SGOCO Group, Ltd. Announces Second Quarter 2013 Financial Results

      SGOCO Group, Ltd. Announces Second Quarter 2013 Financial Results

PR Newswire

BEIJING, Aug. 20, 2013

BEIJING, Aug. 20, 2013 /PRNewswire/ --SGOCO Group, Ltd. (Nasdaq: SGOC)
("SGOCO" or the "Company"), a company focused on product design, distribution
and brand development in the flat-panel display market, today announced its
unaudited financial results for the second quarter ended June 30, 2013.

Second Quarter 2013 Comparisons with Second Quarter 2012 - Financial
Highlights

  oTotal revenue increased 38.7% year-over-year to $59.2 million 
  oGross profit increased 31.5% year-over-year to $5.2 million, gross margin
    at 8.8% as compared to 9.3%
  oOperating income increased 97.3% year-over-year to $4.1 million, operating
    margin at 6.8% as compared to 4.8%
  oNet income increased 175.7% year-over-year to $3.4 million, net margin at
    5.7% as compared to 2.9%
  oBasic and diluted earnings per share ("EPS") were $0.20 as compared to
    $0.07

Second Quarter 2013 Comparisons with Second Quarter 2012 - Operational
Highlights

  oSGOCO Brand and Licensed Brands (previously known as "SGOCO Brand")
    generated $41.3 million, an increase of 9.1% year-over-year, representing
    69.8% of total revenues as compared to 88.7%. Key Accounts sales
    (previously known as "Non-SGOCO brand and OEM") generated $17.1 million,
    an increase of 255.8% year-over-year, representing 28.9% of total revenues
    as compared to 11.3%.

First Half 2013 Comparisons with First Half 2012 - Financial Highlights

  oTotal revenue increased 47.3% year-over-year to $113.8 million
  oGross profit increased 34.8% year-over-year to $8.9 million, gross margin
    at 7.9% as compared to 8.6%
  oOperating income increased 81.3% year-over-year to $6.7 million, operating
    margin at 5.9% as compared to 4.8%
  oNet income up 137.9% year-over-year to $5.1 million, net margin at 4.5% as
    compared to 2.8%
  oBasic and diluted earnings per share were $0.30 as compared to $0.12

First Half 2013 Comparisons with First Half 2012 - Operational Highlights

  oSGOCO Brand and Licensed Brands generated $77.9 million, increased 32.6%
    year-over-year, representing 68.5% of total revenues as compared to 76.3%.
    Key Accounts sales generated $23.6 million, increased 29.5%
    year-over-year, representing 20.7% of total revenues as compared to 23.7%.

Mr. Burnette Or, President and Chief Executive Officer of SGOCO, commented on
the results. "Our performance over the second quarter demonstrated our
continued strength in the flat-panel display market, as revenue grew 39% year
over year and net earnings increased by 176% from last year. These positive
signs are indicative of the success we have achieved in implementing our
four-prong strategy to position the Company in a promising direction for the
future.

"Our four-prong strategy enables us to focus on strengthening our brand
portfolio, specializing in high-growth industry verticals, diversifying our
product lines and expanding distribution channels across China's tier three
and four cities. These strategies are being well-implemented and we are
pleased with the results of our efforts. We have received positive feedback
for our newly developed products, the touch-screen Parts-In-One (PIO) and
All-In-One (AIO) PC. We expect these new products to further drive our growth
in the second half of the year and to facilitate the expansion of our sales
and distribution networks in various areas of China. As a result, we are able
to strengthen our solid brand portfolio and expand our market share.

"With China's economic focus expected to shift towards tier three and four
cities over the next decade, our leading capabilities in product distribution
in these cities will come to bear on numerous opportunities and challenges
that lie ahead. Over the last three quarters, we have rapidly expanded our
coverage of distribution networks in rural areas to most of the provinces,
covering a substantial area of China geographically."

Mr. Or concluded, "We have also opened our new sales operation in Shenzhen,
one of the most active and demanding cities for innovative electronic devices
to accommodate the expansion of sales and services in China, and it will
become SGOCO's key sales and operational base going forward. Our focus on
geographic and product expansion guarantees SGOCO's success in increasing
profitability through the development of new products and opportunistic
acquisitions, priming the Company to capitalize on the enormous business
opportunities afforded by China's shifting landscape."

