源想集团(08401) - 2021 Q1 - 季度财报

Company Information This chapter outlines Source Network Group Limited's administrative and governance structure, including board members, committee compositions, registered office, auditor, and principal bankers, along with its stock code - The Board of Directors comprises Executive Directors Ms. Zhang Li, Mr. Luo Jiajian, Mr. Li Yongliang, Mr. Liang Weilun, and Independent Non-executive Directors Mr. Guan Zhikang, Mr. Fan Dewei, and Mr. He Haodong[6] - Key board committees include the Audit Committee (Chairman: Mr. He Haodong), Remuneration Committee (Chairman: Mr. Fan Dewei), and Nomination Committee (Chairman: Mr. Guan Zhikang)[6] - The company's auditor is KPMG, and its stock code is 8401[7] Financial Highlights This chapter summarizes the key financial performance for the three months ended June 30, 2020, showing a significant revenue decline, substantial gross profit reduction, a shift from profit to loss, and no dividend recommendation Financial Highlights for the Three Months Ended June 30, 2020 | Metric | 2020 (HK$ '000) | 2019 (HK$ '000) | Change (HK$ '000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 4,887 | 5,769 | (882) | -15.3% | | Gross Profit | 2,173 | 3,514 | (1,341) | -38.2% | | Loss for the Period | (2,658) | (22) | (2,636) | -11981.8% | - The increase in loss was primarily due to decreased revenue, increased selling and distribution costs, and administrative and other operating expenses[10] - The Board of Directors does not recommend the payment of any dividend for the relevant period[10] Management Discussion and Analysis This chapter provides an in-depth discussion of the company's operational and financial performance during the reporting period, focusing on the impact of the COVID-19 pandemic, regional market challenges and strategies, and future outlook, alongside a detailed review of financial metric changes Business Review Despite the Group's active expansion in Southeast Asian markets, the advertising industry in all operating markets significantly slowed due to the COVID-19 pandemic, impairing overall performance with notable declines in both revenue and gross profit - The COVID-19 pandemic led to a significant slowdown in the advertising industry, impacting the Group's overall performance[11] - The Group's revenue decreased by approximately 15.3% to approximately HK$4,887,000, and gross profit decreased by approximately 38.2% to approximately HK$2,173,000[11] - The Group's principal business is providing online advertising services, including viral marketing, interactive engagement, and mass blogger services, primarily operating in Hong Kong, Taiwan, Malaysia, Indonesia, the Philippines, and Singapore[11] Geographical Markets This chapter analyzes revenue contributions and challenges across geographical markets, noting revenue declines in Hong Kong and Taiwan due to the pandemic and increased competition, with Southeast Asia's decline partially offset by new market contributions Geographical Market Revenue Contribution | Region | 2020 Revenue Share | 2019 Revenue Share | | :--- | :--- | :--- | | Hong Kong | Approx. 61.9% | Approx. 65.9% | | Taiwan | Approx. 26.8% | Approx. 24.3% | | Southeast Asia | Approx. 11.3% | Approx. 9.8% | Hong Kong Hong Kong market revenue significantly declined by 20.4% due to the COVID-19 pandemic, intensified competition, and economic instability, presenting a challenging operating environment - Revenue from Hong Kong decreased by approximately 20.4% to approximately HK$3,025,000[13] - The significant revenue decline was primarily affected by the COVID-19 pandemic, increased competition among online advertising service providers, and economic instability[13] Taiwan Taiwan's operating environment remains challenging, with revenue decreasing to approximately HK$1,312,000 due to changes in internet user behavior, increased competition, economic instability, and the pandemic - Taiwan revenue decreased to approximately HK$1,312,000 (2019: approximately HK$1,403,000)[14] - Challenges include changes in internet user behavior, increased competition, economic instability, and the impact of the COVID-19 pandemic[14] Southeast Asia Total revenue in Southeast Asia slightly decreased, as contributions from newly expanded markets offset the revenue decline in Malaysia caused by the pandemic - Total Southeast Asia revenue decreased from approximately HK$566,000 to approximately HK$550,000[15] - Revenue contributions from newly expanded markets offset the revenue decline in Malaysia caused by the COVID-19 pandemic[15] Outlook The company anticipates the COVID-19 pandemic will continue to affect the advertising industry but remains confident in future sales recovery, which will be achieved