TCL Communication Announces 2014 Annual Results

TAIPEI, March 2, 2015 /PRNewswire/ --

• Net Profit for the Year Surged 251% to HK$1,108 Million
• Sales Volume of Smartphones and Other Smart Devices Increased by 136% Year-on-year
• Target to Achieve a Year-on-year Revenue Growth of 30% in 2015

Financial Highlights:

Geographical Breakdown of Revenue:

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 annual results of the Group for the year ended 31 December 2014.

Despite fierce competition in the consumer market in the mobile communications sector, the Group delivered a set of promising results in 2014. Total sales volume of handsets and other products reached 73.5 million units, representing a year-on-year increase of 33%, with 65.9 million units sold in overseas markets and 7.6 million units sold in China. Sales volume of smartphones and other smart devices increased by 136% year-on-year to 41.5 million units, and accounted for 56% of the Group's total shipments. As a result, the overall average selling price ("ASP") of the Group's products increased from US$45.0 in 2013 to US$53.5 in 2014, thereby boosting its overall revenue to HK$30.7 billion, up by 59% year-on-year.

The Group's overall gross profit margin remained at a healthy level of 19.3%, up from 19.0% from 2013. Thanks to swift replacement of feature phones by entry-level smartphones, the Americas remained a major growing market, reporting a significant 82% increase in revenue, whilst EMEA, APAC and China recorded revenue increases of 25%, 49% and 105% respectively. Hence, the Group achieved an encouraging net profit of HK$1,108 million in 2014. Basic earnings per share increased to 91.58 HK cents from 27.50 HK cents from the previous year.

On the other hand, the Group's expenses ratio to sales, consisting of selling and marketing expenses, R&D expenses and administrative expenses, significantly improved to 16.8% from 18.7% in 2013 and further enhanced the profitability of the Group. The Board of Directors of the Company has recommended payment of a final dividend of 26.0 HK cents per ordinary share. After taking into account of interim dividend of 12.8 HK cents, it represents a payout ratio of 42% of the profit attributable to owners of the parent for the year.

Dr. Guo Aiping, the Chief Executive Officer of TCL Communication, said, "In 2014, the Group continued to adhere to and speed up its 'Step-up' and 'Double +' strategies by implementing various R&D investments and strategic partnerships. Innovative and advanced new products and services were launched and well-received by the market. These helped TCL Communication to sustain its market shares as well as further develop in new markets."

Americas

During the year under review, sales volume of handsets and other products to the Americas increased by 41% year-on-year to 36.9 million units, while revenue rose by 82% year-on-year to HK$15.9 billion which accounted for 52% of the Group's total revenue. Sales volume of smartphones and other smart devices increased two-fold year-on-year to 20.1 million units for 2014, accounting for 54% of the total shipment to the region.

Thanks to the right pricing strategy, an extensive product range and good relationships with operators, the Group delivered outstanding performance in all markets within the region. During the year, the Group expanded its market presence in more countries with the adoption of 3G and 4G entry-level smartphones which increased market shares. Moreover, the Group has successfully launched tablets in major markets including United States and LATAM via telecom operators and major retailers. With new products ramp up gradually, the momentum of growth will be extended to 2015.

According to Gartner and company data, ALCATEL ONETOUCH ranked No.4 (total phones) and No.5 (smartphones) in North America and ranked No.1 (total phones) and No.2 (smartphones) in LATAM (excluding Brazil) in the fourth quarter of 2014.

EMEA

Sales volume of handsets and other products to the EMEA region for the year under review totaled 24.6 million units, up 20% year-on-year, with revenue increasing by 25% to HK$9.7 billion, accounting for 32% of the Group's total revenue. Smartphone sales volume reached 13.4 million units with a 90% year-on-year growth, accounting for 55% of the total shipment to EMEA.

The demand for smartphones in the region remained strong and is expected to grow further in 2015. Along with the better 4G networks being constructed in the region, mobile phone users gradually upgraded their phones to mid to high end smartphones. Moveover, tablets were well received with demand growth primarily from the operator channels. The tablet market in the region is expected to continue the growth momentum in 2015.

