Tonly Electronics Announces 2019 Interim Results

HONG KONG, CHINA - Media OutReach - 14 August 2019 – Tonly
Electronics Holdings Limited (“Tonly Electronics” or “the Group”; SEHK
stock code: 01249) today announced its unaudited interim results for the six months ended 30 June
2019 (“the period under review”).

During the period under review, the Group recorded a turnover of
approximately HK$3,518.2 million, up by 25.6% year-on-year. Gross profit
increased by 33.7% year-on-year to approximately HK$457.2 million. Operating
profit rose by 14.2% year-on-year to approximately HK$133.0 million. Profit
attributable to the owners of the holding company climbed by 15.1% year-on-year
to approximately HK$98.3 million. Attributed to the improvement of production
layout and efficiency, the gross profit margin of the Group in the period under
review increased to 13.0% comparing to the same period last year.

Benefiting from the rapid growth in the global market of
smart products and the Group’s advantage in product technology, the Group’s
audio product business recorded a revenue of HK$2,502.6 million, representing a
year-on-year increase of 24.3%. The new audio business maintained its advantage
in scale, and maintained a relatively rapid growth together with the smart
audio speaker business. In the period under review, the revenue of headphones
increased by 71.2% year-on-year to HK$421.5 million, reinforcing the Group’s
leading position in the headphone industry and securing more new customers. True
Wireless Stereo (TWS) earphone business also achieved a breakthrough and
strengthened its competitiveness. For the ancillary product business, benefiting
from the overall market growth and entering into the supply chain of an
overseas mainstream internet corporation, the ancillary products contributed a
revenue of HK$304.9 million to the Group, representing a year-on-year increase
of 63.6%.

During the period under review, the Group continuously
enhanced its capabilities in speaker units and structural components,
especially the new structural parts related to precision moulding in order to
reinforce its vertical integration capability of the supply chain. Leveraging
on its extensive experience in professional electro-acoustic design and pioneer
advantages in smart speakers, the Group constantly innovates in product
development. During the period under review, the Group’s product research and development
(R&D) expenses amounted to HK$169.5 million, accounting for 4.8% of its
total revenue. The R&D team is devoted to introducing news products
epitomised by smart voice speakers in response to consumers’ specific
requirements, as well as developing screening-equipped smart products centring
smart voice and all kinds of smart voice eco-ancillary products to secure more
new customers and explore new fields.

The Group also continuously refines its production and supply chain
management. The Group used Huizhou Zhongkai as a core base and moulding centre
integrating research, production and sales. Phase Two of Seaond Plant on land
parcel No.42 commenced operation in March 2019, enhancing the overall
production management and efficiency, as well as reducing external fees. The Group’s
Huizhou Puli Electroacoustics Tongqiao Industrial Park was also put into
operation, foriming a comprehensive industrial chain integrating carpentry,
speaker assembly, high-end wooden boxes, speakers, and plastic injection. In
orfer to enhance the overseas supply chain capability and to proactively
respond to the potential impact of the U.S. tariff, the Group set up a
subsidiary in Vietnam in the first half of the year, and plans to establish its
own overseas plant which was strived to commence operation in the second half
of 2020 to realise the overseas extension of the Group’s vertical integration
capability of the supply chain.

The management of Tonly
Electronics stated: “The smart product industry is likely to
maintain a relatively rapid growth amid the sluggish global economy. The Group
strives to provide brand companies and customers with outstanding quality
products and services by expanding new businesses, exploring new technologies
and products, and enhancing its productivity. As the smart and ancillary
product business is becoming more mature, we believe the smart products,
headphones and ancillary products of the Group will account for an increasing
proportion to its turnover in 2019, contributing to a strong business growth in
the future. Meanwhile, more intense market competition can be foreseen along
with the continuous development of smart audio products. In face of the various
risks and opportunities, the Group will keep on looking for business expansion
opportunities, which, coupled with its own strengths, will enlarge its business
portfolio, enhance the long-tern value of the Group, and proactively generate
more return for its shareholders.”