equipment market size will grow by **6.8% to US$25 billion**[73](index=73&type=chunk)[74](index=74&type=chunk) [Smart Display Outlook](index=21&type=section&id=Smart%20Display%20Outlook) A cautious outlook is held for the Smart Display business performance in 2023, with global TV panel shipments expected to slightly decrease by 2.8% and global TV set shipments to continue declining by 1.4% - TrendForce predicts global TV panel shipments will slightly decrease by **2.8% year-on-year in 2023**, and global TV set shipments will continue to decline by **1.4% to 199 million units**[69](index=69&type=chunk) - Global TV shipments are expected to decline sharply by **24.3% in Q1 2023**, with Chinese brands declining by **30.6%**[100](index=100&type=chunk) [Optoelectronic Display Outlook](index=22&type=section&id=Optoelectronic%20Display%20Outlook) The Optoelectronic Display business is heavily influenced by PC and laptop market demand, with the market situation remaining unclear, though China's enterprise PC procurement demand is expected to rebound in 2023 - Gartner predicts that PCs will be the category with the largest decline among all devices in 2023, expected to decrease by **6.8%**[71](index=71&type=chunk) - IDC believes that China's enterprise PC procurement demand will bottom out in 2023, with large enterprise market PC procurement demand expected to increase by **3.7% year-on-year in the second half**[102](index=102&type=chunk) [Smart Vision Outlook](index=22&type=section&id=Smart%20Vision%20Outlook) The Smart Vision business market is relatively stable and active, expected to maintain good growth in 2023, with China's consumer-grade camera market size projected to reach 51.2 million units, an 8.5% year-on-year increase - RUNTO predicts China's consumer-grade camera market size will reach **51.2 million units in 2023**, a year-on-year increase of **8.5%**[73](index=73&type=chunk) - The global security video surveillance equipment market size will grow by **6.8% to US$25 billion in 2023**[74](index=74&type=chunk) [Communication Products Outlook](index=23&type=section&id=Communication%20Products%20Outlook) The Communication Products business is expected to maintain rapid growth in 2023, with 5G RF PA potentially bringing new revenue increments, and global cellular IoT module shipments projected to exceed 1.2 billion by 2030 - 5G Red Cap is expected to be commercialized in 2023, primarily applied in video surveillance, industrial sensing, wearables, and smart grids[75](index=75&type=chunk) - Counterpoint predicts that global cellular IoT module annual shipments will exceed **1.2 billion by 2030**, with an average compound annual growth rate of **12%**[106](index=106&type=chunk) - This business unit's 5G RF PA achieved significant sales in 2022 and is expected to bring new revenue increments in 2023[107](index=107&type=chunk) [Storage Products Outlook](index=24&type=section&id=Storage%20Products%20Outlook) The overall storage chip market remains unfavorable, with WSTS predicting a further 17% decline in global storage chip market size in 2023, requiring the Group to actively seek new growth points in AI applications and data centers while awaiting industry recovery - WSTS predicts that the global storage chip market size will experience a further **17% decline in 2023**[77](index=77&type=chunk) - TrendForce research indicates that Nand flash prices will narrow their decline to **10–15% in Q1 2023**, with the industry expected to enter an upward cycle of both volume and price by 2024 at the latest[139](index=139&type=chunk) [Optoelectronic Products Outlook](index=24&type=section&id=Optoelectronic%20Products%20Outlook) The Optoelectronic Products business is expected to see new growth in 2023, benefiting from China's economic recovery and accelerated 5G and AI infrastructure construction, with the Group promoting 400G/800G silicon photonic integrated optical modules and next-generation 50G PON solutions - With strengthening expectations for China's economic recovery in 2023, infrastructure construction around **5G and AI artificial intelligence** is expected to accelerate[78](index=78&type=chunk) - The Group is promoting **400G/800G silicon photonic integrated optical module solutions** for data centers and next-generation **50G PON solutions** for FTTX[79](index=79&type=chunk) - ChatGPT's high demand for computing power means that **800Gbps high-end products** even have the opportunity to become the largest source of orders in the incremental market[140](index=140&type=chunk) [Integrated Products Outlook](index=25&type=section&id=Integrated%20Products%20Outlook) The Integrated Products business is expected to continue its strong growth in 2023, achieving counter-cyclical growth, with the global MCU market size projected to reach US$24.3 billion and China's MCU market size reaching RMB42 billion, a 7.7% year-on-year increase - ICInsight predicts the global MCU market size will reach **US$24.3 billion in 2023**, and IHS predicts China's MCU market size will reach **RMB42 billion**, a year-on-year increase of **7.7%**[80](index=80&type=chunk) - Markets and Markets Research predicts the global IoT market size will reach **US$650.5 billion by 2026**, with an average compound annual growth rate of **16.7% from 2021-2026**[111](index=111&type=chunk) - This business unit maintained rapid growth during the industry downturn in 2022 and is