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Public company info - Lion Rock Group Limited , 01127.HK
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Lion Rock Group Limited, 01127.HK - Company Profile
Chairman Yeung Ka Sing
Share Issued (share) 770,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Printing, Publishing & Packaging
Corporate Profile Business Summary: Provision of printing services. Performance for the year: Revenue for the year ended 31 December 2020 was approximately HK$1,373.5 million and represented a decrease of 14.5% from previous corresponding year (2019: HK$1,607.0 million). Gross profit margin dropped from 28.0% to 24.6%. Profit for the year attributable to owners of the Company amounted to approximately HK$104.3 million (2019: HK$138.8 million), a decrease of 24.9% compared with last year. Business Review The COVID-19 pandemic has wreaked havoc to the global supply chain and the book industry. Printing plants and bookshops were closed by occasional lockdowns, customers cut back on printing orders due to the macroeconomic uncertainty, and logistics was impacted by freight capacity crunch. Despite the unprecedented challenges and downbeat revenue reported in H1, the Group had a solid H2 driven by a rebound of the global book market. Turnover of the Group for the full year declined by 15% to HK$1,373 million (2019: HK$1,607 million) and Group net profit attributable to owners of the Company decreased by 25% to HK$104 million (2019: HK$139 million). Management believe that the Company is one of the better performers in the printing industry. This result vindicated the Group’s asset light strategy and the Group's immediate action to manage costs at the onset of the COVID-19 outbreak. Publishers in the West have been offshoring their print production to the Far East since the 80s. Low labour costs, efficient freight network and digital technology have made 4-colour printing easier and more cost effective to print in China. However, the China-US trade war has forced publishers to re-examine their supply chain strategy, and a number of leading publishing houses have shifted their print orders to non-China print manufacturers, particularly in Europe. The Group expects the offshoring trend that started 40 years ago to come full circle. The continued appreciation of RMB and the increasing labour and material costs in China have chipped away the competitiveness of China based printers. The re-shoring trend is further accelerated by the ongoing global shipping disruption, with freight costs doubled on China-US routes and quadrupled on China-Europe routes. The above development underscores the importance of the Group’s strategy to diversify geographically. the Group foresaw the decline of China’s print manufacturing 6 years ago which led to the acquisition of the OPUS Group in Australia. The Group’s recent purchase of Papercraft Sdn. Bhd. (“Papercraft”), a Johor based Malaysian printing plant, is a continuation of that strategy. Work has commenced to upgrade the infrastructure at Papercraft in preparation for the planned capacity expansion. A.PRINT MANUFACTURING 1010 Printing, China manufacturing and international sales operations: Sales turnover declined by 6% year-on-year. A number of sales orders were lost due to the COVID-19 lockdown in China in Q1. The global macroeconomic uncertainly also led to a drop of order in the first half of the year. Despite the disappointing start, the global book industry rebounded strongly in 2H, which helped us recover considerable lost ground. Left Field Printing Group, Australia manufacturing: Sales turnover at Left Field Printing dropped by 19% year-on-year. Print jobs from local government and small businesses have declined, with most of the revenue drop caused by the loss of a multi-year contract with a major publisher. The financial support from the Australian government’s JobKeeper Payment scheme has cushioned the impact of COVID-19 on the business. COS, Singapore manufacturing: Sales turnover at COS increased by 2%. While the academic journal printing business was affected by regional COVID-19 lockdown, COS took on more US bound inter-company orders. The consolidation of Papercraft, the Group's Malaysian plant acquired in early 2020, was delayed by COVID-19 ‘movement control’ imposed by the Malaysian government. Infrastructure upgrade work has since been re-initiated as part of the consolidation plan. the Group expect that in the foreseeable future, COS/Papercraft will continue to incur loss as it ramps up its operation. B.PRINT SERVICES MANAGEMENT APOL Group, international sales operations: Despite sales turnover declined by 18% year-on-year, profit after tax increased by 20% thanks to tight cost control from APOL management. the Group's business in the Latin American market was hit by weak educational sales and local currencies depreciation. On the positive note, revenues from the US and UK were in line with previous year. Regent, Hong Kong sales operation: Regent’s sales turnover declined by 20% in 2020. Regent’s teaching aids kit and school yearbook segments were severely affected by school closures globally. Given their exposure to the US retail and education sectors, which were particularly impacted by COVID-19, the Regent management is working on mitigating the accounts receivable risks. C.PUBLISHING The Quarto Group Quarto’s revenue is down year-on-year at US$126.9 million (2019: US$135.8 million) as retail book sales were affected by lockdown in the US and UK in Q1. The global book market had a strong bounce back in 2H, aided by growing online sales and reopening of high street retail. Quarto’s strategy to publish less but better books and pruning corporate overhead costs including interest expenses have lifted its’ profit after tax to US$4.6 million (2019: US$2.9 million). Prospects: Scale matters at times of crisis. It is particularly true in the printing and publishing industry where scale gives you access to raw materials, freight capacity, and fulfilment service that come in limited supply during a global pandemic. The Group is in an enviable position to adapt quickly to the challenging business environment because of the Group's scale. The Group expects its China based operations, including 1010 Printing, APOL and Regent, to deliver solid results. Despite the prolonged uncertainly of COVID-19, the Group are seeing good order uptake from a resilient global book market. And the Group believe the positive trading condition will continue throughout the year. The Group has made scaling up geographically a strategic focus of the Group. An important initiative is to develop Papercraft in Malaysia and ramp up its’ manufacturing capacity to add 35% of that of the Group's flagship plant in China. the Group are targeting mid-2022 to accomplish this objective and the combined operation of Papercraft and COS will place the Group in a unique position among major book printers in China to have a significant print manufacturing presence in South East Asia. Left Field Printing management is planning in advance for the end of the Job Keeper wage subsidy programme, which will expire in March 2021. the Group expect the business will be adversely affected without the financial support. And with the Australian Government moving forward with the paperless initiative, the Group anticipate uncertainty and challenges with the local trading environment. The publishing business is an important strategic focus for the Group to diversify vertically and will be the Group’s new engine of growth. Working closely with Quarto management, the Group have managed a successful turnaround of the business after a 3-year effort. It is now a much more streamlined operation with a publishing program that is focused on 6 key book categories. With Quarto in much better financial shape now, the Group will focus on growing the business organically and via bolt-on acquisitions. The Group will continue to make investments in IT and digital capability. The automation of the Group's business processes is enhancing the Group's productivity. And the digitalization of interface with the Group's clients’ systems and improvement of the Group's ERP will allow us to use data analytics to enhance the Group's production efficiencies. These long-term investments will be the driver of the Group's competitiveness in a competitive market. The Group is cautiously optimistic about the year ahead. The changing cost structure in China and the ‘onshoring’ momentum will work against the Group. But the Group are confident that the Group's investments in regional manufacturing footprint, business diversification, and digital capability will reinforce the Group's leadership position in the book printing sector in Asia.

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