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Public company info - Longrun Tea Group Co. Ltd. , 02898.HK
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Longrun Tea Group Co. Ltd., 02898.HK - Company Profile
Chairman Chiu Ka Leung
Share Issued (share) 1,452,000,000
Par Currency Hong Kong Dollar
Par Value 0.05
Industry Soft Drinks
Corporate Profile Business Summary: During the year, the Group were involved in the trading and distribution of pharmaceutical products, tea products and other food products. Performance for the year: For the year ended 31 March 2020, the revenue of the Group decreased by approximately 39.8% to approximately HK$57,120,000 from approximately HK$94,820,000 for the year ended 31 March 2019. Loss attributable to owners of the Company for the year ended 31 March 2020 was approximately HK$70,682,000 (for the year ended 31 March 2019: HK$36,920,000). Basic loss per share was HK4.87 cents for the year ended 31 March 2020 against basic loss per share HK2.54 cents for the year ended 31 March 2019. BUSINESS REVIEW Tea and Other Food Products Businesses During the period under review, the Group focused on distributing tea products under the well-established “Longrun（龍潤）” brand in the PRC market mainly through its distribution network of franchised and self-owned tea shops. Despite the poor spending sentiment had continued to affect the consumer market in the PRC generally, the Group continued to diversify its customer base by providing tailor made non-“Longrun（龍潤）” branded tea products to corporate customers in the PRC. Revenue for the period under review from tea and other food products businesses was approximately HK$54,238,000 (for year ended 31 March 2019: HK$90,947,000), accounting for approximately 95.0% (for year ended 31 March 2019: 95.9%) of the Group’s total revenue. For the year under review, the Group has successfully engaged different independent suppliers of tea products and substantially reduced the Group’s reliance on the connected supplier. The Group will continue to explore opportunities to set up its own tea manufacturing base in Yunnan Province and to engage different independent suppliers with a view to further diversify its procurement sources and reduce its potential business risk. Retail Network The Group’s traditional tea products bearing “Longrun（龍潤）” brand, including tea cakes, tea bricks, loose tea leaves, tea gift sets, instance tea essence and tea bags, etc., are mainly sold in the Group’s traditional tea shops retail network comprising both franchised and selfowned tea shops. During the financial year ended 31 March 2020, the Group managed a retail network comprising about 420 franchisees located in Mainland China. Given the challenging consumer market, the management will continue to actively manage the retail network with a view to enhance brand and product recognitions in the PRC. Mega Retail Outlets Targeting Tourists Currently, there are two mega retail outlets in Yunnan Province (one in Kunming World Horticultural Expo Garden and one in the Group’s headquarter in Kunming) whereby the Group’s tourism associated customers will promote and distribute “Longrun（龍潤）” tea products to both domestic and international tourists travelling to Yunnan Province. The two mega retail outlets have a gross total area of over 4,300 square meters. Given the outbreak of COVID-19 in the last quarter of the financial year, travel restrictions were imposed in the PRC and Yunnan’s tourists related businesses were adversely affected. However, business activities in the PRC are being resumed and the Group’s see tourists related businesses are picking up gradually. The operating environment of tourists related retail sales is expected to remain very challenging in the future. Direct Selling The Group distributed its tea products to direct selling enterprises in the PRC since 2014. Tea products sold to direct selling enterprises are mainly tailor made non-“Longrun（龍潤）” products. For the year under review, the consolidation and enhanced regulation of the PRC direct selling activities are still affecting the direct selling industry. However, the effect of industry consolidation and enhanced regulation is expected to bring positive effect to the development of the direct selling industry in the longer term. Against such background, the Group will continue to develop tailor made tea products using customer’s packaging design and brand name for their onward distribution in direct selling platforms. The Group will continue to strengthen its business relationship with its customers by deploying more resources in new product design and development. Healthcare and Pharmaceutical Business During the year under review, revenue from healthcare and pharmaceutical business was approximately HK$2,882,000 (for the year ended 31 March 2019: HK$3,873,000), accounting for approximately 5.0% (for the year ended 31 March 2019: 4.1%) of the Group’s total revenue. For the year ended 31 March 2020, the decrease in revenue from the healthcare and pharmaceutical business was mainly due to the fact that the retail sector in Hong Kong was deeply affected by the ongoing demonstration and social unrest as well as the intense competition in the health supplement market. In this regard, the Company is formulating a campaign to (i) educate the general public about the benefits of detoxification; (ii) expand the existing sales channels; and (iii) explore opportunities to sell the Group’s products through various social media platforms and online stores. Prospects: The Group’s operating environment remains very challenging. Trade relation between China and the United States are tense, bringing pressure to the PRC economy. The COVID-19 outbreak has rapidly spreaded around the globe and caused pandemic crisis worldwide, which in turn has significantly affected the PRC economy. Traditional retail sales of consumer goods in the PRC has been significantly affected and showing a continuous slowdown. It is likely that the general consumer market in the PRC will continue to face uncertainties and remain very competitive. With the drastic actions taken by the PRC Government, the COVID-19 pandemic has been contained and economic activities are being gradually resumed. The Group’s believe that the PRC economy will be stabilising in the second half of 2020 and the encouragement of domestic consumption by the PRC Government shall present opportunities for the Group. The Group has launched a new marketing and advertising campaign for launching a new line of Pu-erh tea products right after the closing of second quarter of the 2019 financial year and the Group’s expect to see the promotion results in the 3rd to 4th quarter of this financial year as delayed by the COVID-19 outbreak. The outbreak of COVID-19 has aroused the health awareness of the general public in the PRC and the Group’s have launched a new product of instant Pu-erh tea extracts for weight management at the end of the financial year under review. The Group’s have engaged social media marketing in the promotion and distribution of this new product targeting to health-conscious customer. The Group will continue to expand its franchise network of tea shops and to explore other new distribution channels with a view to broaden its customer base.

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