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October 2015
Disclaimer
2
• The information contained herein should not be utilised for any legal purposes with 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
Tonly Electronics Holdings Limited (the “Company“ or “Tonly”). 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 in this presentation. Forward-looking
statements are statements that are not historical facts. These forward-looking statements are
based on the current expectations of the Company and there is 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.
Agenda
3
02 Business & Product Overview
01Financial Highlights
03Future Strategies & Plans
4
02 Business & Product Overview
01Financial Highlights
03Future Strategies & Plans
Results Highlights for 2015 Q1-Q3
5
Turnover for 2015 Q1-Q3 down 8.6% yoy to approximately HK$3,667.8 million, mainly attributable to the decrease in sales of video disc players and the governmental ABS-s tendering projects
Gross profit margin for 2015 Q1-Q3 increased to 13.4%, up 0.9pp yoy; Operating profit increased by 4.1% yoy to HK$151.0 million; Profit for the period increased to HK$131.9 million, up 6.6% yoy
Repurchased Regency Optics’ moulding business in late August 2015. Established a molding centre to enhance the product appearance and component integration capabilities
Acquisition of FP Group completed. Tonly began to take over management in October; Revenue to be consolidated into the Company’s financial statements
Tonly’s first proprietary high-end noise-canceling wireless headphone started commercial shipment in September 2015 and is expected to gradually become a significant revenue source of the Company
Turnover & Earnings Performance
6
Profit Attributable to Owners of the Parent*
(HK$ million)
Turnover
Turnover
• Decreased by 16.8% yoy to approximately HK$1,358.1 million for 2015 Q3
• Decreased by 8.6% yoy to approximately HK$3,667.8 million for 2015 Q1-Q3
Profit for the period
• Increased by 7.3% yoy to approximately HK$44.1 million for 2015 Q3
• Increased by 6.6% yoy to approximately HK$131.9 million for 2015 Q1-Q3
Profit Attributable to Owners of the Parent*
• Increased by 6.0% to approximately HK$43.0 million for 2015 Q3
• Increased by 13.6% to approximately HK$128.3 million for 2015 Q1-Q3
1
Healthy growth in sales and results performance
2
3
*As at 15 May 2014, the Group has completed the acquisition of the remaining 20% interest in the subsidiary, Tonly Electronics Ltd, resulting in an increase of profit attributable to owners of the Parent for 2015 Q1-Q3
(HK$ million)
Profit for the period
(HK$ million)
1,632.6 1,358.1
4,012.2 3,667.8
0
1500
3000
4500
2014 Q3 2015 Q3 2014 Q1-Q3 2015 Q1-Q3
41.1 44.1
123.7 131.9
0
50
100
150
2014 Q3 2015 Q3 2014 Q1-Q3 2015 Q1-Q3
40.5 43.0
113.0 128.3
0
50
100
150
2014 Q3 2015 Q3 2014 Q1-Q3 2015 Q1-Q3
Gross Profit & Operating Profit Analysis
7
Gross Profit & Margin
• Gross profit for 2015 Q3 decreased from
HK$211.9 million to HK$176.0 million. Gross
margin maintained at 13.0%
• Gross profit for 2015 Q1-Q3 decreased 1.9% to
HK$491.2 million. Gross margin grew from 12.5%
to 13.4%
1
2 Operating Profit & Margin
Gross Profit & Margin
(HK$ million) Gross Profit Margin (%)
Operating Profit Margin (%)(HK$ million)
211.9 176.0
500.7 491.2
13.0% 13.0% 12.5%13.4%
0%
5%
10%
15%
0
200
400
600
800
2014 Q3 2015 Q3 2014 Q1-Q3 2015 Q1-Q3
48.0 52.6
145.1 151.0
2.9%
3.9% 3.6% 4.1%
0%
1%
2%
3%
4%
5%
0
40
80
120
160
200
2014 Q3 2015 Q3 2014 Q1-Q3 2015 Q1-Q3
Operating Profit & Margin
• Operating profit for 2015 Q3 increased 9.6% to
HK$52.6 million. Operating margin increased from
2.9% to 3.9%
• Operating profit for 2015 Q1-Q3 increased 4.1% to
HK$151.0 million. Operating margin increased from
3.6% to 4.1%
