WILLAS-ARRAY ELECTRONICS (HOLDINGS) LIMITED
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MANAGEMENT DISCUSSION AND ANALYSIS
Foreign Exchange Risk Management
The Group operates in Hong Kong, PRC and Taiwan. It incurred foreign currency risk mainly on sales and
purchases that were denominated in currencies other than our functional currencies. Sales are mainly
denominated in United States dollars (“USD”), Chinese renminbi (“RMB”), Hong Kong dollars (“HKD”)
and Taiwan dollars (“TWD”) whereas purchases are mainly denominated in USD, Japanese yen (“JPY”),
RMB and HKD. Therefore the exposure in exchange rate risks mainly arises from fluctuations in foreign
currencies against the functional currencies. Given the pegged exchange rate between HKD and USD,
the exposure of entities that use HKD as their respective functional currency to the fluctuations in the
USD is minimal. However, exchange rate fluctuations between RMB and USD, RMB and JPY, HKD and
JPY, or TWD and USD could affect the Group’s performance and asset value. The Group has a foreign
currency hedging policy to monitor and maintain its foreign exchange exposure at an acceptable level.
Gearing Ratio
The gearing ratio as at March 31, 2016 was 153.1% (March 31, 2015: 108.3%). The gearing ratio
was derived by dividing total debt (representing interest-bearing bank borrowings, trust receipt loans
and bills payables) by shareholders’ equity at the end of a given period. The increase was mainly due
to an increase in trust receipt loans from HK$506.5 million to HK$589.5 million and bank borrowings
from HK$189.6 million to HK$250.8 million to enhance the cash buffer and to finance the increased
purchasing activities.
Contingent Liabilities
The Company had given corporate guarantees (unsecured) to its banks in respect of banking facilities
granted to its subsidiaries. As at March 31, 2016, the aggregate banking facilities granted to the
subsidiaries were HK$1,289.9 million (March 31, 2015: HK$1,225.3 million), of which HK$804.2 million
(March 31, 2015: HK$699.1 million) was utilised and guaranteed by the Company.
As at March 31, 2016, the Company had also given guarantees to certain suppliers in relation to the
subsidiaries’ settlement of the respective payables. The aggregate amounts payable to these suppliers
under guarantee were HK$274.6 million (March 31, 2015: HK$235.9 million).
As at March 31, 2016, the Company had given corporate guarantees (unsecured) of HK$ nil (March 31,
2015: HK$167.3 million) to its banks in respect of banking facilities granted to its associates, of which
HK$ nil (March 31, 2015: HK$131.4 million) was utilised, by its associates.
