Company Overview and Financial Summary This section presents the company's fundamental details and a concise overview of its financial performance for the six months ended September 30, 2023 Company Information CHI KAN HOLDINGS LIMITED (Stock Code: 9913) is a company incorporated in the Cayman Islands, listed on the Main Board of the Hong Kong Stock Exchange on August 14, 2020, with this announcement covering interim results for the six months ended September 30, 2023 - Company Name: CHI KAN HOLDINGS LIMITED 1 - Stock Code: 9913 1 - Place of Incorporation: Cayman Islands 1 - Announcement Type: Interim results for the six months ended September 30, 2023 1 Financial Summary For the six months ended September 30, 2023, the company's revenue decreased by 3.46% year-on-year, while gross profit increased by 8.53%, with profit attributable to owners and basic earnings per share both declining Financial Summary for the Six Months Ended September 30, 2023 | Indicator | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 749,157 | 776,006 | -3.46% | | Gross Profit | 131,458 | 121,125 | 8.53% | | Profit attributable to owners of the Company | 20,811 | 27,146 | -23.20% | | Basic earnings per share (HK cents per share) | 2.08 | 2.71 | -23.10% | Condensed Consolidated Financial Statements This section presents the condensed consolidated financial statements, including the statement of comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows Condensed Consolidated Statement of Comprehensive Income For the six months ended September 30, 2023, revenue slightly decreased, but gross profit increased, while profit for the period and profit attributable to owners both declined due to a significant reduction in other income and increased income tax expense Key Data from Condensed Consolidated Statement of Comprehensive Income | Indicator | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 749,157 | 776,006 | -3.46% | | Cost of revenue | (617,699) | (654,881) | -5.68% | | Gross Profit | 131,458 | 121,125 | 8.53% | | Other income | 436 | 7,614 | -94.28% | | Selling and administrative expenses | (96,703) | (91,589) | 5.58% | | Operating Profit | 35,191 | 36,935 | -4.72% | | Net finance income/(costs) | 1,580 | 298 | 430.20% | | Profit before income tax | 36,771 | 37,233 | -1.24% | | Income tax expense | (7,927) | (6,837) | 16.09% | | Profit for the period | 28,844 | 30,396 | -5.11% | | Profit attributable to owners of the Company | 20,811 | 27,146 | -23.20% | | Non-controlling interests | 8,033 | 3,250 | 147.17% | | Basic earnings per share (HK cents per share) | 2.08 | 2.71 | -23.10% | Condensed Consolidated Statement of Total Comprehensive Income For the six months ended September 30, 2023, total comprehensive income for the period slightly increased, primarily due to a significant rise in total comprehensive income attributable to non-controlling interests, despite a decrease for owners of the Company Key Data from Condensed Consolidated Statement of Total Comprehensive Income | Indicator | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Profit for the period | 28,844 | 30,396 | -5.11% | | Exchange differences on translation of foreign operations | (4,692) | (6,734) | -30.32% | | Total comprehensive income for the period | 24,152 | 23,662 | 2.07% | | Total comprehensive income attributable to owners of the Company | 16,564 | 21,013 | -21.20% | | Total comprehensive income attributable to non-controlling interests | 7,588 | 2,649 | 186.45% | Condensed Consolidated Statement of Financial Position As of September 30, 2023, the company's total assets and total liabilities both decreased, with a significant reduction in trade receivables and a notable increase in contract assets, while trade payables also significantly declined Key Data from Condensed Consolidated Statement of Financial Position | Indicator | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Non-current assets | 3,807 | 4,779 | -20.34% | | Current assets | 620,730 | 706,766 | -12.17% | | Total assets | 624,537 | 711,545 | -12.23% | | Liabilities | | | | | Non-current liabilities | 234 | 1,339 | -82.52% | | Current liabilities | 154,156 | 254,966 | -39.54% | | Total liabilities | 154,390 | 256,305 | -39.76% | | Equity | | | | | Total equity | 470,147 | 455,240 | 3.27% | | Equity and reserves attributable to owners of the Company | 462,115 | 445,551 | 3.72% | | Non-controlling interests | 8,032 | 9,689 | -17.00% | - Trade receivables significantly decreased from HKD 174,562 thousand as of March 31, 2023, to HKD 12,040 thousand as of September 30, 2023 6 - Contract assets notably increased from HKD 176,664 thousand as of March 31, 2023, to HKD 332,553 thousand as of September 30, 2023 6 - Trade payables significantly decreased from HKD 181,406 thousand as of March 31, 2023, to HKD 85,947 thousand as of September 30, 2023 7 Condensed Consolidated Statement of Changes in Equity For the six months ended September 30, 2023, total