Vodatel : BUSINESS AND FINANCIAL HIGHLIGHTS FOR THE THREE-MONTH PERIOD AND NINE-MONTH PERIOD (in PDF)

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VODATEL NETWORKS HOLDINGS LIMITED ฌ ༺ л ၣ ഖ છ ٰ Ϟ ࠢ ʮ ̡ *

(Incorporated in Bermuda with limited liability)

Stock Code: 8033

BUSINESS AND FINANCIAL HIGHLIGHTS FOR THE THREE-MONTH PERIOD AND NINE-MONTH PERIOD

• h Due to a stronger third quarter in 2018, the Group reported revenue of HK$108,050,000 and HK$287,562,000 for the Three-Month Period and Nine-Month Period, representing a growth of 4.58% and 13.83% respectively

• h As a result of the mix of sales comprising a relatively higher percentage of the lower-margin hardware sales, the Group reported net loss of HK$2,800,000 for the Three-Month Period, whereas attributable to two consecutive stronger quarters in 2018 as compared to 2017, net loss for the Nine-Month Period narrowed from HK$13,105,000 to HK$7,987,000

• h Although "Vodatel" brand of companies in Macao, Hong Kong and Mainland China were only able to add approximately HK$57,000,000 to its order book during the Three-Month Period, new orders in the areas of DWDM infrastructure and SD-WAN infrastructure were recorded

• h MDL continued to secure over HK$30,000,000 worth of contracts during the Three-Month Period, however, narrowing margins in different contracts has been observed mainly due to increasing competition from other local system integrators as a result of absence of ample business opportunities in the gaming sector

• h TTSA remained positive over the partial recovery of the outstanding receivables that the Government of Timor-Leste owes to TTSA

• h Total net cash balances and yield-enhanced financial instruments as at 30th September 2018 totalled HK$136,919,000 or approximately 43.16% of total assets

• h The Directors do not recommend payment of an interim dividend for the Nine-Month Period

THIRD QUARTER RESULTS

The Board is pleased to present the unaudited consolidated results of the Group for the Three-Month Period and Nine-Month Period, which was reviewed by the audit committee of the Company, as follows:

Unaudited
Three months	Nine months
ended	ended
Three-Month	30th September	Nine-Month	30th September
Period	2017	Period	2017
Notes	HK$'000	HK$'000	HK$'000	HK$'000
Revenue	108,050	103,316	287,562	252,620
Cost of sales of goods	(69,656)	(67,591)	(177,347)	(161,329)
Cost of providing services	(18,288)	(13,682)	(45,904)	(34,572)
Gross profit	20,106	22,043	64,311	56,719
Selling, marketing costs and
administrative expenses	(23,614)	(24,319)	(74,868)	(72,093)
Other gains	63	298	851	714
Operating loss	(3,445)	(1,978)	(9,706)	(14,660)
Finance income	687	421	1,892	1,552
Finance costs	(42)	(1)	(67)	(1)
Finance income - net	645	420	1,825	1,551
Share of profit of an associate	-	4	-	4
Loss before income tax	(2,800)	(1,554)	(7,881)	(13,105)
Income tax expense	1	-	-	(106)	-
Loss for the period	(2,800)	(1,554)	(7,987)	(13,105)
Loss is attributable to:
Owners of the Company	(2,418)	(1,678)	(6,940)	(12,213)
Non-controlling interests	(382)	124	(1,047)	(892)
(2,800)	(1,554)	(7,987)	(13,105)
Loss per Share for loss
attributable to the ordinary
equity holders of the Company
(expressed in HK cents per Share)
Basic and diluted loss
per Share	2	(0.39)	(0.27)	(1.13)	(1.99)
Dividends	3	-	-	-	-
- 2 -

Notes to the condensed consolidated income statement

• 1 Income tax expense

  Hong Kong profits tax was provided at the rate of 8.25% for the first HK$2,000,000 of assessable profits of one of the subsidiaries incorporated in Hong Kong and 16.5% on other assessable profits for the Nine-Month Period (nine months ended 30th September 2017: 16.5% for all assessable profits). Taxation on non-Hong Kong profits was calculated on the estimated assessable profits for the Nine-Month Period at the rates of taxation prevailing in the regions in which the Group operated.

• 2 Loss per Share

  • (a) Basic loss per Share

    Basic loss per Share was calculated by dividing:

    • • the loss attributable to owners of the Company.

    • • by the weighted average number of Shares outstanding during the Nine-Month Period.

