Ten Pao Group’s Revenue Up by 16.4% to HK$3,007.0 million in 2017 Grew Faster than the Switching Pow

[For Immediate Release]

Ten Pao Group’s Revenue Up by 16.4% to HK$3,007.0 million in 2017

Grew Faster than the Switching Power Supply Unit Market

* * *

Continues to Expand Customer Base, Pursue Smart Automation and Enlarge Market Share

(Hong Kong, 22 March 2018) – Ten Pao Group Holdings Limited (“Ten Pao” or “the Group;” stock code: 1979), an industry-leading one-stop provider of smart power supply solutions, has announced its annual results for the year ended 31 December 2017 (“the Year”). Despite a slowdown in the global switching power supply unit industry, Ten Pao was able to continue to develop its business and enlarge market share, with revenue growing at a higher rate than that of the overall switching power supply unit market during the Year.

During the Year, the Group’s two major business segments both recorded growth. Revenue of switching power supply units for smart chargers and controllers for industrial use rose 26.9%, outperforming the overall growth of the Group, driving the total revenue up by 16.4% to HK$3,007.0 million when compared with last year. However, with the fast-growing electric vehicle industry and telecommunications sector having strong demand for raw materials and the strict implementation of environmental protection regulations in China, the prices of certain raw materials surged. Consequently, the Group’s gross profit slightly decreased by 0.6% to HK$525.6 million, and gross profit margin was 17.5%. Profit before tax decreased by 23.4% to HK$200.9 million and profit attributable to owners of the Company contracted by 18.8% to HK$157.6 million. Basic earnings per share were HK$15.8 cents.

As at 31 December 2017, the Group’s net current assets was HK$272.7 million and current ratio was 1.24 times, reflecting its sound financial position. To reward shareholders for their unwavering support to the Group, the Board has recommended payment of a final dividend of HK2.5 cents per ordinary share. Together with an interim dividend of HK2.5 cents per ordinary share already paid, the annual dividend amounted to HK5.0 cents per ordinary share, representing a dividend payout ratio of 31.7%.

Mr. Hung Kwong Yee, Chairman, Executive Director and Chief Executive Officer of Ten Pao, said, “Although our business performance was affected by external factors that beyond the Group’s control, as an industry-leading one-stop smart power supply solutions provider, we were able to boost the market share of our products by continuously enhancing our core capabilities, including strengthening R&D, offering tailor-made products and one-stop power supply solutions to customers. We were also able to mitigate the impact of the increase in raw material and labor costs by upgrading production technologies and automation and continue to grow the business. All these achievements are proof of our remarkable resilience and that we pride a healthy operational system.”

Business Review

Switching power supply units for consumer products – Revenue maintained steady growth

Ten Pao’s switching power supply units for consumer products are used in various industries, including telecommunication equipment, media and entertainment equipment, electronic cigarettes, electrical home appliances, lighting equipment and other products (such as healthcare products). Most of the Group’s products are incorporated into and/or applied in customers’ own-brand end products.

Affected by factors such as the 4G smartphone replacement market gradually reaching saturation point, the revenue of Ten Pao’s switching power supply units for telecommunication equipment was being affected. However, revenue from switching power supply units for consumer products segment still increased by 13.1% to HK$2,224.2 million, accounting for 74.0% of total revenue. Gross profit was HK$366.8 million and gross profit margin was 16.5%. The tight supply of wafer, the raw materials for producing active and passive components of smartphones inevitably created cost pressure on the corporations, but the Group expects related demand to be met in the second half of 2018. In this transition period, the Group will focus on strengthening its R&D advantage as well as expanding production capacity in the first half of 2018, in order to better seize future growth opportunities.

Smart charger and controller products for power tools for industrial use – Revenue grew at a faster pace than the overall growth rate of the Group

Over the past few years, the Group has been actively developing the business and expanding the customer base of power tools. The strategy has started to bear fruit. Revenue of the segment soared by 26.9% to HK$782.8 million, exceeding the overall revenue growth rate of the Group. Gross profit rose by 7.9% to HK$158.8 million and gross profit margin was 20.3%. In addition to developing more business with core customers, the Group will also begin more in-depth cooperation with new customers with the hope of contributing more profit to the Group.

