legend group limited 2003/04 q1 results announcement results overview

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Legend Group Limited 2003/04 Q1 Results Announcement Results Overview Mr. Liu Chuanzhi Chairman August 6, 2003

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Legend Group Limited 2003/04 Q1 Results Announcement Results Overview. Mr. Liu Chuanzhi Chairman August 6, 2003. Overview. Turnover for FY2003/04 Q1 reached HK$5.34 billion, an increase of 11.4% year on year EBITDA amounted to HK$307 million, grew 2.3% year on year from HK$300 million - PowerPoint PPT Presentation

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Legend Group Limited2003/04 Q1 Results Announcement

Results Overview

Mr. Liu ChuanzhiChairman

August 6, 2003

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Overview

Turnover for FY2003/04 Q1 reached HK$5.34 billion, an increase of 11.4% year on year

EBITDA amounted to HK$307 million, grew 2.3% year on year from HK$300 million

Profit attributable to shareholders increased by 3.9% year on year to HK$278 million

The Group’s gross margin improved from 15.49% to 15.63%

Net profit margin was 5.21%, compared to 5.59% of the same period of last year

Return on equity (ROE) was 6.5%, compared to 7.0% of the same period of last year

Legend Group Limited2003/04 Q1 Results Announcement

Financial Review

Ms. Mary MaSenior Vice-President & Chief Financial Officer

August 6, 2003

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2003/04 Q1 Consolidated Profit & Loss Account

(HK$'000)2003/04

Q1% of

Turnover

2002/03 Q1

% of Turnover

Turnover 5,341,739$ 4,796,352$

EBITDA 307,328$ 5.75% 300,437$ 6.26%

Depreciation expenses (48,197)$ (32,015)$

Amortisation of intangible assets (6,793)$ (1,838)$

Gains on disposal of investment securities -$ 6,401$

Interest income 21,045$ 13,591$

Profit from operations 273,383$ 5.12% 286,576$ 5.97%

Finance costs -$ -$

273,383$ 286,576$

Share of losses of jointly controlled entities (8,629)$ (18,251)$

Share of profits of associated companies 5,109$ 7,207$

Profit before taxation 269,863$ 5.05% 275,532$ 5.74%

Taxation 3,405$ (10,919)$

Profit after taxation 273,268$ 264,613$

Minority interests 4,988$ 3,303$

Profit attributable to shareholders 278,256$ 5.21% 267,916$ 5.59%

Earnings per share (Basic) 3.73 cents 3.57 cents

Earnings per share (Fully diluted) 3.72 cents 3.56 cents

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2003/04 Q1 Turnover Breakdown

Corporate IT 48.3% (52.0%)

Consumer IT 38.3% (38.2%)

Handheld Device 7.5% (5.4%)

Contract Manufacturing3.9% (3.6%)

IT Service 2.0% (0.8%)

Note 1: FY2002/03 Q1 figures are in brackets.

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Changes in Turnover Breakdown

(HK$ Million)

2003/04 Q1

2002/03 Q1 Change

Corporate IT 2,578$ 2,495$ 3.3%

Consumer IT 2,045$ 1,833$ 11.6%

Handheld Device 401$ 261$ 53.4%

IT Service 109$ 37$ 195.7%

Contract Manufacturing 209$ 170$ 22.4%

Total 5,342$ 4,796$ 11.4%

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Changes in Profit Contribution Breakdown

Note 2: Profit contribution for FY2002/03 and FY2003/04 before amortization of goodwill and gains on disposal of investment securities.

(HK$'000)

2003/04 Q1

2002/03 Q1 Change

Corporate IT 177,717$ 163,876$ 8.5%

Consumer IT 154,684$ 114,471$ 35.1%

Handheld Device (24,257)$ 4,173$ N/A

IT Service (9,965)$ (10,692)$ N/A

Contract Manufacturing (20,126)$ 10,185$ N/A

Total (Note 2) 278,053$ 282,013$ -1.4%

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Gross Margin Analysis

15.49%16.69%

13.55%

19.08%

28.51%

16.34%15.63%

16.24%14.41%

11.79%13.37%

42.32%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2002/03 Q12003/04 Q1

Note 3: Before elimination of inter-company transaction, the gross margin of contract manufacturing business is 8.0% (2002/03 Q1: 9.4%).

