Straco Corporation Limited

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Extracted from the Annual Report 2020

Overview

The Group registered net loss of $0.98 million in FY2020, compared to a net profit of $38.09 million in FY2019, as the Covid-19 pandemic significantly impacted our performance. Prolonged closures of our Attractions in 1H2020 and subsequent re-openings with daily capacity restrictions and precautionary measures in place saw overall visitor numbers for FY2020 plummet by more than 70% below FY2019. Our China attractions and Singapore Flyer registered about 65% and 92% declines in visitors' arrival respectively. Group revenue was $29.56 million for FY2020, 72.8% lower than in FY2019. Overall visitor arrivals to all the Group's attractions were 1.31 million, 71.6% lower than FY2019.

The Group's main operating assets during the past year include:

  • Shanghai Ocean Aquarium ("SOA"), a premier tourist attraction located in the Lujiazui Financial District of Pudong, Shanghai

  • Singapore Flyer, one of the world's largest observation wheels located in the Marina Bay Precinct, Singapore

  • Underwater World Xiamen ("UWX"), located on the scenic Gulangyu Island in Xiamen City

  • Lixing Cable Car ("LCC"), a cable car service at the historic Mount Lishan in Xi'an

The prevention and control of the spread of Covid-19 was the Group's top priority as the coronavirus pandemic evolved. In accordance with the government's directive, all our three China attractions shut down operations at the start of the Chinese New Year holiday in January 2020. Management promptly formulated the business continuity plans and carried out specific arrangements and staff deployment. With the significant declines in business volume across all subsidiaries, various cost cutting measures were also subsequently implemented, including trimming of wage cost with pay cuts across all staff levels, no pay leave during the temporary closure periods, wage freeze and headcount freeze; renegotiation of outsourced services, deferral of non-essential expenditure; and tightened controls on discretionary expenditure.

As part of the preventive measures, our subsidiaries also stepped up on the implementation of contactless ticket purchase by enhancing the ticketing systems for online payments and increased co-operation with online travel agencies to facilitate online transactions.

China's economy grew 2.3% in 2020, compared to 6.1% in the previous year. Though the Chinese economy suffered a steep 6.8% slump in 1Q2020 when large-scales shutdowns and quarantine were implemented to contain the coronavirus outbreak, it steadily recovered in subsequent quarters and reported positive growth.

The Group's flagship attraction, SOA, reported much lower but positive earnings in 2020 as visitor numbers fell 66% below 2019, while average ticket yield improved marginally. During the Spring festival of 2020, a temporary Chinese Zodiac theme exhibition was organized to celebrate the Year of the Rat, but as the pandemic broke out, SOA was closed the first day of Chinese New Year on 25 January 2020 and remained closed until normal operations resumed on 15 May 2020, though it briefly re-opened for 12 days on 18 March 2020. As operations stabilized in the second half of the year amid daily capacity restrictions and precautionary measures in place, SOA organised several marketing activities during the summer school holidays from July to August, including an online photography contest, H5 games with aquatic animal knowledge contest, road shows, and promotion of night visits to the aquarium. During the National Day golden week holiday in October, a special exhibition with the theme of "Garden under the Sea" was launched, with TV reports and online coverage on social media, Weibo and WeChat, and the appearance of SOA's mascot "Seahorse Didi" to interact with visitors. The golden week welcomed over 60,000 visitors, about 70% of 2019 pre Covid-19 period. During the Christmas season, SOA further expand its social media exposure through footages on Tik Tok.

At UWX, annual visitor numbers dropped 67% from 2019 as the aquarium was closed for more than three months from the start of Chinese New Year. After its re-opening in May, various popular science/ technology initiatives were actively launched to promote the aquarium. Four large-scale special exhibitions were launched throughout the year, including "Beautiful Fish Fun Marine Creatures" during Spring Festival in January, "Exploring Whales with Surprise and Joy in Summer" during summer holiday, "Underwater Concert" during National Day holidays in October, and "Ocean Star Tour" science exhibition during Christmas in December. Apart from these special thematic exhibitions, UWX also published many popular science-related information and constantly update its aquatic knowledge content on the company's WeChat, Weibo official websites and Tik Tok. It also printed flyers, questionnaires, popular science manuals for free distribution at scenic spots, event sites and business partners.

In 2020, UWX introduced various innovative promotion models and achieved good results. It launched "Tickets + Gifts", "Parent-child value tickets package", "Discounted annual membership card", and partner with Yongshun Sightseeing Cart to offer "Scenic Spot + Transport" packages. It also cooperated with Sunlight Rock Scenic Spot for the first time to offer "Up to the Mountain and Dive into the Sea" adult combination tickets.

To further enhance its online ticketing sales, it also partnered with Ctrip.com and Meituan.com to sell tickets directly via these online travel agencies.

Throughout the year, UWX actively participated and organized various popular science academic activities, such as "Marine Culture Publicity Activity" organized by Xiamen Ocean Development Bureau, "Light Up Your Dreams" charity study tour, launching ceremony of "2020 National Science Popularization Day", and the Science Carnival organized by Xiamen Association for Science and Technology. It also held the launching ceremony of "Caring for Aquatic Animals and Building a Harmonious Home" together with Xiamen Marine Development Bureau and carried out the activities of "Reducing Plastic Action" throughout the Aquarium. In October, it participated in the launching ceremony of the "2020 National Aquatic Wildlife Protection Popularization Month and the 30th Wildlife Protection Publicity Month in Fujian Province". In December 2020, UWX was awarded the title of Xiamen Popular Science (Education) Base.