equity attributable to owners of the Company increased, mainly due to profit for the period, though exchange reserves decreased from foreign operations translation differences, while non-controlling interests decreased due to dividend payments Key Data from Condensed Consolidated Statement of Changes in Equity | Indicator | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Sep 30, 2022 (HKD thousands) | | :--- | :--- | :--- | :--- | | Share Capital | 10,000 | 10,000 | 10,000 | | Share Premium | 120,421 | 120,421 | 120,421 | | Statutory Reserve | 7,539 | 7,539 | 3,699 | | Exchange Reserve | (5,810) | (1,563) | (3,707) | | Retained Earnings | 329,965 | 309,154 | 286,639 | | Total attributable to owners of the Company | 462,115 | 445,551 | 417,052 | | Non-controlling interests | 8,032 | 9,689 | 10,162 | | Total Equity | 470,147 | 455,240 | 427,214 | - Profit attributable to owners of the Company for the period was HKD 20,811 thousand, and profit attributable to non-controlling interests was HKD 8,033 thousand 8 - Exchange differences on translation of foreign operations resulted in a HKD 4,247 thousand decrease in exchange reserve within other comprehensive income for the period 8 - Dividends paid to non-controlling interests amounted to HKD 9,245 thousand 8 Condensed Consolidated Statement of Cash Flows For the six months ended September 30, 2023, net cash used in operating activities significantly increased, net cash from investing activities turned into an inflow, and net cash from financing activities substantially decreased, resulting in a reduction in cash and cash equivalents at period-end Key Data from Condensed Consolidated Statement of Cash Flows | Indicator | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (91,899) | (31,827) | 188.76% | | Net cash from/(used in) investing activities | 2,581 | (16,131) | 1160.69% | | Net cash from financing activities | 1,153 | 19,424 | -94.06% | | Decrease in cash and cash equivalents | (88,165) | (28,534) | 209.05% | | Cash and cash equivalents at beginning of period | 318,830 | 217,901 | 46.32% | | Cash and cash equivalents at end of period | 230,524 | 189,214 | 21.83% | - Net cash used in operating activities increased from HKD 31,827 thousand in 2022 to HKD 91,899 thousand in 2023, primarily due to increased cash used in operations 9 - Net cash from investing activities changed from an outflow of HKD 16,131 thousand in 2022 to an inflow of HKD 2,581 thousand in 2023, mainly due to no payments for property and equipment in 2023 9 - Net cash from financing activities significantly decreased from HKD 19,424 thousand in 2022 to HKD 1,153 thousand in 2023, primarily due to reduced net proceeds from bank borrowings 9 Notes to the Financial Statements This section provides detailed notes to the financial statements, covering general information, accounting policies, segment information, and specific financial line items General Information, Reorganization and Basis of Presentation This section outlines the company's basic information, historical reorganization, and the basis for preparing and presenting the interim financial statements, highlighting its construction business in Hong Kong and e-commerce business in China - The company was incorporated in the Cayman Islands as an exempted company on April 16, 2018 10 - The Group's principal businesses include construction in Hong Kong (formwork and other construction services) and e-commerce in China 10 - The condensed consolidated interim financial statements are presented in HKD, unaudited, and prepared in accordance with HKAS 34 and the Listing Rules of the Stock Exchange 12 General Information CHI KAN HOLDINGS LIMITED was incorporated in the Cayman Islands in 2018 as an investment holding company, primarily engaged in construction in Hong Kong and e-commerce in China, and listed on the Hong Kong Stock Exchange Main Board in 2020 - The Company was incorporated on April 16, 2018, under the laws of the Cayman Islands 10 - The Group primarily engages in construction business in Hong Kong (including formwork and other construction services) and e-commerce business in China 10 - The Company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on August 14, 2020 10 Reorganization Prior to the company's incorporation and reorganization, the listed business was conducted by the formwork services division of Chi Kan Timber Company Limited and Chi Kan Engineering Company Limited, with Mr. Lo Hon Kwong as the controlling shareholder - The listed business was conducted by the formwork services division of Chi Kan Timber Company Limited and Chi Kan Engineering Company Limited prior to the reorganization 11 - Mr. Lo Hon Kwong was the controlling party of the operating companies and Chi Kan Engineering Company Limited 11 Basis of Presentation The condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and the Listing Rules, are unaudited by external auditors, but have been reviewed by