by strengthening its sales team, service portfolio, member base, and client relationships, with future strategies including talent acquisition, new opportunity exploration, and enhanced member data - The COVID-19 pandemic is expected to continue impacting the advertising industry, but confidence in sales recovery remains[16] - Sales will be revitalized by leveraging an experienced sales team, diversified advertising services, a consolidated member base, and extensive client relationships[16] - Future focus includes new business maturation, elevating core markets to new heights, recruiting more business development talent, considering sponsorship of advertising-related awards to enhance profitability, and strengthening member base data[16] Financial Review This chapter details the financial metrics for the reporting period, explaining the reasons for decreased revenue, increased cost of services, selling and distribution costs, administrative expenses, and income tax, which ultimately led to a significant expansion of the loss for the period Revenue The Group's revenue decreased by 15.3% year-on-year to HK$4,887,000, primarily attributable to reduced sales in Hong Kong - Revenue decreased by 15.3% from HK$5,769,000 to HK$4,887,000[17] - Primarily attributable to reduced sales in Hong Kong[17] Cost of Services Cost of services increased by 20.4% year-on-year to HK$2,714,000, mainly due to higher system maintenance costs - Cost of services increased by 20.4% from HK$2,255,000 to HK$2,714,000[18] - The increase was primarily attributable to higher system maintenance costs[18] Gross Profit The Group's gross profit decreased by 38.2% year-on-year to HK$2,173,000 - Gross profit decreased by 38.2% from HK$3,514,000 to HK$2,173,000[19] Selling and Distribution Costs Selling and distribution costs significantly increased to HK$2,141,000, primarily due to an increase in headcount and promotional expenses on other media platforms - Selling and distribution costs increased from HK$942,000 to HK$2,141,000[20] - The increase was primarily attributable to an increase in headcount and promotional expenses on other media platforms[20] Administrative and Other Operating Expenses Administrative and other operating expenses increased by 11.3% year-on-year to HK$3,234,000, mainly due to increased directors' emoluments, auditor's remuneration, and net foreign exchange losses - Administrative and other operating expenses increased by 11.3% from HK$2,905,000 to HK$3,234,000[21] - The increase was primarily attributable to increased directors' emoluments, auditor's remuneration, and net foreign exchange losses[21] Income Tax Income tax increased year-on-year to HK$103,000, primarily due to increased taxable profits of subsidiaries and a reduction in deferred tax during the relevant period - Income tax increased from HK$41,000 to HK$103,000[22] - The increase was primarily due to increased taxable profits of subsidiaries and a reduction in deferred tax[22] Loss for the Period The Group's net loss for the period significantly expanded to HK$2,658,000, primarily due to decreased revenue, increased selling and distribution costs, and administrative and other operating expenses - Net loss for the period was approximately HK$2,658,000 (2019: approximately HK$22,000)[23] - The increase in net loss was primarily due to decreased revenue, increased selling and distribution costs, and administrative and other operating expenses[23] Foreign Exchange Risk Despite operating in multiple jurisdictions and using various functional currencies, the Group did not face any significant currency risk during the reporting period - The Group did not face any significant currency risk[24] - The functional and presentation currency of the Company and its subsidiaries is Hong Kong Dollars, except for certain subsidiaries whose functional currencies are New Taiwan Dollars, Malaysian Ringgit, Singapore Dollars, Indonesian Rupiah, and Philippine Pesos[24] Events After the Reporting Period No events occurred after June 30, 2020, that could have a material impact on the Group's operations and financial performance - No events occurred after June 30, 2020, that could have a material impact on the Group's operations and financial performance[25] Other Information This chapter provides detailed information on corporate governance, shareholding structure, and compliance, including directors' and substantial shareholders' interests, adherence to the Corporate Governance Code, share option scheme, potential conflicts of interest, and Audit Committee responsibilities Directors' Interests in Shares, Underlying Shares, and Debentures of the Company and its Associated Corporations As of June 30, 2020, several directors collectively held 