Legend Holdings Corporation (“Legend Holdings” or the “Company”; Stock Code: 3396.HK) announced its unaudited condensed consolidated results for the six months ended 30 June 2020 (the “Reporting Period”) on 27 August 2020. During the Reporting Period, the revenue of the Company increased by 3% year-on-year to RMB184.866 billion; the net profit attributable to equity holders amounted to RMB637 million, representing a yoy decrease, mainly due to the impact from the COVID-19 epidemic, and the large-amount impairment provision for CAR Inc. and specific financial investment.
In the first half of 2020, in proactive response to the significant challenge presented by the epidemic and the increasingly complex international environment, Legend Holdings exhibited considerable resilience in business operations as a whole. The revenue of the Company recorded growth for seven consecutive reporting periods, and some of strategic investments businesses grew steadily. The net profit attributable to equity holders from the financial investments businesses recorded RMB1.427 billion, representing a yoy increase of 6%. During the Reporting Period, the Company’s various platforms continued to promote capital operations and make satisfactory headway.
Facing the further increase of instability and uncertainty in the macro environment, on the one hand, Legend Holdings proactively evaluated and responded to the effects of the epidemic, promoted invested companies to take the initiative to develop new products and services, and carried out dynamic risk assessments, etc. While strictly complying with relevant regulations, the Company proactively resumed work and production in an orderly manner to ensure all staff members’ employment, health and safety, and proactively fulfilled corporate social responsibilities to contribute to the fight against the epidemic at the same time. On the other hand, according to the established plan, Legend Holdings promoted the formulation of the new strategy in an orderly manner. The Company thoroughly reviewed the past business performance, to objectively and prudently assess the changes in the internal and external environments, and to proactively face uncertainties head on.
Strategic investments businesses remain steady
In terms of IT segment, Lenovo proactively responded to the impact of the epidemic, captured the development trend of the industry and yielded satisfactory performance. As of 30 June 2020, IT segment’s revenue increased to RMB168.273 billion, mainly benefiting from the growth of personal computer and smart device business and data center business, and its net profit attributable to equity holders amounted to RMB566 million.
As for advanced manufacturing and professional services, the operating results rose amid the headwinds, its revenue recorded RMB2.768 billion, and its net profit attributable to equity holders amounted to RMB370 million. As an enterprise for securing the “lifeline”, Eastern Air Logistics, made significant contributions to the global epidemic prevention and disaster relief and the resumption of work and production. After withstanding the challenge caused by the epidemic, EAL’s results recorded a yoy growth in the first half of 2020. Levima Group effectively resisted the impact of the epidemic, and the market shares of several segmented products continued to be at a leading level in the domestic market.
As for financial services segment, its overall operation was stable. The segment recorded revenue of RMB4.188 billion and net profit of RMB781 million. In the face of changes in the external environment, Legend Holdings proactively offered comprehensive support for its portfolio companies, which increased efforts to provide service for high-quality customers in the real economy and adopted a more prudent strategy in risk management and control field. The business model of “investment-loan linkage” adhered to by Zhengqi Financial has gradually shown results in the new round of capital market reform. The Operating revenue and net profit attributable to equity holders of Lakala Payment continued to increase. Banque Internationale a Luxembourg (BIL) delivered a resilient performance in the retail, corporate and wealth management business. BIL completed the acquisition of Sino Suisse Financial Group (Hong Kong) Limited to proactively explore innovative ways to support the construction of the Greater Bay Area. In addition, during the Reporting Period, Legend Holdings completed capital increase in Hyundai Insurance, becoming the important layout of the insurance industry. In the future, the company will join DiDi Chuxing and other shareholders to promote the transformation and upgrading of Hyundai Insurance to the field of insurance technology.
In terms of innovative consumption and services, the segment’s normal business operation was heavily hit by the epidemic; especially the regular operation of children’s education, transportation, dental care and other industries was greatly restricted. The segment’s revenue was RMB263 million. To proactively respond to adverse impacts, companies in the segment made a concerted effort to overcame prevailing difficulties, prevented and controlled the epidemic in strict accordance with the requirements of local governments, so as to ensure the health and safety of employees and customers, and support the epidemic prevention and control work. At the same time, the companies promoted the development of new products and services, maintained customer relations, developed new service scenarios, and proactively strove for various supports to alleviate the impact of the epidemic on business performance.
