HONG KONG – (ACN Newswire) – Legend Holdings Corporation Limited (“Legend Holdings” or the “Company”; stock code: 3396.HK) today announced the unaudited condensed consolidated interim results for the six months ended June 30, 2018 (the “Reporting Period”). During the Reporting Period, the revenue of Legend Holdings was RMB156.549 billion, representing a year-on-year growth of 10%. The net profit attributable to equity holders of the Company was RMB2.830 billion, representing a year-on-year growth of 5%. The basic earnings per share came in at RMB1.21, a year-on-year growth of 5%.
As the first pilot company of H-share Full Circulation Project, Legend Holdings completed its listing in Hong Kong Stock Exchange on June 7, 2018. As a result, the Company recorded a marked increase in its circulating H-shares and circulation market value, gaining a more dynamic shareholder base and strengthening its brand image and reputation. At the same time, the mutual interests between the Company’s shareholders and the investors from Hong Kong became stronger, which in turn inspired and motivated the Company’s management team and employees to further enhance the Company’s growth and development.
“For the first half of 2018, China’s economy was still pressing ahead with structural adjustments in this current era of uncertainty brought on by economic globalization. These six months were marked by a juxtaposition of challenges and opportunities. Based on the established strategy, Legend Holdings achieved impressive growth under strategic investments and optimized its investment portfolios as well as achieving a major breakthrough in the acquisition of pillar assets and the allocation of overseas resources. We will continue to strengthen our investment management system as well as portfolio management in order to enhance the overall value of our invested companies and portfolios,” said Mr. Zhu Linan, President of Legend Holdings. “In the future, we will continue to keep a keen eye on changes in the global market. By taking full advantage of our ‘two-wheel-drive’ business model, we will be able to pursue emerging opportunities in the strategic investments segments. Also, through the diversified means of “management + service”, Legend Holdings is posed to optimize its asset management while fully anticipating a marked increase in the value of its invested companies and portfolios. We look forward to a favorable long-term return yield for our shareholders.”
Continuous Growth in Strategic Investments
During the Reporting Period, the existing business of Legend Holdings’ strategic investment saw steady growth. Financial services segment, innovative consumption and services segment, and agriculture and food segment all recorded remarkable increase in revenue and net profit attributable to the parent company.
Revenue from the financial services segment increased steadily by 17% to RMB1,980 million year-on-year, with the net profit attributable to the parent company increasing by 78% to RMB1,101 million year-on-year.
Zhengqi Financial continued to explore the needs and value of its clients through implementing a long-term strategy of investment-loan linkage and providing comprehensive financing solutions for SMEs, which helped contribute to the development of the real economy, while gaining an advantage over its competitors and achieving stable growth in business scale and profits. JC Finance & Leasing achieved sound and rapid growth by optimizing its business mix and pursuing market expansion, and by earning growing recognition in the capital market. Kaola Technology strengthened its leading position in the financial technology sector with cutting-edge internet and big data technologies, and continued to deliver models and experiences to accredited financial institutions.
Revenues from the innovative consumption and services segment increased by 17% year-on-year to RMB886 million with net profits attributable to the parent company coming in at RMB1,139 million, a welcome turnaround from last year’s losses.
With the positive prospect of the pre-school education industry, Better Education continuously invest in the construction of new core business area to acquire kindergartens and nurseries on a scale that is among the largest in the country. To develop a long-term core competency, Better Education placed greater emphasis on the promotion of education and teacher quality and continued to strengthen its chain operations and acquisition prowess. CAR maintained its leading position in the market by launching self- service car rental and car sharing businesses, and succeeded in moving its business processes and management systems from offline to online. Shanghai Neuromedical Center continued to optimize its operating management, nurture its own corporate culture, improve its medical services and introduce an impressive number of talents. As a result, the Company’s healthcare and medical business statistics increased substantially.
Revenue from the agriculture and food segment increased by 218% year-on-year to RMB6,387 million with net profit attributable to the parent company surging to RMB379 million by 203% year-on-year.