Lixing Cable Car registered a 60% decline in revenue and an 80% decrease in profitability in FY2020 compared to a year ago as ridership declined more than 60% as it was closed from 24 January 2020 to 19 March 2020 due to the coronavirus outbreak, and also suspended operations for more than a week in August following advice from the local authority due to stormy weather.

Singapore Flyer's revenue and visitor numbers plummeted more than 90% as travel restrictions and borders closures resulted in sharp decline of international tourist arrivals. Amidst the extraordinary times, Singapore Flyer has been staying resilient, rolling out several initiatives and offerings in 2020.

Since the start of the year, Singapore Flyer had implemented safe management measures to protect guests and staff in the fight against Covid-19. Stricter safety management measures were introduced with the reopening of Singapore Flyer in July. Some of these measures include mandatory wearing of face masks at all times and reduced capacity limits for capsules and indoor experiences. Contactless payment and redemption were also adopted. Other measures such as safe distancing, mandatory temperature screening and SafeEntry check-in and out, frequent disinfection of the premises, informational signage as well as the availability of hand sanitisers continued to be maintained. To assist guests in easing into the new normal, it developed an online "Welcome Guide" detailing safety management measures at various phases of the guest journey.

Time Capsule, Singapore Flyer's newest attraction was officially launched on 9 December 2020 and opened to public on 10 December 2020. The media-exclusive launch event was graced by Mr Alvin Tan, Minister of State for Trade and Industry, and Culture, Community and Youth. Spanning over two levels, the Time Capsule is a complementary addition to the Singapore Flyer. It draws on the concept of time travel taking guests through a journey through Singapore's 700-year history. At the end of the journey and upon stepping into the Giant Observation Wheel, guests will be able to witness Singapore's transformation and marvel at the beautiful skyline.

As one of the country's iconic attractions, Singapore Flyer also participated in the SingapoRediscovers Vouchers scheme, as part of the Singapore government's plan to revive local tourism, which kicked off on 1 December 2020. In addition, Singapore Flyer is supporting a SingapoRediscovers Vouchers donation campaign initiated by It's Raining Raincoats, a social enterprise. The campaign, which started in late December, calls for Singaporeans to purchase Singapore Flyer tickets using their SingapoRediscovers Vouchers for migrant workers. More than three thousand tickets have been donated by the public, and for every three tickets donated, Singapore Flyer will match with two complimentary tickets.

Other community engagement initiatives by Singapore Flyer include supporting the annual Speak Mandarin Campaign Family Talent Competition and the inaugural light up for Singapore World Diabetes Day on 6 November 2020. Singapore Flyer was honoured to be the venue sponsor to Diabetes Singapore for the light up event, shining a light on diabetes.

Apart from marketing initiatives and activities, Singapore Flyer has also been developing its technological capabilities.

In the last quarter of 2020, the Singapore Flyer's official website (singaporeflyer.com) was revamped and launched. The new website is mobile responsive, with an enhanced user experience and interface to increase the website's sales conversion rate and the long-term objectives of increasing lead generations.

Throughout the year, Singapore Flyer has also embarked on three key digital transformation initiatives.

  • A Data Transformation Programme led by the Singapore Tourism Board (STB) and supported by its appointed partner, KPMG. The focus for the Data Transformation Projection is on consolidating key revenue and digital marketing data to track key performance metrics over time to reduce manual processes and enable more timely data driven business decisions. The Data Transformation Programme is Singapore Flyer's first step of a three-year transformation roadmap initiated by STB.

  • Another initiative is the Singapore Tourism Accelerator, which is co-run by STB and its appointed partner Found8. Singapore Flyer has identified its AI partner which is an AI-powered guest engagement cloud that uses automation to drive revenue and guest satisfaction. It allows marketing automation, online reputation management, personalised upselling and provides a singular view of guest data.

  • Singapore Flyer has also been working with a vendor on the development of an Artificial Intelligent Chatbot with the goals of improving guest communication, replacing Singapore Flyer hotline services with round-the-clock customer support, and boosting business growth. The chatbots, which are both voice-activated and text-based chatbots, will be incorporated into Singapore Flyer's branded channels in phases.

FINANCIAL COMMENTARY

The Group incurred a net loss before tax of $0.87 million as compared to a profit before tax of $56.54 million a year ago, mainly attributable to lower profits generated by the China attractions, and losses incurred by Singapore Flyer including an impairment loss of $2.6 million recognized on its investment property. Expenses, excluding finance cost, decreased $17.33 million, or 30.3% as compared to FY2019, mainly attributable to lower operating expenses and staff cost incurred, and exchange gain recognized; partially offset by impairment loss recognised.

The Group's net cash flow from operating activities amounted to approximately $0.50 million in FY2020. During the year, the Group used $21.66 million to pay out dividends and $3.41 million to repay borrowings and interest on loans. Monthly principal repayment of the bank loan at Singapore Flyer has been granted deferment since April 2020. The company also utilized $3.88 million cash for share buybacks. As of 31 December 2020, the Group's cash and cash equivalent balance (excluding bank deposits pledged) amounted to $177.67 million, a decrease of 10.9% for the year.