中国顺客隆(00974) - 2024 - 中期业绩

Company Information and Financial Highlights Company Overview China Shun Ke Long Holdings Limited (Stock Code: 974) operates retail and wholesale businesses in China and Macau, reporting H1 2024 unaudited interim results - The company's principal businesses are retail store operation and management and merchandise wholesale, primarily in China and Macau[1] - This interim results announcement covers the unaudited condensed consolidated results for the six months ended June 30, 2024[1] Financial Highlights H1 2024 revenue decreased 4.6% to RMB 308,164 thousands, and loss expanded 47.0% to RMB (18,747) thousands Financial Highlights for the Six Months Ended June 30 | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :------- | :------------------ | :------------------ | :--------- | | Revenue | 308,164 | 323,177 | -4.6% | | Gross Profit | 38,783 | 46,064 | -15.8% | | Loss for the Period | (18,747) | (12,751) | 47.0% | Financial Highlights at Period End | Metric | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | Change (%) | | :------- | :------------------------- | :-------------------------- | :--------- | | Total Assets | 328,208 | 365,506 | -10.2% | | Total Liabilities | 196,273 | 215,091 | -8.7% | Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For H1 2024, the company reported revenue of RMB 308,164 thousands and gross profit of RMB 38,783 thousands, with loss expanding to RMB 18,747 thousands and basic and diluted loss per share of RMB 0.06 Key Data from Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :----------- | :------------------ | :------------------ | | Revenue | 308,164 | 323,177 | | Cost of Inventories Sold | (269,381) | (277,113) | | Gross Profit | 38,783 | 46,064 | | Other Operating Income | 8,589 | 13,360 | | Selling and Distribution Costs | (56,311) | (60,278) | | Administrative Expenses | (6,891) | (9,406) | | Loss Before Tax | (18,677) | (12,747) | | Income Tax Expense | (70) | (4) | | Loss for the Period | (18,747) | (12,751) | | Loss Per Share | (0.06) | (0.04) | Condensed Consolidated Statement of Financial Position As of June 30, 2024, total non-current assets were RMB 122,128 thousands, total current assets RMB 206,080 thousands, total current liabilities RMB 159,237 thousands, and net current assets RMB 46,843 thousands, with net assets decreasing to RMB 131,935 thousands Key Data from Condensed Consolidated Statement of Financial Position | Metric | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :------------- | :------------------------- | :-------------------------- | | Total Non-current Assets | 122,128 | 131,072 | | Total Current Assets | 206,080 | 234,434 | | Total Current Liabilities | 159,237 | 170,265 | | Net Current Assets | 46,843 | 64,169 | | Total Assets Less Current Liabilities | 168,971 | 195,241 | | Non-current Liabilities | 37,036 | 44,826 | | Net Assets | 131,935 | 150,415 | Condensed Consolidated Statement of Changes in Equity For H1 2024, total equity attributable to owners decreased from RMB 149,181 thousands to RMB 130,852 thousands, mainly due to a loss of RMB 18,596 thousands Changes in Equity Attributable to Owners of the Company | Metric | January 1, 2024 (RMB thousands) | June 30, 2024 (RMB thousands) | | :--------------- | :------------------------ | :------------------------ | | Equity Attributable to Owners of the Company | 149,181 | 130,852 | | Non-controlling Interests | 1,234 | 1,083 | | Total Equity | 150,415 | 131,935 | - The loss for the period of RMB 18,596 thousands was the primary reason for the decrease in equity attributable to owners of the company[6] Condensed Consolidated Statement of Cash Flows For H1 2024, net cash used in operating, investing, and financing activities led to a net decrease in cash and cash equivalents of RMB (23,837) thousands Key Data from Condensed Consolidated Statement of Cash Flows | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :------------------- | :------------------ | :------------------ | | Net Cash (Used in) from Operating Activities | (3,855) | 6,526 | | Net Cash Used in Investing Activities | (4,349) | (1,415) | | Net Cash Used in Financing Activities | (15,633) | (22,996) | | Net Decrease in Cash and Cash Equivalents | (23,837) | (17,885) | | Cash and Cash Equivalents at End of Period | 25,118 | 31,438 | Notes to the Condensed Consolidated Financial Information General Information and Basis of Preparation The company, incorporated in the Cayman Islands and listed on HKEX, primarily operates retail and wholesale businesses in China and Macau, with financial statements presented in RMB under IAS 34 and Listing Rules Appendix D2 - The company is incorporated in the Cayman Islands, with principal operations in China and Macau, its controlling shareholder is GONGXIAO DAJI Group, and the ultimate controlling party is the All China Federation of Supply and Marketing Cooperatives[9] - The condensed consolidated financial statements are presented in RMB and comply with International Accounting Standard 34 and the disclosure requirements of Appendix D2 to the Listing Rules of the Stock Exchange of Hong Kong Limited[10] Principal Accounting Policies Financial statements are prepared on a historical cost basis, with certain financial instruments at fair value, and new IFRS amendments had no significant impact on financial performance or position - The financial statements are primarily