(Hong Kong, 24 March 2016) – 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, is pleased to announce its annual results for the year ended 31 December 2015.
After the Group began the transformation of its business in 2014, the business positioning strategy has begun to bear fruit. During the year, the Group continued to develop its high-end Original Design Manufacturer (“ODM”) consumer handset business and wireless modules business, as well as actively expanded the industrial applications terminal, IOT and intelligent robotic manufacturing businesses. Turnover of its core businesses continued to grow, laying a solid foundation for sustainable development in the future. Profit attributable to owners of the Company surged by 169.7% to approximately HK$65 million (2014: HK$24 million). Total turnover increased year-on-year by 35.9% to HK$3,197 million (2014: HK$2,352 million). Gross profit rose by 41.4% to approximately HK$426 million (2014: HK$301 million) with overall gross profit margin up 0.5 ppt to 13.3% (2014: 12.8%). Basic earnings per share were HK2.53 cents (2014: HK0.94 cents).
During the year under review, the handsets and solutions business recorded steady growth with revenue and gross profit up by approximately 35.2% and 46.9% to HK$2,043 million (2014: HK$1,512 million) and HK$236 million (2014: HK$161 million) respectively. The gross profit margin slightly increased to 11.5% (2014:10.6%). Smartphones have played a key role in penetrating the mobile internet market, and this phenomenon has driven some internet and other consumption brands and channels to transfer their own core business to mobile terminals as well as launch their self-developed handsets. Therefore, the Group has seized the opportunities to focus its efforts on differentiated customers and products, enabling it to achieve outstanding results from the handset business during the year. Demand for industrial application terminals has continued to rise along with the further expansion of the IOT market, still presenting huge room for development in the sale of the industrial terminals market. The rapid growth in specific industries such as information and public safety, mobile office, the “internet of vehicles” and mobile payment is set to further stimulate demand for industrial terminal products, resulting in the continued expansion of market volume in particular. During the year, taking advantage of its experience in handsets, the Group has achieved great success developing the handset chip-based core board (an intelligent module) . The product has been widely applied in areas such as mobile payment Point-of-Sale (“POS”) machines and the “internet of vehicles.”
As for the wireless communication modules business, due to the strong demand for the Group’s 2G, 3G and 4G wireless communication modules from domestic and overseas markets, the Group’s annual shipment volume has set a new high once again in Europe, Southeast Asia and Australia with an increase exceeding 50%. Thus, the Group’s revenue and gross profit have shown notable growth. Sales and gross profit rose to approximately HK$639 million (2014: approximately HK$557 million) and HK$94.7 million (2014: HK$90.8 million) respectively, with gross profit margin down 1.5 ppt to 14.8% (2014: 16.3%). As for the products, sales of 3G modules recorded growth of more than 30% when compared with last year, while sales of global navigation satellite system (“GNSS”) modules also recorded a growth of three times when compared with last year. The Group has also increased the sales of 4G products and two of its important ODM projects have started mass shipment in 2015, with higher selling prices for 4G modules, driving stronger growth in annual sales and gross profit. As for the market, the Group was able to maintain its leadership position in the application in “internet of vehicles,” POS, wireless AMR and security and surveillance, etc. Regarding the emerging smart home, smart electrical appliances and healthcare markets, the Group has actively developed supporting products and conducted research and development (“R&D”) for terminal products which quickly addressed the needs of customers and have achieved outstanding results. For major customers in specific industries, the Group has boosted its efforts in engaging in customised projects, thereby assisting its customers to speed up R&D in terminal products and save development costs. During the year under review, the Group actively cooperated with the various operators and brands. The Group’s SIM7100A 4G module was certified by AT&T and was applied in products by certain customers. It is also currently designing 4G CAT1 modules which meet the requirements set by AT&T, as well as developing the module project in collaboration with Verizon and Sprint, which should generate higher revenue in the future.
