Solomon Systech Announces 2004 Annual Results
Profit Surges by 1.6 Times to US$59.2 million Growth Momentum Continues
Year ended 31 December
|US$ million||HK$ million||US$ million||HK$ million||
|EPS, basic||2.48 US cents||19.3 HK cents||1.09 US cents||8.5 HK cents||+127%|
|DPS, final||1.54 US cents||12.0 HK cents||0.85 US cents||6.6 HK cents|
|DPS, total||1.88 US cents||14.6 HK cents||0.85 US cents||6.6 HK cents|
Turnover grew by 182% attributable to sales of more color display ICs
Net profit grew by 161% to US$59.2 million
Earnings per share was 2.48 US cents, or 19.3 HK cents, an increase of 127%
The Board resolved to declare a final dividend per share of 1.54 US cents, or 12.0 HK cents
Total dividends per share totaled 1.88 US cents, or 14.6 HK cents
Return on equity reached 52% for the year
Management is optimistic about the business outlook for 2005
(Hong Kong – 9 March 2005) – Solomon Systech (International) Limited (“Solomon Systech” or the “Group”, SEHK: 2878) achieved a phenomenal year in 2004 with respect to both turnover and net profit growth.
For the year ended 31 December 2004, its turnover increased by 182% to US$308.2 million (HK$2,404.0 million). The growth was significant and proved that the Group’s strategic direction of focusing on color display ICs, enlarging customer base as well as increasing market share was paying off. By the same token, gross profit also grew to US$96.6 million (HK$753.5 million), an increase of 110% year-on-year. As the Group intentionally set an aggressive and competitive pricing strategy to gain more market share, the gross profit margin for 2004 was 31.3%, compared to 42.1% in 2003.
Net profit for the year was US$59.2 million (HK$461.8 million), representing a remarkable increase of 161% over the previous year. Basic earnings per share for the year grew by 127%, recorded at 2.48 US cents per share (19.3 HK cents per share). The Board of Directors proposed a final dividend of 12.0 HK cents per share.
The Group’s financial position remains strong and healthy. Net cash flow from operations during the year was US$39.4 million. As at 31 December 2004, its net cash position stood at US$125.3 million, and had no borrowings.
Mr. Humphrey Leung, Managing Director of Solomon Systech, said, “Fiscal 2004 was a record year for Solomon Systech. We did not only achieve notable growth in turnover and profit, but had also further increased our market share in mobile phone display IC to roughly 16%, assuming 30% of global mobile phones had dual displays and a total of 680 million mobile phones were shipped. At the same time, we are very proud of a great number of awards granted by various entities, ranging from customers, semiconductor industry, to the investment community.”
Last year, Solomon Systech shipped 157.0 million units of display ICs, a growth of 121% year-on-year. The driver for the spectacular growth was the popularity of the Group’s color display ICs. Among its products, shipment of color STN display ICs rocketed by 337% to 88.2 million units. The growth was attributable to new products launched and dedicated customer support, right pricing and time-to-market. Another encouraging achievement was the volume shipment of 7.1 million units of TFT display ICs, which were commercially used in top brand mobile phone. While OLED display ICs achieved a very healthy growth of 127% to 14.1 million units with the surging demand for MP3 players globally. Monochrome STN display ICs, despite a slowing demand in the market, still rose by 6% to 47.1 million units. Due to the change in product mix, as more color display ICs were shipped in 2004, the blended average selling price of the Group’s products increased from US$1.54 in 2003 to US$1.96 in 2004.
There were encouraging progresses in new products and customers. 16 new products went into production last year. Backed by its extensive sales network and all-round customer services, the Group further enlarged its customer base. For instance, the number of customers with more than US$1 million business with the Group increased from 11 in 2003 to 28 in 2004. At present, the Group serves more than 70 module makers globally.
Solomon Systech takes research and development capability as one of its core competences. In 2004, its R&D expenses amounted to roughly US$11.6 million. The number of R&D staff increased to more than 120 as at the year. On the front of wafer technology, the Group uses various wafer process geometry up to 0.18µm, with a majority portion of ICs in production belongs to the 0.25µm or 0.35µm category. Four patents were filed and six technical articles were published last year.
Looking ahead, the management is optimistic about the business outlook for 2005. Its three product families will see different growths.
For mobile display products, TFT display will emerge strongly given its increasing popularity, while monochrome display will experience a decline in unit shipment. Conventional color STN display will be kept in good position and OLED display may take more time to become popular in mobile phones.
Volume shipment for large panel display driver ICs will be delivered in the first half of 2005. These ICs will be used in LCD TVs, LCD monitors and notebook computers. Benefiting from the sizeable market, the Group will enjoy immediate financial contributions from the large display IC business; meanwhile, this action will pave the way for the Group to tap into the significant digital broadcasting opportunity in the future.
To keep abreast of new display applications, Solomon Systech is dedicated to development of new display ICs. In late 2004, it had successfully launched e-paper driver controller IC. At the moment, it is exploring business opportunities in flexible display product that may find its home in the retailing and logistics sectors.
Commenting on the future, Mr. Leung said, “Gaining market share and achieving earnings growth are undoubtedly the focus of the Group. In order to attain these, we will launch more new products and secure more new customers.”
“We have proven our leadership and success in the global mobile display IC market. For the time to come, we will explore business opportunities in MP3 players, digital cameras, large display and new display areas. Given our solid foundation and professional industry talents, we are confident in creating valuable IC products to our customers and therefore enhancing our continuous business growth, which ultimately will translate into fruitful returns to shareholders.” Mr. Leung concluded.
Solomon Systech (International) Limited
|Consolidated Profit and Loss Account|
|For the Year Ended 31st December 2004|
|Cost of sales||(211,651)||(63,294)|
|Research and development costs||(11,599)||(7,743)|
|Selling and distribution expenses||(1,667)||(994)|
|Other operating expenses||(108)||(142)|
|Share of result of an associated company||(194)||—|
|Profit before taxation||71,808||27,721|
|Profit attributable to shareholders||59,167||22,685|
|Earnings per share (US cents)|