芯智控股(02166) - 2024 - 中期业绩

Interim Results Announcement Financial Summary For the six months ended June 30, 2024, the Group's total revenue decreased by 17.6% to HKD 2,623.9 million, while net profit attributable to owners significantly increased by 186.6% to HKD 36.3 million, with an interim dividend of 2 HK cents per share declared Key Financial Data for H1 2024 | Indicator | June 30, 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 2,623.9 | 3,184.6 | -17.6% | | Gross Profit | 143.4 | 229.9 | -37.6% | | Net Profit Attributable to Owners | 36.3 | 12.7 | +186.6% | | Basic Earnings Per Share (HK cents) | 7.73 | 2.68 | +188.4% | | Diluted Earnings Per Share (HK cents) | 7.72 | 2.67 | +188.4% | | Interim Dividend (HK cents per share) | 2 | 0 | N/A | Basis of Preparation for Interim Results The interim results are prepared under HKAS 34 and Listing Rules, and have been reviewed by RSM Hong Kong - The interim financial statements are prepared in accordance with HKAS 34 and the Listing Rules, and have been reviewed by independent auditor RSM Hong Kong[2] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group reported revenue of HKD 2,623,869 thousand, gross profit of HKD 143,419 thousand, and profit attributable to owners of HKD 36,326 thousand Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (Summary) | Indicator | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Revenue | 2,623,869 | 3,184,637 | | Gross Profit | 143,419 | 229,876 | | Profit Before Tax | 45,229 | 28,378 | | Profit for the Period | 36,917 | 21,116 | | Profit Attributable to Owners of the Company | 36,326 | 12,674 | | Total Comprehensive Income for the Period | 32,089 | 13,030 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group reported total non-current assets of HKD 344,736 thousand, total current assets of HKD 1,576,976 thousand, and equity attributable to owners of HKD 912,463 thousand Condensed Consolidated Statement of Financial Position (Summary) | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Total Non-Current Assets | 344,736 | 339,972 | | Total Current Assets | 1,576,976 | 1,400,325 | | Total Current Liabilities | 1,001,628 | 830,417 | | Net Assets | 912,661 | 904,413 | | Equity Attributable to Owners of the Company | 912,463 | 904,738 | Notes to the Condensed Consolidated Financial Statements 1. Basis of Preparation The condensed consolidated financial statements are prepared under HKAS 34 and Listing Rules, consistent with 2023 annual accounting policies - The interim statements are prepared in accordance with HKAS 34 and the Listing Rules, with accounting policies consistent with the 2023 annual report[7] 2. New and Revised Hong Kong Financial Reporting Standards The Group adopted new and revised HKFRS standards on January 1, 2024, with no significant impact on loan classification, and anticipates future HKFRS 18 amendments will alter financial performance presentation - The Group adopted several new and revised standards on January 1, 2024, including amendments to HKAS 1, HK(IFRIC)-Int 5 (Revised), and HKAS 7/HKFRS 7, without resulting in changes to loan classification or retrospective adjustments[8] - Future HKAS 21 amendments are expected to have no significant impact on financial statements, while HKFRS 18 (effective from 2027) will significantly alter the presentation and disclosure of financial performance, with management currently assessing its impact[9] 3. Segment Information The Board, as the chief operating decision maker, divides the business into "Authorized Distribution" and "Independent Distribution" segments, evaluating performance based on segment profit - The Group categorizes its business into two reportable segments, "Authorized Distribution" and "Independent Distribution", with the Board allocating resources and assessing performance based on each segment's operating results[10] Reportable Segment Profit or Loss For the six months ended June 30, 2024, authorized distribution revenue was HKD 2,597,847 thousand, independent distribution revenue was HKD 26,022 thousand, with total segment profit reaching HKD 33,565 thousand Reportable Segment Profit or Loss | Indicator | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Revenue from External Customers | | | | Authorized Distribution | 2,597,847 | 2,648,007 | | Independent Distribution | 26,022 | 536,630 | | Segment Profit/(Loss) | | | | Authorized Distribution | 31,092 | 24,609 | | Independent Distribution | 2,473 | (2,205) | | Total Reportable Segment Profit | 33,565 | 22,404 | Geographical Information