Earnings Call: H2 2020

Mar 26, 2021

Good morning, ladies and gentlemen. On behalf of Konva Telecom Systems Holdings Limited, I would like to welcome all of you joining the 2020 Annual Results Investor Presentation Web Conference. In today's meeting, there will be a presentation followed by Q and A section. In Q and A section, if anyone wishes to ask questions, please click on the raise hand button located at the bottom of the screen. Today we have 4 senior management joining us from Hong Kong and Guangzhou. From Hong Kong, may I introduce the Chairman, Mr. Fok Dong Lin the Executive Director and Group CFO, Mr. Ken Chang. And from Guangzhou, may I introduce the Executive Director and President of the Group, Mr. And the Executive Director and Senior Vice President of the Group, Ms. Huoxin Now, may I invite Mr. Ken Chang, Executive Director and Group CFO to present the financial highlights in 2020. Mr. Cheng, please. Thank you. Good morning, everyone. I'm here to present the financial result for Konva in 2020, due to the COVID pandemic and the slowdown in telco CapEx, The overall revenue has declined, particularly on antenna. Outside antenna, we actually have a growth in the revenue. But overall revenue is down by 12.5 percent, and result in, HK5.05 1,000,000,000 in 2020, gross profit decreased by 331,000,000, Gross profit margin decreased by 2.1. To 28.6%. The margin Or the gross profit down is because due to the product mix change and an increase in cost such as transportation and customer tax. The tax is down by about 38,000,000 to 23,000,000. The net profit is the net loss is RMB194 1,000,000, is a swing from a profit in 2019. And this is due to 2 major reasons. First of all, the antenna revenue is down and the R and D expenses is up. So let me explain the cost structure of the group in 2020. First of all, the finance costs, the bank loan decreased by 376,000,000 and as a result, the overall finance cost has been down and also thanks to a more balance of a short term and long term loan and in general also the interest rate has declined. So the overall finance cost has declined by 33%. Income tax because of the better tax planning and also a benefit of deferred tax asset, our income tax has decreased by 62.8%. Other expenses, because the increase of the ETL fixed asset depreciation started in the beginning of 20 20, that increased the depreciation costs by about HKD34 million. As a result the other expenses increased by $6,300,000 At mean expenses, Overall, the operating efficiency has improved despite we have an exchange loss of about HKD23 1,000,000. Selling expenses, we have been enhancing our sales operating efficiency and overall we saved about HK17 $1,000,000,000 in which the expenses down by about 3%. R and D expenses, we have been continuing increasing the R and D expenses particularly targeted on the 5 gs technology, we are very optimistic about the prospect Of the 5 gs application scenarios and models, we believe are very promising. We keep on investing for the future and as a result, the R and D expenses increased by about 124,000,000 or by about 35.8%. If we look at our balance sheet, we actually have a stronger balance sheet or stronger financial position compared with the past. Our net cash has increased by RMB144,000,000 to close to RMB500,000,000 at the end of 2020. Our cash position in 2020 is about HKD1.7 billion. Total asset increased by 1.3%, total liability decreased by 6.9%, net asset increased by 18.7 percent to HKD4.1 billion. NAV per share is 1.49. In general, the turnover day have increased. Inventory turnover day, AR turnover day, AP turnover day have increased because of the non VAT effect. Cash conversion cycle remained healthy at around 11 days, the gross gain ratio has been down by 3.5 points to 12.2%, debt to asset ratio down by 5.3% to 59.8%. Because of the losses, our ROE is negative. So this chart shows you the gearing ratio trend over the last 5 years. Currently, our gearing ratio stood at 12.2%, which has been down over the last few years and particularly since the peak in the beginning of 2018 is around 18.9 percent, is a dramatic drop from that. And currently our interest bearing debt or the bank loan standing at about HKD1.38 billion, which is about $376,000,000 down compared with a year ago. And let us look at revenue breakdown by customers. As mentioned, because of the slowdown in telco CapEx and because of the COVID pandemic, we see the free operators revenue has been down in general. However, we look at our 4th biggest customer, which is China Tower, is up very strongly by about 51%. And also thanks to the network system side of the business, international customers and OEM Our core equipment manufacturers has been up by 12.9 percent despite the global COVID pandemic effect, particularly, we want to highlight the core equipment vendors, which account roughly half of the international revenue, was up 26.1% year on year. Other business is up by 14.3%. Our Laos operator, EPL, which accounts roughly about 3.3% of revenue, is up 7.2%. Let us look at the revenue breakdown by business. Basically, antenna has decreased by about 35.8%. And besides antenna business, if we talk about network system services, wireless transmission, the business, all the businesses has been up. Antenna business because of the slowdown in telco CapEx and which has been down by 35.8 percent. Network system, we see continuing strong demand, which we see it has about 14% increase. And particularly, we also want to highlight that in the wireless transmission Yes, which account for about 5.2% of revenue is up very strongly by about 52%. So overall, to sum up on the financial side, our financial position remains strong, categorized by low gain ratio, higher net asset. The businesses outside antenna has remained strong. We believe the 5 gs opportunity set for us remain Very bright and we are in a strong confidence that we can do better despite the fact despite the setback in 2020. So with that, I will turn the time to Mr. Xu, our President of the Group. Thank you. May I now invite Mr. Shihui Jun, Executive Director and President of the Group to present Industry Development and Company Outlook.