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Email This Print ThisChairman's Statement

*Extracted from Annual Report 2017

Dear Shareholders,

The electronic components industry is a challenging one that is dependent not only on global economic conditions and how that affects demand; but also on the rapid pace of change in technology and how it is used in everyday things such as home appliance to major industrial and commercial applications.

The financial year ended March 31, 2017 ("FY2017") was marked by a lot of uncertainty because of several unprecedented world events including Brexit, a new US President, an unstable European economy and the slowdown in China's economy that led to volatility in demand and an imbalance in demand and supply in certain products.

Despite the uncertain outlook, a research report published by Global Industry Analysts, Inc. in April 2017, projected that the global electronics market will reach US$191.8 billion by 2022, driven by the increasing indispensability of electronics in modern life; continuous development of consumer, industrial, automotive and defense electronics; shorter product lifecycles and a parallel increase in opportunities in upstream supply chain.1 According to the report, Asia is leading the robust appetite for consumer electronics with a projected compound annual growth rate of about 4.8% over the analysis period of 2015 to 2022.

This report is supported by an article titled “2017 Forecast for Electronics Components Market” by Radio-Electronics.com.2 It highlighted that automotive and the new Internet of Things sectors are expected to grow significantly driving overall growth while sectors such as mobile, fixed telecommunications, computer devices of all forms and many others are well established and likely to grow less.

The aforementioned observations are also reflected in our performance for FY2017 and matched our own expectations for the current financial year ending March 31, 2018.

YEAR IN REVIEW

Despite the challenging economic and operating environment, the Group achieved 6.8% year-on-year (“YOY”) revenue growth to HK$3,883.1 million in FY2017, as compared to revenue of HK$3,635.6 million for the preceding financial year (“FY2016”).

The Telecommunications segment remained our biggest contributor to sales. In FY2017, it achieved revenue of HK$1,041.9 million. Although this represented an 8.6% YOY increase, the pace of growth was slower as compared to FY2016 when there was a lot of demand for 4G handsets in line with the rapid expansion of China's 4G market.

The Industrial segment, which was our second largest revenue contributor in FY2017, generated an 11.4% increase YOY partially because of the reclassification of customers from our other segments but also because of strong demand from energy saving applications and transportation, communication and power related infrastructure.

The strongest growth in FY2017 was achieved by our Automotive and Home Appliance segments, which generated increases of 32.4% and 15.6% respectively, reflecting the success of our ongoing strategy to strengthen our capabilities and invest more engineering resources into providing value-added services to customers in order to secure more business and market share.

Except for Electronic Manufacturing Services (if excluding reclassification of customers), which was mostly flat, all our other remaining segments including Dealer, Audio and Video, Lighting and Others experienced revenue decline, which was in line with our expectations as some of these sectors continue to face challenges in the form of rapidly changing or obsoleting technology, as well as tough market conditions and lower demand.

Gross profit in FY2017 increased a modest 0.7% YOY to HK$316.8 million but intense market competition and the slowing economic growth in China led to downward price pressures and a squeeze on gross profit margin which fell from 8.65% in FY2016 to 8.16% in FY2017.

To streamline our operations and optimize profitability, we announced on November 4, 2016 that we had disposed of our entire interest in Noblehigh Enterprises Inc. and its subsidiaries (together as "Noblehigh Group") at a cash consideration of HK$0.9 million to a third party. Noblehigh Group's primary business is the design and trading of integrated circuits for the audio equipment market. This shrinking audio equipment market required large upfront investment in research and development, which we were not comfortable devoting more resources into this field. In FY2017, loss for the year from this discontinued business was HK$1.8 million.

The net profit attributable to shareholders rose to HK$37.5 million as compared to a loss of HK$71.6 million in FY2016, which had mainly been due to share of loss and impairment loss from our associated company, GW Electronics Company Limited.

PROPOSED DIVIDEND

In line with its improved performance, the board of directors (the “Board”) of Willas-Array Electronics (Holdings) Limited (the “Company”) has recommended a final dividend of HK31.0 cents per ordinary share for the year ended March 31, 2017. This is expected to be payable on August 25, 2017 following the Shareholders' approval at the 2017 Annual General Meeting.

OUTLOOK

China's gross domestic product officially grew 6.7% in 2016, the slowest in 26 years but Premier Li Keqiang, China is aiming to expand its economy by around 6.5% in 2017 as it continues to implement a proactive fiscal policy and maintain a prudent monetary policy.3

The Group expects market conditions to remain challenging in the year ahead in line with China's slowing economic growth. Although our industry is unlikely to experience exponential growth in the near term, we remain confident that it is still a viable business because of the diversity of uses for electronic componentry.

We anticipate a slowdown in certain segments such as Telecommunications, which is reaching maturity and although there will be some growth, the pace will be slower amidst a likely imbalance of supply and demand and greater price competition. Even within the Audio and Video segment, which has been experiencing falling revenues in the past few years, we have observed new requirements for componentry and as such we will keep adequate resources to co-operate with existing and new suppliers to identify and capitalize on these new opportunities.

Looking ahead, we will be focusing the bulk of our resources and efforts in growth segments including Automotive and Home Appliance, led by the rising percentage of electronic content in automobiles and smart appliances respectively.

We also believe China's “One Belt, One Road” initiative to improve trade and economic integration across Asia, Europe, and Africa using free-trade agreements and infrastructure projects will yield opportunities for our Industrial segment in the areas of transportation, communication and power related infrastructure.

APPRECIATION

In closing, I want to thank all our business partners and customers for your unstinting support over the years through both good times and bad, that has enabled us to respond nimbly to changing market conditions with mutually beneficial results.

I also want to thank the Board for your guidance through the year and the management team and staff for working so hard to chase down every lead.

Lastly, I would like to express my appreciation to our shareholders for your faith in our Group.

Leung Chun Wah
Chairman
May 26, 2017



1"Electronic Components – A Global Strategic Business Report", April 2017 by Global Industry Analysts, Inc.: http://www.strategyr.com/MarketResearch/Electronic_Components_Market_Trends.asp
2"2017 Forecast For Electronic Components Market, Ian Poole", December 13, 2016, Radio-Electronics.com: http://www.radio-electronics.com/articles/electronics-components/2017-forecast-for-electronic-componentsmarket- 199
3"China aims for around 6.5 percent economic growth in 2017", March 4, 2017, CNBC: http://www.cnbc.com/2017/03/04/china-sets-2017-economic-growth-target.html



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