优趣汇控股(02177) - 2021 - 中期财报

Company Overview Company Profile UQH, a leading Chinese brand e-commerce solution provider for Japanese FMCG, achieved stable business growth in H1 2021 with sales revenue up 17.4% to RMB 1.481 billion across all operational models - The company is positioned as a leading brand e-commerce retail and wholesale solution provider in China, strategically focusing on Japanese fast-moving consumer goods[3] Key Performance Indicators for H1 2021 (RMB) | Indicator | Value (RMB) | YoY Growth | | :--- | :--- | :--- | | Total Sales Revenue | 1.481 billion | 17.4% | | B2B General Trade Revenue | - | 20.4% | | B2B Cross-border E-commerce Revenue | - | 17.4% | | B2C General Trade Revenue | - | 17.9% | | B2C Cross-border E-commerce Revenue | - | 12.4% | - The company's business model primarily consists of distribution models (B2B and B2C) and a service fee model, acting as a bridge between brands, e-commerce platforms, and customers[4] Financial Highlights Performance Highlights In H1 2021, the company achieved robust performance with revenue up 17.4%, gross margin slightly improved to 32.2%, net profit turned positive, and operating cash flow significantly improved - Robust performance growth: H1 2021 revenue increased by 17.4% year-on-year to RMB 1.481 billion[12] - Gross margin improved to 32.2% year-on-year, with an operating profit margin of 4.5%, as the company significantly increased marketing investment in new channels like Douyin and Pinduoduo[12] - Net profit turned positive due to the absence of preferred share expenses, and operating cash flow significantly improved and turned positive[12] Management Discussion and Analysis Business Overview In H1 2021, the company achieved robust growth amidst a favorable Chinese online retail market, driven by strong partnerships and strategic investments in emerging e-commerce platforms - Mainland China's online retail market continues to improve, with rapid growth in new formats like live-streaming and short-video e-commerce, indicating multi-layered and personalized demand trends[14] - The company actively increased resource investment and strategic deployment on emerging platforms such as Pinduoduo, Douyin, and Kuaishou to capture new growth opportunities[14] Operating Performance Analysis In H1 2021, total revenue grew 17.4% with gross margin at 32.2%, driven by core categories and incubated brands, while increased marketing expenses slightly reduced operating profit, but EPS turned positive to RMB 0.26 Revenue Analysis H1 2021 total revenue grew 17.4% to RMB 1.481 billion, driven by stable partnerships, category growth, and successful new channel expansion, with B2B and B2C businesses achieving double-digit growth and adult personal care products as the main revenue source Revenue by Business Line (RMB Thousand) | Business Line | H1 2021 | H1 2020 | YoY Growth | | :--- | :--- | :--- | :--- | | B2B | 699,694 | 586,238 | 19.3% | | General Trade | 467,180 | 388,131 | 20.4% | | Cross-border E-commerce | 232,514 | 198,107 | 17.4% | | B2C | 768,362 | 668,978 | 14.9% | | General Trade | 352,331 | 298,778 | 17.9% | | Cross-border E-commerce | 416,031 | 370,200 | 12.4% | | Services Rendered | 13,043 | 6,701 | 94.6% | | Total | 1,481,099 | 1,261,917 | 17.4% | Goods Sales Revenue by Product Category (RMB Thousand) | Product Category | H1 2021 | % of Total | H1 2020 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Adult Personal Care Products | 919,613 | 62.6% | 733,839 | 58.5% | | Maternal & Infant Personal Care Products | 247,295 | 16.8% | 234,050 | 18.6% | | Beauty Products | 172,798 | 11.8% | 179,238 | 14.3% | | Health Products | 80,591 | 5.5% | 71,420 | 5.7% | | Others | 47,759 | 3.3% | 36,669 | 2.9% | | Total | 1,468,056 | 100.0% | 1,255,216 | 100.0% | - The company's investment in emerging channels yielded significant results, with monthly Gross Merchandise Volume (GMV) from stores opened on Douyin and Pinduoduo exceeding RMB 8 million in June 2021 alone, representing a 685% year-on-year increase[15] Gross Profit and Gross Margin Analysis Overall gross margin slightly increased to 32.2% due to channel optimization, with B2B and