TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (2618.HK) Interim Results Presentation Hong Kong 12 August
2 AGENDA FINANCIAL HIGHLIGHTS BUSINESS REVIEW & OUTLOOK Q & A
FINANCIAL HIGHLIGHTS
4 FINANCIAL HIGHLIGHTS Income Statement (HK$ Million) Change (%) Change (%) Total Sales Vol. ( 000 units) Incl. Sales Vol. of Smart Devices ( 000 units) Total ASP (US$) 15,960 17,912-11% 33,101 33,692-2% 8,601 9,975-14% 17,413 19,682-12% 43.5 47.1-8% 42.6 50.7-16% Revenue Gross Profit Margin (%) 5,378 6,537-18% 10,932 13,227-17% 21.4% 19.5% +1.9% 20.4% 19.3% +1.1% Net Profit 2 269-99% 11 454-98% Net Profit Margin (%) 0.04% 4.1% -4.1% 0.1% 3.4% -3.3% Basic EPS (HK Cents) 0.64 21.41-97% 1.76 36.58-95%
5 QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS Revenue (HK$ Billion) 15 Smart Devices Feature Phones and Other Products 12 10.7 1.1 9 6 5.5 7.5 2.3 5.5 6.7 1.3 7.8 1.0 6.7 6.5 0.7 0.6 7.1 0.9 8.3 1.0 5.6 5.4 3 0 2.4 1.2 1.2 Q1 2013 4.0 1.5 2.5 2013 2.1 3.4 Q3 2013 5.2 Q4 2013 1.2 4.3 Q1 2014 5.4 2014 6.8 Q3 2014 9.6 Q4 2014 6.0 5.9 6.2 Q1 Q3 7.3 Q4 0.9 0.8 4.7 4.6 Q1
6 QUARTERLY SALE VOLUME OF TABLETS CONTINUOUS AND STEADY SALES VOLUME Volume ( 000 unit) 2,000 1,500 1,339 1,315 1,099 1,000 986 990 863 718 500 513 289 63 0 Q1 2014 2014 Q3 2014 Q4 2014 Q1 Q3 Q4 Q1
7 SMARTPHONE SALES VOLUME PROPORTION & ASP REFINED PRODUCT PORTFOLIO STRATEGY ASP (US$) 80 ASP (US$) Smart Devices Proportion Smart Devices Proportion (%) 100% 70 90% 60 50 40 30 37.0 41.8 45.4 50.2 52.2 52.4 53.4 55.1 54.7 62% 62% 58% 53% 46% 40% 47.1 56% 42.0 53% 43.3 41.8 43.5 55% 54% 51% 80% 70% 60% 50% 40% 20 27% 34% 30% 20% 10 17% 10% 0 Q1 2013 2013 Q3 2013 Q4 2013 Q1 2014 2014 Q3 2014 Q4 2014 Q1 Q3 Q4 Q1 0%
8 GROSS MARGIN TREND SUSTAINABLE HEALTHY RANGE GP Margin (%) 30.0% 21.1% 21.4% 20.0% 17.4% 19.0% 19.3% 19.4% 10.0% 0.0% Product Competitiveness Economies of Scale Pricing and Currency Strategy 2012 2013 2014 Brand Value and Customer Relationship Q1 Continuing Cost-Down Efforts
9 FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION (HK$ Million) 30 June 31 December Change (%) Non-current assets 4,444 4,364 +2% Current assets Inventories 3,386 2,541 +33% Trade & factored receivables 5,277 6,095-13% Other current assets 1,780 2,013-12% Pledged deposits 696 1,028-32% Cash and cash equivalents 587 566 +4% Total current assets 11,726 12,243-4% Current liabilities Interest-bearing bank and other borrowings (2,499) (3,074) -19% Other current liabilities (4,322) (4,154) +4% Trade and notes payables (4,820) (4,790) +1% Total current liabilities (11,641) (12,018) -3% Net current assets 85 225-62% Total assets less current liabilities 4,529 4,589-1% Non-current liabilities (478) (551) -13% Net assets 4,051 4,038 --
10 KEY FINANCIAL RATIOS 30 June 31 December Gearing Ratio 16% 20% Current Ratio 1.01 1.02 Trade Receivables Turnover Days* 81 89 Inventory Turnover Days ** 28 26 NAV Per Share HK$3.13 HK$ 3.16 * Excluding factored trade receivables ** Only inventories in factory
BUSINESS REVIEW & OUTLOOK
