Activation Group Holdings Limited Announces 2019 Annual Results

Performance Summary

HONG KONG, March 24, 2020 /PRNewswire/ -- A provider of integrated marketing solutions in Greater China, Activation Group Holdings Limited ("Activation" or the "Company", collectively, the "Group", stock code: 9919) is pleased to announce the Company's first annual results.

The Group actively seized opportunities on the market and achieved good performance. For the financial year ended 31 December 2019 (the "Year Under Review"), the Group's revenue was RMB661.8 million. Profit attributable to shareholders was RMB30 million. Earnings per share was 4.99 RMB cents. Excluding the one-off expenses for the listing, the Company recorded an adjusted profit of RMB71.9 million, representing a historically large increase of 65.1% compared to that for the year ended 31 December 2018, achieved new record high. The Board does not recommend the payment of any dividend for the Year Under Review.

Business Review

In the first half of the Year Under Review, the Group posed a strong growth in adjusted profit. Due to social events in Hong Kong that had taken place since June 2019, some of the Group's clients in luxury and premium brands put on hold their upcoming experiential marketing projects originally scheduled for the second half of 2019. Additionally, revenue from clients in the automobile industry was affected significantly by the China-United States trade situation. To adapt itself to the market conditions, the Group strategically steered away from high-income, low-profit margin marketing projects for automotive companies and focused on high-profit margin marketing projects of clients in fashion and the internet. As a result, the total revenue of the Group in 2019 was RMB661.8 million, representing a slight decrease of 3.3% compared with that for 2018, however, the Company still achieved double growth in total gross profit and gross profit margin. The gross profit was RMB198.1 million in 2019, an increase of 14.9%, overall gross profit margin increased by 4.7 percentage points to 29.9%.

In terms of integrated marketing solution services, revenue in accounted for RMB616.6 million in FY2019 or 93.2% of the Group's total revenue. To adapt itself to the market conditions, the Group strategically focused on high-profit margin marketing projects of clients in fashion, resulting in the increase in gross profit margin of the experiential marketing business. Additionally, on the back of its strong capability to come up with creative solutions and its commitment to the provision of quality services for clients, the Group made a breakthrough in the diversification of its client base by developing and providing marketing services for brands which engage in other industries. The Group completed a substantial experiential marketing project for Alibaba Group's 20th anniversary party in September 2019 for a member company of the latter. Within the year, the revenue from the internet industry clients reached RMB74.0 million in 2019, becoming the second largest customer industry after the fashion industry. It also offset the impact of the decline in automobile. 

The Group also actively developed its digital marketing business to improve its profitability and added value. The gross profit margin of our digital marketing business increased from 30.8% in 2018 to 39.6% in 2019. In terms of the Public Relations segment of the business, due to the increase in the enhanced synergy among different business units within the group. Public relations services achieved gross profit of RMB18.2 million in 2019, representing a significant year-on-year increase of 136.4%. 

In terms of IP Development Segment, the Group has ventured into the area of IP development with a focus on sports and entertainment. Within the year, the Group further expanded the geographical market coverage of its sports event marketing business and successfully held a number of large-scale sporting competitions and events in mainland China in the second half of 2019, making good progress in its intellectual property development business. In 2019, the revenue was RMB45.2 million, representing a year-on-year increase of 17.7%. The IP development segment recorded a profit of RMB 9.3 million for the first time.

Within the year, the Group continued to unlock the value of the brands of LaLigaClub and Le Tour de France in the PRC and held multiple IP projects. This includes Tour de France Skoda Shanghai Criterium, which was held in Shanghai in November 2019 and the L'Etape du Tour de France race, which was held in Chengjiang Yunnan in December 2019. The Group held tournaments of Le Tour de France and LaLiga Club in the People's Republic of China and made use of the IP of the two sports events to conduct marketing, sponsorship and merchandising activities in the country. In 2019, the Group signed three-year long-term competition contracts for organising local Le Tour de France competition with Zhuji and Yunnan respectively, which significantly strengthened the sustainability and profitability of the IP developments segment of the Group. Moreover, the development of the IP development business led to integrated marketing segment including experience marketing and public relations services business, strengthening the synergy of different businesses within the Group.

