指尖悦动(06860) - 2021 - 中期财报

Company Information Provides fundamental details and background information about the company Management Discussion and Analysis Analyzes the company's operational performance, financial condition, and future outlook within the market context Market Overview In H1 2021, China's gaming industry growth slowed, with mobile games dominating the market, while the 'games going global' trend was prominent, especially for SLG titles, amidst rising advertising costs Key Data of China's Gaming Industry in H1 2021 | Metric | Value | | :--- | :--- | | Total gaming industry revenue | Approximately RMB 150.5 billion | | Total revenue year-on-year growth | 7.9% | | Mobile game sales revenue | RMB 114.7 billion | | Mobile game year-on-year growth | 9.7% | | China's game user base | 666.6 million people | | Mobile game user base | 656.3 million people | | Overseas sales revenue of self-developed games | USD 8.5 billion | | Overseas sales revenue year-on-year growth | 11.6% | - Strategy games (SLG) accounted for the highest share of overseas revenue from China's self-developed games, approximately 41.5%, demonstrating strong international market competitiveness[42] - The year-on-year increase in game advertising and promotion unit costs is an industry consensus, making improved marketing efficiency a key challenge for game publishers[42] Business Review During the reporting period, total revenue decreased by 34.3% year-on-year to RMB 282 million, primarily due to classic game decline, fewer new game approvals, strategic product launch adjustments, and ineffective marketing, despite user growth and stable performance from core SLG titles H1 2021 Performance Overview | Metric | Value | | :--- | :--- | | Total revenue | RMB 282 million | | Year-on-year change | Decrease of approximately 34.3% | | Cumulative registered users | 178 million | | Registered users year-on-year growth | 3.3% | - Four primary reasons for revenue decline include: (i) classic games reaching maturity; (ii) a significant reduction in new game approvals; (iii) strategic adjustments to new product launch plans; and (iv) uncertain effectiveness of industry marketing and promotion activities[43] - Classic games 'My Mission', 'Tank Front', and 'Starry Fantasy' remain popular years after launch, with peak monthly gross billings during the reporting period reaching RMB 20.1 million, RMB 11.5 million, and RMB 12.2 million, respectively[46] Outlook for H2 2021 The company plans to focus on long-lifecycle, high-quality games, especially SLG titles, within an increasingly regulated environment, leveraging extensive user data and multi-dimensional analytics to optimize new game launches, enhance player experience, and improve monetization for sustainable future growth - The company's core strategy is to develop long-lifecycle products, extending their lifespan through continuous introduction of new gameplay features to generate stable revenue[49] - The company will continue to leverage big data analytics, using its proprietary multi-dimensional data analysis engine to optimize game parameters based on player preferences, playtime, and spending, enhancing cross-promotion effectiveness and market performance[50] - Future plans include expanding the game portfolio, diversifying game categories while maintaining a focus on SLG titles, and adhering to the 'boutique game' philosophy[50] Financial Review The Group's financial performance declined across the board in H1 2021, with total revenue down 34.3%, gross profit down 40%, operating profit down 56.9%, and profit attributable to owners down 48.4%, primarily due to reduced revenue, lower gross margin, and significantly increased R&D expenses H1 2021 Financial Summary (RMB in thousands) | Metric | H1 2021 (Unaudited) | H1 2020 (Unaudited) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 281,997 | 429,451 | -34.3% | | Gross profit | 163,512 | 271,850 | -39.9% | | Operating profit | 33,611 | 77,935 | -56.9% | | Profit before income tax | 54,669 | 99,455 | -45.0% | | Profit for the period attributable to owners of the Company | 45,015 | 87,212 | -48.4% | | Adjusted profit for the period attributable to owners | 46,393 | 94,293 | -50.8% | Revenue Revenue decreased by 34.3% year-on-year to RMB 282 million, mainly due to the natural decline of older games, fewer new game approvals, and delayed launches, with co-publishing revenue increasing from 44.8% to 53.0% and becoming the primary source Revenue by Publishing Method (RMB in millions) | Publishing Method | H1 2021 | % of Total Revenue | H1 2020 % | | :--- | :--- | :--- | :--- | | Self-published | 132.6 | 47.0% | 55.2% | | Co-published | 149.4 | 53.0% | 44.8% | Cost of Revenue Cost of revenue decreased by 24.8% year-on-year to RMB 118.5 million, primarily due to reduced revenue leading to a corresponding decrease in platform sharing fees and commissions paid to game developers Changes in Cost of Revenue | Metric | H1 2021 (RMB in millions) | H1 2020 (RMB in millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Cost of revenue | 118.5 | 157.6 | -24.8% | Gross Profit and Gross Margin Gross profit was approximately RMB 163.5 million, a year-on-year decrease, with gross margin falling from 63.3% to 58.0%, primarily because the decline in costs was less than the decline in revenue Changes in Gross Profit and Gross Margin | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Gross profit | RMB 163.5 million | RMB 271.9 million | | Gross margin | 58.0% | 