57.14% of the company's issued share capital through controlled corporate interests, indicating concentrated control by key management Directors' Long Position in the Company's Ordinary Shares (as at June 30, 2020) | Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Ms. Zhang Li | Interest in controlled corporation; Jointly held interest | 114,280,000 | 57.14% | | Mr. Luo Jiajian | Interest in controlled corporation; Jointly held interest | 114,280,000 | 57.14% | | Mr. Li Yongliang | Interest in controlled corporation; Jointly held interest | 114,280,000 | 57.14% | Substantial Shareholders' Interests in Shares, Underlying Shares or Debentures of the Company This chapter lists substantial shareholders, other than directors, and their interests in the company's shares as of June 30, 2020, including shares held through beneficial interests, spouse interests, and as investment managers, further revealing the company's equity concentration Substantial Shareholders' Long Position in Shares (as at June 30, 2020) | Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Source Network Investment Limited | Beneficial interest | 114,280,000 | 57.14% | | Mr. Szeto Man Wah | Spouse interest | 114,280,000 | 57.14% | | Ms. Leung Kwok Mei | Spouse interest | 114,280,000 | 57.14% | | Ms. Ng Ka Po | Spouse interest | 114,280,000 | 57.14% | | Genesis Financial Group Limited | Investment manager | 34,580,000 | 17.29% | | Genesis Grand Growth Fund | Beneficial interest | 34,580,000 | 17.29% | | Mr. Lam Wang Yuen | Interest in controlled corporation | 34,580,000 | 17.29% | | Ms. Zhang Tian | Spouse interest | 34,580,000 | 17.29% | 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 reporting period and up to the date of this report - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[36] Corporate Governance Code The Company has complied with the Corporate Governance Code in Appendix 15 of the GEM Listing Rules, except for the non-segregation of Chairman and Chief Executive Officer duties, which are jointly performed by three Executive Directors, an arrangement the Board believes ensures effective business planning and decision-making - The Company has complied with all code provisions of the Corporate Governance Code set out in Appendix 15 to the GEM Listing Rules, except for the non-segregation of the roles of Chairman and Chief Executive Officer[37] - The responsibilities of the Chairman and Chief Executive Officer are jointly performed by three Executive Directors, Ms. Zhang Li, Mr. Luo Jiajian, and Mr. Li Yongliang[37] - The Board believes this arrangement ensures effective business planning and decision-making, as these three Executive Directors possess in-depth knowledge of the Company's management and business operations[37] Code of Conduct for Securities Transactions by Directors The Company has adopted a code of conduct for directors' securities transactions no less exacting than required by the GEM Listing Rules, and all directors have confirmed in writing their compliance with the required standards during the reporting period and up to the report date - The Company has adopted a code of conduct for directors' securities transactions with terms no less exacting than those set out in Rules 5.48 to 5.67 of the GEM Listing Rules[41] - All Directors have confirmed in writing their compliance with the required standards regarding securities transactions as set out in the GEM Listing Rules during the relevant period and up to the date of this report[41] Share Option Scheme The Company's share option scheme was approved on March 7, 2018, but no share options were granted, exercised, lapsed, or cancelled during the reporting period and up to the report date, nor were there any outstanding share options - The Share Option Scheme was approved by shareholders on March 7, 2018[42] - No share options under the Share Option Scheme were granted, exercised, lapsed, or cancelled during the relevant period and up to the date of this report[42] - As at June 30, 2020, there were no outstanding share options under the Share Option Scheme[42] Competition and Conflicts of Interest To the best of the Directors' knowledge, no Director, controlling shareholder, or their respective associates held any business or interest that competes or may compete with the Company's business, nor had any other conflicts of interest with the Group during the reporting period - No Director, controlling shareholder of the Company, or any of their respective associates held any business or interest that competes or may compete with the Company's business[43] - No such person had or may have any other conflicts of interest with the Group[43] Interests of Compliance Adviser The Company has appointed Ascent Partners