expected to continue its strong growth trend after market demand recovers in 2023[142](index=142&type=chunk) [Independent Distribution Business Outlook](index=25&type=section&id=Independent%20Distribution%20Business%20Outlook) The independent distribution business faces both challenges and opportunities in 2023, continuing to benefit from imbalances in electronic industry supply and demand and overseas market expansion, with the Group actively developing its international presence and leveraging its extensive domestic spot chip inventory - The independent distribution business primarily includes "reverse supply chain" and "spot trading" models, which can meet manufacturers' sudden incremental spot demands[81](index=81&type=chunk) - Independent distribution, as a crucial business model in the semiconductor supply chain, can effectively meet the incremental demand arising from imbalances in electronic component supply and demand[113](index=113&type=chunk) - The Group's independent distribution business invested heavily in developing overseas operations in 2022, actively expanding and improving its global business network, laying a solid foundation for business growth in 2023[113](index=113&type=chunk) [Summary](index=26&type=section&id=Summary) The Group has built an "all-round" distribution business system through comprehensive strategic deployment in authorized distribution, independent distribution, value-added technology, e-commerce platforms, semiconductor design, manufacturing, and packaging, aiming to consolidate authorized distribution, expand global independent distribution, promote value-added technology and e-commerce, and enhance optical communication device development in the semiconductor sector to improve efficiency and profitability through digitalization - The Group has built an "all-round" distribution business system through diversified strategic deployment and the establishment of domestic and international business networks, ensuring steady business growth[114](index=114&type=chunk) - In the future, the Group will continue to consolidate and expand its authorized distribution business, explore overseas market opportunities, develop its independent distribution business, and build a business data platform[83](index=83&type=chunk) - The Group will promote the growth of value-added technology and e-commerce platform businesses, strengthen the development and implementation of new optical communication devices in the semiconductor industry, and enhance business quality and profitability through digitalization[83](index=83&type=chunk)[115](index=115&type=chunk) [Financial Review](index=27&type=section&id=Financial%20Review) [Revenue and Gross Profit](index=27&type=section&id=Revenue%20and%20Gross%20Profit) In FY2022, Group revenue decreased by 3.7% to HK$10,006.1 million, primarily due to reduced sales of optoelectronic display and storage products, while gross profit increased by 10.6% to HK$1,094.7 million, with the gross profit margin rising by 1.4 percentage points to 10.9% due to higher margins in independent distribution Revenue and Gross Profit Overview | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 10,006.1 | 10,389.3 | -3.7% | | Gross Profit | 1,094.7 | 990.0 | +10.6% | | Gross Profit Margin | 10.9% | 9.5% | +1.4pp | - The decrease in revenue was primarily due to a reduction in sales of optoelectronic display and storage products by approximately **HK$992 million**[116](index=116&type=chunk) - The increase in gross profit margin was mainly due to the higher gross profit margin of the independent distribution business[116](index=116&type=chunk) [Expense Analysis](index=27&type=section&id=Expense%20Analysis) In FY2022, R&D expenses slightly decreased, while administrative, selling, and distribution expenses significantly increased due to higher staff and marketing costs, and finance costs rose due to increased bank borrowing interest rates, with the share of results of an associate turning from loss to profit [Research and Development Expenses](index=27&type=section&id=Research%20and%20Development%20Expenses) In FY2022, research and development expenses were HK$39.6 million, a 1.5% year-on-year decrease, primarily comprising staff costs for the R&D department Research and Development Expenses | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | :--- | | R&D Expenses | 39.6 | 40.2 | -1.5% | [Administrative, Selling and Distribution Expenses](index=28&type=section&id=Administrative,%20Selling%20and%20Distribution%20Expenses) In FY2022, administrative, selling, and distribution expenses totaled HK$525.2 million, an increase of HK$111 million (or 26.8%) year-on-year, representing 5.2% of revenue, mainly due to increased staff and marketing costs to support business expansion Administrative, Selling and Distribution Expenses | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | YoY Change (HK$ million) | | :--- | :--- | :--- | :--- | | Admin, Selling & Distribution Expenses | 525.2 | 414.2 | +111.0 | | % of Revenue | 5.2% | 4.0% | +1.2pp | - The increase in expenses was primarily due to increased staff costs and marketing expenses to support business expansion[150](index=150&type=chunk) [Finance Costs](index=28&type=section&id=Finance%20Costs) In FY2022, finance costs were HK$79.2 million, an increase of HK$25.4 million year-on-year, mainly due to higher bank borrowing interest rates during the year Finance