Highlights of the first half of 2015 ended June 30, 2015: Ø   The Group’s Gross Merchandise Value (“GMV”) was RMB5.8 billion, an increase of 65.7% year-on-year (“YoY”) Ø   Online transaction customers1 as at June 30, 2015 reached 7,485, up 109.8% YoY Ø   Non-GAAP profit attributable to equity shareholders2 of the Company was approximately RMB177.4 million, representing an increase of 57.3% YoY Highlights of the second quarter of 2015 ended June 30, 2015: Ø   The Group’s GMV was RMB3,316.8 million, an increase of 64.2% YoY Ø   Non-GAAP profit attributable to equity shareholders2 of the Company was approximately RMB100.4 million, representing an increase of 51.9% YoY

(August 19, 2015 - Hong Kong) Cogobuy Group (“Cogobuy” or the “Company”, stock code: 400.HK; with its subsidiaries (the ‘‘Group’’)), the largest e-commerce service platform for the enterprise procurement within the electronics manufacturing industry in China, is pleased to announce its unaudited operation summary for the second quarter and unaudited consolidated results for the six months ended June 30, 2015 (the “Period”).

Financial Highlights of the First Half of 2015

During the Period, the total GMV of the Company’s operations was approximately RMB5.8 billion, representing an increase of 65.7% YoY; with 73.3% derived from direct sales value, 17.5% from transaction value in online marketplace and 9.2% from loan value in supply chain financing business. In total, 42.1% of the GMV of our direct sales value was derived from blue chip customers while 57.9% was derived from small and medium enterprise (“SME”) customers.

During the Period, increasing numbers of new customers, mainly from SMEs, as well as better than expected results from supply chain financing business, contributed to the Company robust growth and results. The number of online transaction customers reached 7,485 as at June 30, 2015, of which approximately 1.9% are blue chip customers and 98.1% are SME customers. This represents an increase of 109.8% as compared to that of 3,567 as at June 30, 2014. As at June 30, 2015, the number of registered customers reached 40,891, an increase of 64.5% as compared to that of 24,860 as at June 30, 2014.

During the Period, the Company recorded a total revenue of RMB4,284.4 million, representing an increase of 43.1% YoY. Profit attributable to equity shareholders of the Company grew significantly to approximately RMB166.2 million, representing an increase of 166.3% YoY.

Financial Highlights of the Second Quarter of 2015

For the three months ended June 30, 2015, the total GMV of the Company’s operations was RMB3,316.8 million, representing an increase of 64.2% YoY; with 71.1% derived from direct sales, 18.5% from online marketplace platform and 10.4% from the supply chain financing business line. In total, 49.3% of the GMV was derived from blue chip customers while 50.7% was derived from SME customers.

The Company commenced a new supply chain financing business in September 2014 whereby it earns interest income for providing certain financial services to its customers, including provision of working capital financing programs. By leveraging existing platform and data, the Company is able to provide more and more value-added services in additional to IC component procurement business. Supply chain financing business is a good demonstration that this strategy is effective in further expanding the Company’s revenue stream. For the three months ended June 30, 2015, GMV contributed by the supply chain financing business has reached RMB343.4 million.

INGDAN.com is the largest Internet of Things (“IoT”) innovation business platform for supply chain services and who is dedicated to connecting global intelligent hardware entrepreneurs and China supply chain resources. Benefitting from “Innovation and Entrepreneurship” as a national strategy in China, INGDAN.com grew rapidly with fast growing customer number and start generating GMV.  During the Period, GMV contributed by the INGDAN.com platform has amounted to RMB339.6 million, 10.2% of the total GMV. As at August 13, 2015, the platform registered more than 3.5 million followers and over 4,300 IoT project entries.

For the three months ended June 30, 2015, the Company recorded a total revenue of RMB2,378.0 million, representing an increase of 45.1% YoY. Net profit attributable to equity shareholders of the Company grew significantly to approximately RMB94.7 million, representing an increase of 151.9% YoY. Gross margin was 8.1%. Improvement in gross margin was due to growth in percentages of service revenue provided by marketplace business and supply chain financing business. Non-GAAP profit attributable to equity shareholders² of the Company was approximately RMB100.4 million, representing an increase of 51.9% YoY. Non-GAAP operating expenses³ were RMB70.3 million. With strong service income generated from our marketplace business, the non-GAAP operating margin⁴ was 5.2%. Effective tax rate of the Group was 12.5%.

For the three months ended June 30, 2015, the Group generated positive operating cash flow of approximately RMB81.6 million. Cash and cash equivalents and pledged deposits amounted to RMB1,805.7 million as at June 30, 2015. Inventory turnover days⁵ and trade receivables turnover days⁶ were 33.3 days and 31.5 days respectively.

