TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) 2013 Annual Results Presentation Hong Kong, 24 February 2014 2013
AGENDA BUSINESS REVIEW & OUTLOOK FINANCIAL HIGHLIGHTS Q & A 2
BUSINESS REVIEW & OUTLOOK 3
2013 OVERVIEW 2013 ANNUAL RESULTS Sales volume: 55.2 million units, up 30% YoY (including 17.6 million smartphone units, up 169% YoY) Revenue: HK$ 19.4 billion, up 61% YoY Full Year Net Profit: HK$ 316 million Q4 Net Profit: HK$ 302 million (Record high) Basic EPS/(LPS): Increased to 27.50 HK cents from -18.49 HK cents YoY Proposed Final Dividend: 10 HK cents BUSINESS OVERVIEW Ranked the 5th global handset manufacturer and was No. 1 among Chinese handset players in Q4 (Source: Gartner) Delivered breakthrough in smartphone transition. Smartphone sales accounted for one-third of total sales by volume ratifying the successful transition from feature phones to smartphones Product mix continued to improve. Newly launched advanced smartphones were well received in markets. Achieving economy of scale in smartphone sales volume drove up margins since Q2 Smooth relocation of world-class global manufacturing facility in Q3 with maximum annual capacity of 100-120 millions units for paving the future growth 4
INDUSTRY RANKING NO. 5 GLOBAL HANDSET MANUFACTURER, NO. 1 CHINESE PLAYER TOP-10 CELL PHONE BRANDS IN Q4 OF 2013 (Source: Gartner) (RANKING BY UNIT SHIPMENTS IN MILLIONS) RANK COMPANY Q4 2013 SHIPMENTS (M UNITS) Q4 2013 MARKET SHARE (%) QoQ GROWTH RATE (%) YoY GROWTH RATE (%) 1 Samsung 119.2 24.3 +1.8 +11.5 2 Nokia 63.6 13.0 +0.8-25.3 3 Apple 50.2 10.2 +65.6 +15.6 4 LG 18.4 3.7 +1.8 +22.6 5 TCL-ALCATEL 17.6 3.6 +32.0 +58.3 6 Huawei 17.3 3.5 +27.7 +26.7 7 ZTE 16.3 3.3 +19.1 +1.0 8 Lenovo 13.6 2.8 +4.2 +63.2 9 Sony 10.4 2.1 +6.4 +30.6 10 Coolpad 8.4 1.7-4.4 +36.2 Others 155.3 31.8 +0.2-1.8 TOTAL 490.3 100.0 +7.6 +3.9 Gartner: TCL Communication has strong relationship with carriers, especially in LATAM; it also had success in EMEA with its launch of new products. 5
INDUSTRY RANKING NO.10 GLOBAL SMARTPHONE MANUFACTURER TOP-10 SMARTPHONE BRANDS IN Q4 OF 2013 (Source: Gartner) (RANKING BY UNIT SHIPMENTS IN MILLIONS) RANK COMPANY Q4 2013 Q4 2013 QoQ YoY SHIPMENTS MARKET SHARE GROWTH RATE GROWTH RATE (M UNITS) (%) (%) (%) 1 Samsung 83.3 29.5 +3.7 +29.2 2 Apple 50.2 17.8 +65.6 +15.6 3 Huawei 16.1 5.7 +37.6 +85.3 4 Lenovo 12.9 4.6 +0.1 +63.1 5 LG 12.8 4.5 +6.4 +59.5 6 ZTE 11.2 4.0 +21.9 +34.3 7 Sony 10.3 3.6 +8.6 +45.0 8 Coolpad 8.4 3.0-1.0 +43.4 9 Nokia 8.2 2.9-3.9 +15.6 10 TCL-ALCATEL 7.4 2.6 +58.9 +253.8 Others 61.5 21.8-1.7 +37.7 TOTAL 282.3 100.0 +12.8 +35.9 6
GEOGRAPHICAL REVENUE BREAKDOWN FEATURE PHONES & OTHER PRODUCTS SMARTPHONES & OTHER SMART DEVICES APAC 10% CHINA 4% APAC 6% CHINA 9% EMEA 35% AMERICAS 51% EMEA 44% AMERICAS 41% 7
REGIONAL BUSINESS REVIEW EUROPE, MIDDLE EAST Revenue (HK$ Billion) 8.0 +73% Shipments: 20.5 million units, up 35% YoY Revenue: HK$7.8 billion, up 73% YoY Ranked No. 4 in Eastern European region in terms of Q4 sales volume Most significant growth countries (YoY sales volume growth %): Russia (+122%); United Kingdom (+55%) 2014 business plan: Expand the sales network to Nordic countries and launch more LTE smartphones 6.0 4.0 2.0 0.0 4.5 7.8 2012 2013 AMERICAS Revenue Shipments: 26.1 million units, up 37% YoY (HK$ Billion) Revenue: HK$8.7 billion, up 71% YoY Introduced ALCATEL ONETOUCH FIRE with Firefox OS Ranked No.1 in Central America, Pacific Islands and Caribbean; No. 2 in Mexico; No.3 in LATAM, No. 5 in North America in terms of Q4 sales volume Most significant growth countries (YoY sales volume growth %): Mexico (+103%); USA (+78%) 2014 business plan: Consolidate position with the newly set up sales channels. Smartphones & tablets will be the growth driver 10.0 8.0 6.0 4.0 2.0 0.0 5.1 8.7 2012 2013 +71% 8
