温岭工量刃具(01379) - 2024 - 中期财报

Company Information This section provides basic information about Wenling Zhejiang Cutting Tools and Measuring Instruments Trading Center Co., Ltd., including board members, committee compositions, company secretary, authorized representatives, legal advisors, auditor, principal bankers, registered office, and principal place of business in Hong Kong Company Basic Information This chapter provides basic information about Wenling Zhejiang Cutting Tools and Measuring Instruments Trading Center Co., Ltd., including board members, committee compositions, company secretary, authorized representatives, legal advisors, auditor, principal bankers, registered office, and principal place of business in Hong Kong - The Board of Directors comprises 2 executive directors, 3 non-executive directors, and 3 independent non-executive directors[3] - Mr. Xu Yi serves as the Company Secretary, with Mr. Pan Haihong and Mr. Xu Yi as Authorized Representatives[3] - KPMG is the auditor[5] - The stock code is 1379[5] Financial Highlights For the six months ended June 30, 2024, the company experienced significant declines in revenue and profit for the period, alongside a notable increase in gross profit margin and a decrease in basic and diluted earnings per share Key Financial Indicators For the six months ended June 30, 2024, the company experienced significant declines in revenue and profit for the period, alongside a notable increase in gross profit margin and a decrease in basic and diluted earnings per share Key Financial Indicators for the Six Months Ended June 30 (RMB thousands) | Indicator | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Revenue | 33,887 | 62,074 | | Gross Profit | 27,393 | 35,073 | | Gross Profit Margin | 80.8% | 56.5% | | Profit for the Period | 3,307 | 15,703 | | Net Profit Margin | 9.8% | 25.3% | | Basic and Diluted Earnings Per Share (RMB) | 0.04 | 0.20 | Management Discussion and Analysis This section provides an in-depth analysis of the company's operational and financial performance, covering industry trends, business segments, and financial results for the period Industry Overview In the first half of 2024, China's economy generally recovered, with stable operation in the machinery industry, but the cutting tools and measuring instruments sector continued to decline due to raw material price fluctuations and weak overall demand - China's economic growth (GDP) reached 5.0% in the first half of 2024, with value added of industrial enterprises above designated size increasing by 6.0% year-on-year[10] - The cutting tools and measuring instruments industry continued to decline due to raw material price fluctuations and weak overall demand[10] - CNC cutting tools have significant growth potential, favoring enterprises with brand influence, capital strength, and technological advantages[10] Business Review The Group's primary business involves property leasing and sales of Sci-Tech Innovation Park units, with revenue and profit for the period decreasing significantly due to the absence of property sales income and increased loss from fair value adjustment of investment properties - The Group's main business activities and revenue sources are from property leasing of the Trading Center and Sci-Tech Innovation Park, and the sale of certain Sci-Tech Innovation Park units[11] - For the six months ended June 30, 2024, revenue decreased by approximately 45.4%, and profit for the period decreased by approximately 78.9%[11] - The decrease in revenue was primarily due to no property sales income during the period, compared to approximately RMB 28.2 million in the same period last year[11] - Loss from fair value adjustment of investment properties increased from approximately RMB 10.4 million in the same period last year to approximately RMB 20.5 million[11] Trading Center The Trading Center, a platform for cutting tools and measuring instruments, had 626 tenants and an occupancy rate of 98.64% as of June 30, 2024, with average monthly actual rent slightly increasing on the first and second floors - The Trading Center has a total gross floor area of approximately 74,204.7 square meters, with approximately 71,817.5 square meters held for leasing[12] - As of June 30, 2024, the value of the Trading Center was RMB 829.2 million (December 31, 2023: RMB 845.7 million)[12] - As of June 30, 2024, the Trading Center had 626 tenants (December 31, 2023: 617 tenants)[13] - The percentage of leasable area occupied was 98.64% (December 31, 2023: 98.11%)[15] Average Monthly Actual Rent of Trading Center (RMB per square meter) | Floor | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | 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, attracted 13 enterprises and achieved an occupancy rate of 68.3% as of June 30, 2024, with a fair value of approximately RMB 182.0 million - The Sci-Tech Innovation Park commenced operations in October 2022, primarily providing workshops and dormitory units for manufacturing purposes[16] - As of June 30, 2024, the Sci-Tech Innovation Park had attracted 13 enterprises (December 31, 2023: 14 enterprises)[17] - As of June 30, 2024, the fair value of the Sci-Tech Innovation Park was approximately RMB 182.0 million (December 31, 2023: RMB 185.9 million)[16] - The percentage of leasable area occupied was 68.3% (December 31, 2023: 64.8%)[19] Average Monthly Actual Rent of Sci-Tech Innovation Park (RMB per square meter) | Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Workshops | 15.5 | 15.5 | | Dormitories | 21.5 | 23.6 | | Basement | 20.9 | 20.9 | Cutting Tools and Measuring Instruments