Alltronics Holdings Limited — Interim / Quarterly Report 2022

Aug 30, 2022

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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ALLTRONICS HOLDINGS LIMITED 華訊股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 833)

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022

The board (the “ Board ”) of directors (the “ Directors ”) of Alltronics Holdings Limited (the “ Company ”) is pleased to present the unaudited interim condensed consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 30 June 2022 (the “ Period ”) together with comparative figures for the corresponding period in 2021 as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2022

Notes Revenue 4 Cost of sales Gross profit Distribution costs Administrative expenses Other operating income/(expenses), net Operating profit Impairment losses on financial assets, net Share of losses of associates Finance income Finance costs 6	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 857,505 860,382 (726,544) (718,772) 130,961 141,610 (10,960) (14,318) (39,927) (43,496) 799 (12,665) 80,873 71,131 (14,266) (7) (5,829) (920) 1,112 699 (6,928) (5,725)

– 1 –

Notes Profit before tax 5 Income tax expense 7 PROFIT FOR THE PERIOD Attributable to: Owners of the Company Non-controlling interests EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY 8 Basic and diluted	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 54,962 65,178 (10,754) (17,663) 44,208 47,515 40,442 48,072 3,766 (557) 44,208 47,515 HK cents HK cents 4.27 5.08

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2022

PROFIT FOR THE PERIOD Other comprehensive income Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Share of other comprehensive (loss)/income of an associate Net other comprehensive income that may be reclassified to profit or loss in subsequent periods Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Attributable to: Owners of the Company Non-controlling interests

For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 44,208 47,515 974 19,680 (82) 746 892 20,426 892 20,426 45,100 67,941 41,854 68,676 3,246 (735) 45,100 67,941

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2022

Notes NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Investments in associates Goodwill Financial assets at fair value through profit or loss (“FVTPL”) Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Trade receivables 10 Prepayments, other receivables and other assets Pledged deposits Restricted deposits Cash and cash equivalents Total current assets	30 June 2022 (Unaudited) HK$’000 195,086 72,887 197 11,672 22,099 18,704 320,645 443,342 318,995 86,995 3,763 12,657 152,871 1,018,623	31 December 2021 (Audited) HK$’000 203,025 86,277 6,108 11,672 21,780 14,245 343,107 452,679 342,856 64,450 3,759 13,246 138,422 1,015,412

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Notes CURRENT LIABILITIES Trade and bills payables 11 Other payables and accruals Interest-bearing bank and other borrowings Lease liabilities Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Lease liabilities Deferred tax liabilities Total non-current liabilities NET ASSETS EQUITY Share capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	30 June 2022 (Unaudited) HK$’000 310,497 107,267 241,491 28,080 33,331 720,666 297,957 618,602 49,094 6,070 55,164 563,438 9,461 539,879 549,340 14,098 563,438	31 December 2021 (Audited) HK$’000 318,246 131,887 265,619 27,780 27,948 771,480 243,932 587,039 62,767 5,934 68,701 518,338 9,461 498,025 507,486 10,852 518,338

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 CORPORATE AND GROUP INFORMATION

Alltronics Holdings Limited was incorporated in the Cayman Islands on 24 July 2003 as an exempted company with limited liability under the Companies Law. The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) since 15 July 2005.

The Company is an investment holding company. The principal activities of the Company and its subsidiaries are the manufacture and trading of electronic products, plastic moulds, plastic and other components for electronic products, the trading of biodiesel products and the provision of energy efficient gas stoves, and the provision of energy saving business solutions. The address of the Company’s registered office is Cricket Square, Hutchins Drive, P. O. Box 2681, Grand Cayman KY1–1111, Cayman Islands and its principal place of business is Unit 408, 4/F, Citicorp Centre, 18 Whitfield Road, Hong Kong.

The Group is controlled by Profit International Holdings Limited (incorporated in the British Virgin Islands), which owns 46.48% of the Company’s issued shares as at 30 June 2022 (At 31 December 2021: 46.48%). In the opinion of the Directors, the Company’s ultimate holding company is Profit International Holdings Limited and the ultimate controlling party is Mr. Lam Yin Kee.

The interim condensed consolidated financial information for the six months ended 30 June 2022 were approved for issue by the Board on 30 August 2022.

2 BASIS OF PREPARATION

The interim condensed consolidated financial information of the Group for the six months ended 30 June 2022 has been prepared in accordance with Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and the disclosure requirements of the Rules Governing the Listing of Securities (the “ Listing Rules ”) on the Stock Exchange.

The interim condensed consolidated financial information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2021, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”).

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3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those applied in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2021, except for the adoption of new and amended standards and interpretations effective as of 1 January 2022 noted below. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3.1 New and amended standards adopted by the Group

Amendments to HKFRS 16	Covid-19-Related Rent Concessions beyond
	30 June 2021
Amendments to HKFRS 3	Reference to the Conceptual Framework
Amendments HKAS 16	Property, Plant and Equipment-Proceeds before
	Intended Use
Amendments to HKAS 37	Onerous Contracts-Cost of Fulfilling a Contract
Amendments to HKFRSs	Annual Improvements to HKFRS Standards
	2018-2020
Accounting Guideline 5 (Revised)	Merger Accounting for Common Control
	Combination

The adoption of these new and amended standards had no material impact on the Group’s financial position and performance for the current and prior periods and/or on the disclosures set out in the interim condensed consolidated financial information.