63.3% | Selling and Marketing Expenses Selling and marketing expenses significantly decreased by 47.0% year-on-year to RMB 57.7 million, falling from 25.4% to 20.5% of total revenue, mainly due to adjusted product launch plans and reduced advertising for mature games Changes in Selling and Marketing Expenses | Metric | H1 2021 (RMB in millions) | H1 2020 (RMB in millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Selling and marketing expenses | 57.7 | 108.9 | -47.0% | Administrative Expenses Administrative expenses decreased from RMB 58.0 million in the prior period to RMB 34.3 million, primarily due to a reduction in impairment losses on assets Changes in Administrative Expenses | Metric | H1 2021 (RMB in millions) | H1 2020 (RMB in millions) | | :--- | :--- | :--- | | Administrative expenses | 34.3 | 58.0 | Research and Development Expenses R&D expenses increased by 44.0% year-on-year to RMB 38.4 million, primarily due to strategic investments in building an in-house R&D team to enhance game development capabilities Changes in Research and Development Expenses | Metric | H1 2021 (RMB in millions) | H1 2020 (RMB in millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | R&D expenses | 38.4 | 26.7 | +44.0% | Profit for the Period Profit attributable to owners decreased by 48.4% year-on-year to RMB 45.0 million, primarily due to a decline in gross margin (driven by increased co-publishing game contribution) and a significant rise in R&D expenses - Two main reasons for the profit decline are: 1) increased revenue contribution from co-published games with lower gross margins, leading to an overall gross margin decrease; and 2) a significant increase in R&D expenses incurred to establish an in-house R&D team and enhance development capabilities[68][70] Non-IFRS Measures — Adjusted Profit Excluding share-based compensation, adjusted profit for the period was RMB 46.4 million, a 50.8% decrease from RMB 94.3 million in the prior period Reconciliation of Adjusted Profit (RMB in millions) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Profit for the period | 45.0 | 87.2 | | Add: Share-based compensation | 1.4 | 7.1 | | Adjusted profit | 46.4 | 94.3 | Liquidity, Funding and Borrowing Sources As of June 30, 2021, the Group's financial position was robust, with a current ratio of 7.9, up from 7.1 at the end of 2020, no bank borrowings, a zero debt-to-asset ratio, and plans to fund operations with internal resources Liquidity Metrics (as of June 30, 2021) | Metric | Value (RMB in millions) | | :--- | :--- | | Current assets | 1,521.4 | | Current liabilities | 192.0 | | Current ratio | 7.9 | | Bank and cash balances | 520.5 | | Debt-to-asset ratio | Zero | Investments at Fair Value Through Profit or Loss As of June 30, 2021, the Group's total investments at fair value through profit or loss significantly increased to RMB 273.5 million from RMB 147.8 million at year-end 2020, comprising Hong Kong-listed equity securities, wealth management products, and private company investments Investments at Fair Value Through Profit or Loss Portfolio (as of June 30, 2021) | Investment Category | Fair Value (RMB in millions) | | :--- | :--- | | Hong Kong-listed equity securities | 79.6 | | Wealth management products (Zhongzhou Longteng) | 57.2 | | Investments in private companies | 11.0 | | Wealth management products from major commercial banks | 125.7 | | Total | 273.5 | Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Presents the Group's financial performance, including revenue, expenses, and profit, for the reporting period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (for the six months ended June 30) | Item (RMB in thousands) | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Revenue | 281,997 | 429,451 | | Cost of revenue | (118,485) | (157,601) | | Gross profit | 163,512 | 271,850 | | Selling and marketing expenses | (57,704) | (108,901) | | Administrative expenses | (34,280) | (58,025) | | Research and development expenses | (38,408) | (26,666) | | Other income | 4,460 | 5,115 | | Other losses, net | (3,969) | (5,438) | | Operating profit | 33,611 | 77,935 | | Interest income | 21,366 | 21,666 | | Finance costs | (308) | (146) | | Profit before income tax | 54,669 | 99,455 | | Income tax expense | (9,654) | (12,243) | | Profit for the period attributable to owners of the Company | 45,015 | 87,212 | | Basic earnings per share (RMB) | 0.0237 | 0.0463 | Condensed Consolidated Statement of Financial Position Outlines the Group's assets, liabilities, and equity at the end of the reporting period, reflecting its financial health Condensed Consolidated Statement of Financial Position Summary (RMB in thousands) | Item | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | | :--- | :--- | :--- | | Assets | | | | Total non-current assets | 167,147 | 149,095 | | Total current assets | 1,521,409 | 1,491,488 | | Total assets | 1,688,556 | 1,640,583 | | Equity and Liabilities | | | | Total equity | 1,468,786 | 1,430,700 | | Total current liabilities | 191,967 | 209,552 | | Non-current liabilities | 27,803 | 331 | | Total liabilities | 219,770 | 209,883 | | Total equity and liabilities | 1,688,556 | 1,640,583 | Condensed Consolidated Statement of Changes in Equity Details the changes in the Group's equity components over the reporting period, including profit, other comprehensive income, and transactions with owners - As of June 30, 2021, total equity attributable to owners increased to RMB 1.469 billion from RMB 1.431 billion