The Joyvio Group focused on two major supply chains: fruit and high-end animal protein. During the Reporting Period, Golden Wing Mau recorded rapid growth due to the growing demand from high-end fruit consumers and was changed to Joyvio Group’s controlling subsidiary. Regarding the high-end animal proteins business, Joyvio Group endeavors to build the new business model featuring “global resources + consumption in China” by means of domestic and overseas interaction and coordination, while Joyvio Agriculture accelerated its business expansion in purchasing, processing and distribution. KB Food actively implemented its upstream resource integration strategy and further consolidated its competitive advantages in Australia. KB Food also planned to export more high-quality seafood globally, particularly to the Chinese market.
Revenue from the information technology segment increased by 7% year-on-year with net profits attributable to the parent company coming in at RMB231 million. Lenovo’s PC and smart device business and data center business continues to grow while the losses from their mobile business have narrowed. According to the research firm Gartner, Lenovo is the world’s No. 1 in global PC market. Meanwhile, revenue from the advanced manufacturing and professional services segment increased by 2% to RMB3,124 million year-on-year with a net profit attributable to the parent company of RMB148 million. Legend Holdings is committed to developing China’s leading manufacturing and related professional services businesses and has completed staged layout in areas of advanced materials and high-end logistics, and to supporting its existing business and expanding the cutting-edge layout. During the Reporting Period, profits from Levima Group rose and EAL experienced rapid growth.
Successful Financial Investment and Fundraising Continued to Generate Steady Returns
During the Reporting Period, the Company’s Financial Investments business recorded a net profit attributable to the parent company of RMB470 million, contributing over RMB1 billion cash return, and fundraising for the three fund platforms under the Company’s umbrella proceeded smoothly, which further expanded the Company’s scale of portfolio management.
Legend Star closed its third RMB fund with capital in exceed of RMB700 million. During the Reporting Period, Legend Star invested in nearly 20 onshore or offshore projects, over 40 projects have finished another round of financing; while the exit of nearly 10 projects have been carried out. As of June 30, 2018, Legend Star amassed over 220 onshore or offshore projects.
Legend Capital finished raising a total of RMB1.26 billion for the 2nd RMB medical fund and 2nd culture and sports fund with the 2nd RMB medical fund managing up to RMB1.01 billion. During the Reporting Period, Legend Capital accumulatively completed 37 new project investments, fully or partially exited from 12 projects, and 4 enterprises completed their IPOs. Meanwhile, Legend Capital contributed cash inflow to Legend Holdings of over RMB450 million. As of June 30, 2018, 51 of Legend Capital’s portfolio companies were successfully listed.
The Haidian Technology Industry Space Optimization Fund, the strategic cooperation between Hony Capital and a SOE of Beijing Haidian district, raised RMB2.01 billion in a new round of delivery. During the Reporting Period, Hony Capital completed additional investment in 12 existing projects, fully or partially exited from 12 projects, and one of its portfolio companies was listed. Hony Capital contributed a cash inflow to Legend Holdings of over RMB600 million in total. As of June 30, 2018, 42 of Hony’s portfolio companies were successfully listed onshore or offshore and another 3 were listed on NEEQS.
Pillar Asset Led to Breakthrough & Investment Portfolio Continued to Optimize
During the Reporting Period, the Company pressed ahead with its acquisition of Banque Internationale a Luxembourg S.A with all the regulatory approvals including those of the Commission de Surveillance du Secteur Financier (CSSF) and the European Central Bank (ECB). Following recordation with the National Development and Reform Commission, the transaction was officially completed on July 2, 2018. It was the first time a Chinese non-financial enterprise acquired a systematically important bank supervised by the European Central Bank. The acquisition was widely considered a key strategy implementation of the Company to build pillar asset and allocate overseas assets, and was also considered a solid foundation for long-term growth and superiority in resources, which in turn will enhance the Company’s overall value and financial stability. In the future, the Company will take full advantage of its own superiority in resources, and prepare Banque Internationale a Luxembourg S.A to become a more international bank in the new era of smart banking.