prepared on a historical cost basis, with certain financial instruments measured at fair value[11] - The IFRS amendments first applied in this period (including amendments to IFRS 16, IAS 1, IAS 7, and IFRS 7) had no significant impact on the Group's financial performance and position[13] Application of New and Revised International Financial Reporting Standards Several IFRS amendments, including those to IFRS 16, IAS 1, IAS 7, and IFRS 7, were first applied during this interim period, but they had no significant impact on the Group's financial performance, position, or disclosures - New IFRS amendments applied in this period include IFRS 16 (lease liabilities in a sale and leaseback), IAS 1 (classification of liabilities as current or non-current, non-current liabilities with covenants), and IAS 7 and IFRS 7 (supplier finance arrangements)[13] - The application of these new standards and amendments had no significant impact on the Group's financial performance, position, or disclosures[13] Operating Segment Information The Group operates two reportable segments: retail store operations and wholesale distribution, with retail store operations incurring a loss of RMB 16,839 thousands and wholesale distribution achieving a profit of RMB 25 thousands for H1 2024 - The Group's principal operating segments are retail store operations (selling fresh food, groceries, and household products) and wholesale distribution (selling fast-moving consumer goods and groceries)[14] Segment Revenue and Results | Segment | 2024 Revenue (RMB thousands) | 2023 Revenue (RMB thousands) | 2024 Segment (Loss)/Profit (RMB thousands) | 2023 Segment Loss (RMB thousands) | | :----------- | :---------------------- | :---------------------- | :--------------------------------- | :-------------------------- | | Retail store operations | 231,307 | 255,292 | (16,839) | (10,829) | | Wholesale distribution | 76,857 | 67,885 | 25 | (38) | | Total | 308,164 | 323,177 | (16,814) | (10,867) | Segment Revenue and Results For H1 2024, external customer revenue from retail store operations was RMB 231,307 thousands and from wholesale distribution was RMB 76,857 thousands, with the retail store operations segment incurring a loss of RMB 16,839 thousands and the wholesale distribution segment achieving a profit of RMB 25 thousands Revenue from External Customers | Segment | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--------- | :------------------ | :------------------ | | Retail store operations | 231,307 | 255,292 | | Wholesale distribution | 76,857 | 67,885 | | Total | 308,164 | 323,177 | - The retail store operations segment incurred a loss of RMB 16,839 thousands, while the wholesale distribution segment achieved a profit of RMB 25 thousands[15] Geographical Information All of the Group's revenue from external customers is derived from China, where its non-current assets are primarily located, with no single customer contributing 10% or more of revenue Geographical Revenue and Non-current Assets | Region | 2024 Revenue (RMB thousands) | 2023 Revenue (RMB thousands) | June 30, 2024 Non-current Assets (RMB thousands) | December 31, 2023 Non-current Assets (RMB thousands) | | :--------- | :---------------------- | :---------------------- | :----------------------------------- | :------------------------------------ | | China | 308,164 | 323,177 | 115,174 | 123,818 | | Hong Kong | – | – | 80 | 148 | | Total | 308,164 | 323,177 | 115,254 | 123,966 | - All of the Group's revenue from external customers is derived from China, and no single customer contributed 10% or more of revenue[18] Revenue and Other Operating Income Revenue for the period, totaling RMB 308,164 thousands, primarily stemmed from merchandise sales through retail store operations and wholesale distribution, while other operating income of RMB 8,589 thousands mainly comprised promotional income from suppliers and investment property rental income Revenue Composition | Revenue Source | 2024 (RMB thousands) | 2023 (RMB thousands) | | :------------------- | :------------------ | :------------------ | | General retail sales from retail store operations | 135,950 | 158,856 | | Bulk sales from retail store operations | 84,856 | 94,088 | | Integrated wholesale from wholesale distribution | 76,857 | 62,561 | | Franchise sales commission from retail store operations | 6,292 | 2,374 | | Rental income from sub-leased retail areas | 4,209 | 5,298 | | Total Revenue | 308,164 | 323,177 | Other Operating Income Composition | Other Operating Income Source | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--------------- | :------------------ | :------------------ | | Gain on lease termination | 183 | 806 | | Gain on disposal of property, plant and equipment | 89 | 387 | | Government grants | 8 | 323 | | Interest income from bank deposits | 130 | 192 | | Promotional income from suppliers | 5,299 | 6,990 | | Net rental income from investment properties | 1,371 | 1,313 | | Others | 1,509 | 3,349 | | Total Other Operating Income | 8,589 | 13,360 | Revenue Revenue for the period, totaling RMB 308,164 thousands and representing a 4.6% year-on-year decrease, primarily derived from merchandise sales, including general retail sales, bulk sales from retail store operations, and integrated wholesale from wholesale distribution Revenue Disaggregation by Source and Timing of Recognition | Revenue Source/Timing of Recognition | 