at the beginning of 2021, primarily driven by profit for the period of RMB 45.0 million, partially offset by a decrease in reserves due to exchange differences[89] Condensed Consolidated Statement of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for the reporting period Condensed Consolidated Statement of Cash Flows Summary (for the six months ended June 30) | Item (RMB in thousands) | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Net cash generated from operating activities | 47,576 | 67,892 | | Net cash used in investing activities | (38,941) | (53,376) | | Net cash used in financing activities | (4,860) | (4,161) | | Net increase in cash and cash equivalents | 3,775 | 10,355 | | Cash and cash equivalents at beginning of period | 521,549 | 777,962 | | Cash and cash equivalents at end of period | 520,496 | 799,094 | Notes to the Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements Revenue and Segment Information The Group operates in a single reportable segment, with most revenue derived from China; co-published games generated RMB 149 million, surpassing self-published games at RMB 133 million, and revenue from the top three game developers exceeded 50% of total revenue, indicating concentration risk Revenue Contribution from Major Game Developers | Developer | H1 2021 Revenue Contribution | | :--- | :--- | | Game Developer A | 26.1% | | Game Developer B | 12.1% | | Game Developer C | 11.2% | Bills Receivable The issuer of the company's HKD 250 million bills receivable, Obi Global Development Limited, defaulted by failing to repay principal and interest on the extended due date of June 12, 2021, prompting the company to evaluate legal actions for recovery, which may impact its financial position - The issuer of the bills receivable failed to repay principal and interest on the extended due date, constituting a default event, and the company is seeking legal advice and evaluating potential enforcement actions[162] Share-based Payment Transactions The company has a restricted share unit scheme, with no new grants during the period; as of period-end, 3.333 million restricted share units remained unvested, and the company recognized related share-based payment expenses of RMB 1.377 million Movement of Restricted Share Units (in thousands of shares) | Item | H1 2021 | | :--- | :--- | | Beginning of period | 4,293 | | Vested | (960) | | End of period | 3,333 | Other Information Presents additional disclosures not covered in the main financial statements, including corporate governance, litigation, and shareholding details Use of Proceeds from Listing As of June 30, 2021, approximately HKD 618 million of net proceeds from the listing remained unutilized, with significant balances for 'developing game acquisition capabilities' (HKD 290 million) and 'establishing an in-house game R&D team' (HKD 201 million) Use of Proceeds from Listing and Remaining Balances (HKD in millions) | Intended Use | Net Amount | Balance as of June 30, 2021 | | :--- | :--- | :--- | | Developing game acquisition capabilities | 338.5 | 289.7 | | Establishing an in-house game R&D team | 241.8 | 200.5 | | Marketing and promotion activities | 193.4 | — | | Developing overseas markets and business | 96.7 | 64.0 | | Working capital and general corporate purposes | 96.7 | 63.9 | | Total | 967.1 | 618.1 | Directors' and Chief Executive's Interests in Shares, Underlying Shares and Debentures As of June 30, 2021, Chairman Mr. Liu Jie held 52.18% of the company's shares through controlled corporations, and Executive Director Mr. Zhu Yanbin held 7.69%, indicating a highly concentrated shareholding structure Major Directors' Shareholding | Name | Capacity/Nature of Interest | Number of Shares Held | Approximate % of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Liu Jie | Interest in controlled corporation | 1,007,837,500 | 52.18% | | Mr. Zhu Yanbin | Interest in controlled corporation | 148,488,000 | 7.69% | Litigation The company faces two significant legal issues: a lawsuit from Leading Global Fund SPC claiming HKD 250 million, and a default by the issuer of the company's HKD 250 million notes, both potentially having a material adverse impact on its financial and operational status - The company received a writ of summons from Leading Global Fund SPC as plaintiff, claiming HKD 250 million related to an alleged subscription agreement[234] - A default event occurred on the HKD 250 million principal amount of notes subscribed by the company, as the issuer failed to pay principal and interest on the extended due date[235] Update on Directors' Information Post-reporting period, significant changes occurred in the company's board and management, including the resignations of two executive directors and one independent non-executive director, leading to non-compliance with listing rules regarding board independence, audit committee, and remuneration committee composition - Mr. Wang Zaicheng resigned as Executive Director and Joint Company Secretary (effective May 28, 2021)[240] - Mr. Liu Zhanxi resigned as Executive Director and Chief Financial Officer (effective May 28, 2021)[241] - Ms. Yao Minru resigned as Independent Non-Executive Director and from multiple committee positions (effective July 13, 2021), resulting in the company's non-compliance with several listing rules regarding board and committee composition[242][248] Glossary Provides definitions for key terms and abbreviations used throughout the report for clarity and understanding