Five Segments of Strategic Investments Recorded Profits; Breakthroughs of Building Pillar Assets
Legend Holdings Corporation Limited ("Legend Holdings" or the "Company"; stock code: 3396.HK) announced the audited annual results for the year ended December 31, 2018 (the "Reporting Period"). During the Reporting Period, the revenue of the Company increased by 13% year-on-year to RMB358.92 billion. The net profit attributable to equity holders of the Company decreased by 14% to RMB4.362 billion, mainly caused by the decrease in the fair value of the financial assets invested as financial investments businesses were impacted by capital market. The basic earnings per share came in at RMB1.87, a year-on-year decrease of 13%. The dividend per share (before tax) was RMB0.3, a year-on-year growth of 11%.
- Twelve months ended December 31, 2018:
- Revenue was RMB358.92 billion, a year-on-year growth of 13%
- Net profits attributable to equity holders of the Company were RMB4.362 billion
- Basic earnings per share reached RMB1.87
- Dividend per share (before tax) was RMB0.3, a year-on-year growth of 11%
Mr. Zhu Linan, president of Legend Holdings, stated: "In 2018, the external environment is undergoing profound changes. Legend Holdings duly adjusts the tactics in accordance with environmental changes during the implementation of strategy to ensure steady business development. For strategic investments, we strengthened the risk resistance through post-investment management and services, optimized the asset portfolio by means of resource allocation and capital operation, and achieved breakthroughs for the strategic objective of building pillar assets. Pre-emptive measures have been adopted against potential risks in financial investments to ensure favorable and long-term fundamentals. Legend Holdings has gained more recognition from the financial market for its consistency in business stability, compliant operation and excellent corporate governance.
Moreover, we always attach great importance to cash flow management, further securing the overall financial conditions. In 2019, our strategic investments will focus on three aspects, including: fundamentally strengthening the capability in post-investment management and services, effectively promoting capital operation, and giving full play to the advantages of two-wheel drive, for the purpose of creating new profit pillars. Financial investments will place more emphasis on risk and liquidity management, enhance management of portfolio investments, and pursue opportunities."
With Business Enhancement, Five Segments of Strategic Investments Recorded Profit
During the Reporting Period, the revenue of strategic investments increased by 14% year-on-year to RMB 358.301 billion with net profits attributable to parent company coming in at RM5.223 billion, which represents a year-on-year growth of 186%. The business development and value growth of the strategic investments portfolio was driven by enhancement of both business and capital operations, all the five segments witnessed organic growth.
Intelligent transformation in IT segment witnessed initial results, generating a 10% year-on-year growth to RMB330.78 billion with net profits attributable to parent company amounted to RMB1.085 billion, reversing losses incurred from the previous year. PC business reached a record high market share of 24.6%, ranking 1st in the global market. The mobile business recorded its first ever pre-tax profit in the fourth quarter in 2018 since the Motorola acquisition, while the Data Center Group continued to deliver strong growth and increased profit margins.
The financial service segment increased continuously, the revenue up to RMB6.962 billion representing an increase of 91% year-on-year with net profits attributable to parent company coming in at RMB2.567 billion, a 56% year-on-year growth. During the Reporting Period, Legend Holdings completed the acquisition of an 89.936% of the shares of BIL ( Banque Internationale a Luxembourg), achieving its strategic goal of building pillar assets. From July to December 2018, BIL generated a revenue of RMB2.165 billion, with net profits amounting to RMB510 million.
Zhengqi Financial formally submitted its application to HKEx for listing on the Main Board, and, during the Reporting Period, it generated a revenue of RMB1.831 billion, representing a growth of 55% year-on-year. In addition, JC Finance & Leasing and Kaola Technology kept profit growth. Lakala Payment's application for listing on the GEM of Shenzhen Stock Exchange was successfully approved by the China Securities Regulatory Commission on March 26 2019. Lakala Payment is a well-known third-party payment company in China, playing an important role in financial service segment of Legend Holdings. Listing will bring market resources of high-quality to Lakala Payment, so as to further promote its strategy and business development.
By continuously strengthening the post-investment management and operational improvement of the portfolio companies, the innovative consumption and services segment recorded RMB 1.288 billion in revenue with net profits attributable to the parent company reached RMB1.099 billion, reversing losses incurred from the previous year. By upgrading its business structure, Shanghai Neuromedical Center increased by 24% year-on-year to RMB273 million. During the Reporting Period, the business fundamentals of Better Education saw steady progress and recorded revenue of RMB497 million with net profits coming in at RMB51 million. In the future, Better Education will actively respond to the national policy call for the reform and development of preschool education, and explore kindergarten operations at a multiple-level model. Bybo Dental strategically introduced Taikang Life Insurance to expand its pool of resources and its general operating conditions were improved.