Business Focus Shifted to New Types of Audio Products
8
Turnover by Product Mix
2014 Q1-Q3 2015 Q1-Q3
Turnover (HK$ million)
as a percentage of total turnover (%)
Turnover (HK$ million)
as a percentage of total turnover (%)
Video Disc Players1,586.539.5%
Audio Products1,495.737.3%
Media Boxes499.712.5%
Other Businesses
430.310.7%
Video Disc Players1,089.729.7%
Audio Products1,697.746.3%
Media Boxes600.916.4%
Other Businesses
279.57.6%
Turnover Analysis by Product
9
(HK$’000) 2015 Q3 2014 Q3 Change (%) 2015 Q1-Q3 2014 Q1-Q3 Change (%)
Audio Products 690,646 754,987 -8.5% 1,697,694 1,495,663 +13.5%
- Traditional audio products1 267,888 428,004 -37.4% 730,326 819,513 -10.9%
- New audio products2 422,758 326,983 +29.3% 967,368 676,150 +43.1%
Video Disc Players
- DVD players & BD players 322,942 632,790 -49.0% 1,089,714 1,586,546 -31.3%
Media Boxes3 208,960 110,366 +89.3% 600,911 499,747 +20.2%
Other Businesses 135,546 134,494 +0.8% 279,488 430,277 -35.0%
- ABS-s products 88,268 67,618 +30.5% 129,155 255,831 -49.5%
- Components 39,216 59,066 -33.6% 115,182 118,906 -3.1%
- R&D Income 8,062 7,810 +3.2% 35,151 55,540 -36.7%
Total 1,358,094 1,632,637 -16.8% 3,667,807 4,012,233 -8.6%
1 Mainly include HTS and Micro & Mini2 Mainly include wireless speakers, soundbars, audio docks and headphones3 Mainly include OTT (over-the-top) Internet services and contents set top box (STB)
Consolidated Results for 2015 Q3 & Q1-Q3
10
(HK$’000) 2015 Q3 2014 Q3 Change (%) 2015 Q1-Q3 2014 Q1-Q3 Change (%)
Turnover 1,358,094 1,632,637 -16.8% 3,667,807 4,012,233 -8.6%
Gross Profit 175,957 211,857 -16.9% 491,202 500,669 -1.9%
Gross Profit Margin (%) 13.0% 13.0% -- 13.4% 12.5% +0.9pp
Operating Profit 52,602 48,007 +9.6% 151,003 145,076 +4.1%
Operating Profit Margin (%) 3.9% 2.9% +1.0pp 4.1% 3.6% +0.5pp
Profit for the Period 44,093 41,109 +7.3% 131,905 123,701 +6.6%
Profit Attributable to
Owners of the Parent*42,940 40,505 +6.0% 128,326 112,960 +13.6%
Earnings per share
(HK cent)**N/A N/A N/A 51.96 71.86 -27.7%
**As at 15 May 2014, the Group has completed the acquisition of the remaining 20% interest in the subsidiary, Tonly Electronics Ltd, resulting in an increase of profit attributable to owners of the Parent for 2015 Q1-Q3** The total no. of issued shares as at 30 September 2014 was 165,978,711 shares. The total no. of issued shares as at 30 September 2015 was 249,162,626 shares.
Balance Sheet
11
(HK$’000) 30 September 2015 31 December 2014 Change (%)
Non-current Asset 601,987 584,815 +2.9%
Current Asset 2,769,049 2,554,504 +8.4%
- Inventories 433,861 432,187 +0.4%
- Cash and Cash Equivalents 718,820 938,303 -23.4%
Current Liabilities 2,254,301 2,041,338 +10.4%
Non-current Liabilities 6,009 2,655 +126.3%
Net Assets Attributable to
Owners of the Parent1,110,726 1,067,467 +4.1%
Key Financial Ratios
12
*The above turnover days are calculated based on average balances for the period
2015 Q3 2014 Q3 Change
Inventory Turnover (day)* 37 days 35 days +2 days
A/R Turnover (day)* 83 days 71 days +12 days
A/P Turnover (day)* 104 days 90 days +14 days
Cash Conversion Cycle (day) 16 days 16 days --
Current Ratio 1.2 times 1.0 times +0.2 times
Gearing Ratio Net Cash Net Cash N/A
13
02 Business & Product Overview
01Financial Highlights
03Future Strategies & Plans
Rank Company Market Share
1 Tonly Electronics Holdings Ltd. 15.15%
2 Samsung Electronics 9.79%
3 Sony Electronics 9.52%
4 LG Electronics 6.88%
5 Panasonic Corporation 1.08%
Rank Company Market Share
1 Samsung Electronics 18.47%
2 LG Electronics 15.94%
3 Sony Electronics 9.9%
4 Tonly Electronics Holdings Ltd. 8.8%
5 Panasonic Corporation 5.17%
Top 5 Video Products Manufacturers by Production Volume in 2015*
*Source: TSR 2015 Q2, June 2015. The above data include video products such as DVD and BD Players
