Raytech fiscal 2026 earnings: New services lift revenue and margins

Raytech Holding Limited (Nasdaq: RAY) reported fiscal 2026 revenue of HK$142.6 million, up 81.1% from HK$78.7 million, while diluted EPS declined to HK$7.19 from HK$7.60 for the year ended March 31, 2026. Newly added design, advisory and marketing services contributed 31.0% of revenue and helped expand operating margin, but a sharp increase in receivables caused operating cash flow to turn negative.

Core Financial Results

Revenue growth came from HK$44.2 million of new service income and a 26.2% increase in product sales. Operating income grew faster than revenue despite selling, general and administrative expenses more than doubling to HK$21.6 million from HK$10.2 million.

Based on the reported merchandise and service cost lines, the implied margin after those costs improved to approximately 27.8% from 22.6%. However, diluted EPS fell by about 5.4% because the weighted average share count increased to 2.32 million from 1.09 million, more than offsetting the benefit of higher net income on a per-share basis.

Per-share figures for both periods were retroactively restated for the 1-for-16 share consolidation effective November 7, 2025.

Business and Segment Performance

Raytech ended fiscal 2026 with three reportable segments after Raytech Innovation began operating on October 1, 2025, and the company acquired Worry free on December 29, 2025. The established appliances business remained the largest segment, but the two service operations already generated nearly one-third of consolidated revenue despite contributing for only part of the year.

Within appliances, product revenue increased to HK$95.6 million from HK$75.8 million, primarily because customers engaged new hair-styling models. Tooling revenue declined to HK$2.8 million from HK$3.0 million as the company handled fewer new tooling programs.

Raytech Innovation generated HK$14.0 million from product design and development and HK$8.0 million from project advisory services. Worry free contributed HK$22.3 million of marketing solutions revenue during the roughly three months following its acquisition.

Receivables Turned Higher Earnings Into an Operating Cash Outflow

The largest disconnect in the results was between net income and operating cash flow. Accounts receivable increased to HK$67.8 million from HK$8.1 million, which the company attributed primarily to the newly commenced and acquired service businesses. This year-end buildup helped push operating cash flow to an outflow of HK$14.5 million even as Raytech reported HK$16.7 million of net income.

Raytech said all receivables outstanding at March 31 had been fully settled by the date of the Annual Report. That subsequent collection reduces concern about those specific balances, but the fiscal-year cash flow statement still shows that the expanded business required substantially more working capital.

Cash and cash equivalents declined to HK$78.0 million from HK$84.9 million. Fiscal 2026 financing activities generated HK$34.8 million, mainly from the July 2025 follow-on offering, while investing activities used HK$27.7 million. Net current assets nevertheless increased to HK$97.1 million from HK$76.9 million.

The Worry free acquisition also changed the balance sheet. Raytech paid total consideration of US$6.1 million, consisting of US$4.1 million in cash and a US$2.0 million promissory note. At year-end, the balance sheet included HK$43.8 million of goodwill and a HK$14.6 million non-current promissory note payable.

Management’s Focus

Management intends to continue expanding product design, development, consultation and marketing services while operating the established Pure Beauty sourcing and wholesaling business in the ordinary course. The strategy increases Raytech’s exposure to service revenue, which represented 31.0% of fiscal 2026 sales.

After year-end, the company raised approximately US$6.08 million in net proceeds through a June 2026 registered direct offering. Management believes existing cash, operating cash flows and those proceeds will cover anticipated working capital requirements and repayment of the promissory note for at least the next 12 months.

Risks Investors Need to Watch

• Service-business execution: The two service segments contributed for only part of fiscal 2026. Their full-year growth, cost structure and customer collection patterns are not demonstrated by these results.
• Working-capital requirements: Receivables rose by HK$59.6 million and operating cash flow turned negative. Although the year-end balances were subsequently collected, similar buildups could continue to pressure cash conversion.
• Higher operating expenses: Selling, general and administrative expenses increased to HK$21.6 million from HK$10.2 million. Continued margin expansion depends on revenue and direct-cost performance offsetting the larger expense base.
• Per-share dilution: The higher weighted share count caused EPS to decline despite net income more than doubling. The June 2026 issuance of approximately 3.15 million additional shares could further affect per-share results unless earnings expand accordingly.
• Acquisition-related obligations: The Worry free transaction added substantial goodwill and a promissory note that matures on the second anniversary of issuance, making the acquired business’s performance and cash generation important to the enlarged group.

Summary

Raytech’s fiscal 2026 growth was driven by a combination of higher appliance sales and the addition of two service businesses, lifting revenue, operating income and margins. The central issue for the next reporting period is whether the company can sustain service growth while converting reported earnings into operating cash flow, controlling its larger expense base and managing the per-share effects of recent capital raises.