温岭工量刃具(01379) - 2024 - 中期业绩

Financial Highlights The company experienced a significant decline in revenue and net profit for the period, despite a notable improvement in gross margin, with no interim dividend recommended Key Financial Indicators During the reporting period, the company's revenue and net profit significantly declined year-on-year, while gross margin notably improved 2024 Half-Year Key Financial Data Comparison | Indicator | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 33,887 | 62,074 | -45.4% | | Gross Profit | 27,393 | 35,073 | -21.9% | | Gross Margin | 80.8% | 56.5% | +24.3pp | | Profit for the Period | 3,307 | 15,703 | -78.9% | | Net Profit Margin | 9.8% | 25.3% | -15.5pp | | Basic and Diluted Earnings Per Share | 0.04 | 0.20 | -80.0% | Dividend Policy The Board resolved not to recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the first half of 2024[1] Consolidated Financial Statements This section presents the company's consolidated financial performance and position, detailing revenue, profit, assets, and liabilities Consolidated Statement of Profit or Loss and Other Comprehensive Income In the first half of 2024, the company's revenue decreased by 45.4% year-on-year to RMB 33,887 thousand, with profit for the period significantly down by 78.9% to RMB 3,307 thousand, primarily due to increased fair value loss on investment properties and reduced sales of completed properties Consolidated Statement of Profit or Loss and Other Comprehensive Income (Summary) | Indicator | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 33,887 | 62,074 | | Cost of Services | (6,494) | (27,001) | | Gross Profit | 27,393 | 35,073 | | Fair Value Loss on Investment Properties | (20,465) | (10,387) | | Other Net Income | 38 | 111 | | Selling and Marketing Expenses | (236) | (397) | | Administrative Expenses | (3,839) | (3,724) | | Operating Profit | 2,891 | 20,676 | | Share of Loss of an Associate | (67) | (397) | | Profit Before Tax | 2,824 | 20,279 | | Income Tax | 483 | (4,576) | | Profit for the Period | 3,307 | 15,703 | | Basic and Diluted Earnings Per Share (RMB yuan) | 0.04 | 0.20 | Consolidated Statement of Financial Position As of June 30, 2024, the company's total non-current assets slightly decreased, net current liabilities expanded, and both net assets and total equity reduced Consolidated Statement of Financial Position (Summary) | Indicator | As of June 30, 2024 (RMB thousands) | As of December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Non-current Assets | | | | Investment Properties | 1,011,200 | 1,031,600 | | Total Non-current Assets | 1,031,845 | 1,052,422 | | Current Assets | | | | Cash and Cash Equivalents | 44,024 | 74,437 | | Total Current Assets | 47,330 | 77,762 | | Current Liabilities | | | | Total Current Liabilities | 55,162 | 84,349 | | Net Current Liabilities | (7,832) | (6,587) | | Non-current Liabilities | | | | Total Non-current Liabilities | 233,967 | 240,696 | | Equity | | | | Net Assets | 790,046 | 801,367 | | Total Equity | 790,046 | 805,139 | Notes to the Unaudited Interim Financial Results This section provides detailed explanations and disclosures regarding the interim financial performance and position General Information and Basis of Preparation The company was incorporated in Wenling City, China in 2003 and listed on the Hong Kong Stock Exchange in 2020, with interim financial reports prepared under HKAS 34 assuming going concern despite net current liabilities - The company was incorporated on May 14, 2003, in Wenling City, Zhejiang Province, China, and completed its initial public offering and listing on the Main Board of the Hong Kong Stock Exchange on December 30, 2020[6] - Despite net current liabilities of RMB 7,832,000 as of June 30, 2024, the interim financial report is prepared on a going concern basis, supported by RMB 233,000,000 in unutilized bank facilities from third-party banks[7] Changes in Accounting Policies New and revised HKFRSs, including amendments to HKAS 1 and HKFRS 16, were adopted during the period but had no significant impact on the financial statements - The Group has adopted several new and revised Hong Kong Financial Reporting Standards, including amendments related to liability classification, sale and leaseback, and supplier financing arrangements[8] - No significant reclassifications or material impacts on the financial statements were recognized following the adoption of these amendments[8] Revenue Analysis Total revenue for the first half of 2024 significantly decreased by 45.4% year-on-year, primarily due to zero revenue from sales of completed properties, while property leasing revenue remained stable Revenue Classification | Revenue Source | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | | :--- | :--- | :--- | | Sales of Completed Properties | – | 28,195 | | Others (Property Management Services) | 1,644 | 1,414 | | Property Leasing | 32,243 | 32,465 | | Total | 33,887 | 62,074 | - In the first