Qin Jia Yuan profit up to HK$80mln after HK$390.37mln loss

The Group banks on greater synergies from cross-media business platform to generate higher income and future profit.

Qin Jia Yuan Media Services Company Limited (“QJY”) announced its 2010 annal results demonstrating a significant turnaround in its business. The Group has delivered strong growth with a net profit exceeds HK$80,000,000. During the review period, QJY has successfully expanded its cross-media business platform. As QJY’s cross-media business matures and generates greater synergies, the Group expects to bring higher income and net profits to the Group going forward, according to a QJY report.

The Group’s annual turnover surged by 87% year-on-year to HK$424,610,000. Its net profit after taxation exceeded HK$80,000,000 (2009: loss of HK$390,374,000). Earnings per share were HK10.64 cents (2009: loss of HK55.96 cents).

The Board of Directors proposed a final dividend of HK1.28 cents per share (2009: HK0.88 cent). Together with the interim dividend of HK1.28 cents paid during the year under review, the annual dividend for the year under review was HK2.56 cents (2009: HK1.38 cents). The annual dividend payout ratio was 24%. Shareholders may elect to receive shares in lieu of cash dividend.

Dr. LEUNG Anita Fung Yee Maria, Chief Executive Officer of QJY, said, “With the launch of the “Cultural Industry Promotion Program” announced by the Chinese premier Wen Jiabao last July, which was also re-affirmed in the Fifth Plenum of the 17th Central Committee Session, the highest authority in policy making in China, held in October 2010, the Group’s cross-media business platform has covered more than 80% of the business in the top eight cultural and art enterprises supported, encouraged and nurtured by the country. This base provides major assistance to the Group in boosting our future development”.

“Since establishment 15 years ago, QJY has set up an unique cross-media business platform in China riding on our broad business network and outstanding media experts. The platform covers a wide spectrum from the mainstream TV program production, TV advertising to outdoor media, online media, marketing services, advertising planning and creative business which were developed during the review period. All of our business segments are becoming more stable and mature, enabling cross-selling, thus we can offer a comprehensive one-stop media advertising solution with wide demographic coverage to customers. Looking ahead, the cross-media business platform is set to enhance the existing customer base of the Group and attract new customers, generate greater synergies and improve the Group’s income and profit.”

QJY’s First Core Business - TV Program Production
The TV drama series production market in China, which is the largest contributor to advertisement among all TV programs, began to recover from the financial turmoil at the end of 2009. With the new cooperative arrangement with and the strong support of the Group’s TV drama series production partners from the nine major domestic TV stations and TV production houses, the risk in future production write-off in the event of any unpredictable financial crisis has been minimized.

TV drama series is still a great growth opportunity in the China TV program market. New TV programs can capture 18% of the total TV program market in China today. As a result, any successful TV drama can command a high profit and with a long broadcasting cycle generate greater medium and long-term profit. This makes the China TV drama market a unique opportunity on which QJY, with 18+ years of production history and track record, well positioned to capitalize. In 2010, the Group continued its successful production track record by delivering strong turnover and profits. The Group will continue leveraging its large drama library and production track record to meet this high demand going forward.

QJY’s Second Core Business - TV Advertising
TV continues to be the dominant market for advertising capturing more than 70% share of the entire advertising market with a strong annual growth rate of 15%. In a bid to accelerate the expansion of its established TV advertising agency business, the Group is actively acquiring small to medium size local media advertising agents with high sales performance in city TV channels. This strategy is bearing fruit and is expected to provide a solid foundation for the future development of this business.

New Business Segments in the QJY’s Cross-Media Business Platform

Outdoor Advertising
In the non-TV part of China’s media sector, outdoor advertising medium and digital media are becoming key drivers of future growth. We expect these two areas will outperform the rest of the non-TV media sectors in the next 5 years.

During the period, the Group has scored significant success in its outdoor advertising business, including the winning the exclusive advertising rights for the LED boards dedicated to Xinhua News Agency. It has begun operating six large outdoor LED boards used for news and advertising in the major cities of Beijing, Shanghai, Chengdu and Guangzhou. It has also added three similar LED boards in Shenzhen and Shanghai.

Additionally, the Group became the largest shareholder of CBS Outdoor (Beijing), with 22.95% effective equity interest, which engages primarily in the business of bus advertising for over 6,000 buses in the metropolitan area of Beijing. It also completed the 100% equity interest acquisition of Mega Faith Asia Outdoor Marketing limited, expanding QJY’s dedicated outdoor sales team. The Group plans to proactively increase its market share and profit by expanding this line of business from Beijing to other major cities and continue focusing on expanding its transport and outdoor advertising assets together with its two unique outdoor advertising partners.

Marketing Services
During the review period, Triangle Marketing Services Company Limited which is 90% owned by the Group has been advising clients who show great interests in entering into the China consumer market. This includes Hong Kong Trade Development Council, a large domestic real estate developer and consumer brands with strong presence in China.

QJY’s focus is to open up new opportunities in China for Triangle.

Artist Management and Concert Production
Looking forward, the Group will further expand into artists training and artist agenting adding to current business with the Group’s cooperation with Impact Entertainment (International) Ltd on concert production. This compliments the TV program production and commercial production for advertising business by providing talented artists to participate.

New Media
Within the review period, the Group has successfully completed the acquisition of Green Team Culture Asset Limited, which owns the copyrights to more than 500 books and more than 1,200 original works of renowned authors, including some which were written by Dr Leung Anita Fung Yee Maria, CEO of the Group. An electronic book store “Anita Leung’s Book Shop” has also been launched in China in order to synergize with new e-reading trends. In the coming year, the Group will develop the online publishing, electronic publishing and new digital media business such as online gaming.

The Group’s online gaming strategy is to leverage off its extensive library of IP and adaptation rights. At the same time, the Group’s plans of adapting original works by renowned writers will create additional synergies by encompassing TV production, online games, electronic bookstores, traditional publishing and advertising businesses.

QJY’s Professional Management
Dr. LEUNG Anita Fung Yee Maria, Chief Executive Officer of QJY, said, “QJY has turned to adopt the corporate management model and has re-employed and renewed contracts with 20 senior management professionals during the period. They have accumulated more than 10 years of experience from the senior management positions in domestic media industry. They managed the Group’s businesses effectively and have achieved satisfactory performance in growing the Company and improving the Company’s operations.”