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Who does the stars need to help when they hold a concert? Of course, it is necessary to invite concert solution providers to prepare concerts, provide technical production and creative solutions.
Teyi Culture Entertainment and Production (Holdings) Co., Ltd. (hereinafter referred to as "Teyi Culture") is one of the providers, and its main business is Teyi Culture, a supplier of Hong Kong events and live performance technology production and creative solutions.
htmlOn February 11, Teyi Culture submitted a prospectus to Hong Kong Stock Exchange . It is worth noting that this is the third time that Teyi Culture has submitted a form to Hong Kong Stock Exchange . After the IPO application on Hong Kong Stock Exchange was invalid at the beginning of 2019, Teyi Culture submitted its application for listing on the main board of Hong Kong stocks again on August 12, 2019, but both ended in failure.In this special period, Teyi Culture was not willing to fail, and its three-time submission to Hong Kong Stock Exchange was very firm. Could it be that Teyi Culture has great business performance and great prospects?
Business with low net interest rates
Teyi Culture's main businesses are providing technical production and creative solutions, as well as concert preparation business. The prospectus shows that the proportion of revenue of the company's business providing technical production and creative solutions has been declining year by year, while the proportion of revenue of the concert preparation business has continued to increase. In the six months ended September 30, 2019, the proportion of revenue of the branch reached 64.1%.
2017-2019 and the six months ended September 30, 2018 and the six months ended September 30, 2019, Teyi Culture's revenue was HK$220 million, HK$263 million, HK$305 million, HK$196 million and HK$313 million, respectively; net profits were HK$26.214 million, HK$28.336 million, HK$18.676 million, HK$10.743 million and HK$21.918 million, respectively.
In addition to unstable profits, we can see that the profit margin of Teyi Culture is very low. From 2017 to 2019 and the six months ended September 30, 2019, the company's net interest rates were 11.9%, 10.8%, 6.1% and 7%, respectively. The performance is worrying. The special art culture, which has organized concerts for stars such as Jay Chou and Mayday, failed to make a lot of money like them.
Such a tiring career, but the profits of Teyi Culture are so low, which is really hard to live. So, why is profit margin performance not good?
net interest rate declines is related to changes in Teyi Culture's business structure. In recent years, the company has focused more on the concert preparation business, but this business is a very difficult bone. The preparation of the concert is a very large and complex project. According to the prospectus, Teyi Culture has roles in its business model including customers, suppliers, subcontractors and other stakeholders of the group. The concert preparation business has a lengthy preparation period, including project preparation, pre-project management, on-site project management and other processes, and the project needs to be started about one year before the concert project.
Such a time-consuming project will definitely affect performance. During the concert preparation process, the cost of stage setting, artist expenses, employee expenses, venue expenses, etc. are not low. The annual expenditure of each cost exceeds HK$15 million, and the cost of stage setting even reached HK$116 million in 2019. Therefore, the cost side is the most important reason for the profits of Special Art Culture.
In addition, there are many risks in preparing for concerts, among which the revenue of concerts is full of uncertainty. Cai Jianhui, the founder of Special Art Culture, once said in an interview that whether to make money by preparing for a concert depends mainly on whether the singer’s appeal is strong and whether the tickets are easy to sell. Most of the ticket share is taken away by singers, accounting for 30%, the project producers receive 20%, and the lighting and audio are taken 20%, and the rest is the organizer's income. So if the tickets are sold less than 80% of them, the investors in this concert will definitely lose."
industry faces a short-term cold winter
Hong Kong concert industry has a long history of development and is currently quite mature, becoming one of the most dynamic music industries in the world.
According to Frost & Sullivan's previous data, it is estimated that the box office of Hong Kong concerts and live performances in 2023 may reach about HK$2.289 billion, with a compound annual growth rate of 7.7% between 2018 and 2023.
However, things are unpredictable, and the Hong Kong concert industry will encounter a cold winter in 2020.
In the past month, the novel coronavirus pneumonia epidemic has swept across the country, and of course it has also impacted Hong Kong, a city with a developed music industry. The raging epidemic has affected Hong Kong's tourism, retail and even financial industries. Hong Kong's economic outlook in 2020 is not optimistic. Under the shadow of the epidemic, tourists traveling to Hong Kong will significantly reduce in the first half of 2020, and it will take a long time for tourists' confidence to recover after the epidemic.
At present, Hong Kong has suspended various large-scale commercial/entertainment activities including concerts. The sharp decline in overseas tourists in the short term will also bring challenges to the Hong Kong music industry. Therefore, the special art culture that is aimed at music lovers is undoubtedly deeply affected. In the prospectus, Teyi Culture stated: "Our business may be adversely affected by force majeure events (including natural disasters, epidemics, natural disasters and social unrest) in Hong Kong, China, Macao or other countries where we hold concert projects." "There are concerns that crowded places will increase the risk of infectious diseases in the case of epidemic outbreaks, which has caused the concert industry to plummet."
This epidemic has caused Teyi Culture to worry about, and the outbreak of the epidemic will bring the Hong Kong music industry into a short-term "super cold winter". As of the six months ended September 30, 2019, Teyi Culture's revenue from the Hong Kong market reached 63.1%. Too much reliance on the Hong Kong market will undoubtedly cause Teyi Culture's concert preparation business to suffer a heavy blow in the short term.
For the mainland market, although Special Art Culture is strategically planned, the mainland is the hardest hit area of the epidemic, and the concert industry will also be affected.
summary: In fact, the poor operating performance of Teyi Culture is not due to the company's business decisions, but the characteristics of the industry, because this is an industry that cannot make a lot of money. The sudden outbreak of the new coronavirus epidemic may make Teyi Culture’s financial statements in 2020 look even worse.
Author: Sad Liberal Arts Male
