Workflow
仁恒实业控股(03628) - 2024 - 中期财报
RENHENG ENTRENHENG ENT(HK:03628)2024-09-16 10:35

Summary RENHENG Enterprise Holdings Limited reported a 5.4% revenue increase and a significant rise in profit attributable to shareholders for the six months ended June 30, 2024, with no interim dividend recommended Financial Highlights (HKD thousands) | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 60,979 | 57,840 | 5.4% | | Profit attributable to company shareholders | 7,555 | 804 | 839.7% | | Basic earnings per share (HKD cents) | 0.94 | 0.10 | 840.0% | - The Directors do not recommend the payment of an interim dividend for the six months ended June 30, 20241 Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for the six months ended June 30, 2024, including key financial statements and comparative data Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the company reported a 5.4% revenue increase, a significant rise in gross profit and profit for the period, with basic earnings per share at HKD 0.94 cents Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (HKD thousands) | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 60,979 | 57,840 | 5.4% | | Cost of sales | (40,191) | (43,337) | -7.26% | | Gross profit | 20,788 | 14,503 | 43.34% | | Other income | 1,188 | 335 | 254.63% | | Other gains and losses | 766 | 812 | -5.67% | | Selling and distribution costs | (2,510) | (4,274) | -41.28% | | Administrative expenses | (8,342) | (8,123) | 2.70% | | Research and development costs | (2,658) | (1,500) | 77.20% | | Profit before tax | 9,232 | 1,753 | 426.64% | | Tax | (1,677) | (949) | 76.71% | | Profit for the period | 7,555 | 804 | 839.68% | | Total comprehensive income (expense) for the period | 6,771 | (2,556) | - | | Basic earnings per share (HKD cents) | 0.94 | 0.10 | 840.00% | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the company's net assets and net current assets increased, primarily driven by higher trade and other receivables Condensed Consolidated Statement of Financial Position (HKD thousands) | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Non-current assets | 24,754 | 26,082 | -5.1% | | Current assets | 221,652 | 209,435 | 5.8% | | Current liabilities | 114,743 | 110,451 | 3.9% | | Net current assets | 106,909 | 98,984 | 8.0% | | Net assets | 130,157 | 123,386 | 5.5% | | Total equity | 130,157 | 123,386 | 5.5% | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, total equity increased to HKD 130,157 thousand, driven by profit for the period and special reserve transfers, partially offset by exchange reserve changes Condensed Consolidated Statement of Changes in Equity (HKD thousands) | Equity Item | January 1, 2023 (HKD thousands) | June 30, 2023 (HKD thousands) | January 1, 2024 (HKD thousands) | June 30, 2024 (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | Share capital | 2,010 | 2,010 | 2,010 | 2,010 | | Share premium | 41,818 | 41,818 | 41,818 | 41,818 | | Merger reserve | 49,091 | 49,091 | 49,091 | 49,091 | | Discretionary surplus reserve | 3,338 | 3,338 | 3,338 | 3,338 | | Statutory surplus reserve | 25,607 | 25,607 | 27,529 | 27,529 | | Capital reserve | 999 | 999 | 999 | 999 | | Property revaluation reserve | 2,775 | 2,775 | 2,775 | 2,775 | | Special reserve | - | 628 | 970 | 2,658 | | Exchange fluctuation reserve | (1,049) | (4,409) | (2,542) | (3,326) | | Retained profits (accumulated losses) | (13,268) | (13,092) | (2,602) | 3,265 | | Total | 111,321 | 108,765 | 123,386 | 130,157 | - Statutory surplus reserve and discretionary surplus reserve are appropriated from after-tax profit in accordance with relevant PRC laws and regulations, used to cover losses or converted into capital4 - Special reserve is appropriated in accordance with the "Measures for the Administration of Extraction and Use of Production Safety Fees" issued by the Ministry of Finance and the Ministry of Emergency Management, for improving production safety environment and facilities, and is not distributable to shareholders4 Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities decreased, while net cash from investing activities significantly increased, with period-end cash at HKD 79,642 thousand Condensed Consolidated Statement of Cash Flows (HKD thousands) | Cash Flow Category | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (12,093) | (24,208) | -50.05% | | Net cash generated from investing activities | 6,391 | 977 | 554.14% | | Net cash used in financing