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Annual Report 2019 AAC Technologies Holdings Inc

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Annual Report 2019 AAC Technologies Holdings Inc (Incorporated in the Cayman Islands with limited liability) Stock Code: 2018 Annual Report 2019 AAC Technologies Holdings Inc. is the world’s leading solutions provider for smart devices with cutting-edge technologies in materials research, simulation, algorithms, design, automation and process development in Acoustics, Optics, Electromagnetic Drives and Precision Mechanics, MEMS, Radio Frequency and Antenna, providing advanced miniaturized and proprietary technology solutions. Our goal is to “Lead Innovation & Enhance User Experience”. In delivering high-performance and superior quality products, the Group will continue to create value for customers with innovative user experience. www.aactechnologies.com The English text of this annual report shall prevail over the Chinese text in case of any inconsistency. This annual report is printed on environmentally friendly paper Contents Essence of AAC Corporate Information 2 Core Development Strategies 3 Financial Highlights 8 Global Presence 10 Milestones: 1993-2019 12 Chairman and CEO Statement 14 Management Discussion and Analysis Market Review 17 Performance of Business Segments 18 Financial Review 22 Key Risk Factors 25 Organization Biographies of Directors and Senior Management 29 Governance & Sustainability Directors’ Report 40 Corporate Governance Report 56 Sustainability 88 Auditor’s Report and Financial Statements Independent Auditor’s Report 91 Consolidated Statement of Profit and Loss and Other Comprehensive Income 95 Consolidated Statement of Financial Position 96 Consolidated Statement of Changes in Equity 98 Consolidated Statement of Cash Flows 100 Notes to the Consolidated Financial Statements 103 5-Year Financial Summary 172 Others Investors Information 173 Glossary 175 The Company has since 2013 issued a stand-alone Sustainability Report every year. (Incorporated in the Cayman Islands with limited liability) The annual Sustainability Report discloses the details of sustainability performance, Stock Code: 2018 initiatives and its progress on environmental, social and governance issues for the year. Please visit the website www.aactechnologies.com to download the reports. Sustainability Report 2019 Corporate Information BOARD OF DIRECTORS LEGAL ADVISORS Executive Directors Woo, Kwan, Lee & Lo Mr. Pan Benjamin Zhengmin (Chief Executive Officer) Baker & McKenzie Mr. Mok Joe Kuen Richard PRINCIPAL PLACE OF BUSINESS IN Independent Non-executive Directors HONG KONG Mr. Koh Boon Hwee (Chairman of the Board) Unit 1605–7, China Evergrande Centre Mr. Au Siu Cheung Albert 38 Gloucester Road, Wanchai, Hong Kong Mr. Zhang Hongjiang (Appointed on 1 January 2019) Mr. Poon Chung Yin Joseph HONG KONG BRANCH SHARE REGISTRAR Mr. Kwok Lam Kwong Larry AND TRANSFER OFFICE Mr. Peng Zhiyuan (Appointed on 1 January 2019) Mr. Tan Bian Ee (Retired on 24 May 2019) Computershare Hong Kong Investor Services Limited Shops 1712–1716, 17th Floor, Hopewell Centre Non-executive Director 183 Queen’s Road East, Wanchai, Hong Kong Ms. Wu Ingrid Chun Yuan REGISTERED OFFICE AUDIT AND RISK COMMITTEE Cricket Square, Hutchins Drive Mr. Au Siu Cheung Albert (Chairman) P.O. Box 2681, Grand Cayman, KY1–1111 Mr. Poon Chung Yin Joseph Cayman Islands Mr. Kwok Lam Kwong Larry Mr. Peng Zhiyuan CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE NOMINATION COMMITTEE Maples Fund Services (Cayman) Limited Mr. Zhang Hongjiang (Chairman) Boundary Hall, Cricket Square Mr. Kwok Lam Kwong Larry P.O. Box 1093, Grand Cayman, KY1–1102 Mr. Peng Zhiyuan Cayman Islands REMUNERATION COMMITTEE PRINCIPAL BANKERS Mr. Poon Chung Yin Joseph (Chairman) Mr. Au Siu Cheung Albert Agricultural Bank of China Mr. Zhang Hongjiang Bank of China Bank of Communications AUTHORIZED REPRESENTATIVES DBS Bank Limited Mr. Pan Benjamin Zhengmin The Hongkong and Shanghai Banking Corporation Limited Mr. Mok Joe Kuen Richard Ping An Bank COMPANY SECRETARY STOCK CODE Mr. Ho Siu Tak Jonathan (Appointed on 25 March 2020) 2018 Mr. Lo Tai On (Resigned on 25 March 2020) WEBSITE AUDITOR www.aactechnologies.com Deloitte Touche Tohmatsu FINANCIAL YEAR END 31 December 2 AAC Technologies Holdings Inc. | Annual Report 2019 Core Development Strategies AAC Technologies is offering advanced solutions enabled by its cutting-edge and proprietary technologies to the global consumer electronics industry AAC Technologies is determined to drive growth through innovation and enhance its R&D as well as high-precision manufacturing capabilities, so as to provide the best products and solutions meeting future market demands. The core competencies of the Group include simulations, innovative research and design as well as vertically integrated smart manufacturing, complemented by efficient