TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) 2011 Annual Results Presentation Hong Kong 27 February 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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2011 Highlights Sustainable Growth in 2011 Sales Volume : 43.6 million units, up 20% YoY Revenue : HK$ 10.7 billion, up 22% YoY Net Profit : HK$ 801 million, up 14% YoY Basic EPS increased to 72.83 HK cents from 64.69 HK cents YoY New record high in Q4 sales volume up to 13 million units Gartner: Alcatel successfully entered in the top 10 mobile vendors ranking in Q4 2011 Gartner: Strong relationships with key operators have proved key to its growth IHS isuppli and Strategy Analytics: TCL-Alcatel Ranked NO.8 in Q4 2011 Record High In Sales Volume Growth Drivers Leading to Growth Momentum Step-up product strategy Geographic expansion Brand building and channel penetration in open market Smartphone shipment skyrocketed 23 times YoY to 1.4 million units Cooperated with NetEase to launch the Xiangyun A919, a new cloud-based smartphone TCL W989 was selected by China Unicom for its new 4.0 series products in December 2011 Smartphone Sales and China Business Achieved Remarkable Result 5
Quarterly Sales Volume of Handsets and Other Products Stable Growth in Sales Volume 000 units 6
Gartner: Alcatel ( a brand of TCL Communication) successfully entered in the top 10 mobile vendors ranking in Q4 2011 Gartner: Strong relationships with key operators have proved key to its growth IHS isuppli and Strategy Analytics: TCL-Alcatel Ranked NO.8 in Q4 2011 Mobile Devices Market Share, Unit Sales, Q4 2011 ('000 Units) Industry Ranking Gartner. Current Company Current Growth Rate Current Quarter Name Quarter Sales Previous Quarter Rank Quarter (%) Market Share (%) 1 Nokia 111,699.4 6.0% 23.4% 2 Samsung 92,682.3 12.2% 19.4% 3 Apple 35,456.0 105.0% 7.4% 4 ZTE 18,915.1 34.1% 4.0% 5 LG Electronics 16,938.3-19.4% 3.6% 6 Huawei Device 13,966.2 30.9% 2.9% 7 Research In Motion 13,184.5 3.8% 2.8% 8 HTC 10,837.4-10.4% 2.3% 9 Motorola Mobility 10,075.3-9.9% 2.1% 10 Alcatel 9,004.7 14.8% 1.9% Others 143,795.8-1.9% 30.2% Total 476,554.9 7.9% 100.0% Note : Alcatel for Alcatel Brand Only, excluding TCL Brand & ODM Source: Gartner (February 2012) 7
Geographical Breakdown Geographical Breakdown of Feature Phone/Other products for Year 2011 Geographical Breakdown of Smartphone for Year 2011 Sales of smartphone in CHINA market contributed 1/3 of total smartphone shipment 8
Monthly Smartphone Shipment 000 units Upward Trend in Smartphone Volume and proportion Monthly Smartphone Proportion / Overall Shipment % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 9
Business Review Europe, Middle East and Africa ( EMEA ) Despite Europe debt crisis, through proper management over operating and finance risks, shipment in 2011 still achieved 16.3 million units, surged 21% YoY Maintain strong relationship with key operators and several smartphone models have been successfully selected by first-tier operators such as Orange, Vodafone and Telefonica Successfully launched the Vodafone 555 Blue, the world s first Facebook Feature Phone(exclusively manufactured for Vodafone) 13.4m units +21% 16.3m units Americas +3% In despite of the weakened local purchasing power as a result of currency fluctuation in some emerging markets, shipment in 2011 still achieved 19.3 million units, up 3% YoY ALCATEL ONE TOUCH ranked No. 4 brand in Latin America region, especially No. 2 in Colombia and No. 3 in Brazil Strengthened sales in existing markets such as USA (up 250% YoY), Brazil (up 63% YoY) and Colombia (up 23% YoY) 10
Business Review Asia Pacific +56% Shipment in 2011 totaled 2.9 million units, up 56% YoY Achieved strong results in India and Israel, reinforced marketing efforts in existing markets such as India, the Philippines and Vietnam Successfully expanded into new markets, including Bangladesh, Indonesia and Thailand China Most fast-growing region with shipment achieved 5.1 million units, surged 139% YoY +139% Currently over 30% of the Group s smartphone shipment was contributed by China and we foresee strong growth momentum will continue in 2012 Series of several smartphones have been successfully selected by China Mobile, China Unicom and China Telecom In-depth cooperation with large retail chain stores, such as Suning & Zhongyu Telecom 11
Step-up Product Strategy Dynamic Smart Innovation Design Competitiveness Quality 12
3G Android Products Selected by Global Mainstream Operators and Distributors Americas EMEA The China APAC 3G Android models (e.g. TCL W989, TCL E906, ONE TOUCH 995, ONE TOUCH 918, etc) have been selected by global mainstream operators and distributors in Americas, EMEA, APAC and China. More new models will be launched in coming quarters. 13
TCL W989 Best value Android experience High speed 3G+ & Wi-Fi Pre-embedded apps New Products 2.3 5.8 Mbps WLAN Capacitive 3.2 mpxl 32GB GPS E-compass GSM/GPRS/EDGE & TD-SCDMA Dual Mode 4.0 capacitive display 3.0 megapixel camera 2.3 7.2 Mbps 1Ghz Wi-Fi 4.0 Capacitive 3.0 mpxl 32GB Dual SIM TCL E906 14
