常达控股(01433) - 2020 - 中期财报

Management Discussion and Analysis This section provides an overview of the company's operational performance, financial position, and future outlook, highlighting key factors influencing its results Review of Operations and Operating Environment In H1 2020, the company faced severe challenges from the COVID-19 pandemic, leading to delayed orders and a decline in volume, yet gross margin improved by 0.5 percentage points despite a net loss due to one-off listing expenses Key Financial Indicators for H1 2020 | Indicator | H1 2020 | H1 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | approx. HK$114 million | approx. HK$171 million | -33.3% | | Gross Profit | approx. HK$58.6 million | approx. HK$87 million | -32.6% | | Gross Margin | 51.4% | 50.9% | +0.5pp | | Loss/Profit Attributable to Owners of the Company | Loss approx. HK$11.8 million | Profit approx. HK$10.1 million | Turned from profit to loss | - The COVID-19 pandemic caused order delays and a decline in volume from Q2, with the company responding by adjusting capacity and implementing strict cost controls[10][13] - The company actively sought new revenue streams, with RFID tag products becoming the largest growth category in H1 due to its technological expertise[15][17] - The company successfully listed on the HKEX Main Board in March 2020, enhancing its corporate image and capital strength to better address current challenges[16][17] Business and Financial Review During the period, total revenue decreased by 33.3% due to the pandemic, yet gross margin slightly increased to 51.4% through product optimization and cost control, resulting in a net loss of HK$11.8 million primarily due to one-off listing expenses Revenue For the six months ended June 30, 2020, unaudited consolidated revenue was approximately HK$114 million, a 33.3% decrease from HK$171 million in the prior year, primarily due to COVID-19 related operational delays Revenue Performance | Period | Revenue (HK$) | YoY Change | | :--- | :--- | :--- | | H1 2020 | approx. 114 million | -33.3% | | H1 2019 | approx. 171 million | - | Gross Profit The group's overall gross margin slightly increased to 51.4% from 50.9% in the prior year, driven by optimized product sales mix and effective internal cost controls Gross Profit and Gross Margin | Period | Gross Margin | YoY Change | | :--- | :--- | :--- | | H1 2020 | 51.4% | +0.5pp | | H1 2019 | 50.9% | - | Expenses and Costs Sales and distribution expenses decreased by 27.4% to HK$17.4 million due to the pandemic, while administrative expenses slightly rose by 2.5% to HK$41.7 million due to post-listing professional fees, and other expenses significantly increased to HK$2.1 million Key Expense Changes (H1 2020 vs H1 2019) | Expense Item | H1 2020 (HK$) | H1 2019 (HK$) | YoY Change | | :--- | :--- | :--- | | Sales and distribution expenses | approx. HK$17.4 million | approx. HK$23.9 million | -27.4% | | Administrative expenses | approx. HK$41.7 million | approx. HK$40.7 million | +2.5% | | Other expenses | approx. HK$2.1 million | approx. HK$0.1 million | +2000% | | Finance costs | approx. HK$1.3 million | approx. HK$1.2 million | +8.7% | Loss/Profit for the period In H1 2020, the company reported a net loss of approximately HK$11.8 million, a reversal from a net profit of HK$11.3 million in H1 2019, primarily due to non-recurring listing expenses and reduced revenue from the COVID-19 pandemic - The company turned from profit to loss, reporting a net loss of HK$11.8 million in H1 2020, primarily due to HK$10.6 million in one-off listing expenses and the negative impact of the pandemic on revenue[27][30][110] Capital Structure, Liquidity and Financial Resources As of June 30, 2020, the group's financial position was robust, with cash and cash equivalents significantly increasing to HK$123.8 million and net current assets to HK$117.7 million due to listing proceeds, improving the current ratio to 2.31 times while maintaining a low gearing ratio of 6.7% Key Financial Position Indicators (As of June 30, 2020) | Indicator | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Net current assets | approx. HK$117.7 million | approx. HK$41.5 million | | Cash and cash equivalents | approx. HK$123.8 million | approx. HK$43.8 million | | Bank borrowings | approx. HK$23 million | approx. HK$20.7 million | | Current ratio | approx. 2.31 times | approx. 1.38 times | | Gearing ratio | approx. 6.7% | approx. 