3.2 Issued but not yet effective HKFRSs

At the date of authorisation of these interim condensed consolidated financial information, certain new and amended HKFRSs have been published but are not yet effective, and have not been adopted early by the Group.

HKFRS 17	Insurance Contracts and related amendments1
Amendments to HKFRS 10 and HKAS 28	Sale or Contribution of Assets between an Investor
	and its Associate or Joint Venture2
Amendments to HKAS 1	Classification of Liabilities as Current or
	Non-current and related amendments to
	Hong Kong Interpretation 5 (2020)1
Amendments to HKAS 1 and	Disclosure of Accounting Policies1
HKFRS Practice Statement 2
Amendments to HKAS 8	Definition of Accounting Estimates1
Amendments to HKAS 12	Deferred Tax related to Assets and Liabilities
	arising from a Single Transaction1

1 Effective for annual periods beginning on or after 1 January 2023

• 2 Effective date not yet determined

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The Directors anticipate that all of the pronouncements will be adopted in the Group’s accounting policy for the first period beginning on or after the effective date of the pronouncement. The new and amended HKFRSs are not expected to have a material impact on the Group’s consolidated financial statements.

4 OPERATING SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has three reportable operating segments as follows:

• (i) the electronic products segment – the manufacture and trading of electronic products, plastic moulds, plastic and other components for electronic products;

• (ii) the biodiesel products segment – the trading of biodiesel products and provision of energy efficient gas stoves in Hong Kong; and

• (iii) the energy saving business segment – the provision of energy saving business solutions to customers.

Management assesses the performance of the operating segments based on a measure of operating profit/ loss (before interest and tax and unallocated operating costs). Other information provided is measured in a manner consistent with that in the interim condensed consolidated financial information.

All sales between segments are eliminated on consolidation. All segment revenue reported is derived from external parties. The revenue from external parties reported to the Directors is measured in a manner consistent with that in the interim condensed consolidated financial information.

Segment assets exclude cash and cash equivalents, prepayments and deposits and financial assets at FVTPL as these assets are managed on a group basis.

Segment liabilities exclude other payables and accruals as these liabilities are managed on a group basis.

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Period ended 30 June 2022 (Unaudited) Segment revenue Sales to external customers Segment results Operating profit/(loss) before interest and tax Share of losses of associates Finance costs (other than interests on lease liabilities) Finance income Income tax expense Unallocated operating costs Profit for the year Segment assets Unallocated: Cash and cash equivalents Prepayments and deposits Financial asset at FVTPL Total assets Segment liabilities Unallocated: Other payables and accruals Total liabilities	Electronic products HK$’000 857,351 69,951 (5,829) (4,965) 1,086 (10,754) 49,489 1,297,488 768,268	Biodiesel products HK$’000 154 (42) – – – – (42) 866 264	Energy saving business HK$’000 – (936) – – 26 – (910) 17,024 240	Total HK$’000 857,505 68,973 (5,829) (4,965) 1,112 (10,754) 48,537 (4,329) 44,208 1,315,378 310 1,481 22,099 1,339,268 768,772 7,058 775,830

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Period ended 30 June 2021 (Unaudited) Segment revenue Sales to external customers Segment results Operating profit/(loss) before interest and tax Share of losses of associates Finance costs (other than interests on lease liabilities) Finance income Income tax expense Unallocated operating costs Profit for the year At 31 December 2021 (Audited) Segment assets Unallocated: Cash and cash equivalents Prepayments and deposits Financial asset at FVTPL Total assets Segment liabilities Unallocated: Other payables and accruals Total liabilities	Electronic products HK$’000 859,944 75,268 (920) (3,611) 672 (17,663) 53,746 1,310,077 831,992	Biodiesel products HK$’000 241 (340) – – – – (340) 900 268	Energy saving business HK$’000 197 (2,591) – – 27 – (2,564) 24,192 240	Total HK$’000 860,382 72,337 (920) (3,611) 699 (17,663) 50,842 (3,327) 47,515 1,335,169 224 1,346 21,780 1,358,519 832,500 7,681 840,181

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Geographical information

• (a) Revenue from external customers

The United States Hong Kong Europe The Peoples’ Republic of China (the “PRC”) Other overseas countries	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 550,445 555,690 83,077 63,987 129,462 127,517 69,352 79,488 25,169 33,700 857,505 860,382	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 550,445 555,690 83,077 63,987 129,462 127,517 69,352 79,488 25,169 33,700 857,505 860,382
		860,382

The revenue information above is based on the locations of the customers.

• (b) Non-current assets

Hong Kong The PRC	30 June 2022 (Unaudited) HK$’000 174,175 105,667 279,842	31 December 2021 (Audited) HK$’000 191,089 115,993
		307,082

The non-current assets information above is based on the locations of the assets and excludes deferred tax assets and financial assets at FVTPL.