half of 2024, the company had no revenue from sales of completed properties, compared to RMB 28,195 thousand in the prior year, which is the primary reason for the decrease in total revenue[10] - Property leasing revenue remained stable, at RMB 32,243 thousand in the first half of 2024 and RMB 32,465 thousand in the first half of 2023[10] Other Net Income and Profit Before Tax Other net income decreased year-on-year in the first half of 2024, and profit before tax significantly declined, mainly due to an increased fair value loss on investment properties Other Net Income and Depreciation & Amortization | Indicator | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | | :--- | :--- | :--- | | Interest income from bank deposits | 69 | 115 | | Government grants | – | 100 | | Net exchange loss | (87) | (104) | | Total Other Net Income | 38 | 111 | | Depreciation and Amortization | 274 | 168 | - Profit before tax decreased from RMB 20,279 thousand in the first half of 2023 to RMB 2,824 thousand in the first half of 2024[2] Income Tax Income tax shifted from an expense to a credit in the first half of 2024, primarily due to reduced current income tax, increased deferred tax, and taxable profit offset by over-provision from prior years Income Tax Components | Tax Type | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | | :--- | :--- | :--- | | Current tax - PRC Enterprise Income Tax | 4,899 | 7,341 | | Current tax - Over-provision in prior years | (1,478) | (1,248) | | Current tax - PRC Land Appreciation Tax | 383 | 1,006 | | Deferred tax - PRC Enterprise Income Tax | (4,191) | (2,412) | | Deferred tax - PRC Land Appreciation Tax | (96) | (111) | | Actual Tax (Credit)/Expense | (483) | 4,576 | - The effective tax rate shifted from an expense of approximately 22.6% in the first half of 2023 to a credit of approximately 17.1% in the first half of 2024[43] Earnings Per Share Basic and diluted earnings per share significantly decreased year-on-year in the first half of 2024, consistent with the change in profit for the period Earnings Per Share | Indicator | As of June 30, 2024 (RMB yuan) | As of June 30, 2023 (RMB yuan) | | :--- | :--- | :--- | | Basic and Diluted Earnings Per Share | 0.04 | 0.20 | - Profit attributable to ordinary equity holders of the parent decreased from RMB 15,703 thousand in the first half of 2023 to RMB 3,307 thousand in the first half of 2024[18] Investment Properties and Interests in an Associate Fair value loss on investment properties nearly doubled year-on-year, while loss from an associate decreased - Fair value loss on investment properties increased from RMB 10,387 thousand in the first half of 2023 to RMB 20,465 thousand in the first half of 2024[20] - Share of loss of an associate decreased from RMB 397 thousand in the first half of 2023 to RMB 67 thousand in the first half of 2024[21] Dividends The Board does not recommend an interim dividend for the first half of 2024, but final dividends for prior financial years have been approved and paid - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2024[22] Approved and Paid Dividends for Prior Financial Years | Dividend Type | As of June 30, 2024 (RMB thousands) | As of June 30, 2023 (RMB thousands) | | :--- | :--- | :--- | | Final dividend for prior financial year (per share) | RMB 0.23 (18,400) | RMB 0.20 (16,000) | Receivables, Payables and Contract Liabilities Other receivables and prepayments, other payables and accrued expenses, and contract liabilities all decreased Receivables, Payables and Contract Liabilities | Indicator | As of June 30, 2024 (RMB thousands) | As of December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Other Receivables and Prepayments | 1,062 | 1,495 | | Other Payables and Accrued Expenses | 16,233 | 18,970 | | Contract Liabilities (Property Services) | 611 | 1,472 | - The decrease in contract liabilities during the period was primarily due to revenue recognized from contract liabilities at the beginning of the period[26] Capital Commitments As of June 30, 2024, the Group's capital commitments primarily relate to contracted investment properties Capital Commitments | Capital Commitment Type | As of June 30, 2024 (RMB thousands) | As of December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Contracted | 752 | – | | Authorized but not Contracted | – | 824 | | Total | 752 | 824 | Management Discussion and Analysis This section provides an overview of the industry, business operations, and financial performance, along with future outlook and strategies Industry Overview In the first half of 2024, China's economy generally recovered, and the machinery industry operated stably, but the tools and cutting tools industry continued to decline due to rising raw material prices and weak overall demand, with significant potential in the high-end CNC cutting tools market and expected industry consolidation - In the first half of 2024, China's GDP grew by 5.0%, industrial value added above designated