the company's audit committee - The unaudited condensed consolidated interim financial statements are prepared in accordance with HKAS 34 "Interim Financial Reporting" issued by the HKICPA and applicable disclosure requirements of the Listing Rules 12 - These statements do not include all information required for full financial statements and should be read in conjunction with the 2023 annual financial statements 12 - The condensed consolidated interim financial statements have not been audited or reviewed by the Company's external auditor but have been reviewed by the Audit Committee 12 Summary of Significant Accounting Policies The Group's accounting policies are consistent with the previous financial year, with new or revised HKFRSs effective April 1, 2023, adopted, but these revisions have no significant impact on the financial performance or position for the current and prior periods - The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for estimates of income tax and the adoption of new and revised standards 13 - The Group has adopted new and revised HKFRSs effective April 1, 2023, including HKFRS 17, HKAS 8 (Amendments), and HKAS 12 (Amendments) 1415 - The application of the new amendments has no significant impact on the Group's financial performance and position for the current and prior periods and/or the disclosures in these condensed consolidated interim financial statements 15 Segment Information The Group's chief operating decision maker assesses performance based on profit after tax, dividing operations into construction and e-commerce segments, with construction revenue decreasing and e-commerce revenue increasing - The Group's chief operating decision maker has segmented the business into two operating segments: construction business in Hong Kong (including formwork and other construction services) and e-commerce business in China 16 Revenue by Type of Goods and Services For the six months ended September 30, 2023, construction business revenue decreased year-on-year, with a significant decline in formwork services, while e-commerce business revenue increased year-on-year Revenue by Type of Goods and Services | Type of Goods and Services | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Contract revenue from construction business | 583,265 | 642,409 | -9.19% | | - Formwork services | 500,795 | 592,692 | -15.49% | | - Other construction services | 82,470 | 49,717 | 65.88% | | E-commerce business revenue | 165,892 | 133,597 | 24.17% | | Total Revenue | 749,157 | 776,006 | -3.46% | Segment Results, Assets and Liabilities For the six months ended September 30, 2023, pre-tax segment profit for the construction business significantly decreased, while that for the e-commerce business substantially increased, with construction assets and liabilities both decreasing, and e-commerce assets slightly increasing while liabilities decreased Segment Results | Segment | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Construction business revenue | 583,265 | 642,409 | -9.19% | | Construction business pre-tax segment profit/(loss) | 15,476 | 30,105 | -48.60% | | E-commerce business revenue | 165,892 | 133,597 | 24.17% | | E-commerce business pre-tax segment profit/(loss) | 22,157 | 8,999 | 146.22% | | Unallocated pre-tax profit/(loss) | (862) | (1,871) | -53.93% | | Total pre-tax profit | 36,771 | 37,233 | -1.24% | Segment Assets and Liabilities | Segment | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Construction business assets | 526,874 | 601,724 | -12.44% | | E-commerce business assets | 35,075 | 33,066 | 6.08% | | Construction business liabilities | 135,199 | 221,538 | -38.98% | | E-commerce business liabilities | 18,615 | 32,204 | -42.19% | Geographical Information The Group's external customer revenue primarily originates from Hong Kong and Mainland China, with revenue from Hong Kong decreasing and revenue from Mainland China significantly increasing External Customer Revenue by Geographical Region | Region | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Hong Kong | 583,265 | 642,409 | -9.19% | | China | 165,892 | 133,597 | 24.17% | | Total | 749,157 | 776,006 | -3.46% | Revenue and Other Income Total revenue for the period slightly decreased, mainly due to reduced formwork services revenue within the construction business, despite growth in e-commerce revenue, while other income significantly declined primarily due to the absence of government subsidies Details of Revenue and Other Income | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Contract revenue from construction business | 583,265 | 642,409 | -9.19% | | - Formwork services | 500,795 | 592,692 | -15.49% | | - Other construction services | 82,470 | 49,717 | 65.88% | | E-commerce business revenue | 165,892 | 133,597 | 24.17% | | Total Revenue | 749,157 | 776,006 | -3.46% | | Total other income | 436 | 7,614 | -94.28% | | - Government grants | – | 7,600 | -100.00% | | - Miscellaneous