兴合控股(01891) - 2024 - 中期业绩

Performance Announcement Overview Financial Highlights Heng Hup Holdings Limited achieved significant performance growth in H1 2024, with substantial increases in revenue, gross profit, and profit attributable to owners of the Company, but no dividend was declared by the Board | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 865.2 | 574.8 | +50.5% | | Gross Profit | 61.8 | 29.6 | +109.1% | | Profit attributable to owners of the Company | 11.5 | 2.5 | +367.2% | | Equity attributable to owners of the Company (2024/06/30 vs 2023/12/31) | 224.7 | 213.3 | +5.4% | - The Board of Directors did not declare any dividend for the six months ended June 30, 2024[1] Board Statement The Board is pleased to announce the Group's unaudited condensed consolidated interim results for the six months ended June 30, 2024, which have been reviewed by the Board and the Audit and Risk Management Committee - The Board has reviewed the Group's unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024[2] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Comprehensive Income In H1 2024, the Company's revenue and gross profit grew significantly, with substantial increases in operating profit and profit for the period, and both basic and diluted earnings per share rose | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Revenue | 865,207 | 574,808 | | Cost of sales | (803,407) | (545,253) | | Gross Profit | 61,800 | 29,555 | | Operating Profit | 18,897 | 5,843 | | Profit for the period | 10,114 | 2,452 | | Profit for the period attributable to owners of the Company | 11,456 | 2,452 | | Basic earnings per share (Sen) | 1.15 | 0.25 | | Diluted earnings per share (Sen) | 1.15 | 0.25 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Company's total assets and total equity increased, along with non-current and current liabilities, maintaining a stable overall financial structure | Indicator | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | Assets | | | | Non-current assets | 84,091 | 81,455 | | Current assets | 324,654 | 300,651 | | Total assets | 408,745 | 382,106 | | Equity and Liabilities | | | | Equity attributable to owners of the Company | 224,753 | 213,297 | | Non-controlling interests | (2,049) | (707) | | Total equity | 222,704 | 212,590 | | Non-current liabilities | 21,878 | 19,538 | | Current liabilities | 164,163 | 149,978 | | Total liabilities | 186,041 | 169,516 | | Total equity and liabilities | 408,745 | 382,106 | Notes to the Condensed Consolidated Financial Statements 1 General Information Heng Hup Holdings Limited, registered in the Cayman Islands, primarily trades ferrous scrap metal, used batteries, waste paper, iron ore, and other scrap materials in Malaysia, with the Sia brothers as ultimate controlling parties - The Company is an investment holding company primarily engaged in the trading of ferrous scrap metal, used batteries, waste paper, iron ore, and other scrap materials in Malaysia[7] - The Company's ultimate holding company is 5S Holdings (BVI) Limited, with the ultimate controlling parties being the Sia brothers, including Dato' Sia Kok Chin[7] 2. Basis of Preparation The Group's condensed consolidated financial statements are prepared in accordance with IAS 34, the disclosure requirements of the HKEX Listing Rules, and the Hong Kong Companies Ordinance, and should be read in conjunction with the annual consolidated financial statements - The financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", the disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and the disclosure requirements of the Hong Kong Companies Ordinance (Chapter 622)[8] 3. Significant Accounting Policies and Disclosures This section discloses the amendments to existing standards adopted by the Group in preparing interim financial information and lists new standards and amendments not yet effective, which are not expected to have a significant impact on financial position 3.1 Adoption of Amendments to Existing Standards Amendments to standards first mandatorily adopted for the financial year beginning January 1, 2024, have no significant impact on the Group's financial position and performance for the current and prior periods - Amendments to International Accounting Standard 1, International Financial Reporting Standard 16, and International Accounting Standard 7 were first mandatorily adopted for the financial year beginning January 1, 2024[6][9] - The adoption of these new and revised standards had no significant impact on the Group's financial position and performance and/or disclosures for the current and prior periods[9] 3.2 New Standards and Amendments Not Yet Adopted Several issued but not yet effective amendments to standards are listed, including IAS 21, IFRS 9, 7, 18, 19, 10, and IAS 28, which the Board expects will not have a significant impact upon adoption | Standard Amendments | Effective Date | | :--- | :--- | | International Accounting Standard 21 (Amendments) | January 1, 2025 | | International Financial Reporting Standards 9 and 7 (Amendments) | January 1, 2026 | | International Financial Reporting Standard 18 | January 1, 2027 | | International Financial Reporting Standard 19 | January 1, 2027 | | International Financial Reporting Standard 10 and International Accounting Standard 28 (Amendments) | To be determined | - The Board believes that the adoption of the above amendments to existing standards will not have a significant impact on the Group's current or future reporting periods and foreseeable future transactions[10] 4 Revenue and Segment Information The Group primarily engages in the trading of recycled materials, operating a single business segment, with major revenue and non-current assets located in Malaysia - The Group is primarily engaged in the trading of ferrous scrap metal, used batteries, waste paper, iron ore, other scrap materials, and providing logistics services, operating a single business segment, which is the trading of recycled materials[11] 4.1 Revenue by Location of Goods Delivery The Group primarily conducts transactions in Malaysia, with most revenue generated from Malaysia, and all revenue recognized upon delivery - The Group primarily conducts transactions in Malaysia, and the majority of its revenue is generated from Malaysia[12] 4.2 Non-current Assets As of June 30, 2024, all of the Group's non-current assets are located in Malaysia - As of June 30, 2024, all non-current assets are located in Malaysia[13] 5 Other Income Other income for H1 2024 was MYR 577 thousand, primarily comprising rental income and other income, a decrease from the prior period | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Compensation received | 1 | 3 | | Rental income | 233 | 275 | | Others | 343 | 645 | | Total | 577 | 923 | 6 Other (Losses)/Gains, Net Other (losses)/gains, net for H1 2024 was a loss of MYR 696 thousand, mainly due to write-off of advances to suppliers and gain/loss on disposal of property, plant and equipment, compared to a gain of MYR 56 thousand in the prior period | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Net foreign exchange gain | 184 | 73 | | Write-off of advances to suppliers | (1,153) | – | | Gain/(loss) on disposal of property, plant and equipment | 274 | (17) | | Write-off of bad debts | (1) | – | | Total | (696) | 56 | 7 Expenses by Nature Total cost of sales, distribution and selling expenses, and administrative expenses for H1 2024 amounted to MYR 864,191 thousand, a significant increase from MYR 569,944 thousand in the prior period | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Total cost of sales, distribution and selling expenses and administrative expenses | 864,191 | 569,944 | 8 Net Finance Costs Net finance costs for H1 2024 were MYR 2,830 thousand, a significant increase from MYR 1,396 thousand in the prior period, primarily due to a substantial rise in interest expense on borrowings | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Interest income from bank deposits | 217 | 232 | | Interest expense on borrowings | (2,784) | (1,455) | | Interest expense on hire purchase liabilities | (168) | (129) | | Interest expense on lease liabilities | (88) | (35) | | Interest expense on bank overdrafts | (7) | (9) | | Net finance costs | (2,830) | (1,396) | 9 Income Tax Expense Income tax expense for H1 2024 was MYR 5,953 thousand, a significant increase from MYR 1,995 thousand in the prior period, primarily comprising Malaysian corporate income tax and deferred income tax | Indicator | H1 2024 (MYR '000) | H1 2023 (MYR '000) | | :--- | :--- | :--- | | Current tax: Malaysian corporate income tax | 5,781 | 1,614 | | Under-provision in prior years | (30) | – | | Deferred income tax | 202 | 381 | | Income tax expense | 5,953 | 1,995 | - Malaysian corporate income tax is provided at a rate of 24% on the estimated assessable profit[19] 10 Interim Dividend The Board of Directors did not declare any dividend for the six months ended June 30, 2024 - The Board of Directors did not declare any dividend for the six months ended June 30, 2024[20] 11 Earnings Per Share Basic and diluted earnings per share for H1 2024 were both 1.15 Sen, a significant increase from 0.25 Sen in the prior period, primarily due to a substantial rise in profit attributable to owners of the Company | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company (MYR '000) | 11,456 | 2,452 | | Weighted average number of ordinary shares in issue | 1,000,000,000 | 1,000,000,000 | | Basic earnings per share (Sen) | 1.15 | 0.25 | | Diluted earnings per share (Sen) | 1.15 | 0.25 | - As of June 30, 2024, and June 30, 2023, the Company had no outstanding potential dilutive ordinary shares[22] 12 Trade and Other Receivables As of June 30, 2024, total trade and other receivables amounted to MYR 202,052 thousand, slightly lower than end-2023, with the highest proportion in the 0-30 days aging category, but receivables over 120 days significantly increased | Indicator | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | Non-current: Deposits for acquisition of freehold land | 