Ten Pao Group Announces 2018 Annual Results - Optimise Domestic and International Business Presence
[For Immediate Release]
Ten Pao Group Announces 2018 Annual Results
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Optimise Domestic and International Business Presence
Expand New Customer Base, Deepen Smart Automation and
Enhance Core Market Competitiveness
(Hong Kong, 21 March 2019) – 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 2018 (“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 continued to be the main driver of growth, outperforming the overall growth of the Group. Revenue of switching power supply units for smart chargers and controllers was HK%$1,058.2 million, increased by 35.2% compared to last year. Despite unfavourable factors including uncertainties in the economy, the rising Renminbi exchange rate, and higher labour and material costs have combined to limit the customer orders for the Group to varying degrees in the year ended 31 December 2018, Ten Pao has leveraged its rich operational experience and diligently implemented the existing business strategies. The Group managed to record an operating profit in 2018, while its businesses has gradually generated solid revenue and gross profit has shown improvement against the first half of 2018. During the Year, the revenue actually increased by 6.5% to HK$3,202.5 million from last year. Gross profit and gross profit margin was HK$438.0 million and 13.7% respectively. Profit before income tax was HK$67.9 million and profit attributable to owners of the Company was HK$55.4 million. Basic earnings per share were HK5.5 cents.
To reward shareholders for their undeviating support to the Group, the Board has recommended payment of a final dividend of HK1.5 cents per ordinary share and a special final dividend of HK1.0 cent per ordinary share for the year ended 31 December 2018 to celebrate the 40th anniversary of the Group's founding. The total dividend for the year ended 31 December 2018 was HK2.5 cents per ordinary share (2017: HK5.0 cents per ordinary share), with a dividend payout ratio reaching 45.1%.
Mr. Hung Kwong Yee, Chairman, Executive Director and Chief Executive Officer of Ten Pao, said, “In 2018, the continued volatility of global financial markets, the uncertainties in the macroeconomic environment and the rising tensions in international relations have presented challenges to all sectors. Slowdown in the market demand and rising raw material costs have suppressed the growth of the switching power supply unit industry. As a leading one-stop smart power supply solutions provider in China, the Group’s management, guided by forward-looking insights honed by rich operational experience, has adopted a proactive approach to address such conditions during the Year. The strategy was highlighted by adjustment of resources to address the rising prices and short supply of raw materials and the continuous allocation of resources to enhance its innovation and R&D capabilities implemented through active efforts to plan for the future business development and market layout. Supplemented by its vertically integrated automated production model and ongoing cost control measures, the Group recorded a steady growth.”
Revenue from switching power supply units remained stable, further enlarge market share through business cooperation with new customers
During the Year, revenue of the Group’s switching power supply units for consumer products decreased by 3.6% to HK$2,144.3 million when compared with that of last year, making up 67.0% of the total revenue of the Group. Gross profit and gross profit margin for these segments was HK$267.9 million and 12.5% respectively. Owing to strong demand in the electronic components market driven by the development of smartphone and electronic vehicle industry, the situation of tight supply and rising prices of related raw materials continued in the first half of 2018. Nevertheless, the Group proactively adjusted its order taking procedures during the Year, while maintaining product quality as its priority, the Group has selected alternative materials with secure supply sources and competitive prices, to reduce its reliance on a single raw material. Consequently, the Group was able to maintain the profit and ensure a stable source of income with a reliable supply of products.
According to IDC's Worldwide Quarterly Mobile Phone Tracker report on global smartphone sales volume, the slowdown in the growth of the global smartphone market during the Year inevitably affected the Group’s revenue from switching power supply units for telecommunication equipment, especially smartphones. However, not only has the Group maintained sound and close partnership with existing customers, but also it has successfully introduced one of the top five renowned smartphone manufacturers as a new customer during the Year that has further enlarged its market share. Moreover, raw material prices had been stabilizing and showing a declining trend since the fourth quarter of 2018. The lower cost of passive components gave the Group an advantage in the original equipment manufacturing (OEM) business. In view of this, the Group will invest more in R&D resources to boost its core competitiveness and maintain the stable growth across all business segments.
