創 維 數 碼 控 股 有 限 公 司
SKYWORTH DIGITAL HOLDINGS LIMITED
To: Business Editors (For Immediate Release)

Skyworth Digital 2015/16 Interim Results
Gross Profit Margin Largely Improved by 1.1pp to 20.6%
Profit for the Period
Up by 8.5% YoY to HK$985 million
* * * * *
Key Achievements

- Revenue increased by 5.8% to HK$19,549 million

- China market accounted for 78.2%, increased by 3.0%

- Overseas market accounted for 21.8%, increased by 17.4%

- Gross profit was HK$4,023 million, increased by 11.4%

- Gross profit margin was 20.6%, increased by 1.1pp

- Gross profit margin of TV products in PRC market was 23.5%, increased by 2.7pp

- Profit for the Group amounted to HK$985 million, increased by 8.5%

- Net profit margin was 5.0%, increased by 0.1pp

- Basic earnings per share increased by 5.3% to HK30.66 cents

Solid and Liquid Balance Sheet

- Net assets amounted to HK$15,446 million, up by 18.1% from 30 September 2014

- Bank balances and cash was HK$4,163 million, increased by 38.7% from 30 September 2014

Stable Return

- Proposed 2015/16 interim dividend of HK9.6 cents per share, representing a stable dividend payout ratio of 32.2% on the profit for the period attributable to the owners of the Company

(Hong Kong, 24 November 2015) ------- Skyworth Digital Holdings Limited ("Skyworth", and collectively with its subsidiaries, the "Group") (Stock Code: HK00751) announced its interim results for the period ended 30 September 2015 on 23 November 2015. Revenue increased by 5.8% year on year to HK$19,549 million. Gross profit amounted to HK$4,023 million, increased by 11.4%. Gross profit margin was 20.6%, representing an increase of 1.1pp.

Profit for the period attributable to owners of the Company was HK$869 million, representing an increase of 5.5%. Basic earnings per share was HK$30.66 cents which increased by 5.3%.

The Board is declaring an interim dividend of HK9.6 cents, representing a stable dividend payout ratio of 32.2%.

Mr. Yang Dongwen, CEO of Skyworth highlighted, "In China market, we have continuously focused on large panel and ultra-high definition TV products, kept debut launches of new innovative products and speeded up the vertical integration of online and offline business strategy, resulted in a continuous increase in the sales volume proportion through e-commerce sales channel.

In addition, the Group will continue to explore acquisition opportunities in the overseas market, and focus our effort in improving the brand awareness as well as the market shares of our own-branded products outside of China.

During the Reporting Period, the Company has been selected as a constituent member of Hang Seng Corporate Sustainability Benchmark Index, which further affirmed that the Group's outstanding performance in the market.

As the sales quantity of the TV increased by 11.0%, the Group delivered an increment in revenue."

The Group's TV business in China accounted for 73.5% of the total domestic revenue.

The sales of digital set-top boxes, white appliances and LCD modules accounted for 9.3%, 6.4% and 1.9% respectively. Other business units include those engaged in rental collection, property development, lighting products, security systems, air conditioner, other electronic products and financial services, etc., attributed the remaining 8.9%.

Revenue generated in overseas markets increased by 17.4%, contributing 21.8% of the total revenue.

Mr. Liu Tangzhi, President of TV business unit highlighted, "The TV market in China has entered into a competitive stage both in high-end products and content services. To cope with this, the Group has persisted in developing products with innovative technology and smart features. During the Period, the Group applied product differentiation as our selling strategy and continuously strengthened our position as a high-end brand. The Group has emphasized in promoting Smart TV products with higher profit margin and higher average selling price. As a result, the portion of 4K Smart TV products sales volume accounted for 24.6% of total China TV sales volume, represented a year-on-year growth of 90.7%.

