Dear Shareholders,
We are pleased to report that the Xpress Group has delivered an impressive set of results for the year ended 31 March 2007. The Company has changed its English and Chinese name from “China Credit Holdings Limited 中國信貸集團有限公司”, to “Xpress Group Limited 特速集團有限公司”. This coincides with the Group’s core focus in travel and hospitality businesses and our vision of becoming a leading travel and hospitality service provider serving global communities.
FINANCIAL PERFORMANCE
The Group achieved historic highs in turnover of HK$689 million, representing an increase of HK$244 million or 55% from the corresponding period last year. Net profit amounted to HK$40.1 million, compared to HK$53.1 million for 2006. Earnings per share amounted to HK 2.35 cents (2006: HK 3.27 cents).
BUSINESS REVIEW
Travel Division
The travel division operates through a number of subsidiaries including:
• Anglo-French Travel Pte Ltd (“Anglo-French”), a Singapore company which focuses on corporate travel for small and medium enterprises, government statutory boards, MNCs and global companies’ leisure travel. These include land packages and tours, “MICE” (Meetings - Incentives - Conventions - Exhibitions) and wholesale agent airline ticketing businesses. Anglo-French ranked number 11 amongst 209 Billing and Settlement Plan Agents in Singapore (source: IATA). This ranking includes corporate ticketing, leisure, “MICE” and wholesale agents. During the year, Anglo-French contributed HK$481 million to the Group’s turnover.
• Nihon Kotsu Travel Service Co. Ltd. (“Nikko”), a Japan company 100% acquired in June 2006, was established and granted a first class travel agent license in 1962. Since then, Nikko has developed and extended its businesses including corporate travel and both domestic and overseas leisure travel. Nikko’s package tour is operated under the brand name “Try Tour” which is widely recognized as a wholesale market leader for packages to Hong Kong, Okinawa and Korea. In 2003, Nikko was incorporated as a 100% subsidiary of Nihon Kotsu Co. Ltd. and started trading as Nikko Travel Service Co. Ltd. It is now responsible for all travel related businesses formerly undertaken by Nihon Kotsu Co. Ltd. and has offices in Tokyo and Osaka.
• Makino Air Travel Service Ltd (“Makino”), a Japan company 52% acquired in March 2007, is a well established travel agency in Sapporo City, Hokkaido, Japan founded in 1961. It has over 700 corporate clients from the private sector to official bodies including government offices in Hokkaido. In addition to corporate clients service, its major leisure product is FIT golf package under product brand name ‘M-GOLF’ which is well known at Hokkaido. Makino holds IATA and 1st category license in Hokkaido.
Hotels and Hospitality Division
The hotel and hospitality division operates through a number of subsidiaries including:
• Sapporo Holdings Co. Ltd. (“Sapporo”), a Japan company 100% acquired in July 2006, was established on 8 March 2004 for the purpose of operating investments, inns and hotels. Its principal asset is a hotel known as Hamilton Hotel located in Chuo Ward, Sapporo City, Japan.
Hamilton Hotel is an eight-storey building erected over a one-level basement. It comprises a total of 103 guestrooms of various types including a Japanese room, a meeting room, a haircut saloon, a Japanese restaurant and esthetic saloon. The total gross floor area of Hamilton Hotel is approximately 3,209 square meters.
• After the year end date, the Group further expand its hotel portfolio by acquiring two hotel holdings companies, Aizuya Co. Ltd (“Aizuya”) and Hotel Plaza Miyazaki Co. Ltd.(“Hotel Plaza Miyazaki”)
Hotel Plaza Miyazaki is located at Southern side of Japan Kyushu Island, Miyazaki City is the second largest city on Kyushu Island. It is one of the well-known hotels situated at the center of city, 10 minutes from Miyazaki Station along Oyodogawa riverside. The hotel has 164 rooms provides full service including 15 different size banquet rooms, 4 meeting rooms, a river view sky restaurant/ lounge, 2 Japanese restaurants, 1 karaoke room, 1 bar and 1 lobby lounge. In addition, the hotel has a natural hot spring spa facility with in and out door hot spring bath, sauna and massage service open to staying guest and day use visitor.
Aizuya is a traditional Japanese hot spring inn located at Nasu, Tochigi prefecture, a famous mountain resort area which is approximately 2 hours drive from Tokyo downtown. It has total 22 rooms including 2 rooms with hot spring open bath. It can accommodate total over 60 guests at one time. Facilities include 2 large hot spring baths, 2 private hot spring open baths for staying guest exclusive use at charter base, 2 massage rooms serve female clients only, 1 restaurant server dinner & breakfast and 1 souvenir shop including Aizuya private label item such as Sake, Soba (Japanese noodle) etc.
Credit Card Division
The credit card business of the Group is operated through Xpress Finance Limited (“Xpress Finance”). The economy was robust in the past one year, coupled with steady employment and consumer spending propelled the business environment to improve. As a result, the credit card holders tend to repay the outstanding retail spending and the Credit Card business recorded a turnover of approximately HK$7.8 million, representing a mild increase of 1.3% from 2006.
As of October 2006, the name of Online Credit Card Limited has been changed to Xpress Finance Limited to better represent our consumer finance business and the Group’s direction. During the year, Xpress Finance rolled out a series of marketing initiatives and launched its i Xpress MasterCard (www.ixpresscard.com), the first fully customisable MasterCard in the Asia Pacific region. This new and innovative credit card allows customers to design the whole card face and select their preferred interest/cash rebate combination. Xpress Finance received “The Most Innovative Online Program Launch in 2006” award from MasterCard Worldwide in recognition of the success of the i Xpress program. By using the customized card platform, Xpress Finance issues the first customized MasterCard gift card in Hong Kong – i Xpress Gift Card.