Information about major customers

For the six months ended 30 June 2022, revenues from customers which individually contributed over 10% of the Group’s revenue is as follows:

	For the six months ended	For the six months ended
	30 June
	2022	2021
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Customer A	362,036	295,423
Customer B (note a)	N/A	151,158
Customer C (note b)	89,572	N/A

These revenues were attributable to the electronic products segment.

Note: a) The Group did not have transaction with this customer for the period ended 30 June 2022.

• b) The Group had transactions with this customer but the amount of the transactions was less than 10% of the Group’s revenue for the period ended 30 June 2021.

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Disaggregated revenue information for revenue from contracts with customers

For the six months ended 30 June 2022 (Unaudited)

Segments Electronic products HK$’000 Type of goods or services Sale of industrial products 857,351 Timing of revenue recognition Goods transferred at a point in time 857,351 For the six months ended 30 June 2021 (Unaudited) Segments Electronic products HK$’000 Type of goods or services Sale of industrial products 859,944 Timing of revenue recognition Goods transferred at a point in time 859,944	Biodiesel products HK$’000 154 154 Biodiesel products HK$’000 241 241	Energy saving business HK$’000 – – Energy saving business HK$’000 197 197	Total HK$’000 857,505
			857,505
			Total HK$’000 860,382
			860,382

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5 PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

	For the six months	ended 30 June
	2022	2021
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Cost of inventories sold and services provided	527,981	509,895
Auditors’ remuneration	970	931
Depreciation of property, plant and equipment	9,675	10,322
Depreciation of right-of-use assets	14,301	11,832
Amortisation of prepayments	–	741
Provision of warranty	–	8,631
Fair value (gain)/loss on financial assets at fair value through
profit or loss	(319)	3,579
Impairment of trade receivables	14,266	7
Provision/(Reversal) of slow-moving and obsolete inventories	24,201	(1,938)
Wages and salaries (including directors’ emoluments)	140,427	127,566
Foreign exchange differences, net	(371)	10,409
Loss/(Gain) on disposal of property, plant and equipment	59	(335)
Interest income from bank deposits	(128)	(158)
Other interest income	(984)	(541)

6 FINANCE COSTS

An analysis of finance costs is as follows:

Interest on bank loans and bank overdrafts Interest on lease liabilities Total finance costs	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 4,965 3,611 1,963 2,114 6,928 5,725	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 4,965 3,611 1,963 2,114 6,928 5,725
		5,725

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7 INCOME TAX EXPENSE

The Group is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions in which members of the Group are domiciled and operate.

Hong Kong profits tax has been provided at the rate of 16.5% (2021: 16.5%) on the estimated assessable profits arising in Hong Kong during the Period, except for one subsidiary of the Group which is qualifying entity under the two-tiered profits tax rates regime. Under the two-tiered profits tax rates regime, the first HK$2,000,000 (2021: HK$2,000,000) of assessable profits of qualifying entity is taxed at 8.25% and the remaining assessable profits are taxed at 16.5%. The provision for Hong Kong profits tax for this subsidiary was calculated at the same basis in 2021.

Pursuant to the PRC Income Tax Law and the respective regulations, the subsidiaries which operate in the PRC are subject to Corporate Income Tax at a rate of 25% (2021: 25%) on the taxable income.

Current – Hong Kong Current – PRC Over-provision in prior periods Deferred Total tax charge for the period	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 11,500 7,830 3,930 6,333 – (103) (4,676) 3,603 10,754 17,663	For the six months ended 30 June 2022 2021 (Unaudited) (Unaudited) HK$’000 HK$’000 11,500 7,830 3,930 6,333 – (103) (4,676) 3,603 10,754 17,663
		17,663

8 EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY

The calculation of the basic earnings per share amount is based on the profit for the period attributable to owners of the Company of HK$40,442,000 (Six months ended 30 June 2021: HK$48,072,000), and the weighted average number of ordinary shares of 946,116,360 (Six months ended 30 June 2021: 946,116,360) in issue during the six months ended 30 June 2022.

The Group had no potential dilutive ordinary shares in issue for the six months ended 30 June 2022 and 2021 and therefore, diluted earnings per share equals to basic earnings per share.

9 INTERIM DIVIDEND

	For the six months	ended 30 June
	2022	2021
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Interim dividend, proposed, of HK$0.01
(2021: HK$0.01) per ordinary share	9,461	9,461

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The Board recommends the payment of an interim dividend of HK$0.01 per ordinary share for the six months ended 30 June 2022. The interim condensed consolidated financial information does not reflect the above proposed dividend as dividend payable but account for it as proposed dividend from the reserves. The declaration of the interim dividend for the six months ended 30 June 2022 has been approved by the Board on 30 August 2022.

10 TRADE RECEIVABLES

Trade receivables Less: ECL allowances	30 June 2022 (Unaudited) HK$’000 354,946 (35,951) 318,995	31 December 2021 (Audited) HK$’000 364,541 (21,685)
		342,856

The Group’s trading terms with its customers are mainly on credit. The credit period is generally 30 to 90 days. As at 30 June 2022, the Group’s largest customer accounted for approximately 20.5% of total trade receivables (At 31 December 2021: 27.6%). This customer has long term trading relationship with the Group with no defaults in the past and hence the Group does not consider there is any significant credit risk in this regard. The Group’s other trade receivables related to a large number of diversified customers. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.

