TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) 2012 Interim Results Presentation Hong Kong 9 August 2012 1
Disclaimer The information contained herein should not be utilized for any legal purposes in regards to any investor's investment decision or results. In particular, this document does not constitute any recommendation or invitation for subscribing for or sale and purchase of any securities of TCL Communication Technology Holdings Limited (the "Company"). The Company hereby expressly disclaims any liability for any loss or damage resulting from or in connection with any reliance by any investor on the information contained herein. A number of forward-looking statements may be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of the Company and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, the Company s actual results could differ materially from these statements. 2
Agenda Business Review & Outlook Financial Highlights Q&A Session Appendix: Company Overview 3
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1H 2012 Review Results for the Period Revenue: HK$ 5.1 billion, up 11% YoY Net Profit: HK$ 100 million, down 74% YoY Sales Volume: 18.6 million units, down 4% YoY Basic EPS decreased to 9.37 HK cents from 35.49 HK cents YoY Sales volume of smartphone and other smart devices increased MoM; 1H 2012 shipment volume of smartphone and other smart devices skyrocketed 12 times YoY to 2.2 million units Proportion of smartphone and other smart devices increased from 0.8% for 1H 2011 to 11.8% for 1H 2012, leading overall ASP increased from US$ 30.3 for 1H 2011 to US$ 35.1 for 1H 2012 Technology successfully stepped up, much more competitive products were launched, including the dual-core cloud device, TCL S900 Right Android Smartphone Strategy Right China Smartphone Strategy Though facing keen competition, China sales volume increased by 52% YoY, and China sales volume of smartphone and other smart devices in 1H 2012 accounted for 40% of the total sales volume of smartphone and other smart devices in 1H 2012 Brand image and public awareness were greatly enhanced after several star products were launched, including Tencent QQ phone TCL A966, Hello Kitty phone ONE TOUCH 979 and Qihu 360 phone, ONE TOUCH 986, etc. Further expansion and penetration in sales channel, points of sales increased to 6,000 from 4,200 as at 31 March 2012 5
Quarterly Revenue of Handsets and Other Products Sustainable Revenue Growth 6
Geographical Breakdown Geographical Breakdown of Feature Phone/ Other Products for 1H 2012 (based on sales volume) Geographical Breakdown of Smartphone and Other Smart Devices for 1H 2012 (based on sales volume) AMERICAS 50% CHINA 41% AMERICAS 23% CHINA 12% APAC 6% EMEA 32% APAC 5% EMEA 31% 7
Upward Trend in Volume and Proportion of Smartphone and Other Smart Devices Quarterly Shipment of Smartphone and Other Smart Devices 000 units Quarterly Smartphone and other Smart Devices / Overall Shipment 8
Business Review Europe, Middle East and Africa ( EMEA ) Continuously affected by the European debt crisis and economy recession, shipment declined by 18% to 5.9 million units in 1H 2012; However, benefitted from optimized product mix and the increased ASP, revenue increased by 5% Smartphone shipment ramp-up was on track; several models like ONE TOUCH 995, ONE TOUCH 918 and VF860 received great responses from the market Shipment to Russia and France remained strong despite weaker handset demand in EMEA +5% HKD Million Americas Amid in product transition period, demand for entry-level feature phone slowed down, shipment in 1H 2012 totaled 8.8 million units, declined by 7% while revenue decreased by 5% -5% HKD Million Still in a strong position in Latin America. In Brazil, Alcatel ranked No.5 by IDC in Q1 2012, with approximately 6% market share; In Mexico and other Latin American countries, the average position for Alcatel kept at No. 4; In Columbia, Alcatel ranked No. 1 In USA, the Company further cooperated with operators, especially 1 st -tier operators in 1H 2012, and a number of smartphone models were selected and commenced shipment 9
Asia Pacific Business Review +22% HKD Million Shipment in 1H 2012 was 1.1 million units, remained at the same level as that of 1H 2011, while revenue grew by 22% YoY 3G products became the growth driver for the region Operator market in India and the Philippines have been newly explored during the period, such as Digitel (the Philippines) and IDEA (India) China Riding on the strong handset demand in China, shipment in 1H 2012 increased by 65% YoY to 2.8 million units, while 1H 2012 revenue increased by 136% YoY +136% HKD Million In-depth cooperation with Suning. TCL A996, TCL A968 and TCL S900 were the prime promotional items in all Suning stores nationwide. TCL handset became the top seller amongst all domestic-brand handsets in Suning. Brand image and public awareness were greatly enhanced after several star products were launched, including Tencent QQ phone TCL A966, Hello Kitty phone ONE TOUCH 979 and Qihu 360 phone ONE TOUCH 986, etc. 10
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3G Android Products Selected by Global Mainstream Operators and Distributors The China Americas EMEA APAC A series of 3G Android models have been selected by global mainstream operators and distributors in Americas, EMEA, APAC and China. More new models will be launched in the coming quarters. 12
