Skyworth Group Limited · HKEX:751
Skyworth — H1 2008/09 Earnings Presentation
32 slides from Skyworth's earnings presentation, Dec 11, 2008
Slide 1: Interim Results 2008/09
Interim Results 2008/09 11 December 2008 1
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and businesses of Skyworth. These forward-looking statements represent Skyworth’s expectations or beliefs concerning fut
Slide 3: Agenda
Agenda • Key Achievements • Financial Highlights • Company Snapshot • Company Spotlights • Appendices 3
Slide 4: Key Achievements
Key Achievements Gross Margin Maintained Turnover 26% Gross Profit 26% Gross Profit Margin 18.6% (No Change) Net Profit 17% Proven Quality and Leading Market Share in China* No. 3 Overall TV & LCD TV; No. 2 CRT TV Top Tier Digital Settop Box Gaining market share *Source : AVC Ltd. Nov 2007 - Oct 200
Slide 5: Financial Highlights
• Key Achievements • Financial Highlights • Company Snapshot • Company Spotlights • Appendices 5
Slide 6: Operating Margin Improved
Operating Margin Improved Clearance of Disappointing Business Units Six months ended 30 Sep (HK$ million) 1H2008 1H2007 Change Turnover 7,380 5,841 26.3% Gross Profit 1,370 1,090 25.7% Gross Margin (%) 18.6% 18.7% (0.1pp) Operating Profit (EBIT) 273 142 92.3% Operating Margin (%) 3.7% 2.4% 1.3pp Pro
Slide 7: Stringent Measures to Tighten Expenses
Stringent Measures to Tighten Expenses Expected Slower Growth in Labour and Transportation Costs Six months ended 30 Sep 1H2008 1H2007 Change 2007/08 (% to sales) Selling and Distribution 14.2% 13.6% 0.6pp 14.1% General and Administration 4.0% 3.7% 0.3pp 3.5% 18.2% 17.3% 0.6pp 17.6% Total expenses r
Slide 8: Highly Liquid Position
Highly Liquid Position Six months ended 30 Sep (HK$ million) Sep 08 Sep 07 Change Mar 08 Change Inventories - Total 1,990 1,912 4.1% 1,913 4.0% - Finished goods 1,203 1,001 20.2% 1,173 2.6% Liquid bills receivable - On hand 1,942 1,531 26.8% 1,654 17.4% - Endorsed to suppliers* 1,843 1,071 72.1% 1,9
Slide 9: Reduced Borrowings, More Bargaining Power on Payables
Reduced Borrowings More Bargaining Power on Payables Six months ended 30 Sep Mar Sep 08 Sep 07 Change (HK$ million) 08 Change Secured bank borrowings - Construction loans 85 - N/A 353 (75.9%) - Financial liabilities - for discounted bills# 58 - N/A 817 (92.9%) - for forex hedging arrangements^ 1,020
Slide 10: Efficient Distribution System to Turn Inventories
Efficient Distribution System to Turn Inventories Trading Below Net Cash Per Share Sep 08 Sep 07 Change Return on Equity (%) 4.4 5.8 (1.4pp) Current Ratio (times) 1.3 1.4 (7.1%) AR Turnover (days) - with discounted bills 124 137 (9.5%) - without discounted bills 120 133 (9.8%) Inventories Turnover -
Slide 11: Company Snapshot
• Key Achievements • Financial Highlights • Company Snapshot • Company Spotlights • Appendices 11
Slide 12: China TV Market Share Nov 2007 – Oct 2008
China TV Market Share Nov 2007 – Oct 2008 Overall (Volume) LCD TV (Volume) CRT TV (Volume) Rank Brand % Rank Brand % Rank Brand % 1 Konka 13.4% 1 Hisense 11.1% 1 Konka 20.8% 2 Hisense 13.2% 2 Samsung 10.6% 2 Skyworth 16.5% 3 Skyworth 12.1% 3 Skyworth 9.4% 3 Hisense 15.3% 4 Changhong 10.3% 4 Sharp 9.
