自动系统(00771) - 2024 - 中期财报

2024 Interim Performance Overview The Group's H1 2024 performance shows stable core business revenue and gross profit, but profit for the period significantly decreased due to reduced non-recurring gains, while maintaining a robust financial position Group Performance Highlights The Group's core business revenue and gross profit remained comparable to the prior period, with a slight increase in adjusted core business profit, but profit for the period significantly declined due to non-recurring items | Indicator | H1 2024 (million HKD) | H1 2023 (million HKD) | Change | | :--- | :--- | :--- | :--- | | Core Business Revenue | 1,225.5 | 1,242.4 | Comparable | | Gross Profit | 123.2 | Comparable | Comparable | | Adjusted Profit | 46.0 | 45.1 | +2.2% | | Profit for the Period | 38.1 | 91.1 | -58.2% | - Profit for the period significantly decreased primarily due to a reduction in the net gain on deemed disposal of partial interests in an associate[2] Core Business Performance The Group's core business saw slight revenue declines in system integration and other businesses, and converged technology services, yet demonstrated healthy operational efficiency and cash generation through strong adjusted EBITDA and adjusted operating cash flow | Business Type | H1 2024 (million HKD) | H1 2023 (million HKD) | Change Rate | | :--- | :--- | :--- | :--- | | System Integration and Other Businesses | 626.1 | 667.1 | -6.1% | | Converged Technology Services | 668.9 | 646.8 | +3.4% | | Total Revenue | 1,225.5 | 1,242.4 | -1.4% | | Indicator | H1 2024 (million HKD) | H1 2023 (million HKD) | Change Rate | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 58.2 | 65.2 | -10.7% | | Adjusted Profit | 46.0 | 45.1 | +2.2% | | Adjusted Operating Cash Flow | 223.5 | 174.9 | +27.8% | Interests in Associates and Non-Operating Items The contribution from associates decreased, and the net gain on deemed disposal of partial interests in an associate, a non-operating item, significantly declined, negatively impacting the Group's overall profit | Indicator | H1 2024 (million HKD) | H1 2023 (million HKD) | | :--- | :--- | :--- | | Share of Results of Associates | (7.9) | (13.2) | | Net Gain on Deemed Disposal of Partial Interests in an Associate | 0.1 | 60.6 | Key Group Financial Indicators The Group's new contracts awarded and revenue remained largely comparable to the prior period, but profit for the period and basic earnings per share significantly decreased due to non-recurring items | Indicator | H1 2024 | H1 2023 | Change Rate | | :--- | :--- | :--- | :--- | | New Contracts Awarded (million HKD) | 1,295.0 | 1,313.9 | -1.4% | | Revenue (million HKD) | 1,225.5 | 1,242.4 | -1.4% | | Profit for the Period (million HKD) | 38.1 | 91.1 | -58.2% | | Basic Earnings Per Share (HK cents) | 4.57 | 10.93 | -58.2% | DevSecOps Core Business Highlights The Group made progress across its three core DevSecOps business areas—innovative industry solutions, intelligent cybersecurity, and IT integrated management—achieving growth in service orders and revenue, while actively incorporating AI and blockchain to enhance service capabilities and market competitiveness Innovative Industry Solutions Business (Dev) The innovative industry solutions business saw increased service orders and recorded 249.8 million HKD in revenue, primarily driven by application development and IT outsourcing services, while actively leveraging blockchain technology and overseas delivery centers to support cross-border payment services - Service orders for application development and IT outsourcing increased, with service revenue for the period reaching 249.8 million HKD[4][75] - The Group actively promotes Xinchuang brands and technology applications, participating in the "iAM Smart+" platform construction to assist the government in advancing smart cities[4][75] - Innovative use of blockchain technology enhances technical support and applications for cross-institutional platforms and apps, also supporting electronic payment system enterprises in providing Greater Bay Area cross-border and Southeast Asia payment services[4][75] Intelligent Cybersecurity Services Business (Sec) The intelligent cybersecurity services business experienced growth in new service orders, with revenue reaching 105.4 million HKD, primarily driven by sustained demand for cybersecurity services, Security Operations Center (SOC), and security management services, while utilizing AI to enhance SOC platform efficiency - New service orders increased, with service revenue for the period reaching 105.4 million HKD, primarily driven by sustained demand for cybersecurity services, Security Operations Center (SOC), and security management services[4][76] - Large-scale network installation and data center upgrade projects were implemented in the aviation industry, while banking and retail clients adopted SOC and security management services[4][76] - Artificial intelligence (AI) is being leveraged to enhance the SOC platform for faster response and resolution of evolving cyber threats and security incidents[4][76] IT Integrated Management Services Business (Ops) The IT integrated management services business saw an increase in new service orders, with revenue reaching 244.6 million HKD, driven by demand for ITSM, DevSecOps, and managed services, successfully providing large-scale critical system migration services for an entertainment organization and undertaking a private cloud expansion project - New service orders increased, with service revenue for the period reaching 244.6 million HKD, driven by demand for ITSM, DevSecOps, and managed services[4][77] - Successfully provided large-scale business-critical system migration services for an entertainment organization, demonstrating service integration capabilities[4][77] - A private cloud expansion project is underway to provide Infrastructure-as-a-Service[4][77] Building