7.2% | Prospects The company anticipates ongoing challenges from COVID-19 and trade tensions but plans to capitalize on the "stay-at-home economy" by focusing on RFID/NFC technologies, expanding into mainland China, and leveraging industry consolidation, with a new Bangladesh factory expected by late 2021 - Strategic focus will be on RFID and NFC technology applications to meet the growing demands of the apparel retail industry for supply chain monitoring, product anti-counterfeiting, and brand interaction[37][40] - For market expansion, the company plans to allocate more resources to develop the domestic Chinese market, while strengthening relationships with existing international apparel brands in Europe and the US, and seeking new clients[43][46] - Production expansion for the new Bangladesh factory is expected to be delayed until late 2021 due to the pandemic, aiming to meet post-pandemic demand for Bangladesh capacity, with exploration of other Southeast Asian business locations underway[44] Use of Proceeds from Listing The company received net proceeds of approximately HK$69.9 million from its IPO, which remained unutilized as of June 30, 2020, and are earmarked for constructing a new Bangladesh factory, purchasing machinery, and supplementing general working capital Use of Proceeds from Listing and Utilization (As of June 30, 2020) | Intended Use | Estimated Allocation of Proceeds (HK$ thousand) | Net Proceeds Utilized (HK$ thousand) | Net Proceeds Unutilized (HK$ thousand) | | :--- | :--- | :--- | :--- | | Construction of new Bangladesh factory and purchase of machinery | 68,800 | – | 68,800 | | General working capital | 1,100 | – | 1,100 | | Total | 69,900 | – | 69,900 | Corporate Governance and Other Information This section details the company's adherence to corporate governance standards, dividend policy, shareholder interests, and the review process for its financial information Corporate Governance Since its listing, the company has fully complied with all code provisions of the Corporate Governance Code in Appendix 14 of the HKEX Listing Rules, and all directors and senior management have confirmed adherence to the Model Code for Securities Transactions by Directors - The company confirms full compliance with the Corporate Governance Code since its listing date[55][58] Interim Dividend and Investments The Board does not recommend an interim dividend for the six months ended June 30, 2020, and the company made no significant acquisitions, disposals, or held any material investments during the reporting period - The Board decided not to declare an interim dividend for 2020[57] Disclosure of Interests As of June 30, 2020, Mr. Chan Sing Ming Barry and Ms. Law Miu Lan, through Charming International Limited, jointly held 1,404,000,000 shares, representing 70.2% of the issued share capital, while Mr. Chan Tsz Fung beneficially owned 12,000,000 shares, or 0.6% Shareholdings of Directors and Major Shareholders | Shareholder Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Total Share Capital | | :--- | :--- | :--- | :--- | | Mr. Chan Sing Ming Barry | Interest in controlled corporation | 1,404,000,000 | 70.2% | | Ms. Law Miu Lan | Interest in controlled corporation | 1,404,000,000 | 70.2% | | Charming International | Beneficial interest | 1,404,000,000 | 70.2% | Audit Committee and Financial Information Review The Audit Committee and independent auditor Ernst & Young have reviewed the unaudited interim condensed consolidated financial information for the six months ended June 30, 2020, confirming its compliance with applicable accounting standards and adequate disclosure - Both the Audit Committee and independent auditor Ernst & Young have reviewed the financial report for the period, deeming it compliant with applicable accounting standards and adequately disclosed[86][87][91] Independent Review Report This section presents the independent auditor's findings and conclusion regarding the interim condensed consolidated financial information Auditor's Conclusion Independent auditor Ernst & Young reviewed the interim condensed consolidated financial information in accordance with Hong Kong Review Engagements Standards, concluding that nothing came to their attention suggesting the financial information was not prepared in all material respects in accordance with HKAS 34 - Independent auditor Ernst & Young issued an unmodified review conclusion, finding no material non-compliance issues in the financial information[107][109] Interim Condensed Consolidated