activities | (132) | (202) | -34.65% | | Net decrease in cash and cash equivalents | (5,834) | (23,433) | -75.11% | | Cash and cash equivalents at end of period | 79,642 | 72,264 | 10.21% | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and supplementary information for the condensed consolidated financial statements, including general information, accounting policies, and specific financial item analysis 1. General Information RENHENG Enterprise Holdings Limited, incorporated in the Cayman Islands and listed in Hong Kong, primarily manufactures and sells tobacco machinery in China, controlled by Ms. Liu Li, with financial statements presented in HKD - The Company is jointly controlled by LinkBest Capital Group Limited and Open Venture Global Limited, with Ms. Liu Li as the ultimate controlling shareholder6 - The Company and its subsidiaries are principally engaged in the manufacturing and sale of tobacco machinery products in the PRC6 - The Group's condensed consolidated financial statements are presented in Hong Kong Dollars, which is different from the Company's functional currency, Renminbi6 2. Basis of Preparation The unaudited condensed consolidated financial statements were approved by the Board and Audit Committee, prepared in accordance with HKAS 34 and Listing Rules Appendix 16 disclosure requirements - The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited7 3. Principal Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, consistent with prior year policies, with no significant impact from revised HKFRSs - The condensed consolidated financial statements have been prepared on the historical cost basis8 - The application of the revised HKFRSs in the current interim period has had no material effect on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements9 4. Revenue and Segment Information The Group's primary revenue source is manufacturing and selling tobacco machinery products in China, with revenue from flavor blending and adding machinery construction contracts recognized at a point in time Revenue by Product Type (HKD thousands) | Product Type | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Construction contracts for tobacco flavor and fragrance blending and adding machinery | 56,525 | 57,452 | | Sales of other products - pneumatic filament feeding systems | 3,785 | 195 | | Sales of other products - other goods | 669 | 193 | | Total | 60,979 | 57,840 | - The Group's operating activities are principally the manufacturing and sale of tobacco machinery products, which is a single operating segment10 - Revenue from construction contracts for tobacco flavor and fragrance blending and adding machinery is recognized at a point in time when the completed machinery is transferred to the customer13 5. Other Income For the six months ended June 30, 2024, other income significantly increased to HKD 1,188 thousand, driven by higher government grants and bank interest income Other Income Sources (HKD thousands) | Income Source | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Government grants | 741 | 57 | 1199.9% | | Bank interest income | 447 | 278 | 60.86% | | Total | 1,188 | 335 | 254.63% | 6. Other Gains and Losses For the six months ended June 30, 2024, total other gains and losses were HKD 766 thousand, a slight decrease primarily due to exchange losses Other Gains and Losses (HKD thousands) | Item | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Net gain from disposal of scrap materials, components and parts | 766 | 812 | | Exchange (losses) gains | (134) | 59 | | Total | 766 | 812 | 7. Profit Before Tax For the six months ended June 30, 2024, profit before tax was HKD 9,232 thousand, with a notable 77.2% increase in research and development costs Expenses Deducted from Profit Before Tax (HKD thousands) | Expense Item | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Directors' emoluments | 911 | 854 | 6.67% | | Other staff costs | 7,545 | 8,472 | -10.94% | | Total staff costs | 8,456 | 9,326 | -9.33% | | Auditor's remuneration | 542 | 631 | -14.10% | | Research and development costs | 2,658 | 1,500 | 77.20% | | Depreciation of property, plant and equipment | 1,069 | 1,057 | 1.14% | | Depreciation of right-of-use assets | 157 | 233 | -32.62% | 8. Tax For the six months ended June 30, 2024, tax expense was HKD 1,677 thousand, mainly China corporate income tax, with Chinese subsidiaries benefiting from a 15% preferential tax rate as high-tech enterprises