During the year under review, the Group focused on aggressively developing its flat-panel digital TV business, further expanding its TFT-LCD monitor business and, at the same time, maintaining and strategically adjusting its CRT monitor business.
After years of persistent efforts, PROVIEW’s flat digital TV and related operations have won both industry and customer recognition. These operations may contribute a more substantial turnover and profit than TFT-LCD monitor operations in the very near future. During the year, the Group’s flat digital TV shipments doubled on the back of its cutting-edge technology in LIPS (LCD Integrated Power Supply), possession of a number of patents, experience and production capacity in backlighting, LCD modules, standardization and modularization of parts and components, and the vertical integration of upstream and downstream operations. According to the August 2007 report by Display Search, PROVIEW was ranked as the world’s third largest OEM LCD TV manufacturer.
With strong sales of flat digital TVs, the Group was able to mitigate declines in TFT-LCD monitor sales and gross profit caused by falling panel prices. According to the March 2007 forecast by Display Search, the global flat digital TV market will increase from 46 million units in 2006 to 128 million units in 2007.
LCD monitor sales for the year under review constituted about 68% of consolidated turnover. In view of the global downward adjustment in selling prices for LCD monitors, the Group re-examined its customer profile and accepted fewer of those lower profit margin orders. In contrast, LCD TV sales contributed about 23% of consolidated turnover and represented growth of 121.6% year on year.
The rapid slide in TFT-LCD panel prices has closed the gap between TFT-LCD and CRT monitor unit prices dramatically, resulting in a further diminution in global demand for CRT monitors. According to a Display Search forecast issued in March 2007, the global CRT monitor market will decline from 32 million units to 21 million units in 2007. Currently, the Group only manufactures CRT monitors in Wuhan, PRC, and in Brazil. CRT monitor sales therefore slowed to make up about 8% of consolidated turnover. The Group no longer positions CRT monitors as strategic products and thus this decline in the CRT monitor market is not expected to have a significant impact on the Group.
Gross profit margins contributed from sales LCD monitors, LCD TVs and CRT monitors were 6.8%, 7.8% and 5.3% respectively, with the overall gross margin decreasing to 6.9% due to the ever-decreasing selling price of end products and unfavorable fluctuations in panel costs. Thanks to the combined effects of sales orders consolidation and vertical integration, the Group maintained its competitiveness vis à vis other industry participants.
Mr Rowell Yang Long-san, Chairman and Chief Executive Officer, PROVIEW International noted: “The LCD TV market is expected to enjoy exponential growth over the next three years. The panel market is still expected to suffer from supply constraints in 2008; nevertheless the Group’s current resources allocation will be sufficient for our development purposes over the next 12 months and thus circumstances still favor us. We have a full order book for 2008. As the production capacity of our Shenzhen factory cannot yet cope with the development of our flat digital TV business, we have begun construction of a new production facility in Ningbo in order to fulfill all new orders for 2008. This new production line will occupy 62,000 square feet and the relevant construction work is scheduled for completion in November 2007, when production will commence.”
The Group’s geographical market mix was well managed and diversified. Sales to North America, Europe and Asia accounted for about 30%, 20% and 42% of consolidated turnover respectively. The Group closely monitors the emerging markets and continues to explore new business opportunities in regions including Eastern Europe and South America.
The Group is now developing niche product orders for its TFT-LCD monitor business, as well as providing professional EMS services to private brands and major international original equipment manufacturers such as Tatung, Samsung and CMO. To this end, the Group has co-developed the VisBoardTM pen-writing tablet monitor with a strategic alliance partner.
Mr Yang continued: “Meanwhile, our flat digital TV business faces further challenges in the form of high prices for TV panels, less-than-generous payment terms extended by panel factories, and over-extended product supply chains. For this reason, the Group needs to maintain ample liquidity. At the same time, the payment of patent royalties will inevitably lead to a surge in production costs. In respect of our funding requirements, the Group has taken on the Tatung Group as a strategic investment partner.”
As at June 30, 2007, the Group held cash and bank balances of approximately HK$1.5 billion.
Financial Highlights
| Year ended June 30, | ||
| 2007 | 2006 | |
| HK$'000 | HK$'000 | |
| 15,650,016 | 16,177,812 | |
 LCD monitors |
||
| Units sold |
8.6 million units | 7.5 million units |
| Turnover |
10,583,064 | 10,852,932 |
| CRT monitors |
||
| Units sold |
1.7 million units | 4.8 million units |
| Turnover |
1,315,243 | 3,594,102 |
| Flat panel televisions |
||
| Units sold |
1.3 million units | 363,000 units |
| Turnover |
3,666,156 | 1,654,700 |
| Profit from operations | 374,524 | 381,933 |
| Net profit attributable to shareholders | 127,103 | 180,328 |
| Basic earnings per share | HK19.65 cents | HK27.93 cents |
| Interim dividend per share | HK2.5 cents | HK2.5 cents |
| Interim dividend per share | HK1.5 cents | HK2.5 cents |
About PROVIEW International
PROVIEW International Holdings Limited (HKEx: 334) is a world leading display devices producer owning globally recognized house brands including PROVIEW and EMC. The Group commands a global retail-sales and distribution network covering 50 countries with strong leverage of its world-class manufacturing facilities in China and Brazil. It has an annual production capacity of 4 million units of CRT monitors, 13 million LCD monitors and 2 million flat digital TVs. For more information, please visit www.proview.com.