Further pursue smart automation and timely increase production capacity to improve production efficiency

Smart production is crucial for power supply industry player to grasp opportunities. With the realisation of national initiatives such as “Made in China 2025” and “Industrie 4.0”, Ten Pao places major emphasis on upgrading and transforming its business in the course of development. During the Year, the Group has established a strategic partnership with the Hong Kong Productivity Council (“HKPC”) and made good progress in “Smart Production”. The Group is setting up smart automated production lines and workshops in order to achieve digitalisation of production processes and to build an automated and efficient factory so as to offer flexible product solutions that meet market and customers’ needs.

Moreover, Ten Pao expanded production capacity to match its expansion plan. The “One Belt One Road” strategy has put China in a more prominent position in the global value chain. Ten Pao took the opportune time to open its first overseas factory in Hungary in October 2017, close to where the Group’s international customers are located. Customers can enjoy quicker production and delivery cycles, and the Group is able to quickly and flexibly respond to customers’ needs.

Business Outlook

Looking ahead, despite the gap between raw material supply and demand creating pressure on manufacturers, Ten Pao will follow the pace of market developments closely, as well as closely monitor the market and its business development in order to deploy strategies flexibly, adjust its product development plans and improve production efficiency.

The Group expects to achieve balanced development of its six major product segments. Industry expects the popularity of smartphones with full-screen display and the arrival of new technologies will spark the next round of upgrade. Hence, the sales volume of smartphone is expected to return on the uptrend in the second quarter of 2018. The Group will seize the opportunities with the support of its industry leading R&D capabilities, thereby enlarge its market share of the telecommunication equipment market. Regarding power tools which are mainly for industrial use, apart from gaining a larger share of business with existing customers, the Group will also strengthen ties with new customers and strive to earn their recognition.

Furthermore, R&D will be a key pursuit of the Group, in its quest to offer customers more advanced technological power supply solutions, such as continuing to enhance the efficiency of its fast charging technologies for smartphone customers. The Group will position the advancement of high-power electric supply technologies for its products and optimisation of power tools wireless charging to be the key R&D direction. At the same time, the Group will push to enhance its product mix and plan to explore the wireless transmission and Smart Home sectors with strong growth potential. A two-pronged approach will help the Group enlarge the market share of its products and achieve better revenue growth.

Regarding production capacity, with the Group’s plant in Hungary having commenced operation, Ten Pao is in a better position to win more European customers and continue to expand its customer base. In addition, smart production is in the progress and the related automatic production lines are in testing and trial operation stage, promising better efficiencies in the future. The Group will also consider introducing more Surface Mount Technology (SMT) production lines. It is expected to draw up relevant plans this year to help further expand production capacity for responding quickly to market demand.

Mr. Hung concluded, “Ten Pao, strong in innovation, and armed with R&D and efficient production capabilities, and a management team with rich operational experience, will diligently follow its business development strategy in this period of adjustment with the aim to further raise efficiency and achieve sustainable growth. These efforts will help strengthen Ten Pao’s leadership in the switching power supply units industry and generating sustainable, healthy long-term returns for shareholders.”

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About Ten Pao Group Holdings Limited (Stock Code:1979)

Ten Pao Group Holdings Limited is an industry-leading one-stop provider of smart power supply solutions and it becomes a constituent stock in the MSCI Hong Kong Small Cap Index since end of 2016. With almost 40 years of experience in the power supply industry, its clienteles include many leading and fast growing international brands. Ten Pao is equipped with strong R&D capabilities and is one of the few manufacturers that have its own CNAS-accredited testing laboratory, which enables it to transform with the change of the technology market while it develops and produces diversified products catering to the specifications of clients’ new products. Company website: www.tenpao.com

WeChat Account:tenpao_group (Scan the QR Code to follow)

Media enquiries:

Ten Pao Group Holdings Limited

Mr. Eric Pang

Public / Investor Relations Senior Manager

Tel: (852) 2790 5566


For media enquiries, please contact:

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Joanne Lam

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Email: joanne.lam@sprg.com.hk

Cecilia Shum

Tel: (852) 2864 4890

Email: cecilia.shum@sprg.com.hk

Elaine Wang

Tel: (852) 2114 2821

Email: elaine.wang@sprg.com.hk

Website: www.sprg.com.hk

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