SECOND QUARTER 2013 FINANCIAL RESULTS

Revenue

Total revenue for the second quarter 2013 increased 38.7% to $59.2 million
from $42.7 million in the second quarter of 2012. The year-over-year revenue
increase was mainly due to the addition of a few local distributor clients and
increased sales of flat panel monitors in the second quarter.

Of the total revenues in the quarter, $41.3 million or 69.8% of total revenues
were from SGOCO Brand and its Licensed Brands; $17.1 million or 28.9% of total
revenues were from Key Accounts sales; and $0.8 million or 1.3% of total
revenues were from sales of Other Application Products.

Cost of Goods Sold

Cost of goods sold increased 39.5% to $54.0 million from $38.7 million in the
second quarter of 2012. The increase was in line with the revenue growth.

Gross Profit and Gross Margin

Gross profit increased 31.5% to $5.2 million from $4.0 million for the second
quarter of 2012.

The overall gross margin for the second quarter of 2013 was 8.8%, as compared
with 9.3% for the second quarter of 2012. The decrease in gross margin was
mainly due to withholding tax paid to Chinese authorities, starting in the
second half of 2012, for recycling imported monitors. This decrease was
alleviated by the exchange gain we recognized due to the appreciation of the
Renminbi, as most of our purchases were settled in USD. During the second
quarter of 2013, SGOCO Brand and its Licensed Brands' sales had a gross margin
of 9.6%, which decreased from 9.9% in the second quarter of 2012. During the
second quarter of 2013 and 2012, Key Accounts sales had a gross margin of 8.2%
and 5.9%, respectively. Sales of other application products in the second
quarter of 2013 recorded a gross margin of 10.4%, as compared to nil sales in
the second quarter of 2012.

Operating Expenses

Selling, General and Administrative expenses for the second quarter of 2013
decreased to $1.2 million from $1.9 million for the second quarter of 2012.

Selling expenses for the second quarter of 2013 increased 140.0%
year-over-year to $0.3 million, representing 0.5% of total revenues, compared
with $0.1 million or 0.3% of total revenues in the second quarter of 2012. The
increase was mainly attributable to an increase in transportation costs from
increased product sales during the second quarter and increased staff costs
due to additional employees hired in Shenzhen and Beijing offices to
strengthen the sales team.

General and Administrative ("G&A") expenses decreased 52.7% year-over-year to
$0.8 million from $1.8 million for the second quarter of 2012.The decrease of
G&A expenses was due to tightened controls over expenses and a decrease in the
professional fees due to the completion of investigation in relation to the
Company's trading halt and change of auditors in 2012.

Operating Income and Operating Margin

Operating income for the second quarter of 2013 was $4.1 million, up 97.3%
from $2.1 million in the second quarter of 2012. Operating margin was 6.8%,
and improved from 4.8% in the second quarter of 2012 due to the increase of
revenue and reduction of G&A expenses.

Net Income, Net Margin and EPS

Net income for the second quarter of 2013 was $3.4 million, an increase of
175.7% from $1.2 million in the second quarter of 2012. Net margin was 5.7%
for the second quarter of 2013, which increased from 2.9% in the second
quarter of 2012.

Basic and diluted EPS were $0.20 for the second quarter of 2013, compared to
$0.07 in the second quarter of 2012. Basic and diluted EPS for the second
quarter of 2013 was calculated based on 17,173,981 weighted average number of
common shares as compared to 17,059,860 weighted average number of common
shares in the second quarter of 2012.

Balance Sheet

Cash and cash equivalents

As of June 30, 2013, cash and cash equivalents were $14.2 million, an increase
of $ 2.7 million from $11.5 million as of December 31, 2012. The increase in
the cash position was primarily attributable to an increase in operating cash
flow from increased sales during the second quarter.

Accounts receivable

Accounts receivable as of June 30, 2013 increased 28.7% to $76.4 million from
$59.4 million as of December 31, 2012. The increase was primarily attributable
to increased sales during the second quarter. As of June 30, 2013, Accounts
Receivable Turnover Days was 108 days compared to 68 days as of June 30, 2012.
The increase in Accounts Receivable Turnover Days was mainly because most of
our customers made use of the credit period we granted them.

