Solomon Systech Announces FY2006 Annual Results
Sales Amounted to US$254M (HK$1,972M) Net Profit Recorded US$22.4M (HK$174M) Diversifying Product Offerings and Broadening Customer Base
Year ended 31 December
|US$’m||HK$’m equivalent||US$’m||HK$’m equivalent|
|Gross Profit Margin||23.3%||
|EPS, Basic*||0.91 US cents||7.1 HK cents||3.12 US cents||24.3 HK cents|
|EPS, Diluted||0.90 US cents||7.0 HK cents||3.08 US cents||24.0 HK cents|
|DPS, Final||0.51 US cents||4.0 HK cents||1.93 US cents||15.0 HK cents|
|DPS, Total||0.77 US cents||6.0 HK cents||2.44 US cents||19.0 HK cents|
*EPS calculation is based on the weighted average number of shares for the year
Display IC shipment reached 230 million units
Sales amounted to US$254 million
Net profit was US$22.4 million
Basic earnings per share was 0.91 US cents (7.1 HK cents)
The Board proposed a final dividend per share of 4 HK cents. Total annual dividend per share of the year amounted to 6 HK cents
Progressing in growing business through products diversification
(Hong Kong – 26 March 2007) – Solomon Systech (International) Limited (“Solomon Systech” or “the Group”; SEHK: 2878) today announced its annual results for FY2006.
For the year under review, its sales amounted to US$254 million. The decline was mainly the result of (1) average selling price erosion of 26%, (2) severe demand slowdown in 3Q 2006, and (3) the new business of m-TFT not taking off as quickly as the Group had expected. With the Group’s effort in lowering manufacturing cost, the decline in gross profit margin was limited. The gross profit margin was 23.3% and a gross profit of US$59.3 million (HK$460 million) was recorded. Its net profit was US$22.4 million and net profit margin was 8.8%. Basic earnings per share was 0.91 US cents per share (7.1 HK cents per share).
In light of the Group’s net profit and relatively rich cash position with net cash at US$122 million, the Board of Directors proposed to pay a final dividend of 4 HK cents per share. Including the interim dividend of 2 HK cents already paid, the total dividend per share for the year ended 31 December 2006 amounted to 6 HK cents.
The Group’s Managing Director, Mr. Humphrey Leung, said, “2006 was a year of change for Solomon Systech. Some panel makers in OLED and large panel industries realigned their businesses and the display industry shouldered severe pricing pressure. Nonetheless, we saw the commercialization of much anticipated new display technologies. Our foresight in E-paper came true and our ahead of the market E-paper IC was adopted in high volume handset application. We shipped over 10 million units of the IC in the last quarter of 2006 and established firm leadership in this market.”
During the review period, the Group shipped a total of 229.7 million units of display IC. After achieving a strong start in 1H 2006 with unit shipment growth of 16% year-on-year, the Group experienced a severe demand slowdown in 3Q 2006 and shipment plunged to the lowest level for the year. Demand picked up again in 4Q 2006 and shipment amount bounced back to the second highest quarterly unit shipment in the Group’s history. The blended average selling price (ASP) of the Group’s products was US$1.11, down from US$1.50 for 2005. The decrease was mainly due to pricing pressure from the market.
|Units Shipped (million)||2006||2005||Growth|
Note: Miscellaneous includes graphics controller, image processor, microdisplay controller and others
Among the Group’s products, LCD (STN, TFT), which continued to be the most popular and dominant display technology for mobile devices, made up the bulk of the Group’s shipments for the year, but transition from STN to TFT has been underway. m-TFT had a severe sequential decline caused by customers’ product transition as well as slower than expected ramp in new design. On the OLED front, several panel makers announced their withdrawal from this area of business in 2006, and that affected overall market demand for OLED driver IC and in turn the size of shipments made by the Group. Bistable display IC achieved strong growth with over 10 million units shipped in 2006, reflecting the successful adoption of E-paper technology in mobile phones and watches.
During the review period, the Group’s research and development expenses amounted to roughly US$17 million, about the same as in 2005. Its R&D team has been turning out new products using advanced wafer technologies as fine as 0.13µm. And a total of 26 new products went to production last year, similar to 2005’s total of 27. Apart from the bistable display IC, the Group made progress in display system development and introduced new image processors and a world first MIPI master bridge chip as part of its efforts to expand sales beyond mobile phones. The MIPI master bridge chip contains an interface in compliance with Mobile Industry Processor Interface (“MIPI”) specifications, which supports portable devices such as mobile TV and game consoles that require high video quality.
Outlook for 2007
After taking critical steps to cope with and ride on the changes, the Group believes product diversification, where its strength lies, is the way to grow its business.
For its mobile display business, the Group expects unit shipment to grow at a rate above the industry average in FY2007. The Group sees potential growth primarily for its m-TFT. To boost its m-TFT display IC shipment, the Group is seeking to improve its relationships with mobile phone brand names, independent design house (IDH) and module makers, and also to boost the competitiveness of its m-TFT products with die shrinkage and through enhancing functions and integrating different features. For OLED ICs, the Group intends to continue to develop new applications and forge leadership also in active matrix OLED (AMOLED) which commercial use is expected to begin in 2007.
For its large display business, in spite of lacking a new anchor customer after Quanta Display Inc.’s merger with AU Optronics, the Group continues to see potential in large display driver ICs with an estimated market value of more than US$3 billion a year. It is working with a few large TFT LCD panel makers in Japan and the Greater China region on new designs.
As for the new display segment, the Group expects bistable display IC to emerge as an important future growth driver as the application of E-paper display widens. In addition to mobile phones and watches, the Group is developing opportunities in high volume applications for the revolutionary display IC, namely flash memory card, electronic signs and IC cards that did not have display incorporated previously.
For display system business, the Group expects it to contribute higher sales in 2007 with its higher level of product readiness. Leveraging its early leadership in MIPI, the business unit will develop more products including IP to grow with increasing demand for mobile TV and VGA features.
“Supported by our advanced technologies and a workforce committed to excellence, I look forward to growing our business by diversifying our product offerings, creating new market applications for different products and broadening our customer base,” concluded Mr. Leung.
|Solomon Systech (International) Limited|
|Consolidated Income Statement|
|For the Year Ended 31st December 2006|
|Cost of sales||(194,823)||(274,538)|
|Research and development costs||(17,373)||(17,523)|
|Selling and distribution expenses||(4,128)||(2,255)|
|Other operating expenses||(1,265)||(235)|
|Share of result of an associated companies||(662)||(216)|
|Profit before taxation||28,595||92,016|
|Profit attributable to shareholders||22,418||76,254|
|Earnings per share (US cents)|
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