During the Reporting Period, the Company and its existing shareholders strategically introduced Taikang Life Insurance to Bybo Dental to support the dental institution’s endogenous growth and help it achieve future objectives. Widely touted as an ideal corporate synergy, Taikang Life Insurance was expected to bring funding support and customer resources support, assist in marketing and promotion, improve insurance payment procedures, and cooperate on the development of oral health insurance products. Meanwhile, the Company was also working hard to increase its investments to further support the development of Bybo Dental.
Funglian Group has restructured with Hebei Hengshui Laobaigan, a Chinese company listed on the main board of Shanghai Stock Exchange. During the Reporting Period, the transaction was approved unconditionally by the Merger and Reorganization Vetting Committee of China Securities Regulatory Commission. As of June 2018, Joyvio Group became the second largest shareholder of Laobaigan.
In the second half of 2018, Legend Holdings will continue to keep a keen eye on the changes in the global market. By taking full advantage of its “two-wheel-drive” business model, the Company is capable of pursuing emerging opportunities in all strategic investments segments. It will continue to achieve stronger execution, create more post-investment value, optimize existing businesses, and assist its invested companies with resources for development through various ways like refinancing, spin-off, listing and introduction of strategic investors. Also, the Company will adhere to its dominant values and create sustainable medium- and long-term returns. The financial services segment will make good use of the Company’s industry resources and technological advantages, strengthen the existing businesses and pay ample attention to other related new segments; the innovative consumption and services segment will focus on the creation of consumer platforms for education and healthcare, nurture leading enterprises in niche industry segments, and be committed to service branding and service upgrades. The agriculture and food segment will provide safer and better products and services for China’s consumers through the industrial integration and the global presence, and enhance the segment’s efficiency to achieve the corporate and professional investment in the operation of the business.
Mr. Liu Chuanzhi, Chairman of Legend Holdings stated, “Legend Holdings will not miss opportunities arising from the rapid growth of China’s economy that pays more attention of the quality instead of speed, and support the development of the real economy by direct investments. Under the uncertain economic environment, what we can be sure is that consumption and services will create enormous demands for education, medical services and high-quality agricultural products. As these businesses have tremendous growth potentials, they will continue to be our focus and strategic direction. Meanwhile, we will keep close tabs on opportunities emerging from new technologies and business models and therefore be able to better prepare ourselves for the future. Our unique business model, extensive resources and rich experience will allow us to continuously enhance the Company’s mechanism for stronger execution, to continue the optimization of Legend Holdings’ investment portfolios and the achievement of its strategic targets. I believe all this will stand the Company in good stead and generate more value to employees, shareholders and society alike.”
Attachment: Review of Segment Performance
Strategic investments
Revenue from the IT segment reached RMB143,878 million, up 7% year-on-year; net profit attributable to the parent company hit RMB231 million, up 1,344% year-on-year. Lenovo’s PC and smart device business and data center business continues to grow while the losses from their mobile business have narrowed. According to Gartner, Lenovo ranked first in the global PC market. Lenovo’s transformation efforts have started to bear fruit., their revenues hit a new high in the second quarter of 2018 and have increased for four consecutive quarters. During the Reporting Period, Lenovo placed a priority on profitability, driving revenue growth of the PCSD to well above market levels in order to refine its product mix. Their mobile business repositioned its business focus on growing core markets such as Latin and North America. In China, Lenovo continued to refine its strategy to improve the user experience, launching several new models in search of healthier future growth. The DCG continued to serve a sustainable growth and profit engine for Lenovo, and transformation efforts have been making good progress, guiding the Group toward becoming a world-class next-generation IT solution provider. To this end, Lenovo will continue to drive software and services revenues as well as bolster customer engagement and accelerate “Device + Cloud” and “Infrastructure + Cloud” expansion with sizable investments in AI, IoT, Big Data and VR/AR in order to capture growth potential in the smart IoT era.
