Global Sources reports second half and year-end 2016 financial results

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Mar 16, 2017, 04:07 ET

- Posted second half of 2016 revenue of $75.8 million -

- Reported second half of 2016 IFRS EPS of $0.38 and Non-IFRS EPS of $0.51 -

- Reported full year 2016 revenue of $157.7 million -

- Posted full year 2016 IFRS EPS of $0.73 and Non-IFRS EPS of $0.96 -

- Provides guidance for first half of 2017, expects revenue to be between $76.0 million and $78.0 million and IFRS EPS to range from $0.12 to $0.16 -

NEW YORK, March 16, 2017 /PRNewswire/ -- Global Sources Ltd. (NASDAQ: GSOL) reported financial results for the six-month period July 1, 2016 through Dec. 31, 2016 and year-end 2016.

Merle A. Hinrich, Global Sources' executive chairman stated: "In the second half of 2016, we had a successful fall series of trade shows in Hong Kong with growth in both booth sales and attendance. With Global Sources Electronics, the world's largest electronics sourcing trade show showcasing consumer and mobile electronics, we are in a strong position to capture the continued growth of mainland China's electronics export industry. Our Startup Launchpad initiative is Asia's largest gathering of consumer electronics startups. Consisting of a conference track and pavilion within each phase of the show, it lets buyers see the latest innovations and be first to market with shelf-ready products. Also, we added a Smart Living website, magazine and trade show pavilion covering smart security, energy management, entertainment, appliances, and gadgets for the fast-growing smart home market. We continue to focus on enhancing value for customers through further integration of our online and trade show services in our core business of connecting buyers worldwide with suppliers in mainland China and Asia."

Financial highlights -- Second half: 2016 compared to 2015

Revenue from continuing operations was $75.8 million, as compared to $85.1 million.
- Exhibitions revenue was $45.0 million, as compared to $45.7 million.
- Online and other media services revenue was $27.6 million, as compared to $34.5 million.
IFRS net profit from continuing operations was $9.5 million, or $0.38 per diluted share, as compared to $15.2 million, or $0.58 per diluted share from continuing operations.
Non-IFRS net profit from continuing operations was $12.8 million, or $0.51 per diluted share, as compared to $8.7 million, or $0.33 per diluted share from continuing operations.
Adjusted EBITDA from continuing operations was $15.6 million, as compared to $13.1 million from continuing operations for the second half of 2015.
Total deferred income and customer prepayments were $81.5 million as at Dec. 31, 2016, as compared to $78.2 million as at Dec. 31, 2015.
Cash and cash equivalents at Dec. 31, 2016 was $110.2 million and the company remains debt free.

Global Sources' CFO, Connie Lai, said: "Our 2016 second half revenue reflects the success of our export trade shows in Hong Kong as well as the continued challenges in our online business. We fully impaired the carrying amount of $2.2 million, net of associated taxes, in relation to the China International Fashion Brand Fair - Shenzhen. Also, our bottom line benefitted from our cost control efforts combined with the recognition of deferred tax assets."

Financial highlights -- Full year ended Dec. 31: 2016 compared to 2015

Revenue from continuing operations was $157.7 million, as compared to $171.0 million.
IFRS net profit from continuing operations was $18.4 million, or $0.73 per diluted share, as compared to $24.0 million, or $0.83 per diluted share from continuing operations.
Non-IFRS net profit from continuing operations was $24.2 million, or $0.96 per diluted share, as compared to $19.0 million, or $0.66 per diluted share from continuing operations, for 2015.
Adjusted EBITDA from continuing operations was $32.0 million, as compared to $30.8 million from continuing operations for 2015.

Financial expectations for the first half of 2017 under IFRS

For the first half of 2017 ending June 30, 2017:
- Revenue is expected to be in the range of $76.0 million to $78.0 million, as compared to $81.8 million for the first half of 2016.
- IFRS EPS is expected to be in the range of $0.12 to $0.16, as compared to $0.35 per diluted share in the first half of 2016. SBC and the amortization of intangibles as it relates to certain equity compensation plans are estimated to be an expense of $0.05 per diluted share for the first half of 2017.
- Non-IFRS EPS is expected to be in the range of $0.17 to $0.21, as compared to $0.45 per diluted share for the same period in 2016.
- Adjusted EBITDA is expected to be between $11.1 million and $11.9 million, as compared to $16.3 million in the first half of 2016.

