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Public company info - Real Nutriceutical Group Ltd. , 02010.HK

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Real Nutriceutical Group Ltd., 02010.HK - Company Profile
Chairman WANG Fucai
Share Issued (share) 1,592,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Health Products
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sales of health and nutritional supplements and pharmaceutical products. Performance for the year: The revenue of the Group in 2017 was RMB357.7 million, representing a decrease of approximately 59.7% from RMB886.4 million in 2016. Loss attributable to owners of the Company was RMB86.7 million in 2017 as compared to a loss of RMB65.4 million in 2016. The Company’s basic loss per share (“Share”) from continuing operations was RMB15.1 cents (2016: basic loss per share: RMB3.2 cents) based on the weighted average number of 1,592.0 million (2016: 1,592.5 million) Shares in issue during the Year. Business Review The Group’s major business recorded a significant decrease in sales compared with that in 2016 due to the slowdown in China’s economy and consumer market. Sales of the Group’s core health and nutritional supplement products decreased by 59.4% to RMB291.6 million as sales of the amino acid tablets and liquid products decreased considerably for the year ended December 31, 2017 (the “Year”). Meanwhile, sales of health drinks decreased by 60.7% to RMB66.0 million. As a result, the Group’s revenue decreased by 59.7% to RMB357.7 million. The Group’s overall gross profit margin continued to stand at a healthy level but decreased to 59.2% from 62.1% in 2016, due to higher production costs in 2017 and the change in sales mix. The Group reported an attributable loss of RMB86.7 million for 2017 compared with a loss of RMB65.4 million in 2016. This was mainly because gross profit decreased by RMB339.1 million and the impairment loss on trade receivable of RMB160.3 million recognised during the Year. During the Year, the Group adopted a prudent approach to the development of its sales network. In addition to consolidating its footholds in its major markets in eastern and southern China, the Group also enhanced its cooperation with both distributors and retail outlets in tapping into the potential of the new sales network. During the Year, newly developed retail outlets included Foshan Zhong Kang Tang Chain Pharmacy Store, Zhong Tian Chain Pharmacy Store, Zhong Rui Chain Pharmacy Store and Gu Zhen Yan Pharmacy Store in Inner Mongolia. Meanwhile the Group also actively developed new sales channels for health drinks, at convenience stores, supermarkets and petrol stations’ retail stores. The Group continuously expanded both its online and offline sales and marketing networks for its health supplements products to achieve integration of multiple channels during the Year. Besides reinforcing the management of existing online platforms and the efforts in online sales and marketing, the Group constantly enriched its health products portfolio to further develop new e-commerce network to promote products’ online sales performance. The Group sold its health products through the key e-commerce platforms like Tmall, YHD.Com and JD.Com. The Group’s online direct sales business generated revenue of RMB11.0 million, which accounted for 3.2% of the total revenue during the Year. Besides, the Group continued to utilize WeChat Mall platform to expedite WeChat Mall sales team building. Through the launch of training courses for WeChat Mall marketing, the Group strengthened the fostering of WeChat Mall sales talents and fastened the development of offline regional agents for the promotion of WeChat Mall sales. In relation to customers’ relations management, the Group actively perfected Real Nutri Health Club member services programme and developed membership sales business through diverse membership activities and quality health services including free basic body checks, health indicators’ records, health experts’ consultations and advices on personalized total solutions combining health supplement products combination and services. All these initiatives forged the interaction and trust between the Group and the Real Nutri Health Club members. During the year, the Group held a number of health activities for its health club members, including the Real Nutri’s 20th Anniversary Shanghai Celebration Event in Shanghai and the “China Dream, Health Dream” Elderly Healthcare Industry Conference in Pingyao Gucheng, Shanxi Province. For brand promotion, the Group adopted a targeted marketing and promotion strategy, primarily on internet media to increase its brand recognition through online advertorials and activities. During the Year, the Group increased the number of online advertorials on its production technology, corporate culture and products on websites in national health, portals and financial categories, in order to enhance internet users’ understanding of the Group and to prioritize the Group’s name in key word search. To celebrate the Group’s 20th anniversary in 2017, a number of grand celebration events were held, and strategic introduction, live interactive broadcast, and review of different stages of the events were presented in social media and other portals. Such programme strengthened the interactive understanding between the Group and the consumers plus internet users, and enhanced the Group’s brand image. During the Year, the Group actively participated in various large health exhibitions and conferences, including the 2017 International Amino Acid Industry