Along with the increasing popularity of internet and the booming numbers of internet users, the e-commerce business has run into a great opportunity to develop and grow. We have seized this opportunity by positioning its subsidiary, Coocaa Company, as an internet brand. On one hand, coocaa is pushing forward the services development on smart platform, which include: content, advertising, education, shopping, gaming, travelling, Apps store and music; on another hand, Coocaa Company has kept on improving its infrastructure of services platform including payment system, operating system, online after-sales service system, etc., in order to implement its monetisation strategy. Coocaa brand targets mainly on the youth community. In order to create a soundbite within the youngsters, Coocaa Company has developed a fans group with high viscosity that involves itself into the fans lives and to create a lifestyle that being pursued."

Leveraging on the continued increase in sale of our Smart TV, the Group is determined to adhere to the internet transformation strategy and have developed eight business models in order to derive servicing income. They are: Content, Advertising, Education, Shopping , Gaming, Travelling, Apps store and Music.

1. Content: Video on demand frequency per user has increased from 9.19 times in 2014 to 10.98 times in 2015, and the average time spent per user has increased from 92.86 minutes in 2014 to 165 minutes in 2015. Average daily increment of activated content users is over 20,000 per day.

2. Advertising : Up until October 2015, Daily activated users increased by over 20,000 per day, monthly advertisement exposure increase at a rate of over 1 million times per month to totaling 125 million times a month.

3. Gaming: For the reporting period, the group has introduced 1,125 different kinds of selected TV games, an increase of 225%, with an average weekly active users of 1.51 million

In October 2015, total smart TV accumulated activated users reached 13.59 million and daily active users reached 4.05 million. The revenue from internet services was RMB 11.23 million.

With the ever increasing Smart TV users coupled with the continuous introduction and promotion of video content (Tencent, QIY, Mango, 1905), advertising, education and shopping etc., alongside with the newly developed 5.0 TV OS payment gateway in operation, which will greatly increase our servicing income. It is expected that total income generated from our internet business will exceed HK$50 million in this fiscal year.

According to the extrapolated TV sales data based on the market survey covering 711 cities and 6,023 retail terminals in China conducted by All View Consulting Ltd., a market research and marketing consulting company focusing on consumer electronic and home appliance industry, the establishment of which was initiated and advocated by China Video Industry Association (CVIA) in the PRC, Skyworth 4K UHD TVs, LCD TVs, and all TVs ranked at No.1 in terms of cumulative sales volume market shares in China LCD TV market including domestic and foreign brands for the 12 consecutive months ended 30 September 2015, representing 20.0%, 17.4% and 17.3%.

"The revenue of overseas TV products for the year was HK$3,081 million, or 72.4% of the total overseas revenue, has grew by 51.0%.

During the Period, the Group successfully acquired the TV segment of METZ in Germany. After setting up its branch office in Germany, and leveraging on the brand awareness and distribution channels of METZ in Germany and Europe, the Group will implement a parallel dual-brand marketing strategy to promote our products in the European markets. Skyworth has just participated in the IFA exhibition in Berlin. During the IFA exhibition, we have demonstrated a variety of self-developed high intelligence products with the latest technology, and established a smart home experience center which allows users to experience the wonderful features of Skyworth products, in our effort to further strengthen our brand reputation in the European markets.

Over the years, with OEM and ODM as our foundation in the overseas market, we promotes through setting up branches in different countries to further enhance our brand popularity and awareness. During the Period, our own brand sales in overseas market has increased by 43.2% on a year-on-year basis. In addition, the Group would tailored made its product mix according to the market demand of individual market, as well as rapidly ramping up our higher-end products to achieve our target of increasing the sales in the overseas market.

It is anticipated that in the second half of the financial year, the Group will continuously apply a dual-brand marketing strategy in African and European markets, so as to tackle the European markets which will be one of the major growth drivers in the overseas market in the next three to four years," Mr. Liu emphasized.

