(August 30, 2018 - Hong Kong) Realord Group Holdings Limited (“Realord” or the “Company”, together with its subsidiaries collectively known as the “Group”, stock code: 01196.HK) is pleased to announce its unaudited interim results for the six months ended 30 June 2019 (“the Period” or “1H2019”).

 

During the period under review, the total revenue increased to HK$403 million, representing an increase of 83.1% as compared to HK$220 million in the 2018 interim results ("1H2018"). The revenue was mainly contributed by the Environmental Protection Segment (“EP Segment”), the Motor Vehicle Parts Segment (“MVP Segment”) and the Commercial Printing Segment. The EP Segment contributed approximately 72.4% of the total revenue of the Group, the MVP Segment approximately 12.6% and the Commercial Printing Segment approximately 10.1%. The remaining part was contributed by other segments of the Company 

 

The EP Segment

• As a major revenue stream of the Group, the EP Segment generated revenue of approximately HK$292.1 million in 1H2019, representing a significant increase of approximately 156.7% as compared to that in 1H2018.
• Since the tightening control policy of the imports of scrap materials (the “Policy”) promulgated by the government of the PRC in the second quarter of 2018.
• The EP Segment will continue to be one of the major revenue streams of the Group and in view of the promulgation of the Policy, the Group expects that the major drivers of the EP Segment would be the Malaysia’s operation and the Japan’s operation. The Group will continue to explore the feasible delivery and processing options from Malaysia and Japan and it is the Group’s target to commence the local sales in Japan through the leased processing plant in Osaka.

 

The MVP Segment

• The MVP Segment generated the second largest revenue to the Group in 1H2019, amounting to approximately 12.6% (i.e. HK$50.7 million) of the total revenue of the Group. The MVP Segment has a slight increase of revenue of approximately 9.2% in 1H2019 which was mainly attributable to the increase in sales to the wholesale customers.
• The Group’s strategy as to the MVP Segment is to continue to focus on the wholesale business of the motor vehicle parts, as well as sales on online platform and the automobile sales service shops located in the PRC. The existing customers of the Group are mainly from Guangzhou, and the Group will start to explore other business opportunities in other provinces of the PRC.

 

The Financial Services Segment

• The Financial Services Segment generated a revenue of approximately HK$14.0 million, representing 3.5% of the total revenue of the Group during the 1H2019. The revenue from this segment increased by 182.3% as compared to 1H2018. The increase in the revenue of Financial Services Segment was mainly attributable to the consolidation of revenue generated by Optima Capital since completion of acquisition in April 2019, which enables the Group to provide more comprehensive financial services to its customers and thus improves the segment results during the period under review.
• In April 2019, the Group completed its acquisition of 60% issued share capital of Optima Capital, which is a corporation licensed to carry out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and is principally engaged in provision of corporate finance advisory services in Hong Kong. The Group believes that the acquisition strengthens the Financial Services Segment of the Group in Hong Kong and it facilitates the Group to build an one stop financial service platform with good branding and market positioning.

 

The Commercial Printing Segment

• The Commercial Printing Segment contributed a revenue of approximately HK$40.7 million, which represented 10.1% of the Group’s total revenue during 1H2019 and a decrease in revenue by 9.3% as compared to approximately HK$44.9 million in 1H2018. The operating profit decreased from HK$2.1 million to HK$0.7 million. Both decline in segment revenue and operating profit were resulted from the negative sentiment of the capital market which stagnated the merger and acquisition and fundraising activities during the period under review.
• Contemplating the continuous competition for the Commercial Printing Segment over the years, it is expected that the competition in the market will hinder the Group to pass the inflating operating costs to customers in coming years and this will limit the profit margin for the Segment in the foreseeable future.
• The Directors will keep reviewing and assessing the risks, benefits and prospects thereof along the operations.

 

The Hangtag Segment

• The Hangtag Segment generated a revenue of approximately HK$0.2 million, representing 0.1% of the Group’s total revenue. The segment revenue decreased by 52.2% from approximately HK$0.5 million for 1H2018 to approximately HK$0.2 million for 1H2019. The operating loss derived from this segment was relatively minimal during the period under review and the last corresponding period.

 

The Property Investment Segment

• The revenue of the Property Investment Segment was mainly generated from the rental income of the Group’s investment properties. In 1H2018, the Group generated aggregate rental income of approximately HK$9.8 million.
• In 1H2019, to facilitate the approval process by the Development and Reform Commission (發展和改革委員會) and other government authorities in relation to the Group’s application made for urban redevelopment of the Qiankeng Property from industrial use to public housing and residential use, the Group had terminated the lease agreement of the subject property for setting up the development projects (立項) in this regard. Due to the termination of the lease, the revenue generated from this segment decreased from HK$9.8 million to HK$5.7 million.
• Apart from this, the Property Investment Segment generated a profit of approximately HK$304.6 million in 1H2019, representing a slight decrease of approximately 13.9% as compared to that in 1H2018. This was mainly attributable to the increase in finance costs arising from the bank borrowings for financing the Acquisition of approximately HK$117.7 million, offset by the increase in the fair value gain on the investment properties of HK$91.5 million.
• The Group considers that this acquisition would further diversify the Group’s portfolio of investment properties and strength the Property Investment Segment. In addition to this, the Group holds other investment properties including but not limited to that in Realord Villas in Gualan District and that in Guangming High-Tech Zone – East District, Guangming District. Both investment properties are located in direct administrative districts which had been designated for speedy economic development by the local PRC governments. It is expected that the growth engine for the development of these two districts will be the investors within Shenzhen City or from other regions of the PRC. The Group is optimistic to the property market in these two districts and in view of this, has engaged a consultant to establish a bespoke rebranding strategy and refurbishment plan for its investment properties.
• The Group has initiated works to enable the redevelopment of the Qiankeng property and the Zhangkenjing property for more than a year. The Zhangkenjing property was acquired by the Group in September 2015. In February 2017, the Group has made an application to the PRC government authority to change the land use of the Zhangkenjing property from industrial use to residential apartments and office use for redevelopment purpose. In accordance with the notice from the government authority, the application is being processed and reviewed by the relevant authorities and is still under review as at the reporting date. The Qiankeng property was acquired by the Group in June 2016 and the application for urban redevelopment of the Qiankeng property from industrial use to public housing and residential use was also made to 深圳市龍華區城市更新局 (Shenzhen Longhua District Urban Renewal Bureau) in May 2017. It was noted that the Qiankeng property has been included in the relevant urban renewal bureau’s announcement regarding the proposed urban redevelopment plan for the Longhua District of 2019. The Company is uncertain about when the approvals will finally be granted but it expects that it should be granted in second half of 2019, subject to government schedules, and thereafter the redevelopment works will commence. The Group has also obtained consents from local residents regarding another redevelopment plan located in Nanshan District, Shenzhen

 

Dr. Bryan Lin, Xiaohui, Chairman of Realord Group expresses “Given that the recent reform plan to make Shenzhen as a model city promulgated by the Government of the People's Republic of China on 18 August 2019, the Group believes that it is absolute a golden opportunity to the Shenzhen enterprises as well as Realord Group. Thus, we are confident in maintaining a momentum to our business in the future in order to make more attractive returns to our shareholders.”