Sales Volume of Handsets and Other Products Increased by 9% to 17.1 Million Units
Gross Profit Margin Up Slightly to 19.4%
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Solidify Service Business Foundation and Deepen New Branding Position
Stand Out as a Unique "Products + Services" Enterprise
(Hong Kong, 20 April 2016) - TCL Communication Technology Holdings Limited ("TCL Communication" or the "Company" which, together with its subsidiaries referred to as the "Group"; HKSE stock code: 2618) today announces the unaudited 1st quarter results of the Group for the 3 months ended 31 March 2016 ("the Period").
Amidst the challenging global economy, global demand for smartphones has weakened due to currency fluctuation and gloomy economic conditions. Coupled with the effects of the 1st quarter of the year being the traditional low season for the industry, the Group's revenue was down by 17% year-on-year to HK$5.6 billion for the 1st quarter ended 31 March 2016. During the Period, the Group's sales volume of handsets and other products was up by 9% to 17.1 million units; of which sales volume of smart devices decreased by 9% to 8.8 million units. As Chinese handset brands constantly explore opportunities in overseas markets, competition in the global handset market has been intensified, putting great pressure onto the Group's product prices and gross profit margin. Overall average selling price ("ASP") of the Group's products declined to US$41.8 from US$54.7 over the same period of 2015.
However, the Group successfully managed to maintain its gross profit margin at a steady and healthy level with a slight increase to 19.4%, through strict cost controls and inventory management, as well as focusing on business areas with high profitability.
The Group intensified its investment on product R&D and brand building to ensure sustainable growth. For the 1st quarter of 2016, the Group's operating expense (including research and development cost, selling and distribution expense and administrative expense) was HK$1,277 million. Net profit recorded a year-on-year decrease of 95% to HK$9 million. Basic earnings per share decreased to 1.12 HK cents from 15.11 HK cents over the corresponding period of previous year.
Dr. GUO Aiping, Chief Executive Officer of TCL Communicaation, expressed, "Entering a brand new year, the Group has successfully launched a series of smart devices equipped with the latest technology and features which were well received by global operators and distributors. In terms of service businesses, the Group continued to promote its "Intelligence + Internet" strategic transformation and establish the "Product + Service" business model, in order to enhance the competitiveness of vertical application businesses, and to build an user platform based on different kinds of smart devices."
During the Period, the Group launched a number of smartphone products. Apart from entry-level and mid-level alcatel PIXI 4 and alcatel POP 4 series, it also introduced its flagship smartphone alcatel IDOL 4 series, which received 14 recognitions from various international media outlets. This series made two major breakthroughs in terms of enhancing user experience and technological innovation: BOOM Key and virtual reality ("VR") experience. The launch of the Group's first two tablets with Windows 10 operating system: alcatel PIXI 3 (8) and 2-in-1 tablet alcatel PLUS 10, was also recognised by the industry generally; the former supports ultra-fast 4G downloads, while the latter is equipped with detachable 4G keyboard which can serve as Wi-Fi hotspot, together with multiple ports. Furthermore, the Group launched kid's watch alcatel MOVE TIME which possesses in-built GPS and pre-loaded quick dial function.
During the Period, the Group partnered with the Hong Kong Applied Science and Technology Research Institute ("ASTRI") to present a new generation cellular Device-to-Device ("D2D") technology solution. Meanwhile, the Group will further invest on R&D of VR related devices following the launch of VR box coupled with IDOL 4S. In terms of mobile internet applications and services, the number of cumulative activated mobile users of the Group's mobile internet platform has grown almost 2 times year-on-year to 29.4 million during the Period; while the number of cumulative application downloads amounted to nearly 300 million. The settlement of the online financial service platform (third-party mobile payment gateway), which was jointly developed by the Group and its parent company, recognised a settlement amount of HK$2.4 billion, increased by more than 2 times year-on-year.
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2016 sees a weakened macro economy with continued difficult regional politics, which lead to a sharp drop in the purchasing power of the overall market. Given the current uncertain economic situation, along with fierce competition in the smartphone market and the restructuring of the Group's regional businesses, operating environment for the 1st half of 2016 will remain difficult, the net profit for the interim results of the Group may recorded a significant decline on a year-on-year basis.
Dr. GUO concluded, "Though facing many challenges, the management is confident towards the Group's outlook in the long term. Following the launch of a number of new smart devices in the 2nd quarter, the rebranding as alcatel and brand new image in the China region, coupled with the Group's extensive global sales network, optimised product portfolio and stable relationship with operators, the Group expects the sales of smart devices in the 2nd quarter to improve and the revenue of second half may increase as well. The Group will continue to gradually establish a smart ecosystem anchored on "Smart Devices + Cloud-Based Platform + Internet Services" in response to market challenges and to maintain a healthy balance between sales and operation, thereby maximising shareholders' value.
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About TCL Communication
TCL Communication Technology Holdings Limited ("TCL Communication" or the "Company"; HKSE stock code: 2618) together with its subsidiaries (collectively the "Group") designs, manufactures and markets an expanding portfolio of mobile and internet products worldwide under two key brands - alcatel and TCL. The Group's portfolio of products is currently sold in China and over 170 countries throughout North America, Latin America, Europe, the Middle East, Africa and Asia Pacific. According to telecommunication research firm Gartner and company's data, the Group ranked No. 5 and No. 8 among global phone manufacturers and global smartphone manufacturers respectively in 2015. The Group also ranked No. 7 among global tablet manufacturers. Headquartered in Shenzhen, China, TCL Communication operates its highly efficient manufacturing plant and R&D centres in various provinces of the PRC. It employs around 14,000 people in China, Hong Kong and overseas.
TCL Communication is one of the few companies in Hong Kong or China who owns or licenses 2G, 2.5G, 2.75G, 3G and 4G patented technologies. It is also able to independently develop products and solutions for the GSM, GPRS, EDGE, CDMA, WCDMA, TD-SCDMA and LTE. For more information, please visit its website at http://tclcom.tcl.com.
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