Tax Components (HKD thousands) | Tax Component | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | PRC corporate income tax – current | 1,840 | 1,088 | | Deferred tax | (163) | (139) | | Total | 1,677 | 949 | - The Company's PRC subsidiaries are entitled to a preferential tax rate of 15% during the period, as they have been recognized and approved as high-tech enterprises17 9. Earnings Per Share For the six months ended June 30, 2024, basic earnings per share significantly increased to HKD 0.94 cents, driven by a substantial rise in profit for the period Earnings Per Share Calculation | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company (HKD thousands) | 7,555 | 804 | | Number of ordinary shares | 804,000,000 | 804,000,000 | | Basic earnings per share (HKD cents) | 0.94 | 0.10 | - The Group did not present diluted earnings per share for both periods as there were no issued potential ordinary shares in either period18 10. Dividends The Company's directors decided not to declare any dividends for the six months ended June 30, 2024 - The Directors of the Company have resolved not to declare any dividend for the interim period19 11. Inventories As of June 30, 2024, total inventories decreased to HKD 64,538 thousand, mainly due to reductions in raw materials and work-in-progress Inventories by Category (HKD thousands) | Inventory Category | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Raw materials | 4,450 | 8,650 | | Work-in-progress | 60,088 | 63,904 | | Total | 64,538 | 72,554 | 12. Trade and Other Receivables As of June 30, 2024, total trade and other receivables significantly increased to HKD 71,556 thousand, driven by higher trade receivables and prepayments and deposits Trade and Other Receivables (HKD thousands) | Receivables Category | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Trade receivables (net of allowance) | 60,366 | 21,572 | | Trade receivables aging (0-90 days) | 27,360 | 20,048 | | Trade receivables aging (91-365 days) | 33,006 | 1,524 | | Total trade receivables | 63,558 | 24,787 | | Less: Allowance for credit losses | (3,192) | (3,215) | | Retention receivables (net of allowance) | 6,114 | 6,340 | | Prepayments and deposits | 681 | 5,161 | | Advances to staff | 829 | 367 | | Total | 71,556 | 38,780 | - The Group generally grants its trade customers a credit period of three months22 13. Restricted Bank Deposits / Bank Balances and Cash As of June 30, 2024, restricted bank deposits secured bills payable and construction contracts, while bank balances and cash, mainly in RMB and HKD, earned market interest rates - Restricted bank deposits bear interest at effective annual rates ranging from 0.2% to 1.35% and are used to settle bills payable and guarantee certain construction contracts23 - Bank balances and cash bear interest at effective annual rates ranging from 0.15% to 3.78%23 14. Trade and Other Payables As of June 30, 2024, total trade and other payables decreased to HKD 38,506 thousand, mainly due to reductions in bills payable and welfare expenses Trade and Other Payables (HKD thousands) | Payables Category | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Trade payables | 20,028 | 16,622 | | Bills payable | 3,111 | 9,176 | | Accrued warranty provision | 4,671 | 5,406 | | Welfare expenses payable | 1,575 | 2,687 | | Other payables | 4,140 | 5,274 | | Other tax payables | 4,981 | 2,859 | | Total | 38,506 | 42,024 | Aging of Trade Payables and Bills Payable (HKD thousands) | Aging | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | 0 to 90 days | 19,448 | 14,587 | | 91 to 365 days | 3,019 | 9,164 | | One to two years | 403 | 1,443 | | Over two years | 269 | 604 | | Total | 23,139 | 25,798 | - The average credit period on purchases of goods is 90 days25 Management Discussion and Analysis This section provides a detailed overview of the Group's business, financial performance, capital structure, liquidity, future outlook, corporate governance, and employee policies Business Overview The Group manufactures, sells, and maintains tobacco machinery in China, holding a national license, with key revenue from flavor blending, pneumatic filament feeding, and pre-pressing machinery - The Group is principally engaged in the business of manufacturing and selling tobacco machinery products in the PRC, and providing maintenance, overhaul, and modification services for these products26 - The Group has obtained a Tobacco Monopoly Production