In the Year, the volatile global economy, weak investment sentiment and continuous implementation of stringent regulatory control on the PRC property market led to a conservative capital market within the country. The Group's reliance on the PRC property market inevitably put pressure on its results for the Year. However, thanks to management's faith in "taking measures to repair the house before it rains", the Group still recorded satisfactory revenue, which increased by 15.9%, or HK$69.1 million, to approximately HK$503.9 million in the Year. Net profit decreased from approximately HK$73.6 million to approximately HK$58.0 million, decreased by HK$15.6 million, which was mainly attributable to several expenses incurred for listing, recruiting additional staff and expanding and relocating office premises, etc. The Group still remains cautiously optimistic about its business prospects, and believes all the dedicated efforts can pave the way for its long-term sustainable development and will be paid off in the near future.

The Board has recommended a final dividend of HK2.5 cents per share and a special dividend of HK2.5 cents per share for the year ended 31 December 2018. The total dividend is HK 5.0 cents, occupying around 100.5% of the Group's profit attributable to shareholders for this financial year.

Business ReviewIn the Year, the Group actively implemented its expansion plans as promised during its IPO listing, specifically enhancing its interior design services and developing specialised design services, further bolstering its interior decorating and furnishing services as well as proactively widening its revenue sources, expanding its professional design teams, and cooperating with external professionals to further equip its internal research and design teams with specialised design capabilities. It has also established a marketing department to enhance brand diversification and implement corresponding marketing strategies. The Group also extended its design projects to hospitality, elderly and wellness facilities, exerted added efforts on promotion in the international market to consolidate its leading position in the interior design industry and well-prepared to seize potential opportunities in the future.

Interior Design ServicesIn the Year, the interior design services segment continued to be the primary business and main source of revenue of the Group. Revenue of this segment amounted to approximately HK$380.3 million (Previous Year: HK$360.5 million), accounting for approximately 75.5% of total revenue. Affected by the volatile environment of the PRC economy and property market, the total amount of newly awarded contract sum decreased by 17.0% to HK$370.4 million in the Year. Despite the decline, the Group still has been favored by a number of major developers and has been awarded several large-scaled projects, e.g. a large-scale hotel project located at Cotai Macau; Zengcheng Development of New World China Land Limited in Guangzhou; top luxury Residential Project along Huangpu River, Shanghai, organised and constructed by CR Land. The Group also built solid long-term cooperation relationships through strategic partnerships with clients. As at the date of the announcement, over 70% newly awarded contracts were from recurring customers.

Residential projects account for the largest share of the Group's interior design services segment. Following the dominant trend of urbanisation in the PRC, the Group expanded the coverage of property projects from first-tier cities to second- and third-tier cities during the Year. The proportion of newly awarded contract sum from the first-, second-, and third- and fourth-tier cities changed from around 39%, 51% and 10% in 2017 to around 38%, 37% and 25% in 2018 respectively. This shift in business has created more room for the Group's sustainable development.

Meanwhile, the Group actively adopted business diversification strategies to reduce over-reliance on the residential projects, expand its service scale and revenue sources. The Group regards hospitality and private residential projects, the second and third largest contributors to its business, as the focused areas of development. During the Year, the Group's hospitality design projects, such as the Japanese cuisine restaurant "Ta-ke" and the modern Chinese cuisine restaurant "HEXA", won several design awards, which have enhanced the Group's reputation and position in this design sector. As for the hotel projects, the Group has also engaged in a large-scale hotel project in Sanya, mainly responsible for designing the lobby, public areas and hotel rooms.

Realising the enormous development potential in the elderly and wellness market, in line with the trends of providing the elderly with a sense of security and pursuit of a healthy lifestyle, the Group has been actively developing specialised design projects such as elderly and wellness facilities in recent years. In the Year, the Group cooperated with, among others, China Merchants Group and China Taiping in elderly property interior design projects. Recently, the Group was also invited to join a sizable health and medical integrated project in Beijing, responsible for the interior design and decoration and furnishing of its medical and health centre, elderly apartments, community hall, clubhouse, etc. Although elderly facilities design is a new business sector to the Group, it has quickly accumulated experience. Its elderly facilities project in collaboration with China Merchants Group in Banshan Tianyuan of Hangzhou has won a design award.

