Comba Telecom Systems Holdings Limited

Good morning, ladies and gentlemen. On behalf of Comber Telecom Systems Holdings Limited, I would like to welcome you all for joining today's 2024 Any Results in Presentation video conference. In today's meeting, there will be a presentation followed by Q&A section. During the Q&A section, you may raise your question to the management by clicking on the raise hand button and wait for further guidance from our moderator. Good morning, everyone. Welcome to the PPPT presentation and the Q&A session. In the Q&A session, if you have any questions, please raise your hand and wait for our system staff to arrange questions. The senior management joining us today are 请容许我介绍今天出席的管理层 他们分别是 The Chairman, Mr. Fok Dong Ling 主席,霍东霖先生 Executive Director and President of the Group and President of Combo Telecom Systems International Limited, Ms. 霍欣如 即行董事兼集团总裁 及精信国际总裁,霍欣如女士 and Executive Director and Group CFO, Mr. Ken Chang. Now may I invite Mr. Ken Chang, Executive Director and Group CFO, to present the financial highlights for the year of 2024. Mr. Chang, please. Good morning, everyone. First of all, I would give some financial highlights on the Comber.

Revenue is 4.5 billion in 2024, down by 24.3% compared with a year ago. The decline is mainly due to the slowdown in CapEx globally. Gross profit is 1.17 billion, down by around 30% year on year. Gross profit margin is 25.9%. down by 1.9 percentage point. This is due to two facts. One is we actually managed to optimize our asset side, particularly on the inventory side. And second is due to the product mix and due to the decline overall revenue. Operating expenses is 1.8 billion compared with a year ago, it's kind of flat. However, I would like to point out two points. First of all, as we also pointed out in our previous announcement is that we have decided to terminate the Asia IPO and that actually have incurred the one-off costs in 2024. And that cost is roughly about 160 million. And that actually has... to get into the 2024 operating expenses. And also, secondly, we have actively managed our sales force and staff size, and we have done appropriate restructuring on the whole group. So that actually also have involved some of the non-recurring costs. Roughly, it's about 18 million Hong Kong dollar. So with that actually removed, we actually will be seeing our operating expenses on a recurring basis in 2025 to have a much better result. Profit before tax is a loss of 538 million. Income tax is 14.8 million, down by 62%. and loss to shareholder is 564 million, which compared to the announcement we made on the earnings warning, the earning is not exceeding 600 million, which is in line. Another thing I want to point out is that this time we delayed the announcement of today's earning by roughly about a week. And this is due to the fact that on the Laos accounting side, because Laos as a country has been classified as a hyperinflation country in the fourth quarter of 2024. and due to the accounting principle of accounting principle 29, we actually have to account the hyperinflation on the asset side. And also we have to adjust the currency appropriately. And all in the effect, basically the impact to our group is actually minimal. On the profit and loss side is slightly positive. Actually, it cut down on loss slightly. And on the SSI, particularly on the net SSI, it reduced the net asset by roughly about 200 million. the goodwill on the Laos operator ETL has reduced by roughly about 150 million Hong Kong dollar. And the intangible asset side on the ETL has reduced by also around 150 million. So in other words, on the asset side of the company actually become much more optimal and much more healthier for the company to operate in the future. So because the operating expenses has been flat compared with a year ago, and as the revenue has reduced, so as a percentage of revenue of the OPEX has increased. So first of all, the finance costs, we have seen a reduce on the finance costs. However, if we look at the finance costs as a percentage of interest-bearing debt, if we look at interest-bearing debt itself, is actually a slight increase, roughly about 850 million Hong Kong dollar at the end of 2024. However, if we look at the finance cost as a percentage, it's roughly about 3.5%, 3.7% compared with a year ago, around 7%. So the interest expenses we are paying has been substantially reduced due to a more optimal borrowing structure. Income taxes come down by 62%. Other expenses is a pretty large increase that is due to a one-off non-recurring costs due to the fact that we have decided not to do the Asia IPO. and that is roughly about as mentioned, that is the cost come to the other expenses is roughly about 130 million and the other 30 million of the IPO related costs go mainly to the admin expenses. And for the admin expenses and selling expenses have come down respectfully. and also, as I explained, the IPO costs also come into the admin expenses. But also, we have done the actively restructuring on the company that also incurred some of the one-off and non-recurring costs that go mainly into admin expenses and the selling expenses. And also, if you look at our annual report in the staff number, you actually see a reduction in the staff work. So selling expenses also has come down and R&D expenses as a percentage of revenue actually has gone up. This actually means our determination to keep on investing on R&D. The net cash, this is the cash reducing the roughly is about 744 million. If you look at our cash and cash equivalent is 1.4 billion compared with a year ago is actually an increase from 1.1 billion. Total SSI is 7.4 billion down by 17.7%. And two notes I want to make is, If you look at our inventory, a year ago is 1.3 billion. It actually has come down to 934 million in 2024, a substantial reduce by 29%. Our account receivable a year ago is 3.5 billion. And now it has come down to 2.5 billion. come down by 27%. So on the asset side, it actually has come down by more than the sell side. So this actually means that also 2024 is the adjustment on the asset side, so that the company in a more optimal asset structure to operate in the future. The net SSI has come down by 21% to 2.6 billion. If we look at the turnover day, although the denominator has come down, however, if you look at our turnover day, it hasn't gone up by that much. Infantry turnover day is 123 days. AR turnover day is roughly similar to 2023, 244 days. AP turnover day has lengthened. 345 days, and that gives us a cash conversion cycle at 22 days, which I believe is quite healthy in our industry. Operating cash flow, although we have record more than 500 million losses, our operating cash flow in recent years has been healthy. And in 2024, it's 339 million. Gold screening ratio is 11.3%. This is mainly due to the SSI reduction. If you look at our interest rate, that has slightly gone up, but not that much. It's roughly about 850 million Hong dollar. Debt to asset ratio is 63.5%. So look at our interest-bearing debt and giving ratio over the last five years, we can actually see that we actually have hit the bottom in 2023 at around 8.8%. And it suddenly has climbed up to 10.2% in the interim result. And at this year end is 11.3%. is still lower than what we have seen five or seven years ago. And we believe this structure is still optimal and healthy. Also, if we look at our operating cash flow, we only have one negative operating cash flow over the last 10 years. And although this year lost, we still have a positive. on operating cash flow side. So let's look at our revenue breakdown, first of all, by customer. So the three major operators in mainland China account for 30.1% total revenue. If we add China Tower into the free operators as a percentage is close to 38%. and China Telecom Revenue go up by 9.2% and the others has gone to come down. One major highlight is that our international and core equipment makers in the whole pie right now has gone up to close to 50% of our whole total pie. And compared with the domestic mainland market, the international market on a relative basis has been more resilient. It has come down by around 8% year on year. Others come down by 21.9%. And our lounge operator ETL currently account roughly about 4% of total revenue. and even though Lowskip has depreciated against Hong Kong dollar, in Hong Kong dollar term, the revenue has gone up by 13% and in local currency term, the revenue has gone up by 32%. And if we look at the loss from ETL and in the recent year, it has substantially reduced.

Let's look at the breakdown by business.