2024 (RMB thousands) | 2023 (RMB thousands) | | :---------------- | :------------------ | :------------------ | | Total sales of goods | 303,955 | 317,879 | | Rental income | 4,209 | 5,298 | | Total Revenue | 308,164 | 323,177 | | Timing of revenue recognition: At a point in time | 303,955 | 317,879 | Other Operating Income Other operating income for the period amounted to RMB 8,589 thousands, a 35.7% decrease from the prior year, primarily due to reduced promotional income from suppliers and government grants Details of Other Operating Income | Income Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :----------------- | :------------------ | :------------------ | | Gain on lease termination | 183 | 806 | | Gain on disposal of property, plant and equipment | 89 | 387 | | Government grants | 8 | 323 | | Interest income from bank deposits | 130 | 192 | | Promotional income from suppliers | 5,299 | 6,990 | | Net rental income from investment properties | 1,371 | 1,313 | | Others | 1,509 | 3,349 | | Total | 8,589 | 13,360 | - The net difference in gain on lease termination was RMB 183 thousands in 2024, primarily involving a decrease in right-of-use assets and lease liabilities[21] Loss Before Tax The Group's loss before tax was RMB 18,677 thousands, primarily driven by factors such as depreciation, employee benefit expenses, and finance costs Components of Loss Before Tax | Expense Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :----------------- | :------------------ | :------------------ | | Depreciation of property, plant and equipment | 3,571 | 3,721 | | Depreciation of investment properties | 163 | 163 | | Depreciation of right-of-use assets | 14,303 | 16,019 | | Total employee benefit expenses | 29,846 | 31,947 | Finance Costs Finance costs for the period amounted to RMB 2,264 thousands, primarily comprising interest on bank borrowings and lease liabilities, representing a decrease from the prior year Details of Finance Costs | Finance Cost Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :----------- | :------------------ | :------------------ | | Interest on bank borrowings | 562 | 223 | | Interest on lease liabilities | 1,702 | 2,255 | | Total | 2,264 | 2,478 | Income Tax Expense Income tax expense for the period was RMB 70 thousands, primarily from a Chinese subsidiary that was reclassified as not being a small-profit enterprise, leading to a tax top-up, while Hong Kong and Macau subsidiaries had no taxable profits - Income tax expense for the period was RMB 70 thousands, an increase of RMB 66 thousands compared to the same period last year[24] - The increase in income tax was primarily due to a Chinese subsidiary being reclassified by the local tax authority as not a small-profit enterprise for 2020, requiring a top-up payment for previously enjoyed tax benefits[24] - The Group's Chinese subsidiaries generally pay enterprise income tax at a rate of 25%, but high-tech enterprises may enjoy a preferential tax rate of 15%[24] Dividends No dividends were paid or proposed by the company for the six months ended June 30, 2024 - The company has neither paid nor proposed any dividends during the period or since the end of the reporting period[25] Loss Per Share For H1 2024, the basic and diluted loss per share attributable to owners of the company expanded to RMB (0.06) from RMB (0.04) in the prior year Loss Per Share Calculation Data | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--------------- | :------------------ | :------------------ | | Loss for the period attributable to owners of the company | (18,596) | (12,622) | | Weighted average number of ordinary shares | 290,457,000 | 290,457,000 | | Basic and diluted loss per share | (0.06) | (0.04) | - As there were no outstanding potential dilutive ordinary shares for both periods, the diluted loss per share was the same as the basic loss per share[26] Capital Expenditure During the period, the Group acquired property, plant and equipment totaling RMB 4,916 thousands, and as of June 30, 2024, certain buildings and investment properties were pledged to banks for financing Changes in Carrying Amount of Property, Plant and Equipment and Investment Properties | Item | January 1, 2024 (RMB thousands) | Additions (RMB thousands) | Disposals (RMB thousands) | Depreciation/Amortisation (RMB thousands) | June 30, 2024 (RMB thousands) | | :--------------- | :------------------------ | :---------------- | :---------------- | :--------------------- | :------------------------ | | Property, plant and equipment | 28,095 | 4,916 | (348) | (3,571) | 29,092 | | Investment properties | 8,697 | – | – | (163) | 8,534 | - As of June 30, 2024, buildings with a carrying amount of RMB 10,768 thousands and investment properties with a carrying amount of RMB 8,533 thousands were pledged to banks[28] Leases As of June 30, 2024, total right-of-use assets amounted to RMB 77,628 thousands and total lease liabilities were RMB 60,329 thousands, with new right-of-use assets of RMB 11,364 thousands recognized and a gain on lease termination of RMB 183 thousands during the period Lease-Related Assets and Liabilities | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :------------- | :------------------------- | :-------------------------- | | Total right-of-use assets | 77,628 | 87,204 | | Total lease liabilities | 60,329 | 69,162 | - Additions to right-of-use assets during the period amounted to