Cogobuy Announces 2017 Annual Results

Press Releases

Mar 27, 2018

HONG KONG, March 27, 2018 /PRNewswire/ —

Highlights of the annual results for the year ended December 31, 2017:

The Group’s Gross Merchandise Value (“GMV”) was approximately RMB25.2 billion, a year-on-year (“YoY”) increase of 16.6%
Transaction customers¹ reached 31,176, representing an increase of 50.6% as compared with 20,705 for the year ended December 31, 2016.
Non-GAAP profit attributed to equity shareholders² of the Company was approximately RMB355.6million, decrease 32.5% YoY.
Implementation of AI+ hardware strategies and Kepler System achieved breakthrough.

Cogobuy Group (“Cogobuy” or the “Company”, stock code: 400.HK; with its subsidiaries (the ”Group”)), a leading e-commerce platform serving the electronics manufacturing industry in China, is pleased to announce its audited consolidated results for the year ended December 31, 2017 (the “Period”).

Financial Highlights of the Full Year of 2017

During the Period, total GMV of the Company’s operations was approximately RMB25.2 billion, an increase of 16.6% YoY; with 37.1% derived from direct sales value, 44.1% from transaction value in the online marketplace, and 18.8% from IngFin Financing Services.

During the Period, as a result of malicious short selling reports, commercial banks in Hong Kong reactively tightened the Company’s short-term credit line, materially affecting third quarter performance. After the Company pivoted its corporate development strategy to monetize INGDAN.com and trim the scale of its direct sales business while raising its internal cash ratio, its direct sales business rebounded and stabilized in the fourth quarter. As at December 31, 2017, the number of transaction customers reached 31,176, representing an increase of 50.6% as compared with 20,705 for the year ended December 31, 2016.

During the Period, the Company recorded total revenue of RMB9,613.7 million, a YoY decrease of 25.7%, mainly attributable to a decrease in sales revenue from blue chip customers as a result of tightened bank credit lines. Profit attributable to equity shareholders of the Company was RMB302 million, a YoY decrease of 36.9%. Non-GAAP profit attributable to equity shareholders² of the Company was approximately RMB355.6million, a YoY decrease of 32.5%.

The Company recorded net cash inflow of approximately RMB800 million and cash and bank balances including pledged deposits amounted to RMB2,233.2 million as at December 31, 2017. Inventory turnover days and trade receivables turnover days were 39.2 days and 65.8 days, respectively. As at December 31, 2017, basic common shares outstanding were 1,456,679,000, and diluted common shares outstanding were 1,463,624,000.

INGDAN.com, the largest Internet of Things (IoT) and artificial intelligence (AI) innovation business platform in China, has continued to attract new customers for the Group. Since the fourth quarter of 2017, the Group transformed its corporate development strategy to its latest “INGDAN.com Commercialization + IC Component Trading Platform” dual business model. Many of the commercialization projects on INGDAN.com have become more mature, especially in AI for industrial robotics and smart cars. The platform has contributed significant momentum to the Group’s performance since the fourth quarter, especially through its value-added services, such as corporate and technology services. As a result, the Company’s gross profit margin remained stable at about 8%.

Focusing on INGDAN.com’s supply chain monetization in 2018, INGDAN.com will emphasize serving innovative SMEs in emerging industries and, providing AI upgrade services to traditional enterprises, both of which will help the Company resume its high growth. Using its IC components business as an entry point, the Group will gradually expand to a higher value-added service system that will include hardware modules, technology support, software, and supply chain finance and system solutions. EZ Robot Inc., which incubated on INGDAN.com platform, has grown over the past three years and accumulated more than 1,000 creative robotic projects and 300 up and downstream suppliers. Turnover for the components business reached over RMB 700 million in 2017. The platform will use its eco-system resources to help drive projects to rapid commercialization and profitable future returns.

Business Highlights

IngDan Labs was officially upgraded to an AI and loT hardware products design company, and launched several K-series products including an AI voice recognition module and an AI image processing module. The modules can be generally applied to intelligent manufacturing and AI+ industrial automation. Industrial automation involves automatic production lines and intelligent manufacturing backed by cloud computing. The integration of automatic control systems for machines and production lines, Manufacturing Execution Systems (MES) for factories, and Enterprise Resource Planning (ERP) systems, bridges the gap between information and automation systems, and optimizes factories’ and companies’ manufacturing capabilities. For those in the business of intelligent manufacturing upgrades, the “Made in China 2025″ policy presents tremendous market opportunities. According to Qianzhan Industry Institute research, China’s total market output of intelligent manufacturing surpassed RMB 1.5 trillion in 2017, and is expected to grow at an accelerated rate in the coming years. INGDAN.com is at the forefront of AI + industrial automation, and is one of the leading, early movers in China’s intelligent technology market.
During the Period, the Company expanded its distribution partnerships with well-recognized suppliers, such as becoming the official distributor for STMicroelectronics (NYSE: STM – the global leader in semiconductors), as well as signing a new strategic agreement with Samsung Electronics Co., Ltd. (OTCMKTS: SSNLF – the global leader in electronics). The Samsung Electronics partnership was formed to connect Samsung’s ARTIK™ IoT Platform (ARTIK™) with INGDAN.com’s users and vendor ecosystem, to strengthen their respective advantages and better capture opportunities in China’s Trillion-RMB IoT market. In its partnership with STMicroelectronics (ST), Cogobuy became the official distributor for ST’s full line of products, to introduce ST’s leading car-to-car and car-to-infrastructure connectivity solutions in China. The partnership is expected to help Cogobuy to accelerate its growth in autonomous driving and other AI-based technology applications.