An aging analysis of trade receivables as at the end of the reporting period, based on the invoice date, is as follows:

Within 1 month 1 to 2 months 2 to 3 months Over 3 months Total	30 June 2022 (Unaudited) HK$’000 185,762 70,841 43,171 19,221 318,995	31 December 2021 (Audited) HK$’000 174,552 107,204 30,317 30,783
		342,856

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11 TRADE AND BILLS PAYABLES

The aging analysis of trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 1 month 1 to 2 months 2 to 3 months Over 3 months Total	30 June 2022 (Unaudited) HK$’000 143,004 94,668 49,528 23,297 310,497	31 December 2021 (Audited) HK$’000 143,238 125,070 37,762 12,176 318,246

The trade payables are non-interest bearing and are normally settled on terms of 30 to 90 days.

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INTERIM DIVIDEND

The Board declared an interim dividend of HK1.0 cent per ordinary share for the six months ended 30 June 2022, payable on or about 28 October 2022, to the shareholders whose names appear on the register of members of the Company on 30 September 2022.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 28 September 2022 to 30 September 2022, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong for registration no later than 4:30 p.m. on 27 September 2022.

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW

Revenue

Total turnover for the six months ended 30 June 2022 (the “ Period ”) had decreased slightly by 0.3% to HK$857.5 million, as compared to HK$860.4 million for the same period in 2021. The drop in turnover was due to the decrease in sales of electronic products during the Period.

The turnover analysis by business segments for the two periods is as follows:

Revenue from sales of electronic products Revenue from biodiesel products and energy efficient gas stoves Revenue from energy saving business	For the six months ended 30 June 2022 2021 HK$’000 HK$’000 857,351 859,944 154 241 – 197 857,505 860,382	For the six months ended 30 June 2022 2021 HK$’000 HK$’000 857,351 859,944 154 241 – 197 857,505 860,382
		860,382

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Sales of electronic products comprise sales of finished electronic products; plastic moulds and components; and other components for electronic products. Although the global economy continued to be affected by the new coronavirus (the “ COVID-19 ”), total sales revenue from electronic products during the Period had remained stable. The sales of the Group’s irrigation controller products had increased by approximately HK$66.6 million to HK$362.0 million, as compared to HK$295.4 million for the same period in 2021. Sales of walkie-talkie products had increased by approximately HK$12.9 million to HK$81.5 million. On the other hand, sales of electronic component products had increased by approximately HK$65.3 million to HK$183.7 million. During the Period, there were no sales of electrostatic disinfectant sprayers.

The operation of the biodiesel products and energy efficient gas stoves business segment in Hong Kong continued to be affected by the COVID-19 and had remained at a low level during the Period, with total revenue of approximately HK$0.2 million.

Regarding the energy saving business segment, as the installation work at the retail stores of Suning.com Co., Ltd. (“ Suning ”) had ceased since last year, there were no sales revenue from this business segment for the Period.

In terms of geographical market, customers in the United States continued to be the major market for the Group’s products which accounted for approximately 64.2% of the total revenue for the Period (2021: 64.6%). Management expected that United States will continue to be the dominant market for the Group’s products during the second half of the year.

Gross profit

The overall gross profit margin had reduced from 16.5% for the six months period ended 30 June 2021 to 15.3% for the Period. The drop was mainly due to the increase in unit costs of certain raw materials including chips and plastic resins, the provision of slow-moving and obsolete inventories and the increase in average labour costs due to annual adjustment in wages level in the PRC. Production overheads had also increased as a result of general inflationary increase.

Expenses and finance costs

Distribution costs had decreased by HK$3.4 million mainly due to the reduction in sales commission on sales of electrostatic disinfectant sprayers. Total administrative expenses were comparable to prior period and had decreased by HK$3.6 million. The total administrative staff costs for the Period, including directors’ emoluments, had decreased by approximately HK$1.2 million mainly due to the reduction in headcount of administrative staff during the Period.

– 18 –

Finance costs had increased by HK$1.2 million which was mainly due to the increase in interests on bank loans and overdraft as a result of increase in interest rates when compared to prior period.

Other operating income/expenses

During the Period, there was a net other operating income of approximately HK$0.8 million which was mainly due to exchange gain and changes in fair value of financial assets at FVTPL.

Profit attributable to owners of the Company

The profit for the Period attributable to owners of the Company was HK$40.4 million, compared to HK$48.1 million for the same period in 2021. The drop in net profit was mainly due to the reduction in gross profit margin and the impairment losses on trade receivables of HK$14.3 million incurred during the Period.

PRODUCTION FACILITIES

The Group currently has three production facilities in the PRC for the manufacturing of electronic products and components, two of which are located in Shenzhen, and one in Yichun. During the Period, the Group spent approximately HK$2.2 million to acquire property, plant and equipment to enhance its production capacity.

