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EVA Precision Industrial Holdings Limited
億和精密工業控股有限公司 Stock code: 838 HK
Final Results Presentation
March 2017
EVA Guangdong Shenzhen (Shiyan) Electronic Industrial Park
Business Highlights
We are one of the few high end manufacturers in China capable of producing moulds and components with high
precision and dimensional accuracies which are key to high quality office automation (OA) equipment, automobile
and consumer electronics products.
Our unique one-stop services covering a wide range of production processes provides strong incentives for customers
to increase their procurements from us, as this can effectively reduce the additional costs and excess production lead
time that arise from outsourcing different production processes to different suppliers.
Our excellent engineering expertise and services are well recognised by world renowned companies including Canon,
Fuji Xerox, Kyocera Mita, Samsung, Dongfeng and Faurecia. With a proven track record as a valued business
partner, certain major customers decided to elevate their strategic partnership with us to a global level and invited us to
establish industrial parks outside China, presenting us with exciting opportunities for overseas expansion.
By the invitation of certain major customers in the OA equipment market, we had established a new industrial park in
Haiphong, Vietnam. The new Vietnam industrial park was completed by end of 2016, and is currently under trial
production. Although it will initially focus on tapping businesses from the OA equipment customers, it can also expand
into other sectors such as the high end consumer electronic sector at a later stage.
We are also invited by a major customer in automobile business to establish a new industrial park in San Luis
Potosí, Mexico. Taking into account the current uncertainties over the trade relations between the United States and
Mexico, the development of the new Mexico industrial park will be divided into phases. Phase one is scheduled for
completion in late 2018. Additional capacity can be added should a surge in turnover be seen.
Business Highlights
3
Business Highlights (Cont’d)
4
In China, we have received “Excellent Supplier” accolade from a leading automaker for the fourth consecutive years,
and continued to receive other accolades for product quality and services from numerous renowned brand owners again.
The emergence of high technology industries in China provides us with many new business opportunities, as product
quality and engineering expertise are essential for high technology products.
Remarkable results on working capital management. Cash conversion cycle (defined as the total sum of inventory and
debtors’ turnover days less creditors’ turnover days) decreased significantly from 63 days in 2015 to 36 days in 2016.
Cash flows from operations increased despite the reduction in profit, allowing us to pay down our debts and repurchase
our own shares from the market at the same time.
From October 2016 up to now, a total of 87,000,000 shares of the Company were repurchased, which leads to an
enhancement of earnings and net asset value per share for all existing shareholders of the Company. In the
expectation of interest rate hikes from 2017 onwards, we also used our operating cash flows to pay down the debts, and
therefore we were in net cash position as at 31 December 2016.
Dedicated efforts to streamlining costs and production automation and headcount reduced from 8,804 employees as
at 31 December 2015 to 7,855 employees as at 31 December 2016 despite the construction of the new Vietnam industrial
park.
Also reduced the shareholding interest in the Group’s micro lending company from 60% to 40% in August 2016 for
the purpose of focusing our resources on the core manufacturing business.
Corporate Overview
Digidie Chongqing (Dadukou) Automobile Industrial Park
Company at a Glance
6
A vertically-integrated precision metal and plastic mould and component manufacturing service provider.
Started off in 1993 in OA equipment market, which is oligopolised by Japanese brand owners and requires very high
dimensional accuracy standards to prevent paper jam and distorted images.
Expansion into automobiles and high end consumer electronics markets since a few years ago. Significant
inroads have been made.
Actively sourcing new customers to widen our customer base. Notable new customers include another leading
automaker in China which had established a new production plant in Chongqing and a number of multinational tier-
one suppliers in the automobile industry.
Major
Business
Precision engineering expertise and laser welding technology distinguished ourselves from other
low end manufacturers.
Well recognised by renowned Japanese brand owners, including Canon, Fuji Xerox, Kyocera Mita, Epson and
Konica Minolta etc, which are well known for their demanding quality and production management requirements.
Successful track record in substituting Japanese suppliers in OA equipment market.
Certifications from brand owners in other sectors e.g. Dongfeng, FAW-Volkswagen, Samsung and Faurecia.
Market
Position
Market share gain in OA equipment market through vertically integrated one stop solution.
Utilised precision engineering expertise to capture the increasing demand for sophisticated moulds and
components tailored for high quality vehicles, hi-tech and consumer electronics products.
