Chairman′s Statement

Dear Valued Shareholders

On behalf of the Board of Directors (the “Board”) of Smartac Group China Holdings Limited (the “Company”) and together with its subsidiaries, the “Group”, I herein present the annual results of the Group for the year ended 31 December 2018 (“FY2018”).

For E-commerce solutions segment, this segment began to contribute results to the Group in FY2018 upon acquisition completed on 28 December 2017. The main services were to build and operate single and multi-brand e-commerce platforms and flagship stores on multiple online channels such as Tmall, Taobao, JD.com, brand official website and self-built platform and provide end-to-end e-commerce solutions that were tailored to meet clients’ unique need. Amid the shift in consumer behaviour and market landscape from traditional e-commerce platforms to other new social media e-commerce platforms, the segment recorded a net loss for FY2018 mainly resulted from reduced investment in brand promotion by brand partners on the traditional e-commerce platforms which the Group provides services to clients in FY2018.

E-commerce market of the People’s Republic of China (“PRC”) has increased focus on social media e-commerce platforms which enables customers to create richer consumer experiences. In the PRC, consumers use social media to discover new brands and products, validate the product quality through reviews, comments and feedback, purchase directly through a social channel and then write a review of the product or experience. Social media e-commerce platforms such as Pinduoduo and WeChat, have captured increasing attention in the PRC’s market to make purchases and share post-purchase experiences. In the view of increasing market attention and high growth on social media e-commerce platforms in the PRC, apart from working with traditional e-commerce platforms such as Tmall, Taobao and JD.com, the Group would increase resources to develop self-built platforms, brand official website malls and WeChat official accounts that will enable collection of data about customers’ consumption pattern and preferences so as to better adjust product assortment and carry out more precise marketing and promotional activities for brand partners. The Group also started to partner with different e-commerce channels to increase branded product exposure and liaise with suppliers for improvement on supply chain in order to provide timely and quality-assured delivery for enhancing consumer shopping experiences, drive sales and improve profit margin.

For integrated digital marketing (“IDM”) solutions segment, the Group mainly continued to engage in WeChat Pay business in Hong Kong during FY2018 through a subsidiary, Haihai Travel Cloud Limited (“Haihai”). In FY2018, Haihai was awarded WeChat Pay’s Excellent Service Award 2018 award for its dedication to offer quality services to merchants. Riding with the support of the People’s Bank of China and the Hong Kong Monetary Authority, a rapid development of the mobile payment industry was anticipated in FY2018. Although the revenue of WeChat Pay business had been increased by 68% in FY2018, many service providers in the mobile payment industry have been racing in the competition at a low rate in order to seize the merchants. In order to create more comprehensive services to merchants, increase merchants’ loyalty and make differentiation among other players, apart from purely serving merchants with WeChat Pay payment as a mobile payment collection tool, we have planned to focus on the significance in data collection, precise marketing and promotion through WeChat Pay payment services in the coming years. For Online to Offline (“O2O”) solutions segment, during the year under review, segment revenue for the FY2018 dropped by 70.8% largely because of decrease in customer demand on social customer relationship management services and O2O marketing under PRC’s economy slowdown.

In December 2018, the Company completed the placing of 812,500,000 ordinary shares which generated a net proceed of approximately RMB226,926,000 (equivalent to approximately HK$257,380,000, after deducting relevant expenses incurred in relation to the placing), which was mainly used as general working capital for existing business and for investment of new business in the upstream and downstream of the Group’s principal business if opportunities arise. The placing proceeds would further strengthen the Group’s capital structure for future challenges.

Finally, I would like to take this opportunity to express my sincere gratitude to our team for their efforts and contributions and to all of our shareholders for their long-term trust and support.

Yours Faithfully

Yang Xin Min
Chairman

28 March 2019

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