Slide 1: Corporate Presentation Annual Results 2005
Corporate Presentation Annual Results 2005
Slide 2: Agenda
Agenda Major Accomplishment in 2005 Financial Highlights Financial Review Customer Review Solutions Review Business Review & Outlook Open Forum 1
Slide 3: Major Accomplishment in 2005
Major Accomplishment in 2005 Ranked No.1 in China Mobile’s central procurement programme for outdoor repeaters and BTS antennas New products and solutions included: – Dynamic Traffic Routing solutions – 3G products – Remote Radio Head (RRH) solution – SDH Digital Microwave Systems Set up a Power Amp
Slide 4: Financial Highlights
Financial Highlights 3
Slide 5: Financial Highlights
Financial Highlights For year ended 31 December HK$’000 2005 2004 Change (Restated) Revenue 1,170,515 1,092,761 7% Gross profit 474,326 563,379 -16% Profit attributable to shareholders 82,089 237,478 -65% Basic earnings per share (HK cents) 9.86 28.59 -66% Dividend per share (HK cents) • interim nil
Slide 6: Key Financial Figures
Key Financial Figures HK$’000 31 Dec 2005 31 Dec 2004 (Restated) Total assets 2,182,236 1,828,652 Net assets 1,187,658 1,100,986 Cash and bank balances 492,414 516,299 Current ratio 2.0X 2.3X A/R turnover days 174 137 A/P turnover days 170 153 Inventory turnover days 286 260 Return on average equity
Slide 7: Financial Review
Financial Review 6
Slide 8: General Overview in 2005
General Overview in 2005 Uncertainty of possible industry reorganisation in the PRC Continuous wireless enhancement capital expenditure by the GSM mobile operators Slowdown in CDMA capital expenditure Downward trends in selling prices and profit margins for the mature 2G mobile communications market
Slide 9: Revenue Breakdown by Customers
Revenue Breakdown by Customers Others 12.2% 3.6% China Unicom – GSM China Mobile 18.3% 54.1% 132.6% 19.0% 15.4% China Unicom – CDMA 43.8% = YOY change Solid growth in revenue from GSM networks 8
Slide 10: Revenue Breakdown by Solutions
Revenue Breakdown by Solutions DMS Maintenance 1.0% 850.6% 36.3% 1.2% PHS Others 5.4% 1.3% 12.5% 18.5% Sub-systems & Antennas 4.7% 63.9% Outdoor 19.2% Indoor 30.7% 67.2% 2.2% = YOY change Diversification started fuelling growth 9
Slide 11: Revenue Breakdown by Regions
Revenue Breakdown by Regions Southwest China Overseas 1.7% 4.9% 4.6% 75.7% Northwest China 4.5% 50.7% Southern China 30.8% Northern China 14.4% 20.8% 13.5% Northeast China Eastern China 21.4% 13.0% 17.5% 25.1% = YOY change Coastal regions remained as the major revenue contributors 10
Slide 12: Gross Profit
Gross Profit Gross Profit (HK$M) 600 563.3 Decreasing average selling 550 price in mature 2G market Cost savings measures 51.6% 500 lagging behind 474.3 Increased costs in providing 450 40.5% quality services nationwide 400 2004 2005 Gross Profit Margin 11
Slide 13: Cost Structure
Cost Structure As % of Total Sales 35% R & D costs Further enhanced R&D capabilities, including those 30% 5.3% for 3G products and solutions 3.4% Set up an R&D centre in Silicon Valley, USA 25% 7.4% 6.4% Selling and distribution costs 20% Increase in headcount for nationwide expansion 15% in t
Slide 14: Net Profit
Net Profit Net Profit (HK$M) 250 237.5 Decline in gross profit 200 margin 21.7% 150 Increase in R&D, selling and distribution and finance 100 82.1 costs 50 Expiry of full tax exemption 7.0% 0 2004 2005 Net Profit Margin 13
Slide 15: Customer Review
Customer Review 14
Slide 16: Expanding our Partnerships
Expanding our Partnerships Operators & Core Equipment Manufacturers Well positioned in home market Enabled growth in all regions Expanded to OEM channels Established reputable global customer base All logos and company names are registered trademarks of respective companies 15
Slide 17: China Relationship
China Relationship Review: Extending leadership & maintaining long term relationship 2G market ~10 years & commoditized Restructuring & uncertain policies affects network enhancement plan Strategic pricing and new product launches Key long term partner in network enhancement & participation in 3G tr
Slide 18: Establish Strategic Relationship
Establish Strategic Relationship Review: Selective PHS products Deepened relationships with China Telecom & China Netcom PHS Revenue Growth in the uncertain period of PHS in China Opportunities: Revenue 62,638 Limited PHS growth opportunities (HK$’000) 52,870 Strategically align long term relationsh
