Winox : Announcements and Notices - 2017 Interim Results

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(Incorporated in the Cayman Islands with limited liability) (Stock code: 6838)

• The Group's turnover amounted to HK$342,594,000, representing a corresponding increase of 39.8%.

• The Group's gross profit amounted to HK$97,021,000, representing a corresponding increase of 38.2%.

• The Group's profit for the period amounted to HK$39,193,000, representing a corresponding increase of 139.6%.

• Basic earnings per share amounted to HK7.8 cents, representing a corresponding increase of 136.4%.

• The Board declared an interim dividend of HK4 cents per ordinary share for the six months ended 30 June 2017.

BUSINESS REVIEW

The principal focus of Winox Holdings Limited ("Company", together with its subsidiaries "Group") remains on the development and manufacture of premium stainless steel products, and our major business segments are, namely, watch bracelets, costume jewellery, mobile phone cases and parts, and accessories and parts for leather goods.

During the first half of 2017, the demand for luxury goods has been slowly picked up as the economy of the world's major economies has achieved modest improvement. The Group recorded a growth of 39.8% in turnover for the first six months of 2017 as compared to the same

period of last year, which was mainly due to the increase in sales of watch bracelets, and mobile phone cases and parts. Our continuous stringent cost control policy and efficient supply chain management have maintained our gross profit margin level.

FINANCIAL REVIEW

Turnover

For the six months ended 30 June 2017, the Group's unaudited consolidated turnover increased by 39.8% to HK$342,594,000 (2016: HK$245,072,000) as compared to the same period of last year. Turnover attributable to watch bracelets, costume jewellery, mobile phone cases and parts, and accessories and parts for leather goods were 55.1%, 17.2%, 25.3% and 2.4% respectively (2016: 65.6%, 22.8%, 8.1% and 3.5%).

In the first six months of 2017, the downward trend of the global demand of Swiss made watches was improving. Turnover of watch bracelets reported an increase of 17.4% to HK$188,673,000 (2016: HK$160,712,000) during the period under review. Our client base has been extended to renowned wearable devices brands and we need to put into more efforts and time to grow the business volume in size.

During the period under review, turnover of costume jewellery recorded an increase of 5.7% to HK$59,030,000 (2016: HK$55,847,000) as compared to the same period of last year.

During the period under review, sales of mobile phone cases and parts was HK$86,685,000 (2016: HK$19,803,000), representing a significant increase of 337.7%. Despite the severe competition of the mobile phone market, we will continue to increase our efforts in serving our market leading customers, targeting to grow this segment into scale in the coming year.

During the period under review, sales of accessories and parts for leather goods amounted to HK$8,206,000 (2016: HK$8,710,000), representing a decrease of 5.8%.

Profit

As a result of increase in sales, the Group's gross profit increased by 38.2% to HK$97,021,000 (2016: HK$70,190,000) as compared to the same period of last year. Gross profit margin for the period under review maintained at the similar level of 28.3% (2016: 28.6%). Profit for the period increased by 139.6% to HK$39,193,000 (2016: HK$16,359,000) and basic earnings per share for the period under review increased by 136.4% to HK7.8 cents (2016: HK3.3 cents).

Cost of Sales

Cost of sales included costs of production materials, labour costs, and manufacturing overhead and other costs. The following table sets forth the breakdown of our cost of sales for the six months ended 30 June 2017:

Six months ended 30 June

During the six months ended 30 June 2017, direct materials costs accounted for about 38.7% (2016: 28.1%) of the total cost of sales, while direct labour costs, and manufacturing overhead and other costs accounted for about 42.3% and 19.0% (2016: 50.5% and 21.4%) of the total cost of sales respectively.

Other Income

Other income increased by approximately 114.2% to HK$4,384,000 for the six months ended 30 June 2017 as compared to HK$2,047,000 for the same period last year mainly due to the increase in government subsidies received.

Other Expenses

Selling and distribution expenses increased by approximately 13.0% to HK$11,502,000 for the first six months of 2017 as compared to HK$10,180,000 for the same period last year due to the increase in turnover.

Administrative expenses increased by 2.2% to HK$39,448,000 (2016: HK$38,598,000) during the period under review.

Finance costs for the six months ended 30 June 2017 amounted to HK$1,895,000 (2016: HK$2,282,000), representing a decrease of 17.0%.

Taxation

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods.

Under the Law of the PRC on EIT ("EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

Inventories

As at 30 June 2017, the Group recorded an inventory balance of HK$75,446,000 (31 December 2016: HK$53,447,000), representing an increase of 41.2% which was due to the increase in raw materials, work in progress and finished goods. Inventory turnover for the first half of 2017 was

47.5 days as compared to 59.7 days for the same period of 2016.

Trade Receivables

As at 30 June 2017, the Group recorded trade receivables of HK$92,709,000 (31 December 2016: HK$88,938,000). The credit periods granted to our customers were considered on individual basis ranging from 30 days to 90 days. Generally, no credit would be granted to customers which are new, short-term and placing orders in immaterial scale. As most of our customers are internationally renowned brand owners, we considered we were exposed to relatively low default risk. The trade receivables turnover of the Group for the period under review was 48.0 days (for the year ended 31 December 2016: 51.2 days).

Trade Payables

As at 30 June 2017, the Group recorded trade payables of HK$71,554,000 (31 December 2016: HK$42,852,000). The trade payables was primarily related to the purchase of raw materials from suppliers with credit periods ranging from 30 days to 90 days. The trade payables turnover of the Group for the six months ended 30 June 2017 was 42.2 days (for the year ended 31 December 2016: 33.2 days).

Liquidity, Indebtedness and Charges on Assets

During the period under review, the Group maintained a satisfactory liquidity level. As at 30 June 2017, net current assets of the Group was HK$166,820,000 (31 December 2016: HK$180,678,000). Besides, the Group maintained cash and bank balances of HK$174,311,000 (31 December 2016: HK$179,247,000), of which 50.0% was in Hong Kong dollars, 33.1% was in United State dollars, 14.9% was in Renminbi, and 2.0% was in Swiss Franc and other currencies.

The Group's outstanding bank borrowings as at 30 June 2017 was HK$88,965,000 (31 December 2016: HK$110,739,000), which was all in Hong Kong dollars. All of the Group's bank borrowings were arranged on floating rate basis. Except for certain bank borrowings which were committed loan facilities with specific maturity dates, the Group's other bank borrowings contained repayment on demand clause at any time at the discretion of the bank. Under the Hong Kong Accounting Standards, the Group had separated and classified the bank borrowings as current and non-current liabilities in the consolidated statements of financial position as at 30 June 2017 in accordance with the settlement term. Of the total bank borrowings, according to the