1H2022 Interim Results
(12 August 2022 – Hong Kong)Activation Group Holdings Limited (“Activation Group” or the “Company”, together with its subsidiaries, the “Group”, stock code: 9919.HK), aleading interactive data performance marketing group for pan-fashion brands in Greater China, today announced its interim results for the six months ended 30 June 2022 (“ReviewPeriod”).
Activation Group is a leading interactive data performance marketing group for pan-fashion brands in Greater China. According to the research report of China Insights Consultancy Limited, the Group is the largestfashionexperiential marketing service provider in Greater China and accounted for 9.2% of the total market share in 2021. The Group has accumulated over 500 world renowned branded clients, including renowned mid-range and high-end fashion brands,mid-range and high-end automobile brands andChinese local premium brands. In which, CHANEL, DIOR, LOUIS VUITTON, PRADA are some of the long-term partners of theGroup.
For high-end and luxury brands that the Group focuses on, their marketing needs are extremely seasonal. The industry often peaks in the second half or even in the fourth quarter, which would account forapproximately60-70% of the annual marketing volume. The Group currentlyhas a strong order book on hand,withmore than 100 projectsfrom several international brands. As the pandemic situation in Mainland China improved,theGroup has also resumed its business operation in Shanghai since June, including two large-scale events held in July,such as Van Cleef & Arpels “Time, Nature, Love” Exhibition, and “Museum of Ice Cream” in Qiantan TAIKOO.
During the Period under Review, due to the implementation of quarantine and lockdown measures, the Group’s clients have seen a slowdown in business, and multiple events were either postponed or cancelled. This has led to an55.1% YoY decrease in theGroup’s revenue, from RMB 385.2 million to approximately RMB 172.8 million. Gross profitdropped50.3% YoY fromapproximatelyRMB 106.0 million toapproximatelyRMB 52.7 million, whereas grossprofitmarginimproved by 3.0 percentage points from27.5%to30.5%. The Group incurred a net loss for the period under review of approximately RMB 8.5 million (1H2021: net profit of RMB 38.5 million), which includes share award expenses of approximately RMB 7.0 million. If excluding such expense, actual net loss for the period under review was approximately RMB 1.5 million.
Experiential Marketing Business – Strong market position, being the largest luxury experience marketing service provider in Greater China
The Group continued to be the leading luxury experience marketing service provider in Greater China. Itsfashion shows and exhibitions were not only able to attract a large number of live audiences, but also able to become the platform for online secondary marketing campaigns. Through its data interactive services, the Group was able to create hundreds of millions of online exposures, thus increasing brand’s influence in the Chinese market. Such practices will be continued in the second half of 2022.
During the Period under Review, the recurring pandemic situation in the PRC has resulted in the suspension or postponement of a number of luxury brand events. Hence, revenue of the experiential marketing business decreased by 61.1% YoY toapproximatelyRMB107.6 million (1H2021: RMB276.4 million). Nonetheless, prior to the lockdown in Shanghai, the Group has successfully completed approximately 50 small-medium sized projects and several large-scale projects from January to March this year,including the OPPOFind X5Baize launch event, DIOR Xitang Villa, and BOTTEGA VENETA FW22 Show Screening. Looking ahead to the second half, the experiential marketing business is on an up-trend.. A number of major exhibitions or fashion shows have already been held in July and August , including Van Cleef & Arpels “Time, Nature, Love” Exhibition, and PRADA 2022 autumn and winter men's wear and women's fashion show.
Digital and Communication Business – Explore further growth opportunities
The pandemic has undoubtedly accelerated the digitalization of all industries in the PRC, and the subsequent increase in brands’ budgets in digital marketing has created a huge opportunity for the digital marketing segment. In order to strengthen its capabilities in this niche market, the Group has strategically formed a joint venture with Beijing Weikuai Technology Co., Ltd., a subsidiary of VeeR Group in January, which is a leading enterprise in Metaverse and virtual content production in the PRC. The Group holds 51% equity interest in the joint venture, and both parties will work cooperatively to create new solutions for pan-fashion Metaverse marketing focusing on 2B business.
During the period under Review, the Group obtained new customers Rémy Martinand launched two large-scale onlineevents, NEIWAI 22SS Fashion Show and LAND ROVER“Above & Beyond” Online Launch. Despite the sustained impacts of the pandemic, theGroup was still able to carry out the projects by working remotely. Nonetheless, the Group’s digital and communication business segment has recorded 33.9% decrease in revenue toapproximatelyRMB65.2million (1H2021: RMB98.7 million).
IP Development Business – Exclusive right for Shanghai Design Week new IP
On 10 June 2022, theGroup was granted the exclusive rights to manage the "Shanghai Design Week" IP,allowing the Group to befully responsible for brand promotion, annual large-scale design exhibition and other branding-related promotions across five major design industries (industrial design, architectural design, fashion design, service design and digital design). Internationally, Shanghai Design Week will link up with ParisDesignWeek, MilanDesignWeek and London Design Week to promote crossover and integration. To support the development of Shanghai’s digital economy,theGroup has also launcheda virtual networkingexchange platform of Shanghai Design Week -- "D UNIVERSE" on July 10 2022,providing a seamlessly connected "Online +Offline +Metaverse" marketing solutions in order to maximize the IP value of Shanghai Design Week.Unfortunately, the offline activities of La Liga club and Tour de France were suspended due to thepandemic outbreak in the PRC.
Outlook
According to Bain &Company Spring 2022 Luxury Industry Report: Luxury 2022 Spring Update — “rerouting the future” published on 21 June 2022, it estimates that the global personal luxury market will expand from EUR 360billion to EUR 380billion by 2025. In which, traditional luxury goods, digital assets and virtual worlds (metaverse, social media and digital games) are expected to play a more important role in the value proposition of luxury brands. The report also predicts that by the end of 2030, digital assets and metaverse will account for approximately 5-10% of the luxury market, and luxury brands are preparing to play more influential roles in this emerging virtual world.To seize the subsequent opportunities,the Groupwill strive to provide one-stop “offline + online + metaverse” comprehensive marketing solutions to its clients.
Mr. Lau Kam Yiu, Joint-Chairman and Chief Executive Officer of Activation Group, said, “
After two years of learning and growth, we are now able to better manage the changes and risks that come with thepandemic, as we continue to see signs of recovery across all operational indicators. Looking into the second half, which is the traditional peak season of the marketing industry, we believe our development will closely follow industry norm, of havingapproximately60-70% of business volume of the entire year in this rather short period.In addition to the recovery of our traditional business,the Group will be hosting its first large-scale offline design exhibition for its new IP ‘Shanghai Design Week’ from 15-18 September 2022.On25July 2022, the Group has also announced its cooperation with Baidu XIRANG regarding the introduction of our D UNIVERSE to the Baidu XIRANGMetaverse Platform, essentially providing a platform for premium and luxury brands to explore and discover the Web3.0. Going forward, we will continue to solidify our market position in our core experiential marketing business, as well as exploring business opportunities in the digital marketing business, so that we canprovide clients with one-stop ‘offline + online + metaverse’ data interactivemarketing service solutions,maximize the value of our existing businesses.”
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