Inventories

Inventories as of June 30, 2013 increased 186.6% to $16.4 million from $5.7
million as of December 31, 2012. The increase was primarily to fulfill the
upcoming sales orders and expected market demand. As of June 30, 2013,
Inventory Turnover Days was 19 days compared to 4.5 days as of June 30, 2012.
The increase in Inventory Turnover Days was mainly because we made significant
purchases close to June 30, 2013 for next quarter orders.

Working capital

Working capital increased to $83.6 million from $78.1 million at the end of
2012. The current ratio was 2.56 on June 30, 2013, compared to 3.86 on
December 31, 2012.

Voting results of the 2012 Annual General Meeting of Shareholders

SGOCO also announced thevoting resultsof its 2012 annual general meeting of
shareholders ("AGM"), held in Beijing, China on June 24th, 2013. At the AGM,
shareholders approved all of the following resolutions put forward in the
proxy statement: (i) the approval and adoption of the financial statements for
the year ended December 31, 2012; (ii) the approval and appointment of Crowe
Horwath (HK) CPA Limited as auditor of the Company and to authorize the
directors to fix the remuneration of the auditors; (iii) the election of
Burnette Or, Robert Eu, Frank Wu, John Chen, Pik Yue Hon, Wai Man (Helen) Hsu,
and Tin Man Or to serve as directors on the board until the close of the next
annual general meeting of shareholders or until their successors are duly
elected. For more detailed information regarding these resolutions, please
review the Notice of 2012 Annual General Meeting posted at the website:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=shareholder.

CONFERENCE CALL INFORMATION

SGOCO's senior management will host a conference call on Wednesday, August 21,
2013 at 8 a.m. (Eastern)/5 a.m. (Pacific)/8 p.m. (Beijing/Hong Kong) to
discuss quarterly results and operational updates.

To access the conference call, please dial in at least 10 minutes before the
call.

1-877-941-4774 (US Toll-free)
1-480-629-9760 (International)
4001-200-611 (China Toll-free)
86-400-628-0671 (China)

Conference call identification number: 4632020

The Company will also broadcast a live audio webcast of the conference call.
The webcast will be available at http://public.viavid.com/index.php?id=105494

An archive of the call will be available within 48 hours at
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=16

ABOUT SGOCO GROUP, LTD.

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

For investor and media inquiries, please contact:

SGOCO Group, Ltd.

Serena Wu
Investor Relations Manager
Tel: +86 (10) - 85870173 (China)
US: +1(646) - 5831616 (Voice mail)
Email:ir@sgoco.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 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 trends and client mix; possibility
of securing loans and other financing without fixed assets as collateral;
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.



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2013 AND 2012
(Unaudited)
(In thousands of U.S. dollars except share and per share data)
                                                        2013        2012
REVENUES:
Revenues                                              59,242      42,702
COST OF GOODS SOLD:
Cost of goods sold                                    54,040      38,746
GROSS PROFIT                                            5,202       3,956
OPERATING EXPENSES:
Selling expenses                                      312         130
General and administrative expenses                  838         1,772
Total operating expenses                                1,150       1,902
INCOME FROM OPERATIONS                                  4,052       2,054
OTHER INCOME (EXPENSES):
Interest income                                       4           1
Interest expense                                      (58)        (24)
Other income (expense), net                           13          3
Change in fair value of warrant derivative liability  (31)        47
Total other income (expenses), net                      (72)        27
INCOME BEFORE PROVISION FOR INCOME TAXES                3,980       2,081
PROVISION FOR INCOME TAXES                              586         850
NET INCOME                                              3,394       1,231
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment               92          (11)
COMPREHENSIVE INCOME                                    3,486       1,220
EARNINGS PER SHARE:
Basic                                                   0.20        0.07
Diluted                                                 0.20        0.07
WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING:
Basic                                                   17,173,981  17,059,860
Diluted                                                 17,173,981  17,059,860



