During the year, the poor economic outlook in North America exerted downward pressure on display products, against a backdrop of rising operating costs. Borrowing costs also increased as interest spread widened after the credit crunch. Finally, panel prices dropped in June 2008, which induced the Group to make an exceptional once-off inventory provision at year end.
Mr Rowell Yang Long-san, Chairman and Chief Executive Officer, PROVIEW International remarked: “Facing the economic downturn, we are aware that it is vital for the Group to preserve its competitiveness. We are now running programs to further strengthen supply chain management and streamline production process. Customer profile and product mixes are being re-examined to ensure the highest returns with our existing resources.”
Such measures include further vertical integration through an equity alliance with Tatung Group, a reputable listed conglomerate in Taiwan operating a full-line branded home appliance business and controlling one of the world’s leading panel suppliers, Chunghwa Pictures Tubes Ltd.. Tatung Group has invested into PROVIEW since October 2007 and is now a strategic investor holding about 16.22% of the Group’s issued shares. On May 23, 2008, PROVIEW entered into three agreements with Tatung Group pursuant to which the latter will supply panels to PROVIEW with an annual cap of at least HK$3,500 million in each of the coming two years. This will take up a significant portion of the Group’s panel purchase and will help to secure a stable supply of high quality panels at competitive prices. Meanwhile, PROVIEW will supply TV products to Tatung Group with an annual cap of at least HK$620 million in each of the coming two years. This will help to further build up sales of PROVIEW, by taking advantage of Tatung Group’s well-established distribution channels. This alliance goes a further step forward, whereby Tatung Group is committed to provide PROVIEW with manufacturing and processing services through its world-class production sites in Eastern Europe and Asia.
These synergistic cooperation plans have begun in June 2008. The Group believes that they will significantly enhance its performance in the coming years.
During the year, the Group’s sales of flat-panel digital TVs increased by 118%, bringing in a record-breaking HK$8.0 billion (2007: 3.7 billion) in segment revenue and contributing 46% of consolidated turnover.
Mr Yang said: “We will continue to acquire further sales growth in flat-panel digital TVs. As the world is undergoing a global economic retrenchment, the global demand for low-priced flat-panel digital TVs will increase greatly, opening up a tremendous opportunity for our already established ‘white box’ and ‘private label’ ODM TV business. We are impressed by the remarkable potential of the market in Mainland China, in which we currently have a solid customer base consisting of top-tier local brands and leading retail chains.”
During the year, LCD monitor sales dropped by 28% to HK$7.6 billion (2007: HK$10.6 billion), reflecting the Group’s ongoing plan to reallocate internal resources. Starting from last year, the Group has started to re-examine its customer profile for LCD monitors. It carefully reviews and selects sales orders to ensure a satisfactory return from LCD monitor sales. Meanwhile, the Group introduces innovative products in order to improve profitability, including VisBoardTM, a new-generation tablet monitor with state-of-the-art penwriting touch-screen functionality which was launched in the third quarter of 2008. The Group is impressed by the prodigious potential of VisBoardTM, which is reflected in its shipment growth and remarkable profit margin. It expects the sales of VisBoardTM to further increase, thereby helping to enhance the Group’s overall profitability.
CRT monitor sales dropped by 3% to HK$1,283 million (2007: HK$1,315 million), which resulted from the further decline in the global CRT monitor market. Foreseeing that CRT monitors will be replaced by LCD monitors within the coming five years, the Group will scale down its existing CRT production in phases to release resources for other core businesses.
The Group’s geographical mix was well managed and diversified, with sales to North America, Europe and Asia accounting for about 25% (2007: 30%), 16% (2007: 20%) and 49% (2007: 42%) respectively of Group turnover. The remarkable growth in Asia was driven by the blooming demand for display products in Mainland China, but efforts will also be made in exploring the emerging markets in South America, Eastern Europe and the Pacific region.
The gross profit margin of the Group decreased from 6.9% to 6.5%. Gross margins contributed from the sales of flat-panel digital TVs, LCD monitors and CRT monitors were 7.0% (2007: 7.8%), 6.2% (2007: 6.8%) and 6.0% (2007: 5.3%) respectively.
As at June 30, 2008, the Group held cash and bank balances of approximately HK$1.3 billion (2007: HK$1.5 billion). The Group is working on a plan to improve its existing loan structure by actively seeking borrowing and facilities with relatively longer tenor from banks. It is also continuously negotiating with customers for the adoption of consignment panel arrangements under which customers will acquire and bring along their own panels for PROVIEW’s production, thereby releasing working capital from inventory for operations.
Financial Highlights
| Year ended June 30, | ||
| 2008 | 2007 | |
| HK$'000 | HK$'000 | |
| Turnover | 17,394,950 | 15,650,016 |
 LCD monitors |
7,613,034 | 10,583,064 |
| CRT monitors |
1,282,514 | 1,315,243 |
| Flat-panel digital televisions |
7,995,475 | 3,666,156 |
| (Loss)/profit before taxation | (50,082) | 170,467 |
| (Loss)/profit attributable to equity holders | (61,642) | 127,103 |
| Basic (loss)/earnings per share | (8.36)cents | 19.65 cents |
| Interim dividend per share | Nil | 2.5 cents |
| Final dividend per share | Nil | 1.5 cents |
About PROVIEW International
PROVIEW International Holdings Limited (HKEx: 334) is the world’s leading display devices producer. The Group commands a global sales and distribution network covering 50 countries with strong leverage of its world-class manufacturing facilities in China, Taiwan and Brazil. For more information, please visit www.proview.com.