income | 436 | 14 | 3014.29% | - Government grants in 2023 were zero, compared to HKD 7,600 thousand in 2022, leading to a significant decrease in other income 2324 - Miscellaneous income primarily consists of service fees from China consulting business 24 Net Finance Income/(Costs) Net finance income significantly increased during the period, primarily driven by a substantial rise in bank interest income, while bank borrowing interest expenses also increased Details of Net Finance Income/(Costs) | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Finance income | | | | | - Bank interest income | 2,581 | 714 | 261.48% | | Finance costs | | | | | - Interest expense on lease liabilities | – | (379) | -100.00% | | - Interest expense on bank borrowings | (1,001) | (37) | 2605.41% | | Net finance income/(costs) | 1,580 | 298 | 430.20% | Profit Before Income Tax Profit before income tax slightly decreased, mainly influenced by reduced staff costs (included in selling and administrative expenses) and lower cost of revenue, with depreciation expenses significantly decreasing Components of Profit Before Income Tax | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total staff costs | 125,326 | 112,387 | 11.51% | | Less: Amounts included in cost of revenue | (120,293) | (105,496) | 14.03% | | Staff costs (not included in cost of revenue) | 5,033 | 6,891 | -27.00% | | Cost of revenue | 617,699 | 654,881 | -5.68% | | Depreciation - owned assets | 118 | 2,693 | -95.62% | | Depreciation - right-of-use assets | 539 | 459 | 17.43% | Income Tax Expense Income tax expense increased during the period, primarily due to a significant rise in China corporate income tax, while Hong Kong profits tax decreased, and entities in BVI or Cayman Islands are tax-exempt Details of Income Tax Expense | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Current income tax | | | | | - Hong Kong profits tax | 2,157 | 4,471 | -51.76% | | - China corporate income tax | 5,770 | 2,366 | 143.87% | | Total income tax expense | 7,927 | 6,837 | 16.09% | - Hong Kong profits tax is subject to a two-tiered tax rate, with the first HKD 2,000,000 of assessable profits taxed at 8.25% and the remainder at 16.5% 27 - China corporate income tax provision is calculated at 25% 28 Earnings Per Share For the six months ended September 30, 2023, basic earnings per share attributable to owners of the Company was 2.08 HK cents, a decrease from the prior period, with diluted earnings per share being the same as basic earnings per share due to no outstanding potential ordinary shares Earnings Per Share Data | Indicator | 2023 (HKD thousands/HK cents) | 2022 (HKD thousands/HK cents) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Profit attributable to owners of the Company | 20,811 | 27,146 | -23.20% | | Weighted average number of ordinary shares in issue (thousands) | 1,000,000 | 1,000,000 | 0.00% | | Earnings per share (HK cents per share) | 2.08 | 2.71 | -23.10% | - The Company has no outstanding potential ordinary shares, thus diluted earnings per share are equal to basic earnings per share 29 Property and Equipment During the period, the Group neither purchased nor disposed of any property and equipment, while lease liabilities and related right-of-use assets both decreased - The Group did not acquire any property and equipment during the six months ended September 30, 2023 (2022: approximately HKD 16,800,000) 30 - The Group did not dispose of any property and equipment during the six months ended September 30, 2023 and 2022 30 - As of September 30, 2023, lease liabilities of approximately HKD 1,600,000 (March 31, 2023: approximately HKD 2,400,000) were recognized, along with related right-of-use assets of approximately HKD 1,900,000 (March 31, 2023: approximately HKD 2,500,000) 30 Inventories As of September 30, 2023, inventories of finished goods decreased Details of Inventories | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Finished goods | 5,707 | 8,242 | -30.76% | Trade Receivables and Contract Assets Trade receivables significantly decreased during the period, while contract assets notably increased, primarily driven by growth in uncertified work in progress and retention receivables Trade Receivables As of September 30, 2023, trade receivables significantly declined, with the 31 to 90-day aging category accounting for the largest proportion Aging Analysis of Trade Receivables | Aging | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total trade receivables | 12,040 | 174,562 | -93.10% | | Up to 30 days | 2,246 | 74,838 | -96.99% | | 31 to 90 days | 9,794 | 99,724 | -90.17% | - The Group grants credit periods ranging from 14 to 60 days to third-party customers 32 Contract Assets As of September 30, 2023, contract assets significantly increased, primarily due to a substantial rise in uncertified work in progress Details of Contract Assets | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Contract