Dr. Shi Chi, Executive Director and President of set-top boxes business unit said, "The revenue of digital set-top boxes in the China market recorded HK$1,429 million, representing an increase of 30.1% or HK$331 million, compared with HK$1,098 million recorded in the same period of previous year.

Throughout the years, the Group has constructed a smart eco-system, based on broadcasting networks, telecommunication networks and internet that amid the system of "Platform + Content + Terminal+ Application", as well as to ally with its strategy partners such as cable operators, content, application and channel providers, etc. The Group has progressively unveiled digital TV, intelligent network, IPTV etc, the full spectrum of set-top boxes. Its intelligent network access equipment, intelligent vehicle network, goods linked network and other series of smart products, also make system and operational service fully meet the demands of cable operators and end-users. During the Period, driven by larger business coverage and high-end market share, marked a favorable result in revenue."

The revenue of overseas digital set-top boxes for the Period recorded HK$752 million, comparing with HK$1,172 million recorded in the same period of previous year, representing a decrease of 35.8%.

During the Period, our overseas development strategy for digital set top box is to utilize its market competitive advantages, to actively exploit the European and American markets. The Group aimed to establish an international sales team and to create a diversified sales channels and service platforms. Meanwhile, the business model will extend from B2B to B2C, in order to provide multi-business operators with value-added, professional services, end-to-end distribution and delivery services of set-top box, for promoting its brand value and improving its bargaining power. The Group has acquired Strong Media based in Europe, and by utilizing its existing distribution channels and customer networks, we aim to improve brand image and awareness in the European markets. All of these will help to accelerate the growth of our overseas sales in the second half of the financial year." Dr. Shi continued.
The revenue of white appliances in the China market recorded HK$983 million, representing a decrease of 10.6% or HK$117 million, compared with HK$1,100 million recorded in the same period of previous year. However, its segmental profit has increased by 93.1% to HK$56 million due to the improvement in gross profit margin.

During the Period, the Group aimed to expand the market shares of our white appliances and have set up the professional sales and after sales services teams etc. Meanwhile, we have adopted the strategy to upgrade our products in 5 aspects covering: product, quality, manufacturing, market and brand, which has rapidly enhanced the brand awareness and consumers' trust of our white appliances.

In order to promote sales and development of Skyworth and Toshiba products in the China and Japan markets, the Group formed a strategic partnership with Toshiba Lifestyle Products and Services Corporation and will acquire 5% equity interests in each of Toshiba HA Manufacturing (Nanhai) Co., Ltd. and Toshiba Home Appliances Manufacturing (Shenzhen) Co., Ltd. According to the strategic agreements, the Group was granted an exclusive sales right in the PRC for designated models of refrigerators, washing machines, and vacuum cleaners manufactured by the two aforementioned Toshiba companies. This will further enhance the revenue and market position of our white appliances.

Mr. Yang Dongwen, CEO of Skyworth said, "For the Period, the overall gross profit margin of the Group increased 1.1 percentage point from 19.5% to 20.6% versus the same period last year.

During the Period, apart from stringent cost and expenditure control, we constantly adjust our product mix in line with the market needs. We focused on promoting products with higher profit margin and larger size smart products. The sales volume of star products with 49 inches or above has been increasing quite significantly. The sales volume of 4K Smart TV showed a 90.7% year-on-year growth which accounted for 24.6% of China TV sales volume. This is a key factor that directly improved the gross profit margin of our China TV sales.

The ratio of S&D expense to revenue decreased 0.8 percentage points from 12.2% to 11.4%.

The management acknowledged that the China TV competitive landscape has been transforming from hardware to "hardware + services" and our overseas market is still in a fast growing stage. The fading out of the Japanese brands provides ample room for Chinese TV manufacturers to grow and seize the expansion in the overseas market. As such, the Group will formulate strategies in four aspects: product innovation, business model innovation, product diversification and internationalisation. At the same time, the Group will continue to promote more smart products to further develop our internet businesses.

