(Hong Kong, July 17, 2001) -- Leading audio-visual ODM and OEM manufacturer Tonic Industries Holdings Limited ("Tonic") (Stock Code: 978) today announced its annual results for the year ended March 31, 2001. Tonic attained a consolidated turnover of HK$2,625 million, an increase of 29% over last year's turnover of HK$2,039 million. Earnings before interest and depreciation (EBITDA) was HK$92 million, compared to the previous year's figure of HK$137 million. Net profit for the year was HK$12.5 million.
Basic earnings per share were HK2.0 cents. The Board of Directors recommended the payment of a final dividend of HK0.5 cent per share. This will bring the full year dividend to a total of HK1.5 cents per share, including the interim dividend of HK 1 cent per share already paid.
During the year, Tonic's profit did not show a corresponding growth due to reductions in profit margins. This was attributable to the abnormal increase and fluctuations in the cost of raw materials, the significant expenditure in R&D for the new products launched in the second half of the year and heavy capital investment. In addition, markets in Europe and Japan were affected by currency depreciation and continued to be highly competitive. However, raw material costs have returned to normal levels and capital investment for automated machinery such as IC insertion machines and SMT machines have increased production efficiency and enhance product quality. Together with the opening of the 2 new factory buildings no. 8 and 9, the Group's production capacity has been doubled. It is expected that profits will be significantly improved next year.
Mr. Simon Ling, Chairman of Tonic said, "The fiscal year 2000/2001 was a year of challenge. However, despite the adverse market conditions, we were able to maintain our business growth. Realizing the global trend towards the digital era, we have taken the necessary steps to prepare for these changes. We constructed 2 new factory buildings last year, with the installation of advanced automated machinery, bolstering production capacities to meet market demand for the next three years. We are confident that the Group will experience positive profit growth in the years ahead."
In addition to the heavy investment in advanced automation equipment, the Group has continued to develop new products including CD-RW, DVD, MP3, digital satellite receiver and Internet set-top box. Most of these products provide higher profit margins and had received strong welcome when launched in the market in 2001.
The Group is committed to employing advanced production facilities to cater for escalating demand. Factory Block 8, was inaugurated in June 2000, and provides an additional production area of 40%. Factory Block 9, with a capacity of 8 production lines was completed in June 2001, and has bolstered production areas by a further 20%. The Group's total production area now exceeds 1,500,000 sq.ft and comprises of 26 production lines.
Building on the solid foundations of the Group's audio business, the Group is diversifying into the high technology and home appliances business. Mr. Ling commenting on this move said, "The business development of our home appliances company, Tonic Appliances Limited progressed smoothly during the year. In addition to our 3 in 1 coffee making machine, we have introduced air purifiers, ovens and industrial irons to the market and received encouraging feedback from customers. Products from our high technology division, Tonic Technology Limited achieved a strong foothold in the United States and Europe. We believe that the contribution from these divisions will increase rapidly in the next few years."
Looking forward, Tonic is confident of its business growth. In addition to the sales of its general audio products to existing customers, the Group's prestigious OEM customer, Pioneer Electronics, has contracted the Group to manufacture three new models for them. These include high value DVD and MD products with total turnover exceeding HK$600 million. The Group has also secured a new customer from the United States, manufacturing Internet-DVD products with quantities forecasted at more than 500,000 sets per year.
Grasping opportunities arising out of the e-commence era, the Group is planning to empower its B2B platform with the implementation of payment gateways and other value added services such as logistics, insurance, quality control and credit checking facilities among others. Upon completion, these enhanced facilities will enable suppliers and customers to search for products, negotiate terms, place orders, arrange delivery and make payment in one easy stop.
Mr. Ling concluded, "2000/01 was a period of investment, consolidation and repositioning for the Group. Anticipating the swift pace of development of the digital technology, we have prepared ourselves well ahead of the trend. Without the need for further heavy investment, we expect fruitful returns to be generated from our new products and increased business. We are confident that the Groups' performance will significantly improve in the years ahead."
About Tonic Industries Holdings Limited
Tonic is principally engaged in the design, manufacture and marketing of a wide range of consumer AV products. These include CD-RW, mini Hi-fi music centres, MD systems, DVD players, CD portables, MP3 products, digital satellite receivers, internet set-top box, Dolby Prologic stereo receivers and portable CD/cassette/radio systems, etc. Products are sold on an ODM and/or OEM basis to overseas importers and manufacturers with well-known brandnames such as Alba, Bush, Emerson, GPX, Kenwood, Medion, Pioneer, RCA, Sanyo and Thomson. In 1999, the Group set up 2 divisions - high technology and home appliances, to diversify its business and product mix. The Company was listed on the Hong Kong Stock Exchange in October 1997. Its production facilities are located at Dongguan, the PRC, with a total production area of over 1,500,000 sq.ft.
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This media release and the other corporate information of Tonic Group can also be accessed through the following website:
http://www.tonic.com.hk