The Group’s turnover for the year 2018 was HK$5.3 billion, reflecting an increase of approximately 7.5% compared to 2017. However, the Group’s profit attributable to shareholders was HK$82 million, representing a decrease of approximately 26.3% largely due to a decline in the profitability of the Manufacturing Division due to a shortage of components and escalating labour costs and overheads in the PRC.
Trading and Distribution Division (WKK Distribution)
The turnover of the Group’s Industrial Products Trading and Distribution Division for the year of 2018 was HK$2.2 billion, representing an improvement of approximately 6% compared to last year. Despite softening demand for the industrial products distributed by the Group due to the US-China trade war in the second half of 2018, which resulted in a reduction in profit in the second half of 2018 compared to the corresponding period in 2017, the Division’s operating profit for the whole year was HK$105.9 million, reflecting an improvement of 28% compared to last year. While the trading of printed circuit board related products contributed the largest part of the Division’s profit, the operations in Taiwan and Singapore recorded good improvements in operating profits. All other major trading operations contributed positively to the Division’s profit with the exception of trading in Electronic Assembly related products by the Electronic Equipment Department.
OEM Manufacturing Division (WKK Technology)
The turnover of the Group’s OEM Manufacturing Division increased by 8.5% to HK$3.1 billion for the year 2018 compared to last year. However, the Division’s operating profit decreased to HK$31.3 million for the year 2018 from HK$90.9 million for last year mainly due to the tightening component environment and escalating labour costs and overheads in the PRC.
As at 31 December 2018, the Group had committed bank and other financing facilities totaling HK$2,576 million, of which HK$973 million was drawn down. As at 31 December 2018, the Group’s consolidated net borrowings amounted to HK$556 million and its total equity amounted to HK$1,672 million, resulting in a net gearing ratio of 33.3%.
Most of the Group’s sales were conducted in the same currencies as the corresponding purchase transactions. Foreign exchange contracts were used to hedge exposures where necessary.
As at 31 December 2018, the Group had a total of 5,617 employees, of whom 233 were based in Hong Kong, 5,059 in the PRC and 325 overseas. The remuneration packages of the Group’s employees are mainly based on their performance and experience, taking into accounts current industry practices. Provident fund scheme, medical allowances and in-house and external training programs are available to employees. Share options and discretionary bonuses may be provided to employees according to the performance of the individual and the Group. The remuneration policy and packages of the Group’s employees are regularly reviewed.
After the 2019 Chinese New Year holiday, the average return rate of the factory workers in the PRC was approximately 91.4%.
The Group is committed to making contributions in various areas of sustainable development, including environment protection. The Group has established a green council to lead and organize various environmental protection activities and programs.
The Group has set up various systems, including a sewage treatment plant, solar panels for warming water supplies for workers, LED and solar energy lighting systems, computerized filing systems to limit paper usage, selective flux and soldering systems, an ISO14001 certified environmental management system since 2002, an IECQ QC080000 hazardous substance process management system, as well as an ISO50001 energy management system for the monitoring and improvement of greenhouse gas emissions and energy consumption.
The Group applies environmentally friendly designs and packaging and complies with green procurement policies. Moreover, the supply chain and the entire product life-cycle are in keeping with a clean and green manufacturing policy, thus producing consistently high-quality green products from start to finish. The Group constantly instils an awareness of environmental protection in its employees, the main internal stakeholders, thereby setting a good example to external stakeholders.
The Group’s success in the field of environmental protection has earned recognition from the Government, industry, customers and suppliers.
Corporate social responsibility is one of the core management philosophies in the Group. The Group actively engages in social activities, helping and nurturing those in need. The Group’s staff have formed a volunteer team who contribute their free time in the service of society by visiting and organizing activities at centers for elderly people. The Group has made donations to various charities, and also provides scholarships to eligible students who otherwise cannot afford to further their studies at university.
As a result, the Group has been awarded the “10 Years Plus Caring Company” logo by the Hong Kong Council of Social Service. In addition, we have repeatedly formed visiting groups for students of secondary schools and universities to tour our PRC factory to enhance their knowledge of green production facilities.
LEGAL AND REGULATORY COMPLIANCE
The Group complies with all relevant laws and regulations that have a significant impact on the operations of the Groups.
In view of the ongoing US-China trade war and the unclear economic outlook, it is expected that the demand for the industrial products distributed by the Trading and Distribution Division will continue to be soft for the foreseeable future.
Given the souring market sentiment and level of orders on hand, the operating environment for the Group’s OEM Manufacturing is expected to be difficult. The Group will continue to enhance factory automation to alleviate the impact of continuing increase in labour costs and overheads in the PRC.
On behalf of the Board, I wish to thank all employees for their loyalty, dedication and hard work throughout the year.
By Order of the Board
Hong Kong, 14 March 2019