Solomon Systech Announces 2011 Interim Results

Expand Product Portfolio to Capitalize on Growing Market Demand

Financial Highlights:

 

	For the Six Months ended 30 June
	2011		2010
	US$’m	HK$’m equivalent	US$’m	HK$’m equivalent	YoY Change
Sales	27.5	212.8	38.0	294.6	(28%)
Gross Profit	8.9	69.1	11.2	86.9	(21%)
Gross Profit Margin	32.5%		29.5%		Increased by 3 percentage pts.
Net Loss	5.2	40.2	3.9	30.6	31%
Loss Per Share	0.21 US cent	1.64 HK cents	0.16 US cent	1.25 HK cents	31%
Dividend per Share	Nil	Nil	Nil	Nil

 

(Hong Kong – 18 August 2011) – Solomon Systech (International) Limited (“Solomon Systech” or “the Group”; SEHK: 2878) announced its interim results for the six months ended 30 June 2011 (“1H 2011”). 

 

In 1H 2011, Solomon Systech’s sales totaled US$27.5 million (1H2010: US$38.0 million), a decrease of 28% year-on-year. The Group recorded a decline in shipment quantity and the blended ASP of its products compared with the corresponding period last year. Nevertheless, gross margin rose to 32.5% from 29.5%, mainly due to a greater percentage of products with relatively higher profit margin contributions.  

 

As at 30 June 2011, the Group had total bank deposits and cash and cash equivalents of US$82.6 million. To retain the earnings for further business development, the Board of Directors of the Group resolved not to declare any interim dividend for 1H 2011.

 

Dr. Humphrey Leung, Managing Director of the Group, said, “Despite weakened market demand amidst a cautious economic outlook, we have managed to work closely with our business partners, bringing in new revenue sources through investment, and successfully launching new products and solutions for our customers.”

Business Review

The Group has shipped a total of approximately 54 million display IC units during the period under review, a 22% decrease year-on-year. This decrease was primarily attributable to (1) lower than expected Mobile Display business unit sales and (2) a later than anticipated start of volume sales for new products resulting from a weakened demand from customers. The weakened demand was due to a cautious outlook for 2011 economic growth in the aftermath of the Japan earthquake and lingering European sovereign debt issues.

 

During the review period, apart from fostering relationships with leading display module makers and top-tier end-product manufacturers from China, Europe, Japan, Korea and Taiwan, the Group’s Mobile Display business unit has been collaborating with capacitive touch panel makers and related end-product manufacturers to produce the Group’s first capacitive touch panel solutions. On the Display System Solution business front, the Group’s MagusCore^TM multimedia system solution has secured several design wins in pico and pocket projectors with rich multimedia and connectivity capabilities in 1H 2011.

 

The Group’s Large Display business unit has been working with target customers to qualify its new driver products to be in time for volume shipment this year, as well as with the Green Power business unit on LED backlighting to provide total TV display solutions. The Group’s Advanced Display business unit has also secured design wins in OLED applications and electronic shelf labels.

 

Seeing the great market potential in Internet TV, in August this year, the Group announced its investment in C2 Microsystems Inc. (“C2”), a fabless semiconductor company focusing on the development and sales of System-on-Chip solutions (“SoC”) for Internet TV. The acquisition was made to introduce Internet TV as its new product line and one of its growth engines.

 

With a continuous commitment to Research & Development, the Group has devoted US$8.3 million to R&D expenses during the period, representing 30% of total sales revenue. The dedication has enabled the Group to be awarded three patents in 1H 2011, including two for display driver design and one for image enhancement. One patent was also filed for LED controller driver design while several other patents were filed in different regions including the US, China, Taiwan, Korea and Europe.

 

Prospects

Display IC Businesses

With a number of the Mobile Display unit’s new generation products soon commencing full production, the Group is well positioned to capture the market opportunity in smartphones and other mobile display applications. These products support higher display resolution and bigger display size, including multi-touch capacitive panel controllers for displays ranging from 3” to 12″, high-speed display interface controllers and TFT driver controllers for HD displays. The Group is also continuing its efforts to advance its technology and introduce cutting-edge products to support the next generation of 3D displays.

 

For Advanced Display, the Group will work with clients in the automotive, industrial and healthcare markets on design-in projects, aiming to further diversify and extend the applications of PMOLED display IC to achieve growth. Moreover, the Group has shipped a large volume of new display ICs during the period to cater for the surging demand in electronic shelf labels. The Group will ramp up its business and target to establish its leadership in this emerging market.

 

The Group’s Large Display business unit is developing new products to support the growing 6G & 8.5G production lines in China.

 

System Solution Businesses

As an important growth engine, the Group will continue to expand its Display System Solution business through further promoting the capability of MagusCore^TM, targeting at Android-based applications, as well as its newly launched system solutions for multimedia products with advanced features, such as HD & 3D. Leveraging the successful development of the world’s first Android-based GPS tracker, the business unit will continue to development more Android-based solutions to capitalize on this growing market segment.

 

The Group’s Green Power business unit has started to bring in revenue for the Group since its newly developed products have commenced mass production in 1H 2011. The Group will continue to develop more new high performance constant current driver ICs and modules to seize opportunities in this expanding market sector.

 

New Product as Growth Engine

It is expected that C2’s Android system on TV SoC solution will create synergies with the Group’s current Large Display business and Green Power business’ LED backlight solutions, which will enable the Company to provide total solutions for its customers in the TV/large display business. Moreover, this new product line of Internet TV shares a similar set of technology and intellectual property with the Group’s Display System Solutions business and thus enables the Group to enjoy enhanced cost effectiveness. This new growth engine is expected to further strengthen the Group’s competitiveness, in particular in the booming Internet TV market, and also boost the Group’s overall business development.

 

“We see potentials for stable growth in the second half of the year, given our efforts in strategic investment and development of new technologies and products. However, we remain cautious about the global economy and its possible impact. We will continue delivering new technologically leading ICs and fast turnkey solutions for emerging high-growth applications to generate higher revenue, expand our customer base and provide total solutions to our customers.” concluded Dr. Leung.

 

– end –

 

 

Solomon Systech (International) Limited   Condensed Consolidated Interim Income Statement For the Six Months ended 30 June 2011
	Unaudited For the Six Months Ended 30 June
	2011 US$’000	2010 US$’000
Sales	27,454	38,018
Cost of sales	(18,534)	(26,799)
Gross profit	8,920	11,219
Research and development costs	(8,348)	(7,259)
Selling and distribution expenses	(1,759)	(1,932)
Administrative expenses	(4,130)	(4,931)
Other income/(expenses)	49	(3)
	(5,268)	(2,906)
Finance income(costs)  – net	153	(676)
Share of results of associated companies	(64)	(359)
Loss before income tax	(5,179)	(3,941)
Income tax expense	(2)	(2)
Loss attribute to the equity holders of the Company	(5,181)	(3,943)
Earnings per share for profit attributable to the equity holders of the Company: (expressed in US cent per share)
–    Basic	(0.21)	(0.16)
–    Diluted	(0.21)	(0.16)
Dividend	—	—