Geographical expansion into Vietnam and Mexico where our customers in OA equipment and automobile markets
had also established assembly plants.
Growth
Drivers
Eight industrial parks in China and Vietnam: 3 in Shenzhen, 1 in Suzhou, 1 in Zhongshan, 1 in Chongqing, 1 in
Wuhan and 1 in Haiphong.
New industrial park for automobiles in San Luis Potosí, Mexico which is scheduled for completion in late 2018.
Business
Scale
6
Vertically Integrated One-stop Services
7
1. Mould design and production
Joint co-development of moulds with customers during customers’ product development processes.
Production and testing of moulds by EVA.
Upon completion of moulds, fees are charged to the customers for the design and production of moulds i.e. titles of moulds are transferred to customers. However, the completed moulds are consigned in EVA’s industrial parks for the future mass production of components.
3. Individual components assembled into semi-finished products
Assembly of various components into semi-finished modules through high precision laser welding and other assembly processes.
Metal stamping moulds Plastic injection moulds
Metal stamping components
Plastic injection components
Lathing products (Principally used as paper rollers)
Semi-finished modules
Finished products
2. Component production using completed moulds
Mass production of components by using the completed moulds consigned at EVA’s industrial parks.
Industry Leading Technologies
8
Mould is the “Mother Tool” of manufacturing
Products are replicated from moulds.
Quality of a mould has a decisive impact on the quality of a product.
A 1/1,000th mm defect in a mould will result in a 1/100th mm defect in the product.
Demand very high level of engineering skills, sophistication and technology.
Shorten production lead time
High quality moulds eliminate the needs for subsequently fine-tuning or repairing products that
would otherwise be required if low quality moulds are used.
Essential for hi-tech and consumer electronics markets as product life cycle becomes
shorter and shorter.
In a different league from low end OEMs
EVA is one of the few hi-tech companies in China capable of producing moulds with precision
and dimensional accuracies comparable to overseas peers such as Japanese or
German manufacturers.
Products Product Sophistication
Industry Leading Technologies (Cont’d)
9
High-precision metal stamping moulds of 0.005mm precision.
Deficiency rate of below 10 PPM
(<10 defected outputs for every 1 million units of components produced).
30-45 days production lead-time for moulds
(market average 90-120 days).
Metal stamping moulds and components
Moulds for thin-walled plastic products with thickness of only 0.2mm.
Moulds for high-precision plastic gears.
Meets Japan Industrial Standards (JIS) Grade 2 or below.
In-mould decoration (IMD) and environmental friendly hot runner technologies.
High-precision shafts mainly used as paper rollers.
Diameter distortion less than 0.02mm.
Efficient simultaneous processing of different lathing procedures.
Capable of producing shafts from multiple materials including aluminum,
plastic and steel.
Plastic injection moulds and components
Lathing components
Industry Leading Technologies (Cont’d)
10
Products Product Sophistication
Laser welding
Computerised inspection device
Robotic assembly
Traditionally used in aviation and luxury sport car industries.
Low temperate welding to minimise excessive melting and distortion
during welding process, and thus eliminate the need for secondary processing.
Concentrated laser beam with welding area of < 0.2mm i.e. small
heat-affected zones suitable for handling highly precise components.
Self-developed devices with built-in red ray systems for testing
dimensional accuracies.
Capable of detecting defects of less than 0.01 mm.
Remarkably reduce product deficiency rate and eliminate manual
inspection error.
Accelerate product inspection time by 70% compared to manual inspection.
Self-developed robotic systems to automate assembly process.
Accelerate production lead time by 40% compared to manual assembly.
Significantly reduce the cost of labour.
Essential for producing high tensile structural parts for automobiles and
precision equipment.
Office Automation (OA) Equipment
11
Market share gain
Leading position in the industry
The supplier base of OA equipment market is
presently fragmented.
Other suppliers in this market are highly
specialised in product type i.e. they are unable
to produce a wide range of components in OA
equipment like EVA.
Market share gain through vertically
integrated one-stop solution.
Customers include world-class OA
equipment brand owners which are well
known for their demanding quality
requirements.
Well established customer base covering all
major brand owners which together
dominate the market.