Revenue from the financial services segment reached RMB1,980 million, up about 17% year-on-year. Net profits attributable to the parent company hit RMB1,101 million, up 78% year-on-year. Legend Holdings successfully completed the acquisition of Banque Internationale a Luxembourg S.A. on July 2, 2018. It was the first time a Chinese non-financial enterprise acquired a systematically important bank supervised by the European Central Bank. Approved by the European Central Bank and regulatory authorities of other countries, this acquisition is a testament to Legend Holdings’ strengths and will help further the cooperation between China and the European Union. Zhengqi Financial continued to achieve significant growth in both income and profits. During the Reporting Period, it recorded operating income of RMB637 million, a year-on-year increase of about 8%, and net profit of RMB396 million, a year-on-year increase of around 25%. After four years in operation, the investment-loan linkage business of Zhengqi Financial has become another profit growth focus of the Company. During the Reporting Period, Zhengqi Financial adopted the strategic investment-loan linkage thinking. As a result, the financial leasing business balance at the end of the period grew 24.62% to RMB5,310 million. Moving forward, Zhengqi Financial will integrate diversified strategic resources to build up its differentiated core competitive advantages and become a model enterprise in today’s new financial industry. JC Finance & Leasing continued to reinforce its business presence and market expansion. While maintaining growth in existing business segments, business expansion plans for its transportation and logistics operations in 4 provinces got off to a great start. Moreover, JC Finance & Leasing made breakthroughs in diversifying financing channels. During the Reporting Period, JC Finance & Leasing successfully issued asset-backed securities (ABS) amounting to RMB941 million and asset-backed notes (ABN) amounting to RMB1,512 million, further burnishing its reputation in capital markets. Taking full advantage of advanced internet technology and big data exploring, Kaola Technology serviced over ten million loan applicants. Its credit balance was maintained at nearly RMB6.4 billion at the end of June 2018 with peak monthly loans granted to individuals exceeding RMB1.2 billion. With the development of new technology-driven credit business, Kaola Technology will continue to generate profits, leveraging its own advantages and pushing ahead along with the development of the entire industry by delivering to financial institutions customer acquisition technology based on data analysis and risk control technology. The transaction amount of Lakala Payment exceeded RMB1,700 billion, a year-on-year increase of over 100%. Lakala Payment operations branched out to over 330 cities across China, covering more than 15 million merchants and over 10 million individual users. On March 3, 2017, Lakala Payment submitted to CSRC the application for the initial public offering on the ChiNext Board of the Shenzhen Stock Exchange.
Revenue from innovative consumption and services segment reached RMB886 million, up 17% year-on-year. Net profit attributable to the parent company was RMB1,139 million, a welcome turnaround from last year’s losses. As of the end of the Reporting Period, Better Education operated 110 directly-managed kindergartens in Shanghai, Suzhou, Nanjing, Chongqing, Changsha, Guangzhou and other cities, representing an increase of 21% compared with the end of June 2017, with over 32,000 enrolled students and over 4,800 staff members, leading the country in terms of scale. In the future, Legend Holdings will continue to promote business development and value the growth of Better Education by integrating its brand resources, financial support capabilities and professional operation capabilities of Hony Capital with the aim of developing it into a leading pre-school education group in China. Shanghai Neuromedical Center’s operations and management enhancement efforts, culture cultivation, improvement of healthcare services, and introduction of new talent have all taken a positive initial effect. The medical technology standards of the Shanghai Neuromedical Center were further enhanced with the participation of a cohort of renowned doctors from China, leading to a substantial increase in medical business indicators such as outpatient visits and discharged patients. In addition, the increased number of hospital beds available has also created opportunities for business growth. Through its strategic partner, UCAR, CAR provides on-demand chauffeured car services based on mobile Internet technology and the powerful brand – “UCAR”. As of the end of July 2018, 53% of car rental fleets have achieved intelligent interconnection for self-service car rental. Car aims to achieve intelligent interconnection for all its fleets by the end of the year. Moreover, Car launched a car-sharing service which has garnered encouraging market response. Its service outlets as well have expanded to 36 cities. As of June 30, 2018, the number of CAR operating fleets reached 114,894 units, representing an increase of 30.1% compared with the corresponding period last year. The number of cars in the fleets reached 123,879, an increase of 23.8% compared with the corresponding period last year. During the Reporting Period, Legend Holdings reached an agreement with Taikang Life Insurance for the strategic introduction of Taikang Life Insurance to be the controlling shareholder of Bybo Dental. In addition to funding support, Taikang Life Insurance will also create a strong business synergy for Bybo Dental based on collaborations in customer resources support, marketing and promotion, insurance payment procedures, and insurance products for oral health, in order to promote the long-term development of Bybo Dental.