Business Highlights

•        We entered into a strategic agreement with JD.com and Lenovo to build an intelligent hardware ecosystem and provide technology, marketing, promotion, distribution and financing services to hardware innovation enterprises. We believe that Cogobuy will be able to further shorten the distance between the suppliers market and end-consumers market by providing services to intelligent hardware innovation companies.

•        We entered a strategic cooperation with Baidu Inc. (“Baidu”). Under the framework of the IoT Industry Alliance, we will jointly develop cloud service access and hardware industry chain cooperation while providing support to small and medium IoT enterprise startups. With the enterprise data provided by Cogobuy, Baidu can provide better services to SME.

•        Our INGDAN.com platform has attracted extensive market attention with follower number approaching approximately 3.5 million and the number of IoT project entries grew from more than 2,400 to over 4,300 as July 31, 2015. The online community built upon hardcore smart device enthusiasts is expected to enable INGDAN.com to expand its business from B2B to B2B2C.

•        “IngDan Experience Center” in Shenzhen has been officially launched. It can bring intelligent devices products much closer to consumers, and complete the online to offline closed loop business model. Besides, INGDAN.com officially entered into the Hong Kong market. It will devote major efforts to expand into Hong Kong and overseas markets in the future, to help innovative companies in Hong Kong and worldwide in their innovation development.

OUTLOOK

Looking forward, Mr. Jeffrey Kang, CEO of Cogobuy Group, said: “During the Period, in spite of demand in the Chinese end-market has been challenging and changing, and the performance of certain electronics sectors and blue chip customers did not meet market expectations. Cogobuy still generated strong growth in results. By leveraging our Internet + platform and effective business model targeted to a large and diversified customer base, we do not rely on a few customers or be affected by particular industry cycles. As China’s economy is transitioning from the previous investment-led model to a new innovation-centric economic development model, impacts on the traditional industries are inevitable. We believe that this fast-changing market will lead many of our customers’ dependency on our Internet + platform to increase significantly. Meanwhile, we do not expect the recent Renminbi exchange rate fluctuation to have any significant impacts on our business as most of our business is conducted in USD and HKD. Therefore, we remained confident of our business growth prospect in the second half of the year.

As a leading Internet + company, we have created an innovative business model - ‘mobile social networking + plus enterprise e-commerce’. INGDAN.com community with millions of followers and its access to enterprise key decision makers network enable Cogobuy to implement precision marketing. We believe that this strategy would further expand customer base at lower customer acquisition costs. Moreover, we used IC components business as an entry point to establish a customer base and collect enterprise relevant big-data. Such transaction based big-data enables us to build an e-commerce procurement and service platform and further diversified our product offerings to customers – from providing software, cloud services, financing services to all other business related value-added services.

Recently, we have launched a new program called ‘Xinhuo +’ (or “芯火+” in Chinese). The unique program uses our marketplace platform to assist traditional manufacturer customers in their transformation into Internet + companies. We believe this new program not only shows that many of our traditional electronic manufacturing customer are transforming and upgrading its business, but also brings healthy increase in customer number and GMV to our marketplace platform. In addition, this program is expected to create valuable big-data opportunity in the near future.

Mr. Kang continued, “Looking outside of China, the US recovery is gradually picking up its pace. We are encouraged that INGDAN.com is becoming the largest IoT innovation services platform in China. We have been relentlessly creating an industry ecosystem, not only in China, but also gradually expanding into the global market with presence in Hong Kong, the US and Europe. While most business services offered by INGDAN.com are free of charge, we started to record GMV in the second quarter and have been collecting meaningful data on the industry as well as fan profile and behavior since the launch of the platform. INGDAN.com has maintained strong growth. From the end of June to mid-August, followers increased from nearly 2.0 million to approximately 3.5 million and IoT project entries grew from more than 2,400 to over 4,300. With great interests from the market, INGDAN.com is considering bringing in strategic partners or investors to demonstrate its market value around the second half of the year.”

 

¹       Customers who had completed at least one online transaction during the current period and had completed at least one other online transaction since the beginning of the previous fiscal year.

²    Net profit attributable to equity shareholders less share-based compensation costs, amortization of intangible assets and its related deferred taxation effect, and expenses incurred in relation to the global offering of the Company.

³    Total operating expenses less share-based compensation costs, amortization of intangible assets, and expenses incurred in relation to the global offering of the Company.

⁴    Non-GAAP operating margin is non-GAAP profit of the period divided by revenue for the period. Non-GAAP profit is gross profit less non-GAAP operating expenses of the period.

⁵    The average of the opening and closing balances of inventories of the period divided by cost of sales of the period and multiplied by 91 days.

⁶        The average of the opening and closing balances of trade receivables for the period divided by revenue of the period and multiplied by 91 days.

