Annual Report 2016
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MANAGEMENT DISCUSSION AND ANALYSIS
EMS
Revenue from this segment fell 19.9% year-on-year to HK$189.2 million in FY2016. The market
continued to be plagued by over capacity which led to price erosion and severe competition among EMS
customers and made it difficult for them to survive. With the current market sentiment and slow economic
growth situation, the road to recovery for this segment would be a long way.
Lighting
Revenue from this segment declined 6.7% year-on-year to HK$123.2 million in FY2016. This segment
also faces oversupply and price erosion. Despite the slowdown, the segment shows potential in certain
areas, such as the expanding LED lamp coverage in consumer application. As such, we will try to keep
adequate engineering service in this segment to maintain our market share.
Others
Revenue from this segment fell 7.8% year-on-year to HK$112.0 million in FY2016. Demand for
componentry by this segment is very unstable. Demand from toy and health care product manufacturers
was strong in the first half of FY2016 but fell sharply after the holiday gift season in the second half of
FY2016. We will carefully monitor demand cycles for seasonal peaks in FY2017.
Profit Margin
China’s GDP growth rate in 2015 sunk to its lowest in the last 25 years with growth decelerating every
quarter since the beginning of 2010. This led to downward pressure on prices and a squeeze on our
gross profit margin to 8.78% in FY2016 from 9.13% in FY2015.
Distribution costs
Distribution costs increased by HK$1.7 million, or 3.9%, from HK$45.3 million in FY2015 to HK$47.0
million in FY2016. The increase in distribution costs was mainly due to higher sales commissions incurred
to boost the Group’s sales revenue.
Administrative expenses
Administrative expenses decreased by HK$5.4 million, or 2.6%, from HK$206.2 million in FY2015 to
HK$200.8 million in FY2016. The decrease was mainly attributable to fewer staff cost incurred following
the restructuring of ValenceTech group in FY2015 because of operational downsizing to an optimum
level.
