华夏文化科技(01566) - 2024 - 年度业绩

Financial Highlights as of March 31, 2024 For the year ended March 31, 2024, the company's revenue slightly increased by 1.0% to HK$364.0 million, gross profit surged by 178.4% to HK$55.4 million, and gross margin improved to 15.2%. Loss attributable to owners significantly decreased by 83.5% to HK$170.7 million, with basic loss per share also narrowing substantially Key Financial Data for FY2024 | Indicator | 2024 (HK$ Million) | 2023 (HK$ Million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 364.0 | 360.3 | +1.0 | | Gross Profit | 55.4 | 19.9 | +178.4 | | Gross Margin | 15.2% | 5.5% | +176.4% | | Loss attributable to owners of the Company | (170.7) | (1,033.6) | -83.5 | | Basic Loss Per Share (HK Cents) | (14) | (87) | -83.9 | Consolidated Financial Statements This section presents the consolidated statement of profit or loss and other comprehensive income for the year ended March 31, 2024, and the consolidated statement of financial position as of that date, detailing the company's revenue, costs, expenses, losses, assets, liabilities, and equity structure, reflecting its operating results and financial position during the reporting period Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended March 31, 2024, the company's revenue slightly increased to HK$364.0 million, and gross profit significantly grew to HK$55.4 million. Despite substantial reductions in selling and marketing, administrative, and research and development expenses, finance costs increased, leading to a narrowed annual loss of HK$170.3 million Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue | 364,028 | 360,302 | | Cost of sales and services | (308,652) | (340,362) | | Gross Profit | 55,376 | 19,940 | | Other income | 586 | 16,429 | | Other gains and losses | (12,959) | 2,957 | | Selling, marketing and distribution expenses | (22,050) | (69,198) | | Administrative expenses | (73,031) | (155,748) | | Research and development expenses | (14,907) | (262,570) | | Finance costs | (93,994) | (80,663) | | Loss before tax | (186,234) | (1,057,083) | | Loss for the year | (170,311) | (1,033,146) | | Loss attributable to owners of the Company | (170,679) | (1,033,575) | - Total comprehensive expense for the year significantly decreased from HK$1,032.2 million in 2023 to HK$160.5 million in 2024, primarily due to the substantial narrowing of losses[7][15] Consolidated Statement of Financial Position As of March 31, 2024, both non-current and current assets decreased, leading to a reduction in total assets. Total current and non-current liabilities slightly increased, further expanding net current liabilities and net liabilities, reflecting severe liquidity and solvency pressures faced by the company Summary of Consolidated Statement of Financial Position | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :--- | :--- | :--- | | Non-current assets | 291,065 | 400,559 | | Current assets | 116,869 | 161,938 | | Current liabilities | 1,240,504 | 1,163,995 | | Net current liabilities | (1,123,635) | (1,002,057) | | Non-current liabilities | 212,775 | 283,364 | | Net liabilities | (1,045,345) | (884,862) | | Total capital deficiency | (1,045,345) | (884,862) | - As of March 31, 2024, the company recorded net current liabilities of HK$1,123.6 million and net liabilities of HK$1,045.3 million, with cash and cash equivalents of only HK$11.7 million, indicating severe liquidity issues[35] Notes to the Consolidated Financial Statements This section details the basis of preparation, accounting policies, specific composition and changes in assets and liabilities, and the ongoing concern challenges and debt restructuring progress. It provides an in-depth understanding of the company's financial position and operating results, including revenue recognition, segment information, interests in associates and a joint venture, and detailed analysis of receivables, payables, and borrowings Company Information China Cultural Technology Group Limited is incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange. The company and its subsidiaries are primarily engaged in the sale of anime derivative products, the establishment and operation of indoor theme parks, and multimedia animation entertainment businesses - The Company is an investment holding company, with principal activities including the sale of anime derivative products, operation of indoor theme parks, and multimedia animation entertainment[26] Application of Amendments to Hong Kong Financial Reporting Standards The Group first applied new and amended Hong Kong Financial Reporting Standards issued by the HKICPA this year, including adjustments to accounting policy disclosures and deferred tax recognition scope. These amendments had no material impact on the Group's financial position or performance but affected the disclosure of accounting policies - The Group first applied new and amended Hong Kong Financial Reporting Standards, including HKAS 1 (Disclosure of Accounting Policies) and HKAS 12 (Deferred Tax)[9][21][28][30] - The application of these amendments had no material impact on the Group's financial position or performance, but affected the disclosure of accounting policies in Note 3 to the consolidated financial statements[30][31] Basis of Preparation of Consolidated Financial Statements The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and comply with the disclosure requirements of the Listing Rules and the Hong Kong Companies Ordinance. However, the company faces severe going concern issues, including substantial losses, net current liabilities, net liabilities, and significant overdue debts. Management is addressing these challenges through debt restructuring and new fundraising, but the success of these efforts remains highly uncertain - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and comply with the disclosure requirements of the Listing Rules and the Hong Kong Companies Ordinance[34] - The company faces significant going concern doubts, recording a net loss of HK$170.3 million, net current liabilities of HK$1,123.6 million, and net liabilities of HK$1,045.3 million as of March 31, 2024, with a large amount of borrowings due or maturing within 12 months[35] - The company's restructuring plan was approved by creditors on June 27, 2023, and sanctioned by the High Court on March 19, 2024, but the effectiveness of going concern remains contingent on the ultimate success of the restructuring plan and the acquisition of new funds[25][37][51] Going Concern The company's ability to continue as a going concern faces significant uncertainty, primarily due to substantial losses, net current liabilities, and a large amount of overdue debts. Management relies on the success of debt restructuring, new fundraising, and cost control measures to sustain operations, but the ultimate outcome of these factors remains uncertain - The company's total bank and other borrowings, bonds payable, and