assets related to: | | | | | - Uncertified work in progress | 172,598 | 30,549 | 464.99% | | - Retention receivables | 161,549 | 147,709 | 9.37% | | Total contract assets (less impairment losses) | 332,553 | 176,664 | 88.24% | Prepayments, Deposits and Other Receivables As of September 30, 2023, total prepayments, deposits, and other receivables significantly increased, primarily due to a notable rise in prepayments Details of Prepayments, Deposits and Other Receivables | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Prepayments | 12,261 | 480 | 2454.38% | | Deposits and other receivables | 145 | 624 | -76.76% | | Less: Non-current portion (deposits) | – | (136) | -100.00% | | Total | 12,406 | 968 | 1181.61% | Cash and Cash Equivalents and Restricted Cash As of September 30, 2023, cash and cash equivalents decreased, mainly due to a decline in HKD cash, while restricted cash remained unchanged as collateral for bank facilities Cash and Cash Equivalents As of September 30, 2023, total cash and cash equivalents decreased, with a significant reduction in HKD cash and a slight decrease in RMB cash Cash and Cash Equivalents by Currency | Currency | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | HKD | 155,545 | 241,850 | -35.60% | | RMB | 74,979 | 76,980 | -2.60% | | Total | 230,524 | 318,830 | -27.69% | Restricted Cash As of September 30, 2023, restricted cash remained unchanged at HKD 27,500,000, serving as collateral for bank facilities - As of September 30, 2023, and March 31, 2023, restricted cash of approximately HKD 27,500,000 was held in Hong Kong as collateral for bank facilities granted to the Group 38 Trade Payables As of September 30, 2023, total trade payables significantly decreased, primarily due to substantial declines in payables aged up to 30 days and 31 to 90 days Aging Analysis of Trade Payables | Aging | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Up to 30 days | 82,810 | 116,006 | -28.62% | | 31 to 90 days | 1,117 | 40,388 | -97.23% | | 91 to 180 days | 607 | 24,622 | -97.54% | | Over 180 days | 1,413 | 390 | 262.31% | | Total | 85,947 | 181,406 | -52.62% | Accrued Expenses and Other Payables As of September 30, 2023, total accrued expenses and other payables decreased, mainly due to a decline in contract liabilities and other accrued expenses and payables Details of Accrued Expenses and Other Payables | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Accrued staff salaries and other benefits | 20,018 | 18,784 | 6.57% | | Contract liabilities | 6,527 | 11,422 | -42.86% | | Other accrued expenses and other payables | 2,499 | 8,926 | -71.99% | | Total | 29,044 | 39,132 | -25.80% | Lease Liabilities As of September 30, 2023, total lease liabilities decreased, with a significant decline in the non-current portion Details of Lease Liabilities | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Current | 1,394 | 1,135 | 22.82% | | Non-current | 234 | 1,339 | -82.52% | | Total | 1,628 | 2,474 | -34.19% | - The Group leases various properties for office use, and lease liabilities are measured at the present value of unpaid lease payments over the lease term 40 Dividends, Share Capital and Share Premium The directors do not recommend a dividend for the period, and the company's authorized and issued and fully paid ordinary share capital and share premium remained unchanged Dividends The Board of Directors does not recommend the payment of a dividend for the six months ended September 30, 2023 - The directors do not recommend the payment of a dividend for the six months ended September 30, 2023 (2022: nil) 41 Share Capital As of September 30, 2023, the company's authorized ordinary share capital and issued and fully paid ordinary share capital, including share premium, remained consistent with March 31, 2023 Share Capital and Share Premium | Item | Sep 30, 2023 (HKD thousands) | Mar 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Authorized ordinary share capital | 100,000 | 100,000 | | Issued and fully paid ordinary share capital | 10,000 | 10,000 | | Share premium on issued and fully paid ordinary shares | 120,421 | 120,421 | - Authorized ordinary shares have a par value of HKD 0.01 and a number of 10,000,000 42 - Issued and fully paid ordinary shares have a par value of HKD 0.01 and a number of 10,000,000 42 Contingent Liabilities and Claims As of September 30, 2023, the Group had no significant contingent liabilities, and the directors believe existing insurance coverage is sufficient for potential litigation claims - As of September 30, 2023, the Group had no significant contingent liabilities 43 - The directors believe that the insurance coverage will cover any potential compensation arising from ongoing litigation, and such litigation will not have a material adverse effect on the Group's consolidated financial statements 43 Significant Related Party Transactions Total key management personnel compensation decreased during