Commences Chip Manufacturing Business
Actively Diversifies Development of Hardware Business
IBO Technology Company Limited (IBO Technology or the Company, together with its subsidiaries, the Group; HKG: 2708) announces the audited consolidated annual results for the year ended 31 March 2023 (the Year). The Group has been actively diversifying the development of its hardware business and announced the commencement of chip manufacturing business in May this year. This business is expected to complement the Group’s three major businesses, namely 5G (communication equipment and private network solutions), Information Technology Application Innovation (ITAI) IT (terminal products and industry solutions) and Internet of Things (IoT) (products and solutions), to form a complete business model and industrial ecosystem.
During the Year, domestically, widespread lockdown and historic downturn in the property market were caused by the Outbreak of the 2019 Coronavirus (the “Pandemic”). Internationally, the Russian-Ukrainian war and the trade tension between China and the United States posed a huge impact on the international situation. The overall economic environment in the PRC was stagnant in the second half of the year, and a number of industries, including those in which the Group and the Group’s customers operate, were inevitably affected to varying degrees. In order to maintain a healthy financial position, the Group took a prudent and pragmatic approach to its businesses in the second half of the Year, rather than blindly pursuing growth in business scale. Therefore, the Group recorded a revenue of approximately RMB907.27 million (FY2021/22: approximately RMB1,046.30 million), a gross profit of approximately RMB93.90 million (FY2021/22: approximately RMB178.60 million) and a gross profit margin of 10.3% (FY2021/22: 17.1%). In addition, since the impairment losses increased substantially year-on-year, no gain on change in fair value of derivative component of the convertible bonds was recorded and foreign exchange losses were recorded during the Year, loss attributable to owners of the Company for the Year was approximately RMB243.56 million (FY2021/22: profit attributable to owners of the Company of approximately RMB14.66 million).
Importance of the ITAI Industry continues to rise, while 5G development enters a critical period
With the rapid development of information technology, practical applications are expanding to include information security, cloud computing, big data, artificial intelligence and industrial internet, etc., the ITAI industry has become the top priority in the development of national strategies. In order to continuously improve and expand the development of the ITAI industry, the central government has continued to introduce relevant supporting policies and development strategies, meanwhile repeatedly mentioning the need to safeguard its national security in meetings.
Leveraging favorable policies, 5G technology has been developing in the PRC, and the industry application scenarios have been broadening, becoming a new engine in the construction of “Digital China”. In order to continue to stimulate new vitality in 5G application innovation and achieve continuous breakthroughs in the depth and breadth of 5G applications, the central and local governments have been strengthening their support and introducing supportive policies, thereby steadily advancing the construction of 5G base stations.
General market conditions were poor in China, with multiple businesses being affected to varying degrees
Intelligent terminal products sales business is the largest contributor to the Group’s revenue, accounting for 92.9% of its total revenue for the Year. During the Year, the Group continued the development, production and sales of customised IoT smart terminals to customers. Revenue from the intelligent terminal products sales business only recorded a year-on-year decrease of approximately 5.5% to approximately RMB842.61 million (FY2021/22: approximately RMB891.37 million), despite the poor general market conditions in China during the Year.
Regarding system integration business, based on the analysis and assessment of customers’ needs, the Group provides customers with integrated and customised system solutions based on IoT and related technologies, including overall system planning, development and design, system equipment procurement, system software and hardware equipment integration, system implementation, pilot runs, as well as system management and maintenance. The Group’s revenue from the system integration business is derived from one-off projects with fluctuating revenue as compared to other segments. Affected by the suspension of operation and production in a number of industries last year, the Group’s system integration business recorded a revenue of approximately RMB0.43 million for the Year (FY2021/22: approximately RMB39.82 million).
With regard to software development business, the Group plans and designs the software system frameworks and function lists for customers, and also provides customised software application development services based on their business and management needs. Leveraging on its strong software development capabilities, the Group has been providing quality software application development services to serve customers in different industries for many years. The Group’s software development business recorded a revenue of approximately RMB52.46 million for the Year (FY2021/22: approximately RMB104.23 million).
As for system maintenance services business, the Group provides software and hardware system maintenance services for information systems, including system equipment maintenance and management, database maintenance, daily system monitoring and system upgrade, etc. Given that the system maintenance services business is less affected by external factors and has already built a strong customer loyalty, the segment revenue increased by 8.2% year-on-year to RMB11.77 million (FY2021/22: approximately RMB10.88 million).
Actively investing in the development of the PRC chip manufacturing through investment in Hangzhou Yixin
With the gradual recovery of our economic environment, the Group will continue to diversify the development of its hardware business. On 29 May 2023, the Group announced an investment of an amount in RMB which is equal to HK$40 million (equivalent to RMB36,035,600) in 5.00% of the share capital of Hangzhou Yixin Micro Technology Co., Ltd.* (“Hangzhou Yixin”), a company that integrates the research and development, production and sales of constant pressure and constant power airflow sensing chips. Hangzhou Yixin holds a number of patents on constant pressure and constant power airflow sensing chips. The Group is entitled to further invest in Hangzhou Yixin to hold 35% to 46% of its share capital and become its controlling shareholder in the future.
The “airflow sensing chip” is one of the main components of electronic atomisation equipment and is in enormous demand in the electronic atomisation equipment market. PRC’s electronic atomisation equipment industry is one of the sectors that is bucking the trend of growth during the Pandemic, and the number of patent applications related to electronic atomisation equipment has continued to rise in recent years, reflecting the industry’s favourable development towards high technology. Looking ahead, the Group is optimistic about the future of the chip manufacturing market in the PRC and plans to increase its investment in the chip manufacturing market through further investment in Hangzhou Yixin. With the recovery of the current economic environment, the Group is keen to capitalise on the growth potential of Hangzhou Yixin in the relevant business areas and accelerate its exploration of the chip manufacturing sector, thereby broadening the source of revenue.
Mr. LAI Tse Ming, Chairman and Executive Director of IBO Technology, said, “There are close connection and synergy among our three major business segments in the aspects of underlying technology, application technology, supply chain, project and business model. In addition, the new chip manufacturing business also complements the three major businesses to form a complete business model and industrial ecosystem. The strong synergy between the businesses will help optimise the Group’s strengths and comprehensive technological capabilities, promoting the Group to grow its business scale on the one hand, and creating a unique core strength on the other, thereby providing one-stop industrial digital solutions to customers in different industries and seizing golden opportunities in the fast-growing market. Looking forward, the Group will continue to operate under prudent commercial principles and pay close attention to the latest market developments, striving to create long-term and stable returns for our shareholders.”
About IBO Technology Company Limited
IBO Technology Company Limited (HKG: 2708), a leading digital solutions provider, is principally engaged in providing 5G communication equipment and private network solutions, ITAI terminal products and industry solutions, IoT products and solutions, as well as industrial digital solutions in the PRC. The Group’s businesses mainly cover four areas, namely (i) intelligent terminal products sales; (ii) system integration; (iii) software development; and (iv) system maintenance services. With nearly 20 years penetration in the IoT industry, the Group serves customers from both the public and private sectors in the PRC, including government authorities, large-scale state-owned enterprises and private enterprises. On 29 May 2023, IBO Technology Company Limited announced an investment in Hangzhou Yixin Micro Technology Co., Ltd.*, in order to commence chip manufacturing business.
For more details, please visit: http://www.ibotech.hk/
* The English name is not the official name and is translated for reference purpose only.