size increased by 6.0% year-on-year, and the machinery industry's value added increased by 6.1% year-on-year[27] - The tools and cutting tools industry continued its downturn due to rising raw material prices and weak overall demand, with merchants holding pessimistic expectations for future revenue[27] - The high-end CNC cutting tools market has immense future growth potential, and enterprises with brand, capital, and technological advantages are expected to gain more market share[27] Business Review As a prominent operator of a tools and cutting tools trading center in China, the Group's revenue and profit for the period significantly decreased in the first half of the year, mainly due to the absence of property sales income and increased fair value loss on investment properties, while continuing to operate the trading center and Sci-Tech Innovation Park, and expanding industrial innovation services and cross-border e-commerce platforms - The Group's primary business activities and revenue sources are derived from property leasing operations of the trading center and Sci-Tech Innovation Park, and the sale of certain Sci-Tech Innovation Park units[28] - Revenue and profit for the period in the first half of 2024 decreased by approximately 45.4% and 78.9% respectively, mainly due to the absence of property sales income and an increased fair value loss on investment properties[28] Trading Center The trading center maintained a high occupancy rate and stable average monthly actual rent in the first half of the year, also receiving several industry honors - The trading center has a total gross floor area of approximately 74,204.7 square meters, with land use rights extending to November 15, 2046[29] - In the first half of 2024, the trading center received honors such as "National Intellectual Property Protection Standardization Market Cultivation Object"[30] - As of June 30, 2024, the trading center had 626 tenants, with an occupancy rate of 98.64% for leasable area[30][31] Trading Center Average Monthly Actual Rent | Floor | As of June 30, 2024 Average Monthly Actual Rent (RMB yuan/sqm) | As of June 30, 2023 Average Monthly Actual Rent (RMB yuan/sqm) | | :--- | :--- | :--- | | First Floor | 373.4 | 372.2 | | Second Floor | 193.6 | 193.4 | | Third Floor | 65.0 | 72.3 | | Basement | 17.1 | 17.1 | Sci-Tech Innovation Park The Sci-Tech Innovation Park, operational since October 2022, aims to provide factory premises for tools and cutting tools manufacturing and production, showing an improved occupancy rate in the first half of the year despite a slight decrease in the number of resident enterprises - The Sci-Tech Innovation Park has a gross floor area of approximately 116,000 square meters, with land use rights extending to January 27, 2069, primarily for tools and cutting tools manufacturing[32] - As of June 30, 2024, the Sci-Tech Innovation Park attracted 13 enterprises, with an occupancy rate of 68.3% for leasable area, an increase from 64.8% at the end of 2023[32][34] Sci-Tech Innovation Park Average Monthly Actual Rent | Area | As of June 30, 2024 Average Monthly Actual Rent (RMB yuan/sqm) | As of June 30, 2023 Average Monthly Actual Rent (RMB yuan/sqm) | | :--- | :--- | :--- | | Factory | 15.5 | 15.5 | | Dormitory | 21.5 | 23.6 | | Basement | 20.9 | 20.9 | Industrial Innovation Service Complex The Group established an R&D-centric Industrial Innovation Service Complex, offering a one-stop service platform and actively engaging in scientific research collaborations - The complex provides one-stop services including coating new material R&D, achievement commercialization, startup incubation, talent cultivation, and technological transformation[35] - A cutting tool quality inspection center has been established, gathering 16 scientific and technological innovation service institutions to offer intellectual property, brand building, and financial services[35] - Active collaborations with domestic and international universities and research institutes aim to jointly establish advanced coating technology joint laboratories to overcome key common technical challenges[35] E-commerce Platform The Group launched a cross-border e-commerce export project for the tools and cutting tools industrial cluster, promoting through independent websites and Alibaba International Station, achieving initial results - The cross-border e-commerce export project was launched in June 2023, establishing independent websites and Alibaba International Station, conducting Google ad campaigns and SEO optimization[36] - The independent website achieved 16.5061 million impressions, 133,300 clicks, generated over 300 inquiries, and conducted 6 cross-border training sessions, cultivating 50 talents[37] Financial Review The company's financial performance significantly declined in the first half of 2024, with substantial reductions in revenue and profit for the period, primarily due to the absence of property sales revenue and increased fair value