Financial Review

Financial Resultsopen

Result Analysis

The Group’s turnover for the year amounted to HK$26.4 billion, 10.0% higher than the HK$24.0 billion reported in 2009. Profit attributable to Owners of the Company amounted to HK$740 million as compared to HK$491 million reported in 2009. Basic earnings per share for the year improved to HK46.23 cents as compared to HK31.87 cents in 2009.

EBITDA amounted to HK$2.2 billion, an increase of 22.6% as compared to HK$1.8 billion reported in 2009.

EBIT amounted to HK$1.3 billion, an increase of 33.1% as compared to HK$978 million reported in 2009.

Gross Margin

Gross margin improved to 32.2% as compared to 31.3% reported last year. The margin gain was the result of new product introduction, favorable product mix with higher margin products, efficient production in the new PRC facilities, effective supply chain management and improved economies of scale.

Operating Expenses

Total operating expenses for the year amounted to HK$7.1 billion as compared to HK$6.6 billion reported in 2009. The Group managed to control the non-strategic SG&A expenses and reinvested into the strategic SG&A as planned.

Investments in product design and development amounted to HK$504 million, representing 1.9% of turnover (2009: 2.1%) reflecting efficiency improvements from the consolidated and effectively structured R&D resources.

Net interest expenses for the year amounted to HK$563 million as compared to HK$550 million reported in 2009, an increase of 2.4%. The increase was mainly due to the Group having issued two tranches of 5-year 8.5% coupon convertible bonds with an aggregate principal amount of US$150 million in April 2009. Interest coverage, expressed as a multiple of EBITDA to total interest was 3.8 times (2009: 3.2 times).

During the year, there were tax credits of HK$1 million which translated to an effective tax rate of -0.1% as a result of effective global tax planning.

Liquidity and Financial Resourcesopen

Shareholders’ Funds

Total shareholders’ funds amounted to HK$8.7 billion as compared to HK$8.1 billion in 2009. Book value per share was at HK$5.41 as compared to HK$5.08 as reported last year.

Financial Position

The Group’s net gearing, expressed as a percentage of total net borrowing (excluding bank advance from factored trade receivable which is without recourse in nature) to equity attributable to equity holders, was at 72.9% as compared to 68.7% last year. The Group remains confident that gearing will improve further after the successful implementation of the Strategic Repositioning Plan and initiatives to deliver focused and stringent working capital management.

During the year, holders of unlisted warrants previously issued by the Company, entitling the holder to subscribe for new shares of the Company at an exercise price of HK$5.10 per share between April 30, 2010 and April 30, 2012 (the “Warrants”), exercised 14,903,600 Warrants at the exercise price resulting in the issuance of 14,903,600 new shares of the Company.

During the year, the Group bought back 40,984,900 Warrants from the Warrants holders for a consideration of HK$101,843,000.

Bank Borrowings

Long term borrowings accounted for 44.8% of total debts (40.0% at December 31, 2009).

The Group’s major borrowings continued to be in US Dollars and in HK Dollars. Other than the fixed rate notes and the 5-year 8.5% Coupon Convertible Bonds, borrowings are predominantly LIBOR or Hong Kong best lending rates based. There is a natural hedge mechanism in place as the Group’s major revenues are in US Dollars and currency exposure therefore is low. Currency, interest rate exposures, and cash management functions are all being closely monitored and managed by the Group’s treasury team.

During the year, the Group repaid HK$1,354 million of fixed interest rate notes, refinanced by a new syndicated loan obtained in February 2010. This refinancing arrangement will lower our interest cost in future periods.

Working Capital

Total inventory increased from HK$4.8 billion in 2009 to HK$5.0 billion in 2010. Days inventory improved from 73 days to 70 days. The inventory build is in preparation for new products to be launched in 2011, buffer for the European manufacturing relocation and anticipated 2011 first quarter sales increase as compared to that of 2010.

Trade receivable turnover days were at 63 days as compared to 62 days as reported last year. Excluding the gross up of the receivables factored which is without recourse in nature, receivable turnover days were at 55 days. The Group is comfortable with the quality of the receivables and will continue to exercise due care in managing the credit exposure.

Trade payable days declined from 59 days reported in 2009 to 52 days in 2010.

The Group’s current ratio improved from 1.25 times in 2009 to 1.34 times and quick ratio also improved to 0.89 from 0.81 in 2009.

Capital Expenditure

Total capital expenditures for the year amounted to HK$725 million (2009: HK$697 million) including HK$17 million (2009: HK$80 million) related to the new Asia Industrial Park and Innovation Centre.

Capital Commitments and Contingent Liabilities

As at December 31, 2010, total capital commitments amounted to HK$108 million (2009: HK$83 million) and there were no material contingent liabilities or off balance sheet obligations.

Charges

None of the Group’s assets are charged or subject to encumbrance.

Major Customers and Suppliers

For the year ended December 31, 2010

  1. the Group’s largest customer and five largest customers accounted for approximately 36.4% and 52.3% respectively of the Group’s total turnover; and
  2. the Group’s largest supplier and five largest suppliers accounted for approximately 3.4% and 13.4% respectively
    of the Group’s total purchases (not including purchases of items which are of a capital nature).

According to the knowledge of the Directors, none of the Directors, their associates or any shareholders who owned more than 5% of TTI’s share capital had any interest in the five largest customers or suppliers of the Group.

Human Resourcesopen

The Group employed a total of 18,440 employees (2009: 16,772 employees) in Hong Kong and overseas. Total staff cost for the year under review amounted to HK$3.6 billion (2009: HK$3.3 billion).

The Group regards human capital as vital for the Group’s continuous growth and profitability and remains committed to improving the quality, competence and skills of all employees. It provides job-related training and leadership development programs throughout the organization. The Group continues to offer competitive remuneration packages, discretionary share options and bonuses to eligible staff, based on the performance of the Group and the individual employee.

Purchase, Sale or Redemption of Sharesopen
Neither the Company nor any of its subsidiaries has, during the year, purchased, sold or redeemed any of the listed securities of the Company.
Review of Financial Informationopen
The Audit Committee has reviewed with senior management of the Group and Messrs Deloitte Touche Tohmatsu the accounting principles and practices adopted by the Group and has discussed internal controls and financial reporting matters, including the review of Group’s consolidated financial statements for the year ended December 31, 2010. The Board acknowledges its responsibility for the preparation of the accounts of the Group.
Dividendopen
The Directors have recommended a final dividend of HK6.25 cents per share for the year ended December 31, 2010 (2009: HK4.50 cents) payable to the Company’s shareholders whose names appear on the register of members of the Company on May 20, 2011. Subject to the approval of the shareholders at the forthcoming annual general meeting of the Company, the proposed final dividend is expected to be paid on or about July 8, 2011. This payment, together with the interim dividend of HK3.75 cents per share (2009: HK3.00 cents) paid on September 29, 2010, makes a total payment of HK10.00 cents per share for 2010 (2009: HK7.50 cents).
Closure of Register of Membersopen
The register of members of the Company will be closed from May 18, 2011 to May 20, 2011, both days inclusive. In order to qualify for the final dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s share registrars, Tricor Secretaries Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not later than 4:00 p.m. on May 17, 2011.