Revenues from the agriculture and food segment reached RMB6,387 million, up 218% year-on-year. Net profits attributable to the parent company reached RMB379 million, up 203% year-on-year. With respect to the fruit business, the Company achieved greater global expansions through Golden Wing Mau. Thanks to an upturn in consumption, the number of overseas imported quality fruits has grown rapidly, while domestic markets focused greater efforts on selling branded and quality fruits, resulting in a fast-paced increase in the operating revenues from supermarket channels as well as Golden Wing Mau’s wholesale channels whose main products are quality fruits. During the Reporting Period, Golden Wing Mau further deepened its cooperation with the world-leading blueberry enterprise HORTIFRUT to develop new varieties and new technologies for the domestic blueberry market. This has further enhanced the advantages the company’s blueberry products in terms of quality, cost and seasonal production. Golden Wing Mau also strengthened the supply chain assurance for Thai durian through its invested enterprise – Thai Crown. At the same time, Golden Wing Mau has put forth continuous efforts to market its own branded products, which has further expanded the brand influence of Joyvio blueberry and Joyvio durian and consolidated its leading position and competitive advantages in the market. In addition, Golden Wing Mau continued to introduce new categories and seek strategic cooperation with several leading domestic suppliers, thereby increasing the sales share of its new categories and optimising the overall product mix. In terms of the Company’s high-end animal protein business, as a strategic industrial development platform of Joyvio, Joyvio Agriculture will seek to speed up expansion of the purchase, processing and distribution businesses of high-end animal proteins, including seafood. Joyvio Agriculture made investments in Qingdao Starfish, a leading seafood company in China. Qingdao Starfish is China’s largest pandalus borealis importer and distributor, the largest pollock processor and exporter, and a retailer fully engaged in seafood importation. KB Food further expanded the categories of its imported seafoods to include lobsters from North and South America. While increasing its revenue from Australian market, KB Food also actively developed Chinese and international markets. KB Food was once again dubbed the ‘Best Seafood Supplier of the Year’ by Woolworths, a large supermarket chain operator in Australia, and is currently working with Woolworths to further expand cooperation. At the same time, KB Food signed a five-year contract with the Compass Group, the world’s largest restaurant service provider with business operations spanning across 50 countries. This year, KB Food will participate in international food exhibitions again, including the China Fisheries & Seafood Expo to be held in Qingdao in November. Funglian Group has restructured with Hebei Hengshui Laobaigan, a Chinese company listed on the main board of Shanghai Stock Exchange. During the Reporting Period, the transaction was approved unconditionally by the Merger and Reorganisation Vetting Committee of the China Securities Regulatory Commission. As of June 2018, the Joyvio Group became the second largest shareholder of Laobaigan, holding a 6.33% stake.
Revenue of the advanced manufacturing and professional services segment reached RMB3,124 million, up about 2% year-on-year. Net profit attributable to the parent company was RMB148 million. Legend Holdings is committed to developing leading manufacturing and related professional services operations in China and has expanded into the areas of advanced materials and high-end logistics. By strengthening product development and market channel expansion, the product mix of Levima Group has been further optimised. In particular, its market share ranked first in China in terms of PP, EVA, EOD and other product segments. Moreover, earning the title as a high-tech enterprise, Levima New Materials was entitled to enjoy a 15% income tax preferential policy, which further improved its overall profitability. EAL recorded a year-on-year increase of more than 30% in revenue and net profit. EAL has opened a new cargo airline between Shanghai and Frankfurt to increase the proportion of cargo transportation between China and Europe. Moreover, EAL has established freight service agencies and long-distance freight stations in Shanghai Zhangjiang High-tech Park and Waigaoqiao Bonded Zone to improve the overall customer experience and enhance EAL’s control over the value chain. EAL will also leverage on shareholders’ resources, which will lay a solid foundation for EAL’s future development and performance.
