Annual Report 2009/10
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Skyworth Digital Holdings Limited Annual Report 2009/10 Contents Financial Highlights 2 Letter from Executive Chairman and Chief Executive Officer 4 Management Discussion and Analysis 8 Corporate Governance Report 21 Directors and Senior Management Profiles 33 Corporate Structure 41 Investor Relations 42 Directors’ Report 47 Independent Auditor’s Report 60 Consolidated Statement of Comprehensive Income 63 Consolidated Statement of Financial Position 65 Consolidated Statement of Changes in Equity 67 Consolidated Statement of Cash Flows 69 Notes to the Consolidated Financial Statements 71 Summarised Statement of Financial Position of the Company 163 Financial Summary 164 Financial Review 165 Corporate Information 166 1 Skyworth Digital Holdings Limited Annual Report 2009/10 Financial Highlights Amount expressed in HK$ million (except for share data) 2010 2009 Change OPERATING RESULTS FROM CONTINUING OPERATIONS Turnover 22,769 15,329 +48.5% Operating Profit (EBIT) from continuing operations 1,660 700 +137.1% Profit from continuing operations 1,326 460 +188.3% DISCONTINUED OPERATIONS Gain (loss) for the year from discontinued operation – 43 -100.0% Net Profit for the year 1,326 503 +163.6% Profit attributable to owners of the Company 1,251 460 +172.0% FINANCIAL POSITION Net cash (used in) from operating activities (1,987) 794 -350.3% Cash position* 4,585 1,539 -52.8% Bank loans 6,721 1,429 +197.9% Bank loans excluding the financial liabilities arising from discounted bills and foreign exchange arrangements 968 147 +558.5% Equity attributable to owners of the Company 5,773 4,353 +32.6% Working capital 4,268 2,757 +54.8% Bills receivable 6,938 4,539 +52.9% Bills discounted with recourse 3,428 1,157 +196.3% Trade receivables 1,584 1,403 +12.9% Inventories 3,298 1,267 +160.3% KEY RATIOS Gross profit margin (%) 21.4% 20.2% +1.2pp Earnings before interest, taxation, depreciation and amortisation (EBITDA) margin (%) 8.3% 5.8% +2.5pp Profit margin (%) 5.8% 3.0% +2.8pp Return on equity holders of the Company (ROE) (%) 21.7% 10.6% +11.1pp Debt to equity (%)** 114.8% 32.4% +82.4pp Debt to equity excluding portion of financial liabilities arising from discounted bills and foreign exchange arrangements (%) 16.8% 3.4% +13.4pp Net debt to equity Net Cash Net Cash n/a Current ratio (times) 1.3 1.4 -7.1% Trade receivable turnover period (days)*** 116 138 -15.9% Trade receivable turnover period excluding portion arising from discounted bills receivable (days)*** 78 114 -31.6% Inventories turnover period (days)*** 47 48 -2.1% DATA PER SHARE (HK CENTS) Earnings per share – Basic 52.32 20.15 +159.7% Earnings per share – Diluted 49.46 20.10 +146.1% Dividend per share 16.00 8.00 +100.0% Dividend payout ratio – Basic 30.6% 39.7% -9.1pp Dividend payout ratio – Diluted 32.3% 39.8% -7.5pp Book value per share 228.5 190.8 +19.8% SHARE INFORMATION AT FINANCIAL PERIOD END Number of shares in issue (million) 2,527 2,282 +10.7% Market capitalisation 2,292 1,621 +41.4% * Cash position refers to bank balances and cash, including pledged bank deposits of approximately HK$2,394 million ** Bank loans and financial liabilities arising from discounted bills and foreign exchange arrangements / equity attributable to owners of the Company at year end *** Calculated based on average inventory / average sum of bills receivable and trade receivables # Except for otherwise stated, all ratios calculated above were based on Continuing Operations figures 2 Skyworth Digital Holdings Limited Annual Report 2009/10 Turnover Profits Attributable to (HK$ million) Equity Holders of the Company 22,769 (HK$ million) 1,251 15,329 13,939 12,560 10,699 457 460 216 128 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Return on Equity Holders of the Earnings Per Share – Basic Company (ROE) (HK cents) (%) 21.7 52.32 11.6 10.6 20.15 7.0 19.95 3.9 9.53 5.59 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Payout Ratio Dividend Per Share (%) (HK cents) 39.9 39.7 16.0 30.4 30.6 25.1 8.0 5.0 3.8 1.7 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 3 Skyworth Digital Holdings Limited Annual Report 2009/10 Letter from Executive Chairman and Chief Executive Officer Zhang Xuebin Executive Chairman and Chief Executive Officer Highlights of Results The Group recorded the following results during the year ended 31 March 2010: • Turnover from continuing operations reached HK$22,769 million (91.2% from the PRC market), an increase of 48.5% from that of previous year. • Sales of TV products and digital set-top boxes accounted for 90.2% and 8.3% of the Group’s total turnover from continuing operations, respectively. • Gross profit from continuing operations achieved HK$4,873 million, increased by 57.5%; gross profit margin was 21.4%, increased by 1.2 percentage points. • Profit for the year from continuing