LIQUIDITY AND FINANCIAL RESOURCES AND CAPITAL STRUCTURE

At 30 June 2022, the Group’s total cash and cash equivalents, net of current bank overdrafts, amounted to HK$149.5 million. The net funds are sufficient to finance the Group’s working capital and capital expenditure plans.

At 30 June 2022, total borrowings of the Group amounted to HK$241.5 million, comprising bank loans of HK$237.0 million, trust receipt loans of HK$1.2 million and bank overdraft of HK$3.3 million, of which HK$39.2 million were denominated in United States dollars, HK$158.2 million were denominated in Hong Kong dollars and HK$44.1 million were denominated in Renminbi respectively.

The Group’s trade receivable turnover, inventory turnover and trade payable turnover were approximately 70 days, 112 days and 106 days respectively for the Period. These turnover periods are consistent with the respective policies of the Group on credit terms granted to customers and obtained from suppliers.

– 19 –

As at 30 June 2022, the Group’s total current assets were HK$1,018.6 million compared to HK$1,015.4 million as at 31 December 2021, and the Group’s total current liabilities were HK$720.7 million compared to HK$771.5 million as at 31 December 2021. The current ratio (current assets/current liabilities) as at 30 June 2022 was 1.41 times, compared to 1.32 times as at 31 December 2021.

During the Period, the Company had not issued any new shares and had not repurchased any of its own shares on the Stock Exchange.

At 30 June 2022, the Company had in issue a total of 946,116,360 ordinary shares. A share option scheme (the “ 2016 Share Option Scheme ”) has been adopted by the shareholders of the Company at the annual general meeting of the Company held on 7 June 2016. There were no share options granted, exercised, lapsed or cancelled since the adoption of the 2016 Share Option Scheme. As at 30 June 2022, the Company did not have any share options outstanding.

CASH FLOWS

The net balance of cash, cash equivalents and bank overdrafts at 30 June 2022 was HK$149.5 million, which had increased by HK$16.6 million compared to the balance at 31 December 2021.

The net cash generated from operating activities for the Period was HK$57.0 million. The net cash used in investing activities amounted to HK$2.2 million, which was mainly due to HK$2.2 million being paid for the acquisition of property, plant and equipment.

On the other hand, there was a net cash outflow of HK$35.7 million from financing activities. During the Period, new borrowings of HK$44.2 million were obtained, and HK$79.9 million was used to repay borrowings and principal repayment of lease liabilities. There was no dividend paid during the Period.

CAPITAL EXPENDITURE

During the Period, the Group acquired property, plant and equipment at a total cost of HK$2.2 million, mainly financed by internal resources of the Group.

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PLEDGE OF ASSETS

At 30 June 2022, the Group had total bank borrowings of HK$241.5 million, out of which HK$87.1 million were secured by the land and buildings and right-of-use assets of HK$157.8 million in aggregate, HK$5.2 million were secured by short-term bank deposits of HK$3.8 million and HK$6.0 million were secured by plant and machinery of HK$9.8 million.

DEBT POSITION AND GEARING

As at 30 June 2022, the Group has net debts (being total bank and other borrowings and lease liabilities excluding trade debts and net of cash and cash equivalents) of approximately HK$164.6 million (At 31 December 2021: HK$216.7 million). The total equity was approximately HK$563.4 million (At 31 December 2021: HK$518.3 million). The gearing percentage as at 30 June 2022 was approximately 29.2% (At 31 December 2021: 41.8%).

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the maintaining appropriate debt and equity balance. The directors of the Company review the capital structure of the Group on a regular basis. As part of this review, the directors consider the cost of capital and the risks associates with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through various alternatives including the payment of dividends, new share issues and share buy-backs as well as the issue of new debts or the redemption of existing debts.

– 21 –

CONTINGENT LIABILITIES

• (a) Potential litigation related to a fire incidence in the United States

During the fourth quarter of 2020, the Group was informed by a customer (the “ Customer ”) that a fire was occurred at a school in the United States involving an electrostatic disinfectant sprayer manufactured by the Group. Based on preliminary investigations subsequently conducted by the insurance company, the Customer and some experts, and other information available, the Group believes that the root cause of the fire is most likely the defective design and manufacturing of the lithium-ion battery pack which powers the sprayer. The battery pack was designed and manufactured by a supplier designated by the Customer. However, not all the electrostatic disinfectant sprayers sold by the Customer were embedded with the subject lithium-ion battery pack. The Customer also informed the Group that there were some other reports of property damage but no reports of injury involving the subject lithium-ion battery pack. In February 2021, in view of the potential risk that the battery pack can overheat and melt and potentially causing a fire or an explosion, the Customer decided to recall voluntarily in the market four models of electrostatic sprayers embedded with the subject lithium-ion battery pack.

Management currently is of the view that the issue is the direct result of the defective design and manufacturing of the lithium-ion battery pack and the Customer understands that the Group was not involved with the design and manufacturing of the subject battery pack. The supplier of the subject battery pack was chosen and introduced to the Group by the Customer and the Group cannot change the supplier of the subject battery pack unless written consent from the Customer is obtained. Management believes that the Group does not have any responsibility or significant potential liability on this issue. The Group has engaged a lawyer firm and a cause and origin expert in the United States to handle the issue. The Company will closely monitor the situation and announcement(s) will be made by the Company to keep its shareholders and potential investors informed of any material development as and when appropriate.