Office Automation (OA) Equipment (Cont’d)
12
EVA Vietnam (Haiphong)
Electronic Industrial Park
EVA Jiangsu (Suzhou) Electronic Industrial Park EVA Guangdong Shenzhen (Shiyan)
Electronic Industrial Park
In China, we have two industrial parks i.e. EVA Guangdong Shenzhen (Shiyan)
Electronic Industrial Park and EVA Jiangsu (Suzhou) Electronic Industrial Park to
serve the major assembly plants of our OA equipment customers in Southern and
Eastern China.
We were also invited by certain OA equipment customers to establish a new
industrial park in Haiphong, Vietnam to serve their assembly plants in Vietnam.
The new Vietnam industrial park was completed by end of 2016 and is now under
trial production.
Due to geographical distance, we were unable to serve our customers’ assembly
plants in Vietnam in the past. Therefore, the new Vietnam industrial park enlarges
our addressable market within the OA equipment sector and provides us with an
additional source of revenue from a new geographical market.
Geographical coverage
Automobiles
13
According to IBIS World, China’s automobile component industry is forecast to grow at an average annualised rate of 6.0%,
totaling US$783.2 billion in 2021. At the same time, customers’ demand is rapidly changing from low cost to higher quality
vehicles and the Chinese government is nurturing higher end local suppliers with a view to reducing the reliance on foreign
suppliers for sophisticated automobile moulds and components. These factors create an increasing demand for the precision
manufacturing services offered by EVA in the automobile industry.
Overview
Digidie Chongqing (Dadukou) Automobile Industrial Park
Factory Building Robotic Welding Line 2,000T Servo Line
Acquired in 2011 through the purchase of an
automobile mould company.
To source orders from automobile makers in
Chongqing and adjacent cities such as Ford,
Mazda, Suzuki, Changan, SAIC-GM-Wuling and
FAW-Volkswagen.
2,000T fully automated servo line and robotic
welding lines capable of producing components
for high tensile parts for automobiles, which
require high safety and anti-collision standards.
14
Automobiles (Cont’d)
Commenced commercial production in early 2014.
Currently produces moulds and components and provides
automated welding for high tensile parts primarily used for
passenger cars such as the Dongfeng Citroen and Peugeot series.
Other existing and targeted customers include the automakers
located in Wuhan and adjacent cities, such as Dongfeng, Honda,
Renault and General Motors.
Digidie Hubei (Wuhan) Automobile Industrial Park
Factory Building Automated Robotic Assembly 2,500T Press Line
Automobiles (Cont’d)
15
EVA Guangdong Shenzhen (Guangming)
Industrial Incubation Park
EVA Guangdong Shenzhen (Guangming) Industrial Incubation Park and
Digidie Guangdong (Zhongshan) Automobile Industrial Park
Digidie Guangdong (Zhongshan)
Automobile Industrial Park
EVA Guangdong Shenzhen (Guangming) Industrial Incubation Park was
purposely built in 2008 to extend the application of our precision moulds from
just OA equipment to a wider range of applications such as automobiles. It is
capable of producing moulds for various parts of automobiles including car seat
frames, air filter housings and high tensile parts.
Digidie Guangdong (Zhongshan) Automobile Industrial Park was merged into
EVA’s automobile business line in 2015, targeting at automobile components.
These two industrial parks are set to serve the automobile market in Guangdong
Province, in which reputable automakers such as Guangzhou Automobile Group,
Toyota, Honda and Audi are located.
Automobiles (Cont’d)
16
Location of San Luis Potosí, Mexico
Exhaust system and automobile seat
In 2017, we were invited by a major
automobile customer, which is an
international leader in the production of
automobile seats, interiors and exhaust
systems, to establish a new industrial park in
San Luis Potosí, Mexico.
Taking into account the current uncertainties
over the trade relations between the United
States and Mexico, the development of the
new Mexico industrial park will be divided
into phases. Phase one is scheduled for
completion in late 2018.
To source orders from automakers and
multinational tier-one suppliers located at
San Luis Potosí and its adjacent states, such
as Faurecia, BMW, Volkswagen, Audi, Fiat-
Chrysler and General Motors.
Additional capacity can be added should a
surge in turnover be seen.