guaranteed notes amount to HK$951.4 million, of which HK$887.7 million is due or will mature within the next twelve months, while cash and cash equivalents are only HK$11.7 million[35] - The company has received multiple demand letters and statutory demands from bondholders, further exacerbating liquidity pressure[35] - The going concern assumption is contingent on the successful completion of debt restructuring, the acquisition of additional new funds, the successful dismissal of statutory demands, and effective cost control measures[24][36][50] Revenue and Segment Information The Group's revenue primarily derives from three segments: sale of anime derivative products, establishment and operation of indoor theme parks, and multimedia animation entertainment. For the year ended March 31, 2024, total revenue slightly increased by 1.0%, with significant growth in indoor theme park revenue and a decrease in anime derivative product sales. Japan is the main source of revenue, while China holds the largest share of non-current assets - The Group's operating and reportable segments are: (i) sale of anime derivative products; (ii) establishment and operation of indoor theme parks; and (iii) multimedia animation entertainment[38] Disaggregation of Revenue from Contracts with Customers | Revenue Source | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :--- | :--- | :--- | | Sale of anime derivative products | 146,285 | 172,376 | | Ticket sales | 209,115 | 178,982 | | Sale of theme park machines | 6,957 | 7,136 | | Licensing income from indoor theme parks | 1,668 | 1,808 | | Licensing income from multimedia animation entertainment | 3 | – | | Total | 364,028 | 360,302 | - Revenue recognition is primarily completed at a point in time, amounting to HK$361.8 million in 2024, with revenue recognized over time being HK$2.2 million[41] Revenue Classification and Recognition Revenue is classified by sale of anime derivative products, ticket sales, sale of theme park machines, and licensing income. Revenue from anime derivative products and theme park machine sales is recognized when control is transferred, ticket sales revenue is recognized upon ticket redemption or expiry, and licensing income is recognized over time - Revenue from the sale of anime derivative products is recognized when control of the goods is transferred to the customer, i.e., when the goods are delivered to the customer's designated destination[42] - Revenue from ticket sales is recognized when customers receive and redeem tickets upon entering the theme park; revenue from tickets sold for future use is deferred and recognized as contract liabilities[43] - Licensing income from indoor theme parks and multimedia animation entertainment is recognized over time in accordance with the terms of the licensing agreements[44] Segment Revenue and Results For the year ended March 31, 2024, the indoor theme park segment generated revenue of HK$216.0 million, and the anime derivative product sales segment generated revenue of HK$148.0 million. All segments recorded losses, but the multimedia animation entertainment segment's loss significantly narrowed Segment Revenue and Loss (HK$ Thousand) | Segment | 2024 Revenue | 2024 Loss | 2023 Revenue | 2023 Loss | | :--- | :--- | :--- | :--- | :--- | | Sale of anime derivative products | 147,977 | (5,068) | 172,376 | (9,051) | | Establishment and operation of indoor theme parks | 216,048 | (15,843) | 187,926 | (376,710) | | Multimedia animation entertainment | 3 | (8,608) | – | (471,042) | | Total | 364,028 | (29,519) | 360,302 | (856,803) | - Unallocated expenses, other income, gains and losses, and finance costs led to a significant reduction in loss before tax from HK$1,057.1 million in 2023 to HK$186.2 million in 2024[61] Segment Assets and Liabilities As of March 31, 2024, total segment assets were HK$383.5 million, a decrease from 2023. The establishment and operation of indoor theme parks segment accounted for the largest share of assets. Total segment liabilities were HK$245.4 million, with unallocated liabilities (such as bonds and bank borrowings) comprising the majority of total consolidated liabilities Segment Assets (HK$ Thousand) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Sale of anime derivative products | 90,073 | 99,470 | | Establishment and operation of indoor theme parks | 288,270 | 390,465 | | Multimedia animation entertainment | 5,159 | 12,917 | | Total segment assets | 383,502 | 502,852 | Segment Liabilities (HK$ Thousand) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Sale of anime derivative products | 3,502 | 3,245 | | Establishment and operation of indoor theme parks | 241,862 | 295,764 | | Total segment liabilities | 245,364 | 299,009 | - Total consolidated liabilities amounted to HK$1,453.3 million, with bonds (HK$721.0 million) and secured bank and other borrowings (HK$205.3 million) being the main components[212] Geographical Location and Major Customer Information The Group operates in Hong Kong, Japan, Cambodia, and China. Japan is the primary source of revenue, while China holds the largest share of non-current assets. Customers A1 and B1 are the Group's major clients, with their revenue primarily derived from the sale of anime derivative products Revenue from External Customers by Geographical Location (HK$ Thousand) | Region | 2024 | 2023 | | :--- | :--- | :--- | | China | 33,772 | – | | Hong Kong | 82,778 | – | | Japan | 247,478 | 360,302 | | Total | 364,028 | 360,302 | Non-current Assets by Geographical Location (HK$ Thousand) | Region | 2024 | | :--- | :--- | | China | 228,265 | | Hong Kong | 148 | | Japan | 39,146 | | Cambodia | 8,460 | | Total | 276,019 | Major Customer Revenue (HK$ Thousand) | Customer | 2024 | 2023 | | :--- | :--- | :--- | | Customer A1 | 82,772 | 78,120 | | Customer B1 | 41,294 | 44,087 | Other Gains and Losses For the year ended March 31, 2024, the Group recorded other losses of approximately HK$13.0 million, compared to gains of approximately HK$3.0 million in the prior year. This change was primarily due to increased net losses from write-offs and disposals of property, plant and equipment, and net losses from put options granted to non-controlling interests Other Gains and Losses (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Net foreign exchange gains | 234 | 632 | | Gain on lease modification | – | 3,058 | | Net (loss)/gain on put options granted to non-controlling interests | (4,149) | 969 | | Loss on disposal of property, plant and equipment | (11,616) | (1,708) | | Gain on settlement of legal case | 1,377 | – | | Other gains | 1,195 | 5 | | Total | (12,959) | 2,957 | - The increase in loss was mainly due to an increase in net loss from write-offs and disposals of property, plant and equipment of approximately HK$9.9 million, and a net loss from put options granted to non-controlling interests of approximately HK$4.1 million[145] Taxation The Group's tax credit primarily