(Hong Kong, 27 March 2015) – SIM Technology Group Limited (“SIM Technology” or the “Group;” SEHK stock code: 2000), a leading mobile handset and wireless communication module solutions developer in China, announced its annual results for the year ended 31 December 2014, which saw a turnaround in its business. Profit attributable to owners of the company recorded HK$24 million (2013: loss attributable to owners of the company of 239 million). Basic earnings per share were HK0.94 cents (2013: basic loss per share of HK9.4 cents). The overall turnover increased year-on-year by 37.1% to HK$2,352 million (2013: 1,716 million), with the overall gross profit margin of 12.8% (2013: 10.9%). During the year, the Group has maintained stable growth in its ODM consumer handset business, and at the same time has continued to enlarge the market share of its wireless communications modules business domestically and overseas. Besides, it has also actively expanded the industrial application handset business and new businesses, including exploring opportunities in internet of things (IOT) and the automated robotic business. Overall, the Group has achieved results in its business positioning and development strategies, laying a solid foundation for the sustainable growth of its business.

During the year under review, the handsets and solutions business recorded an outstanding performance with revenue and gross profit up by approximately 56.9% and 58.0% to HK$1,512 million (2013: HK$963 million) and HK$161 million (2013: HK$102 million) respectively. The gross profit margin remained at 10.6% (2013:10.6%). Thanks to the strong R&D capability and the steady effort of the entire staff, the Group has focused on developing the quality ODM handset business and accelerating the development of industrial application terminals. It has also strived to capture the opportunities arising from the popularity of 4G LTE and continued to develop high-end products and quality customer base in both the domestic and overseas markets. During the year, the Group has completed mass production and delivered several high-end ODM projects. The Group has recorded stable growth in turnover for its existing consumer handset business and expanded its cooperation with several new domestic and overseas customers. As for the overseas market, the Group is exploring some large and mid-size regional and global customers. The Group’s ODM consumer handset business mainly targets customers in the high-end customised terminal markets in Europe, the America, and Japan, while the main promotion targets of the Group’s own branded products include European, Central and South American markets. The Group has started shifting its R&D investment in the handset business to 4G applications since 2013. It has also cooperated with overseas customers in LTE projects and made shipments to South and North America and Europe, as well as Japan and Korea in Asia. Currently, more than 90% of the Group’s R&D resources are allocated to the development of 4G handsets and terminals. Thus, the Group has moved to the forefront of the industry in 4G development and product planning.

As for the industrial application terminals, the Group has developed various industrial application terminals and IOT terminals, making shipments to South and North America, Europe and Asia. Meanwhile, the Group’s waterproof, dust-proof and shock-resistant handset project in collaboration with a branded company in the US has obtained product certification from AT&T with products already delivered to customers. The Group is developing new products based on the handset version of another large telecom operator in the US, which are expected to be delivered in the first half of 2015. At the same time, the Group’s own branded mobile terminal products specially designed for use in logistics, telematics, finance and medical care industries have gained traction in both domestic and overseas markets.

As for the wireless communication modules business, the Group achieved a new record in the overall delivery volume for the year and satisfactory growth in revenue and gross profit in this business segment. The growth was attributable to the increase in demand in the overseas market. The notable growth in demand for high value 3G/4G products in Europe, North America and Japan has led to a 27% growth in the overall sales of the products. Sales volume of 3G/4G products have also doubled. Revenue and gross profit increased to HK$557 million (2013: HK$473 million) and HK$90.8 million (2013: HK$73.8 million) respectively, with gross profit margin up by 0.7 percentage points to 16.3% (2013: 15.6%). During the year, the Group saw higher selling price and profit growth in overseas market. Growth in the overseas market was also higher than that in the domestic market, which led to a drastic increase of revenue in the wireless communication modules business. Meanwhile, 3G/4G platform products with higher selling price and profit recorded double sales volume growth, which was constituted as the paramount factor in achieving outstanding performance. The Group’s strategies for 2014 remained in place as it continued to expand its market share in domestic and overseas market, maintained its price competitiveness in China and maximised its market share in major fields such as fleet management, commercial telematics, AMR, wireless POS terminals, security and telehealth in China. As for overseas regions, the Group has continued to increase its market share capitalising on its competitive cost structure. It has also strengthened the direct cooperation with major operators, in particular seizing first mover opportunities in Europe, the US, Japan and Korea.