Mexico Automobile Industrial Park
17
EVA Guangdong Shenzhen (Tianliao) Smart Device Industrial Park
Factory building SMT lamination Multi-layer coating system
Hi-tech and Consumer Electronics Products
According to Gartner, worldwide information technology spending is forecast to reach US$3.5 trillion in 2017. At the same time,
China is expected to increasingly concentrate on the production of higher value products. Together with the emergence of high
technology industries in China, they create a rapidly growing demand for the high quality precision manufacturing services
offered by EVA.
Overview
Established in 2012 and was assigned as EVA’s principal production base for hi-tech and consumer electronics products.
Started off by producing moulds and components for smartphones and mobile tablets, and subsequently explored into the
markets of other hi-tech products.
Comprehensive technologies which include multi-layer color coating, insert moulding, SMT lamination and laser engraving etc.
For more than 20 years, EVA has been reputed for its high quality manufacturing services which are attractive to a lot of high
technology companies as dimensional accuracy and product quality are essential for high technology products.
Note 1: Net debt-to-equity ratio is calculated based on the total balance of bank borrowings and finance lease liabilities less cash and bank balances divided by
shareholders’ equity.
Our Competitive Strength
18
One of the few manufacturers
in China capable of producing
moulds with high precision
and dimensional accuracies
State-of-the-art technology
and equipment
Strategic partnership with
numerous universities for
research and development
Strong management and
engineering team with more
than 20 years of experience
in industry
Conservative financial
management and low net debt-
to-equity ratio1 over the years
Dedicated to streamlining costs
and headcount through
production automation and
other cost control measures
Customer Accolades
Technology
Management Corporate Governance
Solid track record in serving world-
class customers such as Canon,
Fuji Xerox, Konica Minolta,
Dongfeng and Faurecia, which
are well known for their demanding
quality requirements
Long-term global partnership
with renowned customers clearly
demonstrated by their invitation of
us to establish new industrial parks
in Vietnam and Mexico
Committed to creating values for
shareholders and corporate social
responsibilities
Constant dividend payouts of
roughly 30% of net profits since IPO
Repurchased 87 million shares from
the market in 2016 and early 2017 to
enhance earnings and net asset
value per share for all existing
shareholders
Received “Best Employer in
Guangdong Province” accolade in
2016
Key Milestones
19
Relocation of
production facilities
to EVA Guangdong
Shenzhen (Shiyan)
Electronic
Industrial Park
IPO on the Hong Kong
Stock Exchange (Stock
code: 00838HK)
EVA Jiangsu
(Suzhou)
Electronic
Industrial Park
commenced
operation, signifying
our first step to
expand outside
Guangdong
Completed EVA
Guangdong Shenzhen
(Guangming)
Industrial Incubation
Park to extend the
applications of our
precision moulds from
just OA equipment to
automobile, hi-tech and
consumer electronics
products
A new industrial
park in Zhongshan
commenced
operation
Completed EVA
Guangdong
Shenzhen (Tianliao)
Smart Device
Industrial Park to
provide additional
factory areas for hi-
tech and consumer
electronics products
Acquired an
automobile mould
company in
Chongqing, being our
first industrial park to
specialise in
automobile market
Started to use the
Digidie brand for
automobile business
The new EVA
Vietnam (Haiphong)
Electronic
Industrial Park was
completed, being our
first industrial park
outside China
2002 2005 2006 2008 2010 2017 2014 2012 2011 1993 2016
Phase 2 of Digidie
Chongqing (Dadukou)
Automobile Industrial
Park was completed
Digidie Hubei (Wuhan)
Automobile Industrial
Park for automobile
components
commenced commercial
production Establishment
of
Started off in the
OA equipment
market
Invited by a major
automobile
customer to
establish a new
industrial park in
San Luis Potosí,
Mexico for the
automobile market
Industrial Parks
20
Digidie Chongqing (Dadukou)
Automobile Industrial Park
GFA:
31,000 sq.m.
Land area:
100,000 sq.m.
EVA Jiangsu (Suzhou)
Electronic Industrial Park
GFA:
82,000 sq.m.
Land area:
120,000 sq.m.
EVA Guangdong Shenzhen (Shiyan)
Electronic Industrial Park
GFA:
95,000 sq.m.
Land area:
65,000 sq.m.
EVA Guangdong Shenzhen (Tianliao)
Smart Device Industrial Park
GFA:
48,000 sq.m.
Land area:
28,000 sq.m.