Industry Innovation Service Complex The Group established an R&D-centric innovation service complex for the cutting tools and measuring instruments industry, offering one-stop services including new coating material R&D, achievement transformation, and startup incubation - The complex is a one-stop service platform integrating R&D of new coating materials, achievement transformation, startup incubation, talent cultivation, and technological transformation[20] - A cutting tool quality inspection center, comprising a material inspection center, a cutting tool testing center, and a cutting test center, has been successfully established[20] - It has gathered 16 scientific and technological innovation service organizations, providing intellectual property, brand building, financial services, and legal consulting functions[20] - Strategic cooperation has been established with 9 renowned domestic universities (including Taizhou University, Tsinghua University, Sichuan University, Tianjin University, Zhejiang University of Technology) and 16 research institutes[21] E-commerce Platform The Group launched a cross-border e-commerce brand global expansion project in June 2023, achieving 16.51 million impressions and 133,300 clicks through independent websites, Alibaba International, Google Ads, and SEO optimization - The cross-border e-commerce brand global expansion project for the cutting tools and measuring instruments industry cluster officially launched in June 2023[22] - The independent website achieved 16.51 million impressions, 133,300 clicks, nearly 15,000 overseas social media followers, and over 300 inquiries[22] - Six specialized cross-border training sessions were conducted, cultivating 50 cross-border e-commerce professionals[22] Financial Review This chapter reviews the financial performance for the six months ended June 30, 2024, detailing revenue, costs, profit, liquidity, capital expenditure, and contingent liabilities, along with explanations for key changes Revenue Total revenue significantly decreased by 45.4% year-on-year, primarily due to the absence of completed property sales income, while property leasing revenue remained stable - Total revenue decreased by approximately 45.4% from approximately RMB 62.1 million in the same period of 2023 to approximately RMB 33.9 million in the same period of 2024[23] - The main reason was zero income from sales of completed properties in the first half of 2024, compared to approximately RMB 28.2 million in the same period of 2023[23] - Property leasing revenue remained stable at approximately RMB 32.5 million (2023) and approximately RMB 32.2 million (2024)[23] Cost of Sales Cost of sales significantly decreased by 75.9% year-on-year, primarily due to the absence of completed property sales costs during the period - Cost of sales decreased by approximately 75.9% from approximately RMB 27.0 million in the same period of 2023 to approximately RMB 6.5 million in the same period of 2024[25] - The main reason was no cost of sales for completed properties recorded in the first half of 2024, compared to approximately RMB 21.0 million in the same period of 2023[25] Gross Profit and Gross Profit Margin Gross profit decreased by 21.9% year-on-year, but the gross profit margin significantly increased from 56.5% to 80.8%, mainly because the leasing business has a higher gross profit margin than completed property sales - Gross profit decreased by approximately 21.9% from approximately RMB 35.1 million in the same period of 2023 to approximately RMB 27.4 million in the same period of 2024[26] - Gross profit margin increased from approximately 56.5% in the same period of 2023 to approximately 80.8% in the same period of 2024[26] - The increase in gross profit margin was primarily due to the gross profit margin of completed property sales being lower than that of the Group's leasing business[26] Loss from Fair Value Adjustment of Investment Properties Loss from fair value adjustment of investment properties increased by approximately RMB 10.1 million year-on-year, mainly due to reduced comparable market rents and remaining land use rights - Loss from fair value adjustment of investment properties increased from approximately RMB 10.4 million in the same period of 2023 to approximately RMB 20.5 million in the same period of 2024[27] - The increase of approximately RMB 10.1 million was mainly due to reduced comparable market rents and remaining land use rights[27] Administrative Expenses Administrative expenses remained stable during the reporting period - Administrative expenses remained stable at approximately RMB 3.7 million in the first half of 2023 and approximately RMB 3.8 million in the first half of 2024[28] Income Tax Expense Income tax expense shifted from an expense last year to a credit this year, with a decreased effective tax rate, primarily due to reduced taxable profit - Income tax expense shifted from an expense of approximately RMB 4.6 million in the same period of 2023 to a credit of approximately RMB 0.5 million in the same period of 2024[29] - The effective tax rate changed from approximately 22.6% in the same period of 2023 to approximately 17.1% in the same period of 2024[29] - The change was primarily due to the taxable profit in the first half of 2024 being fully offset by an over-provision for income tax in prior years[29] 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 impacted by increased loss from fair value adjustment of investment properties, partially offset by an increased gross profit margin - Profit for the period decreased by approximately 78.9% from approximately