Costs | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | | :--- | :--- | :--- | | Finance Costs | 79.2 | 53.8 | - The increase in interest expenses was primarily due to higher bank borrowing interest rates during the year[150](index=150&type=chunk) [Share of Results of an Associate](index=28&type=section&id=Share%20of%20Results%20of%20an%20Associate) In FY2022, the Group recorded a profit of approximately HK$0.03 million from its share of results of an associate, compared to a loss of HK$4.8 million in 2021, mainly due to improved operations of Shanghai Zhoujia Optoelectronics Co., Ltd Share of Results of an Associate | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | | :--- | :--- | :--- | | Share of Results of an Associate | +0.03 | -4.8 | - This profit was primarily due to improved operations of the associate, Shanghai Zhoujia Optoelectronics Co., Ltd[151](index=151&type=chunk) [Profit for the Year and Net Profit](index=28&type=section&id=Profit%20for%20the%20Year%20and%20Net%20Profit) In FY2022, the Group's profit for the year was HK$379.7 million, a 3.1% year-on-year decrease, and net profit attributable to owners of the Company was HK$164.7 million, a 23.1% year-on-year decrease, mainly due to increased administrative, selling, and distribution expenses and net exchange losses Profit for the Year and Net Profit | Indicator | 2022 (HK$ million) | 2021 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Profit for the Year | 379.7 | 391.9 | -3.1% | | Net Profit Attributable to Owners of the Company | 164.7 | 214.1 | -23.1% | | Net Profit Margin | 3.8% | 3.8% | 0.0pp | - The decrease in profit for the year was primarily due to increased administrative, selling, and distribution expenses and net exchange losses, partially offset by the reversal of impairment losses under the expected credit loss model[151](index=151&type=chunk) [Use of Proceeds from Global Offering](index=29&type=section&id=Use%20of%20Proceeds%20from%20Global%20Offering) As of December 31, 2022, the Group had utilized HK$179.5 million of the net proceeds from its listing, with HK$26.3 million remaining as bank deposits, allocated for new staff recruitment, e-commerce platform promotion, technology infrastructure upgrades, R&D, and potential acquisitions or investments Use of Proceeds from Global Offering and Utilization | Use of Proceeds | Net Amount (HK$ million) | Amount Utilized as of Dec 31, 2022 (HK$ million) | Remaining Amount (HK$ million) | | :--- | :--- | :--- | :--- | | Recruit new staff for sales, marketing, and business development, and upgrade warehouse facilities | 20.6 | 20.6 | 0.0 | | Advertising and marketing activities for e-commerce platform, Xinquiu program, and new products | 41.2 | 41.2 | 0.0 | | Upgrade, further develop, and maintain our e-commerce platform and improve technology infrastructure | 41.2 | 14.9 | 26.3 | | For research and development | 20.6 | 20.6 | 0.0 | | Fund potential acquisitions or investments in e-commerce or electronics industry businesses or companies | 61.7 | 61.7 | 0.0 | | General working capital | 20.5 | 20.5 | 0.0 | | **Total** | **205.8** | **179.5** | **26.3** | - The timeline for utilizing the remaining net proceeds was delayed due to factors such as technological changes, US-China trade tensions, social unrest in Hong Kong, and the outbreak of COVID-19[126](index=126&type=chunk) [Liquidity and Financial Resources](index=30&type=section&id=Liquidity%20and%20Financial%20Resources) The Group possesses sufficient cash and bank financing to meet its commitments, with total bank balances and cash of HK$951.7 million, net current assets of HK$935.9 million, and a current ratio of 1.57 times as of December 31, 2022, while inventory turnover remained stable, trade receivables turnover slightly increased, and trade payables turnover improved Liquidity Indicators | Indicator | December 31, 2022 (HK$ million) | December 31, 2021 (HK$ million) | | :--- | :--- | :--- | | Bank Balances and Cash | 951.7 | 711.8 | | Current Assets | 2,581.8 | 3,387.4 | | Current Liabilities | 1,646.0 | 2,571.4 | | Net Current Assets | 935.9 | 816.0 | | Current Ratio | 1.57x | 1.32x | Turnover Period Indicators | Indicator | 2022 (Days) | 2021 (Days) | | :--- | :--- | :--- | | Inventory Turnover Period | 18 | 20 | | Trade Receivables Turnover Period | 58 | 54 | | Trade Payables Turnover Period | 18 | 22 | - The increase in trade receivables turnover period was due to delayed payments from certain small and medium-sized enterprise customers affected by changes in the economic environment[159](index=159&type=chunk) [Foreign Currency Risk](index=31&type=section&id=Foreign%20Currency%20Risk) The Group's transactions are primarily denominated in USD and RMB, recording a net exchange loss of approximately HK$41 million in FY2022, though business operations were not materially adversely affected, and while no foreign currency hedging policy is currently adopted, the Group will consider using forward foreign exchange contracts if risks become significant - The Group's transactions are primarily denominated in **USD and RMB**, and a net exchange loss of approximately **HK$41 million** was recorded in FY2022[161](index=161&type=chunk) - The Group currently does not adopt a foreign currency hedging policy but will consider using forward foreign exchange contracts when foreign exchange risks become significant[161](index=161&type=chunk) [Pledged