The Group operates in Hong Kong, China, Singapore, and Japan, with Hong Kong revenue significantly decreasing while China and Singapore revenues grew substantially for the six months ended June 30, 2024 Revenue from External Customers (by Operating Location) | Region | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Hong Kong | 1,322,132 | 2,444,579 | | China | 879,383 | 652,901 | | Singapore | 416,603 | 65,858 | | Japan | 70 | 6,647 | | Other | 5,681 | 14,652 | | Consolidated Total | 2,623,869 | 3,184,637 | 4. Revenue from Customer Contracts Analysis The Group's revenue from electronic component sales is recognized immediately, with significant growth in storage products and optical communication, but substantial declines in smart display, integrated products, and independent distribution Revenue from Customer Contracts Analysis (by Sales Channel/Product Line) | Sales Channel/Product Line | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Authorized Distribution | | | | | Optoelectronic Display | 329,107 | 422,227 | -22.1% | | Storage Products | 645,724 | 43,614 | +1380.5% | | Communication Products | 277,050 | 218,192 | +27.0% | | Smart Vision | 551,212 | 456,991 | +20.6% | | Smart Display | 444,514 | 1,168,405 | -62.0% | | Integrated Products | 68,839 | 197,709 | -65.2% | | Optical Communication | 170,966 | 430 | +39659.5% | | Other | 110,435 | 140,439 | -21.3% | | Independent Distribution | 26,022 | 536,630 | -95.2% | | Total | 2,623,869 | 3,184,637 | -17.6% | 4.b Performance Obligations from Customer Contracts Revenue from electronic component sales is recognized upon transfer of goods control, with prepayments recorded as contract liabilities, and all unfulfilled contracts expected to be completed within 12 months - Revenue is recognized upon the transfer of control of goods, prepayments are recognized as contract liabilities, and all unfulfilled contracts are expected to be performed within 12 months[14] 5. Income Tax Expense For the six months ended June 30, 2024, total income tax expense increased to HKD 8,312 thousand, driven by higher corporate income tax in China and Singapore, despite a slight decrease in Hong Kong profits tax Income Tax Expense | Tax Category | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Hong Kong Profits Tax | 4,247 | 6,632 | | China Corporate Income Tax | 2,246 | 106 | | Singapore Corporate Income Tax | 507 | 117 | | Total Current Tax | 7,000 | 6,979 | | Deferred Tax | 1,312 | 283 | | Total Income Tax Expense | 8,312 | 7,262 | 6. Profit for the Period (Deductions/Credits) For the six months ended June 30, 2024, total staff costs decreased to HKD 56,958 thousand, with reductions in amortization and depreciation, while inventory costs and provisions remained stable Profit for the Period Deductions/Credits | Item | June 30, 2024 (thousand HKD) | Prior Period (thousand HKD) | | :--- | :--- | :--- | | Total Staff Costs | 56,958 | 91,799 | | Amortization of Intangible Assets | 790 | 1,985 | | Depreciation of Property, Plant and Equipment | 1,047 | 2,040 | | Depreciation of Right-of-Use Assets | 4,747 | 7,579 | | Inventory Costs Recognized as Expenses | 2,474,796 | 2,949,159 | | Inventory Provisions | 5,654 | 5,602 | 7. Dividends During the interim period, a final dividend of 5 HK cents per share for 2023 was paid, and an interim dividend of 2 HK cents per share for 2024, totaling HKD 9,774 thousand, was declared Dividend Declaration Status | Dividend Type | 2024 (HK cents per share) | 2023 (HK cents per share) | Total Amount (thousand HKD) | | :--- | :--- | :--- | :--- | | 2023 Final Dividend | 5 | 6 (2022) | 23,469 | | 2024 Interim Dividend | 2 | 0 | 9,774 | 8. Earnings Per Share For the six months ended June 30, 2024, basic earnings per share were 7.73 HK cents and diluted earnings per share were 7.72 HK cents, both showing significant year-on-year growth Earnings Per Share Data | Indicator | June 30, 2024 (HK cents) | Prior Period (HK cents) | | :--- | :--- | :--- | | Basic Earnings Per Share | 7.73 | 2.68 | | Diluted Earnings Per Share | 7.72 | 2.67 | | Number of Shares | | | | Weighted Average Number of Ordinary Shares (Basic) | 469,780,068 | 472,827,991 | | Weighted Average Number of Ordinary Shares (Diluted) | 470,780,068 | 474,327,991 | 9. Trade and Bills Receivables As of June 30, 2024, total trade receivables were HKD 846,547 thousand, with a notable increase in receivables aged 61-120 days and over 120 days, and some receivables discounted with full recourse Aging Analysis of Trade and Bills Receivables | Aging | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Trade Receivables | | | | 0–60 Days | 654,012 | 635,356 | | 61–120 Days | 168,148 | 6,169 | | Over 120 Days | 24,387 | 4,250 | | Bills Receivables | | | | 0–60 Days | 16,420 | 10,768 | 10. Trade and Bills Payables As of June 30, 2024, total trade and bills payables increased to HKD 392,457 thousand, with the largest increase observed in the 0-30 days aging category Aging Analysis of Trade and Bills Payables | Aging | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | 0–30 Days | 339,600 | 214,819 | | 31–60 Days | 33,474 | 22,240 | | 61–90 Days | 14,075 | 11,566 | | Over 90 Days | 5,308 | 16,935 | | Total | 392,457 | 265,560 | 11. Bank and Other Borrowings As of June 30, 2024, total bank and other borrowings increased to HKD 516,589 thousand, with all borrowings secured and mostly classified as current liabilities due to demand clauses Bank and Other Borrowings | Borrowing Type | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Import/Export Loans | 287,035 | 172,669 | | Other Bank Borrowings | 213,450 | 208,518 | | Other Borrowings | 16,104 | 16,549 | | Total | 516,589 | 397,736 | | Repayment Term | | | | Within One Year | 68,121 | 25,837 | | Portion with Demand Clause | 445,389 | 368,304 | | Settled After 12 Months | 3,079 | 3,595 | Interim Dividend and Closure of Register of Members Interim Dividend Declaration The Board declared an interim dividend of 2 HK cents per share for the six months ended June 30, 2024, payable around September 27, 2024 - The Board declared an interim dividend of 2 HK cents per share, a significant increase from the prior period (nil dividend), expected to be paid on September 27, 2024[22] Suspension of Register of Members The company will suspend its register of members from September 11-13, 2024, requiring all transfer documents to be lodged by 4:30 p.m. on September 10, 2024, to qualify for the interim dividend - To facilitate interim dividend distribution, the company will suspend share transfer registration from September 11 to 13, 2024, with the registration deadline set for 4:30 p.m. on September 10[23] Management Discussion and Analysis Review: Global Economy and Semiconductor Industry Global economic growth forecasts for H1 2024 were revised upwards, with China's high-tech manufacturing outperforming GDP, while the semiconductor market entered an upturn driven by memory chips and AI technology, boosting AI phone and AIPC demand - The UN and World Bank revised 2024 global economic growth forecasts upwards to 2.6%-2.7%, with China's H1 GDP growing 5.0% year-on-year and high-tech manufacturing increasing by 8.7%[24] - The global semiconductor market is in its fifth upturn cycle, with Q1 2024 sales growing 15.2% year-on-year, primarily driven by memory chips; the AI technology revolution is accelerating AI-driven upgrades in servers, PCs, and mobile phones, with AI phone and AIPC market shares projected to rapidly increase to 54% and 71% respectively between 2024 and 2028[25] Business Segment Performance Review In H1 2024, the Group optimized its business by increasing investment in AI-related products, leading to significant growth in storage, optical communication, smart vision, and communication products, while other segments experienced declines - In the first half of the year, the Group increased R&D investment in AI-related products (storage and optical communication chips) and AI algorithms, with all related business units achieving substantial growth[26] Storage Products Driven by global digital transformation and AIGC, the storage chip market entered a golden era of volume and price increases, with this business unit achieving HKD 645.7 million in H1 2024 sales, a 1,380.5% year-on-year surge - The storage chip market entered a golden era of both volume and price increases, with DRAM and NAND flash memory achieving Q1 growth rates of 20% and 23-28% respectively[26] Storage Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 645.7 | 1,380.5% | Smart Vision Driven by AI, big data, and IoT, the security industry is shifting towards intelligence, with this business unit achieving HKD 551.2 million in H1 2024 sales, a 20.6% year-on-year increase, by integrating various AI algorithms - Global smart camera shipments in Q1 increased by 10.3% year-on-year, with rapid penetration in the Chinese and US markets[28] Smart Vision Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 551.2 | 20.6% | Smart Display Due to global economic weakness and declining TV market demand, this