Press Release | 16 January 2012 |
RCG Holdings Limited
("RCG" or the "Company" and together with its subsidiaries, the "Group")
Trading Update
RCG Holdings Limited (AIM: RCG, HKSE: 802), an international provider of biometric and RFID products and solution services with a primary focus in the Asia Pacific and the Middle East markets, announces the following trading update.
During 2011, the Group focused on the Solutions, Projects and Services business segment, reducedits reliance on the less profitable distributorship modeland divested less profitable and non-core businesses. As a result of the reduction in distribution sales and continuing delays on certain projects in the Company's Solutions, Projects and Services business segment, revenues for the year ended 31 December 2011 are estimated to have decreased by approximately half compared with the prior year.
The Group continues to experience margin pressure in both the Consumer and Enterprise business segments with lower selling prices arising from increased competition, coupled with rising cost of sales. These trends, together with the substantial disposal of surplus inventory by the Group in the second half of the year at discounted prices, have resulted in substantially lower gross margins than have been achieved in the past.
The Board has decided to make very substantial further impairment provisions against the carrying value of trade receivables, in addition to the impairment provisions made at the half year stage; this, combined with the lower revenues and margins referred to above, has contributed to a significant net loss for the full year ended 31 December 2011 which is estimated to be materially larger than the net loss reported for the first half of 2011.
Although the Group has been able to execute smaller-scale projects secured with various governmental bodies and major corporations in the Southeast Asia, China and the Middle East, some delays in the bigger projects together with the decreased revenues and margins described above and research, development and investment expenditure, has put further pressure on the Group's working capital position. As at 31 December 2011, the Group had cash of approximately HK$24 million and bank borrowings of approximately HK$83 million. As set out in the Company's recent circular to shareholders, the Board intended to seek funding through further issues of equity. However, in light of the fact that the General Mandate Refreshment Resolution was not approved at the recent shareholder meeting, the Board is currently considering various funding alternatives to finance its development plans and reduce its borrowings.
The information contained in this announcement is based on a preliminary assessment by the Board of the financial information currently available, which has not yet been confirmed or reviewed by the Company's auditors or the audit committee of the Company. The Company expects to announce its audited results for the year ended 31 December 2011 around the end of March 2012.
- Ends -
Enquiries:
RCG Holdings Limited | Tel: +852 3669 6999 |
Danny Chew, Acting Chief Executive Officer |
|
ir@rcg.tv |
|
Smith & Williamson Corporate Finance Limited |
|
(Nominated adviser and broker) |
|
Dr. Azhic Basirov / David Jones | Tel: +44 (0) 20 7131 4000 |
About RCG
RCG, a leading global provider of integrated biometrics and RFID security solutions, is publicly quoted and its shares are listed on the Main Board of the Stock Exchange of Hong Kong Limited and admitted to trading on the AIM Market of the London Stock Exchange and the PLUS market. The Company has a growth strategy focusing on long-term projects, solutions and services and development of new applications and revenue streams, particularly in the security applications industry.