Recent Corporate Highlights

Announced plans to partner with Shenzhen Globex e-Services Inc., an integrated e-commerce service provider, to co-develop a fully integrated electronic solution to facilitate more efficient cross-border trade between mainland China-based exporters and overseas buyers.
Announced retirement of board member James Watkins effective Jan. 1, 2017.
Appointed Craig Pepples as Global Sources' CEO effective Jan. 1, 2017.
Received the Gold corporate award for excellence in corporate governance and investor relations in The Asset's December 2016 issue.
Held Global Sources series of fall trade shows in October 2016 at Hong Kong's AsiaWorld-Expo, including Global Sources Electronics, the world's largest electronics sourcing trade show.
- In total, the fall trade shows had more than 8,500 booths.
- Total attendance exceeded 79,000 and included buyers from 153 countries and territories.
Appointed Fumbi Chima and Michael Scown as new members to Global Sources' Board of Directors effective Sept.12, 2016.

Conference call for Global Sources second half and year-end 2016 earnings

Executive chairman Merle A. Hinrich and CFO Connie Lai are scheduled to conduct a conference call at 8:00 a.m. ET on March 16, 2017 (8:00 p.m. on March 16, 2017 in Hong Kong) to review these results in more detail. Investors in the United States may participate in the call by dialing (888) 256-1014, and non-Hong Kong international participants may dial (1-913) 312-1296. Investors in Hong Kong may participate by dialing (852) 3008-0382. The conference ID is 3765441 and participants are encouraged to dial 10 minutes prior to the call to prevent a delay in joining. A live webcast of the conference call is scheduled to be available on Global Sources' corporate site at http://www.investor.globalsources.com.

For those who cannot listen to the live broadcast, a webcast replay of the call is scheduled to be available on the company's corporate site for 30 days. A telephone replay of the call is also scheduled to be available through March 23, 2017. To listen to the telephone replay dial (888) 203-1112 or dial (1-719) 457-0820 outside the United States, and enter pass code 3765441. For those in the Hong Kong area, the replay dial-in number is (800) 901-108, and the pass code is 3765441.

About Global Sources

Global Sources is a leading business-to-business media company and a primary facilitator of trade with Greater China.

The core business facilitates trade between Asia and the world using English-language media such as online marketplaces (GlobalSources.com), trade shows, magazines and apps.

More than 1.7 million international buyers, including 95 of the world's top 100 retailers, use these services to obtain product and company information to help them source more profitably from overseas supply markets. These services also provide suppliers with integrated marketing solutions to build corporate image, generate sales leads and win orders from buyers in more than 240 countries and territories.

Now in its fifth decade, Global Sources has been publicly listed on the NASDAQ since 2000.

Global Sources' non-IFRS metrics

Management believes non-IFRS metrics are useful measures of operations and provides IFRS to non-IFRS reconciliation tables at the end of this press release. Global Sources defines non-IFRS net profit as IFRS net profit excluding non-cash stock based compensation expense or credit, amortization of intangibles assets as it relates to certain equity compensation plans, profits or losses on acquisitions and disposals of investments, net of transaction costs and related tax expenses and/or impairment charges net of related taxes, for all historical and future references to non-IFRS metrics. Non-IFRS diluted net profit per share is defined as non-IFRS net profit divided by the weighted average of diluted common shares outstanding. Adjusted EBITDA is defined as profit before interest, taxes, depreciation, amortization, non-cash stock based compensation expense or credit, profits or losses on acquisitions and disposals of investments, net of transaction costs and impairment of goodwill and intangible assets.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements.

