On behalf of the board of directors (the “Directors” or the “Board”) of Grace Wine Holdings Limited (“Grace Wine” or the “Company”, and together with its subsidiaries, the “Group”), I am pleased to present the Company’s annual report for the year ended 31 December 2019.

In this statement, I would like to highlight some of our achievements which may help you better understand our operation beyond looking at the financial results.

For 2019, our revenue reached RMB73.0 million, which is slightly better than 2018. However, both our gross profit margin and profit before taxes have increased significantly. Our gross profit margin jumped from 35.1% in 2018 to 43.8% in 2019, while our profit before taxes had increased by 20%, from RMB3.7 million to RMB4.5 million. Such increase has already taken into account the one-off administrative expenses of RMB2.6 million which was resulted from the transfer of shares from the major shareholder of the Company to our employees during 2019. You can find further details in the Management Discussion and Analysis section.

Towards the end of 2019, we decided to reform our strategy in the Shanxi market and step away from the sole-agent distribution model in the region. This allows us to develop closer relationships to the front-line sales channels and widen our distribution network. Also, by having fewer layers, we hope to provide better value and service to our end-customers. I’d like to take this opportunity to thank our Shanxi distributor for its contribution in the past, and look forward to forming a new partnership in the future.

In 2019, wine production and consumption in China continued to slow down. The whole industry was going through significant adjustments. With an increasing number of premium local wines being available in the market, we believe this is a positive development for building consumer confidence in premium Chinese wine. Grace Vineyard, positioned as the leading premium Chinese winery, has an advantage. We will continue to invest in branding and marketing, particularly in Shanxi and online markets.

Last year, we acquired a new whisky and gin production line. The target date for the commencement of production is the second quarter of 2021. We believe this is an exciting opportunity for the Group. Not only does it help us diversify our product portfolio, it also allows us to expand our business to another province (Fujian). The management is working around the clock to make sure we stay on schedule.

As I’m writing this statement, we are still in the middle of the coronavirus (COVID-19) outbreak. Despite the uncertainty on when the outbreak will be controlled, the management remains optimistic. Firstly, Shanxi is fortunately not one of the most severely impacted areas of the outbreak. Secondly, we believe the growth in wine consumption will resume once this is over. Last but not least, the management has already taken steps to reduce costs by streamlining our operation. As a result, our current liquidity position remains healthy, and we will continue to closely monitor our cashflow. On behalf of the Board and the team, once again I would like to express my gratitude to our shareholders and clients for your support throughout the years.