Interior Decorating and Furnishing ServicesIn light of rising consumption capabilities of PRC citizens along with the progress of urbanisation in recent years, their strong demand for quality life and decorative aestheticism has created a huge and continuously expanding market for interior decorating and furnishing services. In the Year, this segment delivered outstanding performance with remarkable growth with its revenue soaring by 68.5% to HK$119.1 million, taking up around 23.6% of the Group's total revenue. The Group believes that related market demand will increase steadily, hence effectively promoting the long-term growth of this segment, making it one of the pillar businesses and operations of the Group. As such, the Group will focus on expanding this business to international fully-furnished residential properties, private residences and hospitality projects, aiming at cultivating this segment to be its second major source of revenue.

To further develop this segment, apart from recruiting design talents and raising its design efficiency and quality, the Group is enhancing its information technology system, and has compiled catalogue and devised a procurement system specified for furniture, fittings and accessories, so as to accelerate the working cycle and streamline the operating flow.

Product Design ServicesThough the product design services is not the Group's main source of revenue, it is nonetheless vital to brand building and marketing strategies. In the Year, this segment performed steadily, and garnered several awards in the industry, which enhanced its reputation and built up its branding image. Currently, the Group mainly focuses on designing furniture, kitchen cabinets and bathroom products, etc. It also works with renowned brands around the world.

Future OutlookLooking ahead, the global economy is expected to be volatile and market sentiment continues to be conservative. The Group will continue to strengthen its three core businesses, interior design services, interior decorating and furnishing services and product design services, especially striving for further penetration of the PRC market. The Group believes that the PRC Government's determination to support urbanisation and municipal development should remain unchanged as seen in its policies, so domestic demand for property will continue rising. In addition, the Group will take advantage of the promotion of major policies and initiatives including the "Greater Bay Area" and "Belt and Road" by the PRC government, to further expand its business and seize a greater market share.

In the future, the Group will adopt strategies of diversification, specialisation, and globalisation, to enhance its capabilities as well as value, and disperse the risks, so it can rise to the challenges ahead. Regarding business diversification, the Group will provide one-stop and comprehensive services under multiple design brands to meet the demand of different customer segments. At the same time, it will expand the synergies among the businesses of different brands, in order to provide superior professional and quality services. Regarding business specialisation, more resources will be allocated to achieve specialised development of interior design services and interior decorating and furnishing services, particularly for elderly and wellness related projects, so as to establish its leading presence among industry peers. As for business globalisation, based on the internationally-renowned projects already completed , the Group will continue developing the international market. It believes that by strengthening its branding overseas, it will obtain more quality projects, thus generating promising contributions to the Group and creating value for shareholders in the long run.

Furthermore, the Group's newly-established marketing department will take a proactive role in conducting outreach to potential clients, securing domestic and international projects with potential for development, and seizing market share. The Group will also promote six of its major competitive advantages, including strength of its brand, creating value, convergence of talent, efficient execution, forming a one-stop diversified business platform and people-oriented operations, in order to further consolidate and boost its brand value and leading position in the market. While enhancing promotion and marketing, the Group will continuously strengthen its internal work, including the SLD+, an experience centre in its Shanghai office that allows customers and visitors to experience the atmosphere and concept of its interior design, interior decoration and furnishing, and product design services. SLD+ is expected to open in the third quarter of this year at the earliest.

With its strong, experienced and professional teams, quality services, sound reputation and leading position, the Group is confident in seizing opportunities, sustaining strong growth, and further advancing to create values and deliver sustainable yields and reasonable capital gains for shareholders.

About Steve Leung Design Group LimitedSteve Leung Design Group Limited is an internationally renowned and award-winning interior design and interior decorating & furnishing company founded in 1997 by Mr. Steve Leung. Headquartered in Hong Kong, the Group has branch offices in Beijing, Shanghai, Guangzhou and Shenzhen, and with over 500 staff. The Group is second largest pure interior design services providers in the PRC and Hong Kong in terms of revenue for FY2017.

The Group has a wide spectrum of design projects that have been accredited with design awards in Asia Pacific region and worldwide. Overseas award-winning projects include Yuan at Atlantis The Palm, The Eight at Grand Lisboa Hotel in Macau; PRC projects include: One Park Shanghai, One Shenzhen Bay, Nanjing Mandarin Palace and Tang Island; and Hong Kong projects include: MX, yoo Residence II and more. The Group has become part of Jangho Group since 2014.

Media Enquires:Strategic Financial Relations LimitedVicky Lee Tel: (852) 2864 4834 Email: [email protected] Rita Fong Tel: (852) 2114 4939 Email: [email protected] Yoko Li Tel: (852) 2864 4813 Email: [email protected] Fax: (852) 2527 1196^[1][2][3]

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References

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