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Last update: 2024-03-22
 
 

BUSINESS REVIEW

The Group derives its income principally from its network of distribution channels, including spas and concessionary counters in department stores. As at 31 December 2022, there were 1,408 spas and 9 concessionary counters. Of these, 1,405 were franchised spas, while 3 spas and 9 concessionary counters were directly operated and owned by the Group. No concessionary counters were entrusted to third-party operators. Franchised spas are owned by the franchisees who are responsible for the capital investment in these spas. They are obliged to use only Natural Beauty or “NB” products in their spas. A wide array of services including hydrotherapy, facial treatment, body care and skin care analysis, are provided in all spas, while skin care analysis is widely available at the concessionary counters in department stores. Group-wide, a total of 140 (2021: 255) new stores were opened and 76 (2021: 119) stores were closed during the year ended 31 December 2022.

Research and Development

Natural Beauty places a strong emphasis on research and development and strives to maintain its competitive advantage. Our primary objective is to develop new products along with optimizing their quality and efficacy. The philosophy of Natural Beauty is “Human Testimonies, Material Evidences and Scientific Witnesses”. Therefore, the core value of our R&D team is the combination of basic research and industry-university collaboration. The R&D team consists of over ten experienced researchers in the fields of cosmetics, medicine, pharmacy, and biochemistry, as well as a number of top beauty and biochemistry consultants from both domestic and overseas. To develop new technologies, the R&D team collaborates with professional laboratories in Europe, Japan, Australia and other countries. In terms of hardware equipment, our group has established two research and development centers: the Natural Beauty Biotechnology R&D Center and the Dongsen-NTU Industry-University Cooperation Center. Our collaboration with NTU effectively leverages Natural Beauty’s research strengths and resources, facilitating product development and technology transfer and creating a win-win situation by cultivating talent, enhancing our R&D vitality and boosting profits. In terms of patent portfolio, Natural Beauty has devoted significant effort to developing its own intellectual property rights, and has obtained three stem cell patents (US 7,405,195B2), (TW I331042), (US 8,076,296B2), and a plant extraction patent (TW I640505). In order to further develop its plant patents, our group has collaborated with National Taiwan University and National Yang Ming Chiao Tung University. Research data shows that it possesses a unique ability to activate hair follicles. Currently, we have a pending patent application and are developing scalp care products. In addition, the upgrade of the classic NB-1 series is the annual highlight in 2022. Our R&D team has introduced MicroRNA Gene activation technology to activate the circadian rhythm of skin cells with MicroRNA and promote cell rejuvenation and repair. Each year, we invite scholars from industry, government, and academia to co-hold an industry-university summit where we discuss the development direction, projects, and product quality with our R&D, distribution, and marketing teams. Our group has continuously worked closely with academia to enhance our innovative development capabilities. Products In July 2022, Natural Beauty launched an affordable moisturizing mask to attract new consumers. By the end of 2022, the sales volume approached 52,959pcs. In November, we upgraded the classic NB-1 series to enhance its core competitiveness. In the second half of 2022, sales of the NB-1 series reached HK$32.4 million (RMB28.6 million). Taking advantage of the booming healthcare market, the Spain INDIBA deep diathermy sold 108 sets and generated HK$37.9 million (RMB33.5 million) by the end of the year. Throughout the year of 2022, we launched a total of 43 new products and brought in HK$16.4 million (RMB14.5 million) in revenue. In October, we launched a new brand called B.U.T. ESSE and organized co-brand show activities, which generated HK$1.2 million (RMB1.0 million), opening a new chapter for the Natural Beauty Group.

Human Resources

As at 31 December 2022, the Group had a total of 497 employees, of whom 339 were based in the PRC, 137 in Taiwan and 21 in other countries and regions. Total remuneration (excluding directors’ emoluments) in 2022 was approximately HK$124.7 million (HK$146.1 million in 2021), including retirement benefit related costs of HK$10.8 million (HK$10.9 million in 2021). Competitive remuneration packages are maintained to attract, retain and motivate capable staff members and are reviewed on a regular basis. Capital Expenditures The Group’s capital expenditure of HK$44.3 million in 2022 was mainly related to the new plant construction in the PRC amounting to HK$29.3 million, opening of new stores, renovation and equipment amounting to HK$13.1 million.

Right-of-use Assets and Lease Liability

Hong Kong Financial Reporting Standards No. 16 – Lease (HKFRS 16) came into effect on 1 January 2019. At the commencement date, the Group should recognise a right-of-use asset and a lease liability. The related right-of-use assets and lease liabilities are mainly located in the PRC and Taiwan. As at 31 December 2022, the Group’s right-of-use assets were HK$41.1 million (HK$81.7 million as at 31 December 2021) and its lease liabilities were HK$23.6 million (HK$31.8 million as at 31 December 2021). In 2022, depreciation charges of right-of-use assets amounted to HK$10.4 million and interest charges of lease liabilities amounted to HK$1.3 million.

OUTLOOK

The business growth affected by the epidemic has entered a new era by the end of 2022. In particular, the new epidemic policy has brought positive development in Mainland China. Looking forward to 2023, significant business growth can be expected. Eastern International Co., Ltd. (“Eastern International”) continues to invest in innovative services, product development, chain franchising, e-commerce, telemarketing and TV shopping to accelerate the development of multi-brand strategies. We have entered into the live-streaming channel era where new businesses spring up every day to engage with young consumers.

Key Market Development Strategies

  • Taiwan: Natural Beauty continues the multi-channel strategy and develops the live-streaming channel cooperating with global influencers. As the result, we have seen positive achievements in promoting affordable products via live-streaming platforms. Multi-brand strategy can meet the product needs of different live-streaming platforms, make full use of product development and mass production, and promote business growth. Plus, immunity concern has become the focus of consumption in the post-epidemic era, we have deployed a large number of essential health supplements to chain stores and other channels to boost sales opportunities.
  • Mainland China: The new epidemic policy has positively affected the brick and mortar store business and driven sales performance back to normal. In 2023, in addition to increasing investment, we continue to rapidly expand chain stores by leveraging our brand power. Meanwhile, we introduce health supplements to seize the business opportunity of immunity-boosting products after the epidemic. Moreover, our new e-commerce brand is also ready to launch, with affordable products to approach online young people along with increasingly investing in huge traffic Tiktok platform to drive e-commerce growth.
  • Southeast Asia market: Following the first own shop opening in 2019, the second store was opened at the beginning of 2023, and we continue to expand our franchise business in Malaysia. Furthermore, we plan to enter Vietnam in 2023 to expand overseas market. Looking ahead to 2023, we will continue to enhance brand recognition, effectively promote core business, drive innovation, develop the global market, and pursue leap-forward growth.

 
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