Slide 13: LCD TV Market Share Oct 2008 vs Nov 2007
LCD TV Market Share Oct 2008 VS Nov 2007 Balancing Market Share and Profitability LCD TV (Volume) LCD TV (Revenue) Brand Oct Nov Change Brand Oct Nov Change 2008 2007 (%pt) 2008 2007 (%pt) 1 Hisense 13.6% 12.4% 1.2% 1 Sony 12.8% 10.4% 2.4% 2 Skyworth 11.3% 10.1% 1.2% 2 Sharp 12.8% 9.2% 3.6% 3 Sharp
Slide 14: Revenue Breakdown by Products: 1H2008
Revenue Breakdown by Products: 1H2008 (1H2007) Over 80% Revenue Generated in China Market under SKYWORTH Brand Overseas China TV OEM TV 75.6% (80.1%) 13.7% (6.5%) Digital Set-top box 8.6% (9.1%) HK$ 7.4bn 26.3% • Mobile Phone 0.6% (2.5%)* • Others 1.5%(1.8%) * Sold 80% equity interests of Mobile Pho
Slide 15: Operating Profit by Business Segments
Operating Profit by Business Segments Solid and Market-leading Core China TV business 344 Total 199 192 TV 200 Digital Set Top 116 Boxes 122 Mobile Phones 8 -62 Other Electronic 19 Products -73 1H2008 9 1H2007 Property Holding 12 (HK$m) 50 0 0 0 0 0 50 15 25 35 45 -5 -1 • Operational profit of China
Slide 16: Gross Profit Margin Sustainable
Gross Profit Margin Sustainable Sep 08 Sep 07 Change pp Mar 08 Group 18.6% 18.7% 0.1pp 21.4 % China TV 20.4% 21% 0.6 pp 24.5 % Overseas TV (OEM) 2.5% 1.6% 0.9pp 3.0 % Digital Set-top Box 29.5% 23.9% 5.6pp 23.1 % • China TV: Margin is sustainable due to differentiated icon models, effective inventori
Slide 17: China TV Profitability Outperforms
China TV Profitability Outperforms High-end Revenue Mix and Gross Margins %to China TV Sales 1H2008 1H2007 75% 65% 60% 53% 55% 45% 35% 21% 25% 19% 16% 15% 11% 7% 9% 3.0% 0.9% 5% -5% High Definition LCD TV Pure Flat (CRT) Sphere & Plasma TV (CRT) Super-Flat (CRT) GP Margin 1H2008 1H2007 Change pp 200
Slide 18: ASP Growth in LCD TV
ASP Growth in LCD TV Units Coupled with Premium Brand, Stayed Ahead of Peers on Market Segmentation and Product Innovation ASP (HK$,net of tax and rebate) 2,000 1,618 1,712 1,874 1,283 1,342 1,459 14% 1,000 + 10% 9% + 9% + 11% + 6% + 5% 0 4% 2004/05 2005/06 2006/07 1H2007 2007/08 1H2008 LCD TV ASP H
Slide 19: 7mths 2008/09 TV Sales Volume
7mths 2008/09 TV Sales Volume Better Performed Slack Season 2008/09 2007/08 Change 2008/09 Achieved (Units) (Apr – Oct) (Apr -Oct) % Target % Total 5,607k 4,211k 33% 9,000k 62.3% China TV 3,370k 3,286k 3% 6,500k 51.8% comprises: - Flat Panel TV 927.3k 555k 67% 1,800k 51.5% - HD CRT TV 694.8k 696.9k
Slide 20: Impressive Breadth of Distribution and Logistics Skills
Impressive Breadth of Distribution and Logistics Skills Domestic/ Exports Direct/ Bulk Distributors* Sales Hypermarket 11.3% (12.6%) 6.8% (3.6%) 3.5% (3.5%) Individual Large Scale Electronic Chain Stores Shops 21.1% (23.4%) 57.3% (56.9%) Individual electronic shops and direct sales support margin La
Slide 21: Overseas Sales Geography Summary
Overseas Sales Geography Summary Loyal Customer Base 1H2008 1H2007 % overseas sales 60% 50% 40% 40% 40% 31% 30% 25% 22% 17% 20% 10% 7%7% 5% 2% 1% 3% 0% America Europe Asia Middle Australasia Africa East More strategic OEM TV to South America markets Revenue included TV and set-top boxes 21
Slide 22: Digital Set Top Box Focus China Market