20
Digidie Hubei (Wuhan)
Automobile Industrial Park
GFA:
49,000 sq.m.
(Phase 1)
Land area:
166,000 sq.m.
EVA Vietnam (Haiphong)
Electronic Industrial Park
GFA:
12,000 sq.m.
(Phase 1)
Land area:
37,000 sq.m.
Digidie Guangdong (Zhongshan)
Automobile Industrial Park
GFA:
35,000 sq.m.
Land area:
34,000 sq.m.
EVA Guangdong Shenzhen (Guangming)
Industrial Incubation Park
GFA:
55,000 sq.m.
Land area:
54,000 sq.m.
Mexico Automobile Industrial Park
GFA:
15,000 sq.m.
(Phase 1)
Land area:
83,000 sq.m.
EVA currently has eight industrial parks in China
and Vietnam: 3 in Shenzhen, 1 in Suzhou, 1 in
Zhongshan, 1 in Chongqing, 1 in Wuhan and
1 in Haiphong. A new industrial park in San
Luis Potosí, Mexico is scheduled for completion
in late 2018.
20
Major Awards and Accolades
21
Year Honors Company / Organisation
2004 Excellent Supplier Award Toshiba
2004 Certificate of Green Activity Canon
2005 Chemical Substances Management System
Certificate Ricoh
2005 Acclamation Certificate Konica Minolta
2004–2007 Very Valuable Vendor Award Canon
2007 Supplier Special Improvement Award Fuji Xerox
2009–2015 Golden Quality Award Konica Minolta
2009 Distinguished Supplier Award General Electric
2009–2017 EQCD Remarkable Contribution Award Canon
2009–2016 National High and New Technology
Enterprise Certification Chinese Government
2010 Special Contribution Award Midea
2010 Product Assembly Service Certification Kyocera Mita
2010 Environmental Collaboration Program
Certificate Konica Minolta
2011 Part-Defect on Arrival Zero Award Konica Minolta
2009–2015 Supplier QCC Forum Award Kyocera Mita
2011 Certificate in Chemical Substance
Management Standard Brother
Major Awards and Accolades (Cont’d)
22
Year Honors Company / Organisation
2011–2016 Premiere Partner Award Fuji Xerox
2012–2013 Special Contribution Award Canon
2013–2016 Excellent Supplier Award Dongfeng
2013 Best Quality Award Toshiba
2013–2016 Mould Supplier Certification FAW-Volkswagen
2014–2015 Excellent Supplier Award Konica Minolta
2014–2016 Excellent Supplier Award Canon
2014 Excellent Corporate Partner Dongfeng
2014–2016 Unit Improvement Contest
Champion Award Canon
2015 Improvement Forum – Excellent Supplier
Presentation Award Fuji Xerox
2015 Gratitude Certificate Shenzhen Aerospace
2016 Golden Quality Award Samsung
2016 Excellent Improvement Award Konica Minolta
2016 Excellent Supplier Award Epson
2016 A Class Supplier Award Brother
2016 Best Supplier Award Toshiba
2017 Gratitude Certificate - External
Component Procurement Activities Konica Minolta
2017 Sourcing Quality Assurance – Overall
Excellence Award Ricoh
Total number of shares in issue as at 27 March 2017 = 1,792 million shares
Outstanding share options of 105,726,200 options as at 27 March 2017
Shareholding Structure
23
60.7% 39.3%
Zhang Family Public
Shareholders
Experienced Management Team
24
Management Position
Mr. ZHANG Yaohua CEO
Co-founder of the Group
More than 20 years of operational management experience in the precision moulding industry
Responsible for the operation and management of the Group
President of Shenzhen Machinery Association, council member of Shenzhen General Chamber
of Commerce, vice president of Guangdong Die & Mould Industry Association, Shenzhen
Enterprise Confederation and Shenzhen Entrepreneur Association
A member of the Shenzhen Committee of the Chinese People’s Political Consultative
Conference
Mr. ZHANG Jian Hua Vice
Chairman
Co-founder of the Group
Substantial experience in organisational planning, production facilities management and
business risk monitoring in the precision moulding industry
Responsible for the Group’s organisational structure, production facilities management and
business risk monitoring
Previously worked for the tax bureau in Shenzhen and accumulated extensive experience
in tax regulations and communications with government departments in China
Mr. ZHANG Hwo Jie Chairman
Co-founder of the Group
More than 20 years of experience in marketing, strategic planning and corporate management in the
precision moulding industry
Responsible for the Group's overall strategic planning and marketing development
Obtained “Young Industrialist Award of Hong Kong” in December 2008
President of Hong Kong Young Industrialists Council
A member of the Chongqing Committee of the Chinese People’s Political Consultative Conference
Credentials
Looking ahead, we expect to see increasing volatility in international politics and global economy. However, the market
never lacks opportunities.