12 OVERVIEW RESULTS Sales Volume: Revenue: Net Profit: Basic EPS: 33.1 million units, down 2% YoY (including 17.4 million units of smart devices, down 12% YoY) HK$ 10.9 billion, down 17% YoY HK$ 11 million, down 98% YoY Decreased to 1.76 HK cents from 36.58 HK cents BUSINESS OVERVIEW Healthy gross margin: Continuous growth in tablet sales volume: Sustainable growth in internet applications and service business: Virtual Reality (VR) device debut: Implemented a more stringent approach to controlling risk and focused on business with high profitability in view of the gloomy economic conditions, intensified competition and continued currency fluctuation. Gross margin remained at a healthy level of over 19%. Quarterly tablet sales volume has increased steadily over the past 2 years. In, tablet sales volume increased 9% YoY to almost 1.9 million units. In, the cumulative number of activated users of mobile Internet application platforms increased almost 2 times YoY to 34.5 million; while the settlement amount of third party payment increased for more than 3 times YoY to HK$7.3 billion. Unveiled its first VR-supporting flagship smartphone, Alcatel IDOL 4S, alongside VRin-the-Box, which officially announced its entry into the VR market.
13 INDUSTRY RANKING - TOTAL PHONES NO. 6 GLOBAL HANDSET BRAND + COMPANY DATA TOP 10 MOBILE PHONE BRANDS IN Q1 16 (Source: Gartner and Company Data) Rank Company Q1 16 Shipments (Million units) Q1 16 Market Share (%) QoQ Growth Rate (%) YoY Growth Rate (%) 1 Samsung 95.5 21.3-4.5-2.6 2 Apple 51.6 11.5-27.8-14.2 3 Huawei 29.0 6.5-10.2 +56.0 4 Microsoft 16.7 3.7-38.1-49.3 5 OPPO 16.3 3.6 +22.5 +136.5 No.6 6 TCL-Alcatel 16.2 3.6-33.8 +7.3 7 Xiaomi 15.0 3.4-17.4 +2.1 8 LG 14.3 3.2-21.8-27.4 9 BBK 14.1 3.2 +23.7 +125.4 10 ZTE 13.7 3.1-19.9 +2.3 Others 165.0 36.9-15.6-5.9 TOTAL 447.4 100.0-15.4-3.0
14 INDUSTRY RANKING SMARTPHONES NO. 10 GLOBAL SMARTPHONE BRAND + COMPANY DATA TOP 10 SMARTPHONE BRANDS IN Q1 16 (Source: Gartner and Company Data) Rank Company Q1 16 Shipments (Million units) Q1 16 Market Share (%) QoQ Growth Rate (%) YoY Growth Rate (%) 1 Samsung 81.2 23.2-2.7 +0.1 2 Apple 51.6 14.8-27.8-14.2 3 Huawei 28.9 8.3-10.1 +59.4 4 OPPO 16.1 4.6 +24.3 +144.7 5 Xiaomi 15.0 4.3-17.4 +2.1 6 BBK 14.0 4.0 +23.3 +131.4 7 Lenovo 12.7 3.6-36.8-33.0 8 LG 12.6 3.6-18.5-18.6 9 ZTE 11.1 3.2-24.8 +10.7 No.10 10 TCL-Alcatel 7.9 2.3-40.8-13.2 Others 98.2 28.1-10.6 +2.2 TOTAL 349.3 100.0-13.4-3.9
15 INDUSTRY RANKING TABLETS NO. 7 GLOBAL TABLET BRAND + COMPANY DATA TOP 10 TABLET BRANDS IN Q1 16 (Source: Gartner and Company Data) Rank Company Q1 16 Shipments (Million units) Q1 16 Market Share (%) QoQ Growth Rate (%) YoY Growth Rate (%) 1 Apple 10.1 24.9-33.9-26.5 2 Samsung 7.1 17.5-12.6-5.9 3 Lenovo 2.1 5.2-32.8-17.1 4 Huawei 2.0 4.9-7.1 +89.5 5 Amazon 1.5 3.7-51.8 +132.6 6 Asus 1.0 2.5-37.5-39.2 No.7 7 TCL-Alcatel 1.0 2.5-24.7 +37.9 8 Microsoft 0.9 2.2 +7.4 +16.0 9 Acer 0.6 1.5-34.4-12.3 10 LG 0.6 1.5-38.4-45.3 Others 13.7 33.6-17.0-35.1 TOTAL 40.6 100.0-24.7-21.3
16 GEOGRAPHICAL REVENUE BREAKDOWN FEATURE PHONES & OTHER PRODUCTS SMART DEVICES CHINA 4% APAC 6% MEA 8% NORTH AMERICA 30% CHINA 3% APAC MEA 5% 8% NORTH AMERICA 32% EUROPE 24% EUROPE 32% LATIN AMERICA 20% LATIN AMERICA 28%