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(Unaudited)
(In thousands of U.S. dollars except share and per share data)
                                                        2013        2012
REVENUES:
Revenues                                              113,785     77,224
COST OF GOODS SOLD:
Cost of goods sold                                    104,840     70,586
GROSS PROFIT                                            8,945       6,638
OPERATING EXPENSES:
Selling expenses                                      556         247
General and administrative expenses                  1,670       2,684
Total operating expenses                                2,226       2,931
INCOME FROM OPERATIONS                                  6,719       3,707
OTHER INCOME (EXPENSES):
Interest income                                       5           2
Interest expense                                      (93)        (39)
Other income (expense), net                           (61)        (12)
Change in fair value of warrant derivative liability  (27)        48
Total other expenses, net                               (176)       (1)
INCOME BEFORE PROVISION FOR INCOME TAXES                6,543       3,706
PROVISION FOR INCOME TAXES                              1,429       1,556
NET INCOME                                              5,114       2,150
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment               106         (83)
COMPREHENSIVE INCOME                                    5,220       2,067
EARNINGS PER SHARE:
Basic                                                   0.30        0.12
Diluted                                                 0.30        0.12
WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING:
Basic                                                   17,130,888  17,059,860
Diluted                                                 17,130,888  17,059,860



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2013 AND DECEMBER 31, 2012
(In thousands of U.S. dollars except share and per share data)
                                                                                  June 30,     December31,
                                                                                  2013
                                                                                               2012
ASSETS                                                                         (Unaudited)
CURRENT ASSETS
Cash                                                                          14,156          11,548
Accountsreceivable,netofprovisionfordoubtfulaccountsof$105andnil,
                                                                               76,401          59,355
respectively
Other receivables and prepayments                                             2,665           169
Inventories                                                                   16,408          5,725
Advances to suppliers                                                         27,401          28,511
Other current assets                                                          115             78
Total current assets                                                           137,146         105,386
PLANT AND EQUIPMENT, NET                                                       242             261
                                                                                               
Total assets                                                                   137,388
                                                                                               105,647
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term loan                                                             7,034           6,230
Accounts payable, trade                                                     35,324          12,038
Accrued liabilities                                                         257             156
Short-term loan – shareholder                                               209             209
Other payables                                                              403             379
Customer deposits                                                           2,666           1,155
Taxes payable                                                                 7,691           7,147
Total current liabilities                                                      53,584          27,314
OTHER LIABILITIES
Warrant derivative liability                                                   44              18
Total liabilities                                                              53,628          27,332
Commitment and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 1,000,000 shares

 authorized, nil issued and outstanding as of June 30, 2013                  -               -

 and December 31, 2012, respectively
Common stock, $0.001 par value, 50,000,000 shares

 authorized, 17,660,356 and 17,465,356 issued and
                                                                               18              17
 outstanding as of June 30, 2013 and December 31, 2012,

 respectively
Paid-in-capital                                                                25,052          24,828
Statutory reserves                                                             401             401
Retained earnings                                                              58,158          53,044
Accumulated other comprehensive income                                        131             25
Total shareholders' equity                                                     83,760          78,315
Total liabilities and shareholder's equity                                   137,388         105,647



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013  AND 2012
(Unaudited)
(In thousands of U.S. dollars)
                                                            2013      2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                  5,114     2,150
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization                               37        31
Provision for doubtful debts                                105       -
Change in fair value of warrant derivative liability        27        (48)
Share-based compensation expenses                           224       273
Change in operating assets and liabilities
Accounts receivable, trade                                  (17,469)  (18,725)
Other receivables and prepayments                           (2,467)   (54)
Notes receivable                                            -         (94)
Inventories                                                 (10,475)  38,537
Advances to suppliers                                       1,592     (43,793)
Other current assets                                        (35)      (121)
Accounts payables, trade                                    22,956    (144)
Accrued liabilities                                         98        81
Other payables                                              13        672
Customer deposits                                           1,476     1,426
Taxes payable                                               415       1,258
Net cash provided by (used in)
                                                            1,611     (18,551)
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Settlement of consideration received from disposal of       -         18,734
subsidiaries
Purchase of equipment                                       (15)      (69)
Net cash (used in) provided by
                                                            (15)      18,665
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in restricted cash                                 -         (318)
Notes payable                                               -         318
Proceeds from short-term loan                               804       -
Net cash provided by financing activities                   804       -
EFFECT OF EXCHANGE RATE ON CASH                             208       65
INCREASE IN CASH                                            2,608     179
CASH, beginning of period                                   11,548    535
CASH, end of period                                         14,156    714
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expenses paid (net of amount capitalized)          93        39
Income taxes paid                                           900       293
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Settlement of consideration receivable – received in        -         38,375
finished goods

SOURCE SGOCO Group, Ltd.

Website: http://www.sgoco.com
Website: http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=shareholder
Website: http://public.viavid.com/index.php?id=105494
Website:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=16
 
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