loss on investment properties Revenue Total revenue decreased by 45.4% year-on-year to RMB 33.9 million, mainly due to no sales revenue from completed properties in the current period - Total revenue decreased from RMB 62.1 million in the first half of 2023 to RMB 33.9 million in the first half of 2024, a 45.4% decline[38] - Sales of completed properties revenue was zero in the first half of 2024, compared to RMB 28.2 million in the first half of 2023[38] - Property leasing revenue remained stable, at RMB 32.5 million (2023) and RMB 32.2 million (2024) respectively[38] Cost of Sales Cost of sales significantly decreased by 75.9% year-on-year, primarily due to the absence of cost of sales for completed properties in the current period - Cost of sales decreased from RMB 27.0 million in the first half of 2023 to RMB 6.5 million in the first half of 2024, a 75.9% decline[39] - There was no cost of sales for completed properties in the first half of 2024, compared to RMB 21.0 million in the first half of 2023[39] Gross Profit and Gross Margin Gross profit decreased by 21.9% year-on-year, but gross margin significantly improved to 80.8% due to the absence of property sales revenue - Gross profit decreased from RMB 35.1 million in the first half of 2023 to RMB 27.4 million in the first half of 2024, a 21.9% decline[40] - Gross margin increased from 56.5% in the first half of 2023 to 80.8% in the first half of 2024, primarily because the gross margin from sales of completed properties is lower than that of the leasing business[40] Fair Value Loss on Investment Properties Fair value loss on investment properties nearly doubled year-on-year, mainly due to reduced market rents and a shorter land use right term - Fair value loss on investment properties increased from RMB 10.4 million in the first half of 2023 to RMB 20.5 million in the first half of 2024, an increase of approximately RMB 10.1 million[41] - The increased loss was primarily due to reduced comparable market rents and a shorter land use right term[41] Administrative Expenses Administrative expenses remained stable - Administrative expenses remained stable at approximately RMB 3.7 million in the first half of 2023 and RMB 3.8 million in the first half of 2024[42] Income Tax Expense Income tax shifted from an expense to a credit, with a significant decrease in the effective tax rate - Income tax expense shifted from an expense of RMB 4.6 million in the first half of 2023 to a credit of RMB 0.5 million in the first half of 2024[43] - The effective tax rate shifted from 22.6% to a 17.1% credit, mainly because taxable profit was offset by over-provision from prior years[43] Profit for the Period and Net Profit Margin Profit for the period significantly decreased by 78.9% year-on-year, and net profit margin declined, primarily due to an increased fair value loss on investment properties - Profit for the period decreased from RMB 15.7 million in the first half of 2023 to RMB 3.3 million in the first half of 2024, a 78.9% decline[44] - Net profit margin decreased from 25.3% to 9.8%, primarily due to an increased fair value loss on investment properties, partially offset by an increased gross margin[44] Liquidity, Financial Resources and Capital Structure Cash and cash equivalents decreased, primarily due to income tax and dividend payments - Cash and cash equivalents decreased from RMB 74.4 million at the end of 2023 to RMB 44.0 million as of June 30, 2024[45] - The decrease in cash was mainly due to income tax and dividend payments, amounting to RMB 8.1 million and RMB 18.5 million respectively[45] Financing and Treasury Policies The Group will continue to rely on operating cash flow and other financing methods to meet working capital needs and support business expansion - The Group will continue to rely on cash flows generated from operations and other debt and equity financing to fund working capital requirements and business expansion[46] Foreign Exchange Risk The Group has low foreign exchange risk and does not use financial instruments for hedging - The Group's transactions and most assets and liabilities are denominated in RMB, resulting in low foreign exchange risk, and no hedging instruments are used[47] Bank Loans and Pledged Assets As of the end of the reporting period, the Group had no bank loans, but RMB 233 million in bank facilities were secured by investment properties - As of June 30, 2024, the Group had no bank loans[48] - RMB 233 million in bank facilities are secured by investment properties valued at approximately RMB 829.2 million[48] Capital Expenditure Capital expenditure significantly decreased, primarily due to the completion of construction and renovation works for the Sci-Tech Innovation Park - Capital expenditure decreased from RMB 20.8 million in the first half of 2023 to RMB 0.6 million in the first half of 2024[49] - The decrease was mainly due to the completion of construction and renovation works for the Sci-Tech Innovation