SGOCO Group, Ltd. Announces 2014 Annual Financial Results and Unaudited Second Half Financial Results

HONG KONG, May 15, 2015 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC) ("SGOCO" or the "Company"), a company focused on product design, distribution and brand development in display products, today announced its audited financial results for the year ended December 31, 2014 and the unaudited second half financial results of 2014.

2014 Annual Results Overview

The annual results of SGOCO were adversely impacted by the weak industrial growth and increase in competition and in the traditional display industry in China.

• Annual revenues decreased 78.5% to $43.2 million in the year ended December 31, 2014, as compared to $201.0 million year-over-year.
• Gross profit dropped 87.3% year-on-year drop to $2.0 million in the year ended December 31, 2014, from $15.9 million in the same period of 2013.
• Net loss became $2.3 million in the year ended December 31, 2014 as compared to $8.4 million of net income year-over-year.
• Basic and diluted loss per share was $0.13 in the year ended December 31, 2014, as compared to basic and diluted earnings per share of $0.49 in the same period of 2013.

Mr. Shi-bin Xie, President and Chief Executive Officer of SGOCO, commented on the results. "SGOCO has faced a challenged market condition throughout 2014 resulting from the drop of the traditional flat panel display market."

"As a result, the Company decided to further restructure its business by disposing SGOCO (Fujian) Electronic Co., Ltd., a subsidiary engaged in sales and distribution of LED and LCD products in Southern China ("SGOCO (Fujian) "), in December 2014. After that, the Company will decrease the sales of traditional flat panel LCD and LED monitors, but increase the sales of All-In-One ("AIO") and Parts-In-One ("PIO") computers."

Mr. Xie concluded, "In 2015, SGOCO will focus on new investments and exploring new products, including but not limited to acquiring equities of potential target companies related to electronic and internet-related businesses and enriching the our product range."

FULL FISCAL 2014 AND SECOND HALF OF 2014 FINANCIAL RESULTS

Revenue

Due to the increasing popularity of mobile devices, the contraction of personal computer market demand continued and it adversely impacted the market demand of our major product, flat panel LCD and LED monitors. The drop in market demand also led to intense competition with our peers which has further affected our revenue and gross margins. SGOCO's revenue decreased by 78.5% to $43.2 million in the year ended December 31, 2014 compared with $201.0 million in the year ended December 31, 2013.

Total revenue for the second half of 2014 decreased 89.6% to $9.1 million from $87.2 million in the second half of 2013. The year-over-year revenue decrease was mainly due to the significant contraction of market demand in the second half of 2014 when comparing with the same period in 2013.

Gross Profit and Gross Margin

In the year ended December 31, 2014, the gross profit of the Company decreased 87.3% to $2.0 million from $15.9 million year-over-year. The overall gross margin for the year ended December 31, 2014 was 4.7%, as compared with 7.9% during the fiscal 2013.

Gross profit for the second half of 2014 decreased 96.1% year-over-year to $0.3 million from $7.0 million in 2013. The gross margin for the second half of 2014 was 3.0%, as compared with 8.0% for the second half of 2013.

Operating Expenses

Selling, General and Administrative expenses for the fiscal year of 2014 decreased 31.0% year-over-year to $3.4 million from $4.9 million. Selling expenses decreased 72.3% year-over-year to $0.3 million as compared to $1.1 million in the 2013. The decrease in selling expenses was primarily due to the decrease in sales volume and reduction of sales personnel during the year. General and Administrative expenses for the fiscal year of 2014 decreased 19.3% year-over-year to $3.1 million from $3.8 million. The decrease in General and Administrative expenses was mainly due to tightened expenses control.

Selling, General and Administrative expenses for the second half of 2014 decreased 61.3% to 1.0 million from $2.6 million for the second half of 2013, after the consideration of $1.3 million of recovery of bad debt expenses recorded in the first half of 2014. Selling expenses for the second half of 2014 decreased 89.0% year-over-year to $0.1 million, representing 0.6% of total revenues, compared with $0.5 million or 0.6% of total revenues in the second half of 2013. General and Administrative expenses decreased 54.6% year-over-year to $0.9 million from $2.1 million for the second half of 2013.

Operating loss 

The Company recorded $1.3 million operating loss in the year ended December 31, 2014, as compared to $11.1 million operating income during the same period of 2013. Operating expenses in the year ended December 31, 2014 decreased 31.0% to $3.4 million, which recorded for $4.9 million in the same period of 2013.

Operating income for the second half of 2014 was $0.6 million, decreased from $4.3 million in the second half of 2013.

Net loss and loss per share

The Company's net loss for the year ended December 31, 2014 was $2.3 million, which changed from the net income position of $8.4 million year-over-year. The net margin experienced a loss of 5.3% in the year ended December 31, 2014, as compared to 4.2% net profit margin during the same period of 2013. Basic and diluted loss per share was $0.13 in the year ended December 31, 2014 based on 17,406,069 weighted average number of common shares, as compared to basic and diluted earnings per share of $0.49 based on 17,193,189 weighted average number of common shares for the same period of 2013.

Cash and working capital

SGOCO held $0.1 million cash and cash equivalents as of December 31, 2014, compared to $13.5 million as of December 31, 2013. Working capital decreased to $85.2 million from $87.8 million at the end of December 31, 2013. Increasing cost in the products and suffering of operating loss are the major causes for the drop of cash flow.

Sale of SGOCO (Fujian)

On December 31, 2014, the Company announced the entering of a Sale and Purchase Agreement ("SPA") to sell its 100% equity ownership interest in SGOCO (Fujian) to Apex Flourish Group Limited ("Apex"), which is an independent third party with interests in real estate and forestry products.

The sales price for all the equity of SGOCO (Fujian) is equivalent to the net asset value of SGOCO (Fujian) on December 31, 2014 calculated on the basis of Chinese Accounting Standards. The final amount is $11.0 million (the "Sale Price"). Apex also agreed to assume responsibility to settle the entire balance of accounts payable and other payables (the "Payables") due by SGOCO (Fujian) to SGOCO and its affiliates, which amounts to $80.4 million, by installments prior to June 30, 2015. The transfer of the Sale Equity was effective on December 31, 2014.  As of April 30, 2015, Apex has paid the aggregated amount of $75.9 million to the Company as installment payments of the Sale Price and settlement of the Payables.

About SGOCO Group, Ltd.

SGOCO Group, Ltd. is focused on product design, brand development and distribution in the Chinese display market, including computer monitors, AIO and PIO computers and application specific products. SGOCO sells its products and services in the China market and abroad. For more information about SGOCO, please visit our investor relations website http://www.sgocogroup.com.

Safe Harbor and Informational Statement

This announcement contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," "will," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company's multiple-brand, multiple channel strategy and the transitioning of its product development and sales focus and to a "light-asset" model, Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal control over financial reporting; our success in designing and distributing products under brands licensed from others; management of sales trend and client mix; possibility of securing loans and other financing without efficient fixed assets as collaterals; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED products in China; China's overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; compliance with government regulations; legislation or regulatory environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this press release and in the attachments is as of the date of the issuance, and SGOCO does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

SGOCO Group, Ltd.Johnson LauChief Financial OfficerTel: +852 25010128Email: [email protected]

 

 

 

 

 

 

 

 

 

 

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SOURCE SGOCO Group, Ltd.