Comba Telecom Systems Holdings Limited

Good morning, ladies and gentlemen. On behalf of Comba 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&A section. In Q&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 four senior management joining us from Hong Kong and Guangzhou. From Hong Kong, may I introduce the Chairman, Mr. Fok Donglin. The Executive Director and Group CFO, Mr. Ken Chang. And from Guangzhou, may I introduce the executive director and president of the group, Mr. Xu Huijun. And the executive director and senior vice president of the group, Ms. Huo Xinru. Now, may I invite Mr. Ken Cheng, 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 Comba 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% and result in 5.05 billion Hong Kong dollar in 2020. Gross profit decreased by 331 million. gross profit margin decreased by 2.1 point to 28.6%. The margin or the gross profit down is because due to the product mix change and then increase in cost such as transportation and customer tax. The tax is down by about 38 million to 23 million. The net profit is a lot. The net loss is 194 million. It's a swing from a profit in 2019. And this is due to two major reasons. First of all, the antenna revenue is down and the R&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 million. And as a result, the overall finance cost has been down. And also thanks to a more balanced 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 2020, that increased the depreciation cost by about HK$34 million. As a result, the other expenses increased by HK$6.3 million. At mean expenses, overall the operating efficiency has improved. despite we have an exchange loss of about 23 million Hong Kong dollar. Selling expenses, we have been enhancing our sales operating efficiency and overall we saved about 17 million Hong Kong dollar in which the expenses down by about 3%. R&D expenses, we have been continuing increasing the R&D expenses, particularly targeted on the 5G technology. We are very optimistic about the prospect of the 5G application scenarios and models. We believe are very promising. We keep on investing for the future. And as a result, the R&D expenses increased by about 124 million 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 144 billion to close to 500 million at the end of 2020. Our cash position in 2020 is about 1.7 billion Hong Kong dollar. Total asset increased by 1.3%. Total liability decreased by 6.9%. Net asset increased by 18.7% to 4.1 billion Hong Kong dollar. 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 denominated effect. Cash conversion cycle remain 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 giving ratio trend over the last five years. Currently our giving 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%. is a dramatic drop from that. And currently our interest-bearing debt or the bank loan standing at about 1.38 billion Hong Kong dollar, which is about 376 million 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 fourth 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 or the core equipment manufacturers has been up by 12.9% 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%, allows operator ETL, which account 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, all the businesses has been up. Antenna business, because of the slowdown to telco capex, which has been down by 35.8%. Network system, we see continuing strong demand. which we see it has about a 14% increase. And particularly, we also want to highlight that in the wireless transmission business 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 5G 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... I turn the time to Mr. Xu, our president of the group. Thank you.

May I now invite Mr. Xu Hui Jun, Executive Director and President of the group to present industry development and company outlook. 现在我们有请执行董事兼集团总裁, 许慧君先生为我们介绍行业前景及公司展望。 有请许总。