resulted from over-provision for Hong Kong profits tax and Japanese corporate tax in prior years, and under-provision for PRC corporate income tax. Hong Kong profits tax operates under a two-tiered system, PRC subsidiaries are taxed at 25%, and Japanese corporate tax rate is 23.25% Tax Credit (HK$ Thousand) | Item | 2024 | | :--- | :--- | | Hong Kong profits tax: Current tax | – | | Over-provision in prior years | (13,459) | | Under-provision in prior years (PRC corporate income tax) | 1,188 | | Over-provision in prior years (Japanese corporate tax) | (3,957) | | Current tax | 305 | | Total | (15,923) | - Under Hong Kong's two-tiered profits tax system, the first HK$2 million of assessable profits is taxed at 8.25%, with the remainder at 16.5%. PRC subsidiaries are taxed at 25%, and the Japanese corporate tax rate is 23.25%[230][240][252] Loss for the Year For the year ended March 31, 2024, the company's annual loss was HK$170.3 million. Total staff costs amounted to HK$75.5 million, with salaries and other benefits accounting for HK$62.7 million. Other major expenses included cost of inventories, legal and professional fees, depreciation and amortization, and research and development costs Items Deducted in Calculating Loss for the Year (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Total staff costs | 75,499 | 72,482 | | Auditors' remuneration (audit services) | 3,226 | 3,227 | | Cost of inventories recognized as an expense | 146,500 | 145,234 | | Legal and professional fees | 14,032 | 54,537 | | Depreciation of property, plant and equipment | 38,735 | 59,806 | | Depreciation of right-of-use assets | 25,170 | 28,715 | | Amortisation of intangible assets | 2,188 | 33,779 | | Research and development costs | 14,907 | 262,570 | - Total salaries and other benefits of approximately HK$31.6 million were included in cost of sales and services, approximately HK$5.1 million in research and development expenses, and approximately HK$26.0 million in administrative expenses[242] Dividends The Board does not recommend the payment of any final dividend for the year ended March 31, 2024, consistent with 2023 - The Board does not recommend the payment of a final dividend for the year ended March 31, 2024[243] Loss Per Share For the year ended March 31, 2024, basic loss per share was HK$0.14, a significant narrowing from HK$0.87 in 2023. Diluted loss per share was the same as basic loss per share, as the exercise price of share options was higher than the average market price of the company's shares, thus having no dilutive effect Loss Per Share (HK$) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Basic loss per share | (0.14) | (0.87) | | Diluted loss per share | (0.14) | (0.87) | - Basic loss per share is calculated based on the loss attributable to owners of the Company of HK$170.7 million and the weighted average number of ordinary shares in issue of 1,182.0 million shares[245] - Diluted loss per share is the same as basic loss per share because the exercise price of share options was higher than the average market price of the shares, thus having no dilutive effect[246] Financial Assets at Fair Value Through Other Comprehensive Income As of March 31, 2024, the Group held financial assets at fair value through other comprehensive income totaling HK$3.5 million, primarily comprising unlisted debt investments and a small amount of equity securities listed in Hong Kong. These investments are designated for long-term strategic purposes, with short-term fair value fluctuations not recognized in profit or loss Financial Assets at Fair Value Through Other Comprehensive Income (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Equity securities listed in Hong Kong | 25 | 1,128 | | Unlisted debt investments | 3,517 | 3,604 | | Total | 3,542 | 4,732 | - Listed equity investments are designated as at fair value through other comprehensive income because they are held for long-term strategic purposes, and short-term fair value fluctuations are not consistent with the profit or loss recognition strategy[247] - The business model for unlisted debt investments aims to collect contractual cash flows and sell financial assets simultaneously, thus classified as at fair value through other comprehensive income[255] Intangible Assets The Group's intangible assets include film production rights and applications, anime characters, indoor theme park operating rights, and trademarks. As of March 31, 2024, the carrying value of intangible assets was zero, primarily due to amortization and impairment losses recognized during the year. These assets all have finite useful lives and are amortized on a straight-line basis Carrying Value of Intangible Assets (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Film production rights and applications | – | 963 | | Anime characters | – | 997 | | Indoor theme park operating rights | – | 228 | | Trademarks | – | – | | Total | – | 2,188 | - Intangible assets include film production rights and applications (amortized over 2 to 5 years), anime characters (amortized over 5 years), indoor theme park operating rights (amortized over 10 years), and trademarks (amortized over 5 years)[68][257][259][260][261] Interests in Associates The Group holds interests in associates including Changzhou Joypolis, Triple Blessing, Shi Yun, and Jia Yu. Changzhou Joypolis primarily operates indoor theme parks, while Triple Blessing and Shi Yun mainly develop and license intellectual property. Jia Yu develops logistics and theme parks. Some associates face impairment risks due to lack of funds or market reasons, leading to the Group not recognizing further losses Carrying Value of Interests in Associates (HK$ Thousand) | Associate | 2024 | 2023 | | :--- | :--- | :--- | | Changzhou Joypolis | 2,926 | 2,941 | | Triple Blessing | – | – | | Shi Yun | – | – | | Jia Yu | 2,730 | 2,577 | | Total | 5,666 | 5,528 | - The Group holds a 48% equity interest and voting rights in Triple Blessing and Shi Yun, but is only considered to have significant influence due to the lack of dominant voting power[262] - Triple Blessing and Shi Yun's intangible assets have been fully impaired due to failure to collect consideration from licensees and loss of contact[266][268][284] - Jia Yu has not commenced land development due to lack of funds and pandemic impact, with the recoverable amount of its land being approximately HK$25.1 million, and an impairment loss reversal of HK$920,000 recognized[70][71][72] Interests in a Joint Venture The Group holds a 50% equity interest and voting rights in Kai Jing Global Limited, a joint venture in multimedia animation entertainment. As Kai Jing Global failed to collect any consideration from its licensee and lost contact, its intangible assets have been fully impaired, and the Group has not recognized further losses Carrying Value of Interests in a Joint Venture (HK$ Thousand) | Joint Venture | 2024 | 2023 | | :--- | :--- | :--- | | Kai