中国再生医学(08158) - 2024 - 年度业绩

Supplementary Announcement Overview This announcement supplements China Regenerative Medical International Limited's 2023 annual report, addressing significant impairment loss, auditor's qualified opinion, and restatement of prior year financial statements - This announcement supplements China Regenerative Medical International Limited's 2023 annual report, primarily addressing significant impairment loss on third-party receivables, the auditor's qualified opinion on 2022 impairment loss, and the restatement of prior year agency business financial statements[1] Impairment Loss on Other Receivables | Year | Impairment Loss Amount (HKD) | | :--- | :--------------------------- | | 2023 | 83,001,000 | | 2022 | 7,273,000 | Significant Impairment Loss on Other Receivables This section details the significant impairment loss on other receivables, including valuation methodology, inputs, assumptions, and commercial reasons for changes Impairment Loss Amount and Valuation Methodology The company engaged an independent valuer to assess expected credit loss provisions for other receivables in the aesthetic medical and beauty segment for 2023 and 2022 Provision for Expected Credit Loss on Other Receivables | Year | Provision Amount (HKD) | | :--- | :--------------------- | | 2023 | 83,001,000 | | 2022 | 7,273,000 | - The valuer used a settlement analysis approach, based on historical quarterly aging and default records, to assess full-lifetime expected credit loss, particularly useful when debtor financial information is unavailable for in-depth credit assessment[3] Valuation Inputs and Assumptions Impairment is determined by expected credit loss under HKFRS 9, with key inputs being probability of default and loss given default, influenced by macroeconomic indicators Expected Credit Loss Input Data for Other Receivables as of December 31, 2023 | Metric | Value | | :---------------------------------------- | :-------------------------------------------- | | Full-lifetime Probability of Default (Current Quarter) | 14.11% | | Loss Given Default Rate | 63.65% | | Expected Credit Loss Rate (Days Past Invoice) | 8.98% (Current Quarter) to 47.90% (Over 365 Days from Invoice Date) | - In determining the probability of default, the valuer considered changes in business cooperation with counterparties in 2023 and management's discussions on an expected 5-year repayment plan, elevating the risk category from general industry risk to a specific B3 rating[5] - Forward-looking adjustments used a regression model, incorporating historical and 2023 forecasted macroeconomic indicators (GDP and CPI) and historical market default data[5] Significant Changes in Inputs and Commercial Reasons Significant changes in valuation inputs for FY2023, including credit risk category and repayment period, reflect increased credit risk due to business suspension with third parties - In FY2023, the credit risk category was elevated from general industry risk in FY2022 to a specific B3 risk category[6] - The repayment period extended from 1 to 2 years in FY2022 to 2.5 years in FY2023, based on a 5-year repayment plan[6] Comparison of Probability of Default and Expected Credit Loss Rate (2022 vs 2023) | Metric | December 31, 2022 | December 31, 2023 | | :---------------------------------------- | :---------------- | :---------------- | | Full-lifetime Probability of Default (Current Quarter) | 1.74% to 3.34% | 14.11% | | Expected Credit Loss Rate (Days Past Invoice) | 1.08% to 10.99% | 8.98% to 47.90% | - In FY2023, due to the suspension of business operations with third parties since May, the vast majority of other receivables could no longer be settled by offsetting future operating costs, leading to the assumption of high collection risk for all other receivables[8] Auditor's Qualified Opinion This section addresses the auditor's qualified opinion regarding the impairment loss on receivables for 2022, including its basis, management's view, and plans to address it Basis of Qualified Opinion The auditor issued a qualified opinion due to insufficient audit evidence to assess the reasonableness of assumptions for the HKD 7.273 million impairment loss on 2022 receivables - The auditor could not obtain sufficient appropriate audit evidence to assess the reasonableness and appropriateness of the basis and assumptions used by the company for the impairment loss of approximately HKD 7,273,000 recognized on receivables as of December 31, 2022[9] - The auditor believes this matter may affect the comparability of the current year's figures with the corresponding figures for the previous year ended December 31, 2022, thus issuing a qualified opinion[9] Management and Audit Committee's View Management and the Audit Committee agree that expected credit loss provisions are based on professional expertise and valuation reports, not differing from the auditor's opinion for FY2022 - Management and the Audit Committee agree that the expected credit loss provision is based on professional expertise and the valuer's assessment report[10] - Management and the Audit Committee do not believe that the auditor's qualified opinion arising in FY2023 will lead to a different view on the expected credit loss provision for FY2022[10] Plan to Address Qualified Opinion The qualified opinion on 2022 impairment loss will only have a carry-forward impact on 2023 retained earnings and opening balance of other receivables, with no impact on 2024 - The auditor's qualified opinion will only have a carry-forward impact on retained earnings and the opening balance of other receivables for FY2023[11] - This qualified opinion will not have a carry-forward impact on FY2024[11] Restatement of Prior Year Financial Statements This section explains the restatement of prior year financial statements due to reclassification of revenue recognition for agency business from gross to net basis Background and Reasons for Restatement The group's subsidiary engaged Chinese entities for aesthetic medical and beauty services, with revenue from designated services now recognized on a net basis as an agent - The Group's subsidiary engaged Chinese entities to provide aesthetic medical and beauty services since 2021, with approximately HKD 204,743,000 (2022) and HKD 220,774,000 (2021) derived from designated services (agency business)[12] - Following management review, it was determined that under HKFRS 15, the Group acts as an agent in providing these services, and revenue should be recognized on a net basis[12] Impact of Restatement on Financial Statements Restatement reduced revenue and cost of sales for FY2022 and FY2021, but gross profit, basic and diluted EPS, and accumulated losses remained unchanged Impact of Restatement on Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended December 31, 2022 (HKD '000) | Metric | Previously Reported | Misstatement Correction | Restated | | :----------- | :------------------ | :---------------------- | :------- | | Revenue | 231,612 | (190,075) | 41,537 | | Cost of Sales| (193,989) | 190,075 | (3,914) | | Gross Profit | 37,623 | – | 37,623 | Impact of Restatement on Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended December 31, 2021 (HKD '000) | Metric | Previously Reported | Misstatement Correction | Restated | | :----------- | :------------------ | :---------------------- | :------- | | Revenue | 282,897 | (178,962) | 103,935 | | Cost of Sales| (215,170) | 178,962 | (36,208) | | Gross Profit | 67,727 | – | 67,727 | - The aforementioned financial statement misstatement corrections had no impact on basic and diluted earnings per share or accumulated losses for the years ended December 31, 2021 and 2022[13] Agency Business Performance After Restatement and Outlook Post-restatement, agency business incurred a net loss in FY2023, a shift from profit in FY2022, attributed to seasonal effects and a shift of Chinese customers to Hong Kong clinics Agency Business Net Profit/Loss (Restated) | Year | Net Profit/Loss (HKD) | | :--- | :-------------------- | | 2023 | (881,000) (Loss) | | 2022 | 14,668,000 (Profit) | - The Chinese New Year in Q1 2023 caused seasonal effects, leading to fewer client visits to clinics and poorer financial performance[13] - Since May 2023, Chinese clinic centers have generated no revenue, as more Chinese customers chose to visit Hong Kong clinic centers after cross-border restrictions were lifted[13] - The company expects the agency business to further shrink in 2024, while the Hong Kong business is anticipated to flourish[13] Other Information This section provides general information regarding the announcement's compliance with GEM Listing Rules and its public availability - The information in this announcement is published in compliance with the GEM Listing Rules, and the directors collectively and individually assume full responsibility for its content[14] - The announcement will be posted on the Stock Exchange's website and the company's website for at least seven days from the date of publication[14]