business unit's sales of SoC master control chips decreased significantly by 62.0% to HKD 444.5 million in H1 2024 - Global TV shipments in Q1 decreased by 0.9% year-on-year, while mainland China's H1 TV brand complete machine shipments decreased by 4.2% year-on-year[29] Smart Display Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 444.5 | 62.0% | Optoelectronic Display Global large-size LCD TV panel shipments saw slight growth, but this business unit's H1 2024 sales decreased by 22.1% to HKD 329.1 million due to the divestment of its power product line - Global large-size LCD TV panel shipments in Q1 increased by 1.3% year-on-year, with notebook and monitor panel shipments expected to see slight growth[30] - The divestment of the power product line significantly impacted the business unit's total H1 performance[30] Optoelectronic Display Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 329.1 | 22.1% | Communication Products Global cellular IoT module and 5G smartphone shipments grew, leading this business unit's sales of MCP storage chips and 4G/5G RF PAs to HKD 277.1 million in H1 2024, a 27.0% year-on-year increase - Global cellular IoT module shipments in Q1 increased by 7% year-on-year, and 5G smartphone shipments grew by 20.3% year-on-year[31] Communication Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 277.1 | 27.0% | Optical Communication Rapid AI development drove a surge in computing power demand, boosting high-speed optical module needs, leading this business unit's optoelectronic device sales to HKD 171.0 million in H1 2024, a 39,659.5% year-on-year increase - AI development fueled a surge in AI server demand, driving demand for 400G/800G high-speed optical modules, with Q1 optical communication component revenue growing 72%[32] Optical Communication Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Growth (%) | | :--- | :--- | :--- | | Sales | 171.0 | 39,659.5% | Integrated Products This business unit, covering AIoT, MCU, and CE products, saw its H1 2024 sales decrease significantly by 65.2% to HKD 68.8 million due to internal business and product line adjustments - The business unit underwent business adjustments and optimization, streamlining and reallocating product lines with lower sales volume and profit margins, with some product lines transferred to other business units for follow-up[33] Integrated Products Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 68.8 | 65.2% | Independent Distribution The independent distribution business, providing spot supply chain services, saw its H1 2024 sales plummet by 95.2% to HKD 26.0 million due to global macroeconomic downturn and reduced demand for spot electronic components - The independent distribution business was significantly impacted by the global macroeconomic downturn and weak market demand, leading to an oversupply in the electronic components market and a substantial reduction in demand for spot purchases[34] Independent Distribution Sales | Indicator | H1 2024 (million HKD) | Year-on-Year Decrease (%) | | :--- | :--- | :--- | | Sales | 26.0 | 95.2% | Outlook For H2, global economic recovery is expected to be moderate, with central banks cutting rates, while China's economy maintains steady growth; the semiconductor industry's AI and memory chip-driven recovery faces uncertainties, and the Group will focus on AI dividends, expanding distribution, and improving profitability - The global economy is expected to experience a moderate recovery, with major central banks entering a rate-cutting cycle, though growth rates will remain below pre-pandemic levels[35][36] - China's economy is projected to maintain steady growth, with the IMF revising its 2024 China economic growth forecast upwards to 5%[36] - WSTS forecasts the semiconductor market to achieve double-digit growth in 2024, primarily driven by memory (+76.8%) and logic devices (+10.7%), with significant growth in the Americas and Asia-Pacific regions[37] - The semiconductor industry's recovery is driven by rising average chip prices rather than significant increases in shipments; AI application deployment faces challenges such as high costs and data scarcity, posing a risk of an industry bubble[38] Storage Products Outlook AIGC is a key driver for storage chip market growth, with AI PCs, AI phones, and autonomous driving increasing memory demand, leading to a projected 45% global market growth in 2024, and an optimistic outlook for this business unit - AIGC is driving storage chip market growth, with AI PCs and AI phones demanding