Assets](index=31&type=section&id=Pledged%20Assets) As of December 31, 2022, the Group had pledged HK$153 million in financial assets, HK$338.8 million in factored trade receivables, and HK$457.3 million in bank deposits as collateral for bank borrowings and financing arrangements Pledged Assets | Asset Type | 2022 (HK$ million) | 2021 (HK$ million) | | :--- | :--- | :--- | | Financial Assets at Fair Value Through Profit or Loss | 153.0 | 147.3 | | Factored Trade Receivables | 338.8 | 854.3 | | Bank Deposits | 457.3 | 420.8 | [Material Investments Held](index=31&type=section&id=Material%20Investments%20Held) The Group held no material investments for the years ended December 31, 2022, and 2021 - The Group held no material investments for the years ended December 31, 2022, and 2021[162](index=162&type=chunk)[179](index=179&type=chunk) [Capital Commitments and Contingent Liabilities](index=31&type=section&id=Capital%20Commitments%20and%20Contingent%20Liabilities) The Group had no material capital commitments or contingent liabilities for the years ended December 31, 2022, and 2021 - The Group had no material capital commitments or contingent liabilities for the years ended December 31, 2022, and 2021[133](index=133&type=chunk)[162](index=162&type=chunk) [Material Acquisitions and Disposals of Subsidiaries and Associates](index=31&type=section&id=Material%20Acquisitions%20and%20Disposals%20of%20Subsidiaries%20and%20Associates) For the year ended December 31, 2022, the Group did not undertake any material acquisitions or disposals of subsidiaries and associates - For the year ended December 31, 2022, the Group did not undertake any material acquisitions or disposals of subsidiaries and associates[134](index=134&type=chunk)[180](index=180&type=chunk) [Other Information](index=32&type=section&id=Other%20Information) [Employees](index=32&type=section&id=Employees) As of December 31, 2022, the Group's employee count was 579, a slight increase from 2021, with total employee costs (excluding directors' emoluments) amounting to approximately HK$331.2 million Employee Count and Costs | Indicator | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Number of Employees | 579 | 570 | | Total Employee Costs (HK$ million) | 331.2 | 279.7 | [Employee Incentive Schemes](index=32&type=section&id=Employee%20Incentive%20Schemes) The Group adopted a Share Award Scheme and a Share Option Scheme in 2016, with the trustee acquiring 15.6 million shares and granting 3 million share awards to employees in FY2022, resulting in a total share-based payment expense of HK$2.6 million - The Group adopted a Share Award Scheme and a Share Option Scheme on **September 19, 2016**[137](index=137&type=chunk)[164](index=164&type=chunk) - In FY2022, the trustee acquired **15.6 million shares** and granted **3 million share awards** to employees under the Share Award Scheme[183](index=183&type=chunk) - In FY2022, the Group recognized a total share-based payment expense of **HK$2.6 million**[183](index=183&type=chunk) [Purchase, Sale or Redemption of Listed Securities](index=33&type=section&id=Purchase,%20Sale%20or%20Redemption%20of%20Listed%20Securities) For the year ended December 31, 2022, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities - For the year ended December 31, 2022, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities[138](index=138&type=chunk)[184](index=184&type=chunk) [Events After the Reporting Period Ended December 31, 2022](index=33&type=section&id=Events%20After%20the%20Reporting%20Period%20Ended%20December%2031,%202022) As of the date of this announcement, the Group had no material subsequent events requiring disclosure after December 31, 2022 - As of the date of this announcement, the Group had no material subsequent events requiring disclosure after December 31, 2022[185](index=185&type=chunk) [Compliance with Corporate Governance Code](index=33&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company complied with the Corporate Governance Code throughout FY2022, with one deviation from code provision C.2.1 where the roles of Chairman and Chief Executive Officer were combined, which the Board believes ensures consistent internal leadership and efficient strategic planning - The Company complied with the Corporate Governance Code throughout FY2022, except for a deviation from code provision C.2.1[168](index=168&type=chunk) - The deviation from code provision C.2.1, where the roles of Chairman and Chief Executive Officer are combined and held by Mr. Tian Weidong, is believed by the Board to ensure consistent internal leadership and efficient strategic planning[169](index=169&type=chunk)[186](index=186&type=chunk) [Standard Code for Securities Transactions](index=34&type=section&id=Standard%20Code%20for%20Securities%20Transactions) The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, and all Directors have confirmed full compliance throughout FY2022 - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all Directors have confirmed full compliance throughout FY2022[188](index=188&type=chunk) [Sufficiency of Public Float](index=34&type=section&id=Sufficiency%20of%20Public%20Float) For the year ended December 31, 2022, and up to the date of this announcement, at least 25% of the Company's total issued share capital was held by the public, meeting the minimum public float requirement of the Stock Exchange - For the year ended December 