CWT INT'L(00521) - 2024 - 中期财报

Corporate Information This chapter details CWT International Limited's corporate structure, including its board, key executives, and professional advisors - Mr. Wang Kan serves as the Company's Chairman, also chairing the Executive and Nomination Committees[6][7] - The Company's ultimate controlling party is the 'HNA Group Bankruptcy Reorganization Special Service Trust', a trust registered in China[28][31] - The Company's auditor is BDO Limited, Hong Kong[8] Interim Financial Report This section presents the unaudited interim financial statements and related notes for the period ended June 30, 2024 Report on Review of Interim Financial Report BDO Limited, Hong Kong, reviewed the interim financial report for the six months ended June 30, 2024, finding no material misstatements but not expressing an audit opinion, noting 2023 comparative data was unaudited - The auditor reviewed the 2024 interim financial report, concluding no material issues were found, but did not express an audit opinion[9][10][14] - The report explicitly states that the comparative financial statements for the corresponding period in 2023 were unaudited[16] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, group revenue grew by 26.9% to HKD 20.28 billion, while profit for the period declined by 14.3% to HKD 136 million, primarily due to increased finance costs and other net losses Key Financial Performance Indicators | Indicator | H1 2024 (Unaudited) | H1 2023 (Unaudited and Restated) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 20,275,771 HKD Thousands | 15,970,654 HKD Thousands | +26.9% | | Gross Profit | 860,145 HKD Thousands | 876,085 HKD Thousands | -1.8% | | Profit for the Period from Continuing Operations | 136,447 HKD Thousands | 157,586 HKD Thousands | -13.4% | | Profit for the Period | 136,447 HKD Thousands | 159,243 HKD Thousands | -14.3% | | Profit Attributable to Owners of the Company | 120,860 HKD Thousands | 135,023 HKD Thousands | -10.5% | | Basic Earnings Per Share (HK Cents) | 1.06 | 1.17 | -9.4% | - Total other comprehensive expenses significantly increased to HKD 85.97 million from HKD 15.55 million in the prior period, mainly due to expanded exchange differences from translating overseas subsidiaries' financial statements[19] Condensed Consolidated Statement of Financial Position As of June 30, 2024, total assets reached HKD 28.21 billion (+10.9%), total liabilities HKD 23.41 billion (+13.4%), while net assets remained stable at HKD 4.79 billion, with net current assets decreasing due to faster growth in current liabilities Key Financial Position Indicators | Balance Sheet Item | June 30, 2024 (HKD Thousands) | December 31, 2023 (HKD Thousands) | Change | | :--- | :--- | :--- | :--- | | Non-current Assets | 5,964,665 | 6,315,981 | -5.6% | | Current Assets | 22,240,476 | 19,122,248 | +16.3% | | Total Assets | 28,205,141 | 25,438,229 | +10.9% | | Current Liabilities | 20,433,840 | 16,717,618 | +22.2% | | Non-current Liabilities | 2,978,207 | 3,922,449 | -24.1% | | Total Liabilities | 23,412,047 | 20,640,067 | +13.4% | | Net Assets | 4,793,094 | 4,798,162 | -0.1% | - Current liabilities significantly increased, primarily driven by higher trade and other payables, loans and borrowings, and derivative financial liabilities[21] - Non-current liabilities significantly decreased, mainly due to the reclassification of certain loans and borrowings (promissory notes) to current liabilities[22][92] Condensed Consolidated Statement of Cash Flows In H1 2024, net cash from operating activities significantly decreased to HKD 400 million from HKD 1.40 billion in the prior period, with net cash from investing activities at HKD 167 million and net cash used in financing activities at HKD 408 million, resulting in a HKD 159 million net increase in cash and cash equivalents Key Cash Flow Items | Cash Flow Item | H1 2024 (HKD Thousands) | H1 2023 (HKD Thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 399,933 | 1,395,322 | | Net Cash from Investing Activities | 167,019 | 265,614 | | Net Cash Used in Financing Activities | (408,398) | (1,016,677) | | Net Increase in Cash and Cash Equivalents | 158,554 | 644,259 | - Operating cash flow significantly declined, primarily as cash generated from operations decreased from HKD 1.71 billion to HKD 656 million[26] Notes to the Unaudited Interim Financial Report This section details the financial statements' basis of preparation, accounting policies, and specific line items, including revenue segmentation, discontinued operations, loan and borrowing structures, and post-reporting period events 4. REVENUE AND SEGMENT REPORTING In H1 2024, total group revenue grew 26.9% to HKD 20.28 billion, with commodity marketing as the largest contributor at HKD 17 billion (+32.2%), while financial services generated the highest pre-tax profit despite a 15.0% decline, and commodity