RMB 15.7 million in the same period of 2023 to approximately RMB 3.3 million in the same period of 2024[30] - Net profit margin decreased from approximately 25.3% in the same period of 2023 to approximately 9.8% in the same period of 2024[30] - This was primarily due to an increased loss from fair value adjustment of investment properties, partially offset by an increased gross profit margin[30] Liquidity, Financial Resources, and Capital Structure The Group's liquidity primarily stems from cash generated from operating activities, shareholder contributions, and proceeds from the global offering, with cash and cash equivalents decreasing mainly due to income tax and dividend payments - The Group's business is primarily funded by cash generated from operating activities, shareholder contributions, and net proceeds from the global offering[31] - Cash and cash equivalents decreased from approximately RMB 74.4 million as of December 31, 2023, to approximately RMB 44.0 million as of June 30, 2024[31] - The decrease in cash was mainly due to income tax and dividend payments of approximately RMB 8.1 million and approximately RMB 18.5 million, respectively[31] Financing and Treasury Policy The Group regularly reviews cash flows and balances to maintain optimal liquidity and will continue to rely on operating cash flows and other financing methods to fund working capital and business expansion - The Group regularly reviews cash flows and cash balances to seek optimal liquidity levels while maintaining business robustness and supporting growth strategies[32] - In the future, the Group will continue to rely on cash flows from operations and other debt and equity financing to fund working capital requirements and business expansion[32] Foreign Exchange Risk The Group's foreign exchange risk is low, as most transactions, assets, and liabilities are denominated in RMB, and no financial instruments were used to hedge foreign exchange risk during the period - The Group's foreign exchange risk is low, as transactions, most assets, and all liabilities are denominated in RMB[33] - For the six months ended June 30, 2024, the Group did not use any financial instruments to hedge foreign exchange risk[33] Bank Loans and Asset Pledges As of June 30, 2024, the Group had no bank loans but had investment properties valued at approximately RMB 829.2 million pledged to secure general banking facilities of RMB 233 million - As of June 30, 2024, the Group had no bank loans (December 31, 2023: nil)[34] - Investment properties of approximately RMB 829.2 million were pledged to secure general banking facilities of RMB 233 million[34] Capital Expenditure The Group's capital expenditure significantly decreased, primarily because the construction and renovation of the Sci-Tech Innovation Park were completed in 2023 - For the six months ended June 30, 2024, the Group's capital expenditure was approximately RMB 0.6 million (same period of 2023: approximately RMB 20.8 million)[36] - The decrease in capital expenditure was primarily due to the completion of construction and renovation works for the Sci-Tech Innovation Park in 2023[36] Capital Commitments As of June 30, 2024, the Group's capital commitments for investment properties remained stable - As of June 30, 2024, the Group's capital commitments for investment properties were approximately RMB 0.8 million (December 31, 2023: approximately RMB 0.8 million)[37] Contingent Liabilities The Group's contingent liabilities primarily consist of mortgage loan guarantees provided to customers, with a slight decrease in amount, and the directors believe the likelihood of default is remote - As of June 30, 2024, the Group's contingent liabilities related to mortgage loan guarantees provided to banks for its customers were approximately RMB 97.5 million (December 31, 2023: RMB 103.4 million)[38] - The directors believe that the fair value of these financial guarantee contracts at initial recognition is not significant, and the likelihood of default by the Group's property buyers is remote[38] Material Investments, Acquisitions, and Disposals Held For the six months ended June 30, 2024, the Group held no material investments and made no material acquisitions or disposals of subsidiaries, associates, and joint ventures - For the six months ended June 30, 2024, the Group held no material investments and made no material acquisitions or disposals of subsidiaries, associates, and joint ventures[39] Future Plans for Material Investments and Capital Assets As of June 30, 2024, the Group had no immediate plans for material investments and capital assets other than those disclosed in this report - As of June 30, 2024, the Group had no immediate plans for material investments and capital assets other than those disclosed in this report[40] Employees and Remuneration Policy As of June 30, 2024, the Group's number of employees slightly decreased, but total staff costs increased, with the company emphasizing employee training and remuneration based on qualifications and performance - As of June 30, 2024, the Group had a total of 38 employees (December 31, 2023: 39 employees)[41] - For the six months ended June 30, 2024, total staff costs were approximately RMB 2.2 million (same period of 2023: RMB 2.1 million), an increase of approximately 6.5%[41] - The Group provides training to employees and determines remuneration based on qualifications and performance, with total compensation including salaries, performance bonuses, and special incentives[41] Use of Proceeds from Global Offering The Group's net proceeds from the 2020 global offering