Outlook

Mr. Jeffrey Kang, CEO of Cogobuy Group, said: “Due to malicious short selling reports last year, commercial banks in Hong Kong reactively tightened the Company’s credit line. During the second half of 2017, in particular the third quarter, the Group’s direct sales business was adversely affected, however the Company’s full year performance maintained a RMB301.3 million profit. Despite the temporary set back from our direct sales business, Cogobuy continued to build strong partnerships with clients and suppliers. In fact, we expanded the Company’s client base in 2017, which created a strong foundation for our recovery. Our direct sales business bottomed in the third quarter but resumed in the fourth quarter, while growth in our IC component direct sales business will depend on the recovery of the Company’s Hong Kong bank credit lines this year.

“During the Period, the Group raised its internal cash ratio, and recorded a net cash inflow of approximately RMB800 million. As at December 31, 2017, IngFin Financing Services’ outstanding loans decreased from RMB2,403.8 million as at June 30, 2017, to RMB942.6 million. At the same time, the Group transformed its corporate development strategy and officially transitioned to its new ‘INGDAN.com Commercialization + IC Component Trading Platform’ dual business model in the fourth quarter of 2017.

“INGDAN.com Commercialization focuses on three areas: directing INGDAN.com user traffic to IC components on Cogobuy.com, transforming the IngDan Labs from a research lab into an AI hardware design company and launching a series of INGDAN.com-branded AI hardware products for AI+ industrial automation, and incubating the highest potential projects with equity investments.

“Intelligent manufacturing upgrades and AI+ industrial automation aligned with the new favorable ‘Made in China 2025′ national policy present tremendous market opportunities. According to the China Academy of Information and Communications Technology, or CAICT, China’s market share of the global robotics and peripheral services industry is expected to reach RMB 379 billion by 2020, representing 70% of global market output. As the world’s fastest-growing market for industrial robot sales, we expect huge demand for AI hardware across various industries. In 2018, we plan to accelerate the IngDan Labs’ transformation, to take advantage of opportunities resulting from the new national policy and the rise in intelligent manufacturing and upgrading of traditional industries, and to expand INGDAN.com’s market share.

“We appreciate the steadfast support from our clients and suppliers, which has helped the Group overcome our short-term business crisis. With our new ‘INGDAN.com Commercialization + IC Component Trading Platform’ dual business model, the Group is positioned to expedite our restructuring and the recovery of our IC components direct sales business, and grow revenue from INGDAN.com’s commercialization. We anticipate higher revenue from our corporate services including IngFin Financing Services, IT technology services, as well as from the sale of our new INGDAN.com-branded products. Lastly, we anticipate some investment returns on several projects and companies incubated on the INGDAN.com platform. As we move ahead in 2018, we are confident in the gradual rebound of the Group’s direct sales business, and in INGDAN.com’s commercialization, which will become a strong, new driver for growth.”

¹Customers who had completed at least one online transaction during 2017 and had completed at least one other online transaction in the 2016

²Net profit attributable to equity shareholders add share-based compensation costs, amortization of intangible assets and its related deferred taxation effect.

Caution Statement

The information contained in this document has not been independently verified. No representation, warranty or undertaking, express or implied, is made by the Company or any of its affiliates, advisers or representatives as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of such information or opinions presented or contained herein. The information contained in this document should be considered in the context of the circumstances prevailing at the time, is subject to change without notice and the Company makes no undertaking to update the information in this document to reflect any developments that occur after the date of the presentation. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the Company, or its financial or trading position or prospects. Neither of the Company nor any of its affiliates, advisers or representatives accept any responsibility or have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document.

This document may contain statements that reflect the Company’s current intent, beliefs and expectations about the future as of the respective dates indicated herein. These forward-looking statements are not guarantees of future performance and are based on a number of assumptions about the Company’s operations and factors beyond the Company’s control and are subject to significant risks and uncertainties, and accordingly, actual results may differ materially from those described in these forward-looking statements. Neither the Company nor any of its affiliates, advisers or representatives has any obligation, nor do they undertake, to update these forward-looking statements for any events or developments including the occurrence of unanticipated events that occur subsequent to such dates.