17,636 | 17,636 | | Current: Trade receivables (net of allowance for loss) | 178,824 | 185,967 | | Other receivables | 3,506 | 2,201 | | Deposits and prepayments | 8,613 | 5,128 | | Advances to suppliers | 11,011 | 10,630 | | Other recoverable taxes | 98 | 98 | | Total | 202,052 | 204,024 | | Aging of trade receivables | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | 0 to 30 days | 97,424 | 139,127 | | 31 to 60 days | 20,021 | 16,261 | | 61 to 120 days | 25,081 | 29,671 | | Over 120 days | 37,337 | 1,947 | | Total | 179,863 | 187,006 | - The allowance for loss on trade receivables remained at MYR 1,039 thousand in H1 2024[26] 13 Trade and Other Payables As of June 30, 2024, total trade and other payables amounted to MYR 72,194 thousand, an increase from end-2023, mainly due to higher trade payables, accrued staff costs, and directors' loans | Indicator | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | Trade payables | 44,948 | 43,391 | | Accrued staff costs | 9,031 | 8,642 | | Directors' loans | 7,207 | 5,652 | | Other payables and accrued expenses | 11,008 | 9,209 | | Total | 72,194 | 66,894 | | Aging of trade payables | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | 0 to 30 days | 35,203 | 37,735 | | 31 to 60 days | 2,564 | 1,634 | | 61 to 120 days | 1,667 | 2,669 | | Over 120 days | 5,514 | 1,353 | | Total | 44,948 | 43,391 | Management Discussion and Analysis Business Review and Outlook Heng Hup Holdings saw substantial revenue and net profit growth in H1 2024, driven by strong ferrous scrap metal sales and improved operational efficiency; future profitability may be affected by global steel industry volatility and domestic challenges, which the company plans to address through enhanced efficiency and risk management - Revenue for H1 2024 was MYR 865.2 million, a 50.5% year-on-year increase, primarily driven by a 52.7% increase in ferrous scrap metal sales volume[30] - Profit after tax for H1 2024 was MYR 10.1 million, a 312% year-on-year increase, mainly due to improved procurement and operational efficiency, leading to better gross profit margins[30] - Looking ahead, the global steel industry faces challenges such as price volatility, slow demand recovery, geopolitical tensions, and US-China trade conflicts, while Malaysia's domestic steel industry also confronts overcapacity and competition from low-cost imports[30] - The Company will focus on enhancing operational efficiency, strengthening market position, implementing strategic initiatives, and maintaining a proactive risk management approach to navigate market volatility and drive sustainable growth[30] Financial Review This section provides a detailed review of the performance of various financial indicators for H1 2024, including revenue, gross profit, expenses, tax, and profit attributable to owners of the Company, along with key financial ratios Revenue Revenue for H1 2024 reached MYR 865.2 million, a 50.5% year-on-year increase, primarily driven by a 52.7% increase in ferrous scrap metal sales volume, despite a 4.0% decrease in average selling price | Indicator | H1 2024 | H1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue (MYR million) | 865.2 | 574.8 | +50.5% | | Ferrous scrap metal sales volume (Metric Tons) | 471,580 | 308,891 | +52.7% | | Ferrous scrap metal average selling price (MYR/Metric Ton) | 1,670.00 | 1,740.00 | -4.0% | - In H1 2024, ferrous scrap metal accounted for 93.5% of total revenue, used batteries 0.3%, iron ore 1.9%, waste paper 4.0%, and others 0.3%[31] Gross Profit Gross profit for H1 2024 increased to MYR 61.8 million, a 109.1% year-on-year growth, with gross margin improving from 5.1% to 7.1%, primarily due to increased sales volume and lower procurement costs | Indicator | H1 2024 (MYR million) | H1 2023 (MYR million) | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit | 61.8 | 29.6 | +109.1% | | Gross Margin | 7.1% | 5.1% | +2.0pp | - The significant increase in gross profit was primarily attributable to the increased sales volume of ferrous scrap metal and lower procurement costs incurred[33] Distribution and Selling Expenses Distribution and selling expenses for H1 2024 surged by 130.9% to MYR 26 million, mainly due to increased domestic transportation costs from higher scrap metal sales volume and new iron ore trading activities | Indicator | H1 2024 (MYR million) | H1 2023 (MYR million) | Change (%) | | :--- | :--- | :--- | :--- | | Distribution and selling expenses | 26.0 | 11.3 | +130.9% | - The increase was mainly due to higher domestic transportation costs (such as diesel costs, vehicle repair and maintenance costs, etc.) resulting from increased scrap metal sales volume and new iron ore trading activities[34] Administrative Expenses Administrative expenses for H1 2024 increased to MYR 16.7 million, a 24.8% year-on-year growth, primarily due to an increase in office and operational staff headcount and salary adjustments | Indicator | H1 2024 (MYR million) | H1 2023 (MYR million) | | :--- | :--- | :--- | | Administrative expenses | 16.7 | 13.4 | - The increase was mainly due to an increase in the number of office and operational staff and salary adjustments[35] Tax The effective tax rate for H1 2024 was 37.1%, down from 42.8% in the prior period, but still higher than the 24% corporate income tax rate, mainly attributable to non-deductible expenses | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Effective tax rate | 37.1% | 42.8% | | Corporate income tax rate | 24% | 24% | - The high effective tax rate was mainly attributable to the existence of non-deductible expenses[36] Profit Attributable to Owners of the Company Profit attributable to owners of the Company for H1 2024 was MYR 11.5 million, a substantial increase from MYR 2.5 million in the prior period, consistent with the trend of increasing profit before tax | Indicator | H1 2024 (MYR million) | H1 2023 (MYR million) | | :--- | :--- | :--- | | Profit attributable to owners of the Company | 11.5 | 2.5 | Key Financial Ratios As of June 30, 2024, the Company's current ratio remained at 2.0 times, gearing ratio slightly increased to 0.50 times, inventory and trade receivables turnover days remained stable, while trade payables turnover days extended | Indicator | 2024/06/30 | 2023/12/31 | | :--- | :--- | :--- | | Current ratio | 2.0 times | 2.0 times | | Gearing ratio | 0.50 | 0.48 | | For the six months ended June 30 | 2024 | 2023 | | Inventory turnover days | 16 days | 16 days | | Trade receivables turnover days | 38 days | 38 days | | Trade payables turnover days | 10 days | 4 days | Working Capital In H1 2024, the Group's inventory and trade receivables turnover days remained stable, while trade payables turnover days increased to 10 days due to extended payment terms from suppliers - Inventory turnover days remained at 16 days, and trade receivables turnover days remained at 38 days[39] - Trade payables turnover days increased from 4 days in H1 2023 to 10 days in H1 2024, primarily due to extended payment terms from suppliers[39] Liquidity and Financial Resources As of June 30, 2024, the Group's total equity and working capital increased, cash and bank balances significantly rose, total borrowings increased, and the gearing ratio slightly improved, yet the Group maintains sufficient liquidity for operations and expansion needs | Indicator | 2024/06/30 (MYR million) | 2023/12/31 (MYR million) | | :--- | :--- | :--- | | Total equity attributable to owners of the Company | 224.7 | 213.3 | | Retained earnings | 140.7 | 129.3 | | Working capital | 160.5 | 150.7 | | Cash and bank balances, pledged bank deposits and fixed deposits | 52.9 | 25.3 | | Total borrowings | 108.6 | 98.4 | | Gearing ratio | 0.50 | 0.48 | - Borrowings are primarily used to finance the procurement of ferrous scrap metal and capital expenditures[40] - The Board believes that the Group has sufficient liquidity and financial resources to meet its working capital requirements and to fund its budgeted expansion plans for the next twelve months[40] Significant Acquisitions and Disposals of Subsidiaries, Associates or Joint Ventures For the six months ended June 30, 2024, the Group had no significant acquisitions or disposals of subsidiaries, associates, or joint ventures - For the first six months ended June 30, 2024, the Group had no significant acquisitions or disposals of subsidiaries, associates, or joint ventures[40] Pledged Assets As of June 30, 2024, the Group had pledged assets totaling MYR 30,284 thousand to banks, including property, plant and equipment, right-of-use assets, investment properties, and pledged bank deposits, to secure bank borrowings and general banking facilities | Category of Pledged Assets | 2024/06/30 (MYR '000) | 2023/12/31 (MYR '000) | | :--- | :--- | :--- | | Property, plant and equipment | 494 | 533 | | Right-of-use assets | 18,870 | 19,017 | | Investment properties | 5,291 | 5,320 | | Pledged bank deposits | 5,629 | 5,561 | | Total | 30,284 | 30,431 | Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - The Group had no significant contingent liabilities as of June 30, 2024[42] Capital Commitments As of June 30, 2024, the Group's capital commitments for the acquisition of property, plant and equipment amounted to MYR 28.6 million, a significant increase from MYR 11.8 million at end-2023 | Indicator | 2024/06/30 (MYR million) | 2023/12/31 (MYR million) | | :--- | :--- | :--- | | Capital commitments (acquisition of property, plant and equipment) | 28.6 | 11.8 | Risk Management The Group faces market risks (foreign exchange, interest rate), credit risk, and liquidity risk, managed through management oversight and strategic measures; foreign exchange risk is minimal, interest rate risk primarily stems from floating-rate borrowings, and credit risk from cash, receivables, and related party balances is managed through transactions with reputable banks and simplified expected credit loss calculations - The Group is exposed to market risks (e.g., foreign exchange risk and interest rate risk), credit risk, and liquidity risk, which are managed and