were approximately RMB 52.1 million, with approximately RMB 42.3 million utilized as of June 30, 2024, and the remaining RMB 9.7 million expected to be used for further development of the third floor by December 2024 - The Company's net proceeds from the global offering on December 30, 2020, were approximately HK$61.9 million (approximately RMB 52.1 million)[42] - From the listing date to June 30, 2024, the Company had utilized approximately RMB 42.3 million of the net proceeds from the global offering[42] - As of June 30, 2024, the unutilized balance of net proceeds from the global offering was approximately RMB 9.7 million[43] - The remaining balance is expected to be utilized by December 2024 to fund further development of the third floor (including refurbishment and renovation)[43] Use of Net Proceeds from Global Offering (RMB thousands) | Purpose | Budgeted Amount in Prospectus | Actual Usage as of June 30, 2024 | Remaining Balance as of June 30, 2024 | | :--- | :--- | :--- | :--- | | Establishment and construction of Sci-Tech Innovation Park | 36,441 | 36,441 | – | | Funding further development of the third floor | 10,412 | 700 | 9,712 | | General working capital and other corporate purposes | 5,205 | 5,205 | – | | Total | 52,058 | 42,346 | 9,712 | Share Capital As of June 30, 2024, the Company's share capital consisted of 60,000,000 domestic shares and 20,000,000 H shares, totaling 80,000,000 shares Share Capital Structure (As of June 30, 2024) | Share Class | Number of Shares | Percentage of Equity (%) | | :--- | :--- | :--- | | Domestic Shares | 60,000,000 | 75.00 | | H Shares | 20,000,000 | 25.00 | | Total | 80,000,000 | 100.00 | Future Outlook The Group plans to transform into a comprehensive service provider for the cutting tools and measuring instruments industry by expanding leasing scale, building a supporting service system, continuously developing phases two and three of the Sci-Tech Innovation Park, and achieving incremental growth through M&A - Chinese cutting tool manufacturers will shift from pure production and supply to developing new cutting processes and their supporting technologies and products, becoming partners in solving customer processing problems[46] - The Group will focus on its core business, expand its leasing area, and build a supporting service system including logistics, property management, e-commerce, value-added services, and investment management[46] - Plans include continuous investment in developing Phase Two of the Sci-Tech Innovation Park and initiating Phase Three[46] - The Group plans to achieve incremental growth through mergers and acquisitions of relevant companies or teams in the cutting tools and measuring instruments industry, transforming into a comprehensive service provider focused on manufacturing and scientific research[46] Other Information This section covers various corporate governance and shareholder-related matters, including interim dividends, competing interests, compliance with the corporate governance code, and major shareholder interests Interim Dividend The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2024 (2023: nil)[48] Directors' and Supervisors' Competing Interests The controlling shareholder, directors, and supervisors, along with their respective close associates, have no interests in any business that directly or indirectly competes or may compete with the Group's business - The controlling shareholder, directors, and supervisors of the Company and their respective close associates have no interests in any business that directly or indirectly competes or may compete with the Group's business[48] Compliance with Corporate Governance Code The Company is committed to maintaining high standards of corporate governance and strictly complied with the Corporate Governance Code during the reporting period, with one deviation where Mr. Pan Haihong concurrently holds the roles of Chairman and Chief Executive Officer, which the Board believes ensures leadership consistency and efficiency - The Company is committed to maintaining high standards of corporate governance and has complied with the Code Provisions for the six months ended June 30, 2024, and up to the date of this report[48] - There is a deviation from Code Provision C.2.1, where Mr. Pan Haihong concurrently holds the roles of Chairman and Chief Executive Officer[49] - The Board believes the advantages of this concurrent role are ensuring consistent leadership within the Group and enhancing the efficiency and effectiveness of overall strategic planning[49] Interests and Short Positions of Directors, Supervisors, and Chief Executive in Shares, Underlying Shares, and Debentures of the Company and its Associated Corporations As of June 30, 2024, no director, supervisor, or chief executive of the Company held any disclosable interests or short positions in the shares, underlying shares, or debentures of the Company or any of its associated corporations - As of June 30, 2024, no director, supervisor, or chief executive of the Company held any disclosable interests or short positions in the shares, underlying shares, or debentures of the Company or any of its associated corporations[49] Major Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company This section lists the interests and short positions of major shareholders in the Company's shares and underlying shares as of June 30, 2024, with several Wenling-related entities holding significant domestic shares through controlled corporations, forming a controlling shareholder group Major Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company (As