RMB 11,364 thousands, primarily due to new leases and renewals of existing leases[30] - Total cash outflow for leases during the period was RMB 17,295 thousands[35] Right-of-Use Assets As of June 30, 2024, total right-of-use assets were RMB 77,628 thousands, including RMB 20,696 thousands for land use rights in China, with RMB 11,364 thousands in new additions during the period and certain leased land ownership interests pledged to banks Composition of Right-of-Use Assets | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--------------- | :------------------------- | :-------------------------- | | Other leased properties held for own use | 56,932 | 66,072 | | Ownership interests in leased land | 20,696 | 21,132 | | Total | 77,628 | 87,204 | - As of June 30, 2024, ownership interests in leased land with a carrying amount of approximately RMB 18,859 thousands were pledged to banks[30] - Rental income of RMB 4,209 thousands was recognized from sub-leasing right-of-use assets during the period[31] Lease Liabilities As of June 30, 2024, total lease liabilities amounted to RMB 60,329 thousands, comprising RMB 23,293 thousands in current liabilities and RMB 37,036 thousands in non-current liabilities, with new lease liabilities of RMB 11,364 thousands recognized during the period Details of Lease Liabilities | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :------- | :------------------------- | :-------------------------- | | Current | 23,293 | 24,336 | | Non-current | 37,036 | 44,826 | | Total | 60,329 | 69,162 | - The entering into of new retail store leases and renewal of existing leases during the period resulted in an increase in lease liabilities of RMB 11,364 thousands[33] Amounts Recognized in Profit or Loss During the period, depreciation of right-of-use assets recognized in profit or loss was RMB 14,303 thousands, interest expense on lease liabilities was RMB 1,702 thousands, and expenses related to short-term leases amounted to RMB 2,216 thousands Lease-Related Amounts Recognized in Profit or Loss | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :----------------- | :------------------ | :------------------ | | Total depreciation of right-of-use assets | 14,303 | 31,267 | | Gain on lease termination | 183 | 1,174 | | Interest expense on lease liabilities | 1,702 | 3,955 | | Expenses relating to short-term leases | 2,216 | 4,982 | Other Lease Information Total cash outflow for leases for the six months ended June 30, 2024, was RMB 17,295 thousands, a decrease from the prior year - Total cash outflow for leases during the period was RMB 17,295 thousands, compared to RMB 23,096 thousands in the prior period[35] Trade and Bills Receivables As of June 30, 2024, total trade and bills receivables amounted to RMB 33,345 thousands, a decrease from the end of 2023, with an average credit period ranging from 0 to 180 days Details of Trade and Bills Receivables | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--------------- | :------------------------- | :-------------------------- | | Trade receivables | 35,163 | 37,975 | | Less: Impairment allowance | (1,820) | (1,237) | | Net trade receivables | 33,343 | 36,738 | | Bills receivables | 2 | 233 | | Total | 33,345 | 36,971 | Ageing Analysis of Trade Receivables | Ageing | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :----------- | :------------------------- | :-------------------------- | | Within 30 days | 11,794 | 17,833 | | 31 to 60 days | 6,182 | 8,086 | | 61 to 180 days | 7,547 | 1,575 | | 181 to 365 days | 5,487 | 8,503 | | Over 1 year | 2,333 | 741 | | Total | 33,343 | 36,738 | Trade Payables As of June 30, 2024, total trade payables amounted to RMB 69,544 thousands, a decrease from the end of 2023, with the Group generally obtaining credit periods of 0 to 360 days from suppliers Ageing Analysis of Trade Payables | Ageing | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :----------- | :------------------------- | :-------------------------- | | Current to 30 days | 19,261 | 34,168 | | 31 to 60 days | 18,292 | 15,128 | | 61 to 180 days | 17,877 | 12,113 | | 181 to 365 days | 5,773 | 8,506 | | Over 1 year | 8,341 | 8,469 | | Total | 69,544 | 78,384 | Amounts Due from Related Companies As of June 30, 2024, amounts due from related companies were trade-related, unsecured, interest-free, and repayable on demand, with the carrying amount including an accumulated impairment loss of RMB 370 thousands - Amounts due from related companies are trade-related, unsecured, interest-free, and repayable on demand[39] - As of June 30, 2024, the carrying amount of amounts due from related companies includes an accumulated impairment loss of RMB 370 thousands[39] Bank Borrowings As of June 30, 2024, bank borrowings amounted to RMB 28,000 thousands, bearing a fixed annual interest rate of 3.95%, and were secured by certain buildings, right-of-use assets, and investment properties Bank Borrowings Information | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :----------- | :------------------------- | :-------------------------- | | Total bank borrowings | 28,000 | 28,000 | | Interest rate | 3.95% | 3.95% | - Bank borrowings are secured by buildings with a carrying amount of approximately RMB 10,768 thousands, right-of-use assets of RMB 18,859 thousands, and investment properties of RMB 8,533 thousands[41] Share Capital As of June 30, 2024, the authorized share capital