New Products 4.3 Large display for high quality experience High speed: 1.4 Ghz & HSPA+ 14.4Mbps HD video (720p) - HDMI and DLNA - Wi-Fi hot spot 3D one touch UI - NFC 2.3 14.4 Mbps 1.4 Ghz Wi-Fi 4.3 Capacitive AGPS 5.0 mpxl 32GB Smart design. Smart experience. For Smart users Camera with LED flash Sub camera Capacitive touch Proximity sensor Multi touch 2.3 7.2 Mbps 650Mhz Wi-Fi 3.5 Capacitive AGPS 5.0 mpxl 32GB 15
New Products 2.6 portrait capacitive display and OFN 3.2 megapixel camera with flash light 2.3 7.2 Mbps 650Mhz Wi-Fi 2.6 Capacitive AGPS 3.2 mpxl 32GB Dual SIM Large 4 HVGA display CPU 800 MHz Capacitive multi touch screen 3.2 megapixel camera with LED flash - Sub camera 2.3 7.2 Mbps 800Mhz Wi-Fi 4 Capacitive AGPS 3.2 mpxl 32GB G-sensor 16
one touch T50 7 capacitive screen 16M color, multi-touch 10.1 mm Slim design & Metallic casing Visualized multi-task & gesture user experience Front/rear dual camera New Products 2.3 Dual Camera 7 Capacitive Metallic Casing Slim Design Fluent & Unique design High Downlink and Uplink speed Allow you to connect anywhere in the world Bright color will bring you a bright mood Allow you to switch 3G signal to WIFI anywhere Data Card & Hot Spot 17
Brand Building in Overseas Market 2012 MWC 2012 CES 18
Brand Building in China Market 19
2012 Outlook Year of Growth Growth drivers continue -further expand in China and strengthen our position in 3G Android smartphones segment Revenue for 2012 full year target at 30% up versus 2011 revenue performance Q1 2012 will be ramp-up period for smartphone. The growth momentum for smartphone will start from Q2 2012 onwards Smartphone Success Strong relationships with key operators will be the key driver to grow and succeed Further penetrate in open market and commence the direct sales to major retailers and distributors Overall ASP will be improved by launching more smartphone models China Success Keep strong relationship with China Mobile, China Unicom and China Telecom and more new smartphone models are being selected Strengthen cooperation with large retail chain stores such as Suning & Zhongyu Telecom Launch over 30 new smartphone models in 2012 More television and magazine advertising exposure, e.g. sponsor popular TV show The Generation Show 20
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Financial Highlights Sales Volume Revenue & Net Profit ( 000 Units) (HK$ Million) 43,617 20% Revenue Y 2011 YoY Y 2010 10,653 22% 8,701 36,223 Total ASP (US$) 31.4 2% 30.9 GP% 22% - 22% Net Profit 801 14% 702 Y 2010 Y 2011 Net Profit% 8% - 8% 22
25% Gross Margin Pricing and Currency Strategy Continuous Cost Brand Value and Down Effort Customer Relationship Sustainable Gross Margin 3G Android 20% Economies of Scale Product Competitiveness 22% 22% 22% Wi-Fi Touch & Qwerty EDGE Social Networking 17% 18% Entry Multimedia Touch 15% 14% GPRS Messaging Side Slider 10% Y2006 Y2007 Y2008 Y2009 Y2010 Y2011 ULC Full Keyboard SMS Phone 23
Statement of Financial Position Financial Position Highlights (HK$ Million) 31 December 2011 31 December 2010 Change Non-current assets 1,773 635 179% Current assets -Inventories 981 780 26% -Trade receivables 2,585 2,535 2% -Other current assets 1,409 758 86% -Pledged deposits 6,092 6,201-2% -Cash and cash equivalents 1,187 1,345-12% Total current assets 12,254 11,619 5% Current liabilities -Interest bearing bank and other borrowings (7,222) (6,488) 11% -Other current liabilities (2,141) (1,683) 27% -Trade and notes payables (1,952) (1,843) 6% Total current liabilities (11,315) (10,014) 13% Net current assets 939 1,605-41% Total assets less current liabilities 2,712 2,240 21% Non-current liabilities (39) (18) 117% Net assets 2,673 2,222 20% 24
Key Financial Ratios 31 December 2011 31 December 2010 Gearing Ratio * 22% 8% Current Ratio ** 1.12 1.40 Trade Receivables Turnover Days 89 107 Inventories Turnover Days *** 25 32 ROE 30% 64% NAV per share HK$ 2.43 HK$ 2.04 Basic EPS 72.83 HK cents 64.69 HK cents Proposed Final Dividend Per Share 15.00 HK cents 16.80 HK cents Full Year Dividend Per Share 28.80 HK cents 24.80 HK cents Dividend Payout Ratio 40% 38% * Calculated based on the Group s total interest-bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Only inventories in factory 25
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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% 48% 48% TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) * As at 21 February 2012 28
Global Presence Production Facilities, R&D Centres, Sales Offices Headquartered in Shenzhen, China Global research facilities located in Shenzhen, Shanghai, Chengdu, Ningbo and Huizhou Global factory located in Huizhou, China Global presence across over 120 countries and regions 115 repair centers, over 50 offices, over 9,600 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 29
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 9,600 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 30
Strong R&D capability More than 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 31
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 32
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 33
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 34
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