of June 30, 2024) | Shareholder Name / Name | Capacity / Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding in Relevant Class | Approximate Percentage of Total Share Capital of the Company | | :--- | :--- | :--- | :--- | :--- | | Wenling City Market Group Co., Ltd. | Beneficial Owner | 58,200,000 Domestic Shares (L) | 97.00% | 72.75% | | Wenling City Qiaoling Investment Development Co., Ltd. | Beneficial Owner | 58,200,000 Domestic Shares (L) | 97.00% | 72.75% | | Wenling City Wenqiao Town People's Government | Interest in Controlled Corporation | 58,200,000 Domestic Shares (L) | 97.00% | 72.75% | | Jiaxing Yuantai Equity Investment Partnership (Limited Partnership) | Interest in Controlled Corporation | 5,980,000 H Shares (L) | 29.90% | 7.48% | | Hong Kong Reagan Investment Center Co., Ltd. | Beneficial Owner | 5,980,000 H Shares (L) | 29.90% | 7.48% | | Zhejiang Qianjiang Motorcycle Co., Ltd. | Beneficial Owner | 3,275,813 H Shares (L) | 16.38% | 4.09% | | Wanbangde (Hangzhou) Investment Management Co., Ltd. | Beneficial Owner | 1,605,151 H Shares (L) | 8.03% | 2.01% | | Wenling Longxi Enterprise Management Center (Limited Partnership) | Interest in Controlled Corporation | 1,266,000 H Shares (L) | 6.33% | 1.58% | | New Territories Pump Industry (Zhejiang) Co., Ltd. | Interest in Controlled Corporation | 1,266,000 H Shares (L) | 6.33% | 1.58% | | New Territories Pump Industry (Hong Kong) Co., Ltd. | Beneficial Owner | 1,266,000 H Shares (L) | 6.33% | 1.58% | | Zhejiang Zhongma Transmission Co., Ltd. | Beneficial Owner | 1,097,395 H Shares (L) | 5.49% | 1.37% | | Han Yi | Beneficial Owner | 1,024,500 H Shares (L) | 5.12% | 1.28% | - Wenling City Market Group Co., Ltd., Wenqiao Town People's Government, and other parties acting in concert are deemed to exercise or control the exercise of 72.75% of the voting rights at the Company's general meetings[58] Purchase, Sale, or Redemption of Listed Securities For the six months ended June 30, 2024, and up to the date of this report, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities, and the Company held no treasury shares - For the six months ended June 30, 2024, and up to the date of this report, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[60] - As of June 30, 2024, the Company held no treasury shares[60] Standard Code for Securities Transactions The Company has adopted the Standard Code as the code of conduct for directors and supervisors in securities transactions, and all directors and supervisors confirmed compliance with the relevant provisions - The Company has adopted the Standard Code as the code of conduct for directors and supervisors in securities transactions[61] - All directors and supervisors confirmed their compliance with the relevant provisions of the Standard Code for the six months ended June 30, 2024, and up to the date of this report[61] Events After Reporting Period No major events occurred after June 30, 2024, that would significantly impact the Group's operations and financial performance as of the date of this report - No major events occurred after June 30, 2024, that would significantly impact the Group's operations and financial performance as of the date of this report[62] Audit Committee The Company's Audit Committee reviewed the accounting principles and policies adopted by the Group with management, discussed internal control and financial reporting matters, including the interim results for the six months ended June 30, 2024 - The Audit Committee reviewed the accounting principles and policies adopted by the Group with the Company's management, and discussed the Group's internal control and financial reporting matters[64] - The Audit Committee reviewed the Group's interim results for the six months ended June 30, 2024[64] Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group's consolidated statement of profit or loss and other comprehensive income shows a significant decrease in revenue and profit for the period compared to the prior year, mainly due to reduced income from sales of completed properties and increased loss from fair value adjustment of investment properties Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group's consolidated statement of profit or loss and other comprehensive income shows a significant decrease in revenue and profit for the period compared to the prior year, mainly due to reduced income from sales of completed properties and increased loss from fair value adjustment of investment properties Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB thousands) | Indicator | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Revenue | 33,887 | 62,074 | | Cost of Services | (6,494) | (27,001) | | Gross Profit | 27,393 | 35,073 | | Loss from Fair Value Adjustment of 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 Associates | (67) | (397) | | Profit Before Tax | 2,824 | 20,279 | | Income Tax | 483 | (4,576) | | Profit for the Period | 3,307 | 15,703 | | Total Comprehensive Income for the Period | 3,307 | 15,703 | | Basic and Diluted Earnings Per Share (RMB) | 0.04 | 0.20 | Consolidated Statement of Financial Position As of June 30, 2024, the Group's consolidated statement of financial position shows a slight decrease in total non-current assets, a reduction in total current assets, leading to an increase in net current liabilities, and a decrease in both net assets and total equity Consolidated Statement of Financial Position As of June 30, 2024, the Group's consolidated statement of financial position shows a slight decrease in total non-current assets, a reduction in total current assets, leading