TK Group 2021 Revenue Reaches HK$2.4 Billion, Profit Exceeds HK$280 Million with 34.7% Year-on-Year Growth

Announces 2021 Annual Results

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Revenue Reaches HK$2.4 Billion, Profit Exceeds HK$280 Million with 34.7% Year-on-Year Growth, Final Dividend of HK8.6 Cents

Order Book Reaches HK$920 Million with Strong Growth Across Multiple Segments

Continuing Domestic Market Expansion in 2022

[Hong Kong - March 25, 2022] The world's leading one-stop plastics solutions provider - TK Group (Holdings) Limited ("TK Group" or the "Group", Stock Code: 2283), today announces its annual results for the year ended 31 December 2021 (the "Year").

In 2021, the global economy gradually recovered from the previous year's COVID-19 pandemic lows as European and American economies progressively reopened. Countries generally implemented large-scale relief and stimulus measures to boost their economies and stimulate consumer sentiment. Additionally, with the Group's main production capacity located in Mainland China and benefiting from China's relatively successful pandemic control policies, the Group's production remained stable. In 2021, the Group's revenue recovered to 2019 pre-pandemic levels. The Group's revenue for 2021 reached HK$2,404.4 million (2020: HK$2,033.4 million), representing an 18.2% year-on-year increase.

However, the continued impact of new virus variants in 2021 prevented supply chains from fully recovering, leading to sustained increases in raw material prices amid supply-demand imbalances. Furthermore, the global semiconductor shortage significantly affected certain clients' production plans and order demand, while frequent order adjustments affected production efficiency. During the Year, the Group's gross profit increased by 6.9% to HK$569.2 million (2020: HK$532.6 million). Gross profit margin decreased by 2.5 percentage points to 23.7% (2020: 26.2%). Nevertheless, with effective control of selling and administrative expenses, profit attributable to owners of the Company increased significantly by 34.7% year-on-year to HK$282.4 million (2020: HK$209.7 million). Net profit margin increased by 1.4 percentage points to 11.7% (2020: 10.3%), with basic earnings per share at HK$0.34 (2020: HK$0.25), representing a 36.0% increase year-on-year.

The Board has resolved to recommend the payment of a final dividend of HK8.6 cents per share for the year ended 31 December 2021. Together with the interim dividend of HK5.4 cents per share already paid, the payout ratio reaches 41.3%.

Outlook

With COVID-19 continuing for over two years, affecting raw material supply, logistics, production, and even the global supply chain ecosystem, combined with various countries' trade measures and geopolitical economic conflicts, certain obstacles to full economic recovery remain. Facing uncontrollable macroeconomic factors, the Group's client industry diversification strategy demonstrates greater advantages, effectively dispersing business risks across different economic cycles to address ever-changing market conditions. In fact, the Group's various business segments have shown different degrees of recovery, while newly developed emerging industries have brought growth momentum. As of December 31, 2021, the Group's order book reached HK$918.3 million. TK Group is confident in maintaining its competitive advantage of client diversification to meet new changes and challenges in the coming year, continuing to create value for clients and shareholders.

Mr. Li Pui Leung, Chairman of TK Group, said, "In 2020, the Group established its first five-year plan, setting a target to double sales in the injection molding segment within five years. We are pragmatically progressing toward this target and have implemented a series of internal reform policies to promote company-wide unity in driving business growth." He added, "We established an injection molding production base in Vietnam in November 2021 and commenced first-phase production, with plans to implement second-phase production in the second half of 2022. The Vietnam facility helps the Group explore and develop new markets in the local and neighboring regions, preparing for long-term growth demand from Southeast Asian supply chains and Europe/America regions."

Mr. Yung Kin Cheung Michael, Executive Director and Chief Executive Officer of TK Group, added, "We maintain an active approach toward potential acquisition plans to keep pace with the times and maintain the Group's competitive advantages in the industry. Over the past year, our investments in expanding production at the Huizhou facility and the acquisition of Techco Silicone & Technology Co., Ltd. to broaden our product line have gradually shown results, successfully developing several promising new projects that provide further room for business development. In the coming year, the Group will continue investing in related projects and maintain its diversified business layout, establishing close relationships with industry leaders. We will continue supporting long-term overseas clients in realizing their global market expansion plans while continuously developing the domestic market, particularly focusing on capable, industry-leading enterprise brands, striving to help clients capture opportunities from the national dual-circulation policy and expand into international markets."

Business Review for the Full Year 2021

As a global leader in one-stop injection molding solutions, TK Group provides customized, cost-effective, and high-precision injection molding products and services to numerous internationally renowned enterprises. During the Year, downstream sectors including mobile and wearable device, commercial communication equipment, and smart home segments achieved strong growth, while the new electronic vaporizer segment also showed outstanding performance.

Revenue from the mobile and wearable device segment increased by 11.7% year-on-year, attributed to market popularity of products from wireless earphone brand clients and smartphone case brand clients, driving significant growth in the Group's orders. The smart home segment revenue surged by 51.1% year-on-year, benefiting from economic stabilization in Europe and America and rapid recovery in consumer demand, with multiple products from the Group's two major brand clients entering mass production during the Year. Revenue from the medical and personal care segment decreased by 4.6% year-on-year, primarily due to personal care clients temporarily reducing orders affected by semiconductor shortages impacting production volume. However, this has not affected the Group's strategic investment in this segment, as the Group actively develops renowned medical brand clients both domestically and internationally, maintaining long-term optimism for this segment's development. Revenue from the commercial communication equipment segment increased significantly by 70.5% year-on-year, as clients adjusted their supply chains and transferred some supplier production share to the Group, leading to substantial sales growth. Clients' newly developed products were well-received by the market, and under the latest supply chain arrangement, the Group remains a major supplier for clients' new products with stable prospects.

Plastic Components Manufacturing Business (Approximately 70.6% of Total Revenue)

Overall revenue from the plastic components manufacturing business was approximately HK$1,698.4 million (2020: HK$1,333.2 million), representing a 27.4% increase year-on-year. Gross profit margin of the plastic components manufacturing business decreased to 22.2% (2020: 25.6%), mainly due to rapid short-term increases in raw material prices with costs difficult to fully pass on to clients immediately, coupled with logistics constraints and semiconductor shortages hindering production scheduling, leading to decreased production efficiency and low machine utilization. The Group expects gross margin to return to healthy levels as material supply improves and logistics difficulties ease, along with improved capacity utilization as a number of new projects enter mass production phase.

Mold Fabrication Business (Approximately 29.4% of Total Revenue)

In 2021, the mold segment maintained the positive momentum from the second half of 2020, with stable mold demand driven by clients actively launching new products. Revenue slightly increased by 0.8% to HK$706.0 million (2020: HK$700.2 million), while segment gross profit margin slightly decreased by 0.3 percentage point to 27.1% (2020: 27.4%). Facing market pressure, the Group will continue to enhance its technical capabilities, expand mold product range, deepen client relationships, and provide high-quality mold and design solutions to maintain competitive advantages. China's internal circulation economic policy provides domestic market opportunities, and beyond export clients, the Group is actively developing new domestic clients to implement its client diversification strategy.