The overall business layout of agriculture and food sector became more clear-cut, the revenue of which increased by 161% year-on-year to RMB12.94 billion with net profits attributable to the parent company amounting to RMB210 million. During the Reporting Period, Joyvio Group's two main supply chain systems, namely fruit and high-end animal protein, were further consolidated and developed. Joyvio Group acquired the controlling position of Golden Wing Mau and got wider influence for "Joyvio". Joyvio Agriculture saw steady operating income and maintained its leading position as a seafood brand importer and has started to expand its business layout towards scarce seafood resources and assets in the upstream. KB Food further consolidated its pole position in the Australian market and cooperated with Joyvio Agriculture to explore Chinese market.
The advanced manufacturing and professional services segment presented continuous improvement in terms of operations, with revenue increased by 8% year-on-year to RMB6.331 billion and net profits attributable to parent company coming in at RMB262 million. Levima New Materials, a subsidiary of Levima Group, achieved remarkable results through operational improvements and product portfolio optimization. The advanced manufacturing and professional services segment presented continuous improvement in terms of operations, with revenue increased by 8% year-on-year to RMB6.331 billion and net profits attributable to parent company coming in at RMB262 million. Levima New Materials, a subsidiary of Levima Group, achieved remarkable results through operational improvements and product portfolio optimization. During the Reporting Period, Levima New Materials completed its shareholding reform and the application for the spin-off and IPO by Levima New Materials was approved by the Hong Kong Stock Exchange, and was actively engaged in the preparation of its A-Share listing. EAL strove for further development in air express and high-end logistics solutions, and succeeded in reducing costs by operational optimization, thus generating a remarkable year-on-year growth in both revenue and net profit. During the Reporting Period, EAL was entering to the restructuring and listing stage.
Fundamentals of Financial Investments Performed Well with Steady Pace in FundraisingDuring the Reporting Period, the profit of the financial investments segment was significantly impacted by the fluctuations of fair value resulting from the global market decline. However, our three fund platforms maintained good fundamentals and a steady pace in terms of fundraising, new investments and exits , and the business of which were continuously enhanced with well-developed fund portfolio and portfolio companies in good conditions, ranking as top tier in successive years by the professional institutions in the industry. Furthermore, Legend Holdings achieved sound cash returns from its direct financial investments, and the office building held as the investment properties brought good returns with its value increased steadily.
Legend Star, an angel investment firm, managed 5 funds in total, of which the size exceeded RMB2 billion with an aggregate of over 230 onshore or offshore investment projects. During the Reporting Period, Legend Star completed its first fundraising from external, the 3rd RMB fund raised over RMB700 million, and its 3rd USD fund raised USD20 million. At the same time, Legend Star invested in nearly 40 onshore or offshore projects. Among the projects under management, over 60 completed follow-on financing, while 10 projects were fully or partially exited.
Legend Capital, a venture capital firm, managed 20 funds in total, of which the size exceeded RMB45 billion and accounted for almost 400 invested companies. Legend Capital continued to consolidate its investment influence in industries such as TMT, innovative consumption, intelligent manufacturing, professional services, medical care and health as well as culture and sports. During the Reporting Period, Legend Capital raised RMB3.45 billion in funds, completed 50 new investment projects, and fully or partially exited 24 projects, while 11 of its invested companies were listed domestic and overseas capital markets, and 2 companies have passed the IPO review.
Hony Capital, an investment management firm, managed 11 funds in total, of which the size exceeded RMB80 billion and accounted for more than 100 portfolio companies. Hony Capital successfully form a "2+3" business development pattern. On one hand, Hony Capital keeps building its advantages in PE and real estate finance, on the other hand, it seeks breakthroughs in new businesses such as public offering fund, hedge fund and special opportunity investment. During the Reporting Period, Hony Capital raised RMB5.8 billion funds, completed 17 investment projects and exited 19 projects fully or partially, while 2 invested companies successfully went IPO on the domestic capital market.
Strategic Investments in BIL Pushes for Breakthroughs in Building of Pillar Assets
On July 2nd 2018, Legend Holdings officially completed its acquisition of an 89.936% stake in Banque Internationale a Luxembourg, and became its controlling shareholder. It was the first time the European Central Bank (ECB) approved a Chinese non-financial company to acquire an "Other Systemically Important" European bank regulated by ECB. This reflects the international influence of the Legend Holdings brand as well as its outstanding leading business strength and solid compliance. As of the end of 2018, the balance sheet size of BIL amounted to EUR25.5 billion (approximately RMB200 billion) and the assets under management amounted to EUR39.5 billion (approximately RMB310 billion), with the common equity tier 1 ratio measuring 12.04%, demonstrating BIL's business stability.
