Financial Highlights Key Financial Indicators During the reporting period, the Group experienced significant declines in revenue and gross profit, with an expanded loss, primarily due to challenging business conditions and reduced customer orders; revenue decreased by 49.5% year-on-year, gross profit by 81.3%, and the loss for the period widened from HK$12.7 million to HK$29.5 million, with no interim dividend recommended by the Board | Indicator | Six Months Ended June 30, 2024 (HKD million) | Six Months Ended June 30, 2023 (HKD million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 43.5 | 86.2 | -49.5% | | Gross Profit | 3.7 | 19.8 | -81.3% | | Loss for the Period | 29.5 | 12.7 | +132.3% | | Interim Dividend | Not Recommended | Nil | - | Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the company's revenue was HK$43.5 million, a 49.5% decrease year-on-year; gross profit was HK$3.7 million, an 81.3% sharp decline; operating loss expanded from HK$7.6 million to HK$26.3 million due to increased administrative expenses; ultimately, loss for the period widened to HK$29.5 million, with basic loss per share at 35.65 HK cents | Item (HKD '000) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Revenue | 43,495 | 86,163 | | Gross Profit | 3,742 | 19,830 | | Operating Loss | (26,349) | (7,614) | | Loss Before Tax | (29,388) | (12,534) | | Loss for the Period | (29,464) | (12,667) | | Basic and Diluted Loss Per Share (HK cents) | (35.65) | (15.8) | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the company's total assets decreased to HK$187 million from HK$234 million at the end of 2023; total liabilities were HK$178 million, and total equity significantly shrank from HK$34.26 million at the beginning of the year to HK$8.94 million; notably, the company reported a net current liability of approximately HK$133 million, indicating severe liquidity pressure | Item (HKD '000) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 150,000 | 180,103 | | Current Assets | 37,301 | 53,674 | | Total Assets | 187,301 | 233,777 | | Equity and Liabilities | | | | Total Equity | 8,944 | 34,261 | | Non-current Liabilities | 11,946 | 22,093 | | Current Liabilities | 166,416 | 177,423 | | Total Liabilities | 178,362 | 199,516 | | Total Equity and Liabilities | 187,306 | 233,777 | Condensed Consolidated Statement of Changes in Equity Due to a loss of HK$29.5 million recorded during the reporting period, the Group's total equity significantly decreased by 73.9% from HK$34.3 million at the beginning of the year to HK$8.9 million at period-end - As of June 30, 2024, total equity decreased from HK$34,261 thousand at the beginning of the year to HK$8,944 thousand, primarily due to a loss of HK$29,464 thousand recorded during the period8 Condensed Consolidated Statement of Cash Flows During the reporting period, net cash outflow from operating activities was HK$1.9 million, largely consistent with the prior year; investment activities generated a small net cash inflow, while net cash outflow from financing activities significantly decreased; cash and cash equivalents (including bank overdrafts) at period-end were negative HK$10.6 million, indicating tight liquidity | Item (HKD '000) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (1,874) | (1,869) | | Net Cash From Investing Activities | 385 | 8,426 | | Net Cash Used in Financing Activities | (251) | (6,278) | | Cash and Cash Equivalents at End of Period | (10,649) | (11,078) | Notes to the Financial Statements Basis of Preparation and Going Concern Risk While the financial statements are prepared on a going concern basis, management explicitly highlights significant uncertainties that may cast substantial doubt on the ability to continue as a going concern; key risks include a significant loss for the period, substantial net current liabilities of approximately HK$133 million, and large bank loans of approximately HK$123 million repayable within one year; to address this, the company has formulated several measures, including cost control, negotiating loan renewals with banks, planning property disposals, and seeking new financing when appropriate - The company faces significant going concern risks, primarily evidenced by a loss of HK$29.464 million as of June 30, 2024, net current liabilities of approximately HK$133 million, and bank loans and overdrafts of approximately HK$123 million repayable within one year12 - To improve its financial position, the directors have taken or plan to take measures including strict cash flow monitoring, implementing cost controls, negotiating loan renewals with banks, disposing of certain properties, and seeking additional financing12 Revenue and Segment Reporting All company revenue is derived from a single operating segment, the production of books and paper products; geographically, Hong Kong and the United States are the primary revenue sources, both experiencing significant declines of 48.4% and 57.2% respectively during the reporting period - The Group operates in a single business segment: the production of books and paper products16 | Region (HKD '000) | H1 2024 | H1 2023 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Hong Kong | 23,782 | 46,051 | -48.4% | | United States | 16,920 | 39,511 | -57.2% | | Mainland China | 2,482 | 9 | +27477.8% | | United Kingdom | 311 | 472 | -34.1% | | Total | 43,495 | 86,163 | -49.5% | Loss Per Share and Dividends During the reporting period, basic and diluted loss per share significantly widened to 35.65 HK cents from 15.8 HK cents in the prior year, reflecting a deterioration in the company's profitability; the Board decided not to declare an interim dividend for the six months ended June 30, 2024 - Basic loss per share expanded from