Willas-Array Electronics (Holdings) Limited: Interim 2025 Financial Analysis

Willas-Array Electronics (Holdings) Limited (“Willas-Array” or “the Group”) has released its unaudited interim results for the six months ended June 30, 2025. This analysis breaks down the key financial metrics, segmental performance, management commentary, and strategic direction, providing investors with a clear view of the company’s current standing and future prospects.

Key Financial Metrics

*NM = Not Meaningful, due to change from loss to profit.

Historical Performance Trends

• Revenue: Slight YoY decline of 2.1%, reflecting broad-based weakness across most business segments except Automotive and Others.
• Gross Profit Margin: Jumped from 3.0% in 1H FY2024 to 9.8% in 1H FY2025, primarily due to a net reversal of inventory allowance (HK\$18.9m reversal vs. HK\$41.8m provision previously). Adjusted for these, gross margin improved to 8.2% from 6.5%.
• Net Profit: Swung to a profit of HK\$20.7m from a loss of HK\$78.6m, largely due to improved gross margins, reversals of impairment and inventory allowances, and tight administrative cost control.
• EPS: Similarly, EPS rebounded to 23.63 HK cents from a loss of 89.64 HK cents per share.
• Working Capital: Improved to HK\$228.5m (cash of HK\$49.6m), up from HK\$200.6m (cash of HK\$41.4m) at the prior year-end, reflecting positive operational cash flow.
• Net Gearing: Improved from 139.9% to 104.9%, due to reduced borrowings and higher equity base from the swing to profitability.

Segmental Analysis

• Automotive: Revenue rose 8.2% YoY, driven by successful strategic market deployment, deeper partnerships with domestic OEMs, and supply chain expansion.
• Industrial: Down 2.7% YoY, impacted by the suspension of low-margin, higher-risk client business.
• Home Appliance, EMS, Dealer, Audio & Video, Telecommunications, Lighting: All segments saw revenue declines, with Audio & Video (-17.3%) and Lighting (-20.6%) particularly weak due to sanctions, client exits, and shifting procurement strategies.
• Others: Up 12.9%, benefiting from diversification (e.g., drones, new brands).

Exceptional Items and Expenses

• Inventory Allowance: Net reversal of HK\$18.9m in 1H FY2025 vs. HK\$41.8m provision in 1H FY2024.
• Impairment Losses: Net reversal of HK\$7.0m for trade receivables due to better-than-expected collections and prior over-provisioning.
• Other Losses: HK\$5.7m, mainly from exchange losses, but improved YoY due to greater RMB/USD stability.
• Administrative Expenses: Down 9.5% YoY due to cost optimization and efficiency efforts.

Chairman’s Statement

“Amid persistent U.S.-China tariff tensions and resulting market uncertainties, the Group is strategically positioning itself to thrive in a complex global environment. Leveraging over 40 years’ experience and the new synergy with Shanghai YCT, the Group aims to establish a robust overseas expansion platform capable of navigating intricate supply chain dynamics and responding to the relocation trends of its client base. This initiative is designed to sustain current business operations while unlocking new growth opportunities in emerging markets. Domestically, the Group continues to face challenges stemming from weak demand, particularly in the real estate and consumer sectors, necessitating a proactive and diversified approach.”

The chairman’s tone is cautiously optimistic, stressing both the company’s resilience and the need for proactive adaptation in a volatile macroeconomic and geopolitical environment.

Dividends

No interim dividend was declared for the period, as the Group intends to retain cash to support ongoing operations and growth initiatives. This is unchanged from the prior year.

Share Capital, Fundraising, and Corporate Actions

• Share Placement: On June 12, 2025, the company completed a placement of 15 million new shares (approx. 17.11% of pre-issue capital), raising new equity at HK\$2.66/share. This will help strengthen the balance sheet and support expansion. There were no share buybacks or treasury shares outstanding.
• No Divestments, IPOs, or Major Asset Sales: None reported during the period.

Directors’ Remuneration and Staff

• Total directors’ emoluments for the half-year were HK\$1.78 million. Staff costs (excluding directors) were HK\$49.6 million. The Group employed 303 staff as at June 30, 2025, mostly in the PRC.

Liquidity, Borrowings, and Related-Party Transactions

• Trust Receipt Loans: Reduced significantly to HK\$25.1m (from HK\$140.0m at end-2024).
• Bank Borrowings: HK\$365.2m, mostly short-term, with 86% at fixed rates and 14% floating, at competitive rates (3.47%–3.90%).
• Loans from Ultimate Holding Company: HK\$78.8m, down from HK\$163.2m; interest at 6.8% p.a., supporting working capital needs. No issues with compliance or related-party terms.
• Asset Pledges: HK\$148.3m in properties pledged for HK\$25.1m trust receipt loans and HK\$153.2m bank borrowings.

Events After Reporting Period

• Completion of the 15 million share placement at HK\$2.66/share, increasing the share base by 14.61% post-issue. No other major events reported.

Strategic Outlook

• The Group aims to deepen its focus on the EV sector, expand product lines, and build a collaborative platform to support client globalization and supply chain relocation.
• Continued cost control, selective client engagement, and overseas expansion should help counteract domestic sectoral weakness, especially in real estate and consumer segments.

Conclusion and Investment Recommendation

Overall Assessment: Willas-Array has delivered a strong turnaround, swinging to profit with improved margins and solid cost control. Key risks remain in macroeconomic headwinds, especially in China, and ongoing industry disruptions. The company’s proactive strategic shifts toward the EV sector, supply chain resiliency, and global expansion, supported by a recent equity placement, position it well for further improvement.

• If you are currently holding the stock:
  The results and outlook suggest maintaining your position is reasonable. The company has returned to profitability, improved its balance sheet, and is investing for future growth. However, monitor for execution risks in its strategic initiatives and exposure to cyclical end markets.
• If you are not currently holding the stock:
  Consider initiating a position cautiously, especially if you are seeking exposure to the electronics supply chain and EV sectors in Asia. The recent equity placement has removed some balance sheet pressure and positions the company for further growth, but be mindful of the macro risks and ongoing margin volatility.

Disclaimer: This analysis is based solely on the company’s published interim financial report. It does not constitute investment advice, and investors should conduct their own due diligence and consider their financial circumstances and risk tolerance before making investment decisions.

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