high memory capacity, and the autonomous driving vehicle market projected to achieve a CAGR of 28%[39][40] - Morgan Stanley and Samsung anticipate Q3 DRAM and NAND chip prices to increase by 10-20%[40] - WSTS forecasts the global storage chip market size to grow substantially by 45% to USD 129.8 billion in 2024[40] Smart Vision Outlook The smart security market is large and growing, driven by AI, big data, and IoT, with widespread demand for smart cameras and a projected 13.8% CAGR for IP cameras, leading to an optimistic H2 outlook for this business unit - The smart security market is large and growing, with widespread demand for smart cameras, and Q1 global shipments increasing by 10.3% year-on-year[41][42] - Bezges Consulting projects the global IP camera market CAGR to reach 13.8% from 2024-2029[42] Smart Display Outlook Global TV market shipments continue to decline, with lower usage rates and longer replacement cycles; despite 2024 being a major sports year, early demand release leads this business unit to a cautious H2 performance outlook - Global TV market shipments continue to decline, with China's TV power-on rate dropping from 70% in 2016 to less than 30% in 2022, and replacement cycles exceeding 10 years[43] - Sigmaintell forecasts global TV shipments to increase by only 0.6% year-on-year in 2024[43] Optoelectronic Display Outlook Large-size display panel shipments are expected to grow, driven by new energy vehicles and the "large-screen" central control trend, with global automotive display panel shipments projected to reach 220 million units in 2024, leading to a positive outlook for this business unit - Omdia forecasts large-size display panel shipments to grow by 7.4% in 2024[44] - The new energy vehicle industry is driving innovation in automotive display technology, with "large-screen" central controls becoming a new trend, and global automotive display panel shipments for the pre-installation market projected to reach 220 million units in 2024[44] Communication Products Outlook The global cellular IoT module market is expected to recover in H2, driven by 5G-Advanced and RedCap modules, with IoT Analytics projecting a 22% CAGR for IoT modules by 2027, leading this business unit to an optimistic H2 outlook - Counterpoint forecasts the global cellular IoT module market to recover in H2, with the 5G-Advanced standard freezing accelerating 5G-A commercialization[45] - IoT Analytics projects the IoT module CAGR to reach 22% by 2027, with high-AI capability modules achieving a CAGR of 128%[45] - Data from the Ministry of Industry and Information Technology shows a slowdown in net new cellular IoT connections from January to April 2024, requiring close attention going forward[46] Optical Communication Outlook AI development drives computing power demand, accelerating optical module iteration to 800G and beyond; Lightcounting projects 800G modules to be mainstream in 2024, with 1.6T scaling up, and overall market growth potentially exceeding 40%, leading to an optimistic H2 outlook - AIGC's urgent demand for computing power is driving the rapid iteration of optical modules towards 800G and higher specifications, with 800G optical module production expected to double in H2[47] - Lightcounting forecasts 800G optical modules to become mainstream in 2024, with 1.6T also scaling up, and overall market growth potentially exceeding 40%[47] Independent Distribution Outlook Semiconductor inventory is healthy, and H2 peak season demand may trigger restocking; the Group will prioritize overseas markets and leverage its supplier database despite low global economic sentiment, maintaining a cautious H2 performance outlook - Semiconductor industry inventory has largely returned to healthy levels, with H2 peak season demand potentially triggering a restocking cycle, and overseas markets presenting significant business opportunities[48] - The independent distribution business will leverage its robust supplier database and information matching transaction system to expand operations[48] Summary of Management Discussion The global economy faces uncertainties despite moderate recovery, while China's Q2 growth was below expectations; the semiconductor industry, driven by AI and new energy vehicles, is projected to exceed USD 1 trillion by 2030, and the Group will focus on AI dividends and comprehensive business development - The global economy is experiencing a moderate recovery but still faces uncertainties, with China's Q2 economic growth below expectations, making the