On the sales and marketing frontier, we continue to run proven programs such as product installment and cash installment plans, merchant joint promotions, and bonus point promotions, cash rebate incentives and various other initiatives that stimulate consumer spending.
SINGXPRESS LTD
As at 31 March 2007, the Group held 45.68% of SingXpress Ltd (formerly known as Futuristic Group Ltd.) (“SingXpress”), a Singapore listed associate of the Group.
On June 2006, SingXpress entered into an agreement to sell its entire direct and indirect shareholding in the companies which conduct all its store fixtures and interior fit-out business, all the assets, rights and liabilities owed by SingXpress used in the conduct of the future store business for a consideration of US$1.25 million. Following that, SingXpress has developed its new travel businesses and intends to leverage on the Group’s expertise, to develop consumer finance and spending products such as credit cards and loyalty cards.
RSI INTERNATIONAL SYSTEMS INC.
The Group holds approximately 19% in RSI International Systems Inc. (“RSI”), a dynamic public company head-quartered in North Vancouver, British Columbia. RSI has been providing computerized property management and reservation systems to the hotel & resort industry since 1978. Today, satisfied customers across North America and Europe are using its proven web-based software solutions for virtually every type of property and accommodation management application including real-time online reservations capability.
The Group is working with RSI to take advantage of its hotel industry and information technology expertise to complement our travel and hotel related businesses.
NOVENA HOLDINGS LIMITED
The Group holds approximately 16% in Novena Holdings Limited (“Novena”), a Singapore based listed company that is known as a consumer lifestyle player in furniture and beauty products. Its range of furniture, marketed under the brands Novena, Modern Living, The White Collection, Natural Living, Castilla Design, Castilla Modern, Castilla Premium, Art of Living and Living Lifestyle, caters to the needs of different consumer lifestyles. Novena’s comprehensive range of beauty products and services, typically beauty and personal care items, are marketed under the household name of Beaute Spring. Over the years, Novena has received numerous awards in recognition of their superior business operations. These include the prestigious Superbrands Award which recognizes some of the world’s greatest brands and the Singapore Promising Brand Award which recognizes SMEs which have shown outstanding performance in brand communication. Novena strives to continuously upgrade its production and merchandising values in order to provide the best retail experience, products and services.
SKYWEST LIMITED
During the year, the Group disposed of its entire stake in Skywest, by accepting an off market offer from Advent Air Limited (“Advent”) for all the fully paid ordinary shares in Skywest. The disposal was completed in August 2006.
PROPERTY INVESTMENT
During the year, the Group’s acquired HK$93.4 million property investments in Singapore and Japan. Property investments have performed well, with higher rents and increases in fairvaluation changes of HK$78.4 million.
OUTLOOK
We will continue our business strategy of focusing on the travel, leisure and hospitality businesses as well as our consumer finance and the credit card business. The Board and management will continue to focus on the strategic development of the Group through strategic partners and alliances, the development of our own brand names to achieve international recognition and achieving economies of scale for our existing businesses.
The market outlook is expected to be strong in the year ahead. Despite a competitive environment, the growth in consumer spending and borrowing, lower unemployment rates and changes in lifestyle will create an opportunity of growth for our leisure and hospitality businesses and a demand for consumer loans.
The Group will continue in its direction to diversify its business risk through the expansion and development of its existing businesses in corporate finance, consumer finance, credit cards, and travel related activity outside of Hong Kong with a strong focus on Singapore, the PRC and Japan. The Group seeks to create synergies in the activities and businesses it currently has and will undertake in future. The Group’s cash position remains healthy which, together with the continued growth of our core businesses and prudent investment strategies, makes us highly competitive. We strive to take advantage of new opportunities and develop new strengths and strategies to thrive in a different world.
Japan Xpress Ltd, in addition to Nikko and Makino’s existing businesses, intends to open travel stores nationwide in Tokyo, Osaka and other cities in the next 12 to 24 months. Nikko also plans to be the leading operator in outbound tour groups to Hong Kong, the PRC and Singapore in addition to its Korean destinations.
In line with our hotel and hospitality business development, the Xpress Hotels and Resorts division intends to aggressively acquire hotel properties in Japan and develop links between their businesses and our consumer finance and consumer loyalty programs.
We have entered into a letter of confirmation with a security house in Japan to study the feasibility of applying for a secondary listing of and a quotation for its shares on the Tokyo Stock Exchange and looking forward to increase the name awareness of the Group and the shareholder value.
Xpress Finance will continue to design tailor made card acquisition programs, spending and retention programs to increase card base and card usage. The unique features of i Xpress card customization have been widely accepted by the customers, we will continue capture new market segments and its distribution network by issuing affinity/co-branded credit card using this customization platform. To satisfy different demands in the consumer finance market, we also plan to extend its credit services to personal loans to attract quality customers by launching purpose loans program, such as travel loans. The Group will also pursue a regional expansion of its credit card and other consumer lending services.
APPRECIATION
The record performance for the past year would not be possible without the excellent teamwork, passion and dedication of our staff worldwide. The Board therefore wishes to extend its appreciation to the team for their achievements and looks forward to their continued commitment.
It is also my pleasure to thank all my fellow Board members for the wisdom and guidance rendered so unstintingly throughout a challenging year.
Yours sincerely,
For and on behalf of the Board
CHAN HENG FAI
Managing Chairman
Hong Kong, 26 July 2007
