Comba Telecom Systems (2342) H2 2024 earnings summary

Executive summary

• Revenue declined 24.3% year-over-year to HK$4.53 billion, mainly due to a global CapEx slowdown and the termination of a planned spin-off and A-share listing of a key subsidiary.

• Gross profit fell 29.6% to HK$1.17 billion, with gross margin down 1.9 percentage points to 25.9%.

• Net loss attributable to shareholders was HK$564 million, reversing from a profit of HK$6.7 million in FY2023; net margin dropped to -12.5%.

• Operating expenses included HK$160 million in one-off costs from the terminated A-share IPO and HK$18 million from restructuring, with other expenses and impairment losses surging 80.8%.

• Cash and cash equivalents increased to HK$1.4 billion, while net assets fell 21% to HK$2.65 billion.

Financial highlights

• Operating cash flow remained positive at HK$339 million, though down 31.2% year-over-year.

• Finance costs increased 42.7% to HK$31.3 million, but as a percentage of interest-bearing debt dropped to 3.5%-3.7% from 7% year-over-year.

• Inventory, receivable, and payable turnover days all increased, with inventory turnover at 123 days, AR at 244 days, AP at 345 days, and cash conversion cycle at 22 days.

• Gross gearing ratio rose to 11.3% from 8.8%; debt-to-assets ratio increased to 63.5%.

• Return on average equity dropped to -18.8% from 0.2% year-over-year.

Outlook and guidance

• Management expects recurring operating expenses to improve in 2025 after one-off costs in 2024.

• Focus remains on revenue diversification, R&D investment, and operational efficiency, with growth anticipated in 5G private networks, in-building solutions, and international markets.

• Operators are shifting focus to in-depth 5G coverage, energy efficiency, and integration of cloud-network-computing-intelligence.

• China’s 5G base stations increased 4.5% in 2024, with 85% of applications expected indoors by 2025; manufacturing leads private network growth.

• Continued cost control and lean operations planned for 2025.