Activation Announces 2020 Interim Results

Actively Developing Digitalized Business and Investing in Pan-cultural Sector to Capture Market Opportunities in Post-pandemic Era

HONG KONG, CHINA - Media OutReach - 27 August, 2020 - Activation Group Holdings Limited ("Activation" or the "Company", which together with its subsidiaries, is referred to as the "Group"; stock code: 9919), a provider of integrated marketing solutions in Greater China, announces its interim results for the six months ended 30 June 2020.

During the period under review, the China-United States trade war and the outbreak of the novel coronavirus pneumonia pandemic (COVID-19) led to a decrease in the number of engagements for brand events, weighing on the earnings in the first half of the year. The Chinese government gradually loosened several pandemic prevention measures, including restrictions on public gatherings, activities, exhibitions, and travel in April when the disease abated. The Group's experiential marketing services and public relation services, which were significantly affected by the pandemic, have begun to recover in the second half of the year. Meanwhile, the Group seizes opportunities on the market and has been successfully engaged by several luxury and premium brands as the experiential marketing service provider in organizing the brand events and IP intellectual property ("IP") development in the People's Republic of China ("PRC") in the second half of 2020.

Quick recovery in Experiential Marketing and Public Relation services

The Group is an experiential marketing services provider to premium and luxury brands in Greater China, providing a comprehensive range of marketing solutions for its clients. Such services include the development of a concept for an event, event planning, production and event management. The clients can expect to achieve a desired effect on the general public and target audience alike through the brand-building and marketing projects designed, organized and managed by the Group. After a number of pandemic prevention measures were relaxed in April, Activation has resumed holding a series of fashion events for its clients, including the Christian Dior "Designer of Dreams" Exhibition in July and the Louis Vuitton Men's Spring-Summer 2021 show in August.

Although the pandemic continues to rage in many countries and regions, the disease has been brought under control in mainland China by the country's effective measures. The Group expects that its clients such as premium and luxury brands will turn to the market of mainland China which has a quicker economic rebound. This will ultimately benefit the Company.

Actively Expanding Digitalized Business

The digital and brand communication business has not been affected by the pandemic, and even achieved a slight growth compared with its performance in the first half of 2019. The revenue generated from this service increased from RMB45.4 million in the first half of 2019 to RMB47.0 million in the first half of 2020. Furthermore, some clients reallocated their budget from offline to online marketing activities., thus creating a great opportunity for the Company's digital marketing services.

The Group also seized the opportunity by entering into cooperation agreements with renowned brands to expand its digital and brand communication business. In early June, the Company entered into a memorandum of understanding with Guangzhou Yuerun Information Technology Co., Ltd.（廣州悅跑信息科技有限公司）("GYIT") in respect of possible cooperation in developing and operating a new online cycling mobile app, named ImIN (由我). GYIT is a high-tech company focusing on the provision of a wide range of services for Chinese enthusiasts of running by means of mobile internet applications and offline events. At present, the total number of the users of GYIT's mobile internet applications exceeded 80 million in 2,100 cities all over the world and in 29,000 registered running groups in the PRC.

Moreover, the Company entered into a memorandum of understanding with HTC Corporation in July about popularizing the application of virtual reality ("VR") in China's events industry through their long-term strategic partnership. The VIVE VR equipment provided by HTC Corporation has already reached world-class level. Given the solid background of HTC in the provision of the VR solutions, the strategic partnership with HTC would enable the Company to lead the way in the market for event management, thereby bringing strategic benefit and generating new revenue streams to the Group.

Stable Financial Position with No Debts

As at 30 June 2020, the Group did not have any interest-bearing borrowings. The gearing ratio, calculated by dividing the bank and other borrowings by total equity, was nil. Cash and cash equivalents amounted to approximately RMB332.4 million. In the first half of the year, the Company repurchased an aggregate of 33.504 million shares for a total consideration of HK$29.651 million as it had abundant financial resources.

Making a Renowned Investment Fund a Shareholder of the Company to Facilitate Investment in Pan-cultural Sector

In July 2020, the Group made Shanghai Innovital Capital ("SHIVC") its shareholder. SHIVC is an investment fund initiated and established by the Shanghai Municipal Government. Upon completion of the share transfer, SHIVC will become the third-largest shareholder of the Company, holding 14.42% of its issued share capital. SHIVC principally engages in equity investment and investment management in emerging industries of strategic importance. The total value of funds managed by SHIVC exceeds RMB50 billion. SHIVC has invested in 780 innovative enterprises and 796 business incubation projects in their early stages, thus fostering many leading enterprises that have independently developed their proprietary intellectual property rights. According to the limited partnership agreement entered into between the Group and SHIVC, the parties will each invest RMB200 million to establish a partnership, with an ultimate  total capital commitment of RMB1,002 million. The partnership will invest in projects in the pan-cultural sector, including those in the fashion, sports and entertainment industries as well as those undertaken by the Company's digital and creative marketing segment. 

Mr. Steve Lau Kam Yiu, Joint-chairman and Chief Executive Officer of Activation, said, "In order to adapt to the market affected by the China-US trade war and the pandemic, the Group will take four major actions in the future. Firstly, it will enhance its services to the clients in the Internet industry and consumer goods sector. Secondly, it will step up the development of its digital marketing business through mergers and acquisitions and cooperation. Thirdly, the Group will actively extend the geographical market coverage of its experiential marketing business beyond Asia. Finally, the Group will also continue to strengthen and expand its integrated marketing and sports IP development business. The second half of the year is usually a peak season of the industry. As the pandemic abates and the economy gradually picks up, the demand for luxury goods is expected to recover. This can lead to a rebound in the market for luxury goods. The Group will closely monitor the market and seize opportunity when it arises from a recovery in the market."

For the six months ended 30 June 2020, the Group recorded a revenue of RMB71.8 million. The loss attributable to shareholders of the Company was RMB19.3 million. Basic loss per share was 2.5 RMB cents. The board of directors does not recommend the payment of interim dividend for the first half of 2020.

About Activation Group Holdings Limited

Activation Group Holdings Limited is a leading and fast-growing integrated marketing solutions provider that focuses on the provision of experiential marketing, digital and brand communication, and public relations services mainly in Greater China. The shares of the Company were listed on the main board of The Stock Exchange of Hong Kong Limited on 16 January 2020. According to an independent market research report issued by China Insights Industry Consultancy Limited, the Group ranked first in the experiential marketing services for premium and luxury brands market in Greater China in 2018. The Group also focused on the intellectual property (IP) development for the sectors of sports and entertainment. Since 2016, the Group has started its IP development business for the sports market by entering into separate cooperation agreements with LaLiga and Amaury Sport Organization. Under such agreements, the Group was granted exclusive rights to organize authorized events with LaLiga Club brand and Le Tour de France brand and other rights such those of marketing, sponsorship, merchandising and other purposes in the PRC. In 2017, the Group also established Stufish Asia Limited with Stufish Productions Limited to diversify into the business of entertainment IP development.