After the acquisition, the total asset of Legend Holdings increased markedly by 67% to RMB558.267 billion, the asset structure has been optimized where the financial services, IT, and other segments now account for 45%, 36%, and 19%, brought relatively a more diversified and balanced asset allocation at home and abroad. In addition, BIL is expected to contribute stable profits to Legend Holdings on a long-term basis and help ease the volatility of the company's overall profits. Therefore, the financial stability and financing capabilities of Legend Holdings have been further enhanced. Legend Holdings will continue to invest in the development of the BIL brand in Luxembourg, Europe and the rest of the world, pursue development opportunities in China, bridge BIL with Legend Holdings in the Chinese market and the fintech area, so as to create value for its future innovation and international business, empower it with more intelligence, and expand its global presence.
First Company to Carry Out the H-share "Full Circulation" Pilot Project, Boost the Company's Value Creation and Sustainable Growth
In 2018, Legend Holdings was carry out as the first company to take part in the H-share "full circulation" trial, completing the conversion of its domestic stocks into H shares, and thus elevating its circulation from 16.63% to 53.98%, reflecting the full honor to the company by receiving the recognition for the business and brand from the regulations.
The conversion allow the floating market capitalization better matches the overall value for the company and the H-share holders are more diversified. Higher liquidity of the shares will foster a closer connection between the interests of the Company as well to all shareholders, inspire the management team and all employees to work with closer with such greater enthusiasm, and enhance the Company's value creation and sustainable growth, lastly, consolidates the foundation for Legend Holdings' future development as a listed company.
March Towards Goals by Strengthening Post-Investment Management and Services.In 2019, Legend Holdings will keep consolidating advantages of the "two-wheel-drive" model and keep a balanced development through effective asset allocation and portfolio management. The Group will also continue to raise the value of existing assets via post-investment management and services. The capital operation, spin-off and listing of the portfolio companies are gradually unfolding. Lakala Payment's application for listing on the GEM of Shenzhen Stock Exchange was successfully approved by the China Securities Regulatory Commission on March 26 2019, and Zhengqi Financial's IPO on the Main Board of Hong Kong Exchange has already been in the process of regulatory review. In addition, Levima New Materials and EAL have completed the counseling and filing for A-share IPO.
We hope that the asset value and return of Legend Holdings will be enhanced with the increase of listed platforms affiliated to the Company. Meanwhile, the Group will strike to construct new core assets with growth potential in strategically focused segment, especially the non-financial ones, to reinforce our portfolio.
Financial investments will continue to strengthen the risk control and liquidity management, assist its portfolio companies in achieving operational enhancements through value-added services, and capture the next round of investment opportunities through affiliated investment platforms and direct investment. Despite challenges from external financial environment, we are confident that the three fund management platforms will stand out in future competition, with its sound track record, abundant project resources and in-depth research.
Mr. Liu Chuanzhi, Chairman of Legend Holdings stated: "Legend Holdings marks the 35th anniversary of establishment this year. The company has been keeping its finger on the pulse by revamping actively with precise strategies and its persistence throughout 35-year journey. In 2018, with the challenges of external environment, the management has been vigorously promoted the achievement of strategic goals and made certain breakthroughs, while safeguarded the healthy growth of the Company.
The brilliant result was recognized by the board of directors and I. Looking ahead, in view of external uncertainties, the company needs to enhance its internal strength and solidify its foundation of sustainable development. Meanwhile, we must reinforce the effectiveness of our business strategies by exerting the advantages of "two-wheel-drive", be sensitive to ever-changing environment and pay more attention to technology advancement and business models innovation. By the "Capital + Experience" model, we will incubate more outstanding enterprises and maximize returns to shareholders and society."
About Legend Holdings Corporation Limited
Legend Holdings is a leading large investment holding company in China, and has developed an innovative two-wheel-drive business model of "strategic investments + financial investments". Strategic investments aim at holding over the long term and focus on strategic sectors to cultivate and optimize the portfolio. Through strategic investments, the Company invests in 5 segments including IT, financial services, innovative consumption & services, agriculture & food, and advanced manufacturing and professional services. Financial investments businesses include angel investment, venture capital and private equity investment, creating a holistic financial investment industrial chain. The Company has concluded its distinctive investment concepts and management system based on the deep understanding of economies and enterprises. Through forward-looking layout, clear investment strategies and sustained value-added services, Legend Holdings has cultivated a number of influential outstanding enterprises in several sectors.
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