HONG KONG, CHINA - Media OutReach - 14 August 2019 - TonlyElectronics Holdings Limited ("Tonly Electronics" or "the Group"; SEHKstock code: 01249) today announced its unaudited interim results for the six months ended 30 June2019 ("the period under review").

During the period under review, the Group recorded a turnover ofapproximately HK$3,518.2 million, up by 25.6% year-on-year. Gross profitincreased by 33.7% year-on-year to approximately HK$457.2 million. Operatingprofit rose by 14.2% year-on-year to approximately HK$133.0 million. Profitattributable to the owners of the holding company climbed by 15.1% year-on-yearto approximately HK$98.3 million. Attributed to the improvement of productionlayout and efficiency, the gross profit margin of the Group in the period underreview increased to 13.0% comparing to the same period last year.

Benefiting from the rapid growth in the global market ofsmart products and the Group's advantage in product technology, the Group'saudio product business recorded a revenue of HK$2,502.6 million, representing ayear-on-year increase of 24.3%. The new audio business maintained its advantagein scale, and maintained a relatively rapid growth together with the smartaudio speaker business. In the period under review, the revenue of headphonesincreased by 71.2% year-on-year to HK$421.5 million, reinforcing the Group'sleading position in the headphone industry and securing more new customers. TrueWireless Stereo (TWS) earphone business also achieved a breakthrough andstrengthened its competitiveness. For the ancillary product business, benefitingfrom the overall market growth and entering into the supply chain of anoverseas mainstream internet corporation, the ancillary products contributed arevenue of HK$304.9 million to the Group, representing a year-on-year increaseof 63.6%.

During the period under review, the Group continuouslyenhanced its capabilities in speaker units and structural components,especially the new structural parts related to precision moulding in order toreinforce its vertical integration capability of the supply chain. Leveragingon its extensive experience in professional electro-acoustic design and pioneeradvantages in smart speakers, the Group constantly innovates in productdevelopment. During the period under review, the Group's product research and development(R&D) expenses amounted to HK$169.5 million, accounting for 4.8% of itstotal revenue. The R&D team is devoted to introducing news productsepitomised by smart voice speakers in response to consumers' specificrequirements, as well as developing screening-equipped smart products centringsmart voice and all kinds of smart voice eco-ancillary products to secure morenew customers and explore new fields.

The Group also continuously refines its production and supply chainmanagement. The Group used Huizhou Zhongkai as a core base and moulding centreintegrating research, production and sales. Phase Two of Seaond Plant on landparcel No.42 commenced operation in March 2019, enhancing the overallproduction management and efficiency, as well as reducing external fees. The Group'sHuizhou Puli Electroacoustics Tongqiao Industrial Park was also put intooperation, foriming a comprehensive industrial chain integrating carpentry,speaker assembly, high-end wooden boxes, speakers, and plastic injection. Inorfer to enhance the overseas supply chain capability and to proactivelyrespond to the potential impact of the U.S. tariff, the Group set up asubsidiary in Vietnam in the first half of the year, and plans to establish itsown overseas plant which was strived to commence operation in the second halfof 2020 to realise the overseas extension of the Group's vertical integrationcapability of the supply chain.

The management of TonlyElectronics stated: "The smart product industry is likely tomaintain a relatively rapid growth amid the sluggish global economy. The Groupstrives to provide brand companies and customers with outstanding qualityproducts and services by expanding new businesses, exploring new technologiesand products, and enhancing its productivity. As the smart and ancillaryproduct business is becoming more mature, we believe the smart products,headphones and ancillary products of the Group will account for an increasingproportion to its turnover in 2019, contributing to a strong business growth inthe future. Meanwhile, more intense market competition can be foreseen alongwith the continuous development of smart audio products. In face of the variousrisks and opportunities, the Group will keep on looking for business expansionopportunities, which, coupled with its own strengths, will enlarge its businessportfolio, enhance the long-tern value of the Group, and proactively generatemore return for its shareholders."