Enterprise License issued by the China National Tobacco Corporation, making it one of 35 licensed domestic producers26 - Revenue is primarily generated from three categories of specialized tobacco machinery products: tobacco flavor and fragrance blending and adding machinery, pneumatic filament feeding systems, and tobacco pre-pressing and packing machinery26 Financial Review For the six months ended June 30, 2024, the Group reported a significant profit increase to HKD 7,555 thousand, 4.6% revenue growth, improved gross margin to 34.1%, and a 77.2% rise in R&D costs Financial Performance (HKD thousands) | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Profit | 7,555 | 804 | 839.7% | | Revenue | 60,979 | 57,840 | 5.4% | | Revenue from construction contracts for tobacco flavor and fragrance blending and adding machinery | 56,525 | 57,452 | -1.61% | | Sales of pneumatic filament feeding systems | 3,785 | 195 | 1841.0% | | Sales of other goods | 669 | 193 | 246.63% | | Gross profit margin | 34.1% | 25.1% | +9.0pp | | Gross profit margin for tobacco flavor and fragrance blending and adding machinery construction contracts | 32.2% | 25.1% | +7.1pp | | Research and development costs | 2,658 | 1,500 | 77.2% | | Selling and distribution expenses | 2,510 | 4,274 | -41.3% | | Administrative expenses | 8,342 | 8,123 | 2.7% | | Tax expense | 1,677 | 949 | 76.7% | - An allowance for inventories of HKD 887,000 was recognized in cost of sales, compared to a loss allowance of HKD 406,000 in the prior period27 - Other income increased by HKD 853,000 or 254.6%, primarily from government grants and bank interest income28 Dividends The Directors do not recommend the payment of a dividend for the six months ended June 30, 2024 - The Directors do not recommend the payment of a dividend for the six months ended June 30, 202429 Capital Structure, Liquidity and Financial Resources As of June 30, 2024, the Group maintained a stable capital structure with increased net current assets and significant bank balances, free from other borrowings or charges Capital Structure and Liquidity (HKD thousands) | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Net current assets | 106,909 | 98,984 | | Bank balances and cash | 79,642 | 86,100 | - The Group had no other borrowings, mortgages, or charges30 Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group had no significant contingent liabilities31 Material Investments Held For the period ended June 30, 2024, the Group's investment activities primarily involved short-term time deposits and property, plant, and equipment purchases - The Group's investment activities primarily included placing and withdrawing short-term time deposits and purchasing property, plant and equipment32 Material Acquisitions and Disposals For the six months ended June 30, 2024, the Group had no material acquisitions or disposals of subsidiaries - For the six months ended June 30, 2024, the Group had no material acquisitions or disposals of subsidiaries33 Business Review and Outlook The Group, collaborating with China National Tobacco Corporation, benefits from industry stability and will pursue specialized product opportunities and technological innovation in automated machinery to enhance shareholder value - The Group primarily conducts business with its customer, the China National Tobacco Corporation34 - The tobacco machinery industry is expected to maintain a stable development momentum in the coming years34 - The Group will capture market opportunities for specialized products, secure contracts in various machinery industries, and commit to key technological innovations in the customized automated machinery industry to create greater value for shareholders34 Pre-IPO Share Option Scheme The Pre-IPO Share Option Scheme incentivizes contributions to the Group, with no outstanding share options granted as of June 30, 2024 - The Pre-IPO Share Option Scheme aims to grant share options to participants to incentivize or reward their contributions to the Group35 - As of June 30, 2024, no outstanding share options had been granted35 Share Option Scheme The Share Option Scheme aims to incentivize individuals by offering company equity, with no options granted to directors, eligible employees, or third parties as of June 30, 2024 - The Share Option Scheme aims to provide individuals and parties working for the benefit of the Group with an opportunity to acquire equity in the Company, thereby