Jing Global Limited | – | – | - Kai Jing Global holds intangible assets—anime characters, but failed to collect any consideration from licensee C and lost contact, leading to legal action being taken against them[80] - Kai Jing Global's intangible assets have been fully impaired, and the Group has not recognized further losses, as its share of losses has accumulated to its interest in the joint venture[79][272] Trade Receivables As of March 31, 2024, the Group's net trade receivables amounted to HK$41.6 million, a decrease from 2023. The Group generally grants credit terms of 30 to 90 days to customers, with some strategic partners extending up to 180 days. Receivables overdue by more than 365 days have been provided for impairment, reflecting a significant increase in credit risk Trade Receivables (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Trade receivables | 269,739 | 268,248 | | Less: Accumulated impairment losses | (228,130) | (214,324) | | Net | 41,609 | 53,924 | Ageing Analysis of Trade Receivables (by invoice date, HK$ Thousand) | Ageing | 2024 | 2023 | | :--- | :--- | :--- | | 0 to 90 days | 34,071 | 29,211 | | 91 to 180 days | 280 | 10,888 | | 181 to 365 days | 6,592 | 7,276 | | Over 365 days | 666 | 6,550 | | Total | 41,609 | 53,924 | - As of March 31, 2024, total trade receivables overdue by more than 365 days, amounting to approximately HK$225.7 million (before impairment provision), were considered credit-impaired[306] Other Receivables, Deposits and Prepayments As of March 31, 2024, total other receivables, deposits, and prepayments amounted to HK$56.5 million, a decrease from 2023. This primarily included deposits for the acquisition of property, plant and equipment and deposits for theme park development projects. A portion of the theme park development deposits has been used for R&D expenses of the metaverse theme park Other Receivables, Deposits and Prepayments (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Rental deposits | 4,748 | – | | Prepayments | 50,169 | – | | Total | 56,540 | 63,818 | Deposits for acquisition of property, plant and equipment/Deposits for theme park development projects (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Deposits for acquisition of property, plant and equipment | 72,492 | 72,492 | | Deposits for theme park development projects | 50,000 | 54,400 | | Total | 122,492 | 126,892 | - Of the deposits for theme park development projects, HK$4.4 million has been utilized for research and development expenses of the metaverse theme park[277] Trade Payables As of March 31, 2024, total trade payables amounted to HK$6.3 million, largely consistent with 2023. The average credit period for goods purchased ranges from 0 to 30 days Trade Payables (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Trade payables | 6,255 | 6,266 | | Total | 6,255 | 6,266 | Ageing Analysis of Trade Payables (by invoice date, HK$ Thousand) | Ageing | 2024 | 2023 | | :--- | :--- | :--- | | 0 to 30 days | 630 | 1,330 | | 31 to 60 days | 32 | – | | 61 to 90 days | 57 | – | | Over 90 days | 5,536 | 4,936 | | Total | 6,255 | 6,266 | Amount Due to a Director As of March 31, 2024, the amount due to a director was zero, compared to HK$25 thousand in 2023. This amount was unsecured, interest-free, and repayable on demand Amount Due to a Director (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Amount due to a director | – | 25 | - This amount was unsecured, interest-free, and repayable on demand[295] Bank and Other Borrowings As of March 31, 2024, total bank and other borrowings amounted to HK$205.3 million, a slight decrease from 2023. Of this, bank borrowings due within one year were HK$26.9 million, and other borrowings were HK$123.5 million. The company did not pledge bank deposits to secure bank financing Bank and Other Borrowings (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Bank borrowings and overdrafts | 80,490 | 100,249 | | Other borrowings | 124,841 | 113,115 | | Total | 205,331 | 213,364 | Carrying Amount of Bank Borrowings Repayable Within (HK$ Thousand) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Within one year | 26,883 | 21,933 | | Over one year but not exceeding two years | 8,230 | 28,485 | | Over two years but not exceeding five years | 31,936 | 26,334 | | Over five years | 13,441 | 23,497 | | Total | 80,490 | 100,249 | Carrying Amount of Other Borrowings Repayable Within (HK$ Thousand) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Within one year | 123,462 | 98,801 | | Over one year but not exceeding two years | 827 | 12,739 | | Over two years but not exceeding five years | 552 | 1,575 | | Total | 124,841 | 113,115 | - As of March 31, 2024, the Group had not pledged bank deposits to secure bank financing[88] Events After the Reporting Period The company's restructuring plan with creditors was approved on June 27, 2023, and sanctioned by the Hong Kong High Court on March 19, 2024. The plan will become effective upon the fulfillment of all preconditions, including the completion of the subscription - The restructuring plan was approved by creditors at the scheme meeting on June 27, 2023, and sanctioned by the Hong Kong High Court on March 19, 2024[137] - The creditors' scheme will become effective upon the fulfillment of all preconditions, including the completion of the subscription[137] Management Discussion and Analysis This section reviews the Group's market performance in the theme park, gaming, and toy industries, and provides a detailed analysis of each business segment's operations. Management highlights the progress of debt restructuring and future business development strategies, including online-offline integration, VR technology application, and IP resource development. The financial review delves into the reasons for changes in revenue, costs, expenses, and losses, and discusses the company's capital structure, liquidity, and future investment plans Industry Review In 2023, the Japanese theme park industry saw a strong recovery, with innovative business models and intelligent transformation becoming key focuses. China's gaming market experienced slower growth and increased competition, with license approvals affecting new product launches, but the mobile gaming market share continued to rise, and the metaverse concept gained traction. The Chinese toy industry showed steady growth, with significant technological innovation, evolving consumer demands, and increased e-commerce sales, achieving notable success in overseas markets Theme Park Business Market In 2023, the Japanese theme park industry experienced a strong recovery, with operating rates and visitor numbers returning to pre-pandemic levels. Industry trends include innovative business models (such as immersive theme parks, VR gaming experience centers), investment in intelligent management systems, and the gradual implementation of green and environmental protection concepts - In 2023, the Japanese