TIME Interconnect Technology Limited Announces 2019 Interim Results
During the Reporting Period, the pace of global economic growth has continued to slow down due to the trade tariffs imposed by major economies, particularly between the United States and China. In spite of the challenges in the macro-economy environment and the difficulties brought by RMB depreciation, the Group reported solid operating results during the Reporting Period, benefiting from its sensible business strategies and unique customer profile.
In the past half year, the Group continued to pay great efforts in solidifying its customer base by developing relationships with leading international customers and further enhancing the business relationships with existing customers. During the Reporting Period, the Group's revenue slightly decreased by 4.0% to HK$801.9 million from $835.6 million in the previous financial period, due to the impact of RMB depreciation and the overall slowdown of global macro-economy. Gross profit for the Reporting Period was HK$174.8 million, a decrease of 5.2% compared to the HK$184.4 million recorded in the previous financial period. Total profit of the Group for the Reporting Period was HK$77.4 million, a decrease of 12.4% as compared to the last financial period. By excluding the professional fee for the Possible Acquisition of the business of manufacturing and sales of networking cables engaged by the relevant subsidiaries of Linkz Industries Limited, the Group's net profit margin was recorded at 10.4% as compared to 10.6% in the previous financial period.
Basic earnings per share for the Reporting Period were HK4.2 cents as compared to HK4.8 cents in the previous financial period.
Business Review
All of the Group's business sectors have different degrees of change in revenue, and the decrease in revenue was mainly driven by the lower sales in telecommunication and industrial equipment sectors.
The Group's turnover by business division is as follows:
Business Sector Six Months Ended 30 September
Turnover (HK$ million) Share of Turnover
2019 2018 Changes 2019 2018
Data centre 396.5 323.7 +22.5% 49.4% 38.7%
Telecommunication 313.0 391.1 -20.0% 39.0% 46.8%
Medical equipment 65.4 74.8 -12.6% 8.2% 9.0%
Industrial equipment 27.0 46.0 -41.3% 3.4% 5.5%
Total 801.9 835.6 -4.0% 100% 100%
Data Centre
The shipments of the data centre sector were back to the normal level as before the Sino-U.S. trade war since May 2019, leading the revenue to substantially increase by 22.5% to HK$396.5 million during the Reporting Period as compared to HK$323.7 million for the previous financial period.
Telecommunication
For the telecommunication sector, a decrease of revenue from HK$391.1 million in the previous financial period to HK$313.0 million for the Reporting Period was recored, representing a decrease of 20.0%. Besides the RMB depreciation impact, the decrease was mainly attributable to the impact from the United States had added the Group's largest customer to the entity list under Export Administration Regulations. The Group has been seeking for any kind of measures to mitigate the impact of trade war on its businesses.
Medical Equipment
The revenue contributed by medical equipment sector recorded a mild decrease of 12.6% from HK$74.8 million for the previous financial period to HK$65.4 million for the Reporting Period. Such represented orders slowdown due to the consumption of inventory backlog. Orders are expected to resume in the rest of the year.
Industrial Equipment
The revenue generated from the industrial equipment sector dropped 41.3% from HK$46.0 million for the previous financial year to HK$27.0 million for the Reporting Period. The decrease was mainly due to the turmoil from the Sino-U.S. trade war and the overall slowdown on the growth of the global economy.
Prospect
Being benefit from the further development in the 5G network and the growing trend of big data processing, the cable assembly industry is expected to sustain growth in the coming years. To meet with the market demand, the Group is striving to enhance its production capacity by acquiring a parcel of industrial land for the production, with 24 production lines to be schedule installed [in the coming twelve months]. The Directors remain confident that the Group's enlarged production capacity, together with its cutting-edge technologies and well-established business fundamentals would enable it to capture the market opportunities and outperform its potential upon the arrival of the next-generation 5G network.
In the recent years, a new world is coming with the next-generation 5G network being realised gradually. According to a report released by Global System for Mobile Communication Association and Global TD-LTE Initiative, China is expected to become the world's largest 5G market by 2025, accounting for 430 million 5G connections, or one-third of the global total. With the 5G network deployment pushing forward in China, the demand for optical fibre cable are believed to grow outstandingly and the Directors are confident on the Group's future performance in the telecommunication and data centre sector as its customers are the primary network equipment suppliers to the three nationwide mobile operators, namely China Mobile, China Unicom and China Telecom.
For the medical equipment sector, the Directors expect it to resume growth momentum in the rest of the year, as the inventory backlog for [an existing client] are being consumed and the orders have recovered since October. In view of the constant increasing demand for medical care services, the Group will continuously enhance its R&D capabilities in respect of launching such medical-grade products and technologies. The Group will also strive to secure new customers to further improve its market share and strengthen its position in medical equipment sector.
In the recent half year, the Sino-U.S. trade tensions have continued and erupted into a full-blown trade war. Though the United States announced to delay tariff increase for Chinese goods following a meeting between both countries in October, uncertainties still surrounding the global economy and bringing negative impact to the industries inevitably. Under such circumstances, revenue of industrial equipment sector becomes difficult to predict. The Group will closely monitor the changes in relevant circumstances and exert itself to grasp business opportunities in order to minimise the risks and uncertainties involved in the unstable economies.
Moving ahead, the Group will continue to stay alert to the changes in economic environment and take prompt and decisive actions to maintain the Group's competitiveness and sustainability. In respect of the additional tariffs that may be raised by the United States on certain Chinese imported goods, the Group has been taking measures to mitigate the impact of trade war on its businesses since 2018. In this condition, the Group has preliminarily assessed that the additional tariffs will not have a material adverse impact on its businesses in the United States in the current fiscal year. Meanwhile, the Group will keep enhancing its business operations, so that it is fully capable to capitalise on an eventual market turnaround.
About TIME Interconnect Technology Limited
TIME Interconnect Technology Limited is a well-established supplier of custom cable assemblies with more than 20 years of experience in the cable assembly industry. The Group primarily manufactures and supplies a wide variety of copper and optical fibre cable assemblies which are produced in accordance with the specifications and designs of individual customer. The products of the Group are used by a number of established PRC and international customers in a variety of market sectors including 5G telecommunications, data centre, industrial and medical equipment.
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