REGIONAL BUSINESS REVIEW ASIA PACIFIC Shipments: 3.8 million units, up 50% YoY Revenue: HK$1.5 billion, up 81% YoY Most significant growth countries (YoY sales volume growth %): Malaysia (Newly entered market) ; India (+138%) Ranked No.2 in Malaysia, No. 1 supplier of major operators in the Philippines 2014 business plan: Widen sales channels in open markets and strengthen existing sales points Revenue (HK$ Billion) 2.0 1.5 1.0 0.5 0.0 0.8 1.5 2012 2013 +81% CHINA Revenue (HK$ Billion) Shipments: 4.8 million units, down 16% YoY Revenue: HK$1.4 billion, down 11% YoY Enhanced sales channels through with greater cooperation with operators in major provinces, including Jiangsu, Inner Mongolia, Hebei, Sichuan, Chongqing and Shanxi Strategically partnered with the largest B2C e-commerce company in China, 360 Buy, to promote flagship product, TCL S950 TCL HERO N3 won the Best Innovative Product Award of 2013 from China Communications Industry Association 2014 business plan: Strengthen sales points with operators and distributors 9 2.0 1.5 1.0 0.5 0.0 1.6 1.4 2012 2013-11%
- STRATEGY - 500MHz-600MHz Android 2.1-2.3 3G - 650MHz-1.5GHz Dual-core CPU Android 4.0-4.1 Windows - Quad-core CPU 6.45mm Thickness Android 4.2 Firefox Cloud applications Multi-screen Wifi display on TV LTE - - Tablets Octa-core CPU Metal casing Wearable devices Android 4.4 4K video GPRS, Ultra-low cost Qwerty key pad EDGE Qwerty keypad Entry-level Multi-touch display Multi-touch Panel Technology 2007-08 Entry-level Feature Phone Advanced Feature Phone EDGE Phone Entry-level Smartphone Advanced Smartphone Cloud terminals / Smart Connectivity Devices LTE/Tablet 10
PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS USA LATAM EMEA CHINA APAC 11
NEW PRODUCTS Real Octa-Core 2 GHz CPU Full HD Display 8.1mm slim Narrow bezel 13 Mpxl rear camera, 2 Mpxl Full HD front camera Smart Wristband 2500mAh battery Color: Champagne Gold / Slate Quad Core 1.2 GHz CPU Mpxl rear Camera Ultra Thin Body: 7.5mm Wireless Connection to TV with Wifi Display Aluminum Metal Frame Translucent upper and lower edges with LED lighting 12
NEW PRODUCTS Quad Core 1.5 GHz CPU with Dual SIM Mpxl Camera Heavy Duty Battery: 3400 mah Wireless Connection to TV with Wifi Display Bluetooth Enabled Phone Slim Capacitive Stylus and LED Magic Flip Quad Core 1.2 GHz CPU display Full lamination 8 Mpxl rear camera LTE Cat4. NFC 2150mAh battery 7.45mm thickness Quad Core 1.2 GHz CPU 4.5 display Full lamination 8 Mpxl rear camera LTE Cat4. NFC 2000mAh battery 8.5mm thickness 13
NEW PRODUCTS Dual Core 1.3 GHz CPU 1024X600 TFT Display Super thin: 8.9mm Super light : 285 g Narrow Border Dedicated accessories Two Connectivity Mode: Quad Core 1.3 GHz CPU Super thin: 7.9mm Super light 325 g TV Mirror: Two Connectivity Modes: 14
NEW GLOBAL PRODUCTION FACILITY WORLD CLASS STANDARD PRODUCTION FACILITY Located in Huizhou, China 30 SMT lines, 29 assembly lines, 46 customization/packing lines Annual Capacity: 100-120 Mu World-class SMT production lines and supporting facilities Efficient global logistics experiences Strict tests by key telecommunication global operators ISO 9001, ISO 14001 and TL9000 qualified Testing and R&D manufacturing capability for platforms: MTK & QUALCOMM 15
BRAND BUILDING & AWARDS IN EMEA & AMERICAS CES 2014, USA ONETOUCH IDOL X+ awarded one of Digital Trends Best Smartphone Finalist in CES International Incubation Programme: Le Project, France ALCATEL ONETOUCH IDOL X received GOOD DESIGN award from the Chicago Athenaeum 16
BRAND BUILDING IN APAC & CHINA IDOL X+ Product Launch, China Product Promotion, Malaysia MTR Advertisement, Hong Kong Concert Title Sponsorship, Hong Kong Outdoor Billboard, Hong Kong 17
