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Interim PresentationInterim Presentation1H 20091H 2009
TCL Communication Technology Holdings LimitedTCL Communication Technology Holdings Limited
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Agenda
Company Overview
Business and Strategy Overview
Financial Highlights
Investment Highlights
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Company Overview
Principal Business
Research & Development, manufacturing and global sales of cell phones and 3G data card of two key brands - ”TCL” and ”ALCATEL”
CoreProducts
Cell phones --- Two key brands
TCL (in China)
ALCATEL (in Europe, Middle East, Africa, Latin America, Asia-Pacific and China)
Production
Facilities
Headquartered in Shenzhen, China
Global research facilities located in Shenzhen, Shanghai and Huizhou
Global factory located in Huizhou
Global presence across over 80 countries and regions
65 repair centres, over 50 offices and more than 4,000 employees around the world
Listing Status Listed on the Hong Kong Stock Exchange in Sep. 2004 (Ticker: 02618 HK)
TCL Communication Technology Holdings Limited (TCL Communication)
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Shareholding Structure
Public
52%
TCL Communication Technology Holdings Limited( 02618 HK )
46%
TCL Group(000100 SZ)
Mr. Li Dongsheng
2%
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Agenda
Company Overview
Financial highlights
Investment Highlights
Business and Strategy Overview
Financial Highlights
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Investment Highlights
1
2
5
6
Strong relationship with worldwide operators
Experienced management team
Strong portfolio of brands with high consumer recognition
TCL Communication: Chinese leading global manufacturers of consumer electronics products
3 Leading manufacturing capacity and experienced global logistics
management
Innovative business model
Strong R&D capability with wide series of products
4
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Highly Experienced Senior Management Team and Company Structure
BoardMr. Li DongshengChairman
CEO Charles Yang
TCL BusinessCharles Yang
TCL executive committee
GSMWang Jiyang
AmericasNicolas Zibell
EMEAYves Morel
APACAlbert Wong
CDMALi Bing
BDLVittorio
Di Mauro
ChinaInterface
Zhang Yongjun
Alcatel BusinessGeorge Guo
Alcatel executive committee
CMDChun Lau
HQ & OperationCharles Yang
George Guo, Thomas Liu
HR,IS/IT,AuditGeorge Guo
FinanceThomas Liu
QMS&GCSLaurent Labbe
LegalStephen Chiang
CEO OfficeNiu Haizhen
GMCLv Xiaobin
BPS
Products design center
Xu Jinhong
R&D centerWang Kailong
Sales centerChen Qihui
Operator center
Xie Feng
Operationcenter
Xiao Feng
FinanceHu Lihua
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Highly Experienced Senior Management Team
Chairman of TCL CommunicationMr. LI Dongsheng
Born in July 1957, Tomson Li graduated from South China University of Technology with a major in wireless technology. Li had taken the position of the general manager of TCL Communication Group, general manager of TCL Corporation and now acts as the chairman of the board and president of TCL Corporation. “Special contributor to the development of China electronic home appliance industry” 1994."CCTV Annual Economic Contributor of China" 2002, 2004“Asia Businessman of the Year" by Fortune magazine 2004 Conferred medal of national honor by French president Jacques Chirac 2004“The Most Influential Enterprise Leader" by China Entrepreneur magazine 2005“Deloitte prize entrepreneurs” (in Barcelona), 2008Delegate of 16th Party Congress and 10th and 11th National People’s Congress
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Executive Director, CEODr. Yang Xingping Charles
Dr. Yang Xingping Charles, obtained a Bachelor`s degree in 1982 and a Master`s degree in 1985, both in Engineering from Xian Jiaotong University. He obtained a M.S. in 1987 and Ph.D. in 1989 from the University of California, Los Angeles (UCLA). Before joining the Group, he established DopodCommunication Corporation in 2001 and served as the CEO and President between 2001 and 2006 and the Honorary Chairman between 2006 and 2008.He joined TCL Corporation as the Vice President and TCL Communication as President in charge of TCL brand business in January 2009. Dr. Yang has been appointed as an executive director and the CEO of TCL Communication with effect from 1 April 2009.