-- Tables follow --

GLOBAL SOURCES LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

		As at December 31,	As at December 31,
		2016		2015
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	88,749	$	70,356
Term deposits with banks		9,919		9,097
Financial assets, available-for-sale		11,234		-
Accounts receivables, net		838		849
Receivables from sales representatives		4,962		8,802
Inventories		111		176
Prepaid expenses and other current assets		14,129		16,268
		129,942		105,548
Non-current assets
Property and equipment		71,604		59,064
Investment properties		47,955		69,726
Intangible assets		16,907		26,309
Financial assets, available-for-sale		257		-
Long term investment		-		100
Deferred income tax assets		2,669		389
Other non-current assets		2,118		951
		141,510		156,539
Total assets	$	271,452	$	262,087

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	5,681	$	7,383
Deferred income and customer prepayments		77,450		75,265
Accrued liabilities		14,917		15,183
Income tax liabilities		934		2,990
		98,982		100,821
Non-current liabilities
Accounts payable		-		289
Deferred income and customer prepayments		4,040		2,917
Deferred income tax liabilities		2,453		4,493
		6,493		7,699
Total liabilities	$	105,475	$	108,520

Equity attributable to Company's shareholders
Common shares		536		533
Treasury shares		(250,089)		(250,089)
Other reserves		153,181		157,562
Retained earnings		258,293		239,812
Total Company shareholders' equity		161,921		147,818
Non-controlling interests		4,056		5,749
Total equity	$	165,977	$	153,567
Total liabilities and equity	$	271,452	$	262,087

GLOBAL SOURCES LTD. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015
		(Unaudited)		(Unaudited)		(Unaudited)
Revenue:
Exhibitions	$	44,968	$	45,683	$	92,381	$	91,854
Online and other media services (Note 1)		27,646		34,512		58,340		70,242
Miscellaneous		3,235		4,914		6,946		8,929
		75,849		85,109		157,667		171,025
Operating Expenses:
Sales (Note 2)		21,858		25,538		44,767		50,231
Event production		12,018		12,309		25,084		24,533
Community and content (Note 2)		8,152		10,332		17,163		20,535
General and administrative (Note 2 & 3)		20,685		22,945		43,019		43,697
Information and technology (Note 2)		5,541		6,896		11,315		13,348
Total Operating Expenses		68,254		78,020		141,348		152,344
Profit on sale of property		-		9,791		-		9,791
Profit from Operations		7,595		16,880		16,319		28,472
Interest income		265		226		558		792
Gain on sale of available-for-sale securities		26		52		93		188
Profit on sale of long term investment		-		-		43		-
Interest expenses		(7)		(24)		(23)		(83)
Profit before Income Taxes		7,879		17,134		16,990		29,369
Income tax credit / (expense)		752		(2,421)		1,328		(4,609)
Net Profit from continuing operations	$	8,631	$	14,713	$	18,318	$	24,760
Net Profit from discontinued operations, net of income tax (Note 4)		-		223		-		5,629
Net profit	$	8,631	$	14,936	$	18,318	$	30,389
Net (profit)/loss attributable to non-controlling interests from:
Continuing operations		913		457		51		(765)
Discontinued operations		-		-		-		264
Total		913		457		51		(501)
Net profit attributable to the Company's shareholders from:
Continuing operations	$	9,544	$	15,170	$	18,369	$	23,995
Discontinued operations		-		223		-		5,893
Total	$	9,544	$	15,393	$	18,369	$	29,888
Diluted net profit per share attributable to the Company's shareholders from:
Continuing operations	$	0.38	$	0.58	$	0.73	$	0.83
Discontinued operations		-		0.01		-		0.20
Total	$	0.38	$	0.59	$	0.73	$	1.03
Shares used in diluted net profit per share calculations		25,397,702		26,249,657		25,305,261		28,820,976

Note: 1. Online and other media services consists of:

		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015
		(Unaudited)		(Unaudited)		(Unaudited)
Online services	$	25,064	$	31,220	$	52,750	$	64,421
Print services		2,582		3,292		5,590		5,821
	$	27,646	$	34,512	$	58,340	$	70,242

Note: 2. Non-cash compensation expenses associated with the several equity compensation plans and Global Sources Directors Share Grant Award Plan included under various categories of expenses are as follows:

		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015
		(Unaudited)		(Unaudited)		(Unaudited)
Sales	$	206	$	240	$	279	$	418
Community and content		44		47		62		88
General and administrative		624		650		1,360		1,418
Information and technology		85		92		204		225
	$	959	$	1,029	$	1,905	$	2,149

