桦欣控股(01657) - 2022 - 中期财报

Management Discussion and Analysis Business Review The Group's business recovered from the COVID-19 pandemic, with significant growth in revenue and gross profit driven by increased orders and new clients, but shifted from profit to loss due to higher staff and logistics costs Interim Results Overview for the Six Months Ended October 31, 2021 | Metric | Interim 2021 | Interim 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | HK$70.8 million | HK$48.0 million | +47.5% | | Gross Profit | HK$16.5 million | HK$9.4 million | +75.5% | | Total comprehensive (expense) attributable to owners | (HK$0.6) million | HK$0.8 million | Shifted from profit to loss | - Performance growth was primarily driven by increased sales orders from a major customer and the successful development of new clients in the Middle East market[3] - The shift to a loss was mainly due to increased employee benefit expenses from team expansion and higher transport and logistics costs from global container shortages[4] Financial Review The Group's financial performance showed increased revenue but decreased profit, as higher operating expenses and provisions offset significant gains in revenue and gross margin Revenue Performance | Period | Amount | YoY Growth | | :--- | :--- | :--- | | Six months ended Oct 31, 2021 | HK$70.8 million | 45.4% | | Six months ended Oct 31, 2020 | HK$48.7 million | - | - Revenue growth was mainly from increased purchase orders from a major UK-based customer and the successful development of new clients in the Middle East[4] Gross Profit and Gross Profit Margin Performance | Metric | Six months ended Oct 31, 2021 | Six months ended Oct 31, 2020 | | :--- | :--- | :--- | | Gross Profit | HK$16.5 million (+75.5%) | HK$9.4 million | | Gross Profit Margin | 23.3% | 19.4% | - The increase in gross profit margin was mainly due to the Group's continuous efforts to optimize its customer and supplier portfolio during the industry rebound[7] Expense Analysis - Administrative expenses increased by 40.3% YoY to HK$8.7 million, primarily due to higher employee benefit expenses from expanding the back-office team to support new markets and customers[12] - Selling and distribution expenses increased by 62.5% YoY to HK$7.8 million, driven by higher testing expenses, transport costs (due to container shortages), and employee benefits for the expanded sales and supply chain teams[13] Profitability Indicators | Metric | Six months ended Oct 31, 2021 | Six months ended Oct 31, 2020 | | :--- | :--- | :--- | | (Loss)/Profit for the period | (HK$0.6) million | HK$0.3 million | | Basic (loss)/earnings per share | (HK$0.02) | HK$0.01 | - The shift from profit to loss was mainly attributable to increased employee benefit expenses during the business development phase and higher transport and logistics costs amid the impact of COVID-19[15][16] Liquidity and Financial Resources The Group maintained a sound financial position with healthy liquidity and gearing ratios, holding net current assets of approximately HK$90.4 million Key Financial Ratios | Metric | Oct 31, 2021 | Apr 30, 2021 | | :--- | :--- | :--- | | Net current assets | HK$90.4 million | HK$91.1 million | | Bank balances and cash | HK$44.5 million | HK$49.4 million | | Current ratio | 3.9 | 4.4 | | Gearing ratio | 0.0617 | 0.0659 | Business Strategies and Use of Proceeds The Group is progressing with its business strategies as planned, having utilized approximately HK$40.6 million of the HK$44.4 million net proceeds from its listing - The Group has implemented its business strategies across several fronts, including acquiring a property for a Hong Kong flagship showroom, recruiting designers in the UK, establishing a sourcing office in China, and planning participation in trade fairs to enhance its corporate image[37] Use of Listing Proceeds (as of October 31, 2021) | Business Strategy | Adjusted Allocation (HK$'000) | Actual Use (HK$'000) | Unutilized Amount (HK$'000) | | :--- | :--- | :--- | :--- | | Strengthen and develop customer relationships | 27,464 | 25,257 | 2,207 | | Enhance design and development capabilities | 4,703 | 4,682 | 21 | | Expand supplier base | 5,191 | 5,191 | – | | Enhance corporate image | 2,662 | 1,038 | 1,624 | | General working capital | 4,392 | 4,392 | – | | Total | 44,412 | 40,560 | 3,852 | Future Outlook The Group will focus on cost control amid economic uncertainty while strengthening its core services, exploring new opportunities, and enhancing client relationships for sustainable growth - The Group will continue to assess the impact of the COVID-19 pandemic and implement cost control measures as necessary to improve operational efficiency[41] - Future strategic priorities include strengthening customized