Financial Statements This section presents the company's key financial statements, including the profit or loss, financial position, and cash flow statements for the interim period Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2020, revenue was HK$114 million, down 33.3%, with gross profit at HK$58.58 million and a slight gross margin increase, but a pre-tax loss of HK$10.6 million and a net loss of HK$11.84 million resulted from HK$10.61 million in one-off listing expenses Condensed Statement of Profit or Loss (For the six months ended June 30) | Item (HK$ thousand) | 2020 (Unaudited) | 2019 (Unaudited) | | :--- | :--- | :--- | | Revenue | 114,008 | 171,005 | | Gross Profit | 58,578 | 86,967 | | Profit/(Loss) before tax | (10,602) | 15,245 | | Profit/(Loss) for the period | (11,838) | 11,265 | | Attributable to owners of the Company | (11,838) | 10,114 | | Basic loss/earnings per share (HK cents) | (0.66) | 0.67 | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2020, total assets were HK$340.5 million, total liabilities HK$123.8 million, and net assets HK$216.8 million, with significant increases in total and net assets primarily due to IPO proceeds boosting cash and cash equivalents to HK$123.8 million, improving the current ratio and strengthening the financial structure Condensed Statement of Financial Position (HK$ thousand) | Item | June 30, 2020 (Unaudited) | December 31, 2019 (Audited) | | :--- | :--- | :--- | | Total non-current assets | 133,031 | 136,352 | | Total current assets | 207,498 | 150,048 | | Total current liabilities | 89,772 | 108,577 | | Net current assets | 117,726 | 41,471 | | Net assets | 216,770 | 143,970 | | Total equity | 216,770 | 143,970 | Interim Condensed Consolidated Statement of Cash Flows In H1 2020, operating activities generated a net cash inflow of HK$3.38 million, investing activities a net outflow of HK$3.28 million, and financing activities a net inflow of HK$80.11 million, primarily from IPO proceeds of HK$95.56 million, resulting in a significant increase in period-end cash and cash equivalents to HK$123.8 million Condensed Statement of Cash Flows (For the six months ended June 30, HK$ thousand) | Item | 2020 (Unaudited) | 2019 (Unaudited) | | :--- | :--- | :--- | | Net cash generated from operating activities | 3,379 | 26,647 | | Net cash flows used in investing activities | (3,278) | (8,985) | | Net cash flows from/(used in) financing activities | 80,112 | (11,828) | | Net increase in cash and cash equivalents | 80,213 | 5,834 | | Cash and cash equivalents at beginning of period | 43,807 | 22,958 | | Cash and cash equivalents at end of period | 123,831 | 28,753 | Notes to Interim Condensed Consolidated Financial Information This section provides detailed explanatory notes supporting the interim condensed consolidated financial statements, covering segment information and share capital changes Operating Segment and Geographical Information The group operates a single reportable segment: the production and sale of printed products; geographically, Hong Kong and Mainland China were the largest markets in H1 2020, contributing HK$33.28 million and HK$30.88 million in revenue, respectively, with 67% of non-current assets located in Mainland China Revenue from External Customers by Geographical Location (For the six months ended June 30) | Region | 2020 (HK$ thousand) | 2019 (HK$ thousand) | | :--- | :--- | :--- | | Hong Kong | 33,284 | 45,726 | | Mainland China | 30,879 | 47,797 | | Bangladesh | 11,579 | 17,155 | | Vietnam | 7,497 | 10,716 | | United States | 8,791 | 8,908 | | Others | 21,978 | 40,703 | | Total | 114,008 | 171,005 | Share Capital Changes During the period, the company's share capital underwent significant changes, including an increase in authorized share capital and a capitalization issue on February 21, 2020, followed by the issuance of 500,000,000 new ordinary shares at HK$0.25 each upon listing on March 12, resulting in 2,000,000,000 issued and fully paid shares totaling HK$20 million as of June 30, 2020 - The company listed on the HKEX Main Board on March 12, 2020, issuing 500 million ordinary shares at HK$0.25 per share[217][219] Summary of Share Capital Changes | Date | Event | Number of Shares Issued | Share Capital (HK$ thousand) | | :--- | :--- | :--- | :--- | | December 31, 2019 | Beginning of period | 250 | ~0 | | February 21, 2020 | Capitalization issue | 1,500,000,000 | 15,000 | | March 12, 2020 | Share offer | 2,000,000,000 | 20,000 |