In recent year, the Group is committed to expand its IOT business. With a platform built from its leading technologies in cloud computing, big data, mobile internet, IOT and organisational smart elderly management applications, the Group has deployed more than 50,000 units of virtual machines used for big data processing, providing all-round cloud computing services for its customers. Based on the elderly cloud big data service platform, the Group has introduced the advanced elderly service concept from Sweden and completed the development of the high-end elderly service system in Shanghai. The Group has built an LBS “internet of vehicles” system with several hundred thousand vehicles connected to the system to date. The system enables the simultaneous connection of up to ten million vehicle terminals and thus effectively lowers the loss rate of vehicles. After two years of development, the Group has enhanced the digital and networking functions of its vending machines. It has also transferred the status and transaction information of vending machines with Internet connections to the cloud platform. The vending machine operation, maintenance and management platform developed by the Group is backed by high performance servers, and is able to support up to millions of terminal connections, as well as various online-to-offline (“O2O”) businesses including advertising, online payment and purchase points redemption in loyalty programs. During the year, the scope of the automatic vending machine business expanded from retail and finance leasing to more areas including beverage trading, vending machine O2O operations and the manufacturing of smart vending machine controllers.
In 2015, the Group placed great emphasis on the development of the robotic automation business and officially established the intelligent manufacturing business segment. The Group seamlessly integrated its self-developed standard robot arm and visual system and developed a handset motherboard PCBA automatic testing system, which replaced more than 10 testing workers. During the year, the Group completed the equipment upgrade to the third generation, further enhancing its price-performance ratio. Consequently, the system can enhance the quality level while greatly lowering the manufacturing cost of handsets. Currently, the equipment is widely used by the leading handset processing plants in China and has been highly praised in the industry. During the year, the Group officially formed the “SIM IMS (Intelligent Manufacturing System) Manufacturing Industry Alliance.” The alliance has attracted a number of non-standard automation integration companies. Through this platform, they can realise their strengths in their respective technology fields and most familiar markets and utilise the shared resources of the platform to grow rapidly, as the Group transforms from a single-unit intelligent equipment vendor to a turnkey total automated solutions restructuring service provider.
For the property development business, as at 31 December 2015, sales from property development amounted to HK$162 million (2014: HK$211 million) with a gross profit margin of 15.8% (2014: 21%). Projects of the Group include “The Riverside Country” (晨興‧翰林水郡), which is located in Shenyang City, the PRC, and “Seven River in Sweet” (七裏香溪), which is located in Taizhou City, the PRC.
Looking ahead, the Group will continue to execute its ongoing strategies. It will actively secure more high-end differentiated customers and increase its investment in the industrial applications terminal business. It will actively strive to secure domestic and international customers with good market prospects and development potential. The Group has begun stringent control over the R&D and operating costs of several major industrial customers in the second half of 2015, which will bring a greater contribution to the business performance in the second half of 2016. Within the coming three years, the wireless communication module 2G products will remain the core of IOT applications. The Group will enrich its 2G product range and boost competitiveness of its products. It will launch 3G products with a higher price-performance ratio in 2016 while continuously increasing investment in the GNSS products while optimising the product range. However the 4G module products will be the Group’s most important focus and have enormous room for growth. As for the IOT business, the Group will accelerate integration within the cloud-based business, step up promotion efforts of the O2O business and advance the development of the Shanghai Yunhao division and regional branch offices while expanding the cloud and big data service platform.
Moreover, the Group will expand intelligent automation applications in the handset manufacturing business while speeding up the extension of its business to other fields from the handset manufacturing industry. The Group aims to comply with the Industry 4.0 and Made in China 2025 strategic directives. With the goal of replacing manpower through automated restructuring, the Group has deployed Process Control System (“PCS”), Manufacturing Execution System (“MES”) and Enterprise Resource Planning (“ERP”) systems to implement an information management system across the entire manufacturing process. This deployment is intended to expedite networking of all equipment and, in turn, intelligent applications and a flexible manufacturing system in its factories. In 2016, the Group has formed a team to develop intelligent manufacturing businesses with the aim to achieve restructuring by utilising intelligent applications as in the high-end manufacturing industry. At the same time, the Group is accelerating the R&D of its proprietary MES.
Mr Wong Cho Tung, Executive Director of SIM Technology, said, “Through the concerted efforts of our management team and the entire workforce, the Group has realised steady progress in product development and business transformation, which has delivered promising business results. We believe that customers from different industries can bring stable revenue to the handset business while the industrial applications terminal business will continue to contribute profit to the Group. Based on its satisfactory business performance and solid foundation, we believe the Group can maintain leadership in IOT module applications and solutions. The year 2016 should be a fast-growing period for SIM IMS as riding on the success of 2015, the Group plans to increase investment and expedite development in order to expand SIM IMS to become a core business in the future. The Group has identified new growth areas and development directions setting a course for its sustainable development. We are confident that our new business initiatives can advance the Group to new heights in the coming few years.”