apparel design and sourcing services, actively engaging clients to explore new business opportunities, optimizing showroom displays, and conducting customized e-promotions via online platforms[41] Principal Risks and Uncertainties The Group's primary risks include reliance on major clients without long-term contracts, market competition, credit risk, and supply chain vulnerabilities - The core risk is the reliance on a few major customers without long-term contracts, leading to revenue uncertainty[44] - Other business risks include intense market competition, customer credit risk, fluctuations in raw material prices, and potential reputational damage from suppliers' social responsibility compliance issues[44] Other Information Directors' and Shareholders' Interests As of October 31, 2021, Chairman Mr. Choi King Tin was the controlling shareholder, holding a total of 73.61% of the company's shares Directors' Shareholdings (at October 31, 2021) | Director Name | Nature of Interest | Number of Shares | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Choi King Tin | Interest in a controlled corporation / Beneficial owner | 23,556,500 | 73.61% | | Mr. Lai Kwok Hung | Beneficial owner | 10,000 | 0.03% | - Substantial shareholder JC Fashion International Group Limited (JC International) beneficially owned 23,000,000 shares, representing 71.88% of the issued share capital, and is wholly-owned by Director Mr. Choi King Tin[51] Corporate Governance The company complied with most corporate governance code provisions, with the notable deviation of the Chairman and CEO roles being held by the same individual - The company deviated from code provision A.2.1 of the Corporate Governance Code, as the roles of Chairman and Chief Executive Officer were both held by Mr. Choi King Tin, which the Board believes enables effective management[60][62] - The Audit and Risk Management Committee, comprising three independent non-executive directors, has reviewed the unaudited condensed consolidated financial statements for the period[66] Dividend The Board does not recommend the payment of an interim dividend for the six months ended October 31, 2021 - For the six months ended October 31, 2021, the Board does not recommend the payment of a dividend (Prior year period: Nil)[64] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended October 31, 2021, the Group's revenue and gross profit grew significantly, but higher expenses led to a net loss of HK$0.6 million Key Income Statement Data (For the six months ended Oct 31) | Metric (HK$'000) | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Revenue | 70,818 | 48,713 | | Gross Profit | 16,548 | 9,427 | | Profit before tax | 542 | 847 | | (Loss)/Profit for the period | (626) | 348 | | (Loss)/Earnings per share (HK$) | (0.02) | 0.01 | Condensed Consolidated Statement of Financial Position As of October 31, 2021, the Group's net assets stood at HK$125.4 million, with total assets of HK$159.6 million and a healthy net current asset position Key Financial Position Data (HK$'000) | Metric | Oct 31, 2021 (Unaudited) | Apr 30, 2021 (Audited) | | :--- | :--- | :--- | | Non-current assets | 37,530 | 37,570 | | Current assets | 122,057 | 117,663 | | Current liabilities | 31,691 | 26,587 | | Non-current liabilities | 2,525 | 2,686 | | Net Assets | 125,371 | 125,960 | Condensed Consolidated Statement of Cash Flows The Group experienced a net cash outflow from operating activities of HK$3.1 million, resulting in a decrease in cash and cash equivalents to HK$44.5 million Key Cash Flow Data (For the six months ended Oct 31, HK$'000) | Metric | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Net cash from operating activities | (3,118) | 12,877 | | Net cash used in investing activities | (1,113) | (10,491) | | Net cash (used in)/from financing activities | (702) | 5,838 | | Net (decrease)/increase in cash | (4,933) | 8,224 | | Cash and cash equivalents at end of period | 44,488 | 43,625 | Notes to the Financial Statements (Selected) Notes reveal that revenue is dominated by the supply of apparel products, primarily womenswear, with a healthy aging profile for trade receivables and payables Revenue by Product/Service (For the six months ended Oct 31, HK$'000) | Product/Service | 2021 | 2020 | | :--- | :--- | :--- | | Supply of apparel products - Womenswear | 60,128 | 45,385 | | Supply of apparel products - Kidswear | 10,690 | 2,628 | | Consultancy services | – | 700 | | Total | 70,818 | 48,713 | - As of October 31, 2021, trade receivables (net of allowance) were HK$33.9 million, with approximately 59% (HK$20.1 million) aged within 60 days[117][119] - As of October 31, 2021, trade payables were HK$13.3 million, with approximately 89% (HK$11.9 million) aged within 60 days[121][122]