昇柏控股(02340) - 2024 - 中期财报

Management Discussion and Analysis FINANCIAL OVERVIEW During the reporting period, the Group's revenue decreased by 40.0% year-on-year to HKD 47.5 million. Despite the revenue decline, gross profit increased from HKD 4.9 million to HKD 7.9 million, and gross profit margin improved from 6.2% to 16.6%, benefiting from project cost savings. However, high legal fees led to a 34.7% year-on-year increase in operating expenses, resulting in expanded operating loss and a net loss of HKD 10.5 million for the period Key Financial Indicators for H1 2024 (Unit: Million HKD) | Indicator | As of June 30, 2024 | As of June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 47.5 | 79.2 | ↓ 40.0% | | Gross Profit | 7.9 | 4.9 | ↑ 61.2% | | Gross Profit Margin | 16.6% | 6.2% | ↑ 10.4pp | | Operating Expenses | (19.8) | (14.7) | ↑ 34.7% | | Operating Loss | (11.9) | (9.8) | ↑ 21.4% | | Loss for the Period | (10.5) | (7.9) | ↑ 32.9% | | Basic Loss Per Share (HK cents) | (2.5) | (1.9) | ↑ 31.6% | - Consolidated revenue for the reporting period was HKD 47.5 million, a 40.0% decrease from HKD 79.2 million in the prior year period[7] - Benefiting from cost savings achieved through more realistic final payment agreements with subcontractors on completed projects, gross profit increased from HKD 4.9 million to HKD 7.9 million, with the gross profit margin improving by 10.4 percentage points[7][8] - Due to significant legal fees incurred from completed projects in the Interior Decoration and Special Projects business, the Group's operating expenses increased by 34.7% year-on-year to HKD 19.8 million[7][8] - As a combined effect, loss attributable to equity holders of the Company expanded to HKD 10.5 million for the reporting period, compared to HKD 7.9 million in the prior year period; basic loss per share was 2.5 HK cents[9] BUSINESS REVIEW AND PROSPECTS The Group primarily operates two businesses: Interior Decoration and Special Projects (ISP Business) and Property and Facilities Management China (PFM China Business), with ISP being the core revenue driver experiencing a decline in revenue but improved gross profit, while PFM China saw growth in revenue and profit due to economic recovery, leading the Group to maintain cautious optimism for future opportunities - The Group's two main business segments are Interior Decoration and Special Projects Business (ISP Business) and Property and Facilities Management China Business (PFM China Business)[10] Interior Decoration and Special Projects Business (ISP Business) As the Group's primary revenue source, ISP business revenue decreased by 42.9% to HKD 43.9 million due to market competition and project completion, yet gross profit increased to HKD 5.4 million due to cost control, despite legal fees causing a 93.4% surge in operating expenses and an expanded operating loss of HKD 9.3 million, with new contracts totaling over HKD 85 million and uncompleted contracts of approximately HKD 148 million supporting future operations ISP Business Segment Performance (Unit: Million HKD) | Indicator | As of June 30, 2024 | As of June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 43.9 | 77.0 | ↓ 42.9% | | Gross Profit | 5.4 | 2.9 | ↑ 86.2% | | Operating Expenses | (14.7) | (7.6) | ↑ 93.4% | | Operating Loss | (9.3) | (4.7) | ↑ 97.9% | | Loss for the Period | (9.0) | (4.3) | ↑ 109.3% | - Due to factors such as reduced market tenders, intense competition, project delays, and the completion of large-scale projects, ISP business revenue decreased by 42.9% from HKD 77.0 million in the prior year period to HKD 43.9 million[13][14] - Despite the revenue decline, gross profit increased from HKD 2.9 million to HKD 5.4 million, benefiting from cost savings on completed projects[16][17] - During the reporting period, the ISP business secured new contracts totaling over HKD 85 million, with uncompleted contracts on hand amounting to approximately HKD 148 million as of June 30, 2024[18][19] - As of August 22, 2024, the ISP business has submitted project tenders totaling approximately HKD 721.2 million, awaiting results[18][19] Property and Facilities Management China Business (PFM China Business) Benefiting from China's economic recovery, PFM China business secured new contracts in Qingdao and Shanghai, driving a 68.2% year-on-year revenue increase to HKD 3.7 million, a 25.0% gross profit growth to HKD 2.5 million, and a 50.0% profit for the period increase to HKD 0.3 million, while the Group plans a conservative strategy amidst complex external environments and intense competition, exploring new