the period, with reductions in salaries, allowances, and benefits in kind, as well as a slight decrease in retirement benefit expenses Key Management Personnel Compensation | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Salaries, allowances and benefits in kind | 2,418 | 2,677 | -9.67% | | Retirement benefit expenses - defined contribution plans | 27 | 39 | -30.80% | | Total | 2,445 | 2,716 | -9.90% | Review of Interim Financial Report The unaudited interim financial report for the six months ended September 30, 2023, has been reviewed by the Audit Committee without objection - The unaudited interim financial report for the six months ended September 30, 2023, has been reviewed by the Audit Committee without objection 45 Management Discussion and Analysis This section provides management's discussion and analysis of the Group's business operations, financial performance, and future outlook Business Review The Group primarily operates construction business in Hong Kong (including formwork and other construction services) and e-commerce business in China, with the construction segment securing new contracts worth approximately HKD 643 million and the e-commerce segment retailing diverse products through private domain platforms - The Group's principal activities are construction business (providing formwork and other construction services) and e-commerce business 46 Construction Business The Group, as a formwork contractor in Hong Kong, provides traditional and pre-fabricated formwork services, along with other construction services, securing 7 new contracts totaling approximately HKD 643 million and holding 25 outstanding contracts valued at approximately HKD 1.14 billion during the period - The Group is a Hong Kong-based formwork contractor, providing traditional and pre-fabricated formwork services 46 - During the period, 7 new projects with a total contract value of approximately HKD 642,800,000 were secured, with 6 completed 46 - As of September 30, 2023, there were 25 outstanding contracts with a total value of approximately HKD 1,140,200,000 46 E-commerce Business Since March 2021, the Group has engaged in e-commerce through Baiyin Zhiqin (51% owned), strategically positioned as a brand retailer on private domain e-commerce platforms, offering diverse high-quality products including selenium-rich agricultural products, health foods, and beauty products - The Group has been engaged in e-commerce business through Baiyin Zhiqin (51% owned) since March 2021 47 - The Group is strategically positioned as a brand retailer in private domain e-commerce, collaborating with three private domain e-commerce platforms 48 - It offers a variety of products, including selenium-rich agricultural products, health foods, daily necessities, and beauty and skincare products, prioritizing high quality 48 Financial Review Total revenue for the period decreased by 3.46% to HKD 749.2 million, mainly due to reduced construction revenue, despite e-commerce growth; gross profit increased by 8.53% to HKD 131.5 million, with gross margin rising to 17.6%; selling and administrative expenses increased by HKD 5.1 million to HKD 96.7 million due to higher e-commerce sales commissions; profit attributable to owners decreased by 23.2% to HKD 20.8 million, but adjusted profit (excluding government grants) slightly increased by 6.7% Key Financial Review Data | Indicator | 2023 (HKD millions) | 2022 (HKD millions) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Consolidated Revenue | 749.2 | 776.0 | -3.46% | | Construction Business Revenue | 583.3 | 642.4 | -9.19% | | E-commerce Business Revenue | 165.9 | 133.6 | 24.17% | | Gross Profit | 131.5 | 121.1 | 8.59% | | Gross Profit Margin | 17.6% | 15.6% | 2.0 percentage points | | Selling and Administrative Expenses | 96.7 | 91.6 | 5.57% | | Profit for the period attributable to owners of the Company | 20.8 | 27.1 | -23.25% | | Adjusted profit excluding government grants | 20.8 | 19.5 | 6.67% | - The increase in selling and administrative expenses was primarily due to higher sales commission expenses for the e-commerce business 49 Prospects The Group anticipates its e-commerce business to resume an upward trend post-COVID-19, driven by China's growing online retail market, and despite challenges in Hong Kong's construction sector, the directors remain confident in future development given government commitments to land supply and infrastructure investment, aiming to maintain competitive advantages and achieve revenue and net profit growth for shareholder value - The e-commerce business is expected to resume an upward trend in the coming year as the COVID-19 pandemic ends 51 - China's online retail market is projected to continue growing, driving demand for online consumption 51 - Despite challenges and intense competition in the Hong Kong construction business, the directors are confident in its future development, benefiting from the HKSAR