management, proven operational systems and its tireless effort in nurturing talents. AAC Technologies Holdings Inc. | Annual Report 2019 3 Core Development Strategies STRATEGY “Two-pronged” approach – R&D and The Group always aims to “lead manufacturing innovation and enhance user experience”. Focusing on high-tech entry barrier and high value-added miniaturised components, and establishing the leading edge in each segment, we achieve sustainable development capability. Versatile platforms for technology and equipment 4 AAC Technologies Holdings Inc. | Annual Report 2019 Core Development Strategies Acoustics Optics Electromagnetic Drives CONTINUE TO CONDUCT R&D ON CORE TECHNOLOGIES FOR MAINTAINING THE LEADING POSITION IN THE GLOBAL TECHNOLOGY MARKET: Since inception, the Group has identified technology-leader as its competitive strategy. With investment in R&D accounting for 9.6% of revenue, the Group has set up 19 R&D centers all over the world, with 4,177 R&D talents, and, by 31 December 2019, obtained 4,411 patents, as well as 4,785 patent applications. CONTINUOUSLY DEVELOP ULTRA-PRECISION PRODUCTION TECHNIQUES AND ENHANCE PER CAPITA OUTPUT: The Group has implemented an integrated process of R&D and manufacturing with independent R&D initiatives, self-developed equipment and automated production lines. Per capita output has continuously improved by self-developed production techniques, enhanced production yield and our global presence. Our target is to achieve the per capita output level of developed countries in 3–5 years. ESTABLISH A VERSATILE TECHNOLOGY PLATFORM TO ACHIEVE EFFICIENT USE AND GREATER INTEGRATION OF R&D RESOURCES: Our versatile technology platforms enable the Group to invest in specific R&D of these segments: miniaturized acoustic components, haptics, actuators, stepping motors, WLG lenses, 3D cover glasses and MEMS, to maintain technology leader status and innovative capabilities. ESTABLISH A VERSATILE EQUIPMENT PLATFORM TO ENHANCE LEVEL OF STANDARDIZATION AND DIGITALIZATION: Our self-developed production equipment has been designed with scope for continuous upgrade and further improvement. Hence, our production lines can be modified flexibly for supporting new requirements within the six product segments. We ensure quick response to new requirements of production process for new products, and new techniques can be implemented. Such enhanced versatility of equipment will significantly reduce investment costs of specific production lines of specific product segments. Metallic Casing/ RF Solutions MEMS 3D Cover Glass AAC Technologies Holdings Inc. | Annual Report 2019 5 Core Development Strategies INNOVATIVE TECHNOLOGY ENABLER Continuous Investment in Core and Innovations Materials, Miniaturized Tools & Technology Algorithms Versatile Technology Platforms Universal Intellectual Production Property Equipment Integrated Solutions Vertical Simulations Smart & Integration Digitalized Manufacturing HIGH PRECISION SMART MANUFACTURER 6 AAC Technologies Holdings Inc. | Annual Report 2019 Core Development Strategies Smart Home Drones Acoustics Optics MEMS Electromagnetic Drives IoT Devices Metallic Casing/ RF Solutions 3D Cover Glass Smart Devices Autonomous Vehicles AR/ VR AAC Technologies Holdings Inc. | Annual Report 2019 7 Financial Highlights Revenue EBITDA Earnings Per Share (RMB million) (RMB million) (RMB) 17,884 4,977 1.84 -1.4% -20.9% -40.8% YoY YoY YoY Free Cash Flow CAPEX/EBITDA Per Capita Output (RMB million) (RMB) 846 60.9% 454,075 -70.4% -1.1 ppts -9.9% YoY YoY YoY Net Assets Net Gearing Ratio ROE (RMB million) 19,361 10.5% 11.6% +4.3 ppts -9.2 ppts +2.3% YoY YoY YoY 8 AAC Technologies Holdings Inc. | Annual Report 2019 Financial Highlights SUMMARY OF PAST 5-YEAR OPERATING FINANCIAL DATA 2015 2016 2017 2018 2019 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue 11,738,866 15,506,828 21,118,566 18,131,153 17,883,757 Depreciation and Amortisation 715,745 968,905 1,316,046 1,763,627 2,176,306 Finance costs 21,950 66,812 164,711 217,888 248,210 Net profit 3,106,904 4,025,665 5,324,579 3,795,885 2,222,375 EBITDA 4,172,968 5,668,707 7,477,054 6,291,817 4,976,938 CAPEX (2,420,910) (4,137,632) (5,286,186) (3,903,282) (3,032,874) Taxation paid (276,608) (453,024) (696,234) (676,286) (370,068) Changes in working capital (291,148) (286,125) (1,601,984) 1,149,187 (727,941) Per Capita Output Free cash flow 1,184,302 791,926 (107,350) 2,861,436 846,055 Gross margin 41.5% 41.5% 41.3% 37.2% 28.6% R&D expenses to Revenue 7.3% 7.5% 7.9% 8.3% 9.6% ROA 20.9% 19.8% 19.4% 12.5% 6.9% ROE 30.4% 31.6% 33.6% 20.8% 11.6% Per capita output (Revenue/Employees) 329 334 405 504 454 Net gearing ratio Net cash 0.9% 7.3% 6.2% 10.5% Current ratio 1.89 1.41 1.32 1.44 1.92 CAPEX/EBITDA 58.0% 73.0% 70.7% 62.0% 60.9% AAC Technologies Holdings Inc. | Annual Report 2019 9 Global Presence R&D Patents
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