growth opportunities PFM China Business Segment Performance (Unit: Million HKD) | Indicator | As of June 30, 2024 | As of June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 3.7 | 2.2 | ↑ 68.2% | | Gross Profit | 2.5 | 2.0 | ↑ 25.0% | | Profit for the Period | 0.3 | 0.2 | ↑ 50.0% | - Benefiting from China's economic recovery, this business secured a one-year property management contract in Qingdao and a consulting contract in Shanghai, driving performance growth[24][25] - Looking ahead, despite the recovering business outlook in China, the complex and unstable external environment prompts the Group to adopt a conservative approach while exploring new business development opportunities to diversify revenue streams[27][28] Outlook of the Group The Group anticipates continued challenges in the local economic environment but remains confident in overcoming difficulties and achieving stable growth by leveraging its strong track record in luxury residential projects, diverse professional team, and enhanced financial position to secure larger projects, while maintaining transparency and responsibility to create long-term shareholder value - The local economy is expected to continue facing challenges due to a lack of potential client confidence, global inflation, and economic downturns, which will inevitably impact the ISP business[29][31] - The Group will leverage its strong track record, industry experience, diverse team, and enhanced liquidity to focus on relatively stable luxury residential, commercial, and residential property development and renovation projects to secure more large-scale contracts[29][31] - The Group maintains a positive outlook on achieving stable growth in overall financial performance and creating long-term value for shareholders, by implementing appropriate measures to mitigate operational and financial risks[30] Financial Position and Financial Risk Management As of June 30, 2024, the Group had no outstanding bank loans, with funding primarily from retained earnings from operations, total assets of HKD 313 million, and net assets of HKD 174 million, while adopting a conservative financial risk management strategy with minimal foreign exchange risk due to HKD-denominated operations in Hong Kong, and plans to utilize existing cash to strengthen its competitive advantage for larger project bids Financial Position Summary (Unit: Thousand HKD) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | 313,416 | 348,600 | | Current Assets | 310,669 | 346,528 | | Current Liabilities | 139,124 | 163,493 | | Net Assets | 173,737 | 184,428 | - As of June 30, 2024, the Group had no outstanding bank loans, with funding primarily derived from retained earnings from business operations[33] - The Group's operations are primarily conducted in Hong Kong, with most assets and liabilities denominated in HKD, resulting in minimal foreign exchange risk and no perceived need for foreign exchange hedging[38][39] - Excluding disclosed litigations, as of August 22, 2024, the Group had no significant investments, capital commitments, or contingent liabilities[39][40] Human Resources As of June 30, 2024, the Group employed 311 staff in Hong Kong and China, committed to retaining talent through competitive compensation and benefits, promoting workplace wellness, and investing in employee development to maintain service quality and support sustainable growth - As of June 30, 2024, the Group employed a total of 311 staff (including directors) in Hong Kong and China, largely consistent with 312 staff at the end of 2023[40][42] - The Group is committed to ensuring competitive compensation and benefits for its employees through market research and benchmarking, aiming to retain and attract top talent[41][42] INTERIM DIVIDEND The Board of Directors resolved not to declare an interim dividend for the reporting period - The Board of Directors resolved not to declare an interim dividend for the six-month reporting period ended June 30, 2024, consistent with the decision for the corresponding period in 2023[41][42] Report on Review of Interim Condensed Consolidated Financial Statements Independent auditor BDO Limited, Hong Kong, reviewed the company's interim condensed consolidated financial statements for the six months ended June 30, 2024, in accordance with Hong Kong Standard on Review Engagements 2410, noting that the review scope is substantially less than an audit and thus no audit opinion is expressed, but based on the review, no matters were identified suggesting the financial statements were not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting' CONCLUSION