About Cogobuy Group

Cogobuy Group is a leading e-commerce service platform serving the electronics manufacturing industry in China. Through the e-commerce platform, which includes a direct sales platform, an online marketplace, and a dedicated team of technical consultants and professional sales representatives, the Company provides customers with comprehensive online and offline services across pre-sale, sale, and post-sale stages. The Company serves mainly SME electronics manufacturers. For further information, please refer to the Company’s website at http://www.cogobuy.com

About INGDAN.com

INGDAN.com is a platform dedicated to connecting global intelligent hardware entrepreneurs and China-based supply chain resources. The platform provides information on hardware innovation, supply chain data, and supply chain demand docking for global IoT innovators and entrepreneurs. It is a one-stop hardware innovation business platform with its core being the supply chain. For further information, please refer to the Company’s website at http://www.ingdan.com

FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2017

	December 31, 2017	December 31, 2016
	*RMB’000*	RMB’000

Revenue	9,613,696	12,932,794
Cost of sales	(8,843,461)	(11,870,302)

Gross Profit	770,235	1,062,492
Other income	74,342	65,473
Selling and distribution expenses	(138,174)	(218,053)
Research and development expenses	(118,269)	(62,613)
Administrative and other operating expenses	(154,500)	(198,044)

Finance costs	(109,131)	(55,984)
Share of result of an associate	2,872	2,014
Share of result of a joint venture	(956)	—

Profit before taxation	352,912	595,285
Income tax expenses	(51,609)	(85,678)

Profit for the year	301,303	509,607

Profit for the year attributable to:
Owners of the Company	302,025	478,799
Non-controlling interests	(722)	30,808

	301,303	509,607

	December 31, 2017	December 31, 2016
	*RMB’000*	RMB’000
Other comprehensive income for the year
(after tax and reclassification adjustments)
Item that may be reclassified subsequently to profit or loss:
– Exchange differences arising on translating foreign
operations	(144,195)	134,757
– Available-for-sale investments: net movement in
the fair value reserve	(4,904)	4,904

Total comprehensive income for the year	152,204	649,268

Total comprehensive income for the year attributable to:
Owners of the Company	154,666	616,660
Non-controlling interests	(2,462)	32,608

Total comprehensive income for the year	152,204	649,268

Earnings per share attributable to the Owners of the Company
Basic (RMB)	0.207	0.347

Diluted (RMB)	0.206	0.345

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE HKFRS MEASURES
For the year ended December 31, 2017 and 2016

	For the year ended December 31, 2017	For the year ended December 31, 2016
	*RMB in million*	RMB in million
Profit for the year
GAAP profit attributable to Cogobuy Group	302.0	478.8
Share-based compensation expense	44.6	36.8
Amortization of intangible assets and related deferred taxation	9.0	11.1
Non-GAAP profit attributable to equity shareholders of Cogobuy Group	355.6	526.7


	*RMB*	RMB
Earnings per share — basic
GAAP profit attributable to Cogobuy Group per share	0.207	0.347
Share-based compensation expense per share	0.030	0.027
Amortization of intangible assets and related deferred taxation per share	0.006	0.008
Non-GAAP profit attributable to equity shareholders of Cogobuy Group per share	0.243	0.382


	*RMB*	RMB
Earnings per share — diluted
GAAP profit attributable to Cogobuy Group per share	0.206	0.257
Share-based compensation expense per share	0.030	0.027
Amortization of intangible assets and related deferred taxation per share	0.006	0.008
Non-GAAP profit attributable to equity shareholders of Cogobuy Group per share	0.242	0.379

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31, 2017

	December 31, 2017	December 31, 2016
	*RMB’000*	RMB’000
Non-current assets
Property, plant and equipment	11,819	14,189
Intangible assets	1,128	51,286
Goodwill	170,857	201,659
Available-for-sale investments	20,918	107,426
Interest in an associate	18,318	15,446
Interest in a joint venture	44	1,000
Other non-current assets	—	2,247
	223,084	393,253
Current assets
Inventories	504,403	1,394,835
Trade, bills and other receivables	1,635,818	2,095,591
Loans to third parties	942,558	794,596
Available-for-sale investments	—	471,212
Short-term bank deposits	1,943	12,649
Pledged bank deposits	184,770	1,652,434
Cash and cash equivalents	2,048,431	1,825,543
	5,317,923	8,246,860

Current liabilities
Trade and other payables	213,014	1,027,076
Deposits from customers	589,178	—
Income taxes payables	14,916	81,776
Amount due to a related party	—	38,985
Bank loans	1,084,085	3,797,382
	1,901,193	4,945,219

Net current assets	3,416,730	3,301,641

Total assets less current liabilities	3,639,814	3,696,894
Non-current liability
Deferred tax liabilities	570	8,959
Net assets	3,639,244	3,685,935

Capital and reserves
Share capital	1	1
Reserves	3,609,868	3,600,493

	3,609,869	3,600,494
Non-controlling interests	29,375	85,441
Total equity	3,639,244	3,685,935