31, 2022, and up to the date of this announcement, at least **25%** of the Company's total issued share capital was held by the public[189](index=189&type=chunk) [Audit Committee](index=34&type=section&id=Audit%20Committee) The Company has established an Audit Committee comprising three independent non-executive directors, responsible for reviewing and monitoring the Group's financial reporting process and internal control systems, and has reviewed the audited consolidated financial statements for FY2022 - The Audit Committee comprises three independent non-executive directors, with primary responsibilities including reviewing and monitoring the Group's financial reporting process and internal control systems[189](index=189&type=chunk) - The Audit Committee has reviewed the Group's audited consolidated financial statements for the year ended December 31, 2022[189](index=189&type=chunk) [Scope of Work by Deloitte Touche Tohmatsu](index=34&type=section&id=Scope%20of%20Work%20by%20Deloitte%20Touche%20Tohmatsu) The Group's auditor, Deloitte Touche Tohmatsu, has reconciled the consolidated financial statement figures for FY2022 in the preliminary announcement with the audited consolidated financial statements approved by the Board, but has not expressed any opinion or assurance conclusion - The Group's auditor, Deloitte Touche Tohmatsu, has reconciled the consolidated financial statement figures for FY2022 contained in the preliminary announcement with the audited consolidated financial statements approved by the Board[190](index=190&type=chunk) - The work performed by Deloitte Touche Tohmatsu in this regard does not constitute an assurance engagement, and therefore no opinion or assurance conclusion is expressed[190](index=190&type=chunk) [Publication of Annual Results](index=34&type=section&id=Publication%20of%20Annual%20Results) This announcement has been published on the Stock Exchange and the Company's website, and the Company's 2022 annual report will be dispatched to shareholders and published on the Stock Exchange and the Company's website in due course - This announcement has been published on the Stock Exchange website (www.hkexnews.hk) and the Company's website (www.smart-core.com.hk)[191](index=191&type=chunk) - The Company's 2022 annual report will be dispatched to shareholders and published on the Stock Exchange and the Company's website in due course[191](index=191&type=chunk) [Annual General Meeting and Closure of Register of Members](index=35&type=section&id=Annual%20General%20Meeting%20and%20Closure%20of%20Register%20of%20Members) The Company will hold its Annual General Meeting on May 25, 2023, with the register of members closed from May 22 to May 25, 2023, to determine eligibility for attending and voting, and from June 6 to June 9, 2023, to determine eligibility for the proposed final dividend - The Company will hold its Annual General Meeting on **Thursday, May 25, 2023**[175](index=175&type=chunk) - To determine eligibility for attending and voting at the Annual General Meeting, the register of members will be closed from **May 22 to May 25, 2023**[175](index=175&type=chunk) - To determine eligibility for the proposed final dividend, the register of members will be closed from **June 6 to June 9, 2023**[193](index=193&type=chunk)

Financial Performance - Revenue for the first half of 2022 reached HKD 5,661,548 thousand, representing a 15.3% increase from HKD 4,911,942 thousand in the same period of 2021[10] - Gross profit increased by 62.8% to HKD 677,125 thousand, up from HKD 415,899 thousand year-over-year[10] - Profit before tax rose by 85.3% to HKD 362,033 thousand, compared to HKD 195,345 thousand in the previous year[10] - Net profit attributable to shareholders increased by 53.6% to HKD 145,230 thousand, up from HKD 94,576 thousand[10] - Basic earnings per share increased by 53.8% to HKD 29.78, compared to HKD 19.36 in the prior year[10] - Profit for the six months ended June 30, 2022, was HKD 299.8 million, an increase of 85.5% from HKD 161.6 million in 2021, with a net profit margin of approximately 5.3%, up from 3.3% in 2021[77] - Net profit attributable to owners for the six months ended June 30, 2022, was HKD 145.2 million, a 53.5% increase from HKD 94.6 million in the same period of 2021[78] - The net profit for the period was HKD 299,766 thousand, up from HKD 161,630 thousand, reflecting an increase of about 85.5%[145] Assets and Liabilities - Total assets as of June 30, 2022, were HKD 3,880,634 thousand, a 6.6% increase from HKD 3,639,011 thousand at the end of 2021[10] - Total liabilities increased slightly by 1.1% to HKD 2,624,607 thousand from HKD 2,596,136 thousand[10] - The net asset value increased by 20.4% to HKD 1,256,027 thousand, compared to HKD 1,042,875 thousand at the end of 2021[10] - The group's capital debt ratio decreased from 159.8% as of December 31, 2021, to 125.5% as of June 30, 2022, primarily due to a reduction in bank and other borrowings[87] - The company’s total liabilities decreased slightly to HKD 2,606,519 thousand from HKD 2,571,405 thousand, showing improved financial stability[149] Sales and Market Segments - In the first half of 2022, the company's total sales reached HKD 5,661.5 million, representing a year-on-year growth of 15.3%[19] - The semiconductor chip distribution business maintained stable revenue in smart display, smart vision, and optoelectronic