Independent auditor BDO Limited, Hong Kong, stated that based on their review, they found no matters that caused them to believe the company's interim condensed consolidated financial statements were not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 - Based on the review, the auditor found no matters that caused them to believe the interim condensed consolidated financial statements were not prepared in all material respects in accordance with Hong Kong Accounting Standard 34[46] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group recorded revenue of HKD 47.55 million, a 40.0% year-on-year decrease, and gross profit of HKD 7.89 million, a 60.8% year-on-year increase, but due to increased operating expenses, the loss for the period expanded to HKD 10.49 million, compared to a loss of HKD 7.92 million in the prior year period, with basic loss per share at 2.5 HK cents Profit or Loss Statement Summary (Unit: Thousand HKD) | Item | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Revenue | 47,547 | 79,205 | | Gross Profit | 7,889 | 4,905 | | Loss Before Tax | (10,492) | (7,935) | | Loss for the Period | (10,489) | (7,916) | | Total Comprehensive Loss Attributable to Equity Holders of the Company | (10,691) | (8,815) | | Basic Loss Per Share (HK cents) | (2.5) | (1.9) | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets decreased to HKD 313 million from HKD 349 million at the end of 2023, total liabilities reduced to HKD 140 million, and net assets (total equity) stood at HKD 174 million, down from HKD 184 million at the end of 2023, with net current assets at HKD 172 million Balance Sheet Summary (Unit: Thousand HKD) | Item | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | Total Non-current Assets | 2,747 | 2,072 | | Total Current Assets | 310,669 | 346,528 | | Total Assets | 313,416 | 348,600 | | Total Current Liabilities | 139,124 | 163,493 | | Total Non-current Liabilities | 555 | 679 | | Total Liabilities | 139,679 | 164,172 | | Net Assets (Total Equity) | 173,737 | 184,428 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, the Group's total equity decreased from HKD 184 million at the beginning of the year to HKD 174 million, primarily due to a loss for the period of HKD 10.49 million and an exchange difference loss of HKD 0.202 million - As of January 1, 2024, total equity was HKD 184.4 million[54] - During the reporting period, a loss for the period of HKD 10.49 million and other comprehensive loss of HKD 0.202 million resulted in a total comprehensive loss of HKD 10.69 million[54] - As of June 30, 2024, total equity decreased to HKD 173.7 million[54] Condensed Consolidated Statement of Cash Flows In H1 2024, the Group experienced a net cash outflow of HKD 21.95 million from operating activities, HKD 3.41 million from investing activities, and HKD 0.94 million from financing activities, resulting in a net decrease in cash and cash equivalents of HKD 26.29 million, with an ending balance of HKD 41.49 million Cash Flow Statement Summary (Unit: Thousand HKD) | Item | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (21,947) | (11,221) | | Net Cash Used in Investing Activities | (3,407) | (62,320) | | Net Cash Used in Financing Activities | (936) | (1,135) | | Net Decrease in Cash and Cash Equivalents | (26,290) | (74,676) | | Cash and Cash Equivalents at Beginning of Period | 68,241 | 153,427 | | Cash and Cash Equivalents at End of Period | 41,488 | 77,887 | Notes to the Interim Condensed Consolidated Financial Statements 4 SEGMENT INFORMATION The Group is divided into two reportable segments: Interior Decoration and Special Projects Business (ISP Business) and Property and Facilities Management China Business (PFM China Business), with ISP being the primary revenue source but recording a loss of HKD 9.02 million for the period, while PFM China achieved a profit of HKD 0.29 million, and company administrative expenses totaled HKD 2.73 million H1 2024 Segment Performance (Unit: Thousand HKD) | Item | ISP Business | PFM China Business | Subtotal | Administrative Expenses | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 43,887 | 3,660 | 47,547 | - | 47,547 | | Gross Profit | 5,381 | 2,508 | 7,889 | - | 7,889 | | Operating (Loss)/Profit | (9,320) | 208 | (9,112) | (2,726) | (11,838) | | (Loss)/Profit for the Period | (9,024) | 288 | (8,736) | (1,753) | (10,489) | 9 LOSS PER SHARE For the reporting period, the loss attributable to ordinary equity holders was HKD 10.49 million, resulting in a basic loss per share of 2.5 HK cents based on 424.85 million