a "Center of Excellence" to Promote Xinchuang Products The Group established a "Center of Excellence" to foster the integration and innovative application of domestic and international IT products in solutions, serving clients in Hong Kong and the Greater Bay Area, supported by over 70 international and 30 Xinchuang IT vendors, making it a leading industry player - The "Center of Excellence" aims to promote the integration and innovative application of domestic and international IT products in IT solutions to better serve clients in Hong Kong and the Greater Bay Area[5][78] - The center is supported by over 70 international IT vendors and over 30 Xinchuang IT vendors, making its scale leading in the industry[5][78] - It provides objective evaluation and comparative analysis reports, allowing clients to understand IT product integration and innovative applications at the Hong Kong exhibition center and conduct system testing[5] Industry-Oriented, Greater Bay Area Layout The Group actively participates in industry events to promote digital Greater Bay Area financial development opportunities and Chinese Xinchuang technology, enhancing brand awareness and introducing clients to the latest industry technology trends, including Large Language Models (LLM) - Actively participates in industry events to expand brand awareness and bring the latest industry technology trends to clients[6][79] - Deepens engagement in digital Greater Bay Area financial development opportunities, promoting digital Greater Bay Area financial orientation to the financial industry[6][79] - Actively promotes Chinese Xinchuang technology, introducing government departments to innovative applications and integrated practices of Chinese technology, including Large Language Models (LLM)[6][79] Performance of Associates The Group's European and American associate GDH made significant strides in AI technology, offering customized solutions to Fortune 500 companies, while Asia Pacific associate i-Sprint achieved revenue and EBITDA growth through optimized management and technical certifications, strengthening its industry position European and American Associate Grid Dynamics Holdings, Inc. (GDH) GDH achieved significant advancements in artificial intelligence technology, providing customized solutions to Fortune 500 companies; its H1 total revenue reached 162.9 million USD, non-GAAP EBITDA was 22.0 million USD, with retail, technology, media, and telecom sectors accounting for nearly 60.6% of revenue - Significantly enhanced artificial intelligence technology, currently providing approximately 30 tailored solutions and services to Fortune 500 companies across various industries[7][80] | Indicator | Amount (million USD) | HKD Equivalent (million HKD) | | :--- | :--- | :--- | | Total Revenue | 162.9 | 1,271.6 | | Non-GAAP EBITDA | 22.0 | 172.0 | - Revenue from the retail, technology, media, and telecom sectors accounted for 60.6% of its total revenue[80] Key Asia Pacific Associate i-Sprint Holdings Limited (i-Sprint) i-Sprint achieved revenue and EBITDA growth through optimized management, deepening engagement with key clients, and replicating successful cases; its Universal Authentication System (UAS) received FIDO2 certification and multiple cybersecurity awards, further solidifying its industry position - Business growth was driven by various initiatives, including optimized management, deepening engagement with key clients, and replicating successful cases[7][80] | Indicator | Amount (million HKD) | Growth Rate | | :--- | :--- | :--- | | Revenue | 68.7 | +14.8% | | EBITDA | 15.8 | +37.5% | - The Universal Authentication System (UAS) obtained FIDO2 certification and received multiple awards in cybersecurity and other fields, enhancing the company's industry position[7][80] Future Outlook Facing challenges like talent attrition, geopolitical risks, and market competition, the Group will accelerate the construction of a Chinese-funded brand ecosystem, establish an offshore development center, and leverage AI to enhance management services, aiming to enrich DevSecOps integration capabilities, focus on advantageous industries like government and banking, and become a leading converged technology service partner in the region - Accelerate the construction of a Chinese-funded brand ecosystem, forging partnerships with Chinese vendors to jointly open up markets[7][81] - Prepare to establish an offshore development center on the west bank of the Pearl River Estuary and build a remote omnichannel 24/7 management service support system to provide more intelligent, round-the-clock, and cross-regional professional IT support services[7][82] - Continue to enrich DevSecOps integration capabilities and expand the talent pool, including introducing professionals from mainland China[7][82] - Persistently advance management services using the DevSecOps management service maturity model and focus on developing advantageous industries such as government and banking sectors[7][82] - Committed to becoming a leading converged technology service partner in the region[8] Condensed Interim Financial Information This section presents the unaudited condensed consolidated interim financial information for the six months ended June 30, 2024, including the statements of profit or loss, comprehensive income, financial position, changes in equity, and cash flows, along with detailed financial notes, all prepared in compliance with Listing Rules and HKAS 34 - The financial information is prepared in accordance with the Listing Rules of the Stock Exchange and Hong Kong Accounting Standard 34 "Interim Financial Reporting"[22] - Accounting policies are consistent with the annual consolidated financial statements for the year ended December 31, 2023, with new revised Hong Kong Financial Reporting Standards adopted but without significant impact[22][23] - Detailed disclosures cover financial