B2C cross-border e-commerce margins improving, B2C general trade margin decreasing, and beauty products' margin significantly rising to 48.0% Gross Margin by Business Line (%) | Business Line | H1 2021 Gross Margin (%) | H1 2020 Gross Margin (%) | Change (bps) | | :--- | :--- | :--- | :--- | | B2B | 14.9% | 12.0% | +290 | | General Trade | 14.5% | 12.7% | +180 | | Cross-border E-commerce | 15.6% | 10.5% | +510 | | B2C | 47.9% | 48.8% | -90 | | General Trade | 44.8% | 49.6% | -480 | | Cross-border E-commerce | 50.6% | 48.1% | +250 | | Total | 32.2% | 31.8% | +40 | Gross Margin by Product Category (%) | Product Category | H1 2021 Gross Margin (%) | H1 2020 Gross Margin (%) | Change (bps) | | :--- | :--- | :--- | :--- | | Adult Personal Care Products | 27.4% | 28.8% | -140 | | Maternal & Infant Personal Care Products | 35.5% | 37.4% | -190 | | Beauty Products | 48.0% | 32.7% | +1530 | | Health Products | 32.3% | 32.5% | -20 | | Others | 49.5% | 42.5% | +700 | - Beauty product gross margin significantly increased, primarily due to the company's adjustment of its brand portfolio, focusing on higher-margin brands, and increasing sales volume in high-margin B2C cross-border e-commerce[29] Expense Analysis Selling and marketing expenses increased due to higher promotion and labor costs from new channel investments, while general and administrative expenses decreased by 4.1% due to lower listing fees, and interest expenses rose from increased bank borrowings - Selling and marketing expenses increased, primarily due to higher market promotion fees and labor costs, especially increased investment in emerging channels such as live-streaming, short-video, and social e-commerce[30] - General and administrative expenses decreased by 4.1% year-on-year, primarily benefiting from lower listing expenses[31] Operating Profit and Earnings Per Share Operating profit slightly decreased in H1 2021 due to higher selling and marketing expenses, but earnings per share turned profitable from a loss of RMB 0.48 to a profit of RMB 0.26 - Operating profit slightly decreased year-on-year, primarily impacted by increased selling and marketing expenses[33] Earnings Per Share Performance (RMB) | Indicator | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Earnings Per Share (RMB) | 0.26 | -0.48 | Liquidity and Capital Resources As of June 30, 2021, cash and cash equivalents were RMB 326 million, operating cash flow significantly improved to a net outflow of RMB 36 million, capital structure remained stable with a 65% debt-to-asset ratio, and total borrowings were RMB 718 million Cash Flow Analysis Net cash used in operating activities significantly improved to RMB -36 million, with net cash inflows of RMB 67 million from investing and RMB 69 million from financing activities, leading to period-end cash and cash equivalents of RMB 326 million Cash Flow Summary (RMB Thousand) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (36,097) | (233,140) | | Net Cash From Investing Activities | 66,552 | 35,040 | | Net Cash From/(Used in) Financing Activities | 68,920 | (113,343) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 99,375 | (311,443) | | Cash and Cash Equivalents at Period-End | 325,550 | 239,079 | - Operating cash flow significantly improved, primarily due to the contribution from profit before income tax and a decrease in other current assets (timely collection of Japanese consumption tax receivables), partially offset by increases in inventories and trade receivables[37][41] Capital Structure and Debt Capital structure remained stable with a 65% debt-to-asset ratio as of June 30, 2021, total borrowings were RMB 718 million, primarily bank loans, and a key credit agreement requires the founder to maintain his principal beneficial shareholder status - As of June 30, 2021, the Group's debt-to-asset ratio was 65%[42] - Total borrowings amounted to RMB 718 million, of which RMB 246 million were secured by inventories or trade receivables, and RMB 233 million were guaranteed by group companies or banks[43] - One of the conditions for the credit facility with DBS Bank is that Mr. Wang Yong must remain the company's