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• (b) Litigation related to alleged non-payment of four purchase orders

Shenzhen Allcomm Electronic Co., Ltd. (“ Shenzhen Allcomm ”), being a wholly-owned subsidiary established by the Group in the PRC, received a “ Writ of Summons ” (傳 票) attaching a “ Civil Complaint ” (民事起訴狀) (the “ Litigation ”) from the Dongguan No. 3 People’s Court (東莞市第三人民法院) (the “ Court ”) in relation to the claims made by Dongguan Hongjun Packaging Products Co., Ltd. (東莞市宏俊包裝制品有 限公司) (the “ Plaintiff ”), a supplier of Shenzhen Allcomm, against Shenzhen Allcomm as the defendant for the alleged non-payment of four purchase orders (the “ Purchase Orders ”) for purchase of components for the Group’s electrostatic disinfectant sprayer products. The Plaintiff seeks for court order for payment of the purchase costs under the Purchase Orders and other related costs and costs incurred in connection with the Litigation amounting to approximately RMB10.8 million in aggregate. The Plaintiff has also obtained a property preservation order (the “ Court Order ”) from the Court to freeze deposit balances of Shenzhen Allcomm at a bank, amounting to approximately RMB10.8 million. As at the date of this announcement, the Court Order is still being executed by the bank.

The Plaintiff is a designated supplier chosen and introduced to the Group by the Customer and the Purchase Orders were placed with the Plaintiff under the instructions of the Customer. The Customer subsequently requested the Group to terminate the Purchase Orders with the Plaintiff. The Plaintiff also failed to deliver the ordered goods within the delivery dates as specified in the Purchase Orders. The first court hearing of the Litigation was held on 24 February 2022. Shenzhen Allcomm has engaged a law office in Shenzhen (the “ Legal Advisor ”) to handle the Litigation and the Legal Advisor has attended the first hearing held on 24 February 2022. The second court hearing of the Litigation was held on 29 April 2022 and the Legal Advisor has also attended the second hearing. As at the date of this announcement, the Court has not rendered any judgement on the Litigation. The Company believes that the Litigation and the Court Order will not have any material adverse effect on the Group and the business and operations of the Group remain normal. The Company will keep the shareholders and potential investors of the Company informed of any further material development by way of announcement as and when appropriate.

Save for the Litigation as disclosed above, the Group was not a defendant in any other legal proceedings against the Group during the Period and as at 30 June 2022 and 31 December 2021.

Save as disclosed above, the Group did not have any other material contingent liabilities as at both 30 June 2022 and 31 December 2021.

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UPDATE ON SETTLEMENT OF OVERDUE CONSIDERATION AND DEBT

On 15 April 2019, the Group has completed a very substantial disposal transaction (the “ VSD Transaction ”) in relation to the disposal of the Group’s investment properties business segment. On 15 July 2020, the Group has engaged a solicitor firm at Beijing to commence arbitration proceedings against the purchaser (the “ Purchaser ”) and the guarantor (the “ Guarantor ”) for collection of the overdue consideration of RMB100 million (the “ Consideration ”) and accrued interests in relation to the VSD Transaction. On 12 March 2021, the arbitration hearing was conducted at the Beijing Arbitration Commission (the “ BAC ”) and the arbitral award has been issued by the BAC on 5 August 2021. Under the arbitral award, it was decided by the BAC that, amongst other things, (i) the Purchaser and the Guarantor pay the overdue Consideration and accrued interests thereon to the Group, (ii) the Purchaser and the Guarantor bear the arbitration fees and the legal and other costs related to the arbitration, and (iii) the Purchaser and the Guarantor should settle all the amounts due to the Group within fifteen days from the date the arbitral award is delivered to the Purchaser and the Guarantor. As at the date of this announcement, the Group has not received the overdue Consideration and accrued interests thereon from the Purchaser and the Guarantor.

Alltronics Energy Saving (Shenzhen) Limited (“ Alltronics Energy Saving ”, being an indirect wholly-owned subsidiary of the Group) has filed an official civil complaint (民事起訴狀) (the “ Complaint ”) at the Shenzhen Intermediate People’s Court (深圳市中級人民法院, the “ Shenzhen court ”) on 2 January 2020. Under the Complaint, Alltronics Energy Saving requested for immediate settlement of the debt of approximately RMB212 million (the “ Debt ”) and accrued interests thereon from the borrower (the “ Borrower ”) and the Guarantor in relation to the VSD Transaction.

On 28 April 2021, Alltronics Energy Saving has entered into a settlement agreement (the “ Settlement Agreement ”) with the Borrower and the Guarantor. Pursuant to the Settlement Agreement, the Borrower and the Guarantor have agreed to settle the Debt in accordance with the following schedule:

• (a) RMB20,000,000 on or before 31 May 2021;

• (b) RMB80,000,000 on or before 30 June 2021; and

• (c) the remaining balance on or before 31 December 2021.