marketing's pre-tax profit sharply fell 56.2% due to increased interest costs Revenue and Pre-tax Profit by Business Segment | Business Segment | H1 2024 Revenue (HKD Thousands) | H1 2023 Revenue (HKD Thousands) | H1 2024 Pre-tax Profit (HKD Thousands) | H1 2023 Pre-tax Profit (HKD Thousands) | | :--- | :--- | :--- | :--- | :--- | | Logistics Services | 2,587,470 | 2,383,562 | 107,329 | 97,350 | | Commodity Marketing | 17,000,820 | 12,862,945 | 19,312 | 44,089 | | Engineering Services | 322,283 | 358,715 | 15,025 | 15,846 | | Financial Services | 317,825 | 320,850 | 121,399 | 142,852 | - By geographical region, China was the largest revenue source, contributing HKD 13.90 billion, accounting for 68.6% of total revenue[42] 10. DISCONTINUED OPERATION The Group discontinued its structured trade services business, previously part of financial services, in 2023, leading to restatement of 2023 comparative financial data, with this discontinued operation contributing HKD 1.66 million in profit in H1 2023 - The Group discontinued its structured trade services business in 2023, which generated a profit of HKD 1.66 million in H1 2023[69][73] 16. LOANS AND BORROWINGS As of June 30, 2024, total loans and borrowings amounted to HKD 5.47 billion, with a HKD 716 million promissory note reclassified to current liabilities due to its February 2025 maturity, subsequently partially repaid and successfully renewed post-period end - A promissory note with a principal of HKD 716 million, originally a non-current liability, was reclassified to current liabilities as of June 30, 2024, due to its maturity on February 18, 2025[92][93] - The Group's revolving short-term trade financing amounted to HKD 3.25 billion, supporting its commodity marketing business[92][96] - As of the period end, assets valued at HKD 5.41 billion were pledged as collateral for loans and borrowings, including property, plant and equipment, bank deposits, trade receivables, and inventories[100] 22. EVENTS AFTER THE REPORTING PERIOD A significant post-reporting event occurred on July 18, 2024, where the Group repaid HKD 65.02 million of promissory note principal and interest, successfully renewing the remaining HKD 666 million principal for four years until July 18, 2028, with an adjusted annual interest rate of 5.5% - On July 18, 2024, the Company repaid part of its promissory notes and successfully renewed the remaining HKD 666 million principal until 2028, with the annual interest rate increasing from 5% to 5.5%[131][132] Management Discussion and Analysis This section provides an overview of the Group's performance, a review of its business segments, and insights into liquidity, financial resources, and future strategies OVERVIEW In H1 2024, despite global economic challenges, group revenue grew to HKD 20.28 billion, though net profit declined to HKD 136 million, primarily due to increased interest costs in commodity marketing and volatility in soft commodities within logistics services, with company shares resuming trading on May 29, 2024 - The Company's shares, suspended from trading since April 3, 2023, resumed trading on May 29, 2024, after fulfilling all resumption guidance[133][137] - The decline in net profit from continuing operations is primarily attributed to (i) increased interest costs in the commodity marketing segment due to extended delivery cycles from logistics disruptions, and (ii) high volatility and supply constraints in soft commodities like cocoa and coffee beans within the logistics services segment[135][138] BUSINESS REVIEW This section reviews the performance of the four core business segments in H1 2024, highlighting growth in logistics services, a sharp profit decline in commodity marketing despite revenue growth, a profit decrease in financial services offset by client equity fund growth, and a decline in engineering services due to contract completions Logistics Services The logistics services segment saw revenue grow 8.6% and pre-tax profit increase 10.3%, driven by strong warehousing and integrated logistics performance with full warehouse utilization and improved rates, offsetting higher freight costs from the Red Sea crisis and commodity logistics market volatility Logistics Services Performance | Indicator | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,587,470 HKD Thousands | 2,383,562 HKD Thousands | +8.6% | | Pre-tax Profit | 107,329 HKD Thousands | 97,350 HKD Thousands | +10.3% | - Warehousing logistics business: Despite softening market rates, the Company's warehouses are currently fully utilized, with occupancy expected to remain stable over the next 12 months[140] - Freight logistics business: Q1 sea freight rates sharply increased due to the Red Sea crisis, impacting performance, with market recovery beginning in May, though future trends remain subject to geopolitical influences[142][145] Commodity Marketing The