Prospect and Strategy

In 2020, the spread of novel coronavirus has dealt an inevitable blow to the world economy. The impact on the Group's financial results is inevitable. Although offline promotional activities have decreased significantly amid the pandemic outbreak, this has inadvertently popularized online promotional activities. The Group's competitive digital marketing and branding services help clients continue their marketing campaigns. The Group has planned to speed up the digitalization of its business in 2020. It will commit more efforts and manpower to enrich its digital marketing services.

In order to capture the growing market potential of the digital marketing sector, the Company will accelerate the development of its digital marketing business and allocate more resources to the related services in the following ways:

(i) continuing to launch "comprehensive digital campaign offering" to more clients. It includes the marketing campaign to build brand across all online social platform, e.g., Weibo, Wechat, Tiktok and Redbook etc. The Group also focuses on the campaign to drive sell both through online, e.g. Tmall, client e-commerce sites etc., and through off-line.

(ii) enhancing media / KOL platform through developing fashion KOL platform and incubation, medial ROI and sales performance management.

(iii) providing social Customer Relationship Management (CRM) for clients. The system includes data and engagement platform, retail solutions and data integration. Valued-added services, including big-data analysis will also be provided.

(iv) combining the online and offline marketing resources and develop a better cloud show infrastructure in order to facilitate clients to drive integrated marketing campaign.

The Group has also been expanding both the geographical market coverage and the clientele of its integrated marketing solutions business. For instance, the Group has set up an office in Hangzhou dedicated to provide services to local internet and consumer brands. Meanwhile, the Group plans to set up an office in Guangzhou to strengthen its geographical coverage in the first-tier cities in mainland China and to grasp the business opportunities that arise from the state policy on coordinating the development in the Guangdong-Hong Kong-Macao Greater Bay Area. The Group further plans to establish a Paris office to expand its client base in Europe and to assist Chinese local brands with their marketing in the European market.

In its IP development business, the Group will continue to take the opportunity to gain internationally-renowned IP exclusive operating rights in China, which will in turn bring a large number of new marketing services and products. In addition, the Group will continue to explore opportunities for developing entertainment IP by cooperating with Stufish Productions Limited and other potential market players.

In addition to organic growth, the Group is also exploring possibilities for acquisitions and cooperation to strengthen its market position and enhance its competitiveness in the integrated marketing solutions industry of the PRC. The Group is looking for acquisition targets in companies that specialize in marketing automation, big data and self-media multi-channel networks in China. Internationally, the Group will seek acquisition targets worldwide in companies which engage in the provision of marketing services for mid-range and high-end consumer brands. The Group aspires to become a leading global integrated marketing solutions provider with enhanced competitiveness and a reinforced competitive moat through these acquisition plans.

Activation Group's Joint-chairman and Chief Executive Officer, Mr. Steve Lau Kam Yiu, concluded, "Although the pandemic has cast a shadow over the world, the Group will take positive steps to deal with the present situation, looking forward to an end of the pandemic outbreak and economic recovery in the second half of 2020. In general, the second half of a year is usually the peak season of the retail industry. Rebounds in the demand for luxury goods and the consumer market can be expected then on the back of the release of the pent-up buying power. The Group will closely monitor the market in order to provide the most suitable integrated marketing solutions and thus capitalize on the recovery of the market."

About Activation Group Holdings Limited

Activation Group Holdings Limited is a leading and fast-growing integrated marketing solutions provider that focuses on the provision of experiential marketing, digital and brand communication, and public relations services which mainly operates in Greater China. The shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited on 16 January 2020. According to the independent market research report issued by China Insights Industry Consultancy Limited Group ranked first in 2018. The Group is also focused on tapping into the sports and entertainment IP development sector. Since 2016, the Group has started its IP development business for sports market where the Group entered into cooperation agreements with each of LaLiga and Amaury Sport Organisation for granting the Group exclusive rights to organise authorised events with LaLiga Club brand and Le Tour de France brand and other rights for marketing, sponsorship, merchandising and other uses in the PRC, subject to the terms of the respective IP Cooperation Agreements. In 2017, the Group also established Stufish Asia Limited with Stufish Productions Limited tap into entertainment IP development business.