– 24 –

Alltronics Energy Saving has submitted the Settlement Agreement to the Shenzhen Court for judicial recognition and confirmation. On 28 May 2021, the Shenzhen Court has delivered its judgement on the Settlement Agreement and it has become effective and legally binding on all parties. However, the Borrower and the Guarantor have not settled the Debt in accordance with the repayment terms in the Settlement Agreement. The full amount of the Debt and the accrued interests thereon became due immediately. On 15 July 2021, Alltronics Energy Saving has applied to the Shenzhen Court for execution of the Settlement Agreement and the Shenzhen Court has accepted the application for execution of the Settlement Agreement.

The Group’s legal advisers in Beijing and Shenzhen advised that Henan Luohe Intermediate People’s Court * (河南省漯河市中級人民法院) (the “ Henan Court ”) has accepted an application for bankruptcy liquidation against the Guarantor and a bankruptcy administrator of the Guarantor has been appointed by the Henan Court on 5 July 2021. The Group’s legal advisers in Beijing and Shenzhen have already filed the relevant documents for the declaration of creditor’s right to the bankruptcy administrator of the Guarantor to declare and to register all the amounts due from the Guarantor to the Group so as to protect the interests of the Group. As at the date of this announcement, the bankruptcy administrator of the Guarantor is still analysing and assessing the assets and liabilities of the Guarantor and the bankruptcy liquidation against the Guarantor is still in progress.

The Group is in discussion with its legal advisers in Beijing and Shenzhen to consider the further actions available against the Purchaser, the Borrower and the Guarantor to recover the overdue Consideration and the Debt and accrued interests thereon.

As at the date of this announcement, the Group has not received the overdue Consideration and the Debt from the Guarantor and the Borrower. Full impairment losses on the Consideration and the Debt have been made in the Group’s audited consolidated financial statements for the year ended 31 December 2019. The Company will closely monitor the situation and further announcement(s) will be made by the Company to keep its shareholders and potential investors informed of any material development as and when appropriate.

EMPLOYEES

At 30 June 2022, the Group had 3,362 employees, of which 67 were employed in Hong Kong and 3,295 were employed in the PRC. Salaries of employees are maintained at competitive levels. The Group operates a defined contribution mandatory provident fund retirement benefits scheme for all its employees in Hong Kong, and provides its PRC employees with welfare schemes as required by the applicable laws and regulations in the PRC. The Group also offers discretionary bonuses to its employees by reference to the performance of individual employees and the overall performance of the Group.

– 25 –

No share options had been granted, exercised, lapsed or cancelled since the adoption of the 2016 Share Option Scheme. As at 30 June 2022, there were no share options remained outstanding.

The Group did not experience any significant labour disputes or substantial changes in the number of its employees that led to any disruption of its normal business operations. The Board believes that the Group’s management and employees are the most valuable asset of the Group and they have contributed to the success of the Group.

FOREIGN EXCHANGE EXPOSURE

Most of the Group’s sales are denominated in United States dollars and Renminbi, and most of the purchases of raw materials are denominated in Renminbi and Hong Kong dollars. Furthermore, most of the Group’s monetary assets are denominated in Hong Kong dollars, United States dollars and Renminbi.

The Group’s principal production facilities are located in the PRC whilst its sales proceeds are primarily settled in United States dollars, Hong Kong dollars or Renminbi. As such, management is aware of the potential foreign currency risk that may arise from the fluctuation of exchange rates between United States dollars, Hong Kong dollars and Renminbi. Management will consider various actions to minimise the risk, including the entering into forward foreign exchange contracts with major and reputable financial institutions to hedge its foreign exchange risk exposure. These were for hedging against foreign exchange risk exposure relating to the production costs and certain outstanding payables denominated in Renminbi. As at 30 June 2022, the Group did not have any outstanding forward foreign exchange contracts. Management will continue to evaluate the Group’s foreign currency exposure and take further actions as appropriate to minimise the Group’s exposure whenever necessary.

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OUTLOOK

Electronic products segment

The overall performance of the Group’s electronic products segment during the first half of the year 2022 has remained stable when compared to prior year. The total revenue has decreased slightly by HK$2.9 million to HK$857.5 million, compared to HK$860.4 million for the same period in 2021. However, the impacts of the COVID-19 continue to post threats to the global economy as a result of the emerge of new variants. Management will keep alert and has to remain cautious on the performance in the second half of the year. It is anticipated that the shortage of raw materials and components for electronic products will remain unabated within this year, and the global economy may take longer-than-expected before returning to full speed. Besides the uncertainties on the impacts of the COVID-19, the ongoing trade disputes between the United States and the PRC may further escalate geopolitical tensions and may lead to negative impact to the global economy. The effects of the various sanctions imposed or to be imposed on Hong Kong by the United States and other countries are still challenging. On the other hand, the risk of fluctuation in exchange rate of Renminbi against United States dollars and Hong Kong dollars and the risk of high inflation and fluctuation in interest rate will also affect the performance of the Group’s electronic products segment. The management of the Group is of the view that the difficult business environment may last for some time. The Group will continue its efforts to manage these factors and to tighten controls over production costs and overheads, and to improve production efficiency to maximise the gross profit margin.

