LEO(SZ:002131)2019-04-26 16:00Financial Performance - Leo Group reported a revenue of RMB 1.2 billion for the year 2018, representing a year-on-year increase of 15%[22]. - The company's operating revenue for 2018 was ¥12,250,038,568.54, representing a 15.87% increase compared to the previous year[24]. - The net profit attributable to shareholders for 2018 was -¥1,859,508,127.77, a decrease of 541.50% compared to the previous year[24]. - The net cash flow from operating activities for 2018 was -¥166,646,468.75, a 38.74% improvement from -¥340,317,766.62 in 2017[27]. - The total assets at the end of 2018 were ¥14,174,557,849.86, reflecting a 6.22% increase from the previous year[27]. - The net assets attributable to shareholders decreased by 9.33% to ¥6,887,701,118.81 at the end of 2018[27]. - The basic earnings per share for 2018 was -¥0.33, a decline of 375.00% compared to ¥0.12 in 2017[27]. - The weighted average return on equity for 2018 was -26.31%, a decrease of 31.93 percentage points from 5.62% in 2017[27]. - The company reported a net profit attributable to shareholders after deducting non-recurring gains and losses of -¥1,966,913,852.66 for 2018, a decrease of 743.02% from the previous year[27]. - The company’s financial expenses increased by approximately 72 million yuan due to rising bank borrowings and interest expenses[79]. Digital Marketing Services - The company plans to focus on expanding its digital marketing services, having completed several acquisitions in this sector, including Shanghai Manku and Shanghai Aike[22]. - The company has established a comprehensive integrated marketing platform, enhancing its capabilities in digital marketing and internet traffic integration[22]. - The company's digital marketing services have expanded significantly, covering a complete service chain from internet traffic integration to comprehensive digital marketing services[39]. - The company has integrated multiple high-quality digital marketing firms, providing a comprehensive service chain that includes marketing strategy, media placement, performance monitoring, and optimization, establishing itself as one of the few providers of integrated digital marketing services in the industry[56]. - The company’s digital marketing subsidiary received multiple awards, including "Best Digital Media Innovation Company" from Campaign Asia-Pacific[90]. - The company has established a comprehensive digital marketing service ecosystem covering both brand and performance clients, aiming to enhance its competitive strength and expand market share[150]. Acquisitions and Investments - In 2018, Leo Group's industrial pump business was further strengthened through acquisitions, including Wuxi Leo Pump and Dalian Huanneng[22]. - The company attempted to acquire 75% equity in Suzhou Mengjia Media but ultimately terminated the acquisition due to valuation differences[89]. - The company has committed to invest 94.1 million CNY in the digital marketing cloud platform project, which is currently on hold due to competitive pressures[133]. - The acquisition of a 15% stake in Shanghai Manku has a total investment commitment of 20.71 million CNY, with 100% of the funds already utilized[130]. - The company reported a total of 186.14 million CNY in equity investments completed during the reporting period[124]. Market and Industry Trends - As of December 2018, China's internet user base reached 829 million, with a year-on-year increase of 56.53 million users, and an internet penetration rate of 59.6%[40]. - The mobile internet user base in China reached 817 million by December 2018, with a year-on-year increase of 64.33 million users, and the proportion of mobile internet users rose from 97.5% at the end of 2017 to 98.6% by the end of 2018[40]. - The digital marketing industry in China is projected to exceed 600 billion yuan in market size by 2019, indicating robust growth potential[43]. - The digital marketing industry is still in its early development stage in China, with a large market size but many small enterprises, leading to a fragmented competitive landscape[44]. - The demand for small pumps is expected to continue growing due to increased investment in water conservancy and the global demand for clean water resources[45]. Risks and Challenges - Leo Group has identified potential risks in its future development, including market competition and regulatory changes, which may impact its growth strategy[6]. - The company faces market volatility risks due to its reliance on exports, with potential impacts from global economic uncertainties and trade policies[155]. - The fluctuation in raw material prices poses a significant risk, as material costs constitute a large portion of the company's main business costs[155]. - The company faced challenges due to market demand shrinkage and delays in the "Big Data Processing and Application Center Construction Project," impacting investment progress[137]. Corporate Governance and Financial Management - The company has not declared any cash dividends or stock bonuses for the year 2018, opting to reinvest profits into business expansion[7]. - The company plans not to distribute cash dividends or issue bonus shares for the 2018 fiscal year[170]. - The company has commitments regarding performance compensation, with net profit targets of RMB 58 million, 75.4 million, and 98.02 million for the years 2016, 2017, and 2018 respectively[179]. - The company aims to distribute cash dividends of at least 10% of the distributable profit in profitable years, with a cumulative cash distribution of at least 30% of the average distributable profit over three consecutive years[185]. - The company has a lock-up period for newly issued shares of 36 months from the date of listing[176]. - The company has fulfilled its commitments regarding performance and share transfer restrictions as of the reporting period[188]. Research and Development - The company is committed to enhancing its research and development capabilities to drive innovation in its product offerings[22]. - Research and development expenses rose by 13.42% to ¥162,180,958.41, with R&D personnel increasing by 3.19% to 517[110]. - The company has a strong commitment to technological innovation, maintaining a leading position in research and development within the industry, which is crucial for expanding product sales and securing large client orders[74]. Operational Efficiency - The company has a strong bargaining power through centralized procurement, which enhances its ability to negotiate better prices with suppliers, leading to competitive sales prices that help attract and retain more clients, thereby increasing sales revenue[57]. - The company boasts a high self-manufacturing rate of approximately 80% for key components, which enhances product quality and reduces production costs, distinguishing it from competitors who primarily assemble purchased parts[67]. - The company has invested in advanced production equipment, significantly improving production efficiency and product quality stability in the micro and small pump industry[68]. - The company has a diverse product line that meets the "one-stop" procurement needs of international clients, leading to increased production scale and reduced manufacturing costs[69]. - The company has established a comprehensive international marketing network, collaborating with major local distributors and retailers, which enhances its market presence and customer base[70].