2015 is the initial year for the Group to monetarise on our Smart TV user data. In the next three years, we will focus to form more strategic partnerships with internet platform providers, in order to accelerate the monetization of our big data in the following eight areas: content, advertising, education, shopping, gaming, travelling, Apps store and music. During the revolutions of technology, smart home products will become the mainstream in the market. Leveraging on the success of our TV and set top box in the China market, we will integrate our refrigerator, washing machine, air conditioner, lighting products and security system, etc., to create a health caring and environmental friendly smart home. In the second half of the financial year, the Group will endeavor to promote larger size and higher-end smart TV products, coupled with building up our internet service platform and offering more online services, in our effort to attract consumers to switch to smart products. This strategy will lead the Group to achieve its full year target in TV sales volume and revenue.

Furthermore, the Group will implement three strategies in the overseas market development: (i) To develop the overseas sales team, to build an overseas terminal sales network by developing distribution channels and partnerships with local dealers. (ii) To increase the investment in research and development for products. (iii) To establish overseas production assembly factories. It is expected that by 2017, the Group can build up its entire overseas supply chain by establishing overseas production assembly factories via self-development, acquisition and joint venture, etc. At the same time, overseas business will further expand from TV and set-top box to refrigerator, washing machine and air conditioner. The overseas distribution channels and brand promotion of TV, will also be shared with the white appliances, in order to create synergies and generate the best returns for our stakeholders."

~ End ~
1H2015/16 TV Sales Volume (April - September 2015)

(Thousand Units)	1H2015/16	1H2014/15	Change (%)
TV in China Market Comprises	4,452	4,328	3%
- Smart TV (4K)	1,095.7	574.5	91%
- Smart TV (Non-4K)	1,632.6	1,541.1	6%
- Other Flat TV	1,723.7	2,212.8	(22%)
TV in Overseas Market Comprises	2,143	1,610	33%
- LED LCD TV	2,139.1	1,607.8	33%
- Other TV	3.4	2.3	48%
Total TV sales volume	6,595	5,938	11%

 

About Skyworth Digital Holdings Ltd. (Stock code: HK00751)
Skyworth Digital Holdings Ltd. was established in 1988. It is the leading TV brand and manufacturer in China with around 80% of its revenue generated in the China market. Skyworth has a vision to create a globally prominent brand of consumer electronic products. Skyworth is specialized in TV production with a focus on high-end products, including OLED 4K Smart TV, LED LCD TVs which have 4Kx2K ultra-high definition UHD panel, internet services together with Skyworth coocaa operating system. Other business units cover products such as digital cable and OTT set-top boxes, refrigerators and washing machines, air conditioner and LCD modules. In 2014/15, Skyworth's total sales volume of TV reached 13.17million units. According to the extrapolated TV sales data of 711 cities in China from All View Consulting Limited, Skyworth's market shares in sales volume of all TV, LCD TV, 4K UHD LCD TV, ranked at No. 1 among national and foreign brands in 12 months ended 30 September 2015. Skyworth's digital set-top boxes contributed 10.9% in total revenue of 2014/15 and secured No.1 and Top 3 market shares in China and global markets, respectively. Skyworth's quality ODM/OEM and "Skyworth" products have been recognized by international brands and global markets. It is fast growing and contributed 14.4% in total revenue of 2014/15. Total TV production capacity of Skyworth's four production sites located in Shenzhen, Nanjing, Guangzhou and Inner Mongolia reaches 15 million units, average annual utilization rate is 100%. Skyworth's shares were listed on The Stock Exchange of Hong Kong Limited (00751) in April 2000. For details of the Group, please visit www.skyworth.com

For further inquiries, please contact:
Skyworth Digital Holdings Ltd.
Ms. Katherine Chan/ Ms. Maggie Mak
Executive Director/ General Manager - Investor Relations
Tel: +852 2290 677 / 2290 4620
Fax: +852 2856 3590
E-mail: ir@skyworth.com.hk
Website: investor.skyworth.com