科联系统(00046) - 2024 - 中期财报

Chairman's Statement Performance Overview The Group's H1 2024 total revenue remained stable at HKD 127.6 million, with gross profit increasing 2.0% to HKD 69.0 million and gross margin improving to 54.1% due to cost efficiencies, while net profit attributable to shareholders and interim dividend per share remained flat Key Financial Indicators for H1 2024 | Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue (HKD Million) | 127.6 | 128.1 | -0.4% | | Gross Profit (HKD Million) | 69.0 | 67.6 | +2.0% | | Gross Margin | 54.1% | 52.8% | +1.3pp | | Net Profit Attributable to Shareholders (HKD Million) | 18.2 | 18.2 | 0.0% | | Basic Earnings Per Share (HK Cents) | 7.46 | 7.38 | +1.1% | | Interim Dividend (HK Cents) | 5.5 | 5.5 | 0.0% | - The improvement in gross margin primarily resulted from migrating some development resources to mainland China, leading to a more effective cost structure[8] Business Review The Group's diverse businesses showed mixed performance in a challenging market, with HRMS revenue declining due to recruitment slowdowns, EPMS achieving double-digit growth driven by strong ESG demand, significant revenue growth in Solutions and Integration Services from new government projects, and single-digit growth in e-Service business Application Software The Application Software business showed mixed performance, with HRMS license revenue declining due to recruitment slowdowns and SaaS transition, while EPMS achieved double-digit growth driven by strong ESG demand and over 29% YoY recurring SaaS and maintenance revenue growth, alongside the launch of cloud-native Pi-HCM and AI/NLP project wins - Human Resources Management Software (HRMS) license revenue decreased due to corporate clients slowing down recruitment and the market's transition to a SaaS model[10][13] - Enterprise Procurement Management Software (EPMS) business recorded double-digit revenue growth, with recurring SaaS and maintenance revenue increasing by over 29% year-on-year, driven by rising corporate demand for ESG compliance and procurement process automation[17] - The Group launched Pi-HCM, a revolutionary Human Capital Management (HCM) software based on a cloud-native platform, and actively explores AI and NLP technologies for new applications in procurement, finance, and construction[11][17] Solutions and Integration Services This business segment achieved revenue growth of 9.5% to HKD 56.5 million, demonstrating strong market resilience by securing multiple significant new projects from HKSAR government departments and establishing expertise in cybersecurity and data privacy assessment, with management anticipating substantial growth in this area Solutions and Integration Services Revenue | Period | Revenue (HKD Million) | | :--- | :--- | | H1 2024 | 56.5 | | H1 2023 | 51.6 | - The business successfully secured several significant new projects from various HKSAR government departments and established a strong foundation and technical expertise in security risk and privacy impact assessment[18] e-Service and Related Business The Group's Government Electronic Trading Services (GETS) business achieved single-digit revenue growth, improved its overall profit contribution, successfully navigated market challenges, and increased its market share during the reporting period - The GETS business achieved single-digit revenue growth and improved its profit contribution and market share[18] Investments The Investments segment's asset position declined, recording a loss of HKD 0.4 million compared to a profit of HKD 0.5 million in the prior period, primarily due to the sale of an office property in China and a HKD 1.2 million valuation markdown of remaining investment properties and financial assets amid unfavorable market conditions and high interest rates - The Investments segment turned from profit to loss, recording a HKD 0.4 million loss, primarily due to the sale of a China property and a HKD 1.2 million valuation markdown of existing assets[21][22] Prospects Management anticipates a slow economic recovery in H2 2024 for Hong Kong and mainland China amid uncertainties, but is confident in accelerating business momentum by leveraging cloud-native software to enhance SaaS services and drive recurring revenue growth, while also increasing participation in HKSAR government innovation initiatives and seeking M&A opportunities to expand into overseas markets like ASEAN - The Group will leverage its optimized software product portfolio featuring cloud-native architecture to enhance SaaS offerings and drive recurring revenue growth[21][22] - The Solutions business aims to strengthen its participation in Hong Kong government's innovation and technology and smart city initiatives by leveraging the advantages of the Greater Bay Area's technology resource hub[21][22] - The Group will dedicate additional management resources to identify merger and acquisition opportunities to complement existing businesses and expand into overseas markets such as ASEAN countries[23][25] Financial Review The Group's overall financial position remains robust, with total revenue slightly down 0.4%, but gross profit up 2.0% and gross margin improving to 54.1% due to staff cost savings, while sales and distribution expenses increased, general and administrative expenses were streamlined, net profit remained stable, and the balance sheet shows a healthy structure with ample cash flow and no bank borrowings Revenue and Gross Profit During the reporting period, total revenue slightly decreased by 0.4% to HKD 127.6 million, primarily due to a reduction in application services offset by growth