Highly Experienced Senior Management Team
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Strong Portfolio of Brands with High Consumer Recognition
TCL & ALCATEL have strong brand awareness with consumers in China and Europe respectively
TCL Brand established since 1981 as a leading electronics brand in PRCNo.1 of 2002 Deloitte Technology Fast 500 Asia Pacific Winners Total estimated brand value of RMB40.1bn and ranked the 3rd Most Valuable Brand in China according to China Most Valuable Brand survey in 2007
Established in France since 1898Worldwidely accepted by its fame and great reputationTypical brand in Europe’s telecommunication industry
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Leading Independent Production Capacity
Production capacity of 30 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 TI, MTK, ADI & QUALCOMM
Manufacture center in Huizhou, China
SMT production line Testing centre
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Strong R&D Capability
More than 700 highly skilled and experienced research engineers distributed in Shanghai, Shenzhen and Huizhou
The ownership of GSM core technological patents obtained throughacquisition of ALCATEL mobile phone business
One of the few companies who own 2G, 2.5G, 2.75G core patents inthe world, excellent tradition of research and development
Able to provide solutions to GSM, GPRS, EDGE, CDMA, WCDMA, TD-SCDMA independently
Start to work on 3G, projects already run for TD-SCDMA products
Focus on innovation as well as the high quality of our products
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Full Series of Products and Product Strategy
Low-end Products in Emerging MarketsQuality
Entry-level Camera PhoneProducts Design and Competitiveness
Mobile Music ExperienceInnovation
Mobile Internet Features
High-end Devices
and Services
2007 2008 2009 2010 2011
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Matured Cooperation with Oversea Telecommunication Operators
EMEAUSA
LATAM
China
APAC
HQ, R&D and ManufactureMexico CitySales centre
ParisSales centre
ShanghaiShenzhen & Hong Kong
Huizhou
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Innovative Profitability
4C Convergence
Business Model
Computer
Consumer electronic
Communication
Contents Year One of 3G
3 Core Competences
Products Innovation Ability
Sales and Marketing
Operator Collaboration
Innovative ProfitabilityQuality guaranteed products and services based on good operator collaboration
To provide 3G experience by integrating cell phone and 4C model
To achieve the progression of average revenue by retaining and expanding customers
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Business and Strategy Overview
Financial highlights
Investment highlights
Appendix
Agenda
Financial Highlights
Investment Highlights
Company Overview
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PRC MarketFollowing the award of 3G licenses by the Chinese Government, relevant 3G services has been launched gradually and drove the sustained growth of mobile industry in China.
Despite the weakness of handset industry elsewhere in the world, the Chinese market maintained healthy growth.
ASP of branded handsets were adversely affected by copycat phones in the market.
Oversea MarketAs the global economy is expected to pick up gradually, the Q2 sales volume rebounded and increased by 22% over Q1.
Middle-end products appear a favorable trend in market because of the popular of the touch screen phone.
Consumers’ spending in Latin America, Europe, Middle East and Africa was adversely affected by the economic crisis.
Sales performance in the emerging markets remained buoyant.
ASP in the Q2 edged lower when compared to the Q1 as most products sold in the Q2 were low-end products.
Business Overview
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Business Review
Overview•Total of 5.1 million units of handsets and accessories were sold in the first half of 2009, representing a decrease of 25% over
the corresponding period in 2008 due to the economic crisis.•Sales volume in the second quarter of this year showed signs of significant improvement. The volume of June reached 1.02
million units, increased by 35% over the previous month. In July, sales volume kept going up and reached 1.53 million units,increased by 51% over June.
Europe, Middle East and Africa•Shipments totaled 2.2 million units in the first half, a 15% decrease over the same period last year. The slowdown
was primarily attributed to lower sales volume in Africa. Meanwhile, sales in most European countries staged a steady growth.•Average selling price was flat in the first half.•Re-entered Russia and Turkey market•Planning to expand businesses in Belgium, Switzerland and Ireland
Latin America•In the first half, a total of 1.59 million units were sold in Latin America (LATAM), representing a decline of 49% from the same
period of last year because of the weak market.•Average selling prices edged lower as the majority of products sold in the region were low-end products.
The PRC•Sales volume in China increased by 75% year-on-year to 1.1 million units.•A total of 13 products of the Group won the bid under the government’s program “Household Appliance Subsidy Scheme in
Rural Areas” in the first half of 2009.
