Extracted from Annual Report 2008
Dear Shareholders,
On behalf of our Board of Directors, I am pleased to present the
annual report for the financial year ended 31 December 2008
(FY2008).
Against the backdrop of the global financial crisis, we achieved
a slower growth in sales and a decline in profit. Group's sales
increased by 6.9% to RMB 822.1 million in FY2008, while profit
attributable to shareholders of the Company decreased by
24.3% to RMB 80.2 million.
The Group had paid an interim dividend of RMB 0.08 per
share for FY2008 on 6 November 2008. In view of the current
uncertain operating conditions, the Group will not be declaring
further dividends for FY2008. We are maintaining a cautious
attitude and will continue to seek an appropriate balance
between shareholders' expectation of returns with the financial
performance of the Group.
Business Review
While the Group sales experienced sustained steady growth
in the first three quarters of FY2008, the fourth quarter sales
declined by 13.4% due to the deepening global financial crisis
which led to a significant drop in sales orders. Overall, the
Group achieved a 6.9% increase in sales turnover.
Group profitability declined in FY2008. Overall net profit margin
slid by 4.0 percentage points from 13.8% in FY2007 to 9.8% in
FY2008. This drop was a result of slower growth in sales and an
increase in operating costs over the same period.
In FY2008, our Group experienced unprecedented challenges
in its external operating environment. Our business segments
of Electronic Tuner Components, mobile phone and automotive
components were all affected in varying degrees. To counter the
situation, a slew of measures were taken by the management.
The Group continues to actively develop new products while
exploring new potential business opportunities in various fields.
Our set-top boxes have already passed the quality assurance
test of an international manufacturer, and are being produced
on a large scale. The contribution from sales of our Liquid
Crystal Display products to Japanese-based customers is also
gradually becoming substantial. We are confident that these
two new products have the potential to propel our Group's
future development.
At the same time, the Group has intensified its involvement
in the creation of new technologies, and has established an
engineering technology centre. During the year under review,
our main subsidiary Ningbo Sunrise Electronics Co., Ltd. had
obtained the New/High Technology Enterprises status which
allows it to enjoy a preferential tax rate of 15% from year 2008
to 2010.
Near end FY2008, with a focus to enhance the Group
performance and improve overall efficiency, the Group
commenced the consolidation of our operations in Cixi and
Suzhou in terms of customer resources and manufacturing capacity. We anticipate this move will show results in the
coming year of 2009.
Outlook
We anticipate the deepening financial crisis will continue to
pose significant challenges in the next two years.
In early 2009, major Japanese electronics manufacturers
announced operational losses, and have indicated that future
investment plans will be shelved, and current operations will
be scaled back to remove excess capacity. These actions will
undoubtedly exert a negative effect on our business.
However, we also see opportunities presented by the current
financial crisis, with possibilities of expanding our operations,
as manufacturers may increase outsourcing in search of lower
prices, and explore other cost effective procurement channels.
With our leading edge manufacturing abilities and economies of
scale, the current crisis may offer opportunities for us to further
develop and grow our operations.
In addition, our Group will also seize this opportunity to increase
the Group's core technological abilities through appropriate
mergers and/or acquisitions.
With the increase in global sales of digital television sets, other
application devices like set-top boxes, handheld devices and
automotive audio components have evolved to become major
industries, which will undoubtedly increase the demand for
Digital Tuners. This trend is aligned with the direction in which
the Group intends to grow.
According to the research findings of Strategy Analytics
published in a report named "Digital Television Set-Top Boxes:
A Global Forecast", over 100 million set-top boxes were sold in
2007, an increase of 12% from 2006. It was predicted that the
total number of set-top boxes sold in 2008 could exceed 128
million, whereas between 2008 and 2010, the average demand
for set-top boxes is expected to increase by approximately
14%.
Going forward, in the face of operating challenges and possible
opportunities for further development, the Group will focus on
its core values of "quality, cost, technology and efficiency" to
create uncompromised quality through stringent cost controls,
increased investment in R&D and group efficiency, while
simultaneously nurturing our core competitiveness.
On behalf of the Board of Directors, I would like to express
our sincere appreciation and thanks to our shareholders,
customers, suppliers, business associates and our staff for
your firm belief and support to the Group. China Precision will
continue to endeavour to bring the best products and services
to our customers and reward our shareholders with optimum
returns.
Mr. Zhang Zhongliang
Executive Chairman
31 March 2009