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MANAGEMENT DISCUSSION AND ANALYSIS
Group results

For the six months ended 30 September 2019, the Group recorded turnover of HK$462
million (2018: HK$836 million), and loss attributable to shareholders of HK$217 million
(2018: loss of HK$181 million). One of the most significant factors for the decline was the on-
going trade war between China and the United States, which affected a substantial portion of
the Group’s AV business.
As the China-US trade war dragged on, many China-based electronics manufacturers had to
fight for an ever smaller slice of the export business. In fact, many of these manufacturers
were willing to accept orders at below material costs, thus undermining gross margins for
all industry players. Such dire conditions significantly affected the Group’s ability to take
on orders as highly fierce price competition made many of these orders unacceptable. To
make matter worse, the Group was also unable to pass on the impact of additional US tariffs
that took effect on 15 October to its retail customers. In certain cases, the Group had to
absorb the extra import duties entirely, because the after-tariff retail prices would have been
unacceptable to consumers; in some other cases, the price increases were too high to be
absorbed by either the Group or its retail customers and hence would slow down the pace of
re-ordering; and then there were customers who simply adopted a wait-and-see attitude, thus
continuously delaying their purchase decisions.

Even though the Group’s notebook PC business made progress in terms of number of
units sold when compared with the same period last year, it did not grow as significantly
as it could have due to a weakened economy in China, social incidents in Hong Kong,
and relatively weak consumption sentiment in Taiwan (It would appear that an important
part of Taiwan’s economy remains dependent on the manufacturing industries, with many
participants in one way or another reliant on links with China, hence were affected by
the Mainland’s current economic situation). Nonetheless, to further raise awareness of the
Group’s notebook PC brands and capture market shares, during the period under review,
continuous investments were made in advertising and promotions, product development and
R&D, and penetration into new markets.
The directors do not recommend the payment of an interim dividend (2018: nil) for the six
months ended 30 September 2019.

Interim Report 2019 ALCO HOLDINGS LIMITED 21