TCL Communication Posts Impressive Performance in 2011 Interim Results

Revenue and Net Profit Surge 33% and 56% YoY Respectively

FINANCIAL HIGHLIGHTS

Unaudited results for the six months ended 30 June
(HK$ ‘million)	2011	2010	Change (%)
Revenue	4,600	3,452	33%
Gross profit	1,014	724	40%
Gross profit margin (%)	22%	21%	1%
Profit attributable to owners of the parent	391	250	56%
Basic EPS (HK cents)	35.49	23.30	52%
Interim dividend per share (HK cents)	13.8	8.0	73%

HONG KONG, 8 August 2011 - TCL Communication Technology Holdings Limited (“TCL Communication” or “the Company”, together with its subsidiaries referred to as “the Group”; HKSE stock code: 02618) today announced the unaudited results of the Group for the six months ended 30 June 2011.

Despite the demand for handsets became flat in the second quarter of 2011 as the market concerned about the impact of Japan earthquake on handset component supply shortage, the possibility of deepening European Debt Crisis, as well as traditional low season quarter effect, the Group was able to sustain growth momentum for its handsets and other products sales volume throughout the first half of 2011. A total of 19.5 million units of handsets and other products were sold, representing a 37% surge year-on-year. Sales volume in overseas markets reached 17.8 million units, a 38% increase over the corresponding period in 2010. Meanwhile, sales volume in the PRC market increased by 27% year-on-year to 1.7 million units. Significant progress in sales and operational performances were mainly attributable to the Group’s successful geographical expansion into new and high-potential markets, together with the successes of the Group’s “Step-up” product strategy, brand building efforts and ODM business development.

The Group’s turnover increased to HK$4,600 million, representing a 33% increase year-on-year.  Gross profit increased to HK$1,014 million from HK$724 million. The Group’s efforts in improving cost-control and enhancing the product mix led to higher operational efficiency, improving the gross profit margin to 22% from the 21% recorded in the corresponding period of 2010. Net profit increased sharply by 56% to HK$391 million. Average selling price fell slightly to US$30.3 from the US$31.1 recorded in the last corresponding period.

Basic earnings per share increased to 35.49 HK cents from 23.30 HK cents over the corresponding period of the previous year. In view of this, the Board of Directors has recommended an interim dividend of 13.8 HK cents per ordinary share, a payout ratio of 39% of the profit attributable to owners of the parent during the period.

Commenting on the performance, Dr. Guo Aiping, the Chief Executive Officer of TCL Communication, said, “The Group was able to sustain growth momentum throughout the first half of 2011 despite global economic volatility and the changing landscape of the industry. The remarkable results have consolidated our leading position around the globe. We continued to extend our reach to markets in the Americas, Europe, the Middle East, Africa and the Asia Pacific region by offering new entry-level 3G Android products. Our strong product development and marketing capabilities have increased our competitiveness for maintaining our market leadership in existing markets while strengthening our penetration into high-potential markets, such as Brazil and the southern part of Africa. We also further enhanced our PRC market penetration by launching products with special features that reached our customers through a more greatly expanded national distribution network.  The Group reiterate target sales volume for full year 2011 at 50 million units, representing a 39% increase year-on-year. In the second half of this year , we plan to launch 51 new models, including 3G Android smartphones and tablets in order to strengthen our penetration into both low-end and mid to high-end markets.”

Shipments to Europe, the Middle East and Africa (“EMEA”) in the first half of 2011 amounted to 7.3 million units, up 45% from the corresponding period of the previous year, with the highlights being the Group’s outstanding performance in the open market, satisfactory sales of entry-level devices in Africa and robust sales of the ONE TOUCH 355 PLAY in Europe. In addition, shipments to the Americas grew to 9.4 million units during the period under review, representing an increase of 36% compared to the corresponding period of the previous year. This growth was mainly driven by the sales growth of handsets with special features that suited the demands of local customers. Moreover, the Group achieved better sales in existing markets, such as Brazil (1,265% YoY), Argentina (287% YoY) and Mexico (78% YoY), and successfully broadened our reach into open market and distribution channels in new markets, such as Cuba and Venezuela. In the Asia Pacific region, sales volume surged 15% year-on-year to 1.1 million units, through our enhanced open market development and deeper low to mid-end product penetration. The Group is one of the main official sponsors of Le Tour de France 2011, the world’s premier annual cycling competition. This sponsorship arrangement will further boost the brand image of the ALCATEL ONE TOUCH brand.

Total sales volume in the PRC market reached 1.7 million units in the first half of 2011, representing an increase of 27% compared to the corresponding period. As a result of robust cooperation with the country’s three major telecommunications operators, the Group achieved breakthrough sales in many regions, including Beijing, Shanghai, Sichuan, Tianjin, Hubei, Jiangsu and Zhejiang. The Group also enhanced its product mix and widened its sales network by cooperating with distributors, such as Suning Appliance and Zhongyu Telecom, and strengthening the position of the ALCATEL ONE TOUCH Flagship Store in the handset category of TaoBao Mall and 360Buy during the period under review. To accelerate the penetration of the ALCATEL ONE TOUCH brand in China’s e-commerce market, the Group launched its first experience shop in China offering users a range of online and offline interactive experiences in June 2011.

A total of 57 new models were launched during the period under review, including a number of Android and 3G products, such as the ONE TOUCH 990, ONE TOUCH 908 and ONE TOUCH 906. These have received positive market feedback and have been selected by global major telecommunication operators, including Orange, Vodafone, T-Mobile, Telefonica and America Movil. The Group has repeatedly won recognition from the industry with the reception of numerous prestigious industry awards, including the Reddot Design Award: Product Design 2011 for the ONE TOUCH 818 and ONE TOUCH 355 PLAY, the highest honor for design and international recognition, reflecting the Group’s excellence in creativity and design quality. In February and May 2011, Ningbo and Chengdu R&D Centers were established respectively to enhance in-house R&D capabilities and accelerate high-end smartphones development.

In April 2011, the Group entered into an alliance with China Unicom to launch WCDMA-mode 3G smartphone, TCL A906, to further springboard the Group’s strategic development. The Group also launched the ONE TOUCH 803, a key product that is popular among most key overseas operators; the ONE TOUCH 306, a ULC camera phone that is popular in emerging markets; and the TCL i808, which offers incomparable internet experiences in terms of incorporating basketball elements and is the official phone of the China National Basketball Team.

Mr. Li Dongsheng, Chairman of TCL Communication, said, “In the first half of 2011, we were able to sustain our growth momentum from 2010, achieving impressive progress in terms of product diversification, global market expansion and brand building.  A new production plant, which will increase the Group’s annual production capacity up to 130 million units, will also be in place to ensure that the Group is well-equipped for sustainable future growth. While continuing to expand in new and high-potential overseas markets, we will further our expansion in China by strengthening the market reach and brand profile of the ALCATEL ONE TOUCH brand in first-tier cities.”

Mr. Li Dongsheng added, “Riding on our successful geographical expansion, combined with the successes of the Group’s “Step-up” product strategy, brand building efforts and ODM development, we are well on track to meet our sales volume target for the current fiscal year and are confident that we will be able to deliver ample returns to our shareholders and investors in future.”

Sales volume breakdown by market

Handsets and Other Products Unit Sales for the Six Months Ended 30 June
(‘000 units)	2011	2010	Change (%)
Overseas	17,758	12,899	+38%
The PRC	1,693	1,329	+27%
Total	19,451	14,228	+37%