Rank Company Market Share
1 East Branch Holdings Limited 4.7%
2 Guoguang Electric Co., Ltd. 4.0%
3 Fenda Technology Co., Ltd. 3.45%
4 Tonly Electronics Holdings Ltd. 1.88%
5 Shenzhen Antiy Acoustics Technology Co, Ltd.
1.78%**Source: TSR 2015 Q2, June 2015
***Source: GICIC, July 2015
Top 5 HTS Manufacturers by Production Volume in 2015**
Top 5 Sound Bar Manufacturers by Production Volume in 2015 in China***
The Largest Video Products Manufacturer & the Fourth Largest HTS Manufacturer in the World
14
Four Major Businesses
15
� Turnover for 2015 Q1-Q3 decreased by 31.3% yoy to approximately HK$1,089.7 million, mainly due to the shrinking market and the change of client’s procurement strategies
� Turnover of new audio products increased by 43.1% yoy to HK$967.4 million
� Audio product business has evolved into the Company’s most important business segment with enormous market potential
� Turnover of the ABS-s business for 2015 Q1-Q3 decreased by 49.5% yoy to approximately HK$129.2 million
� As the government relaxes the suspensions in ABS-s market, it is expected to drive sales for the Company
Audio Products
Traditional
Home Theatre System (“HTS”)
Micro & Mini
New
SoundbarWireless Speaker
High-end headphones
Video Disc
PlayersDVD Player BD Player
Media Boxes
OTT DVB-S
Other Businesses
ABS-s
Components and
R&D Income*
� Turnover for 2015 Q1-Q3 increased by 20.2% yoy to HK$600.9 million
� Media boxes is expected to become one of the Company’s major business segments and income sources in the future
� Turnover of traditional audio products for 2015 Q1-Q3 decreased by 10.9% yoy to HK$730.3 million
*R&D income from the Group’s clients
2015 Product Series
16
Desktop Series
Audio Series
Smart Home Series
Wearable Device Series
DVB OTTABS-sSTBDVB/BD
Sound Bar Wireless Speaker
Headphone
HTS Mini/Micro
are offloading
IR Station
IP Camera
Projector SPK
Smart Socket
Smart Bridge
Smart Band
Key Components
are offloading
Loader
RC
Speaker
Power Adapter
are offloading
BT / WIFI/NFC module
STB/OTT
Injectionparts
Mass Production Under Development
Transformation: Increasing R&D Income & Enhancing R&D Efficiency
17
� R&D income for 2015 Q1-Q3 decreased by 36.7% to HK$35.2 million;
R&D expenses increased by 10.1% to HK$146.1 million, accounting for
4.0% of total revenue in 2015 Q1-Q3
� R&D team of headphone products officially began operations. The
earphone business commencing mass production, with commercial
shipment commenced in Sep 2015
� Allocated additional resource on R&D of overseas media boxes and
domestic OTT products and achieved breakthroughs in CA licensing;
commercial shipment of overseas media boxes commenced in Sep 2015
� Restructured the “new products” team with specific resources
� Introduced new customers to the Bluetooth audio OPM business
R&D Income*
(HK$ million)
R&D Expenses Absolute Amount
Turnover of New Audio Products**
(HK$ million)(HK$ million)
*R&D expenses include the expenses related to provision of R&D services and income from customers
**Including wireless speakers, soundbars, audio docks and headphones
55.5
35.2
0
20
40
60
2014 Q1-Q3 2015 Q1-Q3
132.7 146.1
0
60
120
180
2014 Q1-Q3 2015 Q1-Q3
676.2
967.4
0
200
400
600
800
1000
2014 Q1-Q3 2015 Q1-Q3
Industrial Capabilities & Supply Chain Management
18
� 13 SMT production lines, production capacity of 400 million points/month
� 48 main assembly lines, production capacity of 2.3 million pcs/month
� Introduced automated testing system and automated packaging system to improve production efficiency
� Consolidated moulding business in enhancing the product appearance and component integration capabilities
海外供应链Overseas SupplyChain
Overseas Facilities (Indonesia & India)
Automated Production Technology
Automated Test Systems
先进的生产设备Advanced Production Facilities
Advanced SMTProduction Lines
Flexible Production Model
Cell production line
Internationally Standardised Closed-Loop Quality Management System