theme park industry experienced a strong recovery, with operating rates and visitor numbers returning to pre-pandemic levels[128][140] - Innovative business models emerged in the industry, such as immersive theme parks and VR gaming experience centers, with increased investment in intelligent management systems[128] Gaming Business In 2023, China's gaming market experienced slower growth, impacted by macroeconomic downturns and tighter regulations. Domestic game brands faced intensified competition, putting pressure on small and medium-sized enterprises. Slow license approvals hindered new product launches. The mobile gaming market share continued to increase, and the metaverse concept gained popularity, though practical applications still require technological breakthroughs - In 2023, the growth rate of China's gaming market total revenue slowed, with a year-on-year increase of approximately 5%, significantly lower than the high growth rates of previous years[131] - Mobile games remained the primary growth driver in China's gaming market, accounting for over 70% of total market revenue[89] - The metaverse concept gained significant attention, with gaming companies heavily investing in its development, but practical applications still require technological breakthroughs and increased consumer acceptance[169] China Toy Industry In 2023, China's toy industry showed steady growth, with continuous technological innovation (such as AR/VR applications) and product design improvements. Consumers showed strong demand for high-quality, educational, and eco-friendly toys. E-commerce sales significantly increased, and overseas market development achieved notable results, with some leading enterprises substantially increasing their international market share - Chinese toy companies increased investment in technological innovation, with emerging technologies like AR/VR becoming increasingly common in toy development[133] - The expansion of e-commerce channels drove an increase in online sales, with toy sales on major e-commerce platforms maintaining rapid growth[133] - Chinese toy manufacturers actively expanded into overseas markets, maintaining a strong growth trend in sales performance, with some leading enterprises significantly increasing their international market share[93] Business Review In its anime derivative product trading business, the Group maintained stability amidst fierce competition by adjusting sales strategies and providing value-added services. For indoor theme park operations, the new JOYPOLIS SPORTS park is expected to open in Kai Tak, Hong Kong, in December 2024, and existing parks have fully resumed operations. IP projects in multimedia animation entertainment have resumed and are undergoing commercial negotiations to expand into peripheral areas such as theme parks, online live streaming, and virtual platforms Anime Derivative Product Trading Business Despite global inflation and rising operating costs, the prevalence of trendy toys and IP culture drove overall order volumes in the anime derivative products market. The Group maintained steady progress amidst market competition by adjusting sales strategies and providing high-quality value-added services - The prevalence of trendy toys and IP culture drove overall order volumes in the anime derivative products market, but intense market competition led to price reductions by peers[305] - The Group maintained steady progress in its trading business by adjusting sales strategies and providing high-quality value-added services, while reviewing operating costs and benefits[305] Indoor Theme Park Business The Group is collaborating with investors to open a new JOYPOLIS SPORTS park, expected in Kai Tak, Hong Kong, in December 22024. Existing CA SEGA branded parks (including SEGA JOYPOLIS in Tokyo and Sendai, Japan, and JOYPOLIS in Shanghai, China) have fully resumed operations but still face challenges from global economic instability - The new JOYPOLIS SPORTS park is expected to open in Kai Tak, Hong Kong, in December 2024[109][127] - The Group's CA SEGA branded parks (Tokyo, Sendai in Japan, and Shanghai in China) have fully resumed operations but still face challenges from global economic instability[109] Multimedia Animation Entertainment Business The Group's business partners have resumed IP projects and are conducting commercial negotiations, aiming to expand into peripheral areas such as theme parks, online live streaming, and virtual platforms - The Group's business partners have resumed IP projects and are conducting commercial negotiations to expand into peripheral areas such as theme parks, online live streaming, and virtual platforms[110] Business Outlook Upon completion of debt restructuring, the Group expects to relaunch with Meta JOYPOLIS online business, virtual theme parks, big data platforms, online social media, trendy toy platforms, and enhanced CA SEGA JOYPOLIS operations and gaming systems. Future plans include continued development of virtual reality parks, enriching anime IP resources, and leveraging an app to divert offline park visitors to online trendy toy platforms, achieving online-offline synergistic development - Upon completion of debt restructuring, the Group will relaunch with Meta JOYPOLIS online business, virtual theme parks, big data platforms, online social media, trendy toy platforms, and enhanced CA SEGA JOYPOLIS operations and gaming systems[113] - The Group will continue to develop various types of CA SEGA JOYPOLIS theme parks (including metaverse-themed virtual reality parks) and launch IP-themed parks and attractions through rich anime IP resources[113] - The Group plans to use an app to divert offline park visitors to online trendy toy platforms, set up IP trendy toy exclusive zones in indoor parks, and organize IP touring exhibitions and influencer live streams to achieve online-offline synergy[114] Financial Review The Group's revenue for the year ended March 31, 2024, slightly increased by 1.0%, gross profit surged by 178.4%, and gross margin significantly improved. The substantial narrowing of losses was primarily due to significant reductions in selling and distribution expenses, R&D expenses, impairment losses under the expected credit loss model, and losses from associates and a joint venture. Other income significantly decreased due to a lease waiver gain in the prior year Revenue For the year ended March 31, 2024, revenue slightly increased by 1.0% to HK$364.0 million, primarily due to a HK$29.8 million increase in revenue from the establishment and operation of indoor theme parks. Revenue from anime derivative product sales decreased by 14.2%, while indoor theme park revenue increased by 15.0%. Visitor numbers significantly decreased by 41.7% Revenue Overview (HK$ Thousand) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | 364,028 | 360,302 | | Revenue from sale of anime derivative products | 148,000 | 172,400 | | Revenue from