Legend Holdings wants to ‘spin off subsidiaries’ for listing in Hong Kong from mid-2018

Legend reports 2016 revenue decreased by 1 per cent year on year to 307 billion yuan amid ‘uncertainty’ and ‘unexpected’ events

PUBLISHED : Wednesday, 29 March, 2017, 2:19pm
UPDATED : Wednesday, 29 March, 2017, 11:00pm

Legend Holdings Corporation, the parent company of Chinese PC and smartphone maker Lenovo, will push for more subsidiaries to publically list in Hong Kong from mid-2018, in a bid to bolster the value of the company, president Zhu Linan said on Wednesday as the firm reported 2016 net profit rose 4 per cent to 4.9 billion yuan (US$710.71 million).

Revenue decreased by 1 per cent year on year to 307 billion yuan, amid “uncertainty” and “unexpected” events involving international politics, macro-economy and financial markets, the company said in a filing to Hong Kong Exchanges and Clearing on Wednesday during the lunch hour trading break.

Revenue generated by the internet technology sector fell 3.7 per cent to 282.6 billion yuan, but net profit increased to 4.2 billion yuan, reversing from a 1.3 billion yuan loss in 2015, the filing said.

Legend held a 31.5 per cent equity interest in Lenovo as of December 31, 2016.

Lenovo, the world’s largest personal computer supplier, struggled to grow profit amid lagging performance of its mobile sector.

“Lenovo is under transformation, but our other business sectors are growing quickly in 2016,” said Zhu at the post-results press briefing in Hong Kong.

“Legend Holdings chose Hong Kong as the IPO destination because the Hong Kong bourse offers favourable conditions for us to spin off subsidiaries for IPO three years after the IPO of the parent company,” he said, adding that he expect more subsidiaries to publically list in Hong Kong after June 2018.

Legend Holdings has invested in more than 500 companies focused on financial services, agriculture, food and consumer services

Lakala, a third-party payment backed by Legend filed for an IPO on Shenzhen’s ChiNext board earlier this month.

He also said the company would continue to look for investment opportunities overseas, particularly in Europe.

Legend invested more than 1 billion yuan in UK bulk annuity company Pension Insurance Corporation, and took strategic control of the Australian seafood enterprise KB Seafoods in the reporting year.

Li Peng, senior vice president of Legend said the company would spend more effort to expand financial services this year.

Legend will apply to the China Insurance Regulatory Commission to set up a new property and casualty insurance company, along with partners, backed by 1 billion yuan in initial capital, he said.

Legend’s shares closed at HK$20 on Wednesday, down 0.7 per cent from its close in the previous session. The share has tumbled more than 50 per cent from its IPO price of HK$42.98 during its listing debut on June 29, 2015.

Liu Chuanzhi chairman of Legend Holdings said he planned to give Lenovo chief executive Yang Yuanqing greater scope to operate independently.

“The share price has been putting pressure on me and the management...what I can do is to give Yang bigger decision making power as he is the one familiar with the industry,” Liu said.

Zhu said that management has considered a share buy back, but public float requirements had restricted their options.

The board recommended a final dividend of 24.2 fen per ordinary share for the year ended December 31, 2016, reflecting a 10 per cent increase on year.

Lenovo Group, the technology arm under Legend Holdings, in mid February reported a weaker-than-expected third fiscal quarter earnings ending December, as net profit declined by 67 per cent to U$98 million, compared with US$300 million in the same period in 2015.

In September, Legend agreed to sell 42 property projects to developer Sunac China for a total of 13.79 billion yuan, in a bid to exit the real estate industry.