aligning their interests with those of the Group and incentivizing them to work harder for the Group's benefit36 - As of June 30, 2024, no share options had been granted to Directors, eligible employees, and other external third parties under the Share Option Scheme36 Employees and Remuneration Policy As of June 30, 2024, the Group had 138 employees with total staff costs of HKD 8,456 thousand, and remuneration is based on experience, responsibilities, qualifications, capabilities, and operating results Employee Statistics (HKD thousands) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total number of employees | 138 | 147 | | Staff costs (HKD thousands) | 8,456 | 9,326 | - Remuneration is in the form of salaries and bonuses, determined based on employees' respective experience, responsibilities, qualifications, demonstrated abilities, and our operating results37 Directors' and Chief Executive's Interests in Shares, Underlying Shares and Debentures As of June 30, 2024, Ms. Liu Li held 74.6% of shares through controlled corporations, and Mr. Xu Jiagui held 0.1% beneficial interest, with no other directors or chief executives having relevant interests Directors' and Chief Executive's Interests in Shares | Name | Capacity/Nature of Interest | Number of Issued Ordinary Shares Held | Approximate Percentage of Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Ms. Liu Li | Interest in controlled corporations | 600,000,000 | 74.6% | | Mr. Xu Jiagui | Beneficial interest | 800,000 | 0.1% | - Open Venture Global Limited and LinkBest Capital Group Limited are both wholly-owned by Ms. Liu Li39 Substantial Shareholders' and Other Persons' Interests in Shares, Underlying Shares and Debentures As of June 30, 2024, LinkBest Capital Group Limited and Open Venture Global Limited, both wholly owned by Ms. Liu Li, held 44.8% and 29.9% of the company's shares, respectively Substantial Shareholders' Interests in Shares | Shareholder Name | Capacity/Nature of Interest | Number of Issued Ordinary Shares Held | Approximate Percentage of Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | LinkBest Capital Group Limited | Beneficial owner | 360,000,000 | 44.8% | | Open Venture Global Limited | Beneficial owner | 240,000,000 | 29.9% | - LinkBest and Open Venture are both wholly-owned by Ms. Liu Li41 Competing Interests No directors or their associates had any interests in businesses that compete or are likely to compete with the Group's operations - No Directors or their respective associates had any interests in businesses that compete or are likely to compete with the Group's business42 Purchase, Sale or Redemption of the Company's 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 - 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 securities43 Corporate Governance Practices The Company adopted all Corporate Governance Code provisions, except for A.2.1, where Ms. Liu Li holds both Chairman and Chief Executive Officer roles - The Company has adopted all code provisions set out in the Corporate Governance Code, save for code provision A.2.1 of the Corporate Governance Code which has not been complied with as the roles of Chairman and Chief Executive Officer are performed by the same person, Ms. Liu Li44 Directors' Securities Transactions For the six months ended June 30, 2024, all Directors complied with the Model Code requirements in Appendix 10 of the Listing Rules for their securities transactions - All Directors have complied with the relevant requirements under the Model Code set out in Appendix 10 to the Listing Rules regarding their securities transactions in the Company45 Changes in Directors Effective July 10, 2024, Mr. Xu Jiagui resigned as executive Director, and Ms. Liao Lijuan was appointed as an executive Director - Effective July 10, 2024: (1) Mr. Xu Jiagui resigned as an executive Director and (2) Ms. Liao Lijuan was appointed as an executive Director of the Company46 Audit Committee The Audit Committee, chaired by Dr. Lam Ka Lai and comprising three independent non-executive Directors, reviewed and approved the interim results for the six months ended June 30, 2024 - The Audit Committee currently comprises three independent non-executive Directors and is chaired by Dr. Lam Ka Lai47 - The Audit Committee has reviewed the interim results for the six months ended June 30, 2024, and is of the opinion that they comply with applicable accounting standards and have made adequate disclosures47