The Group continued to expand its presence into new markets in 2014, particularly in the Middle East and Africa. Sales volume in the Middle East and Africa recorded significant growth of 126% year-on-year mainly due to deepening market penetration and the increase in number of first-time users. According to Gartner and company data, ALCATEL ONETOUCH ranked No.4 (total phones) in EMEA and ranked No.4 (total phones and smartphones) in Middle East and Africa market in terms of sales volumn in the fourth quarter of 2014. Besides, according to IDC and company data, the Group ranked No.3 (total phones) and No.2 (smartphones) in Egypt, No.3 (total phones) and No.4 (smartphones) in South Africa during the same period.

APAC

In 2014, sales volume of handsets and other products across the APAC region increased by 18% year-on-year to 4.4 million while revenue increased by 49% year-on-year to HK$2.2 billion, accounting for 7% of the Group's total revenue. Sales volume of smartphones and other smart devices grew by 75% year-on-year to 3.1 million units.

The Group achieved satisfactory results despite fierce price competition across the region. During the year, the demand for feature phones across the region was gradually replaced by demand for smartphones. It is expected entry-level smartphones will be the key growth driver in 2015, particularly in the new markets such as Bangladesh and Thailand.

In addition, the Group worked hard on market expansion and spared no effort in developing online sales channels in search of new growth drivers. Online sales was implemented in India, Indonesia, Malaysia and Vietnam since late 2014 and made significant contributions to the Group's sales.

China

Sales volume of handsets and other products in China increased by 58% to 7.6 million units and revenue rose by 105% to HK$2.9 billion, accounting for 9% of the Group's total revenue for 2014. Sales volume of smartphones and other smart devices grew by 197% year-on-year to 4.9 million units.

During the year under review, the Group maintained close and stable relationships with major operators to capitalize on the development of 4G networks in the country. The Group became one of China Mobile's first-tier strategic cooperation partners at the China Mobile Global Partner Conference 2014, and successfully tapped into markets in the provinces of Sichuan, Zhejiang, Jiangsu, Hunan, Guizhou and Heilongjiang. The Group's cooperation with other operators such as China Telecom also achieved important progress in the fourth quarter of 2014, deepening the penetration into Jiangsu and Zhejiang.

To grasp opportunities from the rapidly emerging online sales channels, in the fourth quarter of 2014 the Group launched its TCL Momoda exclusive online mall "mmd.cn" that offers a more convenient shopping channel and provides one-stop services for Momoda users. In 2015, more Momoda products will be launched through both traditional and online sales channels.

Outlook

As growth in emerging market slows down, global economic growth remains modest. The political instability in some emerging markets poses some risks to monetary and financial stability. The Group has been closely monitoring the political development in its existing and potential markets. Credit control, export credit insurance and hedging policies have been consistently in place to tackle market fluctuations.

Despite uncertainties over global economy, accelerating construction of network infrastructure across the world continues to drive growth of smart devices. Emergence of more competitors in the market intensified the competition and inflicted pressure on prices and margins of handset products. However, the Group has been cautious about the market environment. The Group will continue its differentiated propositions in terms of focusing on its strengths such as offering high cost-performance value products with quality and tailor made customer services in order to capture more market share. While gaining market share is the Group's priority objective, the Group continues to exercise stringent cost and expenses control to optimise its operational efficiency. Comparatively lean and mean organisation structure helps the Group adapt to the market changes in a timely manner.

Dr. Guo Aiping said "The Group is still confident about it growth momentum for 2015. By leveraging its strengths in product development, supply chain management, production, distribution and marketing, with establishing mobile internet application and service, the Group is confidence to deliver consistent results and sustainable growth, increase the market shares in China as well as overseas markets and to achieve a 30% year-on-year revenue growth in 2015."

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About TCL Communication

TCL Communication Technology Holdings Limited ("TCL Communication" or the "Company"; HKSE stock code: 02618) together with its subsidiaries and its affiliates (collectively the "Group") designs, manufactures and markets an expanding portfolio of mobile and internet products worldwide under three key brands – ALCATEL ONETOUCH, TCL and PALM. The Group's portfolio of products is currently sold in China and over 170 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific. Headquartered in Shenzhen, China, TCL Communication operates its highly efficient manufacturing plant and R&D centers in various provinces of the PRC. It employs over 16,000 people in mainland China, Hong Kong and overseas.

TCL Communication is one of the few companies in Hong Kong or mainland China who owns or licenses 2G, 2.5G, 2.75G, 3G and 4G patented technologies. It is also able to independently develop products and solutions for the GSM, GPRS, EDGE, CDMA, WCDMA, TDSCDMA and LTE. For more information, please visit its website at http://tclcom.tcl.com