weighted average ordinary shares outstanding, and a diluted loss per share of 2.1 HK cents after considering potential convertible preference shares Loss Per Share Calculation | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Loss Attributable to Equity Holders (Thousand HKD) | (10,489) | (7,916) | | Weighted Average Number of Ordinary Shares (Thousand Shares) | 424,850 | 424,850 | | Basic Loss Per Share (HK cents) | (2.5) | (1.9) | | Weighted Average Number of Ordinary Shares for Diluted Loss Calculation (Thousand Shares) | 504,850 | 504,850 | | Diluted Loss Per Share (HK cents) | (2.1) | (1.6) | 12 RESTRICTED CASH DEPOSITS As of June 30, 2024, the Group held HKD 62.62 million in restricted cash deposits, placed in designated interest-bearing bank accounts per court judgment to settle potential claims related to specific legal cases, releasable upon case resolution or further court order - As of June 30, 2024, the Group's restricted cash deposits amounted to HKD 62,620 thousand, consistent with the amount at the end of 2023[90] - These deposits were established pursuant to a court judgment dated April 21, 2023, and subsequent arrangements, serving as security for potential claims related to specific litigation[90][92] 13 ACCOUNT AND OTHER RECEIVABLES AND RETENTION RECEIVABLES As of June 30, 2024, total trade receivables were HKD 36.87 million, with HKD 28.11 million overdue by more than 90 days, and retention receivables amounted to HKD 44.32 million, while the Group's credit period typically ranges from 30 to 60 days, with an estimated HKD 8.64 million in retention receivables expected to be recovered after 12 months Trade Receivables Aging Analysis (Unit: Thousand HKD) | Aging | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 0 to 30 days | 6,452 | 1,026 | | 31 to 60 days | 1,918 | 1,984 | | 61 to 90 days | 388 | 2,997 | | Over 90 days | 28,111 | 28,310 | | Total | 36,869 | 34,317 | - As of June 30, 2024, net retention receivables amounted to HKD 44,047 thousand, with approximately HKD 8,640 thousand expected to be recovered more than 12 months after the reporting period end[94][95] 17 LITIGATION The Group is involved in two major litigations: one as a defendant facing a claim of approximately HKD 54.4 million from the employer of a Yuen Long factory project, which has been permanently stayed for arbitration, and another as a plaintiff claiming approximately HKD 98.5 million from ATAL Engineering Limited for a Hong Kong International Airport subcontract, with directors deeming it premature to predict outcomes and thus no provisions made - ISPCE, an indirect wholly-owned subsidiary of the Group, is one of the defendants in a claim of approximately HKD 54.4 million by the employer of a factory project in Yuen Long, with the legal proceedings permanently stayed by the court for arbitration[113] - ISPCE, as plaintiff, is claiming approximately HKD 98.5 million in unpaid amounts from ATAL Engineering Limited, the main contractor, for subcontracting works related to the automated baggage handling system at Hong Kong International Airport[113] - The Directors consider it premature to predict the final outcome of these legal proceedings and believe the probability of an outflow of resources is remote, thus no provision or contingent liability has been recognized as of June 30, 2024[113] Other Information SUBSTANTIAL SHAREHOLDERS' INTERESTS As of June 30, 2024, the substantial shareholder, Mrs. Chu (Li Yuehua), held 225,518,633 ordinary shares (53.08% of issued ordinary shares) and all 80,000,000 issued convertible preference shares (100%) through her wholly-owned company, Champ Key Holdings Limited Substantial Shareholders' Interests | Shareholder Name | Capacity | Number of Ordinary Shares Held | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Li Yuehua (Mrs. Chu) | Interest in controlled corporation | 225,518,633 | 53.08% | | Champ Key Holdings Limited | Beneficial owner | 225,518,633 | 53.08% | - Mrs. Li Yuehua also holds all 80,000,000 issued convertible preference shares, representing 100% of that class of shares, through Champ Key[128][130][131] PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the reporting period[135][136] Corporate Information This section provides essential company information, including Board of Directors members, committee compositions, company secretary, auditor (BDO Limited, Hong Kong), principal bankers, registered office and principal place of business in Hong Kong, share registrar, stock code (02340), and company website, detailing key corporate governance and contact information