永联丰控股(09882) - 2024 - 中期财报

Corporate Information Corporate Structure and Key Personnel The report details the company's board members, composition and chairs of various committees (Audit, Remuneration, Nomination, Corporate Governance), and key partners including legal advisors and auditors, along with registered and principal places of business - Executive Directors include Mr. Chan Yuk Bun, Chairman and Chief Executive Officer, and Mr. Chan Lung Bun[2] - The Audit Committee is chaired by Mr. Chan Hung Chun, the Remuneration Committee by Ms. Tam Ho Ting, the Nomination Committee by Mr. Chan Yuk Bun, and the Corporate Governance Committee by Mr. Chan Lung Bun[2] - The company's auditor is PricewaterhouseCoopers[6] Interim Condensed Consolidated Financial Statements Statement of Comprehensive Income For the six months ended June 30, 2024, the Group experienced a significant decline in revenue and profitability, with total revenue decreasing by 40.6% and profit for the period falling from HK$14.756 million to HK$9.949 million Metric (Six Months Ended June 30) | Metric (Six Months Ended June 30) | 2024 (HK$ '000) | 2023 (HK$ '000) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 45,999 | 77,437 | -40.6% | | Gross Profit | 18,031 | 31,838 | -43.4% | | Operating Profit | 10,843 | 18,343 | -40.9% | | Profit for the Period | 9,949 | 14,756 | -32.6% | | Basic Earnings Per Share (HK cents) | 1.2 | 1.8 | -33.3% | - Due to the depreciation of RMB against HKD, the company recorded a HK$1.84 million foreign currency translation difference loss, leading to a total comprehensive income for the period of HK$8.109 million[11] Statement of Financial Position As of June 30, 2024, the Group's total assets decreased primarily due to lower cash and cash equivalents, while total liabilities significantly reduced due to full repayment of bank borrowings, maintaining a stable overall financial structure Balance Sheet Item | Balance Sheet Item | June 30, 2024 (HK$ '000) | December 31, 2023 (HK$ '000) | Change | | :--- | :--- | :--- | :--- | | Total Assets | 145,559 | 164,857 | -11.7% | | Non-current Assets | 22,276 | 24,863 | -10.4% | | Current Assets | 123,283 | 139,994 | -11.9% | | Total Liabilities | 5,790 | 17,197 | -66.3% | | Bank Borrowings | - | 8,093 | -100% | | Total Equity | 139,769 | 147,660 | -5.3% | | Cash and Cash Equivalents | 38,748 | 54,891 | -29.4% | Statement of Changes in Equity In the first half of 2024, the Group's total equity decreased from HK$147.7 million to HK$139.8 million, primarily due to HK$16 million in dividends paid and HK$1.84 million in exchange losses, despite a HK$9.95 million profit for the period - Opening total equity was HK$147,660 thousand[16] - Profit for the period increased equity by HK$9,949 thousand[16] - Dividends declared during the period of HK$16,000 thousand reduced equity[16] - Foreign currency translation differences resulted in other comprehensive loss of HK$1,840 thousand[16] - Closing total equity was HK$139,769 thousand[16] Statement of Cash Flows In the first half of 2024, the Group's cash and cash equivalents decreased by HK$16.072 million, primarily due to a significant HK$24.247 million net cash outflow from financing activities for bank loan repayments and dividend payments, despite HK$8.304 million net cash inflow from operating activities Cash Flow Item (Six Months Ended June 30) | Cash Flow Item (Six Months Ended June 30) | 2024 (HK$ '000) | 2023 (HK$ '000) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 8,304 | 26,253 | | Net Cash Used in Investing Activities | (129) | (777) | | Net Cash Used in Financing Activities | (24,247) | (54) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (16,072) | 25,422 | | Cash and Cash Equivalents at End of Period | 38,748 | 75,954 | - Cash outflow from financing activities primarily included HK$8.093 million for bank loan repayments and HK$16 million for dividend payments[22] Notes to the Financial Information Note 1: General Information The company, incorporated in the Cayman Islands, transitioned its shares from GEM to the Main Board of HKEX on September 28, 2023, operating as an investment holding company with subsidiaries primarily engaged in manufacturing and trading slewing bearings, mechanical products, and parts - The company is primarily engaged in the manufacturing and trading of slewing bearings, mechanical products, and mechanical parts[23] - The company's shares were transferred from GEM to the Main Board of the Stock Exchange on September 28, 2023[23] Note 4: Revenue and Segment Information Management considers the Group as a single operating segment, "manufacturing and trading a range of mechanical products and mechanical parts," with all revenue recognized at a point in time from contracts with customers - Management considers the Group to have