Park in 2023[49] Contingent Liabilities The Group's contingent liabilities for mortgage loan guarantees provided to customers decreased, with directors deeming the likelihood of default to be remote - Contingent liabilities for mortgage loan guarantees provided to customers decreased from RMB 103.4 million at the end of 2023 to RMB 97.5 million as of June 30, 2024[51] - The directors consider the likelihood of default under these financial guarantee contracts to be remote[51] Significant Investments, Acquisitions and Disposals There were no significant investment, acquisition, or disposal activities during the reporting period - For the six months ended June 30, 2024, the Group held no significant investments and undertook no significant acquisitions or disposals of subsidiaries, associates, and joint ventures[52] Employees and Remuneration Policy The number of employees slightly decreased, while total staff costs increased year-on-year, with the company emphasizing employee training and incentives - As of June 30, 2024, the Group had 38 employees, a slight decrease from 39 employees at the end of 2023[54] - Total staff costs increased from RMB 2.1 million in the first half of 2023 to RMB 2.2 million in the first half of 2024, an increase of approximately 6.5%[54] - The company incentivizes employees through training, annual reviews, salaries, performance bonuses, and special awards[54] Use of Proceeds from Global Offering The net proceeds from the global offering have largely been utilized for the construction of the Sci-Tech Innovation Park and general working capital, with the remaining funds allocated for further development of the third floor - The net proceeds from the global offering were approximately RMB 52.1 million, with approximately RMB 42.3 million utilized as of June 30, 2024[55] Use of Proceeds from Global Offering and Remaining Balance | Purpose | Budgeted Amount in Prospectus (RMB thousands) | Actual Use as of June 30, 2024 (RMB thousands) | Remaining Balance as of June 30, 2024 (RMB thousands) | Expected Timeline for Remaining Balance | | :--- | :--- | :--- | :--- | :--- | | Establishment and construction of Sci-Tech Innovation Park | 36,441 | 36,441 | – | – | | Funding further development of the third floor | 10,412 | 700 | 9,712 | December 2024 | | General working capital and other general corporate purposes | 5,205 | 5,205 | – | – | | Total | 52,058 | 42,346 | 9,712 | | - The remaining approximately RMB 9.7 million will be used for the renovation and refurbishment of the third floor, expected to be utilized by December 2024[56] Other Information This section covers additional disclosures including interim dividends, securities transactions, competing interests, corporate governance, and post-reporting period events Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[57] Purchase, Sale or Redemption of Listed Securities During the reporting period, neither the company nor its subsidiaries engaged in any purchase, sale, or redemption of listed securities - For the six months ended June 30, 2024, and up to the date of this announcement, neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities[58] Competing Interests of Directors and Supervisors None of the controlling shareholders, directors, supervisors, or their close associates have any interests that compete with the Group's business - None of the controlling shareholders, directors, supervisors, or their close associates have any interests in any business that directly or indirectly competes or may compete with the Group's business[59] Compliance with Corporate Governance Code The company is committed to maintaining high standards of corporate governance and complies with the Corporate Governance Code, although the roles of Chairman and Chief Executive Officer are combined, which the Board deems effective for now - The company has adopted and strictly complied with the code provisions of the Corporate Governance Code, but the roles of Chairman and Chief Executive Officer are combined and held by Mr. Pan Haihong[60][61] - The Board believes that combining these roles contributes to leadership consistency and strategic planning efficiency, and currently does not impair the balance of power[60] Events After Reporting Period No major events after the reporting period have significantly impacted the operations and financial performance - As of the date of this announcement, there have been no major events after June 30, 2024, that have significantly impacted the Group's operations and financial performance[63] Review and Publication The interim results announcement has been reviewed by the Audit Committee and will be published on the HKEX and company websites - The company's Audit Committee has reviewed the Group's interim results for the six months ended June 30, 2024[65] - The interim results announcement will be published on the HKEX website (www.hkexnews.hk) and the company's website (http://www.cnglj.com)[64](index=64&type=chunk)