Slide 19: International
International Others Review: India Sub-con 5% EMEA 27% 37% Group’s top growth strategy APAC Significant growth of customer base 31% Increased global brand recognition Balanced growth in all regions Opportunities: Revenue 53,237 General increase in CapEx of (HK$’000) worldwide operators 30,302 Broade
Slide 20: Core Equipment Vendors
Core Equipment Vendors Review: A main growth strategy for the group Working relationship with 3 largest China vendors Engaged in discussion with various international vendors Relatively long qualification and business cycle (average of 12months) Opportunities: 2G International network expansion RF s
Slide 21: Solutions Review
Solutions Review – Indoor solutions – Outdoor solutions – Subsystems & Antennas – Digital Microwave – Extended Maintenance Service 20
Slide 22: Expanding our Solution Offerings
Expanding our Solution Offerings: End-End Sub-system Solutions Antennas Various Outdoor Products Tower-Top Inbuilding Solutions solutions Microwave MCPA Base Station Outdoor enhancement Indoor Enhancement Subsystems Solutions Solutions 5.7% 19.2% 73.6% 67.2% 15.7% 3.2% 2004A 2005A 2004A 2005A 2004A
Slide 23: Indoor Solutions
Indoor Solutions Large Venue Medium Small Sized Venue Venue Multi-Operator / Hybrid Fiber / Network Passive Hybrid Passive / Active Coax Review: Unrivaled product portfolio for all in-building wireless needs Revenue (HK$’000) 804,806 787,033 Global leader with completion of numerous major projects 5
Slide 24: Outdoor Solutions
Outdoor Solutions RF Repeater Dynamic Traffic Routing Optical Repeater Frequency Shifting Shifter Solar Power Repeater Review: Revenue (HK$’000) Continuous launch of new solutions to meet customer demand 224,581 183,044 Dynamic Traffic Routing (DTR), Camouflaged Solutions, etc 171,886 Soli
Slide 25: Subsystems & Antennas
Subsystems & Antennas Antennas Tower-Top Solutions RF Front Ends & MCPA Review: Introduction of multi-band antennas streamlined product line Revenue 55,588 (HK$’000) Addition of MIMO and Smart Antennas for 3G applications 33,921 Established leading market position winning of China Mobile Antenna pro
Slide 26: Digital Microwave Systems
Digital Microwave Systems Review: Initial product line launched in 4Q04 Revenue Completed various frequencies offering (HK$’000) 11,091 Launched of S-PDH and SDH solution for up to 155Mbps wireless transmission Recorded strong growth after long initial sales cycle Opportunities: 1,166 Recurring busi
Slide 27: Extended Maintenance Service
Extended Maintenance Service Review: Revenue 13,941 Initiated maintenance contract sales in 2004 (HK$’000) 10,229 Leveraged on the growing installed base Opportunities: Growing installed base offers a growing addressable opportunity 0 Leveraging on existing support structure enables high 2003A 2004A
Slide 28: Business Review & Outlook
Business Review & Outlook – Research & Development – Operations – Market Outlook 27
Slide 29: Research & Development Review
Research & Development Review General: Sustained commitment to technological advancement & leadership with R&D increase from 3.4%* -> 5.3%* Antenna Development New HQ consists of state of the art antenna testing facility Facility allows the development of most sophisticated product Potential benchma
Slide 30: Operations Review
Operations Review Facility New China Headquarters for R&D and G&A by 3Q06 Existing facility will be for manufacturing operations Exceeding doubling of manufacturing capacity Planned capacity expansion for: 1) existing & 2) 3G & Core Equipment Vendor Markets Enterprise Management Completed Phase I &
Slide 31: Market Outlook
Market Outlook China Wireless subscribers exceeds 400M in 2005 China Mobile planned expenditure in 2006 on 2G: – RMB83.3B, vs RMB71.5B 2005 China Unicom planned expenditure in 2006 on 2G: – RMB22B, vs RMB17.6B in 2005 International market gaining good traction Good foundation on new offerings for su
Slide 32: Summary
Summary Diversifications for balanced growth – Solutions and offerings – Customers and Partners Optimization to increase capability & efficiency – Facilities – Enterprise management Capture new growth opportunities – 3G WCDMA & TD-SCDMA – International – New Solutions 31
Slide 33: Open Forum
Open Forum 32