In the past few years, the Group continued to expand the Internet of Things (IOT) business. Leveraging its technological advantages in cloud computing, big data, the mobile internet and IOT, the Group aims to spark innovation and benefits to traditional industries. Not only did the Group integrate online and offline operation of smart vending machines to create a cloud trade O2O platform, but also developed a cloud computing and big data service platform, which has been applied in creating smart communities, smart home elderly service, an internet of vehicles, management of property facilities team, interaction between families and schools, etc. On the other hand, the Group revamped the operation mode of traditional vending machines by developing a cloud platform for vending machines with real-time monitoring function and installing various value-added businesses within the machines. In this way, vending machines can be transformed into one-stop multi-functional devices that provide different convenience services such as product selling, advertisements, logistics, e-commerce, financial services and web-surfing. After development for more than one year, most of the Group’s vending machines are located in economically prosperous regions such as the Yangtze River Delta and Pearl River Delta Regions. Operation teams have been formed in Shanghai, Nanjing and Shenzhen. As for the beverage trading business, the Group has acquired a wholesale and logistics company and has set up many cloud-based trade warehouses in Shanghai, Shenzhen, Wuhan, Qingdao and Hefei to form a complete product distribution system. The finance lease company under the Group provides finance lease services to vending machine operator franchisees to reduce funding pressure.

Furthermore, facing the challenge of rising labour costs in China, the Group has devoted great efforts to develop automation and smart applications for the manufacturing industry. By the end of 2014, the Group’s smart manufacturing business began tapping the machinery industry. Through the “SIM Smart Manufacturing” platform, the Group’s own smart automated manufacturing industry alliance, all members who are franchised automation integration companies can share technologies, R&D results, market information, and valuable equipment and talent resources. Each franchisee focuses on intelligent transformation of one production line so as to leverage their specific advantages. The Group believes that smart automated manufacturing will be the dominant future trend and this business is expected to become one of the Group’s core growth drivers in the future.

With respect to the property development business, as at 31 December 2014, the sales of “The Riverside Country” recognised in 2014 amounted to HK$211 million (2013: HK$118 million). Gross profit margin was 21% (2013: 25.4%). Leveraging the research and professional knowledge from IOT application solutions, the Group’s “IOT and New Generation Energy Model Residential Area” has begun pre-sale and is expected to be delivered in the fourth quarter of 2015.

Looking ahead, the 4G market around the world (in particular the PRC, North America and Japan) will continue to have strong growth. Along with the development of IOT and mobile office, the Group will continue to enhance the R&D efforts on 4G LTE and IOT industry application terminals as well as investment of resources in new products. For the consumer handsets, the Group is structuring the business into “customised high-end ODM products” and “self-customised products”. As for industrial application terminals, the Group continues to develop various industrial application terminals and IOT application terminals, while enhancing direct cooperation with major operators and exploring opportunities with more quality customers. Due to the rising concern about information security, Chinese government authorities, state-owned enterprises and larger private companies have gradually shifted to choosing domestic suppliers and brands for mobile office terminals. Meanwhile, the demand for equipment designed for police and security applications is expected to see stable growth in the short-to-medium term. Moreover, the demand for terminals is expected to show notable growth in the mobile payment and mobile POS industries in the coming years. Regarding the wireless communication modules business, the Group will continue to capture global market share in the 2G market and make inroads into the 3G/4G market through direct communication and cooperation with a number of major global operators in 2015, so as to attain international certification and advance strategic collaboration. Meanwhile, the Group will also build partnerships with its customers who are leading companies in major M2M industrial application areas and collaborate with them to facilitate the implementation of 3G/4G projects and subsequent marketing campaigns. On the IOT business front, the Group is continuing to develop and engage in incorporating smart elements into residential and commercial properties, as well as IOT projects relating to elderly care, transportation and education. In addition, the Group forecasts that total sales of vending machines will grow in multiples during 2015, and it will focus on distribution in first-tier cities such as Shanghai and Shenzhen to create a regional advantage.

Mr Wong Cho Tung, Executive Director and Chief Executive Officer of SIM Technology, said, “With the concerted efforts of the management team and the entire staff, we have achieved substantial progress in product development and business transformation. We believe the high-end consumer handsets and industrial application terminals ODM business will maintain strong growth and the new businesses will generate new growth momentum. We are very confident about the future prospects of the Group and will continue to pursue innovation in all aspects of our business. We expect the overall scale and scope of business and profit to continuously increase in the future.”