# Electronics Parts

The Electronics Parts segment contributed approximately HK\$903 million to the total revenue of the Group for the 12-month period, representing a decrease of 21% as compared with HK\$1,141 million for 15-month period ended December 31, 2016. Gross profit margin increased to 19% for the Year Under Review as compared with 16% for period ended December 31, 2016.

# Construction and Industrial Products

The revenue and gross profit margin of the Construction and Industrial Products segment were HK\$698 million (period ended December 31, 2016: HK\$805 million) and 7% (period ended December 31, 2016: 14%) respectively for the Year Under Review. There was a 2% increase in sales in Australia but a drop of 23% in sales to the other regions (exclude the PRC). The increasing prices of aluminium and other raw materials, have hindered the export sales to overseas customers.

# Branded OPLV Products

The Group had continued the Branded OPLV Products market in Mainland China by engaging distributors for selling Branded OPLV Products. Sales decreased from HK\$290 million for the period ended December 31, 2016 to HK\$178 million for the Year Under Review. Gross profit margin of Branded OPLV Products increased from 3% for the period ended December 31, 2016 to 7% for the Year Under Review. Facing the fierce competition in the door and windows market, along with the low gross profit margin and high marketing costs, the Branded OPLV Products segment continued to be a loss-making operation in the Year Under Review.

In order to prevent further loss to the Group, the management of the Company has decided to dispose this loss-making operation for better allocation of the Group’s resources.

On December 28, 2017, the Group entered into a conditional sales and purchase agreement to dispose of its entire equity interest in OPLV (Nanyang) Doors and Windows Systems Co., Ltd and OPLV Architectural Design Pty Ltd. Details of the disposal of the Branded OPLV products segment are set out under the paragraph headed “Significant Investment, Material Acquisition and Disposal” of this annual report.

# Cost of sales

With the significant decline in sales, cost of sales decreased by 20% from HK\$1,935 million for the period ended December 31, 2016 to HK\$1,547 million for the Year Under Review. This was in line with the decrease in sales from HK\$2,236 million for the period ended December 31, 2016 to HK\$1,779 million for the Year Under Review.

# Gross profit

Despite the decrease of gross profit from HK\$301 million for the period ended December 31, 2016 to HK\$232 million for the Year Under Review, our gross profit margin has dropped from 14% for the period ended December 31, 2016 to 13% for the Year Under Review. The Group has been actively seeking ways to reduce sales of lower gross profit margin products to achieve a higher overall gross profit margin for this fiscal year. Yet, the persisting unfavorable macro factors, including the volatility in each of the market the Group operates and the uncertainty over the economic condition in China, had dampened consumer sentiment and reduced the demand of the Group’s products.

# Distribution and selling expenses

Distribution and selling expenses decreased by 27% from HK\$142 million for the period ended December 31, 2016 to HK\$104 million for the Year Under Review. The decrease was in line with the decline in sales, which led to a significant decrease in staff costs and travelling expenses.

# Administrative expenses

Administrative expenses dropped by 25% from HK\$340 million for the period ended December 31, 2016 to HK\$255 million for the Year Under Review. The decrease was due to absence of provision for impairment of intangible assets, decrease in staff costs due to decrease in number of employees, and absence of the write-off of trade receivables from former Australian Customers of the Group for the Year Under Review.

# Other income

Other income comprised net sales of scrapped materials which was HK\$11 million for the Year Under Review.

# Other gains/(losses) – net

Other gains/(losses) changed from HK\$17 million loss for the period ended December 31, 2016 to HK\$12 million gain for the Year Under Review. The change was mainly due to the appreciation of AUD against HKD during the Year Under Review which the Group had enjoyed significant exchange gains and absence of losses from certain derivative financial instruments.

# Finance income

Finance income mainly comprised interest income which amounted to approximately HK\$1 million for the Year Under Review compared to HK\$3 million for the period ended December 31, 2016.

# Finance costs

Finance costs amounted to approximately HK\$47 million for Year Under Review compared to HK\$29 million for the period ended December 31, 2016.

# Income tax expense

Our income tax changed from income tax expense of HK\$38 million for the period ended December 31, 2016 to HK\$8 million for the Year Under Review.

# Currency translation differences in other comprehensive income

Currency translation differences amounted to approximately HK\$47 million for the Year Under Review, which was mainly attributable to the currency translation differences of RMB against the HKD.

# Adjusted EBITDA results, excluding non-recurring items

<table><tr><td rowspan="2"></td><td>Year ended 
December 31,
 2017</td><td>Fifteen
 months ended
 December 31,
 2016</td></tr><tr><td>HK$ million</td><td>HK$ million</td></tr><tr><td>Loss before income tax</td><td>(150)</td><td>(196)</td></tr><tr><td>Adjusted by:</td><td></td><td></td></tr><tr><td>Depreciation</td><td>100</td><td>99</td></tr><tr><td>Amortisation</td><td>6</td><td>6</td></tr><tr><td>Interest expenses</td><td>47</td><td>29</td></tr><tr><td>Adjusted by:</td><td></td><td></td></tr><tr><td>Other non-recurring items:</td><td></td><td></td></tr><tr><td>Legal and professional fee</td><td>10</td><td>4</td></tr><tr><td>Provision for impairment on other prepayment and deposits</td><td>–</td><td>7</td></tr><tr><td>Relocation cost</td><td>4</td><td>–</td></tr><tr><td>Write off of trade receivables</td><td>–</td><td>3</td></tr><tr><td>OPLV operating losses (Note)</td><td>52</td><td>108</td></tr><tr><td>Total</td><td>69</td><td>60</td></tr></table>

Note: Details of the proposed disposal of the OPLV are set out in the Note 16 to the consolidated financial statements of this annual report and the announcement of the Company dated December 28, 2017.