products, while communication products and independent distribution saw substantial growth[19] - Sales in the smart display segment amounted to HKD 1,516.2 million, a slight decline of 4.0% year-on-year due to a decrease in global TV shipments[20] - The optoelectronic display business reported sales of HKD 685.9 million, a significant drop of 21.0% year-on-year, impacted by weak demand in the consumer electronics market[24] - The smart vision segment achieved sales of HKD 621.2 million, a minor decrease of 2.4% year-on-year, despite challenges from supply chain disruptions[25] - The communication products segment experienced a remarkable growth of 59.6%, with sales reaching HKD 434.1 million, driven by the demand for cellular IoT modules[28] - The independent distribution business generated sales of HKD 1,965.2 million in the first half of 2022, marking a substantial year-on-year increase of 75.6% driven by overseas market recovery[35] Economic and Industry Outlook - The company faced significant challenges due to global economic conditions, including inflation and geopolitical tensions, impacting the electronics manufacturing and semiconductor industries[14] - The overall semiconductor industry is expected to reach a bottom in 2023 after entering a downturn phase since Q3 2021[16] - The company anticipates challenges in the second half of 2022 due to global economic instability, but remains confident in maintaining business growth[41] - The semiconductor industry is expected to experience a rebound in demand post-2023, influenced by global economic conditions and trade dynamics[66] Operational Efficiency and Strategy - The company is actively enhancing its digital platform to improve operational efficiency and is focusing on expanding its distribution capabilities[19] - The company is focusing on expanding its independent distribution business and enhancing its digital transformation to improve operational efficiency[69] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[156] - The company aims to enhance shareholder value through strategic acquisitions and investments in high-growth areas[156] Employee and Administrative Costs - Total employee costs for the six months ended June 30, 2022, were approximately HKD 176.1 million, compared to HKD 119.5 million for the same period in 2021, representing a 47.3% increase[101] - Administrative, sales, and distribution expenses totaled HKD 262.1 million for the six months ended June 30, 2022, compared to HKD 167.8 million in the same period of 2021, representing 4.6% of revenue, up from 3.4% in 2021[75] Research and Development - Research and development expenses for the six months ended June 30, 2022, amounted to HKD 20.2 million, a 6.3% increase from HKD 19.0 million for the same period in 2021, primarily due to increased employee costs[72] - Research and development expenses increased slightly to HKD 20,215 thousand from HKD 19,014 thousand, indicating a focus on innovation[145] Shareholder Information - The company declared an interim dividend of HKD 0.04 per share for the six months ended June 30, 2022, consistent with the interim dividend of HKD 0.04 per share for the same period in 2021[108] - As of June 30, 2022, Mr. Tian Weidong held a controlled corporation interest of 262,500,000 shares, representing approximately 53.72% of the total shares[117] - Mr. Huang Ziliang held a controlled corporation interest of 90,000,000 shares, representing approximately 18.42% of the total shares[118] Compliance and Governance - The company has adopted the Corporate Governance Code and has complied with its applicable provisions during the six months ended June 30, 2022[112] - The company has established an audit committee consisting of three independent non-executive directors to oversee financial reporting and internal control systems[134] - The interim financial report for the six months ended June 30, 2022, has been reviewed and complies with relevant regulations[139]

Financial Performance - The company reported a revenue of HKD 10,389.3 million for the year ended December 31, 2021, representing an increase of 87.5% compared to the previous year[12]. - The net profit attributable to the owners of the company for the year was HKD 214.1 million, with a net profit margin of 3.8%[12]. - Total assets as of December 31, 2021, amounted to HKD 3,639.0 million, reflecting a growth of 27.8% year-on-year[12]. - The company achieved a gross profit of HKD 990.0 million, which is a significant increase of 218.8% compared to the previous year[12]. - The company's basic earnings per share reached 43.82 HKD cents, representing a 203.9% increase[21]. - The return on assets was reported at 10.8%, reflecting a significant improvement of 176.9%[17]. - The company declared a dividend of 12 HKD cents per share, marking a 100% increase compared to previous years[16]. - The group's profit for the year was HKD 391.9 million, an increase of HKD 306.5 million (358.9%) compared to HKD 85.4 million in 2020, mainly due to increased gross profit[88]. - The profit attributable to the company's owners reached HKD 214.1 million, a 201.5% increase from HKD 71.0 million in the previous year[91]. Market Expansion and Strategy - The company plans to expand its market presence and invest in new product development to drive future growth[12]. - The company aims to maintain a sustainable growth trajectory through innovative strategies and