Government's commitment to increase land supply and infrastructure investment 51 - The Group is committed to maintaining its comprehensive advantages in a complex business environment, achieving revenue growth and net profit growth, and continuously creating value for shareholders 51 Employees As of September 30, 2023, the Group had 1,068 employees, offering competitive remuneration packages including salaries, performance-based bonuses, and training benefits - As of September 30, 2023, the Group had 1,068 employees 52 - The Group provides competitive remuneration packages based on market rates, employee performance, and Group performance, including salaries, performance-based bonuses, and other benefits such as training 52 Liquidity, Financial Resources and Capital Structure The Group's current ratio increased from 2.8 to 4.0 times, mainly due to a significant reduction in trade payables, while the gearing ratio slightly rose to 6.7% due to increased bank borrowings, with cash and cash equivalents at period-end totaling HKD 230.5 million, and a capital structure comprising HKD 470.1 million in equity and HKD 31.6 million in debt, with HKD 70 million of its HKD 100 million bank facilities remaining unutilized Liquidity and Financial Ratios | Indicator | Sep 30, 2023 | Mar 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Current Ratio | 4.0 times | 2.8 times | 1.2 times | | Gearing Ratio | 6.7% | 6.5% | 0.2 percentage points | - The increase in the current ratio was primarily due to a significant decrease in trade payables 54 - The increase in the gearing ratio was due to increased bank borrowings during the period 54 - As of September 30, 2023, the Group's cash and cash equivalents amounted to approximately HKD 230,500,000 54 - The Group's capital structure comprises equity of approximately HKD 470,100,000 and debt (lease liabilities and bank borrowings) of approximately HKD 31,600,000 54 - The Group has access to HKD 100,000,000 in bank facilities, of which approximately HKD 70,000,000 remains unutilized and unrestricted 55 Market Risk The Group's management mitigates market risks, such as changes in government policies, interest rate fluctuations, or inflation, by managing and monitoring them to ensure timely and effective measures are taken to reduce potential impacts on profitability and business objectives - Market risk refers to risks affecting the Group's profitability or ability to achieve business objectives 56 - The Group's management manages and monitors risks such as changes in government policies, interest rate fluctuations, or inflation 56 Foreign Exchange Risk Operating primarily in Hong Kong and China, the Group is exposed to foreign exchange risks related to HKD and RMB, currently not using derivative financial instruments for hedging, but managing risk by closely monitoring the proportion of non-HKD assets and liabilities - Operating primarily in Hong Kong and China, the Group is exposed to foreign exchange risks arising from relevant currencies, mainly HKD and RMB 57 - Currently, the Group does not use any derivative financial instruments to hedge its foreign exchange risk 57 - The Group closely monitors the proportion of non-HKD assets and liabilities to manage related foreign exchange risk 57 Material Investments Held, Material Acquisitions and Disposals of Subsidiaries and Affiliated Companies For the six months ended September 30, 2023, the Company did not hold any material investments or undertake any material acquisitions or disposals of subsidiaries and affiliated companies - For the six months ended September 30, 2023, the Company did not hold any material investments or undertake any material acquisitions or disposals of subsidiaries and affiliated companies 58 Capital Commitments As of September 30, 2023, the Group had no capital commitments - As of September 30, 2023, the Group had no capital commitments 58 Contingent Liabilities Except as disclosed in Note 19 to the financial statements, the Group had no other contingent liabilities as of September 30, 2023 - Except as disclosed in Note 19 to the financial statements, the Group had no other contingent liabilities as of September 30, 2023 59 Pledge of Group Assets As of September 30, 2023, the Group's bank facilities were secured by bank deposits of HKD 27,500,000, consistent with March 31, 2023 - As of September 30, 2023, the Group's bank facilities were secured by bank deposits of HKD 27,500,000 (March 31, 2023: HKD 27,500,000) 59 Dividends The directors do not recommend the payment of an interim dividend for the six months ended September 30, 2023 - The directors do not recommend the payment of an interim dividend for the six months ended September 30, 2023 (2022: nil) 60 Purchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended September 30, 2023 - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended September 30, 2023 60 Corporate Governance and Other Information This section