Note: 3. General and administrative expenses consist of:

		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015
		(Unaudited)		(Unaudited)		(Unaudited)
General and administrative expenses before amortization of intangible assets, impairment charge on intangible assets and foreign exchange losses	$	15,331	$	18,984	$	33,310	$	37,289
Amortization of intangible assets		1,639		2,207		3,681		4,314
Impairment charge on intangible assets		2,889		-		4,791		-
Foreign exchange losses		826		1,754		1,237		2,094
	$	20,685	$	22,945	$	43,019	$	43,697

Note: 4. Net Profit from discontinued operations, net of income tax consist of:

		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015
		(Unaudited)		(Unaudited)		(Unaudited)
Profit on sale of subsidiary	$	-	$	223	$	-	$	6,382
Income tax expense		-		-		-		(361)
Profit on sale of subsidiary, net of income tax		-		223		-		6,021
Loss from discontinued operations, net of income tax		-		-		-		(392)
	$	-	$	223	$	-	$	5,629

GLOBAL SOURCES LTD. AND SUBSIDIARIES
ACTUAL IFRS to NON-IFRS RECONCILIATION
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)


		Six months ended December 31,				Year ended December 31,
		2016		2015		2016		2015

IFRS diluted net profit per share from continuing operations	$	0.38	$	0.58	$	0.73	$	0.83

IFRS Net Profit from continuing operations	$	9,544	$	15,170	$	18,369	$	23,995

Non-cash stock based compensation expense (Note 1)		959		1,029		1,905		2,149

Amortization of intangibles (Note 2)		179		88		363		381

Profit on sale of long term investment		-		-		(43)		-

Impairment of goodwill and intangibles (Note 3)		2,167		-		3,593		-

Profit on sale of property, net of transaction costs & related tax expenses		-		(7,550)		-		(7,550)

Non-IFRS Net Profit continuing operations	$	12,849	$	8,737	$	24,187	$	18,975

Non-IFRS diluted net profit per share from continuing operations	$	0.51	$	0.33	$	0.96	$	0.66


Total shares used in non-IFRS diluted net profit
per share calculations		25,397,702		26,249,657		25,305,261		28,820,976


Notes:
(1) Actual SBC is calculated based on actual share price on date of the awards.
(2) Amortization of intangible assets relating to certain non-compete agreements.
(3) Impairment of intangibles are net of related taxes.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(In U.S. Dollars Thousands)

	Six months ended December 31,				Year ended December 31,
	2016		2015		2016		2015

IFRS profit from continuing operations	$	7,595	$	16,880	$	16,319	$	28,472

Depreciation and amortization from continuing operations		4,179		4,961		8,946		9,999

EBITDA		11,774		21,841		25,265		38,471

Non-cash stock based compensation expense		959		1,029		1,905		2,149

Impairment of goodwill and intangibles		2,889		-		4,791		-

Profit on sale of property, net of transaction costs		-		(9,791)		-		(9,791)

Adjusted EBITDA from continuing operations	$	15,622	$	13,079	$	31,961	$	30,829

GLOBAL SOURCES LTD. AND SUBSIDIARIES
GUIDANCE IFRS to NON-IFRS RECONCILIATION
(In U.S. Dollars Million, Except Number of Shares and Per Share Data)


	GUIDANCE			ACTUAL
	Six months			Six months
	ended June 30,			ended June 30,
	2017			2016

Revenue	$76.0	to	$78.0	$81.8

IFRS EPS	$0.12	to	$0.16	$0.35

Non-cash stock based compensation expense (Note 1)	$0.04		$0.04	$0.04

Amortization of intangibles (Note 2)	$0.01		$0.01	$0.00

Impairment of goodwill and intangibles (Note 3)	$0.00		$0.00	$0.06

Non-IFRS diluted net income per share	$0.17	to	$0.21	$0.45

Total shares used in non-IFRS diluted net income
per share calculations	25,600,000		25,600,000	25,358,358


Notes:
(1) Actual SBC is calculated based on actual share price on date of the awards.
(2) Amortization of intangible assets relating to certain non-compete agreements.
(3) Impairment of intangibles are net of related taxes.