We expect to see significant development in the Group’s automobile business, as our outstanding production
services have been acknowledged by key customers in the automobile market. This was clearly demonstrated by the
facts that the Group has received quality accolades from a leading automaker in China for four consecutive years, and
was invited by another key automobile customer for overseas development in Mexico.
Our leading position in the OA equipment industry remains unparalleled despite the temporary slowdown in market
demand, and our customer base covers all major brand owners which together dominate the market. Accordingly, the
Group is poised to be a major beneficiary should market demand show any sign of recovery.
Outlook
25
The new industrial parks in Vietnam and Mexico enlarge our addressable market within the OA equipment and
automobile industries since we were unable to supply to Vietnam and Mexico in the past due to geographical distance.
After production commences, they will provide us with additional streams of revenue from new geographical markets.
Going forward, China is expected to increasingly concentrate on the production of higher value products. Together with
the emergence of local high technology industries in China, they create an even stronger demand for the precision
manufacturing services offered by the Group.
Last but not least, we will continue to implement cost control measures and production automation with a view to
improving productivity and are committed to maintaining a healthy balance sheet. Our ability to improve operating cash
flows despite a reduction in profit is an evident proof of our management capabilities. Therefore, despite the
challenges ahead, we remain confident about the Group’s prospects.
Outlook (Cont’d)
26
Digidie Hubei (Wuhan) Automobile Industrial Park
Financial Information
0
50
100
150
200
250
300
350
400
FY2015 FY2016
Turnover
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY2015 FY2016
HK$M
HK$M
2016 Business Results
28
YoY Growth:
-9.2%
YoY Growth:
-74.0%
For most part of 2016, our customers in the OA equipment and consumer electronics sectors experienced a slowdown in market demand, as many corporations delayed spending and consumer sentiment weakened. Fewer orders were placed to the Group, which led to a reduction of the Group’s turnover by approximately 9.2% to HK$3,209,290,000.
The new product development activities of our customers also slowed down. As we produce moulds for our customers during their product development stages, the Group experienced a reduction in the revenue contribution from mould production to total turnover which had a negative impact on the overall gross profit margin since moulds are products of higher profit margin. In addition, the decrease in the Group’s total turnover led to declining economies of scale since certain costs such as depreciation were fixed. Accordingly, the gross profit margin for the year reduced to 23.3%.
The Group incurred initial costs of HK$10,111,000 for the new industrial park in Vietnam and share option costs of HK$3,318,000 in relation to the new share options granted in 2016. Non-recurrent subsidies from the Chinese government also reduced to HK$746,000 (2015: HK$7,838,000).
With a view to minimising exchange rate risks, the Group had significantly reduced its assets denominated in foreign currencies (primarily bank deposits in Renminbi) in the second half of 2015. Although such action safeguarded the Group from the instability caused by Renminbi exchange rate fluctuations, it led to a reduction in the Group’s finance income to HK$5,378,000 (2015: HK$18,478,000) as the interest rates from bank deposits in Hong Kong and United States dollars were lower than those from bank deposits in Renminbi.
The Group’s net profit decreased by 74.0% to HK$53,486,000 due to the reasons as mentioned above.
