Tonly Electronics(1249) Recorded a Net Profit of HK$ 36 Million for the First Quarter of 2014

Audio Product Business Continues to Grow Rapidly Entered the OTT business

HONG KONG, April 23, 2014 /PRNewswire/ --

Results Highlights:

  • For the three months ended 31 March 2014, the Group recorded a turnover of approximately HK$1,056 million, up by 15.3% year-on-year. Gross profit amounted to approximately HK$113 million, up by 2.7% year-on-year. Gross profit margin decreased to 10.7% from 12.0% in the corresponding period of 2013.
  • Operating profit reached approximately HK$44 million, up by 4.8% year-on-year. Profit attributable to owners of the parent reached approximately HK$29 million, up by 3.6% year-on-year.
  • The overall sales revenue of video disc players reached HK$450 million, representing an increase of 15.3% year-on-year. The sales revenue of audio products reached HK$328 million, representing an increase of 47.0% year-on-year. The sales revenue of media boxes reached HK$201 million, representing an increase of 3,817.5% year-on-year. The sales revenue from other businesses (mainly ABS-s products) reached HK$77 million, representing a decrease of 74.2% year-on-year.
  • The Group entered the OTT (over-the-top) business in the first quarter of 2014 and expected the media box business will become one of its important business growth drivers in the future.

Tonly Electronics Holdings Limited ("Tonly Electronics" or "the Group"; SEHK stock code: 01249) today announced its unaudited quarterly results for the three months ended 31 March 2014.

The Group continues to implement the strategy of industrial upgrade and transformation, expand its product portfolio, and has entered the OTT (over-the-top) business. For the three months ended 31 March 2014, turnover was approximately HK$1,056 million, up by 15.3% year-on-year. Gross profit grew by 2.7% year-on-year to HK$113 million, while gross profit margin decreased to 10.7% from 12.0% in the corresponding period of 2013. The operational efficiency issue in the third quarter of last year has been recovering. It is expected that the operational efficiency in the second half of the year would be resumed to satisfactory level. Operating profit rose by 4.8% year-on-year to approximately HK$44 million. Net profit grew by 2.9% year-on-year to approximately HK$36 million. Net profit margin was 3.4%.

During the year under review, the Group's video disc player sales rose by 15.3% year-on-year to HK$450 million, accounting for 42.6% of the Group's turnover. The increase in sales was because the Group accommodated to the important clients' marketing and product strategies, and gave its advantages in technology, production supply chain and customer relations full play. As a result, it was able to expand the market share of its products. The Group will continue to raise the efficiency of its research and development and to improve its supply chain management with an aim of increasing the gross profit margin and competitiveness of its video disc players.

To capitalize on the market trend, the Group will maintain the competitiveness of its audio product business by stepping up research in the audio and electroacoustic fields and development of new types of audio products to meet the demand. Audio product sales reached HK$328 million, up by 47.0% year-on-year, accounting for 31.1% of the Group's turnover. In particular, sales of new types of audio products rose by 193.9% year-on-year to HK$157 million. The Group expects that the proportion of the audio product business segment in its turnover will continue to rise.

To capitalize on the development of Internet technologies, the Group teamed up with domestic and foreign internet and telecommunications companies to jointly develop its media box business with an aim of enriching and expanding its product portfolio. Sales of media box business surged by 3,817.5% year-on-year to HK$201 million for the first three months of 2014, which accounted for 19.0% of the Group's turnover, for the Group has just entered the OTT business in the first quarter of 2014. The Group will increase the competitiveness of its products by leveraging its advantages in research and development, enhancing its software development capabilities and improving product design. Meanwhile, the Group will expand the customer base and raise the efficiency of its production and operations. The Group expects that the media box business will become one of its important income sources in 2014.

Other businesses generated a revenue of HK$77 million, down by 74.2% year-on-year, accounting for 7.3% of the Group's turnover. To comply with the regulatory requirements of the relevant authorities, the orders placed for the Group's ABS-s in a tender that won in 2013 will be mainly fulfilled in the second and third quarters of 2014. As a result, its ABS-s sales for the first quarter of 2014 decreased when compared with that for the same period of 2013. Sales of ABS-s decreased 86.9% year-on-year to HK$33 million.

The Group began constructing a new factory in 2011 in Huizhou in order to meet its needs in future business development and to further improve its production efficiency. The plant, which has a designed annual production capacity of 17 million units in a single shift, commenced production in July 2013. Its designed annual production capacity was increased to over 20 million units with partial introduction of double shifts. In the first quarter of 2014, the Group has adopted automated production in its plant and commenced relevant trials to tackle the problems of labour shortage and rising labour costs in the PRC. The Group optimized the plant's management relevant to the equipment system usage and maintenance, to achieve a higher efficiency and effectiveness of its fixed assets and capital expenditure. The production capacity of the base in Huizhou has reached its target. The Group is searching for the land to set up a new plant in view of its business development. In terms of research and development, R&D expenses were approximately 3.6% of the Group's turnover during the period under review, which was higher than the industry average.

Mr. Yu Guang Hui, Chief Executive Officer of Tonly Electronics, said, "In response to the economic environment and changing industrial trends, the Group will transform and upgrade its business enterprisingly. It will continue to enhance its capabilities of designing products and developing core technologies. The Group will also create business growth drivers by expanding its product portfolio, maintaining solid relationships with its clients, expanding the scope of cooperations with clients and expanding its clientele continuously. The Group hopes to expand its revenue scale rapidly in the next few years through specialized management, organic business growth, restructuring and M&A opportunities with an aim to maximizing value for the customers and shareholders."

The sales of the Group by products are set forth as follows:

   For the first
three months of 2014

For the first
three months of 2013
   (HK$'000)  (HK$'000)    
Video disc players (1)  449,592  389,841 +15.3% 
Audio products         
-Traditional audio products(2) 171,419  170,009 +0.8% 
-New audio products(3) 156,951  53,409 +193.9% 
Subtotal  328,370  223,418 +47.0% 
Media boxes (4)  201,123  5,134 +3,817.5% 
Other businesses         
-ABS-s products 32,540  247,908 -86.9% 
-Components 21,998  28,348 -22.4% 
-Research and development 22,163  21,531 +2.9% 
Subtotal  76,701  297,787 -74.2% 
Total  1,055,786  916,180 +15.2% 

(1) Mainly DVD players and BD players
(2) Mainly HTS and Micro & Mini speakers
(3) Mainly wireless speakers, soundbars and audio docks
(4) Mainly OTT (provision of over-the-top Internet services and contents)

Source: Tonly Electronics Holdings Limited
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