annual 5% growth target challenging[49] - AI and new energy vehicles are jointly driving the development of the semiconductor industry, with the market size projected to exceed USD 1 trillion by 2030[49] - The Group will maintain its comprehensive strategy across authorized distribution, independent distribution, value-added technology, and optical communication chip manufacturing, continuously focusing on AI industry dividends to enhance business quality and profitability[50] Financial Review Revenue For the six months ended June 30, 2024, the Group's revenue decreased by 17.6% to HKD 2,623.9 million, primarily due to reduced sales in the independent distribution business Revenue Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 2,623.9 | 3,184.6 | -17.6% | - The decrease in revenue was primarily due to reduced sales in the independent distribution business[51] Gross Profit For the six months ended June 30, 2024, gross profit decreased by 37.6% to HKD 143.4 million, with the gross profit margin declining by 1.7 percentage points to 5.5%, mainly due to reduced independent distribution sales Gross Profit Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit | 143.4 | 229.9 | -37.6% | | Gross Profit Margin | 5.5% | 7.2% | -1.7pp | - The decline in gross profit margin was primarily due to reduced sales in the independent distribution business[52] Research and Development Expenses For the six months ended June 30, 2024, R&D expenses decreased by 1.8% to HKD 16.8 million, mainly due to reduced staff costs for R&D personnel R&D Expenses Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | R&D Expenses | 16.8 | 17.1 | -1.8% | - The decrease in R&D expenses was primarily due to reduced staff costs for R&D personnel[53] Administrative, Selling and Distribution Expenses For the six months ended June 30, 2024, administrative, selling, and distribution expenses significantly decreased to HKD 87.4 million, representing 3.3% of revenue, primarily due to reduced staff costs for sales and distribution personnel Administrative, Selling and Distribution Expenses Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Administrative, Selling and Distribution Expenses | 87.4 | 166.7 | -47.6% | | % of Revenue | 3.3% | 5.2% | -1.9pp | - The decrease in expenses was primarily due to reduced staff costs for sales and distribution personnel[54] Finance Costs For the six months ended June 30, 2024, finance costs decreased to HKD 15.7 million, primarily due to a reduction in bank and other borrowings used for the Group's operations Finance Costs Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 15.7 | 31.6 | -50.3% | - The decrease in finance costs was primarily due to reduced bank and other borrowings[55] Profit for the Period For the six months ended June 30, 2024, the Group's profit increased by 74.8% to HKD 36.9 million, with the net profit margin rising to approximately 1.4% Profit for the Period Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Profit for the Period | 36.9 | 21.1 | +74.8% | | Net Profit Margin | 1.4% | 0.7% | +0.7pp | Net Profit Attributable to Owners of the Company For the six months ended June 30, 2024, net profit attributable to owners of the company significantly increased by 186.6% to HKD 36.3 million Net Profit Attributable to Owners of the Company Overview | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Net Profit Attributable to Owners of the Company | 36.3 | 12.7 | +186.6% | Use of Proceeds from Global Offering The company, listed in 2016, utilized HKD 181.4 million of its HKD 205.8 million net proceeds by June 30, 2024, with the remaining HKD 24.4 million for e-commerce and tech infrastructure, expected to be fully used by December 31, 2025, despite past delays Use of Proceeds from Global Offering | Use Category | Net Proceeds (million HKD) | Utilized as of June 30, 2024 (million HKD) | Remaining Amount (million HKD) | Expected Utilization Timeline | | :--- | :--- | :--- | :--- | :--- | | Recruitment of New Staff and Warehouse Upgrades | 20.6 | 20.6 | 0.0 | – | | Promotion of E-commerce Platform and New Products | 41.2 | 41.2 | 0.0 | – | | Upgrading, Development, and Maintenance of E-commerce Platform and Improvement of Technical Infrastructure | 41.2 | 16.8 | 24.4 | By December 31, 2025 | | Research and Development | 20.6 | 20.6 | 0.0 | – | | Potential Acquisitions or Investments | 61.7 | 61.7 | 0.0 | – | | General Working Capital | 20.5 | 20.5 | 0.0 | – | | Total | 205.8 | 181.4 | 24.4 | | - The timeline for the use of proceeds was delayed due to