Hong Kong Resources Holdings 2010 profit up to HK$30mn

3D-GOLD business boosts turnover by 90% to HK$2.45bn and by the satisfactory performance of retailing and franchising operations for selling gold and jewellery products.

Hong Kong Resources Holdings Company Limited (HKRH) announced its second interim results for the twelve months ended 31 March 2011, subsequent to its announcement of change of the financial year end date from 31 March to 30 June earlier this year.

In the first full-year results announced after HKRH’s acquisition of the brand and retail network of 3D-GOLD, the Group’s turnover surged by 90.0% to HK$2.45 billion compared to the turnover of HK$1.29 billion for an eight-month operation of 3D-GOLD in FY2010. When comparing the second half of FY2011 with the same period in FY2010, the six-month turnover achieved a 43.6% growth.

Gross profit rose by 64.2% to HK$571 million (FY2010: HK$348 million), while profit from operations increased by 60.2% to HK$83 million (2010: HK$52 million). The growth was mainly contributed by the satisfactory performance of retailing and franchising operations for selling gold and jewellery products. As a result of significant investment made during the period to establish the Shenzhen headquarters and seven regional offices for long-term development, profit for the period attributable to owners of the Company amounted to HK$30 million, compared with HK$23 million (after excluding a HK$185 million discount on the acquisition of business) in the last corresponding period.

As at 31 March 2011, the Group maintained a healthy financial position with bank balances and cash (including pledged bank deposit) of HK$180 million (31 March 2010: HK$156 million).

Dr. Kennedy Wong, Chairman of HKRH, said, “After the acquisition of 3D-GOLD, we have been committed to building the brand and expanding our sales network, driving turnover growth, and we see our quality products and brand image continuing to gain increasing support from customers.

Despite related costs, by setting up infrastructure and our marketing efforts, we have built a strong foundation for business growth during the coming five to eight years. Cost controls are to be tightened to enhance our profitability along with the growth plan.”

During the period under review, turnover from Hong Kong and Macau retail operations amounted to HK$330 million and that from the Mainland China operation to HK$2.11 billion, and 90 new shops and counters have been opened in total. The Group’s Hong Kong and Macau markets recovered significantly since the 3D-GOLD acquisition by the Group in July 2009 with same-store growth of 65%. The growth of the self-operated points of sales in Mainland China was 29% during the same period since the completion of the 3D-GOLD acquisition.

Meanwhile, significant resources have been allocated to build on this solid foundation to better support continued business growth. Noteworthy here is the newly opened headquarters in Shenzhen occupying a floor area of 10,000 square meters which provides a spacious exhibition area as a one stop opportunity for franchisees, as well as seven regional offices in Mainland China, according to an HKRH report.

This infrastructure buttresses the Group’s strategic plan for adding 100 new points of sales each year, to reach a total of 500 by 2012 and 800 by 2015.

To capture opportunities presented by the promising market potential and increase in popularity of distinctive corporate gift items in China, the Group has tapped the corporate gift market and appointed award-winning Hong Kong actor Mr. Eric Tsang as the worldwide spokesperson of this product series in February 2011. In the first quarter of 2011, the Group also launched an ecommerce platform, “Taozhizun”, to capture the high ground in the fast emerging e-commerce market in Greater China and other regions.

To further advance the brand image and product range, the Group opened a new 3D-GOLD flagship store, which has enjoyed overwhelming popular response, in Tsim Sha Tsui, a major shopping district which attracts many tourists, in April 2011. Given that the total visitor arrivals to Hong Kong in March 2011 reached 3.19 million, an increment of 13.9%, and a cumulative increase of 12.6% from January to March 2011, the Hong Kong jewellery market as well as the Group’s Hong Kong operation should continue to benefit from this favourable trend.

During the period, the Group and the World Gold Council launched a new product series “2010 Only Gold Love Series”, becoming the official retailer of “Only Gold” in China and the sole jewellery brand distributing the “2010 Only Gold Love Series” in Mainland China, Hong Kong and Macau. The Group also sponsored a series of high-profile events, such as Expo 2010 Shanghai China, the Miss Chinese Cosmos Pageant 2010, a local basketball tournament and international dragon boat races. The Group’s effective marketing strategies were rewarded with a rank of 182nd by the World Brand Lab in its list of the China Top 500 Most Valuable Brands 2010 and second in the category of jewellery brands.

The increasing personal income among Mainland Chinese and the current low personal consumption of jewellery implies that there is room for growth. With more than 80% of the earnings from Mainland China, the Group has penetrated into the fast developing cities in Mainland China, which will remain the key growth driver in the future.

Dr. Wong concluded, “Looking ahead, with our solid foundation, we are confident we can capture opportunities generated by the surging purchasing power in China and the attraction of gold as a hedge against inflation. The Group plans to continue developing closer relations with strategic investors and business partners in the industry with the aim being to secure a larger share of both the Hong Kong and Mainland China markets. While we are mindful of factors which may adversely affect the global and domestic Chinese economy, we are maintaining a proactive approach to growing our business and creating greater value for our shareholders and investors.”