A n n u a l R e p o r t 2 0 1 4 Pico Far East Holdings Limited Annual Report 2014 www.pico.com Stock Code 752 (Incorporated in the Cayman Islands with Limited Liability) CONTENT CORPORATE PROFILE Global Network 2 It has now been almost half a century since Pico began our work as a humble exhibition Principal Offices 4 standbuilder. Thanks to our continuous evolution Chairman’s Statement 6 and diversification, today Pico is a global leader Corporate Social Responsibility 16 in Total Brand Activation with an international Financial Summary 18 network of some 2,400 inspired professionals in Profile of Directors and 35 major cities worldwide. Senior Management 20 Voted by readers of CEI Asia magazine as the Corporate Governance Report 22 Best Event Agency 2015*, we have built an Directors’ Report 29 impressive portfolio and a worldwide reputation Independent Auditor’s Report 40 for creating integrated and powerful brand Consolidated Income Statement 41 experiences across multiple activation platforms — from world expos, exhibitions and events; Consolidated Statement of Comprehensive Income 42 to retail and branded environments, museums and themed environments, visual identity Consolidated Statement of Financial Position 43 solutions, sports marketing and overlays, venue management and consultation. Statement of Financial Position 45 Consolidated Statement of Changes in Equity 46 Consolidated Statement of Cash Flows 48 * Pico was voted Best Event Agency in CEI 2015 Industry Notes to the Financial Statements 50 Excellence in Business Events in January issue of CEI Asia magazine. Corporate Information 113 CORE BUSINESS BRAND ENGAGEMENT BRAND MARKETING Exhibition and Event E Marketing Services C N E Brand Signage and RI E Visual Identity P X Engagement Strategy E D Museum, Themed Environment, and Design Integrated Marketing N Interior and Retail A R Creative, Digital & 360 degree B Conference and Show Sustainability Solutions through-the-line services Management Cover: i Light Marina Bay in Singapore BUILD. TOGETHER. 2014 RESULTS IN BRIEF Our enviable reputation has been built, year Turnover: by year and layer by layer, on our rock-solid foundation. As we grow and evolve into the HK$3,833m +15.5% future, we will continue to build our growth on (2013: HK$3,319m) this heritage, together. Profit attributable to owners of the Company: In light of the world’s rapidly-changing HK$240.5m +13.9% technological landscape and challenging marketing environment, our Total Brand (2013: HK$211.1m) Activation service model continues to evolve to EBITDA: stay in tune with our clients’ objectives. HK$353m +9.0% Today, our innovative solutions activate different (2013: HK$324m) touchpoints for our clients in both the real and Equity attributable to owners of the Company: virtual worlds. Our new era of Pico Plus builds on our strong face-to-face and below-the-line HK$1,612m +6.7% marketing foundation, transforming us into a (2013: HK$1,511m) truly 360 degree through-the-line integrated Total assets: marketing service provider. HK$3,242m +10.0% Our strong global network of leading strategists (2013: HK$2,946m) and activators engineer integrated engagements Earnings per share - basic: across all communication platforms, resulting in genuine exchanges between brands and HK19.77 cents +13.8% people. As the scope of our specialties widens, (2013: HK17.37 cents) along with our digital solutions and our focus on sustainability, we will continue to build our Earnings per share - diluted: expertise, together. HK19.72 cents +14.1% The most important factor in our success (2013: HK17.29 cents) over the past five decades has been people: Dividends per share: our clients, our partners, our leaders and our staff. Leveraging our strong global knowledge HK10.5 cents +5.0% network, our innovative, insightful and inspired (2013: HK10.0 cents) individuals will continue to strengthen our core Return on average equity attributable to owners of the competencies and elevate our service leadership Company: to build future growth and success, together. 