17 INTERNATIONAL BUSINESS REVIEW NORTH AMERICA Sales volume: 7.1 million units, up 4% YoY; Revenue: HK$3.43 billion, up 6% YoY Sales volume of smart devices: 4.3 million units, up 37% YoY Q1 sales volume ranking (Source: Gartner & Company data): North America: No. 4 (Total phones); No. 5 (Smartphones) Recorded continuous growth in tablet business by leveraging the close relationship with major operators Q3 business plan: Seize opportunities in VR, increase sales of 4G products Revenue (HK$ Billion) 4.0 3.0 2.0 1.0 0.0 3.22 3.43 +6% LATIN AMERICA Sales volume: 9.9 million units, down 7% YoY; Revenue: HK$2.94 billion, down 27% YoY Sales volume of smart devices: 5.5 million units, down 16% YoY Q1 sales volume ranking (Source: Gartner & Company data): Latin America: No. 3 (Total phones); No. 5 (Smartphones); No. 4 (Tablets) Mexico: No. 3 (Total phones); No. 4 (Smartphones); No. 4 (Tablets) Chile: No. 3 (Total phones); No. 4 (Smartphones); No. 4 (Tablets) Business was affected by prolonged currency fluctuations and the rise of local kings Q3 business plan: Continue implementing stringent controls on currency and credit risks, optimise product mix to strengthen leading position in entry-level smartphone market Revenue (HK$ Billion) 6.0 4.0 2.0 0.0 4.00-27% 2.94
18 INTERNATIONAL BUSINESS REVIEW EUROPE Sales volume: 8.7 million units, up 14% YoY; Revenue: HK$2.77 billion, down 13% YoY Revenue (HK$ Billion) 4.0-13% Sales volume of smart devices: 4.2 million units, down 7% YoY Q1 sales volume ranking (Source: Gartner & Company data): Europe: No. 5 (Total phones); No. 7 (Smartphones) Eastern Europe (excl. Russia): No. 5 (Total phones); No. 8 (smartphones); No. 3 (Tablets) 3.0 2.0 1.0 3.20 2.77 Maintained market share with mid-high end smart devices Q3 business plan: Widen open market and online sales channels 0.0 MEA Revenue (HK$ Billion) Sales volume: 3.9 million units, down 1% YoY; Revenue: HK$890 million, down 30% YoY 2.0-30% Sales volume of smart devices: 1.9 million units, down 28% YoY 1.5 Q1 sales volume ranking (Source: Gartner & Company data): MEA: No. 6 (Total phones); No. 6 (Smartphones); No. 3 (Tablets) South Africa: No. 3 (Total phones); No. 2 (Smartphones); No. 1 (Tablets) Increasing number of domestic brands intensified market competition Q3 business plan: Focus on entry-level products to secure its existing market share 1.0 0.5 0.0 1.28 0.89
19 INTERNATIONAL BUSINESS REVIEW APAC Sales volume: 1.7 million units, up 83% YoY; Revenue: HK$540 million, up 48% YoY Sales volume of smart devices: 0.9 million units, up 46% YoY Revenue (HK$ Billion) 0.8 0.6 +48% Continued monitoring the impact of currency devaluation, enforced stringent controls on exchange rate risk 0.4 Q3 business plan: Further broaden online sales channels 0.2 0.37 0.54 0.0 CHINA Sales volume: 1.8 million units, down 52% YoY; Revenue: HK$360 million, down 69% YoY Revenue (HK$ Billion) 1.5-69% Sales volume of smart devices: 0.6 million units, down 71% YoY Completed strategic adjustment and business reorganisation, implemented premium products strategy Q3 business plan: Develop operators, open markets and e-commerce channels in parallel, establish strategic partnership in pre-installation, promotion and joint marketing 1.0 0.5 0.0 1.16 0.36