in solutions services, while sales and service costs decreased by 3.1% due to staff cost savings, leading to a 2.0% increase in overall gross profit to HKD 69.0 million and an improved gross margin from 52.8% to 54.1% Revenue and Gross Profit Performance | Indicator | H1 2024 (HKD Million) | H1 2023 (HKD Million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | 127.6 | 128.1 | -0.4% | | Cost of Sales and Services | 58.6 | 60.5 | -3.1% | | Gross Profit | 69.0 | 67.6 | +2.0% | | Gross Margin | 54.1% | 52.8% | +1.3pp | Non-operating Incomes and Gains, Net Other income and net gains decreased by 5.2% to HKD 7.6 million, primarily due to reduced VAT refunds, while investment properties and financial assets recorded a fair value loss of HKD 1.2 million, up from HKD 0.5 million in the prior period, impacted by high interest rates and weak market conditions - Other income and net gains decreased to HKD 7.6 million, primarily due to reduced VAT refunds[27] - Investment properties and financial assets recorded a fair value loss of HKD 1.2 million, higher than the HKD 0.5 million loss in the prior period[27] Operating Expenses Sales and distribution expenses increased by 8.2% to HKD 17.6 million due to a strengthened sales team and increased marketing activities, while general and administrative expenses, including finance costs, were streamlined, decreasing by 4.9% to HKD 30.8 million - Sales and distribution expenses increased by 8.2% year-on-year to HKD 17.6 million[27] - General and administrative expenses decreased by 4.9% year-on-year to HKD 30.8 million[27] Assets, Liabilities and Equity As of June 30, 2024, non-current assets grew moderately by 1.2% to HKD 249.6 million, current assets slightly increased by 2.1% to HKD 416.6 million, total current and non-current liabilities climbed 8.2% to HKD 160.7 million primarily due to new lease liabilities, and total equity attributable to owners of the parent remained stable at HKD 504.3 million Key Balance Sheet Item Changes | Item | June 30, 2024 (HKD Thousand) | December 31, 2023 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 249,626 | 246,608 | +1.2% | | Total Current Assets | 416,582 | 407,900 | +2.1% | | Total Assets | 666,208 | 654,508 | +1.8% | | Total Current Liabilities | 136,847 | 135,991 | +0.6% | | Total Non-current Liabilities | 23,876 | 12,518 | +90.7% | | Total Liabilities | 160,723 | 148,509 | +8.2% | | Net Assets | 505,485 | 505,999 | -0.1% | Treasury Policies and Liquidity The Group maintains a prudent financial management approach and a healthy liquidity position, holding HKD 305.6 million in cash and cash equivalents with no bank borrowings as of June 30, 2024, alongside a current ratio of 3.0 and a debt-to-asset ratio of 24.1%, while closely monitoring foreign exchange risk without adopting hedging policies Liquidity Indicators | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents (HKD Million) | 305.6 | 316.1 | | Bank Borrowings | Nil | Nil | | Current Ratio | 3.0 | 3.0 | | Debt-to-Asset Ratio | 24.1% | 22.7% | Interim Dividend The Board declared an interim dividend of HKD 0.055 per ordinary share for the six months ended June 30, 2024, consistent with the prior period, with payment expected on or around September 19, 2024 - An interim dividend of HKD 0.055 per ordinary share was declared, consistent with the prior year[51] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the Group recorded revenue of HKD 127.6 million, gross profit of HKD 68.95 million, profit before tax of HKD 20.76 million, profit for the period of HKD 18.04 million, and profit attributable to owners of the parent of HKD 18.17 million H1 2024 Statement of Profit or Loss Summary (HKD Thousand) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 127,567 | 128,102 | | Gross Profit | 68,951 | 67,649 | | Profit Before Tax | 20,764 | 19,859 | | Profit for the Period | 18,043 | 18,006 | | Profit Attributable to Owners of the Parent | 18,166 | 18,237 | Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2024, the Group's profit for the period was HKD 18.04 million, with total comprehensive income for the period at HKD 16.96 million after accounting for exchange differences on translating foreign operations (a loss of HKD 1.08 million), of which HKD 17.09 million was attributable to owners of the parent H1 2024 Comprehensive Income Summary (HKD Thousand) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Profit for the Period | 18,043 | 18,006 | | Other Comprehensive (Loss)/Income | (1,081) | 134 | | Total Comprehensive Income for the Period | 16,962 | 18,140 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were HKD 666.2 million, total liabilities HKD 160.7 million, and net assets HKD 505.5 million, comprising HKD 249.6 million in non-current assets and HKD 416.6 million in current assets Statement of Financial Position Summary (HKD Thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 249,626 | 246,608 | | Total Current Assets | 416,582 | 407,900 | | Total Assets | 666,208 | 654,508 | | Total Current Liabilities | 136,847 | 135,991 | | Total Non-current Liabilities | 23,876 | 12,518 | | Total Liabilities | 160,723 | 148,509 | | Net Assets | 505,485 | 505,999 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, total equity attributable to owners of the parent was HKD 504.3 million, largely stable compared to HKD 504.7 million at the beginning of the period, with key changes including a HKD 18.17 million increase from profit for the period, a HKD 13.37 million decrease from 2023 final dividend payment, and a HKD 4.75 million decrease from share repurchases - Changes in equity during the period were primarily