Net Profit
Consolidated Income Statement
YoY
Expressed in HK$'000 2016 2015 Chg
Revenue 3,209,290 3,533,026 -9%
Cost of sales (2,461,621) (2,597,999) -5%
Gross profit 747,669 935,027 -20%
Other income 3,753 10,301 -64%
Other gains/(losses) - net 3,871 (17,454) -122%
Selling and marketing costs (167,500) (181,447) -8%
General and administrative expenses (471,664) (488,644) -3%
Operating profit 116,129 257,783 -55%
Finance income 5,378 18,478 -71%
Finance costs (35,919) (34,956) 3%
Share of losses of associates (1,465) (1,767) -17%
Profit before income tax 84,123 239,538 -65%
Income tax expense (22,396) (24,058) -7%
Profit for the year 61,727 215,480 -71%
Non-controlling interest (8,241) (10,011) -18%
Profit attributable to equity holders
of the Company 53,486 205,469 -74%
Dividend 16,092 61,709
Gross Margin 23.3% 26.5%
Operating Margin 3.6% 7.3%
Net Margin 1.7% 5.8%
Dividend Payout Ratio 30.1% 30.0%
Financial Performance
29
For most part of 2016, our customers in the OA equipment and consumer
electronics sectors experienced a slowdown in market demand, and
therefore fewer orders were placed to the Group. Total turnover of the
Group reduced by approximately 9.2% to HK$3,209,290,000.
Gross profit margin decreased to 23.3%, which was mainly attributable to
(1) the slowdown in new product development activities of the customers
which resulted in a decrease in the revenue contribution from the
production of moulds (higher margin products manufactured during new
product development stages) to the Group’s total turnover; and (2)
declining economies of scale brought by the reduction in turnover.
Profit before income tax reduced due to (1) the decrease in turnover and
gross profit margin as mentioned above; (2) initial costs of HK$10,111,000
incurred by the Group’s new industrial park in Vietnam; (3) share option
costs of HK$3,318,000 in relation to the new share options granted in
2016; (4) reduction in non-recurrent government subsidies to HK$746,000
(2015: HK$7,838,000) and (5) the decrease in finance income as the
Group had significantly reduced its Renminbi bank deposits in the second
of 2015, which had higher interest rates as compared to bank deposits in
Hong Kong and United States dollars.
Effective tax rate increased to 26.6% because (1) the micro lending
company, which was the Group’s subsidiary before August 2016, had
operating loss in 2015. The micro lending company returned to profit in
2016, which raised the Group’s overall effective tax rate as the micro
lending company is subject to the highest income tax rate among our
subsidiaries; (2) the Group paid additional taxes of HK$3,747,000 to the
tax authorities in China in relation to certain non-tax deductible expenses
in prior years; and (3) certain subsidiaries such as the new industrial park
in Vietnam incurred losses during the year, and such losses were not
eligible for offsetting the taxable profits generated by other profitable
subsidiaries.
Financial Summary
30
0
10
20
30
40
0
200
400
600
800
1,000
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Revenue Gross Profit and Margin
0
1,000
2,000
3,000
4,000
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
0
5
10
15
20
0
100
200
300
400
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Margin percentage
0
500
1,000
1,500
2,000
2,500
3,000
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
%
Net Profit and Margin Net Assets
HK$M HK$M
HK$M HK$M %
Other Key Financial Ratios
31
Note 1: Cash conversion cycle is defined as the total sum of inventory and debtors’ turnover days less
creditors’ turnover days.
Note 2: Net debt-to-equity ratio is calculated based on the total balance of bank borrowings and finance
lease liabilities less cash and bank balances and divided by shareholders’ equity.
Cash conversion cycle at 36 days.
The Group was in net cash position as at 31 December 2016.
Stable dividend payout ratio at roughly 30% of net profit over the years.
0
20
40
60
80
Days
0.0
0.5
1.0
1.5
2.0
02468
101214161820
Net cash
Net cash
0
10
20
30
40
50%
%
Cash Conversion Cycle1 Current Ratio Net Debt-to-Equity Ratio2
Dividend Payout Ratio
Net cash
The End
EVA Vietnam (Haiphong) Electronic Industrial Park
Disclaimer
33
Whilst all the projections and estimates given in this presentation have been made with assumptions
considered by the Group’s management to be most realistic at the relevant time, neither the Group nor its
management can guarantee their accuracies or completeness. This presentation is not an investment
advice, nor an offer or solicitation for the purchase or sale of any financial instrument. Past performance is
not indicative of future results. Investors should make their own investment decisions without totally relying
on the information contained herein. Only investors with sufficient knowledge and experience in financial
matters to evaluate merits and risks should consider an investment in the Group. Other persons should not
take any action on the basis of this presentation.
For more information:
EVA Precision Industrial Holdings Limited
Francis Wong
Phone: +852 2620 6488
Email: [email protected]
Fax: +852 2191 9978