to an increase in net current liabilities, and a decrease in both net assets and total equity Consolidated Statement of Financial Position (RMB thousands) | Indicator | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Non-current Assets | | | | Investment Properties | 1,011,200 | 1,031,600 | | Property, Plant and Equipment | 7,363 | 7,320 | | Prepaid Lease Payments | 502 | 513 | | Interests in Associates | 7,176 | 7,243 | | Other Non-current Assets | 5,604 | 5,746 | | Total Non-current Assets | 1,031,845 | 1,052,422 | | Current Assets | | | | Amounts Due from Associates | 895 | 201 | | Trade Receivables | 598 | 495 | | Other Receivables and Prepayments | 1,062 | 1,495 | | Land Appreciation Tax and Prepaid Income Tax | 751 | 1,134 | | Cash and Cash Equivalents | 44,024 | 74,437 | | Total Current Assets | 47,330 | 77,762 | | Current Liabilities | | | | Other Payables and Accrued Expenses | 16,233 | 18,970 | | Contract Liabilities | 611 | 1,472 | | Receipts in Advance, Current | 31,518 | 52,400 | | Current Tax | 6,800 | 11,507 | | Total Current Liabilities | 55,162 | 84,349 | | Net Current Liabilities | (7,832) | (6,587) | | Total Assets Less Current Liabilities | 1,024,013 | 1,045,835 | | Non-current Liabilities | | | | Receipts in Advance, Non-current | 61,497 | 63,939 | | Deferred Tax Liabilities | 172,470 | 176,757 | | Total Non-current Liabilities | 233,967 | 240,696 | | Net Assets | 790,046 | 801,367 | | Capital and Reserves | | | | Share Capital | 80,000 | 80,000 | | Reserves | 710,046 | 725,139 | | Total Equity | 790,046 | 805,139 | Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, the Group's total consolidated equity decreased from RMB 805,139 thousand at the beginning of the period to RMB 790,046 thousand at the end of the period, primarily reflecting the impact of profit for the period and approved dividends Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, the Group's total consolidated equity decreased from RMB 805,139 thousand at the beginning of the period to RMB 790,046 thousand at the end of the period, primarily reflecting the impact of profit for the period and approved dividends Consolidated Statement of Changes in Equity (RMB thousands) | Indicator | Share Capital | Capital Reserve | PRC Statutory Reserve | Retained Earnings | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2023 | 80,000 | 67,565 | 13,842 | 632,522 | 793,929 | | Profit for the Period | – | – | – | 15,703 | 15,703 | | Total Comprehensive Income | – | – | – | 15,703 | 15,703 | | Dividends Approved for Prior Year | – | – | – | (16,000) | (16,000) | | Appropriation to PRC Statutory Reserve | – | – | 3,626 | (3,626) | – | | Balance at December 31, 2023 | 80,000 | 67,565 | 17,468 | 640,106 | 805,139 | | Balance at January 1, 2024 | 80,000 | 67,565 | 17,468 | 640,106 | 805,139 | | Changes in Equity for the Six Months Ended June 30, 2024: | | | | | | | Profit for the Period | – | – | – | 3,307 | 3,307 | | Total Comprehensive Income | – | – | – | 3,307 | 3,307 | | Dividends Approved for Prior Year | – | – | – | (18,400) | (18,400) | | Balance at June 30, 2024 | 80,000 | 67,565 | 17,468 | 625,013 | 790,046 | Condensed Consolidated Cash Flow Statement For the six months ended June 30, 2024, the Group experienced net cash outflows from operating, investing, and financing activities, resulting in a net decrease in cash and cash equivalents, with an ending cash balance of RMB 44,024 thousand Condensed Consolidated Cash Flow Statement For the six months ended June 30, 2024, the Group experienced net cash outflows from operating, investing, and financing activities, resulting in a net decrease in cash and cash equivalents, with an ending cash balance of RMB 44,024 thousand Condensed Consolidated Cash Flow Statement (RMB thousands) | Indicator | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash (Used in) / Generated from Operating Activities | (11,436) | 1,897 | | Net Cash Used in Investing Activities | (490) | (20,675) | | Net Cash Used in Financing Activities | (18,487) | (16,104) | | Net Decrease in Cash and Cash Equivalents | (30,413) | (34,882) | | Cash and Cash Equivalents at January 1 | 74,437 | 72,826 | | Cash and Cash Equivalents at June 30 | 44,024 | 37,944 | Notes to the Unaudited Interim Financial Report This section provides detailed notes to the unaudited interim financial report, covering company information, basis of preparation, accounting policy changes, and specific financial statement line items 1 Company Information This note provides information on the incorporation date, registered location, and listing details of Wenling Zhejiang Cutting Tools and Measuring Instruments Trading Center Co., Ltd - The Company was incorporated as a limited company in Wenling City, Zhejiang Province, PRC, on May 14, 2003[71] - The Company completed its initial public offering and was listed on the Main Board of The Stock Exchange of Hong Kong Limited on December 30, 2020[71] 2 Basis of Preparation This interim financial report is prepared in accordance with HKAS 34, assuming the Group can continue as a going concern, supported by sufficient bank financing despite net current liabilities - This interim financial report has been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants[72] - Despite the Group's net current liabilities of RMB 7,832 thousand as of June 30, 2024, the interim financial report is prepared on a going concern basis[72] - The Group obtained bank financing of RMB 233 million from a third-party bank, with an unutilized amount of RMB 233 million, supporting its going concern[72] 3 Changes in Accounting Policies The Group