consisted of 2,000,000,000 ordinary shares of HKD 0.01 each, with 290,457,000 issued and fully paid ordinary shares of HKD 0.01 each, equivalent to RMB 2,387 thousands Share Capital Information | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :----------- | :------------------------- | :-------------------------- | | Authorized share capital | 15,826 | 15,826 | | Issued and fully paid share capital | 2,387 | 2,387 | - The issued and fully paid share capital consists of 290,457,000 ordinary shares of HKD 0.01 each[42] Operating Lease Arrangements (as Lessor) The Group, acting as a lessor, sub-leases internal retail store areas and leases out investment properties with lease terms ranging from 1 to 10 years, and as of June 30, 2024, irrevocable operating lease payments receivable within one year amounted to RMB 12,036 thousands - The Group sub-leases internal retail store areas and leases out investment properties, with lease terms ranging from 1 to 10 years, excluding contingent rents[43] Irrevocable Operating Lease Payments Receivable in Future Periods | Period | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :----- | :------------------------- | :-------------------------- | | Within one year | 12,036 | 15,767 | Major Non-Cash Transactions During the period, the Group experienced a non-cash increase of RMB 11,364 thousands in right-of-use assets and lease liabilities due to retail store lease arrangements, and non-cash decreases due to early lease terminations - During the period, right-of-use assets and lease liabilities increased by RMB 11,364 thousands on a non-cash basis due to retail store lease arrangements[44] - Due to early lease terminations, right-of-use assets decreased by RMB 6,637 thousands on a non-cash basis, and lease liabilities decreased by RMB 6,820 thousands on a non-cash basis[44] Related Party Transactions During the period, the Group engaged in merchandise sales and purchases with related companies, totaling RMB 4 thousands in sales and RMB 17 thousands in purchases, with key management personnel compensation amounting to RMB 1,402 thousands Related Party Transactions | Nature of Transaction | 2024 (RMB thousands) | 2023 (RMB thousands) | | :------- | :------------------ | :------------------ | | Sales of goods | 4 | 36 | | Purchases of goods | 17 | – | Key Management Personnel Compensation | Compensation Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :------------- | :------------------ | :------------------ | | Salaries, allowances and benefits in kind | 1,305 | 1,205 | | Pension scheme contributions | 97 | 92 | | Total | 1,402 | 1,297 | Management Discussion and Analysis Business Review The Group maintained its retail and wholesale distribution channels during the reporting period, increasing its retail store count to 62, primarily in Foshan, Guangdong, while focusing on retaining exclusive distribution rights and attracting more distributors for its wholesale business, and expanding its franchised retail stores to 1,180 - The Group added four new retail stores and closed or converted three to franchised stores during the reporting period, increasing the total number of retail stores to 62[47] - The Group retains exclusive distribution rights for 24 brands and focuses on attracting more distributors as customers[48] - The number of franchised retail stores increased from 1,008 at the beginning of the period to 1,180 at the end of the period[49] Retail Stores As of June 30, 2024, the Group operated 62 retail stores, with 61 located in Guangdong Province, China, and 1 in Macau, and the highest concentration of 52 stores in the Foshan area Changes in Number of Retail Stores | Period/Year | June 30, 2024 | December 31, 2023 | | :-------- | :------------ | :------------- | | Beginning of period/year | 61 | 67 | | Additions | 4 | 4 | | Reductions | (3) | (10) | | End of period/year | 62 | 61 | Geographical Distribution of Retail Stores | Location | June 30, 2024 | December 31, 2023 | | :------- | :------------ | :------------- | | Foshan | 52 | 49 | | Zhaoqing | 5 | 6 | | Zhuhai | 2 | 3 | | Guangzhou | 1 | 1 | | Shenzhen | 1 | 1 | | Macau | 1 | 1 | | Total | 62 | 61 | Integrated Wholesale The Group maintains exclusive distribution rights for 24 brands in Foshan, Jiangmen, and Zhaoqing, and is increasingly focused on attracting more distributors rather than retailers as customers to expand its integrated wholesale business - The Group retains exclusive distribution rights for 24 brands in Foshan, Jiangmen, and Zhaoqing[48] - The Group is more focused on attracting more distributors than retailers as customers to expand its wholesale business scale[48] Franchise Operations The Group's franchise program continued to grow, with the number of franchised retail stores increasing to 1,180 as of June 30, 2024, an increase of 172 from the beginning of the year Changes in Number of Franchised Retail Stores | Period/Year | June 30, 2024 | December 31, 2023 | | :-------- | :------------ | :------------- | | Beginning of period/year | 1,008 | 823 | | Additions | 172 | 185 | | End of period/year | 1,180 | 1,008 | - Revenue from sales of goods to franchisees constitutes part of its wholesale distribution revenue[49] Recent Developments and Outlook Facing a weak consumer market, the Group implemented strategies including launching "Gongxiao Discount Stores," closing loss-making stores, expanding "Shun Kelong