market expansion initiatives[12]. - Strategic acquisitions are being considered to bolster the company's competitive position in the market[12]. - The company plans to fully implement a new ERP system in 2022 to support its diversified and global business expansion[30]. - The group plans to establish an independent e-commerce center to enhance its online distribution capabilities over the next 2-3 years[34]. - The group aims to achieve a revenue scale exceeding HKD 1 billion in the industrial control and automotive sectors in 2022[39]. - The group is focusing on developing new products in the optical communication chip sector and expanding production capacity[39]. - The company is focused on overall business strategy, project development, and operational management under the leadership of its executive directors[118]. Operational Efficiency and Technological Development - The company is focusing on enhancing its technological capabilities to improve operational efficiency and customer satisfaction[12]. - The company implemented various cost-reduction and efficiency-enhancement measures, including the development of multiple information management software systems[30]. - The company has a strong commitment to research and development, focusing on new products and technologies in the electronic components sector[136]. - The company integrates industry resources through close collaboration with integrated circuit technology sources, adopting an OAO (online and offline) business model to provide high-quality core integrated circuits and value-added services[136]. Industry Trends and Market Insights - The global semiconductor industry is expected to grow by 9.5% in 2022, with a market size surpassing $600 billion[31]. - The semiconductor market is expected to see significant growth, with the global storage chip market projected to exceed USD 200 billion by 2023[74]. - The demand for DRAM is expected to grow by 17.1% in 2022, while supply growth is anticipated at 18.6%, potentially leading to a decline in DRAM chip prices[74]. - The global semiconductor market is projected to grow at an average rate of approximately 8.0% in 2022, with some forecasts suggesting a double-digit growth of 11%[59]. - The semiconductor import value in China reached approximately USD 439.7 billion, a year-on-year increase of 25.6%[24]. Corporate Governance and Compliance - The board of directors emphasized the importance of corporate governance and compliance in driving long-term success[12]. - The company has complied with all relevant laws and regulations impacting its business operations during the fiscal year, ensuring adherence through various internal controls and training measures[138]. - The company has maintained compliance with listing rules regarding the appointment of independent non-executive directors, ensuring at least three independent directors on the board[164]. Employee Relations and Corporate Culture - The company emphasizes employee relations, offering competitive compensation and implementing self-assessment programs to motivate employees towards achieving their goals[142]. - A strict internal training program is in place for new employees, focusing on company introduction and workflow skills to ensure quality across all employee levels[142]. - The company has a share incentive plan and stock option plan to reward senior management and employees for their dedication and loyalty[142]. Financial Position and Capital Management - The company's cash and bank balances totaled HKD 711.8 million as of December 31, 2021, an increase from HKD 416.7 million in the previous year[98]. - The company's outstanding bank borrowings increased to HKD 1,638.1 million as of December 31, 2021, up from HKD 727.1 million a year earlier, resulting in a capital debt ratio of 159.8%[98]. - The company's available distributable reserves as of December 31, 2021, were HKD 185.0 million, down from HKD 230.0 million in 2020[157]. - The company's distributive operations rely heavily on short-term financing, which poses a risk if credit lines are withdrawn or interest rates increase[149]. Customer and Supplier Relationships - The company generated over 30% of its revenue from its top five customers during the year, indicating a high customer concentration risk[148]. - Total procurement from the top five suppliers accounted for approximately 68.8% of the company's total procurement, with the largest supplier contributing about 50.3%[160]. - The company has established long-term relationships with major suppliers, some lasting between 9 to 15 years, ensuring stable supply channels[143]. - The company is expanding its supplier base by exploring new supplier partnerships and introducing new product segments with growth potential[145]. Shareholder and Stock Management - The company repurchased a total of 1,960,000 shares on the Hong Kong Stock Exchange during January 2021, with a total cost of HKD 2,421,660[113]. - The board believes that share buybacks can enhance earnings per share, benefiting the company and its shareholders[183]. - The proposed final dividend is HKD 0.08 per share, up from HKD 0.04 per share in 2020, with an interim dividend of HKD 0.04 per share already paid[150].