applied several new and revised HKFRSs during the current accounting period, including amendments to HKAS 1, HKFRS 16, and HKAS 7, but these changes had no significant impact on the financial statements - The Group applied HKAS 1 (Amendments) regarding the classification of current or non-current liabilities[74] - The Group applied HKFRS 16 (Amendments) regarding lease liabilities in a sale and leaseback transaction[74] - The Group applied HKAS 7 and HKFRS 7 (Amendments) regarding disclosure of supplier finance arrangements[74] - The adoption of the revised HKFRSs had no significant impact on these financial statements[75][77] 4 Revenue This note details the Group's revenue sources and recognition timing, showing a significant decrease in total revenue due to zero completed property sales income, while property leasing revenue remained stable Revenue Classification (RMB thousands) | Source | 2024 | 2023 | | :--- | :--- | :--- | | 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 | Revenue Recognition Timing Classification (RMB thousands) | Recognition Timing | 2024 | 2023 | | :--- | :--- | :--- | | At a point in time (Sales of Completed Properties) | – | 28,195 | | Over time (Others) | 1,644 | 1,414 | | Total | 1,644 | 29,609 | - For the six months ended June 30, 2024, no single customer accounted for 10% or more of the Group's revenue[80] - The transaction price allocated to the remaining performance obligations for customer contracts (property management services) is RMB 611 thousand, expected to be recognized as revenue within one year[83] 5 Other Net Income This note presents the components of the Group's other net income, primarily including interest income from bank deposits, government grants, and net exchange losses Other Net Income (RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Interest income from bank deposits | 69 | 115 | | Government grants | – | 100 | | Net exchange losses | (87) | (104) | | Others | 56 | – | | Total | 38 | 111 | 6 Profit Before Tax This note discloses items deducted from profit before tax, mainly depreciation and amortization expenses Items Deducted from Profit Before Tax (RMB thousands) | Item | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Depreciation and Amortization | 274 | 168 | 7 Income Tax in Consolidated Statement of Profit or Loss and Other Comprehensive Income This note details the components of income tax in the consolidated statement of profit or loss and other comprehensive income, including current and deferred tax, and provides a reconciliation of tax expense to accounting profit, showing a shift from tax expense to credit Income Tax in Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB thousands) | Item | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Current Tax: | | | | – PRC Enterprise Income Tax | 4,899 | 7,341 | | – Over-provision in Prior Years | (1,478) | (1,248) | | – PRC Land Appreciation Tax | 383 | 1,006 | | Deferred Tax: | | | | – PRC Enterprise Income Tax | (4,191) | (2,412) | | – PRC Land Appreciation Tax | (96) | (111) | | Total | (483) | 4,576 | Reconciliation of Tax Expense and Accounting Profit at Applicable Tax Rate (RMB thousands) | Item | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Profit Before Tax | 2,824 | 20,279 | | Nominal Tax on Profit Before Tax (at 25% tax rate) | 706 | 5,069 | | Over-provision in Prior Years | (1,478) | (1,248) | | Tax Effect of Non-deductible Expenses | 2 | – | | Land Appreciation Tax | 383 | 1,006 | | Tax Effect of Land Appreciation Tax | (96) | (251) | | Actual Tax (Credit) / Expense | (483) | 4,576 | 8 Earnings Per Share This note calculates the Group's basic and diluted earnings per share for the six months ended June 30, 2024, noting that diluted earnings per share equals basic earnings per share due to the absence of unissued potential ordinary shares - Basic earnings per share is calculated based on the profit attributable to ordinary equity holders of the parent of RMB 3,307 thousand and the weighted average of 80,000,000 ordinary shares outstanding for the six months ended June 30, 2024, resulting in RMB 0.04[87] - The Company had no unissued potential ordinary shares for the six months ended June 30, 2024, thus diluted earnings per share is equal to basic earnings per share[88] 9 Investment Properties This note explains the updated valuation of investment properties and the resulting net fair value loss and deferred tax recognition - The valuation of investment properties was updated by an independent valuer as of June 30, 2024[89] - A net fair value loss of RMB 20,465 thousand (same period of 2023: RMB 10,387 thousand) and deferred tax of RMB 5,116 thousand (same period of 2023: RMB 2,597 thousand) were recognized in profit or loss for the period[89] 10 Interests in Associates This note discloses the Group's share of loss from associates for the six months ended June 30, 2024 - For the six months ended June 30, 2024, the share of loss from associates was RMB 67 thousand (same period of 2023: RMB 397 thousand)[90] 11 Other Receivables and Prepayments This note provides a detailed classification of other receivables and prepayments, indicating that all amounts are expected to be recovered or recognized as expenses within one year Other Receivables and Prepayments (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Prepaid Services | 665 | 670 | | Prepaid Business Tax | 282 | 282 | | Payments on Behalf of Third Parties | 84 | 527 | | Others | 31 | 16 | | Total | 1,062 | 1,495 | - All other receivables and prepayments are expected to be recovered or recognized as expenses within one year[91] 12 Land