In terms of products, irrigation controllers have remained as the Group’s core electronic products during the first half of the year 2022 and management expects that irrigation controllers will continue to be the core products of the Group’s electronic products segment in the near future. Management also expects that the performance of the Group’s irrigation controller products will remain strong with steady growth. On the other hand, management is striving to launch new products to provide new momentum for growth in revenue.

In terms of geographical market, the Group foresees that United States will continue to be the major market for its products during the second half of 2022.

– 27 –

The COVID-19 pandemic has affected the business operations of the Group’s associated companies and management expects that their business operations will continue to incur losses during the second half of the year.

The Group will continue to explore opportunities for new electronic products with other potential customers so as to broaden its revenue base and to maintain its growth momentum.

Biodiesel products and energy saving gas stoves segment

The Group foresees that the revenue from biodiesel products and energy efficient gas stoves will remain at existing level and will not be significant during the second half of 2022.

Energy saving business

The Group foresees that the revenue from the energy saving business will remain at a low level during the second half of 2022 as the Group has already ceased all installation work at Suning stores since 2021.

Going forward, we see both challenges and opportunities. The Group will focus on its core electronic products segment and will continue to explore opportunities for new products and projects with existing and potential customers in Hong Kong, in the PRC and overseas to provide a better return to all shareholders.

CORPORATE GOVERNANCE

The Board believes that corporate governance is essential to the success of the Group. The Group keeps abreast of the best practices in the corporate governance areas and strives to implement such practices as appropriate. None of the Directors of the Company is aware of any information that would reasonably indicate that the Company or any of its Directors is not or was not at any time during the Period and up to the date of this announcement, in compliance with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 of the Listing Rules. The Board will review and update the current practices regularly to ensure compliance with the latest practices in corporate governance so as to protect and maximize the interests of shareholders.

– 28 –

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 of the Listing Rules as its code for dealing in securities of the Company by the Directors. Having made specific enquiry of all Directors of the Company, the Company confirms that all Directors of the Company have complied with the required standard set out in the Model Code during the Period.

AUDIT COMMITTEE

The audit committee of the Company (the “ Audit Committee ”) was established with written terms of reference in compliance with the Listing Rules. The Audit Committee shall meet at least twice every year and currently comprises three members being the independent nonexecutive Directors of the Company, namely Mr. Pang Kwong Wah (Chairman), Mr. Yau Ming Kim, Robert and Mr. Yen Yuen Ho, Tony.

The interim condensed consolidated financial statements have been reviewed by the Audit Committee at a meeting held on 30 August 2022, which is of the opinion that the interim condensed consolidated financial statements complied with applicable accounting standards and legal requirements, and that adequate disclosures have been made.

REMUNERATION COMMITTEE

The remuneration committee of the Company (the “ Remuneration Committee ”) was established with written terms of reference in compliance with the Listing Rules. The Remuneration Committee shall meet at least once every year and shall have a minimum of five members, comprising a majority of independent non-executive directors. The Chairman of the Remuneration Committee is Mr. Pang Kwong Wah and other current members include Mr. Lam Yin Kee, Ms. Yeung Po Wah, Mr. Yau Ming Kim, Robert and Mr. Yen Yuen Ho, Tony.

NOMINATION COMMITTEE

The nomination committee of the Company (the “ Nomination Committee ”) was established with written terms of reference in compliance with the Listing Rules. The Nomination Committee shall meet at least once every year and shall have a minimum of five members, comprising a majority of independent non-executive directors. The Chairman of the Nomination Committee is Mr. Lam Yin Kee and other current members include Ms. Yeung Po Wah, Mr. Pang Kwong Wah, Mr. Yau Ming Kim, Robert and Mr. Yen Yuen Ho, Tony.

– 29 –

CHANGES IN INFORMATION OF DIRECTORS

There were no changes in directors’ information since publication of the 2021 annual report of the Company and there is no other information required to be disclosed pursuant to Rule 13.51B (1) of the Listing Rules.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

The Company has not redeemed any of its shares during the Period. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s shares during the Period.

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

This announcement is published on the website of the Stock Exchange (http://www.hkexnews.hk) and our Company’s website (http://www.irasia.com/listco/hk/alltronics/index.htm). The interim report for the period ended 30 June 2022 containing the information required by Appendix 16 of the Listing Rules will be dispatched to shareholders and published on the websites of the Company and the Stock Exchange in due course.

• For identification purpose only

By order of the Board Alltronics Holdings Limited Lam Yin Kee Chairman

Hong Kong, 30 August 2022

As at the date of this announcement, the Board of the Company comprises:

Executive Directors

Mr. Lam Yin Kee, Mr. Lam Chee Tai, Eric, Ms. Yeung Po Wah, Mr. So Kin Hung and Ms. Lam Oi Yan, Ivy

Non-executive Director

Mr. Fan, William Chung Yue

Independent Non-executive Directors

Mr. Pang Kwong Wah, Mr. Yau Ming Kim, Robert, Mr. Yen Yuen Ho, Tony and Mr. Lin Kam Sui

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