� Adapt to the diversification of products, the trend of small batch orders with variable specifications to build a flexible and efficient “cell” production assembly line
� Expanded overseas supply chain by working closely with factories in Indonesia and India
� Benefit from the established large-scale procurement platform and the procurement scale of TCL Group, which placed us in advantageous position for procurement
19
02 Business & Product Overview
01Financial Highlights
03Future Strategies & Plans
3,762 4,099
3,673
4,554
5,421
3,668
11.4%
9.5%
11.8%
10.8%
12.3%
13.4%
8.0%
10.0%
12.0%
14.0%
1,000
3,000
5,000
2010 2011 2012 2013 2014 2015 Q1-Q3
Sales Revenue
Sales is Expected to Drop Slightly in 2015
20
Highlights
1. Non-US currencies continue to depreciate, reducing the competitiveness of Chinese exports
2. The shrinking market and change of client’s procurement strategies resulted in the decrease in sales of video discs players throughout the year
3. Change in cooperation with one of it customers to directly supply major components led to the drop in sales revenue
4. Spun off Regency Optics, thus Optics-Electron business will no longer be consolidated into the Company’s financial statements from Sep 2015
5. To focus on the impact to the potential risk of TPP
Drawbacks
(HK$ million) Gross Profit Margin (%)
1. First high-end noise-canceling wireless headphone started commercial shipment in Sep 2015
2. Rebuilt overseas video products business; new products started commercial shipment in Sep 2015
3. ABS-s tendering business will start delivery in 2015 2H, revenue from ABS-s is expected to benefit from the gradual opening of the ABS-s retail market
4. Acquisition of FP Group completed. Tonly began to take over management in Oct 2015; revenue to be consolidated into the Company’s financial statements
Future Outlook: Audio Products
21
Wi-Fi Audio
HTS
CD Micro
Google cast
Home
BT Portable
CD Player Personal
Multi-roomMulti-channel
As audio product development moves from localised to cloud, from wired to wireless;Tonly is dedicated to develop a systematic module to deepen capabilities in core competences of
software and cloud-based audio sources, standing at the forefront of the industry
In Ear
Over Ear
Health & Fitness
As headphone products move from wired to wireless, Tonly is committed to developing wireless technology, noise reduction and motion monitoring capabilities,
as well as strengthen cooperation with universities, and research institutes
Tonly Universities & Research Institutes
Cooperative Developments & Independent
R&D
Future Outlook: Headphones & Wearable Devices
22
Human Engineering
Heart Monitor
ComfortMaterial
MusicNoise Reduction
Future Outlook: Smart Video / Media Boxes
23
Smart Internet Modems
Media Boxes
DVD
Smart Video Projector
Multi-room / multi-channel entertainment
system
Hybrid DulSTB(DVB+IPTV)
Smart Sockets
HD STB
Home Theatre
Further develop media boxes and OTT businesses for operators; Transform towards smart video/media boxes business through development of wireless access business
Cloud Services
OTTSD STB
DVB-S2/C/T2
IPTV STB
Product Strategies & Direction
24
� Leverage on R&D and partial vertical integration, Tonly will expand its scale and solidify its leading position in various product areas through product innovation
� To earn a higher gross margin as compared to traditional ODM business by providing customers with total product solutions and transforming into new ODM business model
� To develop smart audio products based on wireless and Internet technology as well as wearable devices such as headsets
� To focus on the development of new audio products, invest into R&D tostrengthen innovation capabilities in electrocaccoustics and relatedtechnologies, and enhance product quality and design
� To strengthen cooperation with both domestic and overseas Internet and telecommunications companies to promote the development of media boxes business
Thank You
TONLY ELECTRONICS HOLDINGS LIMITED