15.40% +0.95% (2013: 14.45%) Average inventory / turnover: 1.17% +0.04% (2013: 1.13%) Bahrain National Day Events 16 3 27 33 34 GLOBAL 17 5 28 8 4 19 10 29 32 7 1 9 22 11 25 18 13 NETWORK 2 35 20 12 6 15 30 Headquartered in 14 Hong Kong 26 24 Operating with 23 43 31 Offices in 21 35 01 Abu Dhabi 10 Guangzhou 19 Manama 28 Shanghai 02 Bangkok 11 Hanoi 20 Manila 29 Shenzhen 03 Beijing 12 Ho Chi Minh City 21 Melbourne 30 Singapore 04 Cairo 13 Hong Kong 22 Mumbai 31 Sydney Cities 05 Chenzhou 14 Jakarta 23 Perth 32 Taipei Worldwide 06 Colombo 15 Kuala Lumpur 24 Rio de Janeiro 33 Tokyo 07 Doha 16 London 25 Riyadh 34 Xian 08 Dongguan 17 Los Angeles 26 Sao Paulo 35 Yangon 09 Dubai 18 Macau 27 Seoul 02 Pico Far East Holdings Limited Annual Report 2014 16 3 27 33 34 17 5 28 8 4 19 10 29 32 7 1 9 22 11 25 18 13 2 35 20 12 6 15 30 Headquartered in 14 Hong Kong 26 24 Operating with 23 43 31 Offices in 21 35 01 Abu Dhabi 10 Guangzhou 19 Manama 28 Shanghai 02 Bangkok 11 Hanoi 20 Manila 29 Shenzhen 03 Beijing 12 Ho Chi Minh City 21 Melbourne 30 Singapore 04 Cairo 13 Hong Kong 22 Mumbai 31 Sydney Cities 05 Chenzhou 14 Jakarta 23 Perth 32 Taipei Worldwide 06 Colombo 15 Kuala Lumpur 24 Rio de Janeiro 33 Tokyo 07 Doha 16 London 25 Riyadh 34 Xian 08 Dongguan 17 Los Angeles 26 Sao Paulo 35 Yangon 09 Dubai 18 Macau 27 Seoul PRINCIPAL OFFICES Abu Dhabi Hanoi Pico International (Brand & Creative) FZ L.L.C. Pico Hanoi Ltd. Sector E-48, Khalifa Park 2/F, 561 Kim Ma Street Park Rotana Office Complex Ba Dinh District Unit No. 605A, P.O. Box 769319 Hanoi Abu Dhabi, United Arab Emirates Vietnam Tel: 02-6652770 Tel: 84-4-3771 1389 Fax: 02-6652771 Fax: 84-4-3771 1387 [email protected] [email protected] Beijing Ho Chi Minh City Beijing Pico Exhibition Management Co., Ltd. Pico Ho Chi Minh City Ltd. Pico Creative Centre 10th Floor, ACB Tower Shunxing Road, Shunyi District 444A-446 Cach Mang Thang Tam Street Beijing 101300, China Ward 11, District 3 Tel: 86-10-8482 3991 Ho Chi Minh City, Vietnam Fax: 86-10-6491 6591 Tel: 84-8-3846 4990 [email protected] Fax: 84-8-3846 4991 [email protected] Colombo Hong Kong Intertrade Lanka Management (Private) Ltd. Pico International (HK) Ltd. Sri Lanka Exhibition and Convention Centre Pico House, 4 Dai Fu Street 12 D.R. Wijewardena Mawatha Tai Po Industrial Estate, N.T. Colombo 10, Sri Lanka Hong Kong, China Tel: 94-11-234 3239 Tel: 852-2665 0990 Fax: 94-11-234 3237 Fax: 852-2664 2313 [email protected] [email protected] Dongguan Kuala Lumpur Dongguan Pico Exhibition Services Co., Ltd. Pico International (M) Sdn. Bhd. 1st Road, Reservoir Industrial District Wisma Pico, 19-20 Jalan Tembaga SD5/2 Guan Jing Tou, Feng Gang Bandar Sri Damansara Dong Guan, Guang Dong 523705, China 52200 Kuala Lumpur, Malaysia Tel: 86-769-8777 4471 Tel: 60-3-6275 5990 Fax: 86-769-8777 4474 Fax: 60-3-6275 3233 [email protected] [email protected] Dubai London Pico International LLC (JLT Branch) Pico In-Creative (UK) Ltd. 12th Floor One Victoria Villas Mazaya Business Centre Building AA1 Richmond, Surrey TW9 2GW Jumeirah Lake Towers United Kingdom P.O. Box 37679, Dubai, United Arab Emirates Tel: 44-020-8948 6211 Tel: 971-4-420 4028 Fax: 44-020-8948 9141 Fax: 971-4-420 4038 [email protected] [email protected] Guangzhou Los Angeles Guangzhou Pico Exhibition Services Co., Ltd. Pico International (LA) Inc. Room 701-2, Dongshan Plaza 2716 Ocean Park Blvd. 69 Xian Lie Road Central Unit 1020, Santa Monica Guangzhou 510095, China CA 90405, USA Tel: 86-20-8732 2990 Tel: 1-310-450 1028 Fax: 86-20-8732 2996 Fax: 1-310-450 7080 [email protected] [email protected] 04 Pico Far East Holdings Limited Annual Report 2014 S E C FI F O L A P CI N Macau Shanghai RI P Pico International (Macao) Ltd. Shanghai Pico Exhibition Services Co., Ltd. 7/F, Flat D Pico Creative Centre Av. Da Amizade, No. 918 99 Cao An Road, Lane 4499 World Trade Centre Building Anting Town, Jiading District Macau, China Shanghai 201804, China Tel: 853-2872 7990 Tel: 86-21-6010 8990 Fax: 853-2872 7902 Fax: 86-21-6010 8900 [email protected] [email protected] Mumbai Shenzhen Pico Services Mumbai Pvt. Ltd. Shenzhen Pico