Fresh Community" and "24-hour AI Smart Unattended Stores," developing new media marketing, broadening brand agency business regions, and optimizing supply chain and operations, with future plans to focus on supermarket chain business, expand regional networks, explore opportunities outside Guangdong and in Hong Kong, and leverage resources from the All China Federation of Supply and Marketing Cooperatives for centralized procurement and distribution - The Group launched its first "Gongxiao Discount Store" and implemented measures to close loss-making stores to stop losses[50] - The Group is expanding "Shun Kelong Fresh Community" stores and "24-hour AI Smart Unattended Stores," integrating cloud-based monitoring to maximize operating hours[50][51] - The Group is developing "Douyin Hour Delivery" business and its own e-commerce platforms, "Shun Kelong Premium Selection" and "Yubanghang Mini Program," to achieve integrated online and offline sales[51] - In the future, the Group will continue to optimize its supply chain system, reduce merchandise costs, and explore international business expansion, leveraging the advantages of the Hainan Free Trade Port and the Guangdong-Hong Kong-Macao Greater Bay Area[52] Financial Review During the period, revenue decreased by 4.6% to RMB 308.2 millions, primarily due to reduced retail store sales and lower demand for group-buying business, leading to a 1.7% decline in gross profit margin to 12.6%, while other operating income, selling and distribution costs, administrative expenses, and finance costs all decreased, but income tax expense increased, resulting in a 47.6% expansion of net loss attributable to owners of the company to RMB 18.6 millions Financial Performance Overview | Metric | 2024 (RMB millions) | 2023 (RMB millions) | Year-on-year Change (%) | | :------------- | :-------------------- | :-------------------- | :------------- | | Revenue | 308.2 | 323.2 | -4.6% | | Gross profit margin | 12.6% | 14.3% | -1.7% | | Other operating income | 8.6 | 13.4 | -35.7% | | Selling and distribution costs | 56.3 | 60.3 | -6.6% | | Administrative expenses | 6.9 | 9.4 | -26.7% | | Finance costs | 2.3 | 2.5 | -8.6% | | Income tax expense | 0.07 | 0.004 | Increase | | Net loss | (18.6) | (12.6) | 47.6% | | Total comprehensive expense | (18.3) | (12.3) | 48.8% | Revenue Total revenue for the period was approximately RMB 308.2 millions, a 4.6% year-on-year decrease, with retail store business revenue declining by 9.4% and wholesale distribution business revenue increasing by 13.3% - The decrease in total revenue was mainly due to reduced retail store sales influenced by market conditions and decreased demand for group-buying business from some customers[53] - Revenue from retail store business was approximately RMB 231.3 millions, a year-on-year decrease of 9.4%[53] - Revenue from wholesale distribution business was approximately RMB 76.9 millions, a year-on-year increase of 13.3%, mainly due to increased market influence and sales of some distributed brands[53] Gross Profit Margin The gross profit margin for the period was 12.6%, a 1.7% decrease from 14.3% in the prior year - The gross profit margin for the period was 12.6%, a decrease of 1.7% from 14.3% in the prior year[54] Other Operating Income Other operating income for the period was approximately RMB 8.6 millions, a 35.7% year-on-year decrease, primarily due to reduced promotional service fees from suppliers and government grants - Other operating income was approximately RMB 8.6 millions, a year-on-year decrease of 35.7%[55] - The decrease was mainly due to reduced promotional service fees from suppliers and decreased government grants[55] Selling and Distribution Costs Selling and distribution costs for the period were approximately RMB 56.3 millions, a 6.6% year-on-year decrease, mainly attributable to reduced labor costs from personnel optimization and lower rental expenses due to store closures or relocations - Selling and distribution costs were approximately RMB 56.3 millions, a year-on-year decrease of 6.6%[56] - The decrease was mainly due to reduced labor costs from personnel optimization and lower rental expenses from store closures or relocations[56] Administrative Expenses Administrative expenses for the period were approximately RMB 6.9 millions, a 26.7% year-on-year decrease, primarily due to reduced labor costs for management personnel and lower bank charges - Administrative expenses were approximately RMB 6.9 millions, a year-on-year decrease of 26.7%[57] - The decrease was mainly due to reduced labor costs for management personnel and lower bank charges[57] Finance Costs Finance costs for the period were approximately RMB 2.3 millions, an 8.6% year-on-year decrease, primarily due to a reduction in unrecognized finance charges on lease liabilities - Finance costs were approximately RMB 2.3 millions, a year-on-year decrease of 8.6%[58] - The decrease was mainly due to a reduction in unrecognized finance charges on lease liabilities[58] Income Tax Expense Income tax expense for the period was approximately RMB 70 thousands, an increase of RMB 66 thousands year-on-year, primarily because a subsidiary was reclassified as not being a small-profit enterprise, requiring a tax top-up - Income tax expense was approximately RMB 70 thousands, a year-on-year increase of RMB 66 thousands[59] - The increase was due to a subsidiary being