(Hong Kong, 28 August 2014) – 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 interim results for the six months ended 30 June 2014, which saw a turnaround in its business. During the period under review, the Group’s turnover increased by 17.6% to HK$925 million (1H 2013: HK$787 million). The overall gross profit margin was 13.8% (1H 2013: 9.5%). The gross profit of core businesses (handsets & solutions, wireless modules, display modules and internet of things business) increased substantially year-on-year by 94.8% to HK$112.1 million (1H 2013: HK$57.6 million). The gross profit margin for core businesses increased to 12.9% (1H 2013: 8.1%), the increase was mainly attributable to the rise in the sales volume of high-end consumer handsets and industrial application terminals in the first half of 2014, which were with higher gross profit margin. Profit attributable to owners of the Company was approximately HK$5 million (1H 2013: loss of HK$126 million) for the first half of 2014. Basic earnings per share were HK0.2 cents (1H 2013: basic loss per share of HK5.0 cents).
In the first half of 2014, the Group has continued to adhere to the strategy of focusing on the quality ODM handset business and completed large-scale production and delivery of high-end ODM consumer handset consignments for several international and domestic customers (including Acer, Vestel and 壹人壹本). Consequently, its handsets business has turned around from making losses during the past two years. During the period under review, the handsets and solutions business has recorded an outstanding performance with revenue and gross profit up 51.5% and 263.9% to approximately HK$618 million (1H 2013: HK$408 million) and HK$82 million (1H 2013: HK$23 million) respectively. The increase was mainly due to a change of product structure, from where the Group sold a greater volume of high-end consumer handsets and industrial application terminals during the year in contrast to a greater sales volume of low margin products to domestic operators in the same period last year.
With the advent of the 4G LTE era, the Group started boosting its R&D investment in 4G solutions last year. Currently, more than 80% of its R&D resources were allocated to the development of 4G handsets and terminals. The Group will commence mass production of more than 10 models of 4G terminals in the second half of the year, moving it to the forefront of the industry in 4G development and product planning.
Benefitting from the emerging demand trends of the IOT and the mobile office, the industry mobile terminal market is expected to grow steadily in the long run. In particular, due to the rising concern about information security, the government authorities, state-owned companies and larger private companies have gradually shifted to choosing domestic suppliers and brands. Due to the increasing potential threat from terrorism, 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 has shown notable growth in the mobile payment and mobile POS industries in recent years. In the first half of 2014, the Group has cooperated with a branded company in the U.S. to produce waterproof, dust-proof and shock resistant mobile terminals with an anti-explosion feature. The new product is expected to be delivered to telecom operators in North America such as AT&T, Bell and Telas in the second half of 2014. Besides, the Group is developing new products based on the handset verion of another large telecom operator in the U.S., which are expected to be delivered in the first half of 2015. Meanwhile, the Group’s own branded mobile terminal products specially designed for use in industry have gained traction in the market sectors.
For the first half of 2014, the Group has recorded growth in overall delivery volume and revenue of the wireless communication modules business. The growth was attributable to an increase in demand from both domestic and overseas markets, especially the higher delivery volume of 2G products in China and Europe and high-value 3G products in North America and Japan. The revenue for wireless communication modules in the period under review increased by 5.1% to HK$228 million (1H 2013: HK$217 million), while the gross profit margin was 15.0% (1H 2013: 15.5%). During the period, the Group has added a new platform to its existing 2G product platform to cater to the customers’ demand for solutions targeted at more sub-market segments in both domestic and overseas markets. At the 3G and 4G platform level, the Group has enriched its product range to meet the rising demand for 3G and 4G LTE solutions in the overseas market, thereby gaining the recognition and confidence of overseas operators and top-tier customers in its own SIMCom brand. The Group has also continued to strengthen cooperation through customized projects with overseas operators and brands such as AT&T, SOFTBANK, Coyote and Panasonic. In domestic market, the modules and terminals used by China Mobile for optimizing networks and on-site testing of 4G networks in 2014 were mostly provided by the Group.
As for the Internet of Things (IOT) business, the Group is developing a cloud computing and big data service platform to address the healthcare needs for the elderly living alone. Moreover, the Group has made significant progress in revamping traditional vending machines into more intelligent models. Currently, a total of 1,300 of these intelligent vending machines capable of delivering wider services are under financial leasing. More than 20 franchisees have signed agreements for cooperation which would include more than 3,000 vending machines. The Group expects this segment to grow further by end of this year and its aim is to become the leader in the industry next year. With respect to the property development business, the sales of “The Riverside Country” (晨興‧翰林水郡) recognised in the first half of 2014 amounted to HK$57.5 million.
Looking ahead, the rapid uptake of 4G technology around the world is expected to generate revenue for the Group in the future. In wireless communication modules, the Group will continue to develop diverse product ranges covering AMI, telematics and mobile payment sectors to maximize its market share in China and overseas in the second half of 2014. For overseas business, the Group intends to launch its new 3G and 4G products and cooperate more closely with overseas telecommunications operators. The Group expects that the shipment volume, sales amount and profit will deliver notable growth in the second half of this year and next year. Regarding the IOT business, the Group will increase its contribution in value-added services for the emerging intelligent vending machine industry, so as to expand its business scale in this sector, generate more profit and adopt a franchise business model to swiftly extend its business scope. On top of this, the Group will continue to develop and engage in incorporating artificial intelligence elements within residential and commercial properties, and also for the IOT projects relating to elderly care, transportation and education.
Mr Wong Cho Tung, Executive Director and Chief Executive Officer of SIM Technology, said, “The Group has undergone a successful business transformation and achieved a turnaround to a profit, thanks to the combined effort of our management team and staff. Building on our solid business foundation, we believe that consumer handsets and industry application terminal products will be the key drivers for the Group’s development this year and beyond. We have confidence that the Group’s high-end consumer handset and industrial application ODM businesses will deliver strong growth momentum. As we expand our scope of business, this momentum together with the growth driver created by the new businesses positions the Group to grow continuously and steadily in the coming years.”
