Audio Business Expanded Steadily; Actively Developed Global Market of Smart Products

Results Highlights (For the year ended 31 December 2019)

(1)      Mainly include smart voice speakers, wireless speakers, soundbars, home theatres, and mini speakers

(2)      Mainly include fabric covering for external sales, plastic injection structural parts, speakers, wireless

modules, and other components. The ancillary products of Guangdong Regency Optics-electron Co., Ltd., a subsidiary of the Group, began to be consolidated into the revenue of ancillary products of the Group in the first quarter of 2019

(3)      Mainly include smart plugs, smart gateways and other IoT products

(4)      Mainly include DVD players, BD players, OTT set top boxes (STB), and other products

*        The sales volume of certain IoT related products in 2018 was reclassified to video products for the reason of product form adjustment.

• Smart speakers, headphones, and soundbars businesses grew rapidly.
• Smart product business maintained growth, its proportion of the revenue generated to the total turnover increased to 16.3%.
• Ancillary product business which is ancillary to the smart product business grew rapidly, up 70.1% year-on-year to HK$786.6 million.
• Profit attributable to owners of the parent increased by 20.4% to HK$268.7 million.
• The board of Directors proposed a final dividend of HK$0.35 per share.

HONG KONG, CHINA - Media OutReach - 24 March 2020 - Tonly Electronics Holdings Limited ("Tonly Electronics" or "the Group"; SEHK stock code: 01249) today announced its audited annual results for the year ended 31 December 2019 ("the year under review").

During the year under review, the Group endeavoured to develop its audio product, smart product and ancillary product businesses, among which products including smart speakers, headphones and soundbars grew rapidly. The Group recorded a turnover of HK$8,146.6 million, representing a year-on-year growth of 11.6%. Gross profit amounted to approximately HK$1,095.5 million, representing a year-on-year growth of 31.7%. Gross profit margin increased by 2.0% from 11.4% in the same period last year to 13.4%, which was attributable to the improvement of production efficiency as well as the decrease in cost of raw materials. Profit attributable to the owners of the holding company during the year under review increased by 20.4% year-on-year to HK$268.7 million. The board of Directors proposed a final dividend of HK$0.35 per share.

As the rapid growth in the global market of smart products and the advantage of leading product technology and the initial market layout, the smart product business of the Group maintained growth and the proportion of the revenue generated by it to the total turnover of the Group increased to 16.3%. Meanwhile, the ancillary product business which is ancillary to the smart product business also benefited from the overall market growth, especially in respect of precision plastic injection, structural parts with new form and speaker units, all of which achieved remarkable results. In addition, with the shipments of Bluetooth headphones of the Group maintaining rapid growth, the Group has achieved large-scale shipments for TWS earphones and enhanced its new technology development.

The Group has been committed to product R&D and innovation. During the year under review, the Group's R&D expenses amounted to HK$370.4 million, accounting for 4.5% of its total revenue. Moreover, the Group maintained close cooperation with global internet enterprises, while screen-equipped smart speaker jointly developed by the Group and its customers breaks the limitation in respect of audio interaction function and content display and allows smart products to acquire audio and visual abilities.

The Group used Huizhou Zhongkai as a core base and moulding centre integrating research, production and sales. After the commencement of operation of the new plant at Phase Two of Second Plant in March 2019, not only solving the problem of decentralised production, certain space was reserved for the production of new products as well, which were beneficial to the enhancement of overall production efficiency. Huizhou Tongqiao Industrial Park was forming a comprehensive industrial chain integrating carpentry, speaker assembly, high-end wooden boxes, speakers, and plastic injection. At the beginning of 2019, in order to enhance the overseas supply chain capability and make use of the global resources, the Group purchased industrial land of over one hundred thousand square meters in Vietnam to establish its own overseas plant which the Group would strive to commence operation in the second half of 2020. Furthermore, the Group continued to increase the proportion of automated equipment, and strengthened the stability of skilled workers to boost its per capita production efficiency and quality steadily.

The outbreak of the novel coronavirus disease ("COVID-19") started from early 2020. Although the Group was affected to a certain extent in respect of work resumption of employees, material supply and increase in cost of raw material, the Group has been under normal management and has fully resumed work maintained normal level of production and operation. However, the pandemic has been spreading in Europe and America since March 2020. As the Group's major markets are in Europe and Americas, there will be significant adverse effects on the Group's business if the European and American markets slump or the countries implement closure of business premises in view of the impact of the pandemic.

The management of Tonly Electronics stated, "Looking into the future, despite uncertainties in the external economic environment, the Group will continue to consolidate and strive to upgrade its position in the new audio market, focus on the development of smart speakers, soundbar and headphone product businesses, as well as strive for more business opportunities and find more new customers. The Group is committed to explore new technologies, new products, and enhance its productivity, in order to provide brand companies and customers with outstanding quality products and services."

About Tonly Electronics

Tonly Electronics Holdings Limited (SEHK stock code:01249), a high-tech smart products manufacturer with competitive industrialadvantages, is principally engaged in the research and development,manufacturing and sales of audio and video products as well as wireless smartinterconnectivity products. It is also developing into smart business. TheGroup is committed to becoming a one-stop smart loT solutions provider based onthe electroacoustic and wireless technologies. 

Formore information, please visit its website at www.tonlyele.com.