Optimises and Integrates Existing Businesses Actively Explores Property Development Opportunities
Hong Kong, June 19, 2014 - (ACN Newswire) - Ground Properties Company Limited ("Ground Properties" or the "Group") announced its annual results for the year ended 31 March 2014. The financial performance for the year was affected as a result of major adjustments to the Group's business. However, measures such as changes in the management team and the Company's name along with expansion into the property development and management business have laid a sound foundation for the Group's future development.
During the year, the Group recorded a turnover of HK$56,211,000, a decrease of approximately 11.7% compared to last year (2012: HK$63,663,000). The mobile communications services business sold in March 2013, did not generate any gains and profit. This, together with the increase in legal and professional fees due to notifiable transactions during the year and the decrease in increment in fair value of the Group's investment properties from 2013, were major factors in recording a loss after tax of HK$3,856,000.
During the year, the Group has changed the name of the Company to "Ground Properties Company Limited", which helps the Group to create a fresh corporate image as it reflects its commitment to entering the property development and management business more accurately. The Group has also actively explored property investment opportunities in order to generate stable rental income with a high rate of return. To cope with the intense competition in the telecommunications industry resulting from the proliferation of electronic communication technologies, the Group has integrated and further developed its telecommunications retail and management services business during the year to improve its performance.
Ms Chai Xiu, Chairman and Chief Executive Officer of Ground Properties Company Limited, said, "The past year has been a truly meaningful one for Ground Properties. The Group has made a strategic decision to enter the property market in the PRC. We currently operate three major businesses: provision of telecommunications retail sales and management services, property investment and property development and management. Riding on the professional expertise and extensive experience of the management team, the Group has strived to diversify its business, capture market opportunities and drive sustainable business growth by focusing on the PRC market and embarking on global expansion."
Telecommunications retail sales and management services
The telecommunications retail sales and management services sector continued to be affected by the high penetration of the mobile service and strategy changes by the Shanghai telecommunications operator. Turnover of the segment decreased to approximately HK$46,452,000 from HK$59,871,000 in the same period last year while gross profit slightly increased from HK$31,309,000 to HK$31,859,000. The decline in turnover was mainly due to reductions in the sales of mobile handsets with a lower profit margin, prepaid mobile services, and fewer promotional campaigns initiated by the Shanghai telecommunications operator. However, the overall gross margin has improved from approximately 52% to approximately 69% as a result of the decrease in the sales of the low margin mobile handset business. The telecommunications retail sales and management services recorded a net loss after tax of approximately HK$1,112,000 as compared to that of HK$45,000 in the prior year. Given the highly competitive telecommunications industry in Shanghai, China, the Group has promptly adjusted its business development strategy to cope with the market changes, including enhancing its management standard, introducing senior management talent with rich experience in the telecommunications industry and optimising its store network within newly developed districts. During the year, the Group has made a strategic decision to close its entire network of smaller specialty stores and to open new stores in the areas which have considerable development potential and are expected to become prosperous, as a way to control operating costs and improve operating efficiency. The Group is continuing collaboration with the Shanghai telecommunications operator to further enhance the management of its existing retail service stores, add new high value-added services and optimise its services portfolio in a bid. As of 31 March 2014, the Shanghai operations managed a total of 20 retail service stores (31 March 2013: 24 stores).
Acknowledging the increasing importance of the property investment business, the Group has designated property investment as a separate business segment. During the year, rental income from property investment was HK$9,759,000, a significant increase from HK$3,792,000 recorded in the last corresponding period (the last corresponding period was around seven months). The substantial increase was mainly due to the rental income being generated from a longer period of twelve months and the increase in rent during the year.
Property development and management
The property market in northeast China is growing steadily among different regions in the PRC. Jilin Province, in particular, offers specific advantages and fast economic growth. During the year, the Group has completed the acquisition of the entire issued share capital in Ace Plus Global Limited which principal asset is a 35% effective interest of a PRC company which in turn holds a property project in Changbaishan, Jilin Province in the PRC ("Changbaishan Property Project") and has secured the management rights of the project. Occupying an area of more than 1,000,000 square meters, the Changbaishan Property Project will be developed into a high-end resort comprising six-star hotel, theme park, stand-alone houses and apartments. The construction of the Changbaishan Property Project will commence in mid-2014 and is expected to start pre-sale by the end of the year. The Group will benefit from the 35% profit derived from the sales of residential units of the project and recurring rental income from the commercial units. Besides, the Group has also obtained the management rights of the Changbaishan Property Project. Thus the Changbaishan Property Project will create a new income stream through the provision of management services including planning, design, budgeting, licensing, contract tendering and contract administration.
Looking ahead, the Changbaishan Property Project in which the Group has invested is believed to be of huge development potential. The management fees from the management contract under the Changbaishan Property Project should bring new revenue streams to the Group in the next financial year. The Group's professional management is poised to fully capitalise on the Group's rich experience in property investment and management and capture the enormous opportunities from the booming commercial property market in the PRC. The Group is continuing to explore commercial property projects with high growth potential. As for the residential property, the Group is seeking investment opportunities in northeastern China, which are suitable for its business scale and withhold good growth prospects and to increase its land bank at a gradual pace.
In addition, the Group will prudently expand the telecommunications business and enlarge its market share through high quality services. At the same time, the Group will diversify its investment portfolio and continue to look for suitable property investment opportunities in the PRC or other parts of the world in the future with the aim to develop a balanced property portfolio that meets the market demand so as to increase its recurring income.
Ms Chai Xiu concluded, "In view that Central Government strives to create and optimise the regulatory mechanism to guide the healthy development of the property market, we believe that the property market will continue its healthy growth benefitting from the stable external environment. The Group will continue to look for suitable property investment opportunities in the PRC or other parts of the world in the future. We will closely monitor market trends and prudently assess the development opportunities of different potential projects so as to provide quality, innovative and competitive property projects, aiming to achieve growth in its three major business segments, in order to provide satisfactory returns to the shareholders."
About Ground Properties Company Limited
Ground Properties Company Limited is primarily engaged in provision of telecommunications retail sales and management services and property investment as well as property development and management business. With regards to telecommunications retail sales and management services, the Group operates 20 retail stores in Shanghai that provide telecommunications equipment and management services. Acknowledging the increasing importance of the property investment business, the Group has designated it as a separate business segment in September 2013 and its investment properties are all situated in Hong Kong. In respect of the property development and management business, the Group completed acquiring 35% equity interest in the property project in Changbaishan, Jilin Province, the PRC, in October 2013 and securing management rights for the project. This integrated-property project is expected to be developed into an upscale resort consisting of a six-star hotel, theme park, stand-alone houses and apartments.
Source: Ground Properties Company Limited
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