Tonly Electronics Holdings Limited

For Immediate Release

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Tonly Electronics Holdings Limited
(Stock Code：01249)

Tonly Electronics Announces 2016 Annual Results

Continuous Turnover Improvement in Q1 to Q3 with 8.2% Growth in Q4

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Implements Smart Transition Based on "Intelligence + Internet" Strategy

(21 March 2017, Hong Kong) Tonly Electronics Holdings Limited ("Tonly Electronics" or "the Group"; SEHK stock code: 01249) today announced its annual results for the year ended 31 December 2016.

During the year under review, the Group recorded turnover of approximately HK$4,265.7 million, a decline of 12.2% year-on-year (yoy). The decrease in turnover for the first three quarters continued to narrow down and achieved growth of 8.2% in the fourth quarter. By virtue of the Group's business transformation, diversified product portfolio and competitive industrial platform, the Group's gross margin and operating margin continued to achieve steady growth. Gross margin rose by 1.5 p.p. yoy to 14% while operating margin increased by 0.5 p.p. yoy to 4.5%. Net profit of the Group dropped by 9.5% yoy to HK$151.7 million. Profit attributable to owners of the parent decreased by 8.8% yoy to approximately HK$151.8 million. The Board recommends a final dividend of HK25.0 cents per share for the year ended 31 December 2016.

During the year under review, sales of the Group's audio products achieved remarkable growth, turnover of the segment increased by 27.3% yoy to HK$2,899.8 million. Benefited from strong market demand, soundbar and headphone products achieved significant progress and gradually built up overseas clientele. In the year under review, the Group successfully launched audio products with voice interactive functions, demonstrating its capabilities in innovative technologies, design and R&D of smart IoT products.

For video product business, the traditional video disc player market was under continuous market pressure, with turnover dropped by 50.3% yoy to HK$1,159.8 million. The Group shifted its focus to ABS-s and set-top boxes in overseas markets. Turnover of ABS-s rose by 35.7% yoy to HK$267.2 million during the year under review. It also focused on the development of high end set-top boxes in Europe as well as emerging markets such as India and Africa, aiming to develop a more diversified product portfolio.

Smart business is one of the Group's future business highlights, providing a full range of smart products of four categories - smart audio and video, smart security, smart health and fitness as well as smart internet management. The Group launched diversified products including smart door locks, smart gateway and related products during the year under review, and expanded into overseas markets such as the United States.

As a leading supplier of high-tech smart products, the Group has successfully expanded its business to the IoT market and actively promote cross-border cooperation. The Group strived to join hands with partners from all aspects in the industry chain to explore cooperation opportunities in the IoT market, laying a solid foundation for future business development. During the year under review, turnover from the Group's smart products amounted to approximately HK$17.0 million. With the increasing popularity of smart life, the business segment will continue to grow and become one of the Group's important sources of turnover and profit.

The Group continued to increase the proportion of automated equipment and strengthened the stability of skilled workers to boost its per capita production efficiency. The Group had completed phase one of Huizhou production base extension and had put it into operation in the first quarter of 2017. In terms of R&D and innovation, the Group's R&D expenses were approximately HK$198.0 million in FY2016, accounting for 4.6% of its total turnover.

Looking into 2017, management of Tonly Electronics says, "We will continue to uphold the steady operation strategy. By leveraging on product innovation and R&D capabilities, the Group will continue to strengthen its capabilities, optimise product mix as well as introduce diversified products to meet market demands and consumer preferences, in order to maintain our competitiveness. The Group will implement smart transition based on "Intelligence + Internet" and make every efforts in exploring the potential of applications in combining smart technologies with IoT platform. We will also strengthen the cooperation with strategic partners, in order to develop the IoT market and grasp the enormous growth potentials. The management is confident in our long term growth prospect."

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About Tonly Electronics
Tonly Electronics Holdings Limited (stock code: 01249), a high-tech smart products manufacturer with competitive industrial advantages, is principally engaged in the research and development, manufacturing and sales of audio and video products as well as wireless smart interconnectivity products. It is also devleoping into smart business. The Group is committed to becoming a one-stop smart audio loT solutions provider based on the electroacoustic and wireless technologies. Its ultimate controlling shareholder is TCL Corporation (a company listed on the Shenzhen Stock Exchange, Stock code 000100.SZ).

For more information, please visit its website at www.tonlyele.com.