芯智控股(02166) - 2022 - 年度业绩

Financial Highlights 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] Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income 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 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 General Information 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] - 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][213] Application of Amended Hong Kong Financial Reporting Standards 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][202][204][214] - 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][216] 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] Segment Information 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 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 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][229] - The final dividend for FY2021 was HK 8 cents per share, totaling HK$38.944 million[33][229] Dividends Declared and Paid to Ordinary Shareholders | Dividend Type | 2022 (HK$ 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 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][198] Trade and Bills Receivables 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] Trade Payables 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] Bank and Other Borrowings 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] - Certain bank facilities contain covenants such as financial ratios, and the Board confirmed no breaches occurred in either year[52] Management Discussion and Analysis Business Review 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] - The consumer electronics industry was impacted by slowing global consumer demand, with significant declines in shipments of smartphones, tablets, PCs, and TVs[55] - Global semiconductor sales increased by 3.2% to US$573.5 billion in 2022, falling short of expectations, primarily constrained by reduced demand for consumer electronic products[56] 2022 Group Overall Performance | Indicator | 2022 (HK$ million) | YoY Change (%) | | :--- | :--- | :--- | | Sales Revenue | 10,006.1 | -3.7% | | Gross Profit | 1,094.7 | +10.6% | Authorized Distribution Business 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] - The Group's invested optoelectronic device semiconductor business began mass shipments in 2022 and has achieved break-even[87] Smart Display 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] Optoelectronic Display 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] Smart Vision 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] Communication Products 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] Storage Products 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] Integrated Products 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] Optoelectronic Products 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] Independent Distribution Business 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] - Independent distribution business volume now accounts for one-third of the Group's total revenue[87] Outlook for 2023 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] - 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] - 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][144] Authorized Distribution Business Outlook 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] - 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] - 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][74] Smart Display Outlook 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] - Global TV shipments are expected to decline sharply by 24.3% in Q1 2023, with Chinese brands declining by 30.6%[100] Optoelectronic Display Outlook 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] - 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] Smart Vision Outlook 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] - The global security video surveillance equipment market size will grow by 6.8% to US$25 billion in 2023[74] Communication Products Outlook 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] - 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] - This business unit's 5G RF PA achieved significant sales in 2022 and is expected to bring new revenue increments in 2023[107] Storage Products Outlook 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] - 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] Optoelectronic Products Outlook 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] - The Group is promoting 400G/800G silicon photonic integrated optical module solutions for data centers and next-generation 50G PON solutions for FTTX[79] - 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] Integrated Products Outlook 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] - 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] - 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] Independent Distribution Business Outlook 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] - 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] - 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] 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] - 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] - 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][115] Financial Review Revenue and Gross Profit 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] - The increase in gross profit margin was mainly due to the higher gross profit margin of the independent distribution business[116] Expense Analysis 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 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 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] Finance Costs 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] Share of Results of an Associate 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] Profit for the Year and Net Profit 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] Use of Proceeds from Global Offering 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] Liquidity and Financial Resources 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] Foreign Currency Risk 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] - 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] Pledged Assets 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 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][179] Capital Commitments and Contingent Liabilities 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][162] Material Acquisitions and 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 - For the year ended December 31, 2022, the Group did not undertake any material acquisitions or disposals of subsidiaries and associates[134][180] Other Information 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 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][164] - In FY2022, the trustee acquired 15.6 million shares and granted 3 million share awards to employees under the Share Award Scheme[183] - In FY2022, the Group recognized a total share-based payment expense of HK$2.6 million[183] Purchase, Sale or Redemption of 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 - 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][184] Events After the Reporting Period Ended December 31, 2022 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] Compliance with Corporate Governance Code 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] - 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][186] Standard Code for Securities Transactions 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] Sufficiency of Public Float 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] Audit Committee 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] - The Audit Committee has reviewed the Group's audited consolidated financial statements for the year ended December 31, 2022[189] Scope of Work by Deloitte Touche Tohmatsu 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] - 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] Publication of Annual Results 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] Annual General Meeting and Closure of Register of Members 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] - 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] - To determine eligibility for the proposed final dividend, the register of members will be closed from June 6 to June 9, 2023[193]