Exhibition Services Co., Ltd. Jay Anthariksh 704, 7th Floor Room 1010-1012 Makwana Road, Andheri East Excellence Times Square Building Mumbai 400093, India 4068 Yitian Road, Futian District Tel: 91-84-5095 5900 Shenzhen 518048, China [email protected] Tel: 86-755-8290 0540 Fax: 86-755-8295 1282 Rio de Janeiro [email protected] Pico Brasil Servicos de Marketing Ltda. Rua Duque Estrada, 41, Gavea Singapore Rio de Janeiro RJ Pico Art International Pte Ltd. Brasil CEP 22451090 Pico Creative Centre Tel: 55-21-7497 4797 20 Kallang Avenue [email protected] Singapore 339411 Tel: 65-6294 0100 Riyadh Fax: 65-6291 8516 Pico International Saudi Arabia Ltd. [email protected] 2nd Floor, Unit No. 2, SERB Building Dhabab Street, Building 6850 Taipei (Opp. King Fahad Medical City Gate 2) Pico International Taiwan Ltd. Riyadh 11393, Kingdom of Saudi Arabia 3/F, No. 343, Nanking East Road Tel: 966-1-464 5903 Section 5, Taipei, Taiwan Fax: 966-1-462 4034 Tel: 886-2-2753 5990 [email protected] Fax: 886-2-2766 6900 [email protected] Sao Paulo Pico Brasil Servicos de Marketing Ltda. Tokyo Rua Bom Sucesso, 1051-Tatuapé Pico International Ltd. São Paulo SP CEP 03305000 Iwasei Nihombashi Building, 6F Brasil 6-5 Nihombashi Odenmacho Tel: 55-11-3296 9983 Chuo-ku, Tokyo 103-0011, Japan [email protected] Tel: 81-3-3808 0891 Fax: 81-3-3808 0897 Seoul [email protected] Pico North Asia Ltd. 6F Hana B/D 12 Teheran-ro 108-gil Gangnam-gu Seoul 135-502, Korea Tel: 82-2-558 3240 Fax: 82-2-561 3005 [email protected] Annual Report 2014 Pico Far East Holdings Limited 05 CHAIRMAN’S STATEMENT I am pleased to present our shareholders with the annual report of the Company and its subsidiaries (“the Group”) for the year ended October 31, 2014. RESULTS The financial year under review continued to pose challenges to business growth due to slower-than-expected improvements in the global economy. Despite this, our turnover recorded a 15.5% increase to HK$3,833 million (2013: HK$3,319 million). Profit for the year attributable to owners of the Company REVIEW OF OPERATIONS increased by 13.9% to HK$240.5 million (2013: HK$211.1 million). Earnings per share were HK19.77 cents (2013: Headquartered in Hong Kong with 43 offices in 35 cities HK17.37 cents). worldwide, the Group combines the resources of our global network with the access and familiarity of our local offices DIVIDEND to provide total branding expertise to our clients. The Board of Directors (the “Board”) has recommended a Last year we highlighted our evolving Total Brand Activation final dividend of HK6.0 cents (2013: HK5.5 cents) per (“TBA”) business service model, in which we offered trade ordinary share. Altogether, the full year dividend is HK10.5 show customers more than just the design and fabrication cents per ordinary share representing 53.1% of the earnings of exhibition booths. Under the TBA business service model, per share. The final dividend will be payable on Friday, our offerings run the whole gamut from brand strategy to April 10, 2015 to shareholders on the register of members execution, with participation in trade shows being just one of the Company as of Tuesday, March 31, 2015. of these offerings. In this way, we have been able to engage our clients well before a particular trade show begins and for a longer service period, due to the greater extent and variety in our service offering. To expand our TBA strategy, we have formed dedicated business units called Pico Plus. Pico Plus devises brand marketing for our clients by employing an integrated marketing EXHIBITIONS IDENTITYVISUAL aupnpitrso amchan aagned puusbinligc areltleartnioantsiv ea nmd arfkaecitliintagt e chspaonnnseolsr.s hTiph esoef events — these allow our clients to gain a visible presence by EVENTS SUSTAINABILITY INTEGRATE INTERI&O RR ETAIL amtosus olptcirpioalmeti nmogta etr hkdeeiitari nlbogrg asunterda stb ewegtiitwehse teahnne d e smevelelentrthsso . daPsnic,d ou sPbilnuugys edarlissg.o it aTelhm mropeulodgyihas D T digital media platforms such as social networking, blogging, N E SPORTS MEGAGNE DIGITAL CREATIVETHENEMVIERDO