principal beneficial shareholder, otherwise it may impact the funding source for this loan[45] Other Operating Information In H1 2021, capital expenditure was RMB 3.3 million for office renovation with no major commitments, the company had 812 employees, and faced unhedged foreign exchange risk from USD and JPY fluctuations against RMB - Capital expenditure amounted to RMB 3.3 million, primarily for office renovation expenses, with no significant capital commitments or investment plans[46][47] - As of June 30, 2021, the Group had a total of 812 employees, with the majority located in China[50] - The company's foreign exchange risk primarily arises from fluctuations in the exchange rates of USD and JPY against RMB, with no hedging undertaken during the period[52] - Post-balance sheet event: The company's shares were listed on the Main Board of the Hong Kong Stock Exchange on July 12, 2021[54] Business Outlook and Strategy The company anticipates benefiting from supportive Chinese policies and will focus its H2 strategy on deepening Japanese brand presence, investing in new e-commerce channels, seeking big data investment opportunities, and strengthening financial and inventory management - The company expects to benefit from supportive Chinese government policies regarding cross-border e-commerce, birth rates, and aging population[55] - Future development strategies include: - Continuing to deepen engagement with Japanese brands to consolidate market leadership - Increasing investment in short-video and social e-commerce channels such such as Douyin and Kuaishou - Seeking investment opportunities in areas like big data analytics - Strengthening financial position and inventory management[56] Other Information Corporate Governance and Internal Control The company maintains high corporate governance standards, despite the combined Chairman and CEO roles, which the Board believes provides strong leadership and is balanced by its composition, and an audit committee reviews financial information and internal controls - The company deviates from Corporate Governance Code Provision A.2.1, where the roles of Chairman of the Board and Chief Executive Officer are held by the same person, Mr. Wang Yong[58] - The Board believes the current structure does not impair the balance of power and responsibilities, as the Board comprises three executive directors, one non-executive director, and three independent non-executive directors, providing sufficient checks and balances[59] - The company has established an audit committee, composed of three independent non-executive directors, responsible for reviewing financial information and overseeing risk management and internal control procedures[66] Dividends and Share Information The Board resolved not to declare an interim dividend for H1 2021; the company listed on July 12, 2021, with net proceeds of HKD 320 million, primarily allocated to social media marketing, brand portfolio, and supply chain management - The Board resolved not to declare any interim dividend for the six months ended June 30, 2021[65] Use of Listing Proceeds (HKD Million) | Item | Percentage (%) | Available | Utilized | Unutilized | | :--- | :--- | :--- | :--- | :--- | | Investment in social media marketing, proprietary brand development, etc. | 54.3% | 174 | 57 | 117 | | Enrichment of health product brands and categories | 15.7% | 50 | 17 | 33 | | Enhancement of technology systems and data analytics capabilities | 7.0% | 22 | 2 | 20 | | Seeking strategic investments in technology companies and O2O service providers | 13.0% | 42 | 0 | 42 | | Working capital and general corporate purposes | 10.0% | 32 | 32 | 0 | | Total | 100.0% | 320 | 108 | 212 | Directors' and Shareholders' Interests The report details director and major shareholder equity, with Chairman and CEO Mr. Wang Yong holding 38.82% through Wisdom Oasis, Executive Director Mr. Ryoji Matsumoto holding 0.60%, and Transcosmos Inc. holding 34.52% Directors' Shareholdings | Director Name | Capacity and Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Mr. Wang Yong | Interest in controlled corporation | 64,392,700 | 38.82% | | Mr. Ryoji