details the company's corporate governance practices, compliance with trading standards, post-reporting period events, and other relevant information Corporate Governance Practices The Company has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules and complied with all applicable provisions from its listing date to September 30, 2023, except for the non-segregation of Chairman and Chief Executive roles, which are jointly performed by all executive directors - The Company has adopted the Corporate Governance Code as set out in Appendix 14 of the Listing Rules 61 - From its listing date to September 30, 2023, the Company has complied with all applicable provisions of the Corporate Governance Code, except for the non-segregation of the roles of Chairman and Chief Executive 61 - The roles and functions of the Chief Executive are jointly performed by all executive directors, and the Board believes the current arrangement is sufficient to ensure effective business management 61 Standard Code for Securities Transactions by Directors The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules, and all directors confirmed compliance with the required standards during the period - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules 62 - Following specific enquiries with all directors, each director confirmed compliance with the required standards set out in the Standard Code during the period 62 Events After Reporting Period No other significant events occurred after September 30, 2023, up to the date of this interim results announcement for the Company or the Group - No other significant events occurred after September 30, 2023, up to the date of this interim results announcement for the Company or the Group 63 Related Party Transactions Significant related party transactions entered into by the Group for the six months ended September 30, 2023, are detailed in Note 20 of this interim results announcement - Significant related party transactions entered into by the Group for the six months ended September 30, 2023, are detailed in Note 20 of this interim results announcement 63 Sufficient Public Float Based on publicly available information and the directors' knowledge, the Company has maintained the required public float under the Listing Rules from its listing date to the date of this interim results announcement - The Company has maintained the required public float under the Listing Rules from its listing date to the date of this interim results announcement 64 Audit Committee The Company's Audit Committee, composed of three independent non-executive directors, is primarily responsible for reviewing and overseeing financial reporting, risk management, internal control systems, the audit process, and the selection and evaluation of external auditors - The Company's Audit Committee comprises three independent non-executive directors: Ms. Chan Sze Man (Chairperson), Dr. Leung Ka Tung, Surveyor, and Mr. Jiang Jun Gan 64 - The Audit Committee's primary responsibilities include reviewing and overseeing the Group's financial reporting process, risk management, and internal control systems, supervising the audit process, and selecting external auditors and assessing their independence and qualifications 64 Audit Committee Review The accounting information provided in this interim results announcement has not been audited by the Company's external auditor but has been reviewed by the Audit Committee - The accounting information provided in this interim results announcement has not been audited by the Company's external auditor but has been reviewed by the Audit Committee 65 Publication of Interim Results and Interim Report The results announcement has been published on the Company's and the Stock Exchange's websites, and the 2023 interim report will be dispatched to shareholders and simultaneously published on both websites in due course - The results announcement has been published on the Company's website www.chikanck.com and the Stock Exchange's website www.hkexnews.hk 66 - The 2023 interim report will be dispatched to shareholders and simultaneously published on the Stock Exchange's and the Company's websites in due course 66 Acknowledgements The Board of Directors expresses gratitude to the Group's management and all employees for their dedication, and to shareholders, business partners, and other professionals for their continuous support - The Board of Directors extends its sincere gratitude to the Group's management and all employees for their diligence and teamwork, and to all shareholders, business partners, and other professionals for their continuous support during the period 67 - The Board of Directors comprises two executive directors (Mr. Lo Hon Kwong, Ms. Chan Mei Kiu), one non-executive director (Mr. Chan Chung Chau), and three independent non-executive directors (Dr. Leung Ka Tung, Surveyor, Ms. Chan Sze Man, Mr. Jiang Jun Gan) 67
智勤控股(09913) - 2024 - 中期业绩