Revenue Surges 2.8 Times to HK$282 Million;
Operating Profit Increases 1.3 Times to HK$123 Million;
Engaging in Both Entertainment and Exhibition Businesses;
Further Expands Presence in the PRC Market
HONG KONG – (ACN Newswire) – Mega Expo Holdings Limited (“Mega Expo” or the “Group”; stock code: 1360), a leading provider of comprehensive services platform of cultural and entertainment solutions, has today announced the interim results for the six months ended 31 December 2018 (the “Reporting Period”). Revenue of the Group amounted to HK$282 million, a surge of 284.1% as compared with the same reporting period last year. The remarkable business performance was attributable to (i) the increase revenue in the contracting services and entertainment equipment solutions segment accounted for HK$93.62 million and (ii) increase revenue in the promotion and consulting services segment accounted for approximately HK$139 million (2017: Nil) as a result of acquisition of an event promotion, entertainment consulting and club membership group, namely Cheer Sino Investment Holdings Limited and its subsidiaries (“Cheer Sino Group”) in March 2018.
Financial highlights
– Revenue surged 2.8 times to HK$282 million
– Operating profit increased 1.3 times to HK$123 million, operating profit margin was 44.0%
– Adjusted EBITDA increased 187.8% to HK$163 million
– Proactive reform and enhancement of core businesses, improvement on overall business performance with bright prospects for businesses
The Group has recorded an operating profit of HK$123 million, representing an increase of 133.0% as compared with the same reporting period last year.
During the Reporting Period, there is a significant loss on change in fair value of contingent consideration payables through profit and loss in the first half year as a result of HK$168 million to be settled by convertible notes in the acquisition of Cheer Sino Group, which resulted in overall loss of HK$127 million. The losses arising on fair value changes in contingent consideration payable were unrealised losses and have no impact on the cash flow of the Group.
The Group’s adjusted EBITDA increased 187.8% to HK$163 million.
Mr Deng Zhonglin, Chairman of Mega Expo, said, “The Group recorded a remarkable business performance for the last year. In additional to the already established exhibition business, we have also developed the cultural entertainment industry. The PRC is gradually catching up with rich economies and moving towards becoming a high-income economy, as well as the recent PRC Government favorable policy on cultural and entertainment industries, which potentially offer numerous advantages in the present stage of Chinese economic transformation. With our existing synergistic advantages of NOD Union Platform, the Groups is able to extend business operations to provide a comprehensive cultural and entertainment solution services platform (“comprehensive services platform”) to cultural and more entertainment players, as well as our existing members of NOD Union Platform.
Business Review
Operation of promotion and consulting services
During the Reporting Period, the Group has achieved remarkable results from the promotion and consulting services segment as well as successful expansion in the PRC, which led to promising business growth of this segment. Revenue reached HK$139 million, accounting for 49.0% of the Group’s total revenue and profit in this segment was approximately HK$114 million. During the period, the Group has completed the planning and execution of more than 100 notable alcoholic beverage promotion events in the PRC for the two top multinational alcoholic beverages suppliers. In addition, the Group has successfully delivered a promotion service campaign for a leading mobile charging equipment producer in the PRC.
Moreover, the effective management of numerous notable promotion events and the consistent high-quality services delivered by the Group has attracted several music theme stores to become high tier Diamond members (more than 90 members) of NOD Union Platform, a brand under Cheer Sino specializing in providing integrated, comprehensive and systematic operations solutions.
Meanwhile, with the advantages of synergies offered through NOD Union Platform, the Group has achieved remarkable results in providing systematic business solutions, entertainment advisory, event planning services and additional ad hoc consultancy for more than 100 clubs, lounges, bars, restaurants and pubs, accounting for revenue of approximately HK$68.01 million.
Operation of contracting services and entertainment equipment solution
Due to the strong demand for customized contracting services in the entertainment industry, the Group has commenced its own one-stop contracting and entertainment equipment solution services to customers. Since the integration of NOD Union, the Group has capitalized on that platform’s client network, and has successfully provided equipment advisory services on the spectacle of artistic lighting, perfect stage effects, specialized sound and music, interactive light and accoustics installation projects for the players in the cultural and entertainment industries and recorded a satisfactory performance. During the Reporting Period, the Group has delivered numerous customized contracting and supply of entertainment equipment services packages for more than 50 customers including high-end restaurants, lounges, clubs, and pubs. Revenue here amounted to HK$93.62 million, 33.0% of the Group’s total revenue. Such unique value-added services have great potential to drive its business growth while tapping synergies of other business segments.