establishment and operation of indoor theme parks | 216,000 | 187,900 | Visitor Numbers (Thousands) | Region | 2024 | 2023 | | :--- | :--- | :--- | | China | 368 | 553 | | Japan | 380 | 606 | | Total | 748 | 1,159 | - Multimedia animation entertainment revenue increased from zero in 2023 to approximately HK$3,000 in 2024, including anime character licensing and VR game experience center ticket sales[143] Gross Profit and Gross Margin The Group's gross profit significantly increased by 178.4% to HK$55.4 million, with gross margin improving from 5.5% to 15.2%. This was primarily attributable to a reduction in cost of sales and services for the theme park segment Gross Profit and Gross Margin Overview | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Gross Profit (HK$ Thousand) | 55,376 | 19,940 | | Gross Margin (%) | 15.2 | 5.5 | - Gross profit and gross margin significantly increased, primarily due to a reduction in cost of sales and services recognized by the theme park segment for the year ended March 31, 2024[156] Other Income Other income significantly decreased from HK$16.4 million in 2023 to HK$0.6 million in 2024, primarily because Shanghai JOYPOLIS received a HK$11.5 million waiver of lease payable in 2023, with no such gain in 2024 Other Income (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Other income | 586 | 16,429 | - The decrease in other income was mainly due to Shanghai JOYPOLIS receiving a HK$11.5 million waiver of lease payable in 2023, with no such gain in 2024[157] Cost of Sales and Services Cost of sales and services decreased by 9.3% from HK$340.4 million in 2023 to HK$308.7 million in 2024, primarily due to reduced depreciation and amortization of theme park assets Cost of Sales and Services (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Cost of sales and services | 308,652 | 340,362 | - The decrease in cost of sales and services was mainly due to a reduction in depreciation and amortization of theme park assets for the year ended March 31, 2024[144] Other Gains and Losses The Group recorded losses of approximately HK$13.0 million in 2024, compared to gains of approximately HK$3.0 million in 2023. This change was primarily due to an increase in net losses from write-offs and disposals of property, plant and equipment of approximately HK$9.9 million, and net losses from put options granted to non-controlling interests of approximately HK$4.1 million Other Gains and Losses (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Other gains and losses | (12,959) | 2,957 | - The increase in loss was mainly due to an increase in net loss from write-offs and disposals of property, plant and equipment of approximately HK$9.9 million, and a net loss from put options granted to non-controlling interests of approximately HK$4.1 million[145] Selling and Distribution Expenses Selling and distribution expenses significantly decreased by 68.1% from HK$69.2 million in 2023 to HK$22.1 million in 2024, with its percentage of revenue falling from 19.2% to 6.1%. The reduction was primarily due to a decrease in marketing expenses of approximately HK$42.5 million Selling and Distribution Expenses (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Selling, marketing and distribution expenses | (22,050) | (69,198) | - The decrease in selling and distribution expenses was mainly due to a reduction in marketing expenses of approximately HK$42.5 million[146] Research and Development Expenses Research and development expenses significantly decreased from HK$262.6 million in 2023 to HK$14.9 million in 2024. This substantial reduction was due to the Group's inability to raise funds to cover related expenses, only being able to issue bonds to service providers, which hindered the original online business development strategy Research and Development Expenses (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Research and development expenses | (14,907) | (262,570) | - The significant decrease in research and development expenses was due to the Group's inability to raise funds to cover related expenses, only being able to issue bonds to service providers[147] - The original strategy was to develop online businesses, including Meta JOYPOLIS, virtual theme parks, big data platforms, online social media, trendy toy platforms, and enhance CA SEGA JOYPOLIS operations and gaming systems[147] Impairment Losses Under Expected Credit Loss Model For the year ended March 31, 2024, impairment losses (net of reversal) under the expected credit loss model amounted to approximately HK$11.9 million, a significant decrease from HK$283.7 million in 2023. This primarily included impairment losses on trade receivables and impairment loss reversals on other receivables and deposits Impairment Losses Under Expected Credit Loss Model (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Impairment losses under expected credit loss model, net of reversal | (11,876) | (283,743) | - Impairment losses included impairment losses on trade receivables of approximately HK$13.8 million (2023: HK$115.6 million), and impairment loss reversals on other receivables and deposits of approximately HK$2.0 million (2023: HK$167.6 million)[150] Loss Attributable to Owners of the Company Loss attributable to owners of the Company significantly decreased by 83.5% from HK$1,033.6 million in 2023 to HK$170.7 million in 2024. This was primarily due to reduced impairment losses on property, plant and equipment, right-of-use assets, and intangible assets, decreased impairment losses on severely overdue receivables, reduced selling, marketing and distribution expenses, R&D expenses, and administrative expenses, as well as lower share of losses from a joint venture and associates Loss Attributable to Owners of the Company (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Loss attributable to owners of the Company | (170,679) | (1,033,575) | - The significant reduction in loss was mainly due to: (i) a decrease in impairment losses on property, plant and equipment, right-of-use assets, and intangible assets of approximately HK$45.3 million; (ii) a decrease in impairment losses on severely overdue receivables of approximately HK$271.9 million; (iii) a decrease in selling, marketing and distribution expenses of approximately HK$41.7 million; (iv) a decrease in research and development expenses of approximately HK$247.7 million; (v) a decrease in share of losses from a joint venture and associates of approximately HK$185.8 million; and (vi) a decrease in administrative expenses of approximately HK$82.7 million[151] Deposits for Acquisition of Property, Plant and Equipment Deposits for the acquisition of property, plant and equipment decreased by HK$7.3 million from HK$63.8 million in 2023 to HK$56.5 million in 2024 Deposits for Acquisition of Property, Plant and Equipment (HK$ Thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Deposits for acquisition of property, plant and equipment | 56,500 | 63,800 | Use of Net Proceeds from Global Offering The net proceeds of approximately HK$298.6 million from the company's 2015 global offering were fully utilized as of March 31, 2024. Funds were primarily used for capital expenditure and working capital for Shanghai JOYPOLIS, investment or acquisition of anime-related companies, development of music anime concerts, and repayment of bonds and related expenses - The net proceeds of approximately HK$298.6 million from the company's 2015 global offering were fully utilized as of March 31, 2024[174] Use of Net Proceeds from Global Offering (HK$ Million) | Purpose | Intended Use (%) | Intended Use (HK$ Million) | Actual Utilized (HK$ Million) | Unutilized (HK$ Million) | | :--- | :--- | :--- | :--- | :--- | | Capital expenditure and working capital for Shanghai JOYPOLIS | 40.0 | 119.4 | 119.4 | – | | Potential investment or acquisition of anime-related companies | 15.3 | 45.7 | 45.7 | – | | Development of music anime concerts | 20.0 | 59.7 | 59.7 | – | | Working capital and general corporate purposes | 22.8 | 68.1 | 68.1 | – | | Repayment of bonds, interest and related expenses | 1.9 | 5.7 | 5.7 | – | | Total | 100.0 | 298.6 | 298.6 | – | Capital Structure, Liquidity and Financial Resources As of March 31, 2024, the company's authorized share capital was HK$500.0 million, with issued share capital of approximately HK$118.2 million. Cash and bank balances were approximately HK$11.7 million, a decrease from the prior year. The gearing ratio was approximately 258.7%, an increase from the prior year, indicating increased financial leverage. The company plans to enhance revenue streams through theme park licensing models, online theme park membership systems, VR technology, and anime IP derivative product sales - As of March 31, 2024, the company's authorized share capital was HK$500.0 million, with issued share capital of approximately HK$118.2 million[155] - Cash and bank balances were approximately HK$11.7 million, a decrease from HK$36.2 million in 2023, primarily due to loans obtained in the prior year[162] - The gearing ratio (calculated as bank and other borrowings, lease liabilities, guaranteed notes, and bonds divided by total assets) was approximately 258.7% (2023: 195.6%)[176] - The company plans to enhance revenue streams through theme park licensing models, online theme park membership systems, VR technology, and anime IP derivative product sales[177] Future Plans for Material Investments and Capital Assets The Board believes that by promoting anime cultural technology, the company can gain more profitable opportunities in 'culture + property' projects, collaborating with the Chinese government and property developers to develop the anime cultural technology industry, achieving greater project returns with low-cost investment - The Board believes that by promoting anime cultural technology, the company can gain more high-quality 'culture + property' project profit opportunities[101] - The company plans to collaborate with the Chinese government and other property developers or investors to develop the anime cultural technology industry in various regions of China, aiming for greater project returns with low-cost investment[101] Mortgages and Charges As of March 31, 2024, the Group had not pledged bank deposits to secure bank financing - As of March 31, 2024, the Group had not pledged bank deposits to secure bank financing[88] Contingent Liabilities As of March 31, 2024, the Group had no significant contingent liabilities - As of March 31, 2024, the Group had no significant contingent liabilities[165] Foreign Exchange Risk There have been no significant changes in the Group's policy regarding exchange rate risk. Transactions are primarily denominated in HKD, RMB, JPY, or USD. Management closely monitors foreign exchange risk and considers using hedging instruments when appropriate - There have been no significant changes in the Group's policy regarding exchange rate risk[179] - The Group's transactions are primarily denominated in HKD, RMB, JPY, or USD, and management closely monitors foreign exchange risk and considers using hedging instruments[179] Significant Events After the Reporting Period The company's restructuring plan with creditors was approved on June 27, 2023, and sanctioned by the Hong Kong High Court on March 19, 2024. The plan will become effective upon the fulfillment of all preconditions, including the completion of the subscription - The restructuring plan was approved by creditors on June 27, 2023, and sanctioned by the Hong Kong High Court on March 19, 2024[166] - The creditors' scheme will become effective upon the fulfillment of all preconditions, including the completion of the subscription[166] Other Information This section covers the company's environmental policy, employee and remuneration policies, securities trading, corporate governance practices, audit committee responsibilities, excerpts from the independent auditor's report (including material uncertainties related to going concern), and general information such as the annual general meeting and publication of the annual report Environmental Policy The Group is committed to environmental protection, adhering to recycling and energy-saving principles, and encouraging employees to support environmental practices in the office, such as using recycled paper and turning off idle lights and appliances to reduce power consumption - The Group is committed to environmental protection, adhering to recycling and energy-saving principles[181] - Employees are encouraged to support environmental protection in the office, including using recycled paper and turning off idle lights and appliances[181] Employees and Remuneration Policy As of March 31, 2024, the Group had 203 employees, a decrease from the prior year. Total employee remuneration, benefits in kind, and retirement scheme contributions amounted to approximately HK$75.5 million, a slight increase. Remuneration packages are determined by reference to employee experience, qualifications, and market conditions, with training and share option schemes provided to incentivize staff Number of Employees and Remuneration (HK$ Thousand) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Number of Employees | 203 | 301 | | Employee remuneration, benefits in kind and retirement scheme contributions | 75,500 | 72,500 | - Remuneration packages are determined by reference to individual employees' experience and qualifications, as well as overall market conditions[182] - The company has a share option scheme to provide incentives and rewards to eligible directors and employees; as of March 31, 2024, 42,910,000 share options lapsed[182] Purchase, Sale or Redemption of Securities Save for the repayment of guaranteed notes and placement of bonds as disclosed in the 'Capital Structure, Liquidity and Financial Resources' section of this announcement, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's