According to South China Morning Post’s news, Legend Holdings Corporation (HKG:3396) announced annual results of the Company and its subsidiaries for the year ended December 31, 2020. Revenue of the Company recorded RMB416.765 billion, representing an increase of 7% yoy. Meanwhile, net profit recorded RMB3,868 million, also representing an increase of 7% yoy. It was mainly due to the profitability improvement of Lenovo, EAL and Levima as well as the increased return of the financial investment segment. Although the COVID-19 brought many adverse effects on the production and operation of invested enterprises in the first half of the year, Legend Holdings took a number of measures to hedge its exposure to the epidemic, which is manifested to be effective later on. In the second half of the year, the net profit attributable to the equity holders of the Company was RMB3,231 million, up 243% year-on-year and over 400% compared with the first half of the year.
Mr. Li Peng, CEO of Legend Holdings, said: “Uncertainties intensified in 2020, however, the results showed that our portfolio companies were able to effectively counter the impact of the pandemic on their operations. Although each company was facing various challenges, they could resume operation and production instantaneously. All business lines were able to maintain the stability of their operations during the pandemic, and many of them were even able to seize the opportunities arising from the crisis to break new ground. As we looked back at 2020, thanks to our profound business experience and effective management system, Legend Holdings steadily fought through the challenging economic environment and obtained a solid foundation for sustainable development in the future.”
The strategic investment segment is regarded as the basis of Legend Holdings’ business, which contributes more than RMB400 billion of revenue and more than RMB550 billion of assets. The business covers five major sectors and the Company participates in more than 20 enterprises. The strategic investment segment operates steadily throughout the year, and if the substantial loss of Car Inc. in 2020 and the one-time income brought about by the listing of Lakala in 2019 are excluded, the net profit attributed to equity holders in the strategic investment segment of the Company is roughly the same as the same period last year.
During the Reporting Period, the IT segment’s revenue increased by 8% year-on-year to RMB384,992 million. Net profit attributable to equity holders of Legend Holdings increased 30% to RMB2,093 million. Since the outbreak of COVID-19, many business sectors of Lenovo have maintained impressive growth due to changes in lifestyle and work habits, of which the PC and Smart Device business achieved record revenue of RMB308,146 million, an increase of 11% yoy, and Data Centre Group revenue of RMB41,047 million, an increase of 8% yoy. The revenue of Mobile Business Group is also gradually coming out of the impact of the epidemic and resuming growth in the second half of the year. At the same time, Lenovo Group has achieved results in the implementation of the strategy of transformation to services. The software and services business grew rapidly in the second half of the year and contributed 8% of the group’s invoiced revenue, a record high.
Levima Advanced Materials Corporation, Legend Holdings’ affiliate as well as a leader of the advanced materials industry, was listed on the Shenzhen Stock Exchange at the end of 2020. The development and rise of Levima is of great significance as it’s another enterprise successfully cultivated by Legend Holdings from scratch. Levima has taken multiple measures in the past year to actively overcome the impact of the epidemic, improve operation efficiency and optimize product structure. At the same time, it emphasizes innovation-driven, focuses on the direction of advanced materials industry, takes the route of high-end, differentiation and refinement, and creates a leading industrial cluster in several subdivision fields of advanced materials. In 2020, Levima achieved revenue of RMB5.931 billion, an increase of 5% yoy, and net profit of RMB655 million, an increase of 21% yoy.
Although the COVID-19 epidemic has brought a great impact on the operation of domestic small and medium-sized enterprises, Zhengqi Financial, China’s leading comprehensive financial service provider, has made a positive response through multiple means such as risk control and strengthening the business foundation, and has still achieved performance growth against the market. Zhengqi Financial ensures the stability of it fundamentals by further improving the risk control system, systematically and comprehensively evaluating business risks and taking multiple measures at the same time. Meanwhile, Zhengqi Financial continues to practice the “joint investment-loan” model, and the results are gradually revealed: five invested enterprises have been successfully listed on the capital market, and the IPO applications for Chemclin Diagnostics Corporation and Gocom Information Technology were approved. During the reporting period, Zhengqi Financial achieved a net profit of RMB521 million, an increase of 140% yoy.
Financial investment segment, as another “wheel” of the Company realized RMB2.439 billion of net profit attributable to the equity holders in 2020, an increase of 169% over the same period last year. In addition, it also contributed a good cash return to the Company. The three funds achieved a cumulative cash return of more than RMB4 billion in 2020.
“Strategic investment + financial investment” two-wheel drive has always been a unique business model of Legend Holdings, the Company is committed to give full play to the inherent advantages of this model, and continues to create leading enterprises. In 2020, the Company strategically bought a stake in Shanghai Fullhan Microelectronics Co., Ltd. through a two-wheel-drive strategy, successfully transformed the fund investment project into Legend Holdings’ strategic investment project in the field of science and technology, created a new paradigm for its layout in the high-tech field. The Company also said that in the future, it will actively look for opportunities in science and technology, healthcare and other related areas.
Looking ahead to 2021, Mr. Ning Min, chairman of Legend Holdings noted, “We are full of confidence. We will not forget our intention to serve the county with industry, which Mr. Liu Chuanzhi passed on to us, and we will go to a higher peak. We will stick to seek improvement in stability, take advantage of the new historical and strategic opportunity, focus on the optimization and improvement of the existing assets, and actively explore the layout of the new track.”
Chart: Information of the three funds in the financial investment segment (As of December 31, 2020)
Name: Legend Star
Type: Angel Investment
Funds under management: 7
Fund size under management: > RMB3 billion
Summary: Legend Star completed the final closing of its 4th RMB fund in 2020, and the second round closing of the 4th USD fund. During the Reporting Period, it invested in more than 20 domestic and overseas projects. More than 50 investee companies had another round of financing. Legend Star also exited from 14 projects. Burning Rock Biotech and Kintor Pharmaceuticals were listed on the NASDAQ and Hong Kong Stock Exchange respectively during the Reporting Period.
Name: Legend Capital
Type: Private Equity Investment
Funds under management: 25
Fund size under management: >RMB50 billion
Summary: Legend Capital raised a total of RMB4.524 billion in funds in 2020, completed 51 new project investments and exited 44 projects, partially or in full, which generated a good cash return. Among the investee companies, 11 companies landed in the capital market.
Name: Hony CapitalType: Investment Management
Funds under management: 13
Fund size under management: > RMB80 billion
Summary: Hony Capital completed two rounds of fundraising for its 3rd property fund. The first Hony Venture Capital Fund completed the final settlement and raised USD130 million. Both new and follow-on investments in existing projects progressed in an orderly manner. Companies under management were also listed, and project exits were relatively active.