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New Product – OT 800 ( “JADE” )
Full Qwerty keypad, unique navigation keyPOP3/IMAP4 E-mail sending capability Instant messaging , easily log into Windows Live Messenger, Google Talk and other messaging toolsSocial networks for Facebook, MySpace, Bebo, Friendster and Flickr2 MPxl camera, taking pictures as well as shooting videos and playing Music player capable for 1,000 songsFM Radio RDSBlue tooth ear phone
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New Product – OT 708 ( “Mini” )
Full touch screen displayFashion outlook and handy design, only 82g in weightSide widget bar on idle screen, easy entry for media player, radio, calling history, calendar, background picture and alarm clock without multi-choice1.3 MPxl cameraMicro-SD slot up to 4 GBFM Radio RDSBlue tooth ear phone
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Sales Volume and Revenue (Handset and Others)
Sales Revenue for Handset and Others in 1H 2009 and 1H 2008Sales Revenue for Handset and Others in 1H 2009 and 1H 2008
‘000 Units 09 Q1 09 Q2 1H 2009 1H 2008 ChangeTotal 2,276 2,782 5,058 6,716 -25%
Overseas 1,787 2168 3,955 6,086 -35%
The PRC 489 614 1,103 630 75%
Sales Volume for Handset and Others in 1H 2009 and 1H 2008Sales Volume for Handset and Others in 1H 2009 and 1H 2008
HK $ Million 09 Q1 09 Q2 1H 2009 1H 2008 ChangeTotal 615 712 1,327 2,340 -43%
Overseas 514 605 1,119 2,116 -47%
The PRC 101 107 208 224 -7%
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Growth of Sale Volume (Year 2005- Year 2008)
2005 2006 2007 2008
6
8
10
12
14
ALCATEL TCL
Million Units
2005：Internal restructuring after acquiring all cell
phone business of ALCATEL
2006：Turnaround successfully
2007：Good business running and stable growth
2008：Keep profitable under global financial crisis
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Jan Feb Mar Apr May Jun July
400
600
800
1,000
1,200
1,400
1,600
ALCATEL TCL
Sales volume (Jan 2009 – July 2009)
‘000 Units
Sales volume of June represented a sign of recovery. The amount kept going up to 1.53 million units in July, increased by 51% over June.
A total of 2.8 million units were sold in Q2 2009, representing a significant increase of 22% over 2.3 million units in Q1. The annual sales volume is expected to reach 10 million.
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Future Outlook
In the second half of 2009, European and American market will recover gradually while the Asia Pacific will remain the key driver for the growth of handset industry. China’s handset industry will continue to expand at a healthy pace. Management believes that the Group’s sales performance in PRC will be improved in the second half of this year.
The Group will continue to push ahead with our “3G + 4C” business model and strengthen its efforts in product innovation and design. The Group’s research team has mastered 3G platforms and has started to design more competitive products to be sold at competitive prices.
A mobile internet device product and three extra low-price products under the ALCATEL brand will be launched in the second half.
Looking ahead, the management believes the second half will still present challenges. However, the management is confident of meeting sales targets of this year.
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Company overview
Business and strategy overview
Financial Highlights
Investment highlights
Appendix
Investment highlights
Appendix
Agenda
Investment Highlights
Company Overview
Business and Strategy Overview
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Income Statement Highlight
Income Statement HighlightIncome Statement Highlight
(HK$ Million) 09Q1 09Q2 1H 2009 1H 2008 ChangeSales Volume (‘000 Units) 2,276 2,782 5,058 6,716 -25%
Revenue 615 712 1,327 2,340 -43%
Average Selling Price (US$) 35 33 34 45 -24%
Gross profit 85 112 197 438 -55%
Gross profit （%) 14% 16% 15% 19% -4%
Profit/(loss) before the effects of convertible bonds
(42) 3 (39) 16 N/A
Effects of convertible bonds (11) (54) (65) 96 N/A
Profit/(loss) after the effects of convertible bonds
(53) (51) (104) 112 N/A
EBIT (before effects of the convertible bonds
HK$ Million)
(16) 12 (4) 61 N/A
EPS (before effects of the convertible bonds HK$ cents)
(5.9) 0.4 (5.5) 2.3 N/A
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Balance Sheet Highlight
Balance Sheet HighlightBalance Sheet Highlight
(HK$ Million) 2009-6-30 2008-12-31 ChangeNon-current assets 525 528 0%
Current assets 3,058 4,037 -24%
including
- Inventory
- Cash and Bank
- Trade Receivable
- Pledged deposit
291
628
659
1,100
230
684
854
1,670
27%
-8%
-23%
-34%
Current liabilities (2,616) (3,349) -22%
including - Interest bearing bank borrowings (964) (1,867) -48%
- Trade and notes payable (469) (591) -21%
Net current assets 442 688 -36%
Non-current liabilities (7) (151) -95%
including
- Convertible bonds0 (142) -100%
Net assets 961 1,065 -10%
Net assets value per share (HK$) (after negative stock split) 1.34 1.5 -11%
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Key Financial Indicators
Key Financial IndicatorsKey Financial Indicators
09Q1 09Q2 1H 2009 1H 2008 Change
Trade receivable turnover (Days) 69 72 72 73 -1day
Inventory turnover (Days)(Finished goods)
23 21 21 24 -3days
Cash balance (HK$ Million) 350 628 628 740 -15%
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Comprehensive Operational Review
Conservative financial management, healthy cash position
Already Repurchased all convertible bonds by using internal financial resources. Gearing ratio and financial pressure from bank interest are significantly reduced.
Keep focusing on reduction of material cost.
Well pressure-resistant of financial crisis and present of performance rebound
New products with high potential already approved by operators
Strengthen research and development. Meet the challenge of 3G market.
Implement the 3G + 4C operation strategy. Strive for the growth of profit.
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谢 谢！
Thank you!