ONE TOUCH 986 / TCL S900 New Products 4.5 IPS, HD Display A9 dual core 1.5GHz CPU Android 4.0, bringing brand-new feeling Cloud-service & Cloud-backup ICS4.0 21Mbps Dual Core 1080P Capacitive M sensor GPS & A-GPS WiFi Dual Camera High performance entertainment: HD video, SRS, HDMI, DLNA Voice unlock Improved Android experience with ICS P2i (Nano) liquid repellent coating ICS 4.0 3G+ 1Ghz Dual Core Wi-Fi 4.3 Capacitive 8.0 mpxl 32GB Dual SIM ONE TOUCH 997D/ TCL S800 13
ONE TOUCH 992/TCL S600 New Products WCDMA & GSM/GPRS/EDGE Dual Mode 4.0 capacitive display 5.0 megapixel camera Cloud-service & Cloud-backup ICS 4.0 7.2 Mbps 1Ghz Wi-Fi 4.0 Capacitive 5.0 mpxl Dual SIM Powerful CPU High speed 3G+ & Wi-Fi Android 2.3 Pre-embedded apps 4.0 Display Android 2.3 32GB 3G+ E-compass WLAN Touch 5 Megapixel ONE TOUCH 960C 14
Hello Kitty ONE TOUCH 918 New Products Hello Kitty Life styled appearance and design Adorable Hello Kitty customized software interface 3.2 WVGA IPS HD screen 3.2 megapixel autofocus camera 15 15
2012 Le Tour De France Brand Building in Overseas Market Billboard in Vietnam Philippine Bus Egypt Supermarket 16
Launch of TCL S900 Brand Building in China Market Airlines Magazines Shenzhen Bus Sponsor Popular TV Show 17
Outlook Revise 2012 Revenue Growth Target In view of the challenging economic and business environment and industry competition, we revised the 2012 full year revenue growth target as 15% increase YoY Smartphone Growth More new models of smartphones to be launched in 2H 2012 Enhancing the style, functions, quality and competitiveness of the smartphones Margin pressure highlighted before will continue, and is expected to be improved when economies of scale (1 million units/month) can be reached, which will show a good chance for turnaround Operation Improvement Continue to establish more points of sales in China Expand our footprints to overseas market by cooperating with more major operators overseas by launching price competitive and good quality smartphones in coming quarters Make continuous effort on improving R&D efficiency, cost structure and speed up new product launch 18
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Financial Highlights Revenue (HK$ Million) Revenue & Net Profit (HK$ Million) Sales Volume ( 000 units) 1H 2012 YoY 1H 2011 18,614-4% 19,451 Total ASP (US$) 35.1 +16% 30.3 Revenue 5,093 +11% 4,600 GP% 19.3% -2.7% 22.0% Net Profit 100-74% 391 Net Profit% 2.0% -6.5% 8.5% 20
Smartphone & Other Smart Devices % and ASP Growth Foresee Upward ASP Trend Continue Upon Better Sales Mix ASP (USD) Proportion of Smartphone and Other Smart Devices 21
Gross Margin Gross Margin Trend 3G Android Wi-Fi Touch & Qwerty EDGE Social Networking Entry Multimedia Touch GPRS Messaging Side Slider ULC Full Keyboard SMS Phone Margin pressure highlighted before will continue, and is expected to be improved when economies of scale (1 million units/month) can be reached, which will show a good chance for turnaround 22
Statement of Financial Position Financial Position Highlights (HK$ Million) 30 June 2012 31 December 2011 Change(%) Non-current assets 2,031 1,773 +15% Current assets -Inventories 1,323 981 +35% -Trade & factored receivables 2,189 2,895-24% -Other current assets 1,376 1,099 +25% -Pledged deposits 4,883 6,092-20% -Cash and cash equivalents 729 1,187-39% Total current assets 10,500 12,254-14% Current liabilities -Interest bearing bank and other borrowings (5,736) (7,222) -21% -Other current liabilities (1,855) (2,141) -13% -Trade and notes payables (2,212) (1,952) +13% Total current liabilities (9,803) (11,315) -13% Net current assets 697 939-26% Total assets less current liabilities 2,728 2,712 +1% Other non-current liabilities (173) (39) +344% Net assets 2,555 2,673-4% 23
Key Financial Ratios 30 June 2012 31 December 2011 Gearing Ratio * 18% 22% Current Ratio ** 1.12 1.12 Trade Receivables Turnover Days *** 68 89 Inventories Turnover Days **** 47 25 NAV per share HK$ 2.3 HK$ 2.4 Basic EPS (1H 2012 / 1H 2011) 9.37 HK cents 35.49 HK cents Interim Dividend per Share (1H 2012/ 1H 2011) 3.0 HK cents 13.8 HK cents Dividend Payout Ratio (1H 2012/ 1H 2011) 32% 39% * Calculated based on the Group s total interest-bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Excluding factored trade receivables **** Only inventories in factory 24
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Company Overview Principal Business Background Research & Development, manufacturing and global sales of mobile phones and accessories of two key brands: - TCL (in China) - ALCATEL ONE TOUCH (in Europe, Middle East, Africa, Americas, Asia-Pacific and China) A member of TCL Corporation (stock code: 000100.SZ) Listed on the Hong Kong Stock Exchange in Sep 2004 (stock code: 02618.HK) Huizhou City Investment Holdings TCL Employee Committee Mr. LI Dongsheng Public Shareholders Directors TCL Corporation Public Shareholders 4% 50% 46% TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) * As at 1 August 2012 27