OUTLOOK CHALLENGES & OPPORTUNITIES Mobile market is rapidly shifting to a new generation of 4G device. LTE will be a key growth driver Operators are warming, in particular, to tablet devices as they shift from traditional communications to personal digital life services providers Rapid and efficient execution is crucial to deliver business growth Competitive business environment; having brand recognition is the key EXECUTION PLANS 60% of 2014 products supports LTE mode including both TDD-LTE and FDD- LTE In order to accommodate market needs, LTE smartphones and tablets includes entry-level and advanced segments Increase open market penetration and strengthen direct sales to major retailers and distributors Strengthen branding via digital and traditional platforms GOAL & FORECAST 2014 full year revenue growth target: 35% versus 2013 LTE smartphones and tablets are the main growth drivers in 2014 18
FINANCIAL HIGHLIGHTS 19
FINANCIAL HIGHLIGHTS +61% Revenue (HK$ Million) 19,362 Sales Volume Revenue & Net Profit/(Loss) (HK$ Million) Q4 2013 Q4 2012 YOY (%) 2013 2012 YOY (%) 19,174 13,439 +43% 55,201 42,608 +30% 12,031 Total ASP (US$) 50.2 37.1 +35% 45.0 36.2 +24% Revenue 7,501 3,885 +93% 19,362 12,031 +61% Gross Profit % 19.6% 15.6% +4.0% 19.0% 17.4% +1.6% Net Profit/(Loss) 302 (229) N/A 316 (220) N/A 2012 2013 Net Profit/(Loss)% 4.0% (5.9%) N/A 1.6% (1.8%) N/A 20
SUSTAINABLE REVENUE GROWTH QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS Revenue HK$ Billion 8.0 Smartphone & Other Smart Devices Feature Phone & Other Products 7.5 7.0 6.0 5.5 2.3 5.0 4.0 3.9 4.0 2.1 3.0 2.0 1.0 1.5 2.0 2.2 3.1 3.2 2.8 2.5 2.1 2.1 3.0 2.1 2.4 2.4 2.6 1.5 3.0 3.1 1.9 1.5 2.0 2.4 1.2 1.5 2.5 3.4 5.2 0.0 Q1 2010 Q2 2010 Q3 2010 0.1 0.0 0.1 0.4 0.6 0.6 1.1 1.6 1.9 1.2 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 21
BETTER SALES PRODUCT MIX & UPWARD ASP TREND SMARTPHONE SALES VOLUME PROPORTION & ASP GROWTH ASP (USD) 55 ASP Sales Proportion of Smartphone & Other Smart Device (%) 50.0% Sales Proportion of Smartphone & Other Smart Devices 50 45 45.4 50.2 40.0% 40.0% 41.8 33.7% 30.0% 40 35 33.4 34.6 35.6 37.1 37.1 37.0 18.8% 17.4% 17.1% 26.7% 20.0% 30 31.3 29.6 31.2 9.5% 13.5% 10.0% 25 0.3% 1.3% Q1 2011 Q2 2011 4.4% Q3 2011 5.5% Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 0.0% 22
GROSS MARGIN TREND GROSS MARGIN 25.0% 21.8% 22.4% 21.9% 20.0% 15.0% 10.0% 5.0% 14.4% 17.0% 17.9% Economies of Scale Product Competitiveness Pricing and Currency Strategy 17.4% 16.4% Brand Value and Customer Relationship 18.4% 19.6% 19.6% Continuous Cost Down Effort 0.0% 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 23
FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION (HK$ Million) 31 December 2013 31 December 2012 Change (%) Non-current assets 2,556 2,109 +21% Current assets -Inventories 2,649 1,263 +110% -Trade & factored receivables 6,036 3,275 +84% -Other current assets 1,341 1,483-10% -Pledged deposits 1,698 4,221-60% -Cash and cash equivalents 142 970-85% Total current assets 11,866 11,212 +6% Current liabilities -Interest-bearing bank and other borrowings (2,690) (6,159) -56% -Other current liabilities (4,656) (2,018) +131% -Trade and notes payables (3,875) (2,429) +60% Total current liabilities (11,221) (10,606) +6% Net current assets 645 606 +6% Total assets less current liabilities 3,201 2,715 +18% Non-current liabilities (288) (392) -26% Net assets 2,913 2,323 +25% 24
KEY FINANCIAL RATIOS 31 December 2013 31 December 2012 Gearing Ratio * 17% 26% Current Ratio ** 1.06 1.07 Trade Receivables Turnover Days 63 68 Inventories Turnover Days *** 39 38 NAV per share HK$ 2.55 HK$ 2.06 Basic Earnings/(Loss) Per Share 27.50 HK cents -18.49 HK cents Interim Dividend Per Share - 3.00 HK cents Final Dividend Per Share 10.00 HK cents - Full Year Dividend Per Share 10.00 HK cents 3.00 HK cents Dividend Payout Ratio 36% N/A * Calculated -bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Excluding factored trade receivables **** Only inventories in factory 25
Q & A 26
THANK YOU 27
DISCLAIMER The information contained herein should not be utilized for any legal purposes in regards to any 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 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 actual results could differ materially from these statements. 28