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SIM Technology Announces 2018 Interim Results Profit Attributable to Owners of the Company Substantially Skyrockets 824.9% to HK$330 Million Disposal of Business and Businesses Portfolio Reorganization Completed Implementing Cost Control Measures to Enhance Operational Efficiency

Hong  Kong,  23  August  2018

Leading  provider  of  handset  and  IOT  terminals,  wireless communication modules, IOT systems and O2O business and intelligent manufacturing in China, SIM Technology  Group  Limited (“SIM  Technology”  or  the  “Group”;  SEHK  stock  code:  2000),  has announced  its  interim  results  for  the  six  months  ended  30  June  2018  (the  “Period”).  Despite macroeconomic fluctuations and increasing market competition, through adjusting its business strategy, restructuring  the portfolio of  its businesses and rigorously controlling costs and  the completion of  the disposal  of  a  business,  during  the  Period,  profit  attributable  to  owners  of  the  Group  substantially skyrocketed 824.9% to HK$330 million compared to the same period of last year. Revenue amounted to HK$1,529 million, while gross profit was HK$127 million with overall gross profit margin of 8.29%. Basic earnings per share were HK12.9 cents.

During the Period, the intelligent manufacturing business enjoyed the best performance among the Group's  four major businesses, with  revenue of HK$90.3 million and gross profit of HK$21.5 million, surging by 103.2% and 38.4%  respectively when compared with  last year. The  increase was mainly from  the sales of  the 3C product  robotic  testing  line of  the  first business unit. With excellent product quality, and strong word-of-mouth  reputation,  the Group has not only gained wide recognition among customers,  but  also  secured  lucrative  orders  that  drove  revenue  and  profit  growth.  In  addition,  to maintain a stable core management team and key technicians while enhancing its competitiveness, the Group has devised a staff shareholding scheme for the first business unit. The scheme has facilitated greater financial benefits, which should drive the revenue and profits of the business.

The consumer handsets market has continued to focus on specific models and brands as the domestic and  international  markets  have  remained  highly  competitive.  The  prices  of  Internet-of-Things (“IOT”)/industrial application  terminals and some differentiated high-end handsets products have also been adjusted. The revenue of the handsets and IOT terminals business was recorded at HK$431 million with a 16.4% decrease when  compared with  last  year. The Group  strictly  implementing  cost control  during  the  Period,  including  the  reduction  of  procurement  costs  and  the  processing  cost  of individual products, and automatic testing in its handset and terminal production lines which effectively reduced the labor costs, hence, the gross profit margin of the business has slightly increased to 12.3% compared with last year.

As for the wireless communication modules business, the Group has recorded revenue of HK$501 million and gross profit of HK$26 million. During  the period,  the business has been  transformed  into electronic  manufacturing  services  (“EMS”)  upon  the  completion  on  disposal  of  the  research  and development (“R&D”) and sales operations of  the shared wireless communication modules business, which has aligned with the strategy of the Group's business transformation. Considering that the Group is no  longer  responsible  for  the R&D and sales expenses of  the modules business, nonetheless  it  is expected that the business will drive its revenue and maintain a reasonable growth if cost control efforts improve efficiency.

During the Period, the Group has actively developed a strategy for IOT systems and O2O business, which  focuses  on  provision  of  various  types  of  “cloud”  system  solutions  with  a  back-end  software system  as  the  core,  and  provision  of  an  online-to-office  (“O2O”)  cloud  trading  platform  to  vending machine operators. The business has achieved good results, with significant decrease in losses when compared with the same period last year. The revenue and gross profit increased by 6.9% and 25.6% respectively.  Instead of vigorously exploring different niche markets  to attract new  clients alone,  the Group  has  strengthened  the  cooperation  with  beverage manufacturers  and  ChinaUMS  to  increase advertising income, open up profit channels and improve overall efficiency.

Looking  ahead,  the  Management  will  maintain  a  sound  and  enterprising  business  development strategy  to execute  the established strategic direction. The proceeds  from  the disposal of part of  the wireless communication modules business will be used to build an operations center in Dongguan and a  factory  to upgrade handsets. This  is expected  to deliver more efficient production and higher profitability afterwards.

For the handsets and IOT terminals business, the Group has adhered to its development strategy of "retaining  its  high-end  handset  ODM  business,  and  actively  developing  IOT/Industrial  application terminals”, while continuously striving  to secure more domestic and international value-added clients. At  the same  time,  the Group will make  full use of  IOT applications  to provide more one-stop  “cloud” services for industrial customers to better cultivate the high-end market and seize market share.

Regarding the IOT systems and O2O business, the Group will pay extensive attention in each niche market to grasp opportunities, so as to seize the market at the early developmental stage of different segments. In addition, the Group will adopt a scheme to bolster the management in the second and the third business units of the intelligent manufacturing business, and continue to optimize the automated robotic line in order to maintain a competitive advantage.

Mr. Wong Cho Tung, Executive Director of SIM Technology,  concluded, "Although  the process of business  transformation presents  tough challenges,  the Group will still pursue adjusting  its business strategy and restructuring its business portfolio. In order to reduce labor costs and enhance the Group’s operational efficiency, we will continuously reform and optimize the automated production system. The above initiatives will bring positive and sustainable development to the Group as we adopt a business strategy that is both robust and enterprising, and strive to achieve long-term stable growth and bring the best returns to shareholders."

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