Global Presence Production Facilities, R&D Centres, Sales Offices Headquartered in Shenzhen, China Global research facilities located in Shanghai, Ningbo, Huizhou, Shenzhen and Chengdu Global factory located in Huizhou, China Global presence across over 120 countries and regions 115 repair centers, over 50 offices, over 11,000 employees around the world California: - Sales Center Mexico City: - Sales Center Paris: - Sales Center Chengdu: - R&D Center Shanghai: - R&D Center Ningbo: - R&D Center Huizhou: - Global factory - R&D Center Shenzhen: - Headquarter - R&D Center 28
One Company Multiple Businesses TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED The China Market ODM Worldwide Customers Worldwide Market A globally-oriented China-based provider of mobile and internet products A multi-cultural workforce over 11,000 employees Two strong brands: ALCATEL ONE TOUCH internationally and TCL in China A growing range of products: mobile phones, convergence mobile devices, tablets and fixed-line phones 29
Strong R&D capability About 3,000 highly skilled and experienced research engineers Ownership of GSM core technological patents obtained through acquisition of ALCATEL mobile phone business One of the few companies who own 2G, 2.5G, 2.75G, 3G patents in the world, excellent tradition of research and development Able to provide solutions to GSM, GPRS, EDGE, CDMA, WCDMA, TD- SCDMA independently Continue efforts in the development of 3G products, OMS-based handsets, data cards and multifunctional phones Focus on innovation as well as the high quality of the products Strong R&D capability 30
Highly Efficient Production Facilities Production capacity of approximately 65 million units annually World-class SMT production lines and supporting facilities Experience of efficient global logistics Strict tests by key telecommunication operators in the world ISO9001 and ISO14001 qualified Testing & manufacturing capability for platform MTK, QUALCOMM, BROADCOM and TI 31
Board of Directors Mr. GUO Aiping CEO and Executive Director Extensive experience in overall management of multinational company, strategic planning and development Graduated from Stanford University with Doctor s degree in Management Science Mr. LI Dongsheng Chairman and Executive Director Founder of the Company Business Leader of the Decade by CCTV in 2009 Over 30 years in various aspects of electronics industry Mr. WANG Jiyang COO and Executive Director Over 20 years experience of research, development and management in electronics industry With PhD major in Electrocircuit & System and MBA degree Mr. BO Lianming Non-executive Director Over 11 years of experience in consumer electronics products industry With Doctor s degree in Business Administration Mr. HUANG Xubin Non-executive Director Rich experience in finance area With Master s degree in Economics and EMBA degree Ms. XU Fang Non-executive Director Vice President and Human Resource Director of TCL Corporation Distinguished professor at Shantou University Prof. Kwok Hoi Sing Independent Non-executive Director Chair Professor Dept. of Electronic & Computer Engineering, HKUST Fellow of the Optical Society of America, IEEE and Society for Information Display Mr. LAU Siu Ki Independent Non-executive Director Fellow member of both HKICPA and ACCA With profound financial and accounting expertise Mr. LOOK Andrew Independent Non-executive Director Over 20 years' experience in equity investment analysis Best Hong Kong Strategist and Best Analyst by Asiamoney Magazine 32
Mr. GUO Aiping, George CEO & Executive Director Extensive experience in overall management of multinational company, strategic planning and development Graduated from Stanford University with a Doctor s degree in Management Science Executive Committee Mr. WANG Jiyang COO & Executive Director Over 20 years experience of research, development and management in electronics industry With PhD major in Electrocircuit & System and MBA degree Mr. LIU Yuk Tung, Thomas CFO & Senior Vice President of Business Strategy About 26 years of experience in areas of audit, international finance and trading business CPA of HKICPA, Charted Accountant of ICAEW and fellow member of ACCA With Bachelor s degree major in Economics, MBA and Master s degree in Accounting Mr. WONG Kwok Chung, Albert Executive Vice President & General Manager of (APAC) 14 years of experience in computers and electronics industry in Hong Kong, Canada and the China With Bachelor s degree in Science and Master s degree in Electrical and Electronics Engineering Mr. Yves MOREL Senior Vice President & General Manager of EMEA 27 years experience of sales and marketing mainly in telecommunication industries Contributed to develop sales area such as Russia, Central Europe, Middle East, Africa and Western Europe Mr. Nicolas ZIBELL Senior Vice President & General Manager of Americas Over 21 years of experience in sales, marketing, product strategy and management in automotive and telecommunications industries in Europe and the Americas Graduated from École Superieure de Commerce de Lyon and ESADE Business School with MBA degree Mr. Lv Xiaobin Senior Vice President & General Manager of Global Manufacturing Center About 18 years of experience in communication terminal manufacturing industry. Graduated from University of Electronic Science and Technology of China with Bachelor degree in Science, and also holds an EMBA Degree from China Europe international Business School 33
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