recent technological changes, US-China trade tensions, social unrest in Hong Kong, and the COVID-19 pandemic[60] Liquidity and Financial Resources As of June 30, 2024, the Group's bank balances and cash totaled HKD 435.8 million, with outstanding borrowings of HKD 516.6 million, a gearing ratio of 56.6%, and a current ratio of 1.57 times, while turnover days remained reasonable Liquidity and Financial Resources Overview | Indicator | June 30, 2024 (million HKD) | December 31, 2023 (million HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Bank Balances and Cash | 435.8 | 395.3 | +10.2% | | Outstanding Bank and Other Borrowings | 516.6 | 397.7 | +29.9% | | Gearing Ratio | 56.6% | 44.0% | +12.6pp | | Current Assets | 1,577.0 | 1,400.3 | +12.6% | | Current Liabilities | 1,001.6 | 830.4 | +20.6% | | Current Ratio | 1.57 times | 1.69 times | -0.12 times | Turnover Days | Turnover Period | H1 2024 (days) | Prior Period (days) | | :--- | :--- | :--- | | Trade Receivables | 53 | 66 | | Trade Payables | 24 | 26 | | Inventory | 15 | 20 | Foreign Exchange Risk The Group's transactions are primarily in USD and RMB, recording a net exchange loss of HKD 0.1 million for the six months ended June 30, 2024, and will consider using forward exchange contracts to mitigate significant foreign exchange risks Net Exchange Loss | Indicator | H1 2024 (million HKD) | Prior Period (million HKD) | | :--- | :--- | :--- | | Net Exchange Loss | 0.1 | 6.2 | - The Group currently has no foreign currency hedging policy but will consider using forward exchange contracts to mitigate significant foreign exchange risks[63] Pledged Assets, Capital Commitments, Significant Investments, Acquisitions/Disposals As of June 30, 2024, financial assets, factored trade receivables, and bank deposits were pledged as collateral for borrowings, with the Group having no significant capital commitments, contingent liabilities, or major investments/acquisitions/disposals - Financial assets, trade receivables, and bank deposits have been pledged as collateral for bank borrowings and financing arrangements[64] - The Group has no significant capital commitments or contingent liabilities, nor does it hold other significant investments or undertake major acquisitions and disposals[64] Other Information Purchase, Sale or Redemption of Listed Securities For the six months ended June 30, 2024, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities - Neither the company nor its subsidiaries engaged in any purchase, sale, or redemption of listed securities during the reporting period[65] Events After June 30, 2024 As of this announcement date, no significant disclosable subsequent events occurred for the Group after June 30, 2024 - As of the announcement date, the Group had no significant disclosable subsequent events after June 30, 2024[66] Compliance with Corporate Governance Code The company complied with all applicable Corporate Governance Code provisions, except for C.2.1 (separation of Chairman and CEO roles), which the Board believes ensures consistent leadership and efficient strategic planning - The company complied with all applicable provisions of the Corporate Governance Code, except for C.2.1 (separation of Chairman and CEO roles), as Mr. Tian Weidong holds both positions[67] - The Board believes the current arrangement ensures consistent internal leadership and efficient strategic planning, and will continue to review this arrangement[67] Standard Code for Securities Transactions The company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, with all directors confirming full compliance during the reporting period - All directors confirmed full compliance with the Standard Code for Securities Transactions by Directors of Listed Issuers during the reporting period[68] Audit Committee The Audit Committee, composed of three independent non-executive directors, reviews and monitors financial reporting and internal controls, and has discussed the interim results with auditors and management - The Audit Committee, comprising three independent non-executive directors, is responsible for reviewing and monitoring financial reporting and internal controls, and has reviewed the interim results[69] Publication of Interim Results The company's interim report for the six months ended June 30, 2024, will be dispatched to shareholders and published on the company and HKEX websites in due course - The interim report will be dispatched to shareholders in due course and published on the company's website and the HKEX website[70]