Operation of brand management and brand management related downstream businesses
The Group has realized remarkable progress in providing bar brand management services under the name of “PHEBE”, “MT”, “U.CLUB” and “Dr Oscar” in various cities in the PRC, including Shanghai, Suzhou, Yixin, Hefei, Nantong, Beihai, Harbin, Chongqing, Changsha etc. During the Reporting Period, the revenue in brand management and related downstream business segments has increased by approximately 54.0% to HK$26.72 million, as a result of its significant increase in the number of licensees to 52 stores from 24 shops.
Financing business
To further expand financing services to customers and enhance income sources, the Group has proceeded with strategic acquisitions between July and August 2018 of a finance leasing company and a credit factoring company respectively that conduct their particular businesses in the PRC, aiming to provide financing services to existing customers, especially for their investment in and renovation of new entertainment stores. During the period, the Group delivered finance lease services for more than 50 customers in the cultural and entertainment industries, accounting to revenue of HK$3.94 million for this segment.
Operation of exhibition business, events planning and related services
Facing challenges including increased competition, higher costs and a shrinking market in Hong Kong, the Group will be prudent in managing its exhibition business operations and evaluating business development opportunities in Hong Kong while proactively exploring business opportunities elsewhere.
Given the scaling down of exhibition operations in Hong Kong and the off-peak period of exhibition events in the PRC, the revenue of the exhibition business decreased during the Reporting Period to HK$18.84 million. In the future, the Group will utilize its abundant experience in the Hong Kong exhibition business to continue to seek new business partners and investment opportunities in the PRC.
Prospects
Looking ahead, the Group will thoroughly and proactively implement the business expansion strategy in the PRC. With the synergy advantages of NOD Union Platform, the Group will further expand its cultural and entertainment businesses as well as its customers group from traditional customers (bars, clubs and lounges) to new customer group (self-serviced KTV, disc jokey (“DJ”) music stores and music restaurants etc), providing multi-scene music services to both traditional and new customers group (“Music Theme Stores”). In addition, the Group will provide more comprehensive solutions services to its customers, which includes upgrading its current online entertainment services system, and incorporating artificial intelligence (“AI”), virtual reality technology (“VR”) and 3D technology into its comprehensive services platform, in order to satisfy the different services needs of customers. Complementing these efforts, the Group is dedicated to building a complete industry supply chain and intends to provide music and performance solutions, DJ agency, liquor supply chain and store-styling design services and construction solutions to its current base of music theme store customers.
Mr Deng concluded, “The Group will be proactive in positioning itself as a brand for the high-end clubbing and entertainment experience, and will continue to propel forward in the exhibition business in the PRC so as to create a new income source. Based on its leading market position in the entertainment industry and its extensive experience in organizing projects in the exhibition business in Hong Kong the Group will forge an industry value chain in order to further expand its presence in the PRC market. It will also provide professional and comprehensive solutions for the brick-and-mortar music stores, and thereby realize the quick expansion of its business scale. In the future, we will maximize our advantages and continue to steadily develop our business and strive for greater returns to shareholders.”
About Mega Expo Holdings Limited (Stock code: 1360)
Mega Expo Holdings Limited is a leading provider of comprehensive services platform of cultural and entertainment solutions. Its business covers mainly preparation and management of exhibitions, and provision of comprehensive and systematic operational solutions to the cultural and entertainment industries. For organizing and management of exhibitions, Mega Expo provides one-stop contract service that entails booth design, equipment procurement and installation, and also planning of exhibitions, product launch, overseas exhibitions, promotions and music awards, etc. As for provision of operational solutions to the cultural and entertainment industries, Mega Expo mainly offers brand licensing and operation service for bars and restaurants. Its subsidiary brand “NOD Union” provides comprehensive business consultation, membership services, contracting services and entertainment equipment solutions, plus activity planning services and financing service to clubs, bars and lounges in the entertainment industry and alcohol and beverage suppliers.