influenced by profit, dividend payments, and share repurchases, with total equity remaining stable[60] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2024, net cash generated from operating activities significantly decreased to HKD 3.63 million from HKD 17.43 million in the prior period, net cash from investing activities was HKD 8.66 million primarily due to investment property sales, net cash used in financing activities was HKD 22.63 million mainly for dividends and share repurchases, and cash and cash equivalents decreased by HKD 10.35 million at period-end Cash Flow Summary (HKD Thousand) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,625 | 17,429 | | Net Cash Generated from/(Used in) Investing Activities | 8,660 | (51,561) | | Net Cash Used in Financing Activities | (22,633) | (35,794) | | Net Decrease in Cash and Cash Equivalents | (10,348) | (69,926) | Notes to Financial Statements Operating Segment Information The Group is organized into three operating segments: Application Services, Solutions and Integration Services, and Investments, with Application Services being the largest revenue source but experiencing a YoY decline in H1 2024, while Solutions and Integration Services saw revenue growth, Investments recorded a loss, and geographically, Hong Kong and other regions accounted for approximately 82% of total revenue Segment Revenue and Results (HKD Thousand) | Segment | H1 2024 Revenue | H1 2023 Revenue | H1 2024 Results | H1 2023 Results | | :--- | :--- | :--- | :--- | :--- | | Application Services | 70,191 | 75,612 | 14,709 | 14,992 | | Solutions and Integration Services | 56,517 | 51,564 | 14,550 | 12,561 | | Investments | 859 | 926 | (356) | 543 | Revenue from External Customers by Geographical Area (HKD Thousand) | Region | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Hong Kong and Other Countries/Regions | 104,680 | 103,213 | | Mainland China | 22,887 | 24,889 | | Total | 127,567 | 128,102 | Earnings Per Share For the six months ended June 30, 2024, basic earnings per share attributable to ordinary equity holders of the parent was 7.46 HK Cents, and diluted earnings per share was 7.42 HK Cents, calculated based on a weighted average of approximately 243.7 million ordinary shares outstanding during the period Earnings Per Share Calculation | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Basic Earnings Per Share (HK Cents) | 7.46 | 7.38 | | Diluted Earnings Per Share (HK Cents) | 7.42 | 7.31 | | Weighted Average Number of Ordinary Shares for Calculation | 243,670,021 | 247,132,666 | Trade Receivables As of June 30, 2024, net trade receivables increased to HKD 38.53 million from HKD 36.34 million at the end of 2023, with approximately 67% of balances due within one month according to aging analysis, and the Group has made an impairment loss provision of HKD 4.62 million Trade Receivables (HKD Thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade Receivables | 43,142 | 40,961 | | Impairment | (4,617) | (4,621) | | Net Amount | 38,525 | 36,340 | Financial Risk Management The Group faces key financial risks including interest rate, foreign currency, credit, equity price, and liquidity risks, with exposure to interest rate risk from floating-rate bank deposits and foreign currency risk from RMB-denominated financial instruments, managed through credit review procedures and close monitoring of cash flows for liquidity - Interest rate sensitivity analysis indicates that a 50 basis point change in interest rates would impact profit before tax by approximately HKD 1.53 million[213] - Foreign currency risk sensitivity analysis shows that a 5% change in the HKD to RMB exchange rate would impact profit before tax by approximately HKD 0.59 million[217] Other Information Directors' and Chief Executive's Interests in Shares As of June 30, 2024, Chairman Mr. Ng Cheung Shing held approximately 49.53% of the company's share interests, making him a substantial shareholder, with the majority held through his controlled entity, Chao Lien Technologies Limited - Chairman Mr. Ng Cheung Shing holds 121,338,000 shares, representing 49.53% of the company's issued share capital[242] Substantial Shareholders' Interests Beyond Chairman Mr. Ng Cheung Shing, other substantial shareholders include Puttney Investments Limited (and its associated companies like CK Hutchison Holdings Limited), holding 11.90% of shares, and Mr. Hui Yau Man, holding 10.93% of shares - Chao Lien Technologies Limited holds 46.79% of the shares[318] - Puttney Investments Limited and its associated companies collectively hold 11.90% of the shares[318] Purchase, Redemption or Sale of Listed Securities During the reporting period, a company subsidiary repurchased 2,064,000 of the company's shares on the Hong Kong Stock Exchange for a total consideration of HKD 4.752 million, aiming to enhance net asset value per share and earnings per share for overall shareholder benefit Share Repurchase Summary | Item | Value | | :--- | :--- | | Number of Shares Repurchased | 2,064,000 shares | | Total Amount Paid (HKD Thousand) | 4,752 | Corporate Governance Practices The company is committed to high corporate governance standards, complying with Listing Rules' Corporate Governance Code during the reporting period, and has an Audit Committee comprising three independent non-executive directors who reviewed this interim report, alongside a Risk Management Committee to ensure effective risk governance - The company states it has complied with the Corporate Governance Code during the reporting period[325] - The Audit Committee has reviewed the interim results and interim report[328]