Matsumoto | Interest in controlled corporation | 1,000,000 | 0.60% | Major Shareholders' Shareholdings | Shareholder Name | Capacity and Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Wisdom Oasis | Beneficial owner | 64,392,700 | 38.82% | | Transcosmos Inc. | Beneficial owner | 57,264,100 | 34.52% | Unaudited Condensed Consolidated Financial Statements Consolidated Statement of Comprehensive Income For H1 2021, revenue was RMB 1.481 billion (up 17.4%), gross profit RMB 477 million, and operating profit RMB 66.65 million; the company turned profitable with a period profit of RMB 35 million (vs. RMB 40.31 million loss prior year) and basic EPS of RMB 0.26 Consolidated Statement of Comprehensive Income Summary (RMB Thousand) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Revenue | 1,481,099 | 1,261,917 | | Gross Profit | 476,647 | 400,731 | | Operating Profit | 66,654 | 74,387 | | Profit/(Loss) Before Income Tax | 52,462 | (16,324) | | Profit/(Loss) for the Period | 34,995 | (40,307) | | Profit/(Loss) Attributable to Owners of the Company | 34,826 | (40,066) | | Basic Earnings/(Loss) Per Share (RMB) | 0.26 | (0.48) | Consolidated Statement of Financial Position As of June 30, 2021, total assets increased to RMB 1.863 billion, with inventories rising to RMB 760 million, total liabilities at RMB 1.223 billion (current liabilities RMB 1.165 billion), and total equity at RMB 640 million Consolidated Statement of Financial Position Summary (RMB Thousand) | Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total Non-current Assets | 88,548 | 86,644 | | Total Current Assets | 1,774,921 | 1,706,831 | | Total Assets | 1,863,469 | 1,793,475 | | Equity and Liabilities | | | | Total Equity | 640,007 | 617,687 | | Total Non-current Liabilities | 58,838 | 57,288 | | Total Current Liabilities | 1,164,624 | 1,118,500 | | Total Liabilities | 1,223,462 | 1,175,788 | | Total Equity and Liabilities | 1,863,469 | 1,793,475 | Consolidated Statement of Changes in Equity For H1 2021, total equity increased from RMB 618 million to RMB 640 million, primarily due to RMB 35 million profit, partially offset by RMB 12.67 million in other comprehensive loss from exchange differences Summary of Changes in Equity (RMB Thousand) | Item | Value | | :--- | :--- | | As at January 1, 2021 | 617,687 | | Profit for the year | 34,995 | | Other comprehensive loss | (12,670) | | Transactions with owners | (5) | | As at June 30, 2021 | 640,007 | Consolidated Statement of Cash Flows In H1 2021, net cash used in operating activities significantly improved to RMB 36.1 million, with net cash inflows from investing (RMB 66.55 million) and financing (RMB 68.92 million), resulting in a net increase of RMB 99.38 million in cash and cash equivalents, ending at RMB 326 million Consolidated Statement of Cash Flows Summary (RMB Thousand) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (36,097) | (233,140) | | Net Cash From Investing Activities | 66,552 | 35,040 | | Net Cash From/(Used in) Financing Activities | 68,920 | (113,343) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 99,375 | (311,443) | | Cash and Cash Equivalents at Beginning of Period | 252,334 | 538,561 | | Effect of Exchange Rate Changes | (26,159) | 11,961 | | Cash and Cash Equivalents at End of Period | 325,550 | 239,079 | Selected Notes to Financial Statements Notes provide detailed financial information, including all revenue from China (customer A contributing RMB 472 million), period-end inventories at RMB 760 million, total borrowings of RMB 718 million (largely secured/guaranteed), and trade payables of RMB 398 million - All of the company's revenue is derived from China, with customer A being a major client, contributing RMB 472 million in revenue, accounting for approximately 31.9% of total revenue[105][110] Inventory Movement (RMB Thousand) | Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Goods | 799,629 | 702,490 | | Less: Provision | (39,899) | (43,129) | | Net | 759,730 | 659,361 | Borrowing Structure (RMB Thousand) | Item | June 30, 2021 | | :--- | :--- | | Secured or Guaranteed | 479,284 | | Unsecured | 238,420 | | Total Borrowings | 717,704 |