Tonly Electronics Announces Consolidated Results for the Year Ended 31 December 2013

Tonly Electronics' Profit Attributable to Owners of the Parent Increases by 12.6% Year-on-year to HK$107 Million for 2013

Transformation and Entrepreneurship Audio product business continues to drive Tonly Electronics' business growth

HONG KONG, Feb. 21, 2014 /PRNewswire/ --

Results Highlights:

• For the year ended 31 December 2013, the Group recorded a turnover of approximately HK$4,554 million, up by 24.0% year-on-year. Gross profit grew by 13.6% to HK$492 million. Gross profit margin stood at a healthy and stable level of 10.8%.
• Operating profit rose by 41.2% year-on-year to approximately HK$161 million. Net profit grew by 40.9% to approximately HK$134 million. Net profit margin was 2.9%. Basic earnings per share were HK80.02 cents for 2013. The Board of Directors proposed a final dividend of HK23.8 cents per share.
• The overall sales revenue of video products reached HK$2,140 million, representing a decrease of 10.6% year-on-year. The sales revenue of audio products reached HK$1,703 million, representing an increase of 95.2% year-on-year. The sales revenue of other products (mainly advanced broadcasting system-satellite receivers ("ABS-s") products) reached HK$711 million, representing an increase of 75.0% year-on-year.
• On 15 August 2013, shares of the Company were successfully listed on the Main Board of the Stock Exchange following a spin-off of the Company from TCL Multimedia, its then holding company.

Tonly Electronics Holdings Limited ("Tonly Electronics" or "the Group"; SEHK stock code: 01249) today announced its consolidated results for the year ended 31 December 2013.

For the year ended 31 December 2013, the Group recorded a turnover of approximately HK$4,554 million, up by 24.0% year-on-year. To adapt to the changes in the market, the Group was proactively to implement a transformation strategy by shifting its focus from traditional video product business to audio product business. Investment in new products in the third quarter of 2013 was high with higher labour cost paid and additional floor space needed, which takes time to adjust. Meanwhile, the relocation of production equipment to the new production plant during the peak production season needs certain time for adjustment, affecting its productivity. Gross profit grew by 13.6% to HK$492 million while gross profit margin dropped to 10.8% from 11.8%.

Operating profit rose by 41.2% year-on-year to approximately HK$161 million. Net profit grew by 40.9% to approximately HK$134 million. Net profit margin was 2.9%. Basic earnings per share were HK$80.02 cents for 2013. The Board of Directors proposed a final dividend of HK$23.8 cents per share.

During the year under review, revenue from the Group's video product business declined by 10.6% to HK$2,140 million; revenue from its audio product business grew by 95.2% to HK$1,703 million; revenue from its business of other products increased by 75.0% to HK$711 million. The revenues from the three business segments of video products, audio products and other products accounted for 47.0%, 37.4% and 15.6% respectively of the Group's turnover.

According to a research report by Techno System Research Co., Ltd, the Group was the largest video product manufacturer and the fourth largest manufacturer of home theatre system ("HTS") on the global basis in terms of production volume in 2013.

For video products business, the Group's video disc player business has long lost its sharpness because of the decreasing average selling price of DVD players. Nevertheless, to cope with the changes, the Group gave its advantages in technology, production and supply chain full play. The Group will continue to enhance its software development capability and raise the efficiency of its R&D, and gradually shift the business segment's focus to the media boxes.

For audio products business, the Group capitalized on the trend by actively developing new types of audio products. In 2013, it developed 48 product series which comprised 248 products in conjunction with new types of audio products, thus achieving satisfactory audio product sales during the year. In particular, sales of conventional audio products such as HTS and Micro & Mini speakers continued to grow rapidly. Meanwhile, sales of new types of audio products reached a higher level than ever, which included wireless speakers, soundbars and dockings. With the prospective development of wireless technologies, smart TVs and smart mobile telecommunication, the Group expected the proportion of audio product segment in its turnover to rise further.

For other business, the Group won tenders for the project of "Bringing Villages Under Satellite Coverage" and 6 projects of "Bringing Households Under Satellite Coverage", thus becoming a leading ABS-s supplier in the country. Sales of the Group's ABS-s rose by 40.9% to HK$516.5 million. The Group believes that ABS-s has huge market potential and will become one of its growth drivers in the next several years.

In order to satisfy its future business development, the Group began constructing a new production plant in 2011 in Huizhou, Guangdong Province. 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 can be increased to 20 million units with partial introduction of double shifts.

For its R&D, the Group will enhance its technology and capabilities of designing intelligent ancillary products and strive to develop drivers and speakers of higher standard and strengthen its research in electro-acoustic technologies in focus of clients' requirements by enhancing technological pre-research. During the year, R&D expenses were approximately 3.5% of the Group's turnover, which was higher than industry average in order to enhance its capacity for product development and its overall competitiveness.

Looking ahead, the Group will enhance its technology and capabilities of designing intelligent ancillary products. Meanwhile, the Group continues to establish its globalized operation capability, industrial capability and technical capability upon the solid customer base, in a view of broadening its client base and enriching its product portfolio.

Mr. Yu Guang Hui , Chief Executive Officer of Tonly Electronics, said, "Centering on the principle of Transformation and Entrepreneurship, we will continue to transform and upgrade our businesses with tireless effort, and capitalize on the popularization of wireless connection technology, Internet and mobile telecommunication to achieve further business growth. We will also use our advantages in R&D, production, quality control and supply chain management to launch new products that can meet what the markets' wants and needs and thus gain more market shares in the industry."

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

(1) Mainly DVD players and BD players
(2) Mainly HTS and Micro & Mini
(3) Mainly wireless speakers, soundbars and dockings