Corporate Finance Limited as its compliance adviser, which confirmed that as of June 30, 2020, neither it nor its directors, employees, or associates held any notifiable interests related to the Group - The Company has appointed Ascent Partners Corporate Finance Limited as its compliance adviser[44] - The compliance adviser confirmed that as at June 30, 2020, neither it nor its directors, employees, or associates held any notifiable interests related to the Group[44] Audit Committee The Audit Committee, composed entirely of independent non-executive directors, has reviewed the Company's unaudited condensed consolidated financial statements for the relevant period and confirmed their compliance with applicable accounting standards, GEM Listing Rules, and statutory disclosure requirements - The Audit Committee was established on March 7, 2018, with members including Mr. He Haodong (Chairman), Mr. Fan Dewei, and Mr. Guan Zhikang[46] - The Audit Committee has reviewed the Company's unaudited condensed consolidated financial statements for the relevant period and is of the opinion that they comply with applicable accounting standards, the GEM Listing Rules, and statutory requirements, and that adequate disclosures have been made[46] Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the unaudited consolidated financial performance for the three months ended June 30, 2020, showing a shift from profit to loss, with significant increases in net loss and total comprehensive expenses, reflecting severe operating challenges Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (for the three months ended June 30, 2020) | Metric | 2020 (HK$ '000) | 2019 (HK$ '000) | Change (HK$ '000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 4,887 | 5,769 | (882) | -15.3% | | Cost of services | (2,714) | (2,255) | (459) | 20.4% | | Gross profit | 2,173 | 3,514 | (1,341) | -38.2% | | Other income | 650 | 352 | 298 | 84.7% | | Selling and distribution costs | (2,141) | (942) | (1,199) | 127.3% | | Administrative and other operating expenses | (3,234) | (2,905) | (329) | 11.3% | | Operating (loss)/profit | (2,552) | 19 | (2,571) | -13531.6% | | Finance costs | (3) | – | (3) | N/A | | (Loss)/profit before tax | (2,555) | 19 | (2,574) | -13547.4% | | Income tax | (103) | (41) | (62) | 151.2% | | Loss for the period | (2,658) | (22) | (2,636) | -11981.8% | | Exchange differences on translation of foreign operations | (60) | (7) | (53) | 757.1% | | Total comprehensive expense for the period | (2,718) | (29) | (2,689) | -9272.4% | | Basic loss per share (HK$) | (0.01) | (0.0001) | (0.0099) | -9900% | Unaudited Condensed Consolidated Statement of Changes in Equity This statement presents the changes in shareholders' equity for the three months ended June 30, 2020, indicating a decrease in total equity due to the loss for the period and other comprehensive expenses Unaudited Condensed Consolidated Statement of Changes in Equity (for the three months ended June 30, 2020) | Item | Balance at April 1, 2019 (HK$ '000) | Balance at June 30, 2019 (HK$ '000) | Balance at April 1, 2020 (HK$ '000) | Balance at June 30, 2020 (HK$ '000) | | :--- | :--- | :--- | :--- | :--- | | Share capital | 2,000 | 2,000 | 2,000 | 2,000 | | Share premium | 71,988 | 71,988 | 71,988 | 71,988 | | Capital reserve | 383 | 383 | 383 | 383 | | Exchange reserve | (417) | (424) | (396) | (456) | | Accumulated losses | (12,151) | (12,173) | (17,492) | (20,150) | | Total equity | 61,803 | 61,774 | 56,483 | 53,765 | | Loss for the period | | (22) | | (2,658) | | Other comprehensive expense | | (7) | | (60) | | Total comprehensive expense | | (29) | | (2,718) | Notes to the Unaudited Condensed Consolidated Financial Statements This chapter provides detailed notes to the unaudited condensed consolidated financial statements, covering the company's general information, basis of financial statement preparation, revenue and segment information, other income, components of profit or loss before tax, income tax details, loss per share calculation, and dividend policy, offering users a deeper understanding 1. General Information Source Network Group Limited is an investment holding company incorporated in the Cayman Islands, primarily engaged in providing online advertising services - The Company is an exempted company incorporated in the Cayman Islands under the Companies Law of the Cayman Islands[51] - The Group is principally engaged in the provision of online advertising services[52] 2. Basis of Preparation of Financial Statements The unaudited condensed consolidated financial statements for the three months ended June 30, 2020, have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards and GEM Listing Rules disclosure requirements, and