HK$12,667,000 in the prior year to HK$29,464,000, calculated based on a weighted average of 82,659,000 shares22 - The Board does not recommend the payment of a dividend for the six months ended June 30, 202424 Management Discussion and Analysis Business Review and Future Prospects Challenging business conditions and reduced customer orders led to a significant decline in company revenue and expanded losses; the core strategic adjustment during the reporting period was the cessation of operations at the Group's Shenzhen factory in June 2024; going forward, remaining operations will outsource some production orders to Chinese subcontractors while utilizing the Hong Kong factory for specialized orders (e.g., religious, political prints) not feasible in mainland China, aiming to significantly reduce fixed costs and improve cash flow - The Group's Shenzhen factory ceased operations in June 202431 - The business model will shift from in-house factory production to outsourcing printing orders to external subcontractors in China, while continuing production at the Hong Kong factory, aiming to significantly reduce the company's fixed overhead costs and improve its cash flow31 Financial Review This section details the reasons for changes in various financial indicators; revenue decreased by 49.5% primarily due to reduced sales orders; cost of sales decreased by 40.0% but at a slower rate than revenue, causing gross profit margin to sharply decline from 23.0% to 8.6%; other income fell by 79.4% due to reduced scrap sales, government subsidies, and asset disposal gains; administrative expenses, conversely, increased by 9.3% due to write-offs of fixed assets and inventories | Item | Change | Primary Reason | | :--- | :--- | :--- | | Revenue | -49.5% | Challenging business environment, reduced sales orders | | Cost of Sales | -40.0% | Reduced revenue and sales orders | | Gross Profit and Gross Margin | Gross Profit -81.3%, Gross Margin from 23.0% to 8.6% | Reduced sales orders | | Other Income | -79.4% | Reduced scrap sales, foreign exchange gains, government subsidies, and machinery disposal gains | | Administrative Expenses | +9.3% | Increased write-offs of fixed assets and inventories | Liquidity, Financial Resources, and Capital Structure The Group faces severe liquidity challenges, with net current liabilities of approximately HK$133 million and cash and cash equivalents of only HK$0.64 million at period-end; the gearing ratio (total borrowings/total equity) sharply deteriorated from 4.0 at the end of 2023 to 13.9; total bank borrowings, overdrafts, and lease liabilities amounted to approximately HK$125 million; additionally, the company completed a share consolidation (10 shares into 1) in August 2023 | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net Current Liabilities | HK$132.7 million | HK$123.7 million | | Cash and Cash Equivalents | HK$0.64 million | - | | Current Ratio | 0.2 | 0.3 | | Gearing Ratio | 13.9 | 4.0 | - On August 29, 2023, the company completed a share consolidation where every 10 shares were consolidated into 1 share44 Employees and Remuneration Policy Due to the cessation of operations at the Shenzhen factory, the Group's organizational scale underwent drastic changes, with the number of employees significantly decreasing from 448 as of December 31, 2023, to 23 as of June 30, 2024, a reduction of 94.9% - Due to the cessation of operations at the Shenzhen factory, the Group's employee count significantly decreased from 448 at the end of 2023 to 23 at the end of the reporting period47 Significant Investments, Acquisitions, and Disposals During the reporting period, the Group disposed of certain machinery and assets in conjunction with the cessation of operations at the Shenzhen factory; no other significant investment, acquisition, or disposal plans exist beyond those already disclosed - In May and June 2024, the Group disposed of certain machinery and assets to facilitate the cessation of operations at the Shenzhen factory48 Other Information Corporate Governance The company complied with the Corporate Governance Code during the reporting period, with one deviation: the roles of Chairman and Chief Executive Officer are held by the same individual, Mr. Lam Sam Ming; the Board believes this arrangement, given Mr. Lam's extensive industry experience and founder status, facilitates effective management and business development, aligning with the company's best interests - The company deviated from the Corporate Governance Code's provision requiring separation of the Chairman and Chief Executive Officer functions, with both roles held by Mr. Lam Sam Ming50 - The Board believes that Mr. Lam holding both positions is in the Group's best interest, and the Board, comprising three independent non-executive directors, is sufficient to ensure a balance of power50 Directors' and Major Shareholders' Interests Mr. Lam Sam Ming, the company's Chairman and Executive Director, is the controlling shareholder, holding 48,000,000 shares through his wholly-owned company First Tech Inc., representing 55.17% of the company's issued share capital; First Tech has pledged a portion of its shares (equivalent to 8.28% of total share capital) to third-party Easy Credit Limited as collateral for a loan | Shareholder Name | Capacity | Number of Shares Held | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Lam Sam Ming | Interest in Controlled Corporation | 48,000,000 | 55.17% | | First Tech Inc. | Beneficial Owner | 48,000,000 | 55.17% | | Easy Credit Limited | Chargee | 7,200,000 | 8.28% | - Controlling shareholder First Tech has pledged a portion of its shares (8.28% of total share capital) to Easy Credit Limited as collateral for a loan5760
万里印刷(08385) - 2024 - 中期财报