TCL Communication achieved significant breakthroughs in 2010 annual results

Net Profit and Revenue Jump 30-fold and 100% YOY respectively.

FINANCIAL HIGHLIGHTS

 

Audited results for the year ended 31 December
(HK$ Million)	2010	2009	Change
Revenue	8,701	4,361	+100%
Gross profit	1,948	949	+105%
Gross profit margin (%)	22.4%	21.8%	+0.6%
Profit attributable to owners of the parent	702	23	+2,952%
Basic EPS (HK cents) per share (HK cents)	64.69	2.51	+2,477%
Proposed final dividend	16.80	3.50	+380%

 

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 audited results of the Group for the year ended 31 December 2010.

During the year under review, the Group achieved record sales and sustained strong growth momentum. A total of 36.2 million units of handsets and accessories were sold, representing a 125% increase from the previous year. Sales volume in the fourth quarter of 2010 also increased sharply, jumping 83% year-on-year to 12.5 million units, attributable to geographical expansion into new and high potential markets globally, "Step-up" product strategy, brand building and Original Design Manufacturer ("ODM") business.

The Group's turnover grew sharply to HK$8,701 million, 100% stronger than the previous year. Gross profit increased to HK$1,948 million from HK$949 million while gross profit margin improved to 22.4% from 21.8% in 2009. The Group achieved a staggering 30-fold increase in net profit to HK$702 million year-on-year.

Due to the development of ODM business, the Group's overall ASP for the year of 2010 slid to US$31 from US$35 last year, with own-brand product average selling price remained strong at US$34 in 2010. Gross profit margin improved to 22.4% from 21.8% in 2009, thanks to better cost control and proportionally more mid-to high-end products that yield higher margins. Attributable to the enhanced operational efficiency, expenses as a percentage of turnover declined significantly to 16.3% in 2010 from 22.5% a year ago.

Basic earnings per share increased substantially to 64.69 HK cents from 2.51 HK cents last year. In view of this, the Board of Directors has recommended the payment of a final dividend of 16.8 HK cents per ordinary share subject to shareholders' approval.

Commenting on the performance, Dr. Guo Aiping, the Chief Executive Officer of TCL Communication, said, "2010 was a year of growth for TCL Communications. We have successfully grasped opportunities from the global economic recovery and achieved significant breakthroughs in both sales and operational performance. As named by Strategy Analytics, we are already one of the world's fastest growing handset suppliers by shipment volume. Besides, iSuppli ranked TCL-Alcatel one of the top ten global brands in terms of handset and accessories shipments in 2010."

"The Group delivered significantly improved performance across the globe. As part of its globalization strategy, we further extended its reach to overseas markets, particularly in the emerging markets such as Africa and Latin America, consolidated our strategic alliances in existing markets with major telecommunications operators on a global scale and have established closer partnerships with distributors in the open market. We have also enhanced competitiveness of our products achieved by stronger R&D and product design capabilities."

Sales in the Americas showed strong growth momentum in 2010. Shipments to the Americas in the year under review surged an impressive 194% year-on-year to 18.8 million units. The ALCATEL ONE TOUCH brand is currently the fourth biggest brand in Latin America by market share. In addition, shipments to the Europe, Middle East and Africa market ("EMEA") totaled 13.4 million units, a 109% increase on a year-on-year basis, exceeding the sales target in 2010. In Russia, the Group is currently ranked No.4 in terms of handset shipments. In the Asia Pacific region, sales volume soared 217% year-on-year to 1.9 million units through the successful launch of various products which provide the best user-experience at an affordable price. As a result of a decline in the ODM business, total sales volume in the PRC market decreased by 23% year-on-year to 2.1 million units. Nevertheless, the results in the PRC segment rebounded in profitability through the successful establishment of a nationwide network of over 1,300 sales offices and partnering with major online media such as Sina, Sohu and Baidu to develop features and specifically tailored content. The Group also became the first mobile phone manufacturer to be endorsed by China UnionPay () as a secured payment platform vender.

A total of 90 new models were launched during the year, most of which were well received by the market. The popular models launched during the year include OT-208, which is hailed as one of the world's most affordable mobile phones; OT-808, a powder compact model catering to the female market; and OT-880, a Touch & QWERTY keypad crossover product. Moreover, the launch of the first Android 3G smartphone, OT-980, and 7-inch tablet marks a significant milestone in the Group's foray into the 3G smartphone and tablet market. The Group has also won recognition from customers and the industry for a handful of its products, including the iF Industry Design award for the OT-806, the China Red Star Design Award for the OT-808, and the Kapok Prize for both models.

In February 2011, the Group entered into a strategic alliance with Sagem Mobiles in France and established the TCL Ningbo R&D Centre for the development of high-end smartphones as part of the Group's business development strategy to enter the high-end smartphone market.

In order to accommodate future business growth, the Group has also expanded its production capacity with the establishment of a new production plant. In December 2010, the Board of Directors approved the proposed issue of Taiwan Depositary Receipts ("TDR"). Proceeds from the issue of TDR will be mainly used for the construction of a new production plant and the purchase and installation of machinery. The site of the new production plant with an area over 300,000 square meters will further increase annual production capacity up to 130 million units for future sustainable development. The TDR issue will attract investors from Taiwan and overseas, further increasing stock liquidity and diversifying the shareholder base. It will also solidify the Group's reputation and public recognition, and promote the Group's corporate image internationally.

Looking ahead, Mr. Li Dongsheng, Chairman of TCL Communication, said, "Our remarkable business and financial performance in 2010 is a strong testament to the successful execution of our strategies. The future success of TCL Communication relies on our continued investment in brand building and the enhancement of our R&D capability. Building on a strong track record of manufacturing entry-level handsets, we will continue to strengthen our efforts on the design and innovation of mid- to high-end products with our proven "Step-up" product strategy. Our plan is to launch over 100 new models in 2011, including Android smartphones and tablets. While continuing to expand in new and high potential markets overseas, we will further our expansion in China, where the burgeoning 3G market and progressive integration of the telecommunications, cable and the internet networks will continue to create opportunities for innovative convergence products."

Mr. Li Dongsheng said, "More than ever we believe we are in a great position to forge ahead with our goal to become a leading player in the global handset market. Our 2010 results demonstrate strong proof that we have the right strategy, best-in-class products and the economy of scale to capture future growth opportunities."

 

Sales volume breakdown by market

 

Handsets and Accessories Unit Sales for the year ended 31 December
('000 units)	2010	2009	Change
Overseas	34,083	13,351	+155%
The PRC	2,140	2,772	-23%
Total	36,223	16,123	+125%