operations were HK$1,326 million, an increase of 188.3% from that of previous year. • The Board has proposed a final dividend of HK8.0 cents per share with an option to elect new shares in lieu of cash. This represents a dividend payout ratio of 30.6% (31.9% based on the issued share capital at 30 June 2010) for the whole year. 4 Skyworth Digital Holdings Limited Annual Report 2009/10 Dear shareholders, partners and other stakeholders: The double digital growth was mainly attributable to the encouraging performance of the Group’s core business In the financial year ended 31 March 2010 (the “Reporting units, being the television (“TV”) and the digital set-top boxes Year”), Skyworth stepped out of the complicated market businesses with operations in the mainland China. The TV environment and achieved excellent results. business turnover increased 44.8% to HK$19,247 million, and the digital set-top boxes business turnover increased During the Reporting Year, the Group continued to 31.6% to HK$1,186 million. concentrate its business activities and deployment of resources in the mainland China. The Group’s TV business unit compassed leeway from the complicated market conditions, and earned outstanding results in the Reporting Year. Winning various awards to OUTSTANDING OPERATING RESULTS its innovations in TV technologies enhanced Skyworth TV’s presence in returns. Given the leading edge in the During the Reporting Year, Skyworth picked up the positive China market, it built success by means of launching value- momentums from the global economic recovery and steady added and state-of-the-art products and gained market economic growth in the mainland China. popularisation, sourcing alternative channels to expand sales growth, and collaborating with educational institutes The Group’s turnover from continuing operation was at and upstream value chain to perform extensive researches record high, from HK$15,329 million to HK$22,769 million, for technological synergies and reserves. Skyworth TVs representing a remarkable increase of 48.5% corresponding ranked number one in LCD TV sales associated with the to that of the financial year ended 31 March 2009 (the China government’s stipulation of the “Home Appliances to “Previous Year”). The profit for the Reporting Year also the Countryside” policy in the Reporting Year. Out of the 48 marked a record high of HK$1,326 million, representing a designated Skyworth’s TVs being elected in the new tender 188.3% increase from the Previous Year. The gross profit under this policy, 11 qualified Skyworth TV models were for the Reporting Year increased steadily by 1.2 percentage LED TVs. points to 21.4%. At the end of the Reporting Year, the Group had net assets of HK$5,854 million, representing The digital set-top boxes business units hosted a leading a 32.9% increase; a strong cash position with cash and position in the market and won large tenders to derive cash equivalents of HK$2,191 million, representing a 58.2% rapid growth. Other business units such as LCD modules increase. business unit reengineered its business scope to provide tremendous supports for the growth of the Group’s core business. 5 Skyworth Digital Holdings Limited Annual Report 2009/10 Letter from Executive Chairman and Chief Executive Officer (continued) OUTLOOK turnaround product cycle brought upon by accelerating pace of TV product evolutions, the expected quick domination of Looking ahead to this new financial year ending 31 March LED back-light TV will take up 30% or more of the mainland 2011 (the “Upcoming Year”), Skyworth applies consistent China TV sales. corporate strategy to uphold and strengthen the core business competitiveness, forming solid supports to the The replacements of digitalised TV and the high-definition continuous business growth by actively developments of TV bring digital TV set-top boxes business to live, inducing our auxiliaries. We seek dynamic expansion around related progressively popularisation to yield opportunities for further industries, and in our upstream and downstream food business expansions without hesitations in the Upcoming chain to extend chains to sustain our core business. We Year. Also, the strategic partnerships with overseas create further strategic connections with our mainstream operators amplify potential scales penetration in the suppliers with in-depth technical aspects through bilateral overseas market. The LCD business unit aims to sustain its cooperation. We advance our controls in governance to current customers and aggressively develop new customers. our business units to minimise unnecessary business risks. The Group also targets to further expand production scope We encourage improvements in operation efficiency and and capacity as tactical growth drivers. management quality, extending capabilities to uplift our product quality and competitive advantages.