20 STEP-UP PRODUCT STRATEGY GPRS, Ultra-low cost Qwerty key pad Entry-level Multi-touch panel technology EDGE Qwerty keypad Multi-touch display 2.8-3.5 display 500MHz-600MHz Android 2.1-2.3 3G 2.8-4.5 display 650MHz-1.5GHz Dual-core CPU Android 4.0-4.1 Windows 2011-2012 4.5-6 display Quad-core CPU 6.45mm thickness Android 4.2 Firefox Multi-screen Wi-Fi display on TV 5-6 Display 6-10 Tablets Octa-core CPU Metal casing Android 4.4 2013-2014 SMART CONNECTIVITY 2.8-6 display 6-10.1 Tablets 16.3 BigPad Wearable devices Android L Windows OS Cloud applications 4G 3.5-6 display 16.3 BigPad Wearable device for kids Android M Windows 10 Mobile Full metal body VR devices - 2 in 1 / WEARABLE DEVICE/ MULTIPLE OS/ IoT 2007-2010 FEATURE PHONE EDGE PHONE SMARTPHONE 4G/ TABLET/ CLOUD TERMINAL VIRTUAL REALITY DEVICE/ BIGPAD
21 PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS EUROPE CHINA NORTH AMERICA APAC LATIN AMERICA MEA
22 NEW PRODUCTS Octa Core CPU 5.2' FHD IPS Display Slim Body: 7.1 mm 13 Mpxl Rear Camera, Dual-tone LED Flash Augmented Multimedia Experience with Boom Key IDOL 4 Series received 14 recognitions at MWC Octa Core CPU 5.5 QHD AMOLED Display Ultra Slim Body: 6.99 mm 16 Mpxl Rear Camera, Dual-tone LED Flash Augmented Multimedia Experience with Boom Key VR in-the-box
23 NEW PRODUCTS PLUS 10 received 3 recognitions at MWC Quad Core CPU 10.1 HD IPS Display Windows 10 Home Long-lasting Battery: 8,410 mah (with LTE Keyboard) Detachable LTE Keyboard (Wi-Fi Hotspot for up to 15 Devices) Octa Core CPU 5.2' FHD LTPS Display Ultra Slim Body: 6.95mm 16 Mpxl Rear Camera Dual-tone LED Flash Fingerprint Recognition Full Netcom Compatible with Android 4.3 & ios 7 or Above Long Standby Time: 4 days IP65 certified: Water & Dust Resistant 2-way Call & Voice Message GPS Locator
24 BRAND-BUILDING ACTIVITIES 01 02 03 04 01. The 4th China Information Technology Expo China 02. TCL 750 Product Launch China 03. IDOL 4S Product Launch Philippines 04. The 10th La Rochelle Beach Cup Sponsorship France
25 OUTLOOK CHALLENGES Strong headwinds in global economic environment persist, which increase operation and credit risks Persistently strong US dollar further weakens purchasing power in emerging markets Active overseas expansion of Chinese handset manufacturers intensifies market competition Threats from local kings in various regions are mounting EXECUTION PLANS Continue to implement stringent credit control and hedging policies to maintain a healthy and stable financial position Optimise management capability, improve internal communication and collaboration efficiency Invest resources into developing cost-competitive mid-high end products and VR devices to seize market share Strengthen new brand image and realign marketing strategy to strengthen dominant position in overseas markets GOALS & FORECAST 4G smartphones and tablets will continue to be the main growth drivers in Continue to promote Double + business transformation strategy, enhance intelligence and internet application service ability, seize the opportunity to develop new strategic business
Q & A
THANK YOU 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.