reclassified as not a small-profit enterprise, requiring a top-up payment for previously enjoyed tax benefits[59] Net Loss Net loss attributable to owners of the company expanded by 47.6% to approximately RMB 18.6 millions, primarily due to reduced gross profit from lower sales and decreased rental income, promotional service fees from suppliers, and government grants - Net loss attributable to owners of the company was approximately RMB 18.6 millions, an increase in loss of 47.6% year-on-year[60] - The increase in loss was mainly due to reduced gross profit from lower sales, and decreased income from various sources (rental, promotional service fees, government grants)[60] Total Comprehensive Expense Total comprehensive expense attributable to owners of the Group increased by 48.8% to approximately RMB 18.3 millions, for reasons similar to the increase in net loss - Total comprehensive expense attributable to owners of the Group was approximately RMB 18.3 millions, a year-on-year increase of 48.8%[61] - The increase was due to the same reasons as the increase in net loss, namely reduced gross profit from lower sales and decreased income from various sources[61] Capital Expenditure During the period, the Group incurred approximately RMB 4.9 millions in capital expenditure for property, plant and equipment, primarily for opening new retail stores and renovating existing ones - The Group incurred approximately RMB 4.9 millions in expenditure on property, plant and equipment during the period[62] - Capital expenditure was primarily used for opening new retail stores and renovating existing ones[62] Use of Proceeds The net proceeds from the company's global offering were approximately RMB 155.0 millions, of which RMB 142.5 millions had been utilized as of June 30, 2024, with the remaining RMB 12.5 millions reallocated on June 19, 2024, from "renovation and expansion of two existing distribution centers" to "renovation of existing retail stores," expected to be utilized by December 31, 2026 - The net proceeds from the global offering were approximately RMB 155.0 millions, of which RMB 142.5 millions had been utilized as of June 30, 2024[63][64] - The use of the remaining RMB 12.5 millions has been changed to "renovation of existing retail stores" and is expected to be utilized by December 31, 2026[64] Analysis of Use of Net Proceeds | Purpose | Revised Allocation (RMB millions) | Utilized as of June 30, 2024 (RMB millions) | Balance of Net Proceeds as of June 30, 2024 (RMB millions) | | :------------------- | :------------------------ | :--------------------------------------- | :------------------------------------------- | | Opening new retail stores | 74.4 | 74.4 | – | | Renovation of existing retail stores | 27.1 | 14.6 | 12.5 | | Repayment of bank borrowings | 27.9 | 27.9 | – | | Information system upgrade | 11.2 | 11.2 | – | | Renovation and expansion of two existing distribution centers | 0.8 | 0.8 | – | | General working capital | 13.6 | 13.6 | – | | Total | 155.0 | 142.5 | 12.5 | Liquidity and Financial Resources As of June 30, 2024, the Group's cash and cash equivalents were approximately RMB 25.1 millions, net current assets were approximately RMB 46.8 millions, net assets were approximately RMB 131.9 millions, and unutilized bank facilities amounted to RMB 62.0 millions, with a RMB 3.4 millions decrease in trade and other receivables primarily due to collection of customer receivables and reduced supplier prepayments Overview of Liquidity and Financial Resources | Metric | June 30, 2024 (RMB millions) | December 31, 2023 (RMB millions) | | :--------------- | :--------------------------- | :---------------------------- | | Cash and cash equivalents | 25.1 | 48.7 | | Net current assets | 46.8 | 64.2 | | Net assets | 131.9 | 150.4 | | Unutilized bank facilities | 62.0 | 62.0 | - Total trade receivables and deposits paid, prepayments and other receivables decreased by approximately RMB 3.4 millions or 3.2%, mainly due to the collection of customer receivables from merchandise sales and reduced prepayments to suppliers[65] Material Investments The Group held no material investments during the period - The Group held no material investments during the period[66] Material Acquisitions and Disposals The Group did not undertake any material acquisitions or disposals of subsidiaries or associates during the period - The Group did not undertake any material acquisitions or disposals of subsidiaries or associates during the period[67] Indebtedness and Pledge of Assets As of June 30, 2024, the Group's bank borrowings amounted to RMB 28.0 millions, bearing a fixed annual interest rate of 3.95%, secured by certain buildings, right-of-use assets, and investment properties, with all borrowings repayable within one year - The Group's bank borrowings amounted to RMB 28.0 millions, bearing a fixed annual interest rate of 3.95%[68][69] - The borrowings are secured by buildings with a carrying amount of approximately RMB 10.8 millions, right-of-use assets of RMB 18.9 millions, and investment properties of RMB 8.5 millions[68] - All bank borrowings are repayable within one year[69] Gearing Ratio As of June 30, 2024, the Group's gearing ratio was approximately 21.2%, an increase from 18.6% at the end of 2023 - As of June 30, 2024, the gearing ratio was approximately 21.2%, an increase from 18.6% at the end of 2023[70] Foreign Exchange Risk As most of the