Financial Performance - Revenue for the six months ended June 30, 2021, was HKD 4,911,942, representing a 130.95% increase compared to HKD 2,126,863 in the same period of 2020[8]. - Gross profit increased to HKD 415,899, a 245.72% rise from HKD 120,298 year-on-year[8]. - Profit before tax surged by 362.61% to HKD 195,345, up from HKD 42,227 in the previous year[8]. - Net profit attributable to shareholders reached HKD 94,576, marking a 217.20% increase from HKD 29,816 in 2020[8]. - Basic earnings per share rose to HKD 19.36, a 220.00% increase compared to HKD 6.05 in the same period last year[8]. - Profit for the six months ended June 30, 2021, was HKD 161.6 million, an increase of HKD 126.8 million (364.4%) compared to HKD 34.8 million for the same period in 2020[65]. - Net profit for the period was HKD 161,630 thousand, compared to HKD 34,840 thousand in 2020, indicating a growth of 364.5%[128]. - The company reported a significant increase in sales of smart devices, which rose to HKD 300,234 from HKD 154,546, marking a growth of 94.3%[171]. Assets and Liabilities - Total assets as of June 30, 2021, were HKD 3,296,272, reflecting a 50.12% increase from HKD 2,195,687 at the end of 2020[8]. - Total liabilities increased by 63.98% to HKD 2,460,254 from HKD 1,500,344 at the end of 2020[8]. - The net asset value grew by 20.23% to HKD 836,018 from HKD 695,343 at the end of 2020[8]. - The group’s total outstanding bank and other borrowings increased to HKD 1,348.1 million as of June 30, 2021, from HKD 727.1 million as of December 31, 2020[75]. - The company’s total liabilities increased to HKD 2,431,587 thousand from HKD 1,481,385 thousand, representing a rise of 64%[129]. Market and Business Segments - The semiconductor chip distribution business benefited significantly, with sales and profitability experiencing substantial growth due to increased demand[13]. - The company anticipates continued growth in the semiconductor sector, driven by the ongoing global demand and supply chain shifts[13]. - The television product segment generated sales of HKD 1,284.6 million, reflecting a year-on-year increase of 91.3%[18]. - The optoelectronic display segment saw sales of HKD 868.5 million, with a year-on-year growth of 118.4%[19]. - The image processing segment reported sales of HKD 513.1 million, which is a remarkable year-on-year increase of 402.8%[20]. - The smart devices segment achieved sales of HKD 300.2 million, representing a year-on-year growth of 94.3%[23]. - The communications products segment recorded sales of HKD 272.0 million, showing a significant year-on-year increase of 129.2%[25]. Future Outlook - The company is focused on enhancing its core competitiveness through digital transformation and internal innovation[14]. - The overall market demand for the company's products is expected to remain strong, driven by various industry trends and new customer acquisitions[14]. - The company anticipates a strong demand for display-related products in the second half of 2021, driven by the upcoming smartphone launches and traditional sales peak season[40]. - The company is optimistic about the growth opportunities in the second half of 2021 across various business directions, supported by a diversified business layout[35]. - The independent distribution business is projected to maintain high growth rates in the second half of 2021, driven by strong demand for semiconductor chips[55]. Operational Metrics - Current ratio as of June 30, 2021, was 1.3, down from 1.4 as of December 31, 2020[76]. - Inventory turnover period increased to 22 days for the six months ended June 30, 2021, compared to 17 days for the same period in 2020[77]. - The total employee count as of June 30, 2021, was 536, compared to 408 as of June 30, 2020, with total employee costs for the six months amounting to approximately HKD 119.5 million, up from HKD 46.8 million in the same period last year[88]. Governance and Compliance - The company has adopted the Corporate Governance Code and has complied with its applicable provisions during the six months ended June 30, 2021[99]. - The board believes that consolidating the roles of Chairman and CEO under the same individual ensures consistency in leadership and effective strategic planning[100]. - The audit committee has reviewed the interim financial results and discussed them with external auditors[117]. - Deloitte has conducted a review of the interim financial statements and found no issues that would lead to non-compliance with accounting standards[124]. Cash Flow and Investments - Operating cash flow before working capital changes for the six months ended June 30, 2021, was HKD 240,327,000, compared to HKD 51,519,000 for the same period last year[141]. - Net cash used in operating activities for the six months ended June 30, 2021, was HKD (497,526,000), significantly higher than HKD 115,504,000 in the previous year[141]. - The company raised new bank and other borrowings amounting to HKD 1,136,528,000 during the financing activities[141]. - The company has made investments in joint ventures and third-party loans, indicating ongoing strategic financial activities[141]. Shareholder Information - The board declared an interim dividend of HKD 0.04 per share for the six months ended June 30, 2021, compared to HKD 0.02 per share for the same period in 2020[95]. - The company repurchased a total of 1,960,000 shares at a total cost of HKD 2,421,660, with the highest and lowest prices per share being HKD 1.26 and HKD 1.20 respectively[92]. - As of June 30, 2021, the total number of issued shares was 488,681,030[113].