only one operating segment: manufacturing and trading mechanical products and parts[36] - All revenue is recognized at a point in time[37] Note 8: Dividends The Board does not recommend the payment of any interim dividend for the reporting period ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the reporting period[49][51] Note 10: Trade Receivables As of June 30, 2024, total trade receivables were HK$41.449 million, with receivables over three months significantly increasing to HK$19.422 million, representing 46.8% of the total, indicating a potential extension of collection cycles, while sales credit terms are typically 60 to 120 days Aging Analysis | Aging Analysis | June 30, 2024 (HK$ '000) | December 31, 2023 (HK$ '000) | | :--- | :--- | :--- | | Within 30 days | 16,169 | 38,104 | | 31 to 60 days | 288 | 2,274 | | 61 to 90 days | 5,570 | 1,901 | | Over 3 months | 19,422 | 2,012 | | Total | 41,449 | 44,291 | Management Discussion and Analysis Business and Financial Review In the first half of 2024, the Group's total revenue declined by 40.6% to HK$46 million due to global economic uncertainties and high interest rates, with core businesses experiencing downturns, but the new mineral (nickel ore) trading business contributed HK$8.6 million in revenue, and reduced administrative expenses, partly due to lower one-off listing costs, mitigated the net profit decline Business Overview As a leading Chinese slewing bearing manufacturer, the Group's revenue declined by 40.6% in H1 2024 due to macroeconomic impacts and slowed construction in Hong Kong and ASEAN, prompting expansion into mineral and related product trading to seek new growth - In the first half of 2024, due to local and global economic uncertainties, the Group's revenue decreased by 40.6% to HK$46 million, with gross profit at HK$18 million[79] - Key reasons for the revenue decline include reduced local construction activity, slower global demand for slewing bearings and other products, and customer project delays[79] - To address challenges, the Group expanded into mineral and related product trading in early 2024, aiming to create new business synergies and profit growth points[82][83] Revenue Analysis by Product In H1 2024, the Group's total revenue decreased by 40.6%, with "Slewing Bearings" revenue sharply declining by 58.3%, and "Mechanical Parts" and "Machinery" also falling by 43.4% and 44.5% respectively, while the newly expanded "Minerals" (nickel ore) business contributed HK$8.601 million, accounting for 18.7% of total revenue Revenue Category (Six Months Ended June 30) | Revenue Category (Six Months Ended June 30) | 2024 (HK$ '000) | 2023 (HK$ '000) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Slewing Bearings | 17,298 | 41,521 | -58.3% | | Mechanical Parts | 8,689 | 15,351 | -43.4% | | Machinery | 11,411 | 20,565 | -44.5% | | Minerals (Nickel Ore) | 8,601 | - | N/A | | Total | 45,999 | 77,437 | -40.6% | - The decline in slewing bearing revenue was primarily due to the impact of manufacturing and construction downturns in Japan and ASEAN markets on ODM business, and customers shifting to direct orders of the company's self-produced high-quality products instead of procurement[101][102] - The decrease in mechanical parts revenue was mainly due to reduced demand from a downturn in construction and mining businesses in the Philippines market[107] - The decline in machinery sales revenue was primarily due to fewer orders from Hong Kong contractor clients, linked to delays in projects such as the Hong Kong International Airport Third Runway[112] - The newly launched mineral trading business (nickel ore) generated HK$8.601 million in sales revenue during the period[116] Cost, Expenses and Profitability Analysis Cost of sales decreased by 38.7% in line with revenue, while administrative expenses significantly dropped by 46.0% due to the absence of HK$6.8 million in one-off listing expenses from the prior period, resulting in a profit attributable to shareholders of HK$9.9 million, compared to an adjusted profit of approximately HK$21.6 million in the prior period, indicating ongoing operational pressure - Cost of sales decreased by 38.7% from HK$45.6 million to HK$28 million, primarily due to reduced revenue and changes in product mix[116] - Administrative expenses decreased by 46.0% from HK$13.9 million to HK$7.5 million, mainly due to the absence of HK$6.8 million in listing-related expenses incurred in the prior period[118][120] - Profit attributable to shareholders for the current period was approximately HK$9.9 million, compared to HK$14.8 million in the prior period[118] Liquidity and Financial Resources The Group maintains a robust financial position, primarily funded by internal cash flow and listing proceeds, with no bank borrowings as of June 30, 2024, and a