Corporate IT Consumer IT Handheld Device

GroupContract Manufacturing

(Note 3)

IT Service

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Consolidated Balance Sheet

(HK$ Million)

As at 30/6/2003

As at 31/3/2003

Intangible assets 114$ 121$ Tangible fixed assets 822$ 846$ Construction-in-progress 212$ 174$ Investments 374$ 374$ Deferred tax assets 9$ -$

Current assets 6,096$ 5,241$ Current liabilities 3,120$ 2,507$

Net current assets 2,976$ 2,734$

Total assets less current liabilities 4,507$ 4,249$

Shareholders' funds 4,457$ 4,189$ Minority interests 50$ 60$ Deferred tax liabilities -$ 0.3$

4,507$ 4,249$

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Key Financial Figures

(HK$ Million)

2003/04 Q1

2002/03 Full Year

2002/03 Q1

Cash reserves 2,936$ 2,808$ 2,747$

Total borrowings -$ -$ -$

Net cash reserves 2,936$ 2,808$ 2,747$

Net tangible assets 4,343$ 4,068$ 3,862$

Capital expenditure 72$ 689$ 229$

Current ratio 2.0 x 2.1 x 2.0 x

Days inventory 25.6 days 22.9 days 20.4 days

Days receivable 23.4 days 21.5 days 18.2 days

Days payable 37.2 days 36.4 days 32.8 days

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Key Financial Figures

2003/04 Q1

2002/03 Full Year

2002/03 Q1

Gross margin 15.63% 14.82% 15.49%

Net margin 5.21% 5.03% 5.59%

Return on equity (ROE) 6.5% 25.6% 7.0%

Return on net tangible assets 6.7% 26.1% 7.0%

Earnings per share (Fully diluted) 3.72 cents 13.54 cents 3.56 cents

Net tangible assets per share 56.03 cents 52.21 cents 50.67 cents

Shares in issue (million shares) 7,468 7,477 7,509

Legend Group Limited2003/04 Q1 Results Announcement

Market and Business Review

Mr. Yang YuanqingPresident & Chief Executive Officer

August 6, 2003

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Market Overview

China IT market in FY2003/04 Q1 was impacted by SARS outbreak– Corporate IT market was affected heavily

• Business trips and promotion activities were restricted

• Government focused on fighting SARS

• School classes were suspended in some regions

– Retail market (PC, handset and digital products stores) in epidemic regions was seriously impacted during April and May

China IT market continues to demonstrate great potential, PC unit shipment in April to June quarter is estimated to grow 10% YoY

– SARS outbreak promoted IT applications, hence stimulated the sales of consumer PC, especially PC for schooling

– 4 to 6 tier market maintains fast growth, yet lowered configurations and average selling price

Intensified competition in handset market continued, product upgrading time shortened

– B/W screen handset inventory reduction caused more price pressure and lowered average profit level

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Business Review

Performed well during SARS period, achieved growth both in turnover and net profit

– Corporate IT was seriously impacted by SARS, especially for education and government sectors, yet still recorded 3.3% and 8.5% growth in turnover and profit respectively

– Consumer IT performed remarkably by leveraging competitive strengths and quick responses to the market, achieving 11.6% and 35.1% growth in turnover and net profit respectively

• Advantages stood out in branding, 1+1 home specialty shop, call center and after sale services

– Handset business grew 53.4% in turnover with the launch of new models and channel expansion

• Gross margin lowered by both SARS and inventory reduction from competitors

– IT service business showed positive results from business integration, the acquired businesses performed well and began to contribute profit

• Possible lagging effect from SARS outbreak

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3-Tier Business Strategies on Track

Core business strongly outperformed the overall market– PC unit shipment grew 21.6% YoY, far better than market growth

– PC market share increased QoQ and YoY

Majority of growth businesses and seed businesses performed in line with expectations– Notebook unit shipment grew 52.4%

– IT service revenue grew 195.7%

– Handheld device revenue grew 53.4%

– Printer units grew 65.5%

Commercial DT 15.7%

Notebook52.4%

Consumer DT24.5%

Server2.0%

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Technology Innovation & Product Portfolio Optimization

Executed market segmentation strategy, rolled out customer-oriented/time-to-market products

Fengxing

Jiayue

High-end users in large cities Enhanced share of

replacement market

Low income families / Students

General users /Quality buyers

Hot model; 30,000 units booked on its debut

Principal product

Launched in June

Tianjiao

Launched in May

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Promote Applications for Data and Communication Convergence

Leverage on data processing advantage, strengthen self-developed capabilities

– Released six new models with proprietary technologies, G818 is the first MMS handset among domestic vendors

– Debuted high end PC-phone ET180

– Penetrate notebook market by rolling out new products with fashionable features such as wireless, wide screen, etc.

G818

ET180

Tianyi

Strengthens high end market position

Improves gross margin

Develops new market

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