NMENTS patinhcocetdriiver i actfisaeresise t ienwnxdghps io cosharub aroveiimu dtte h aorato esunhngeachwro inu wgrpoa,r grodPidn icuogocf tu ,mPs eluuorsssui nttdhoge ocseiorga mnvrli myraa unla nddmi ocapparrttkoeeem rtwsi noittgthoe. Promoting a brand is a two-way process — besides face to EXPO MAN&A EGXECHMOIBNEINTFIETORNEN CE MVAENNUAGE EMENT fvtmaoirca teuye xalplem ldaaediiane lt toioang nguadse dbobeuveseyitrwree rt esht eoetn o wb ubbeyueb.ty toeefrrfs e urasn ndaden rossttehalenlerdr sc ah aapnt rnotedrla ufdcoetr s whseohlwliecrshs, To keep pace with the rapidly-changing technological landscape and the challenging marketing environment, our TBA service model will continue to evolve and stay in tune with our clients’ objectives. Recently, the Group has evaluated the acquisition of several digital marketing, content development and technological companies which will complement and strengthen our existing TBA service offerings. We also seek to partner 06 Pico Far East Holdings Limited Annual Report 2014 T N E M E T A T S S N’ A M R AI H C Chenzhou International Convention and Exhibition Centre in Hunan with industry leaders in certain marketing specialities so that is currently underway to relocate our present south China we are able to handle the entire brand and marketing factory complex in Dongguan to another location due to urban strategies that are supported by a full range of above-the-line redevelopment. It will cost about HK$70 million over the next and below-the-line solutions. two years to build the new factory complex, which will also support our Hong Kong business. Going forward, through the TBA service model, Pico Plus will enable us to win a larger proportion of our clients’ The Group’s exhibition hall management portfolio continues marketing budgets. Our strong project management to expand. In 2014, we entered a management contract foundation will ensure that all subsequent outcomes from with Chenzhou city’s first exhibition hall, the Chenzhou various specialised channels will be aligned to deliver a International Convention and Exhibition Centre (CZCEC). single brand promise with optimal results for our clients. With 50,000 square metres of indoor and 15,000 square metres of outdoor exhibition space, CZCEC commenced full On the infrastructure front, the Group’s 58,000 square metres operations in mid-2014 and has successfully hosted several of expanded production facilities in both Beijing and Shanghai events including the 10th Chenzhou Hunan Real Estate and are now in full operation, servicing our ever-growing clientele Home Appliances Expo, the 2014 China Hunan Tourism of Chinese national enterprises, as well as multinational Industry Expo and the Macalline Home Products and enterprises and renowned brands operating in China. Planning Materials Expo. Coke Summer In Liaoning Annual Report 2014 Pico Far East Holdings Limited 07 T N E M E T A T S S N’ A REVIEW OF BUSINESS This stronger performance seen in the second half was M R achieved, to some extent, through the implementation of HAI General the TBA business mindset into the acquisition of exhibition C business as explained in Review of Operations above. During the second half of the financial year under review, Although the net profit margin after tax attributable to all our business segments reported an increase in turnover shareholders is near the 6.3% achieved in 2013, it would compared to the first half. This enabled the Group to have been closer to 6.7% had we not made a provision of achieve an overall turnover increase of 15.5% as compared HK$17 million to write off a performance bond for the to 2013. The second half of the financial year accounted Commonwealth Games 2010 held in Delhi four years ago. for 57% of the total annual turnover of HK$3,833 million However, we will continue to pursue the release of this and 64% of the total annual profit of HK$240.5 million. performance bond through arbitration. Thai Airways’ Boeing Dreamliner Service Launch In Bangkok Singapore National Day Parade 08 Pico Far East Holdings Limited Annual Report 2014