Financial Investments
Legend Capital (venture capital)
Legend Capital is one of the leading venture capital institutions in China. As of June 30, 2018, Legend Capital managed a total of 19 funds. In the first half of 2018, Legend Capital launched the 2nd RMB medical fund and also completed the final closing of the 2nd culture and sports fund. Total funds raised during the Reporting Period was RMB1.26 billion, with the 2nd RMB medical fund securing up to RMB1.01 billion on its initial fundraising efforts.
During the Reporting Period, Legend Capital completed up to 37 new investment projects, covering startups and growing enterprises in industries such as: TMT, innovative consumption, intelligent manufacturing, professional services, healthcare, plus culture and sports. Legend Capital fully or partially exited from 12 projects, and contributed a generous cash inflow of over RMB450 million to Legend Holdings. Four of its portfolio companies completed listings in domestic and overseas markets, namely: Bilibili, WuXi AppTec, CATL, and Uxin. As of June 30, 2018, 51 portfolio companies of Legend Capital were successfully listed.
In addition, Legend Capital will continue to carry out its exit of projects under management to ensure greater returns for investors.
Hony Capital (private equity investment)
Hony Capital is one of the leading equity investment and management institutions in China. As of June 30, 2018, Hony Capital managed 13 funds. During the Reporting Period, the Haidian Technology Industry Space Optimization Fund, a strategic cooperative venture between Hony property fund and a SOE of Beijing Haidian district, raised RMB2.01 billion in a new funding round.
During the Reporting Period, Hony Capital completed additional investments in 12 existing projects, fully or partially exited from 12 projects, and contributed a cash inflow to Legend Holdings of over RMB600 million while one of its portfolio companies was listed in China’s capital market (Bank of ChengDu).
As of June 30, 2018, 42 of Hony’s portfolio companies were successfully listed onshore or offshore (including PIPE investment) and another 3 were listed on the NEEQS. As of June 30, 2018, Hony Capital fully exited from 46 companies.
Legend Star (angel investment)
Legend Star is one of China’s leading angel investment institutions. As the early-stage investment platform of the Company, Legend Star focuses on three major areas, namely: TMT, healthcare and intelligent technologies. As of June 30, 2018, Legend Star managed 5 funds in total, the size of which exceeded RMB2 billion with an aggregate of over 220 onshore or offshore investment projects, including iDreamsky Games, Megvii Face++, AISpeech, Loock.cn , Homework Box, Surestar, Burning Rock Dx, Kintor Pharmaceuticals, PegBio, MNCHIP, Percans Oncology and other high-quality projects.
During the Reporting Period, Legend Star had nearly 20 onshore or offshore new investment projects covering cutting-edge fields such as intelligent machinery, industrial transformation, biological technology and medical equipment. Among the current ongoing projects, more than 40 projects finished another round of financing and Legend Star exited from nearly 10 projects.
In the first half of 2018, Legend Star completed the raising of over RMB700 million for the third RMB fund.
By the end of 2015, Legend Star initiated the establishment of Comet Labs, an artificial intelligence accelerator and is aiming for a global presence in the artificial intelligence industry.
Since 2014, Legend Star has ranked in the forefront among angel/early-stage investment firms of the year chosen by professional institutions within the industry, such as Zero2IPO Group and China Venture Group.
About Legend Holdings Corporation Limited
Legend Holdings Corporation is a leading investment group in China. The Company has built an innovative business model of Strategic Investment + Financial Investment “two-wheel” business synergy drive. Its strategic investment business stretches over five industries: IT, financial services, innovation consumption and services, agriculture and food, and advanced manufacturing and professional services. Financial investment business operations mainly include: angel investment, venture investment and private equity investment, which cover all stages of the Company’s business growth. For the past 30 years, under the leadership of Founder and Chairman Mr. LIU Chuanzhi and President Mr. ZHU Linan, the Company has seized on the key stages of China’s economic development by employing flexible investment methods and applying their rich management experience. At the same time, the Company leads a group of influential and outstanding companies that promote synergies between businesses, and continues to optimize its portfolios to achieve sustainable growth in corporate value.