Development Symposium in Tianjin, The 78th PharmChina Trade Fair in Guangzhou, and The Amino Acid Sub-committee Founding & First Working Meeting of China Bio-Fermentation Industry Standardization Committee in Shanghai. The Group also organized Real Nutri’s — The First China Wealth Summit On Mobile Internet+ Consumption & Finance in Wuxi, Jiangsu Province, to share its strategies for future online and offline business development with more than twenty online media, organizations and industrial elites. Besides, the Group actively continued universal health education and promotion on amino acids to increase public understanding of amino acids and their benefits through a variety of events and activities at the “Real Nutri Amino Acids Science Exhibition Hall”. Since the Group’s manufacture and sales of pharmaceutical products segment recorded a loss in both 2015 and 2016, the segment’s earnings performance was unsatisfactory and profitability is not expected to improve significantly in the near future, in December, 2017 the Group entered into an agreement to dispose of its three pharmaceutical subsidiaries to an independent third party which was completed during the Year. The Group considered that the disposal will not have a material adverse impact on the Group’s revenue. The Group intends to use the proceeds from the disposal for general working capital and funds for potential acquisitions and investments, such as the expansion of the Group’s distribution channels and online sales platforms. Further details of such disposal are contained in the announcements of the Company dated December 22, 2017 and March 8, 2018. The Group entered into a sales and purchase agreement with an independent third party seller to acquire the retail pharmacy chain stores network of Shenzhen Ailire Investment Company Limited in April, 2017. As certain conditions precedents were not fulfilled by December 31, 2017, being the long stop date for the fulfillment of conditions precedent to completion, the agreement lapsed and the deposit of RMB200.0 million was refunded to the Group in accordance with the terms of the agreement. Notwithstanding the lapse of the agreement, the Group is still actively seeking investment opportunities and will not rule out the possibility of re-negotiating the terms of the acquisition of the retail pharmacy chain. The Group actively cooperated with professional research and development teams in product development to broaden its product portfolio and maintain its brand’s competitiveness. During the Year, the Group signed collaboration agreements with Jiangsu Health Food and Cosmetic Safety Association and Nanjing University of Traditional Chinese Medicine to conduct the development and registration process for three health supplements, namely Amino Acid Peptide Complex for immunity enhancement, Glutathione Amino Acid Complex for liver protection and reinforcement, and Probiotics Dietary Fiber Powder with Fructooligosaccharide (FOS) for maintenance of intestinal microflora. At the same time, the Group conducted the research and development and preparation works for a series of multi-vitamins and minerals products. During the Year, the Group launched a number of high-quality nutritional health foods, including High-Calcium Wheat Germ Mixed Powder, Yam Red Rice and Walnut Mixed Powder, and Red Dates, Ejiao and Wolfberry Mixed Powder. The Group has always been prioritizing product quality for the pursuit of excellence and has also been reinforcing the product quality control of its production lines. The Group continued to upgrade the facilities and equipment at various production bases and made capital expenditure of approximately RMB115.5 million during the Year. Prospects: The growth in China’s economy, rise in the people’s income level and living standards, plus the enhancement and restructure of consumption pattern along with increasing health consciousness of the Chinese people, altogether have given rise to the consistent growth in the demand for quality health products and services. According to the National Bureau of Statistics, healthcare expenditure per capita in China increased by 11% in 2017. The rising personal income and stronger demand for high-quality health products presents good opportunities for the business enterprises and giant driving forces for the health supplements market development. Therefore, the Group is confident about the prospects of China’s health and nutritional supplements industry. The Group has been operating in the healthcare industry for over 20 years and keeps abreast of the times for the reforms and innovation of its brand competitiveness. The Group plans to establish a new integrated service platform of Real Nutri Beauty Life Platform that comprises membership services, online mall, offline physical stores, and brand promotion and product sales, spokespersons. The Group will upgrade the brand and services of existing Real Nutri Health Stores for transformation to Real Nutri Beauty Life Halls which will thrive to become local community centers. Apart from the products sales, the halls can also provide customers with more in-depth health services and life experiences, through one-stop health consultations, membership services, social entertainments, product trials and results sharing. The Group will use the Real Nutri Beauty Life Platform to invite people from all walks of life as members and to provide professional advices on personalized total health solutions comprising health supplement products combination and services according to their health conditions. The Group targets to let such members