Caution Statement

The information contained in this document has not been independently verified. No representation, warranty or undertaking, express or implied, is made by the Company or any of its affiliates, advisers or representatives as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of such information or opinions presented or contained herein. The information contained in this document should be considered in the context of the circumstances prevailing at the time, is subject to change without notice and the Company makes no undertaking to update the information in this document to reflect any developments that occur after the date of the presentation. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the Company, or its financial or trading position or prospects. Neither of the Company nor any of its affiliates, advisers or representatives accept any responsibility or have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document.

This document may contain statements that reflect the Company’s current intent, beliefs and expectations about the future as of the respective dates indicated herein. These forward-looking statements are not guarantees of future performance and are based on a number of assumptions about the Company’s operations and factors beyond the Company’s control and are subject to significant risks and uncertainties, and accordingly, actual results may differ materially from those described in these forward-looking statements. Neither the Company nor any of its affiliates, advisers or representatives has any obligation, nor do they undertake, to update these forward-looking statements for any events or developments including the occurrence of unanticipated events that occur subsequent to such dates.

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About Cogobuy Group

Cogobuy Group is the largest e-commerce service platform for the enterprise procurement with the electronics manufacturing industry in China. Through the e-commerce platform, including a direct sales platform, an online marketplace and a dedicated team of technical consultants and professional sales representatives, the Company provides customers with comprehensive online and offline services across pre-sale, sale and post-sale stages. The Company serves mainly SME electronics manufacturers.

For further information, please refer to the Company’s website at http://www.cogobuy.com/

About INGDAN.com

INGDAN.com is a platform dedicated to connecting global intelligent hardware entrepreneurs and China supply chain resources. The platform provides information of hardware innovation, knowledge of the supply chain and supply chain demand docking for global IoT innovation entrepreneurs. It is a one-stop hardware innovation business platform with its core being the “supply chain.”

For further information, please refer to the Company’s website at http://www.ingdan.com/

For investor and media enquiries

Please contact Ms. Wanyee Ho / Ms. Amy Guo at ir@cogobuy.com.

 

Consolidated Statement of Comprehensive Income — Unaudited

For the six months ended June 30, 2015

 

	Six months ended     June 30,
	2015		2014
	RMB ‘000		RMB ‘000
Revenue		4,284,413		2,993,149
Cost of revenue		(3,939,944)		(2,762,809)
Gross Profit		344,469		230,340
Other revenue		13,475		203
Selling and distribution expenses		(64,606)		(39,496)
Research and development expenses		(23,469)		(16,955)
Administrative and other operating expenses		(53,529)		(76,725)
Profit from operations		216,340		97,367
Finance costs		(14,794)		(17,244)
Profit before taxation		201,546		80,123
Income tax		(25,613)		(9,900)
Profit for the period		175,933		70,223
Attributable to:
Equity shareholders of the Company		166,219		62,424
Non-controlling interests		9,714		7,799
Profit for the period		175,933		70,223

 

 

	Six months ended       June 30,
	2015		2014
	RMB ‘000		RMB ‘000
Profit for the period		175,933		70,223
Other comprehensive income for the period, net of nil tax
Item that may be reclassified subsequently to profit or loss:
-   Exchange differences on translation of financial statements of entities with functional currency other than RMB		(1,726)		5,581
-       Net movement in the fair value reserve of available-for-sale investments		3,323		—
Other comprehensive income for the period		1,597		5,581
Total comprehensive income for the period		177,530		75,804
Attributable to:
Equity shareholders of the Company		167,880		67,946
Non-controlling interests		9,650		7,858
		177,530		75,804
Earnings per share
Basic (RMB)		0.124		0.062
Diluted (RMB)		0.123		0.062

 

 

As of June 30, 2015

	As of June 30, 2015		As of December 31, 2015
	RMB’000		RMB’000
Non-current assets
Property, plant and equipment		4,325			1,635
Intangible assets		69,951			23,703
Goodwill		173,462			154,136
Available-for-sale investments		169,833			—
Other non-current assets		728			14,803
		418,299			194,277
Current assets
Inventories		938,915			501,340
Trade and other receivables		1,053,689			748,507
Loans to third parties		307,810			208,629
Amounts due from related party		6,200			11,478
Short term deposits		11,000			11,000
Pledged deposits		908,945			742,152
Cash and cash equivalents		896,758			1,222,700
		4,123,317			3,445,806
Current liabilities
Trade and other payables		881,456			565,564
Bank loans		1,809,271			1,411,424
Amounts due to related party		34,813			12,434
Current taxation		44,909			21,792
		2,770,449			2,011,214
Net current assets		1,352,868			1,434,592
Total assets less current liabilities		1,771,167			1,628,869
Non-current liabilities
Deferred tax liabilities		11,542			3,912
NET ASSETS		1,759,625			1,624,957
CAPITAL AND RESERVES
Share capital		1			1
Reserves		1,693,334			1,603,149
Total equity attributable to equity shareholders of the Company		1,693,335			1,603,150
Non-controlling interests		66,290			21,807
TOTAL EQUITY		1,759,625			1,624,957