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Press Release -- March 26th, 2015
Source: Comba Telecom
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COMBA TELECOM ACHIEVES TURNAROUND IN 2014 ANNUAL RESULTS

Financial Highlights

HKD’000

2014

2013

Change

Revenue

6,733,214

5,720,599

+17.7%

Gross Profit

1,760,010

1,365,586

+28.9%

Gross Profit Margin

26.1%

23.9%

+2.2pp

Profit/Loss Attributable to Shareholders

151,061

(240,722)

+162.8%

Basic Earnings/(Loss) per Share (HKD Cents)

9.04

(14.46)

(restated)

+162.5%

(25 March 2015, Hong Kong) – Comba Telecom Systems Holdings Limited (“Comba Telecom” or “the Group”, Hong Kong stock code: 2342), a global leading wireless solutions provider, today is pleased to announce its audited annual results for the year ended 31 December 2014.

In 2014, the revenue of the Group increased by 17.7% to HK$6,733 million. The gross profit increased by 28.9% to HK$1,760 million and the gross profit margin also increased to 26.1%, mainly due to the adjustment of product mix and improving gross profit margins of certain product categories. Driven by the strong demand for certain telecom equipment for large-scale domestic 4G network deployments which resulted in a growth of the revenue, and benefiting from the economies of scale and effective cost control measures, the Group achieved a turnaround in 2014 by recording a net profit of HK$151 million as compared with the net loss of HK$241 million in 2013. The Board proposes a final dividend for 2014 of HK1.3 cents (2013: Nil) per ordinary share and to distribute 1 bonus share for every 10 existing ordinary shares held by shareholders.

Mr. Zhang Yue Jun, Vice Chairman & President of Comba Telecom, said, “Leveraging the rapid 4G network deployment in Mainland China and the strong demand of mobile network solutions in the global market, the Group has successfully seized the market opportunities and gradually improved the business performance of the Group, thereby achieving a turnaround for the year. This has fully demonstrated the strong capabilities and solid foundation laid by the Group over the years. In the meantime, our product and business transformation which started two years ago is on course; we believe the favourable factors such as increased consumption of mobile data, evolution to new mobile networks, more new technologies, etc. will give impetus to the Group for its further development.”

During the year, revenue from China Mobile Group increased by 7.6% to HK$3,209 million, accounting for 47.7% of the Group’s revenue. Revenue from China Telecom Group increased significantly by 54.8% to HK$1,138 million, accounting for 16.9% of the Group’s revenue. Revenue from China Unicom Group rose 14.0% to HK$947 million, accounting for 14.1% of the Group’s revenue. As a result of the completion of a number of large wireless solutions projects in overseas markets and the strong demand for 4G products from core equipment manufacturers, revenue generated from international customers and core equipment manufacturers increased notably by 21.1% to HK$1,348 million, accounting for 20.0% of the Group’s revenue.

Revenue from the antennas and subsystems business increased significantly by 40.2% to HK$2,616 million, accounting for 38.8% of the Group’s revenue, mainly due to a strong product demand for global 4G network build-outs. Revenue from the wireless enhancement business increased by 16.5% to HK$1,142 million, accounting for 17.0% of the Group’s revenue, mainly due to strong growth from the international markets and the gradual recovery of the wireless enhancement market in Mainland China. This is because mobile network operators resumed certain wireless projects in view of the growing need to maintain network quality of service under the pressure created by the dramatic data traffic growth. Revenue from the wireless access and transmission business decreased by 20.0% to HK$337 million, accounting for 5.0% of the Group’s revenue, mainly due to the declining mobile network operators’ demand for Wi-Fi products while revenue from small cells increased significantly. Revenue from services grew by 7.5% to HK$2,638 million, accounting for 39.2% of the Group’s revenue, mainly attributable to the resumption of certain investment activities in the wireless enhancement market in Mainland China.

During the year, R&D costs decreased by 6.8% to HK$193 million, representing 2.9% of the revenue. The decrease was mainly due to more centralization of R&D investments into the core businesses, strict control over new project initiations and stringent cost control measures adopted by the Group during the year. The R&D investments of the Group became more efficient and cost effective to stay ahead of the latest technological innovation so as to take advantage of new business opportunities. The Group has achieved significant accomplishments in creating its own solutions with intellectual property rights and has applied for approximately 1,900 patents as at the end of 2014.

Considerable groundwork has been laid by the Group in the past few years to develop the small cell business. The Group has the expertise in place complemented by effective solutions to maximize the opportunities of small cell deployment. During the year, different types of small cells (2G, 3G and 4G) have been commercially launched in many provinces and cities in Mainland China. In the future, the Group will assist mobile network operators to build confidence in diversified small cell applications and augment the small cell deployment to hasten economies of scale.

Mr. Zhang added, “LTE networks were rolled out in full swing during 2014. By the end of the year, more than 360 LTE networks had been commercially launched worldwide. The hybrid network (TD-LTE and LTE FDD) trial has been carried out for several months in various cities of Mainland China with satisfactory results. Thus, the Ministry of Industry and Information Technology (MIIT) of China has duly granted LTE FDD licenses to certain mobile network operators in February 2015, presenting new opportunities for telecommunication equipment suppliers.”

Mr. Tony TL Fok, Chairman of Comba Telecom concluded, “The mobile telecommunication industry nowadays is experiencing an unprecedented pace of change as it encounters a diverse set of both opportunities and challenges. Against this backdrop, we believe an innovation-centric approach is the key to ride through headwinds and strong waves. We will further strengthen our efforts to accelerate transformation, and optimize the business mix with an aim to enhance efficiency, liquidity and profitability. Also, the Group will place greater emphasis on the developed countries in view of the increased political tensions and financial instability in certain countries. Moving forward, the Group will take an active but cautious approach to advance business growth amid the market transition, and endeavour to strive for fruitful returns for our shareholders.”

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