reviewed by the Audit Committee - The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, Hong Kong Generally Accepted Accounting Principles, and the disclosure requirements of the Hong Kong Companies Ordinance, and comply with the applicable disclosure provisions of the GEM Listing Rules[53] - The financial statements are unaudited by the Company's independent auditor but have been reviewed by the Company's Audit Committee[53] 3. Revenue and Segment Information The Group's revenue is entirely derived from online advertising services, with only one reportable segment; geographical data indicates Hong Kong as the primary revenue source and main location for specific non-current assets (a) Revenue The Group's principal business is providing online advertising services, with revenue representing service income generated from these services, and the Group has only one reportable segment - The Group's principal business is providing online advertising services, with revenue representing service income generated from these services[54] - The Group has only one reportable segment, which is the provision of online advertising services[54] (b) Segment Reporting Geographical data indicates Hong Kong as the largest contributor to the Group's revenue from external customers and the primary location for specific non-current assets Geographical Information: Revenue from External Customers (for the three months ended June 30) | Region | 2020 (HK$ '000) | 2019 (HK$ '000) | | :--- | :--- | :--- | | Hong Kong | 3,025 | 3,800 | | Taiwan | 1,312 | 1,403 | | Southeast Asia | 550 | 566 | | Total | 4,887 | 5,769 | Geographical Information: Specific Non-current Assets (as at June 30) | Region | 2020 (HK$ '000) | 2019 (HK$ '000) | | :--- | :--- | :--- | | Hong Kong | 2,865 | 1,093 | | Taiwan | 4 | 6 | | Southeast Asia | 5 | 9 | | Total | 2,874 | 1,108 | 4. Other Income The Group's other income significantly increased, primarily benefiting from government grants received during the period Other Income (for the three months ended June 30) | Item | 2020 (HK$ '000) | 2019 (HK$ '000) | | :--- | :--- | :--- | | Interest income | 158 | 352 | | Government grants | 490 | – | | Miscellaneous income | 2 | – | | Total | 650 | 352 | 5. (Loss)/Profit Before Tax This chapter lists the main expense items comprising loss or profit before tax, including staff costs, auditor's remuneration, depreciation, amortization, and net foreign exchange losses Components of (Loss)/Profit Before Tax (for the three months ended June 30) | Item | 2020 (HK$ '000) | 2019 (HK$ '000) | | :--- | :--- | :--- | | Staff costs (including directors' emoluments) | 2,771 | 2,610 | | Auditor's remuneration | 224 | 50 | | Depreciation charges — owned property, plant and equipment | 22 | 39 | | Depreciation charges — right-of-use assets | 78 | – | | Amortisation of intangible assets | 301 | 85 | | Operating lease charges for office premises — minimum lease payments for rented office premises | – | 82 | | Net foreign exchange losses | 260 | 1 | | Fair value loss on financial assets at fair value through profit or loss | 28 | – | 6. Income Tax Income tax expense increased, primarily due to higher taxable profits of subsidiaries and a reduction in deferred tax, with this chapter also outlining applicable profit tax rates for Hong Kong and Taiwan Income Tax (for the three months ended June 30) | Item | 2020 (HK$ '000) | 2019 (HK$ '000) | | :--- | :--- | :--- | | Current tax — Hong Kong | – | 18 | | Current tax — Other jurisdictions | 103 | 121 | | Deferred tax — origination of temporary differences | – | (98) | | Total | 103 | 41 | - Hong Kong profits tax provision is calculated at 16.5% of the estimated assessable profits[63] - The corporate income tax rate in Taiwan is principally 20%[63] 7. Loss Per Share For the three months ended June 30, 2020, both basic and diluted loss per share were HK$0.01, reflecting the increased loss for the period and the absence of dilutive potential ordinary shares Loss Per Share (for the three months ended June 30) | Metric | 2020 (Unaudited) | 2019 (Unaudited) | | :--- | :--- | :--- | | Loss for the period attributable to equity holders of the Company (HK$ '000) | (2,658) | (22) | | Weighted average number of ordinary shares in issue during the period ('000 shares) | 200,000 | 200,000 | | Basic and diluted loss per share (HK$) | (0.01) | (0.0001) | - There were no dilutive potential ordinary shares in issue for the three months ended June 30, 2020, and 2019[65] 8. Dividends The Board of Directors does not recommend the payment of an interim dividend for the three months ended June 30, 2020 - The Board of Directors does not recommend the payment of an interim dividend for the three months ended June 30, 2020[66]