securities for the year ended March 31, 2024 - Save for the repayment of guaranteed notes and placement of bonds, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's securities for the year ended March 31, 2024[194] Audit Committee and Review of Financial Information The Audit Committee, comprising three independent non-executive directors, has reviewed the Group's audited consolidated financial statements, accounting principles, and practices for the year ended March 31, 2024, and discussed audit, risk management, internal control, and financial reporting matters with management. The Committee believes the annual financial results comply with relevant accounting standards, rules, and regulations - The Audit Committee, comprising three independent non-executive directors, has reviewed the Group's audited consolidated financial statements and accounting principles for the year ended March 31, 2024[195][301] - The Committee has discussed audit, risk management, internal control, and financial reporting matters with management, and believes the annual financial results comply with relevant accounting standards, rules, and regulations[195][303] - The Group's auditor, W. H. Tang & Co. Certified Public Accountants Limited, has reconciled the financial figures in the preliminary announcement with the audited consolidated financial statements[199] Compliance with Corporate Governance Code The Group is committed to maintaining high standards of corporate governance and has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules. Although the roles of Chairman and Chief Executive Officer are held by the same individual, deviating from Code Provision C.2.1, the Board believes this dual role model is more efficient and will review the current structure at an appropriate time - The Group has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules, committed to maintaining high standards of corporate governance[184] - The roles of Chairman and Chief Executive Officer are held by the same individual, deviating from Code Provision C.2.1, but the Board believes this model is more efficient and will review it at an appropriate time[171][196] Compliance with Model Code for Securities Transactions The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions. Following inquiry, all directors confirmed full compliance with the Model Code for the year ended March 31, 2024 - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions[103] - All directors confirmed full compliance with the required standards set out in the Model Code for the year ended March 31, 2024[103] Final Dividend The Board resolved not to recommend the payment of any final dividend for the year ended March 31, 2024 - The Board resolved not to recommend the payment of any final dividend for the year ended March 31, 2024[91][197] Extract of Independent Auditor's Report The independent auditor issued a disclaimer of opinion on the Group's consolidated financial statements for the year ended March 31, 2024, primarily due to material uncertainties related to the going concern assumption. The company faces substantial losses, net current liabilities, and significant overdue debts, with its ability to continue as a going concern dependent on the success of debt restructuring, new fundraising, and effective cost control measures, all of which involve significant uncertainties Basis for Disclaimer of Opinion The auditor could not conclude on the appropriateness of the going concern basis of accounting due to a lack of detailed analysis from management. The validity of the going concern assumption depends on the successful completion of debt restructuring, the acquisition of additional new funds, the successful dismissal of statutory demands, and effective cost control measures, all of which involve material uncertainties - The auditor could not conclude on the appropriateness of the going concern basis of accounting due to a lack of detailed analysis from management[201] - The validity of the going concern assumption depends on the successful completion of debt restructuring, the acquisition of additional new funds, the successful dismissal of statutory demands, and effective cost control measures[191][201] Material Uncertainty Related to Going Concern The Group recorded a net loss of approximately HK$170.3 million, net current liabilities of approximately HK$1,123.6 million, and net liabilities of approximately HK$1,045.3 million. Total bank and other borrowings, bonds payable, and guaranteed notes amounted to approximately HK$951.4 million, of which approximately HK$887.7 million was due or will mature within the next twelve months, while cash and cash equivalents were only approximately HK$11.7 million. These conditions constitute a material uncertainty regarding the ability to continue as a going concern - The Group recorded a net loss of approximately HK$170.3 million, net current liabilities of approximately HK$1,123.6 million, and net liabilities of approximately HK$1,045.3 million[189] - Total bank and other borrowings, bonds payable, and guaranteed notes amounted to approximately HK$951.4 million, of which approximately HK$887.7 million was due or will mature within the next twelve months, while cash and cash equivalents were only approximately HK$11.7 million[189] - These conditions, along with other matters, indicate the existence of a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern[200] Annual General Meeting The upcoming Annual General Meeting will be held on August 28, 2024. The notice of the Annual General Meeting and all other relevant documents will be published and dispatched to shareholders - The upcoming Annual General Meeting will be held on Wednesday, August 28, 2024[202] - The notice of the Annual General Meeting and all other relevant documents will be published and dispatched to shareholders[202] Closure of Register of Members To determine the right to attend and vote at the Annual General Meeting on August 28, 2024, the company will suspend the registration of share transfers from August 23, 2024, to August 28, 2024. All share transfer documents must be lodged with Hong Kong Central Share Registrar Services Limited by 4:30 p.m. on August 22, 2024, for registration - To determine the right to attend and vote at the Annual General Meeting, the company will suspend the registration of share transfers from August 23, 2024, to August 28, 2024 (both dates inclusive)[208] - All share transfer documents must be lodged with Hong Kong Central Share Registrar Services Limited by 4:30 p.m. on August 22, 2024, for registration[208] Public Float As of the date of this annual results announcement, the company's issued shares maintained a sufficient public float as required by the Listing Rules - As of the date of this annual results announcement, the company's issued shares maintained a sufficient public float as required by the Listing Rules[204](index=204&ty