Chairman′s Statement

Dear Valued Shareholders,

On behalf of the board (the “Board”) of directors (the “Directors”) of Smartac
International Holdings Limited (the “Company”) together with its subsidiaries
(the “Group”), I hereby present the annual results of the Group for the year
ended 31 December 2021 (“FY2021”).

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

Dear Valued Shareholders,

On behalf of the board (the “Board”) of directors (the “Directors”) of Smartac International Holdings Limited (the “Company”) together with its subsidiaries (the “Group”), I hereby present the annual results of the Group for the year ended 31 December 2021 (“FY2021”).

During FY2021, the COVID-19 pandemic and rampant virus variants caused wide-ranging impacts, including travel and customs clearance restrictions. Although the strict epidemic prevention and quarantine policies prevented the spread of the variant viruses, they weakened consumer confidence. As a result, the global business environment did not significantly improve. The pandemic has accelerated the trend of online consumption and increased public awareness of health and wellness, driving the demand for healthcare products. Although the Group has invested resources to seize the opportunities in these two areas, due to the fierce competition, the development in these areas was yet to be improved in FY2021. In 2020, the Group introduced a number of international luxury lifestyle brands, including clothing, personal care and skin care products, etc. The repeated pandemic dragged the full recovery of consumers’ confidence on the Group’s international luxury lifestyle brand products. The Group has a number of physical stores and one concept store in Hong Kong, and it has flagship stores on major e-commerce platforms in the People’s Republic of China (“PRC”). Although the Group has a strong e-commerce team, innovative solutions and one-stop services, it has not been able to further increase the sales of its international luxury lifestyle brand products. Staff costs and fixed rental expenses further increased the financial burden of the Group. In addition, backlog of inventories and the provision for large amount of overdue receivables resulted in undesirable performance in FY2021.

Facing unprecedented challenges, the Group has adjusted its management and operation direction, and sold some of its loss-making subsidiaries, including Upfront Success Holding Limited, which is engaged in online and offline general merchandise trading in the PRC and Hong Kong, and Smartronic Limited, which is principally engaged in marketing of health products in the PRC and Hong Kong, so as to reduce operating losses and further financial burdens. The Group has also adopted a proactive approach to collect overdue accounts receivable and dispose of overstocked inventories. We have transferred the inventories in eight public warehouses to a central warehouse managed by ourselves for centralized processing. Human resources have been redeployed to improve operational efficiency, thereby reducing operating expenses.

The Group continues to target the health products market. In FY2021, the Group established Zhangzhou Keruilin Biotechnology Co., Limited* (漳州巿科 睿琳生物科技有限公司) in the PRC and increased its equity interest from 60% to 100% in early 2022, which is mainly engaged in the marketing, promotion and sale of health products in the PRC. The Group is actively exploring other investment opportunities, and will not rule out the development of existing electronic data platform services that in which Group has been acquired rich experience, including investment in wireless network equipment. The electronic payment solutions business recorded a growth in FY2021, despite the pandemic and keen market competition. It is believed that the WeChat Pay services will experience solid growth once border shutdowns are lifted as the pandemic eases. Last but not least, I would like to extend my heartfelt gratitude to the Board, the management team and all staff for their contributions and commitment amid the COVID-19 pandemic. At the same time, I would like to extend my sincere gratitude to our customers, business partners and shareholders for their continuous support and trust. The Group will continue to work hard to create greater long-term value for our shareholders.

* For identification purpose only

Yang Xin Min
Chairman

25 March 2022

Smartac International Holdings Limited

Incorporated in the Cayman Islands with limited liability​

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