strong current ratio of 21.3 times, demonstrating excellent short-term solvency, with cash and cash equivalents totaling HK$43.8 million - As of June 30, 2024, the Group's cash and cash equivalents (including pledged deposits) amounted to HK$43.8 million[118] - The current ratio (current assets/current liabilities) significantly increased to 21.3 times from 8.2 times at the end of 2023[119] - The Group repaid all bank borrowings during the period and had no bank borrowings as of the period end[119] Capital Management and Future Plans The company completed a share subdivision in May 2024 to enhance stock liquidity, with most listing proceeds utilized as planned and the remaining HK$1 million allocated for ERP system, finance department expansion, and staff training, while future strategies include capacity enhancement, marketing, automation, and further expansion into mineral trading to address challenges and create shareholder value Capital Structure and Use of Proceeds On May 21, 2024, the company completed a 1-for-2 share subdivision, and as of June 30, 2024, HK$27.425 million of the HK$28.4 million listing proceeds had been utilized, primarily for machinery and working capital, with the remaining HK$0.975 million earmarked for ERP system, finance department expansion, and staff training by Q4 2024 - The company completed a share subdivision on May 21, 2024, where each ordinary share of HK$0.01 par value was subdivided into two shares of HK$0.005 par value[122] Use of Proceeds | Use of Proceeds | Revised Allocation (HK$ '000) | Total Utilized (HK$ '000) | Remaining Amount (HK$ '000) | | :--- | :--- | :--- | :--- | | Acquisition and Replacement of Machinery and Equipment | 17,210 | 17,210 | - | | Market Share Expansion and Marketing | 1,246 | 1,246 | - | | Enhancement of Automation Level | 2,158 | 2,158 | - | | Establishment of ERP System | 1,704 | 873 | 831 | | Expansion of Finance Department | 1,420 | 1,420 | - | | Enhancement of Staff Training | 227 | 83 | 144 | | Maintenance of Working Capital | 4,435 | 4,435 | - | | Total | 28,400 | 27,425 | 975 | Future Prospects and Strategy Despite global economic uncertainties, the Group aims to solidify its position as a quality slewing bearing manufacturer and expand its business by leveraging integrated advantages in mechanical parts and machinery supply, continuing strategies like capacity enhancement, marketing, automation, and ERP system establishment, while planning to expand mineral and related product procurement to boost revenue and profitability and maximize shareholder returns - The Group aims to consolidate its position as a quality slewing bearing manufacturer and enhance its competitiveness as an integrated product supplier[137] - Key future strategies include acquiring equipment to enhance production capacity, intensifying marketing efforts, improving automation levels, establishing an ERP system, expanding the finance department, and strengthening staff training[138] - The Group remains cautiously optimistic about the recovery of its procurement business and plans to expand the scope of mineral and related product procurement in the foreseeable future to enhance revenue and profitability[139][140] Other Information Interests Disclosure The report discloses shareholdings of directors, chief executives, and substantial shareholders, noting that as of June 30, 2024, Chairman Mr. Chan Yuk Bun, through C Centrum Holdings Limited, holds 75% of the company's issued share capital as the controlling shareholder, with no share option scheme adopted or listed securities purchased, sold, or redeemed during the period - Chairman and Chief Executive Officer Mr. Chan Yuk Bun holds 600 million shares through C Centrum Holdings Limited, representing 75% of the company's issued share capital[143][149] - During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[152] Corporate Governance and Compliance The Group is committed to high corporate governance standards, complying with the Listing Rules' Corporate Governance Code during the period, with the only deviation being the combined roles of Chairman and Chief Executive Officer held by Mr. Chan Yuk Bun, an arrangement the Board deems in the Group's best interest, and the Audit Committee has reviewed this interim financial report - The company complied with the Corporate Governance Code, with one deviation: the roles of Chairman and Chief Executive Officer are not separate, both held by Mr. Chan Yuk Bun[159] - The Board believes this arrangement is currently most appropriate given Mr. Chan Yuk Bun's contributions to the Group's overall management[159] - The Audit Committee, comprising three independent non-executive directors, has reviewed the unaudited interim condensed consolidated financial information for the six months ended June 30, 2024[166][168]