Appreciation Tax and Prepaid Income Tax This note presents the balance of land appreciation tax and its collection method, with tax rates ranging from 30% to 60% Land Appreciation Tax (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Land Appreciation Tax | 751 | 1,134 | - Land appreciation tax is levied on the appreciation of land value at progressive rates ranging from 30% to 60%[92] 13 Cash and Cash Equivalents This note provides a breakdown of the components of cash and cash equivalents, including cash on hand and bank balances Cash and Cash Equivalents (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Cash on Hand | 65 | 50 | | Bank Balances | 43,959 | 74,387 | | Total | 44,024 | 74,437 | 14 Other Payables and Accrued Expenses This note details the various components of other payables and accrued expenses, including payables for property purchases, accrued salaries, and other taxes payable Other Payables and Accrued Expenses (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Payables for Purchase of Property, Plant and Equipment and Investment Properties | 6,709 | 6,897 | | Accrued Salaries | 412 | 822 | | Other Taxes Payable | 6,019 | 7,400 | | Deposits | 1,133 | 1,192 | | Professional Fees Payable | 192 | 1,068 | | Property Management Fees and Utilities Payable | 1,097 | 961 | | Others | 671 | 630 | | Total | 16,233 | 18,970 | 15 Contract Liabilities This note explains that contract liabilities primarily relate to property management services and provides details on the changes in contract liabilities during the period Contract Liabilities (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Property Services | 611 | 1,472 | Changes in Contract Liabilities During the Period (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | At Beginning of Period / Year | 1,472 | 10,331 | | Decrease in Contract Liabilities Due to Revenue Recognized from Opening Balance | (1,472) | (10,331) | | Increase in Contract Liabilities Due to Receipts in Advance for Property Management Services | 611 | 1,472 | | At End of Period / Year | 611 | 1,472 | 16 Receipts in Advance This note clarifies that receipts in advance primarily refer to property leasing fees prepaid by tenants, classified as current and non-current liabilities based on expected revenue recognition timing - Receipts in advance primarily refer to property leasing fees prepaid by tenants[97] Changes in Receipts in Advance (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | At Beginning of Period / Year | 116,339 | 121,494 | | Transferred to Revenue During Period / Year | (31,402) | (65,076) | | Cash Received During Period / Year | 8,078 | 59,921 | | At End of Period / Year | 93,015 | 116,339 | Classification of Receipts in Advance (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Receipts in Advance, Current | 31,518 | 52,400 | | Receipts in Advance, Non-current | 61,497 | 63,939 | | Total | 93,015 | 116,339 | 17 Dividends This note confirms that the Board does not recommend an interim dividend for the first half of 2024 and discloses final dividends approved and paid for previous financial years - The directors do not recommend the payment of any interim dividend for the six months ended June 30, 2024 (same period of 2023: nil)[99] - Final dividends of RMB 0.23 per share (same period of 2023: RMB 0.20 per share), totaling RMB 18,400 thousand (same period of 2023: RMB 16,000 thousand), were approved and paid during the interim period for the prior financial year[99] 18 Commitments This note lists outstanding capital commitments not provided for in the interim financial report as of June 30, 2024 Outstanding Capital Commitments Not Provided for in the Interim Financial Report (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Contracted | 752 | – | | Authorized but Not Contracted | – | 824 | | Total | 752 | 824 | 19 Contingent Liabilities This note discloses contingent liabilities arising from mortgage loan guarantees provided to customers, which the directors deem insignificant in fair value with a remote likelihood of default Contingent Liabilities (RMB thousands) | Item | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Mortgage loan guarantees provided by the Group to banks for its customers | 97,474 | 103,369 | - The directors believe that the fair value of these financial guarantee contracts at initial recognition is not significant, and the likelihood of default by the Group's property buyers is remote[103] 20 Significant Related Party Transactions This note discloses significant transactions between the Group and related parties, primarily involving leasing agreements with Wenling City Qiaoling Investment Development Co., Ltd. and Wenling Gonglian Cutting Tools and Measuring Instruments Technology Services Co., Ltd - The Group entered into a workshop and dormitory leasing agreement with Wenling City Qiaoling Investment Development Co., Ltd. (holding approximately 14.48% of the Company's issued share capital), with an annual rent of RMB 6.42 million[104] - As of June 30, 2024, the amount received in advance from related parties for leasing arrangements with Wenling City Qiaoling Investment Development Co., Ltd. was RMB 3.136 million[104] - The Group entered into a workshop and dormitory leasing agreement with its associate, Wenling Gonglian Cutting Tools and Measuring Instruments Technology Services Co., Ltd., with an annual rent of RMB 1.115 million[104] - As of June 30, 2024, the amount due from related parties for leasing arrangements with Wenling Gonglian Cutting Tools and Measuring Instruments Technology Services Co., Ltd. was RMB 895 thousand[104]