Solomon Systech Announces 2004 Interim Results

Robust Growth in Turnover and Net Profit Exceeding 2003 Performance

Result Highlights

Six months ended 30 June
	2004		2003
	US$’m	HK$’m	US$’m	HK$’m	Change(%)
Turnover	110.1	854.4	46.4	360.1	+137%
Gross Profit	39.7	308.1	19.5	151.3	+104%
Net Profit	22.9	177.7	9.6	74.5	+139%
Earnings per share
– Basic	1.01 US cents	7.80 HK cents	0.46 US cents	3.60 HK cents	+117%
– Diluted	1.01 US cents	7.80 HK cents	0.46 US cents	–	–
Interim dividend per share	0.34 US cents	2.60 HK cents	–	–	–

 

• Turnover grew by 137% from gaining market shares and successful marketing and sales of more colour display ICs.
• Net profit grew by 139%, outperforming turnover growth, was attributed to gain in operational efficiency.
• Overall financial performance in the first six months of 2004 exceeded that in the whole year of fiscal 2003.
• Positive business prospects, strong market position as well as sound earnings and cash positions enabled a healthy dividend payout.

 

(Hong Kong – 27 July 2004) – Solomon Systech (International) Limited (“Solomon Systech” or the “Group”, SEHK: 2878), a leading flat panel display IC company providing one-stop display IC solutions for high tech products, today announced its interim results for the six months ended 30 June 2004. This is also the Group’s first set of interim results since its successful listing on the Main Board of The Stock Exchange of Hong Kong in April 2004.

For the period under review, the Group’s turnover increased by 137% to US$110.1 million (HK$854.4 million), as compared with the same period last year. The growth was mainly attributable to the Group’s success in gaining market share and marketing and sales of more colour display ICs. Net profit increased by 139% to US$22.9 million (HK$177.7 million) while net profit margin was maintained at over 20%. Higher operational efficiency was the major force behind the significant growth in profitability. Basic earnings per share grew by 117%, were recorded at US1.01 cents per share (HK7.8 cents per share).

The Board of Directors proposed an interim dividend of HK2.6 cents per share for the six months ended 30 June 2004.

The Group’s Managing Director, Mr. Humphrey Leung, said, “Our listing in Hong Kong is an important milestone of the Group’s business development. We have posted another strong year with turnover and profits both growing significantly, bolstered by a 126% YoY increase in shipments. We are able to introduce the right products at the right time, matching the strong demand for cellular phones and portable devices, as well as capturing the opportunities brought about by the transition from monochrome to colour displays. Our success in increasing market share is another brick in fortifying our position as a global leader in display IC solutions. We are excited about the tremendous potential of flat panel display ICs going forward.”

Total shipment of display ICs in the review period was 65.1 million units with the majority being used for mobile applications, compared with 28.8 million units in 2003. According to Gartner’s forecast in June 2004, global shipments of cellular phones for 2004 are expected to exceed 600 million units. The Group believes, on average, one out of six cellular phones is using its proprietary display ICs. Among its products, monochrome STN display ICs shipments grew 39% to 28 million units during the review period. On the other hand, shipments of colour STN (CSTN) display ICs reached 28.8 million units, a remarkable increase of 311%. OLED display ICs also saw phenomenal growth, increasing 380% YoY to 7.2 million units. Encouragingly, the Group began mass production of colour OLED and mobile TFT display ICs. The Group has scored initial successes in these two areas and believes they will significantly contribute to the Group’s financial performance in the future.

The Group’s well-established relationships with its customers continued to provide a solid groundwork for future growth. Currently, the Group serves more than 50 global display module makers and believes its display IC products are used by the global end product brand names, such as, BenQ, Bird, DBTEL, LG, Motorola, Panasonic, Pantech, Quanta, Samsung, Siemens, Sony Ericsson, TCL and UTStarcom.

To reinforce its competitiveness in the market, the Group is committed to continuously focusing on research and development. In addition to driving the Group’s technology advancement to 0.18µm for high integration graphic and multimedia processor, the research and development team was also designing a number of mixed mode IC products for mobile display, large display and new display.

Going forward, the Group is optimistic about the prospect of advanced display IC solutions and its continued leadership in the market. The first half yearly book to bill ratio was 1.4, indicating a strong growth of the Group’s business in the second half of the year. As at 30 June 2004, the Group had abundant backlog orders on hand for shipment in the next few months. Taking those in consideration and also the Group’s successful new product launches, the Group is optimistic about the financial performance of the whole year 2004.

In respect of mobile display, the Group will spend more resources to speed up the time-to-market of its colour display ICs for the mobile application market. Apart from the mass production of colour OLED and mobile TFT display ICs, the Group will also enlarge its product portfolios with more high value and multifunction display ICs. On the other hand, the Group has been working closely with several world-class large panel module manufacturers on new large display IC products. The products are under internal qualification and the first shipment is expected in the next 12 months.

To stay ahead in the market, the Group is also focusing on new display technology development. The Group is cooperating with leading technology companies and realizing commercial applications of micro display and e-paper. Such innovative applications with the latest display technology will soon be announced.

Mr. Leung concluded, “We will continue to focus on new product development, invest in securing production capacity and build the necessary infrastructure to cope with the business growth. Apart from these, the Group is also committed to good corporate governance and corporate citizenship. We are confident of maintaining our leadership in display solutions and creating value for our shareholders.”

During the review period, the Group’s capital expenditure was approximately US$6.1 million (HK$47.3 million) (2003: US$1.6 million / HK$12.4 million). A majority of which was spent on the purchase of critical packaging and testing equipment (in cooperative arrangement with contract manufacturers) for the securing of production capacity. As at 30 June 2004, the Group had US$125.4 million (HK$973.1 million) of net cash (i.e. cash and cash equivalents less bank loans) of which approximately US$91 million (HK$706 million) was the proceeds from the IPO in April 2004. As of 30 June 2004, the Group had no borrowings.