In agriculture and food segment, the Company recorded revenue of RMB8.964 billion. Golden Wing Mau, which operates the fruit business, ensured to maintain rapid growth in revenue by expanding its market investment and deepening the layout of production areas. Xinguojiayuan continued to carry out technological innovation and management model optimization, and its blueberry yield hit a new high. In the field of animal protein business, operations continued to be optimized to promote research and development of value-added products and expand diversified sales channels.
Financial investments businesses grew against the trend
In 2020, the global spread of COVID-19 exceeded market expectations. Combined with the continuous increase in uncertainties such as trade frictions, fluctuation in the secondary market was intensified. The Company’s associate funds and direct investment businesses faced increasing challenges. Financial investments businesses quickly launched digital management and resumed work, implemented project tiered management, and prepared for risk mitigation; at the same time, the businesses adopted more prudent investment strategies and more proactive post-investment management to reduce the adverse impact of uncertainties on funds under management.
Legend Star, an angel investment institution, managed a total of 7 funds with a total AUM exceeding RMB2.6 billion. Accumulatively, it has invested in 270 projects at home and abroad. During the Reporting Period, Legend Star invested in nearly 10 projects at home and abroad, covering artificial intelligence, biotechnology, medical equipment, new consumption and other segmented fields. Nearly 30 projects under management garnered the next round of financing, and 4 projects were exited. As of 30 June 2020, the 4th RMB fund had completed the 2nd round of closing.
Legend Capital, a private equity investment institution, managed a total of 23 funds, with a total AUM exceeding RMB50 billion. During the Reporting Period, the total amount of funds raised was RMB787 million; a total of 22 new project investments were completed, covering start-up stage and growing stage enterprises in the TMT and innovative consumption, healthcare, corporate services and intelligent manufacturing sectors. During the Reporting Period, Legend Capital fully or partially exited from 25 projects, contributing a cash inflow of over RMB1.3 billion for Legend Holdings. Up to now, 74 of the portfolio companies of Legend Capital have been successfully listed (excluding those listed on the NEEQS).
Hony Capital, a leading investment and management institution, managed a total of 12 funds, with the total AUM exceeding RMB80 billion. Currently, Hony Capital has covered PE, real estate, mutual fund management, hedge funds and innovation investment businesses. During the Reporting Period, the third property funds completed the first round of closing. Hony Horizon Fund Management Co., Ltd., a mutual fund management company specializing in secondary market investment and management business, managed five mutual funds. During the Reporting Period, Hony Capital proceeded with new investment projects in various business segments, made follow-on investments in existing projects progressively, and also actively exited projects, thereby contributing a constant and steady cash return to Legend Holdings.
Orderly promotion of capital operation
During the Reporting Period, Legend Holdings’ strategic investments and fund platforms of financial investments continued to promote capital operations. A total of 7 portfolio companies completed IPOs, 6 went through the approval of CSRC but were not listed during the Reporting Period, and at least 12 submitted IPO application materials.
In financial services segment, Sansure Biotech, an investment project of Zhengqi Financial in the biomedical field, successfully passed the approval of CSRC on 23 June 2020 for IPO on the SSE STAR Market, thus becoming the first “anti-epidemic stock”. Besides, Chemclin Diagnostic Corporation submitted its application for IPO on the STAR Market on June 8 and was accepted. In addition, ActBlue Co. Ltd. and Trina Solar Co. Ltd. in the green industry were also listed successfully. In agriculture and food segment, Golden Wing Mau was undergoing pre-listing tutoring, and Huawen Food’s A-share market IPO application for the SME Board was approved on August 21. At the same time, in advanced manufacturing and professional services segment, A-share IPO preparations of Levima Advanced Materials and EAL are in smooth progress.
Regarding financial investments, Burning Rock Biotech and Kintor Pharmaceuticals, invested by Legend Star, were listed on NASDAQ and HKEX, respectively, during the Reporting Period. Three of Legend Capital’s portfolio companies, namely UCloud, Cybrid Technologies, and Yanmade Tech, completed IPOs. In addition, QuantumCTek and Wireless Power Amplifier Module Inc. were also successfully listed in July 2020.
As the global macro environment is going through an overhaul, and China’s economy is entering a new phase of high-quality development, Legend Holdings will proactively face uncertainties and strive to contribute its own strength and achieve long-term development as China promotes innovation and technology, and progresses towards creating a new development pattern where domestic and foreign markets can boost each other, with the domestic market as the mainstay.