monitored by management[44] - As most operations are conducted in Malaysian Ringgit, the Group's significant foreign exchange risk is minimal, and there is currently no foreign currency hedging policy[44] - Interest rate risk primarily arises from borrowings obtained at floating rates[45] - Credit risk primarily arises from cash and bank balances, trade and other receivables, and is managed through transactions with reputable banks and applying the simplified approach under IFRS 9 for expected credit losses[45] - As of June 30, 2024, 86% of total trade receivables were due from steel mills and ferrous metal trading companies, and the Directors consider the inherent credit risk to be low[45] Other Information Events After the Reporting Period From the end of the reporting period on June 30, 2024, to the date of this announcement, the Board is not aware of any significant events requiring disclosure - The Board is not aware of any significant events affecting the Group that occurred after June 30, 2024, and up to the date of this announcement, which require disclosure[47] Staff and Remuneration Policy As of June 30, 2024, the Group had 374 employees, with total staff costs and related expenses amounting to MYR 16.7 million, a 51.8% year-on-year increase, mainly due to increased headcount and salary adjustments | Indicator | 2024/06/30 | 2023/06/30 | | :--- | :--- | :--- | | Number of employees | 374 | 227 | | Total staff costs and related expenses (MYR million) | 16.7 | 11.0 | - The increase in staff costs was mainly due to an increase in the number of employees and salary adjustments[48] - The Company provides regular training to employees to enhance their skills and knowledge[48] Pre-emptive Rights Neither the Company's articles of association nor Cayman Islands law provides for pre-emptive rights, thus not requiring new shares to be offered to existing shareholders pro-rata to their holdings - Neither the Company's articles of association nor the laws of the Cayman Islands provide for pre-emptive rights[49] Purchase, Redemption or Sale of the Company's Listed Securities In H1 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities, nor did they hold any treasury shares - For the six months ended June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[50] Interim Dividend The Board of Directors did not declare any dividend for H1 2024 - The Board of Directors did not declare any dividend for H1 2024[51] Sufficiency of Public Float As of H1 2024 and the announcement date, the Company's public float has consistently exceeded the minimum 25% required by the HKEX Listing Rules - The public has consistently held at least 25% of the Company's total issued share capital, complying with the minimum public float requirement of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[52] Compliance with Corporate Governance Code The Company is committed to high standards of corporate governance and has fully complied with the Corporate Governance Code in Appendix C1 of the Listing Rules, except for the combined roles of Chairman and Chief Executive Officer held by Dato' Sia Kok Chin - The Company has adopted the principles and code provisions of the Corporate Governance Code set out in Appendix C1 of the Listing Rules[53] - There is a deviation from Code Provision C.2.1 of the Corporate Governance Code, where the roles of Chairman and Chief Executive Officer are combined and held by Dato' Sia Kok Chin, which the Board believes benefits the Group's management and business development[53] Standard Code for Securities Transactions The Company has adopted the "Standard Code for Securities Transactions by Directors of Listed Issuers" as set out in Appendix C3 of the Listing Rules, and all Directors confirmed compliance with the code during the review period - The Company has adopted the "Standard Code for Securities Transactions by Directors of Listed Issuers" as set out in Appendix C3 of the Listing Rules as a code of conduct for Directors and senior management[54] - All Directors confirmed their compliance with the Standard Code throughout the review period[54] Audit and Risk Management Committee and Review of Financial Statements The Audit and Risk Management Committee has reviewed the H1 2024 condensed consolidated financial information with management, including accounting principles, practices, internal controls, and financial reporting matters - The Audit and Risk Management Committee has reviewed the H1 2024 condensed consolidated financial information with management and discussed internal controls and financial reporting matters[55] Publication of Interim Results Announcement and Interim Report This announcement has been published on the HKEX website and the Company's website, and the interim report will be published in due course - This announcement is published on the HKEX website (www.hkexnews.hk) and the Company's website (www.henghup.com)[56](index=56&type=chunk) - The Company's H1 2024 interim report will be published on the aforementioned websites in due course[56]