Group's assets, liabilities, and cash flows are denominated in RMB, management believes that exchange rate fluctuations between RMB and foreign currencies will not significantly impact its financial position and performance, and no hedging activities were undertaken or are intended in the short term - Most of the Group's assets, liabilities, and cash flows are denominated in RMB, and foreign exchange rate fluctuations are not expected to have a significant impact[71] - No hedging activities were undertaken during the period, nor are they intended in the short term[71] Contingent Liabilities As of June 30, 2024, the Group had not provided any guarantees to third parties and had no material contingent liabilities - As of June 30, 2024, the Group had no material contingent liabilities[72] Employees As of June 30, 2024, the Group had 904 employees, with 895 based in mainland China, and maintained good employee relations through competitive salaries and internal training, with no significant labor disputes during the period - As of June 30, 2024, the Group had a total of 904 employees, with 895 based in mainland China and 9 in Hong Kong[73] - The company provides competitive salaries, internal training, and bonuses, maintains good relationships with employees, and had no significant labor disputes during the period[73] Other Information Interim Dividend The Board of Directors resolved not to declare any interim dividend for the period - The Board of Directors has resolved not to declare any interim dividend for the period[74] 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 period - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the period[74] Directors' Securities Transactions The company adopted the Model Code set out in Appendix C3 of the Listing Rules, and all directors confirmed compliance with its required standards throughout the period - The company has adopted the Model Code set out in Appendix C3 of the Listing Rules as the standard for directors' securities transactions[75] - All directors confirmed compliance with the required standards set out in the Model Code during the period[75] Sufficiency of Public Float The directors confirmed that the company maintained the public float required by the Listing Rules throughout the period and up to the date of this announcement - The directors confirmed that the company maintained the public float required by the Listing Rules throughout the period and up to the date of this announcement[76] Corporate Governance Practices The company's corporate governance practices are based on the Corporate Governance Code in Appendix C1 of the Listing Rules, and the Board believes that, except for disclosed non-compliance, the company complied with all code provisions during the period - The company's corporate governance practices are based on the Corporate Governance Code set out in Appendix C1 of the Listing Rules[77] Matters of Non-Compliance with Listing Rules 3.10(1), 3.21, 3.25 and 3.27A Following Mr. Wang Yilin's resignation as an independent non-executive director, the company temporarily failed to comply with Listing Rules regarding the number of independent non-executive directors and the composition of the audit, remuneration, and nomination committees, but all relevant requirements were met upon Mr. Gao Jingyuan's appointment on March 27, 2024 - Following Mr. Wang Yilin's resignation as an independent non-executive director, the company temporarily failed to comply with Listing Rules 3.10(1), 3.21, 3.25, and 3.27A[78] - All relevant Listing Rules requirements were complied with after Mr. Gao Jingyuan was appointed as an independent non-executive director on March 27, 2024[78] Events After Reporting Period The Board of Directors is not aware of any disclosable material events that occurred after June 30, 2024, and up to the date of this announcement - The Board of Directors is not aware of any disclosable material events that occurred after June 30, 2024, and up to the date of this announcement[80] Audit Committee The company has established an Audit Committee, whose primary responsibilities include providing independent opinions on financial reporting processes, internal controls, and risk management systems, and which has reviewed the condensed consolidated financial statements for the period, with all current members being independent non-executive directors, and Mr. Zheng Xueqi serving as Chairman - The primary responsibilities of the Audit Committee are to provide independent opinions on financial reporting processes, internal control procedures, and risk management systems to the Board[81] - The condensed consolidated financial statements for the period, though unaudited, have been reviewed by the Audit Committee[81] - The Audit Committee members include Mr. Zheng Xueqi (Chairman), Mr. Gao Jingyuan, and Mr. Wu Kai, all of whom are independent non-executive directors[81] Board of Directors As of the date of this announcement, the Board of Directors comprises executive directors Mr. Wang Rengang and Ms. Wang Hui, non-executive director Ms. Du Jing, and independent non-executive directors Mr. Zheng Xueqi, Mr. Gao Jingyuan, and Mr. Wu Kai - The Board of Directors includes executive directors Mr. Wang Rengang and Ms. Wang Hui[82] - The non-executive director is Ms. Du Jing[82] - The independent non-executive directors are Mr. Zheng Xueqi, Mr. Gao Jingyuan, and Mr. Wu Kai[82]