Ten Pao’s switching power supply units for consumer products are not only used in telecommunications equipment, but are also widely used in various industries, including media and entertainment equipment, electrical home appliances, lighting equipment and other products (such as healthcare equipment). Most of its products are incorporated into and/or applied in the customers’ self-branded end products.
Segment of smart chargers and controllers for power tools continued to be a main growth driver
The Segment of smart chargers and controllers for power tools continued to be a main growth driver. In addition to maintaining close cooperation with existing core customers, the Group has also forged a maturing business relationship with new customers. Revenue of the segment during the Year climbed by 35.2% to HK$1,058.2 million, exceeding the Group’s overall revenue growth. Gross profit increased by 7.1% to HK$170.1 million, and gross profit margin was 16.1%.
Deepen smart automation and enhance production efficiency
Benefitting from and spurred by the favorable policy implemented by the Hungarian government, the Group has actively expanded its factory and production capacity there. It has leveraged the advantage of its overseas factory to take more orders and attract new customers during the Year, mainly power tools manufacturers. Construction of phase two of the Group’s Hungarian factory has been smoothly completed, with Automatic Insertion (AI) and Surface Mount Technology (SMT) equipment already commencing operation. As smart manufacturing is the future key development trend in the industry, the Group has optimised its automated production lines. During the Year, the Group added automated elements to more production lines, equipped the new production capacity with automated production technology and conducted comprehensive evaluation and adjustment to the operation of automated production lines.
Looking ahead, Ten Pao will keep its finger on the pulse of market trends, and respond to changes in the industry with flexible measures to achieve greater revenue. These measures include increasing investments in research and development (R&D), creating more technological innovations, deploying automated equipment, diversifying its product mix, introducing brand new power supply devices and expanding its customer base.
To address ever-changing demand in the market, the Group continues investing in innovation and technological advancement with a focus on developing high-tech embedded solutions in order to optimize and strengthen its product mix. The Market generally believes that 2019 will be the first year of 5G phone development, and the forthcoming wave of mobile phone replacements will boost the demand for upgrade of charging components. Therefore, the Group will enhance its R&D, actively develop high-power electric supply technologies, and the application of its power supplies to industrial, medical and commercial sectors. Besides, in line with the environmental policies implemented by the government in these years to increase the efficiency of energy use by individuals, communities and across different industries in order to reduce pollution and achieve green sustainable development in China. As such, the Group will allocate resources to develop “green mobility” related concept products for both existing and new customers in hope of satisfying market demand and fueling the growth momentum for the Group’s business.
Regarding production capacity, the Group’s factory in Hungary is to start phase three expansion in 2019 in order to handle rising orders from existing customers in Europe and new customers, which includes enlarging the floor area of the production base, increasing production capacity, adding new production lines and installing automated modules. Elsewhere, the Group’s management team has already spotted the strong potential for development in Northwestern China. After continuous discussion, analysis and active allocation of resources by the management, Ten Pao plans to build a production base there, which is expected to start production in the second half of 2019. The Group believes that this expansion plan will bring benefits in many aspects. In recent years, the government has launched development subsidies and policies supporting advanced technologies, the Group strategically chose to build a factory to effectively tap the opportunities to work with existing and potential customers, and mitigate the operating impacts from labor shortages and rising labor costs in the Pearl River Delta. In addition, Northwestern China has a high speed railway connection with Hungary, which makes the two factories complement each other and become a strong backbone to support customers around the world. Besides, the Group also plans to create a new cooperation model in Southeast Asia, to actively expand its customer base and further optimise its domestic and international business layout.
Mr. Hung concluded, “Capitalizing on the solid foundation that Ten Pao has built in the past 40 years, its professional R&D team, continued deployment of automated production equipment and gradual optimization of its capacity layout. Despite the Group’s profit being under some pressure caused by various factors in the first half of 2018, we have fearlessly faced dangers, and are poised to capture enormous opportunities in the market thus successfully recording stable revenue in the second half of 2018. We will maintain our pragmatic strategy in order to reinforce our leading presence in the industry, explore more business opportunities in the changing market and strive to deliver long-term sustainable returns to 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 in Guangdong Province, coupled with its one-stop production model, 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
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