  • (b) Loss used in calculating loss per Share

Nine

months ended

Nine-Month

Period HK$'000

30th September 2017 HK$'000

Loss attributable to ordinary equity holders of the Company used in calculating basic loss per Share

(6,940)

(12,213)

(c) Weighted average number of Shares used as the denominator

Weighted average number of Shares used as the denominator in calculating basic loss per Share (thousands)

614,435

614,385

(d)Information concerning the classification of Options

Options granted to Directors, employees and a consultant under the Scheme were considered to be potential Shares. They would have been included in the determination of diluted loss per Share to the extent to which they were dilutive. Options were not included in the determination of basic loss per Share.

The 51,376,000 Options granted on 26th September 2016 were not included in the calculation of diluted loss per Share because they were anti-dilutive for the Nine-Month Period. These Options could potentially dilute basic loss per Share in the future.

• 3 Dividends

  The Directors do not recommend payment of an interim dividend for the Nine-Month Period (nine months ended 30th September 2017: nil).

• 4 Reserves

2017: Available-
for-sale investments
/ 2018: Fair value	Retained
Capital	through other	Foreign	earnings/
Contributed	Share-based	redemption	comprehensive	Merger	Statutory	currency	Total	(accumulated
surplus	payments	reserve	income reserve	reserve	reserve	translation	other reserves	losses)
HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
As at 1st January 2017	97,676	7,442	702	12,170	35,549	49	2,913	156,501	21,042
Revaluation loss	-	-	-	(37)	-	-	-	(37)	-
Currency translation differences	-	-	-	-	-	-	(46)	(46)	-
Dividend relating to 2016	-	-	-	-	-	-	-	-	(6,144)
Loss for the nine months
ended 30th September 2017	-	-	-	-	-	-	-	-	(12,213)
As at 30th September 2017	97,676	7,442	702	12,133	35,549	49	2,867	156,418	2,685
As at 1st January 2018	97,676	7,442	702	489	35,549	49	2,914	144,821	10,071
Revaluation loss	-	-	-	(1,847)	-	-	-	(1,847)	-
Currency translation differences	-	-	-	-	-	-	150	150	-
Dividend relating to 2017	-	-	-	-	-	-	-	-	(6,144)
Loss for the Nine-Month Period	-	-	-	-	-	-	-	-	(6,940)
As at 30th September 2018	97,676	7,442	702	(1,358)	35,549	49	3,064	143,124	(3,013)
- 4 -

BUSINESS REVIEW

Business in Macao, Hong Kong and Mainland China

In Macao, with gaming remains as a core economic pillar, business generated from different gaming operators continues to be one of the main revenue drivers of the Group. As per the official statistics from the Government of Macao, total gross revenue generated from different gaming activities for the Nine-Month Period reached HK$217,529,000,000. Although total gross revenue represented a year-on-year growth of 15.86%, it trailed behind the year-on-year growth of 18.86% for the initial six months of 2018. While the gaming sector continued to show visible signs of growth potential, given the recent global trade tensions, currency volatility and stock market fluctuations, the Group has witnessed cautions over the near term capital expenditures momentum and spending pattern among its customers, in particular gaming operators and telecommunications service providers.

Due to market uncertainties and limited number of gaming operators still constructing new and mega-sized gaming infrastructure, during the Three-Month Period, the Group witnessed a visibly slowdown in securing new contracts in Macao, Hong Kong and Mainland China. In addition, two other observations were noted, including tougher price negotiations and decline in the higher-margin service contracts (involving installation and system support services) awarded, as customers, especially gaming operators, rearranged their internal human resources to perform such services. Nevertheless, "Vodatel" brand of companies in Macao, Hong Kong and Mainland China were able to add approximately HK$57,000,000 to its order book during the Three-Month Period, though feel short the total value of contracts of HK$85,000,000 and HK$91,000,000 registered for first quarter and second quarter of 2018 respectively. The contracts secured during the Three-Month Period included a handful of work orders from different gaming operators to support their customarily upgrades and renovations of their gaming floors, and expansion works to the data centres of Internet value-added services providers in Mainland China, different telecommunications service providers in Hong Kong and Mainland China and data centre providers in Mainland China. Worth noting was new orders in the areas of DWDM infrastructure and SD-WAN infrastructure which VHL commenced carrying and promotion during the third quarter of 2017. During the Three-Month Period, VHL secured over HK$2,500,000 worth of contract from a regional telecommunications service provider in Mainland China to deploy DWDM infrastructure and secured multiple contracts, worth HK$4,000,000, from a leading provider of content delivery services in the Asia Pacific Region to deploy SD-WAN infrastructure.