commodity marketing segment achieved significant growth in trading volume and revenue, with revenue surging 32.2%, but pre-tax profit sharply declined 56.2% year-on-year due to substantially increased interest costs from rising interest rates and extended financing cycles caused by logistics disruptions Commodity Marketing Performance | Indicator | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 17,000,820 HKD Thousands | 12,862,945 HKD Thousands | +32.2% | | Pre-tax Profit | 19,312 HKD Thousands | 44,089 HKD Thousands | -56.2% | - The primary reasons for the profit decline were increased interest costs, specifically: (i) a 10.9% rise in the average federal funds rate; and (ii) extended financing periods and higher transportation costs due to logistics disruptions prolonging metal delivery lead times[151] Financial Services Pre-tax profit from continuing operations in the financial services segment decreased 15.0% to HKD 121 million, primarily due to weak US derivatives performance offsetting increased interest income from rising rates, though total client equity funds grew 17.5%, and the Company is applying for ICE clearing membership to expand services - Pre-tax profit decreased 15.0% to HKD 121 million, but total client equity funds increased by 17.5%[153] - The Company is applying to become a clearing member of the Intercontinental Exchange (ICE), expected to be completed by end-2024, to enhance its service capabilities in global energy markets[156] Engineering Services The engineering services segment experienced a 10.2% decline in revenue and a 5.2% decrease in pre-tax profit, mainly due to contract completions in 2023, yet the Company is confident in maintaining existing contracts and has restructured to expand into infrastructure and facilities management services despite market competition and labor shortages Engineering Services Performance | Indicator | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 322,283 HKD Thousands | 358,715 HKD Thousands | -10.2% | | Pre-tax Profit | 15,025 HKD Thousands | 15,846 HKD Thousands | -5.2% | LIQUIDITY, FINANCIAL RESOURCES AND FINANCING ACTIVITIES As of June 30, 2024, the Group held HKD 2.14 billion in cash, with total debt (excluding revolving trade financing) at HKD 4.41 billion, and its net gearing ratio improved from 27.1% to 22.6%, while commodity price risk is hedged at approximately 100% of inventory, and foreign exchange risk is managed via natural hedging with foreign currency borrowings Liquidity and Financial Resources | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 2,135,001 HKD Thousands | 1,998,840 HKD Thousands | | Total Debt (excluding revolving trade financing) | 4,406,928 HKD Thousands | 4,672,423 HKD Thousands | | Net Debt | 2,049,607 HKD Thousands | 2,528,508 HKD Thousands | | Net Gearing Ratio (Net Debt/Total Capital) | 22.6% | 27.1% | - The Group's hedging level is approximately 100% of total commodity inventory to mitigate commodity price risk[166] LOOKING FORWARD AND OUR STRATEGIES Looking forward, despite a cautiously optimistic global economic outlook, the Group will focus on enhancing core competencies, exploring opportunities in Hainan Free Trade Port and Southeast Asia through strategic partnerships and joint ventures to diversify risk and drive growth, as evidenced by recent agreements with Hainan Yangpu Holdings and Access World Group - The Company's strategic focus is to explore business opportunities in Hainan Free Trade Port and Southeast Asia to achieve risk diversification and business growth[171][175] - The Company initiated strategic cooperation with Hainan Yangpu Holdings Investment Co., Ltd. in April 2024 and signed an MOU with global commodity logistics company Access World Group in May to expand its commodity marketing and logistics businesses[176] Corporate Governance This section covers the Group's interim dividend policy and compliance with corporate governance codes Interim Dividend The Board decided not to declare an interim dividend for the six months ended June 30, 2024, consistent with the prior year - The Board did not declare an interim dividend for 2024[180] Compliance with Corporate Governance Code During the reporting period, the Company largely complied with the Corporate Governance Code, with one deviation where the roles of Chairman and Chief Executive Officer were held by the same individual, Mr. Wang Kan, until June 28, 2024, a situation since rectified with the appointment of Mr. Shang Duoxu as the new CEO - The Company deviated from the Corporate Governance Code during the reporting period, as the roles of Chairman and Chief Executive Officer were held by the same person, violating Code Provision C.2.1[192] - This deviation ceased on June 28, 2024, when Mr. Wang Kan no longer served concurrently as Chief Executive Officer, and Mr. Shang Duoxu was appointed as the new Chief Executive Officer[193][196]