share their experience of Real Nutri’s products with others to promote the Real Nutri’s corporate brand and image. At the same time, the platform will help to establish a more robust members’ communication model and database system for collection of more precise and valid information. These measures can formulate more pin-pointed marketing strategies and allow the implementation of innovative sales modes in the future to enhance the Group’s competitiveness. The Group will adopt precise marketing strategies and improve its promotional efforts in online marketing. The Group will strengthen its cooperation with website operators to post online advertorials of in-depth analyses and guidance on the Group’s corporate culture, flagship products and health information, for more prominent online exposure of the Group. These online advertorials will be posted on the health and financial websites with an aim of covering at least 50 media channels for each post. At the same time, the Group will launch more focused publicity campaigns for its products, corporate activities and the scientific frontiers and latest technology of amino acids to promote its brand awareness through its official website and internet social networking platforms. Besides, the Group will continue to participate in academic marketing campaigns of healthcare industry and scientific research associations so as to increase its publicity in the healthcare sector. For instance, the promotional video for the Group’s U-Energy health drinks will be a key promotional focus in coming distributor conferences. In addition to focusing on nutritional health supplements and health drinks businesses, the Group also proactively seeks and develops healthcare business with good growth potential. China’s ageing population poses a new challenge to the country’s socio-economic development and transformation. The government policies for the elderly have become an important country’s agenda. The Chinese government has introduced a number of measures in recent years to support the development of the elderly care industry covering the financial, real estate and services industry sectors. The incentives include preferential tax treatments and subsidies to encourage investments in the elderly care industry. The modernization of society has also led to an increasing demand for quality elderly healthcare services. As the traditional nursing institutions are unable to totally fulfill the diverse needs of the aged population, the huge elderly population in need of more personalized nursing care presents a gigantic opportunity for elderly healthcare facilities and services. Therefore, the Group has entered into a memorandum of understanding with a government unit under Minle County of Zhangye City of Gansu Province of the People’s Republic of China (the “Minle Government Unit”) and Zhangye City Yongzhen Pharmaceutical Co., Ltd. (“Zhangye Yongzhen”) in March 2018 for the development of a retirement village in the Minle County, Zhangye City, Gangsu Province, China. The project intends to develop a large scale retirement housing village combining elderly healthcare services, unpolluted Chinese herb plantation, and production facilities, and an eco-friendly hotel and travel services. The whole project with gross construction floor area of approximately 160,000 square meters has an estimated a total investment of up to RMB1 billion. The Group will be responsible for introducing investment and financing, providing technological support and operating the project. While Zhangye Yongzhen will provide support for the relevant businesses and technological support and the Minle Government Unit will adopt the necessary supportive policies for the launch of the project. The project would further promote the Group’s core amino acids health supplements business as the retirement housing village would provide a new recurring customer base for the Group’s health supplement products. The retirement village and medical check centre can provide more comprehensive services to the Group’s health club members by offering them vacation with stay at the retirement village hotel for thorough medical check-ups and ecological tours. Furthermore, as the Group has developed a sizable elderly membership base through the sales and promotion of its health supplements for more than 10 years, the project could release the earning potential of such elderly membership base. To meet the changing needs of the consumer market, the Group will accelerate the development of novel products and source high-quality health supplements. It will continue to work close to professional development institutions. In addition to launching new amino acid-based health supplements, the Group will also enrich its product portfolio by introducing more popular and diverse health foods to cater for the consumer preferences. In 2018, the Group plans to launch a number of new health products including Small Peptidomimetics Complex, Plant-based Probiotic Powder, Iron Folic Acid Tablets and Multi-vitamins products. Even though China economic environment remains challenging, the Group is confident that it can overcome the difficulties and identify the opportunities in the challenges. The Group will not only continue to consolidate its leading position in amino acid health supplements industry, but will also fully apply its inherent competitive advantages to capitalize the growth in China’s healthcare industry and to develop a more diversified healthcare business which will bring higher returns for the shareholders.

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