Digital Set Top Box Focus China Market Accelerated Gross Margin and Leading Market Share Sales HK$ million 1,000.0 500.0 - 2003/04 2004/05 2005/06 2006/07 1H2007 2007/08 1H2008 Total 92.8 175 368 733 527 1,120 635 Overseas - 90 181 171 149 418 165 PRC 92.8 85 187 562 378 702 470 Volume Growth on Tra
Slide 23: Company Spotlights
• Key Achievements • Financial Highlights • Company Snapshot • Company Spotlights • Appendices 23
Slide 24: Replacement Cycle of Flat TV Just Began
Replacement Cycle of Flat TV Just Began Sales in Rural Areas Soon Explode Time required for Market Permeation of Flat TV in China from 20% to 100% Urban 1986 11 years 1997 Color CRT TVs Rural 1996 11 years 2007 Urban 2006F 7 years 2013F Flat-screen TVs Rural 2009F 11 years 2020F Source: Skyworth for
Slide 25: Additional Growth Driver – Rural Areas
Additional Growth Driver – Rural Areas LCD TV penetration in rural area will be robust in the coming years, given 700m population affordability, less than 10% households penetration rates and 20m households without TV. China is extending subsidy measures to farmers' purchase in TV in 14 provinces, g
Slide 26: Anchored Footprints in Rural Areas
Anchored Footprints in Rural Areas 14 regional branches, 84 sales offices and 10 service centers covering 3,000 retail terminals Win-win and loyal relationship with retailers tailored to sell Skyworth products High-tech brand building, R&D develops customised products Sophisticated sales network and
Slide 27: Appendices
• Key Achievements • Financial Highlights • Company Snapshot • Company Spotlights • Appendices 27
Slide 28: China TV National Unit Growth by Products
China TV National Unit Growth by Products LCD TV Over CRT TV by 2010 Units (m) 40 0.04 1.42 1.57 Sales 0.09 1.15 0.15 Volume 2006 2007 2008E 2009E 2010E 35 0.32 0.61 0.65 (m units) 3.9 30 7.74 12.57 16.88 20.07 CRT 30.46 27.07 24.30 21.40 18.70 25 LCD 3.90 7.74 12.57 16.88 20.07 PDP 0.61 0.65 1.15 1
Slide 29: China TV National Revenue Growth by Products
China TV National Revenue Growth by Products 2006 - 2010 (RMB billion) 180 120 60 0 2006 2007 2008E 2009E 2010E PTV 2.6 1.1 0.6 0.3 0.1 PDP TV 8.7 7 10 10.5 10.8 LCD TV 37.1 61 87.8 106.2 117.6 CRT TV 47 39.2 32.9 26.8 22.1 Source: AVC Ltd. 29
Slide 30: China Digital Set-top Box Low Penetration
China Digital Set-top Box Low Penetration Government Push & Unique broadcasting model in China gives domestic manufacturers an edge over international competitors (m) Units 450 402 409 400 385 344 348 352 350 300 250 200 172 156 163 141 148 150 134 99 100 69 48 50 27.7 4 12.7 0 2005 2006 2007 2008E
Slide 31: Global Set-top Box Fast Growing
Global Set-top Box Fast Growing (m) Units/ Year 42.8 45 39.5 37.8 40 33.5 32.5 35 29.6 28.8 30 21.2 22.6 25 17.2 20 15.2 13.8 15 10 5 0 2007 2008 2009 2010 DVB-C DVB-T (DTT & iDTV & Combo) DVB-S (DTH & FTA) Source: IMS Research, ST, Sony,2007 31
Slide 32: Objective and Vision
Objective Wholly devoted to provide excellent digital audio-visual life to humans Vision To be the world’s No. 1 in the audio-visual industry MERRY X’mas & HAPPY New Year [email protected] www.skyworth.com