risk management, revenue and segment information, specific explanations for various profit or loss and asset and liability items[26][30][45][56] Independent Review Report on Condensed Interim Financial Information The independent auditor reviewed the Group's condensed consolidated interim financial information for the six months ended June 30, 2024, concluding that no material aspects were found to be non-compliant with Hong Kong Accounting Standard 34 "Interim Financial Reporting" - The scope of review covered the condensed consolidated statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, and statement of cash flows[10] - The review concluded that no matters were identified that would lead the auditor to believe the interim financial information was not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[12] - The scope of the review is substantially less than an audit conducted in accordance with Hong Kong Standards on Auditing, thus no audit opinion is expressed[11] Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the Group's revenue slightly decreased, while cost of sales and services also reduced; however, a significant decrease in other net gains (primarily from deemed disposal of partial interests in an associate) led to a substantial decline in profit before income tax and profit for the period | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Revenue | 1,225,462 | 1,242,379 | -1.4% | | Profit for the Period Attributable to Equity Holders of the Company | 38,101 | 91,091 | -58.2% | | Basic Earnings Per Share (HK cents) | 4.57 | 10.93 | -58.2% | - Other net (losses)/gains switched from a gain of 59,491 thousand HKD in H1 2023 to a loss of (921) thousand HKD in H1 2024, which is the primary reason for the decrease in profit[13] Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2024, the Group's profit for the period significantly decreased, and total comprehensive income attributable to equity holders of the Company also substantially reduced due to exchange differences on translating overseas operations and a switch to losses in share of other comprehensive (losses)/income of associates | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Profit for the Period | 38,101 | 91,091 | -58.2% | | Exchange Differences on Translating Overseas Operations | (4,638) | 4,484 | Switched from gain to loss | | Share of Other Comprehensive (Losses)/Income of Associates | (1,508) | 3,994 | Switched from gain to loss | | Total Comprehensive Income for the Period Attributable to Equity Holders of the Company | 31,955 | 99,569 | -67.9% | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets slightly increased, primarily driven by a rise in current assets, particularly inventories, time deposits, and bank balances and cash; non-current liabilities remained stable, while current liabilities significantly increased, mainly due to growth in contract liabilities and trade payables | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Total Assets | 3,227,365 | 3,110,894 | +3.7% | | Current Assets | 1,585,539 | 1,455,454 | +8.9% | | Current Liabilities | 867,638 | 757,380 | +14.6% | | Equity Attributable to Equity Holders of the Company | 2,184,260 | 2,177,316 | +0.3% | - Among current assets, inventories, time deposits, and bank balances and cash all showed significant growth, with bank balances and cash increasing by 51.5%[15] - The increase in current liabilities was primarily driven by contract liabilities (+45.7%) and trade payables (+12.6%)[16] Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, the Group's profit for the period and total comprehensive income both significantly decreased, while a final dividend was paid, resulting in a slight increase in total equity attributable to equity holders of the Company, primarily due to growth in retained earnings | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Profit for the Period | 38,101 | 91,091 | -58.2% | | Total Comprehensive Income for the Period | 31,955 | 99,569 | -67.9% | | Exchange Fluctuation Reserve | (6,146) | 8,478 | Switched from positive to negative | | Final Dividend Paid | (25,011) | (25,011) | Comparable | - As of June 30, 2024, retained earnings were 1,395,713 thousand HKD, an increase from 1,382,584 thousand HKD at the beginning of the year[18] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2024, the Group's net cash from operating activities significantly increased, but net cash used in investing activities also substantially grew, primarily due to increased placements of time deposits; net cash used in financing activities decreased, ultimately leading to a higher net increase in cash and cash equivalents compared to the prior period | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 223,527 | 172,184 | +29.8% | | Net Cash Used in Investing Activities | (51,953) | (5,719) | Significantly increased | | Net Cash Used in Financing Activities | (40,011) | (52,782) | -24.2% | | Net Increase in Cash and Cash Equivalents | 131,563 | 113,683 | +15.7% | - The significant increase in net cash used in investing activities was primarily due to an increase in time deposits from 6,403 thousand HKD to 49,229 thousand HKD[19] Notes to the Interim Financial Information This section provides detailed notes to the condensed consolidated interim financial information for the six months ended June 30, 2024, covering the basis of preparation, accounting policies, financial risk management, revenue and segment information, specific explanations for various profit or loss and asset and liability items, as well as related party transactions and events after the reporting period, offering essential supplementary information for understanding the financial statements 1 General Information Automated Systems Holdings Limited is an exempted company incorporated in Bermuda with its shares listed on the Hong Kong Stock Exchange, directly controlled by Teamsun Technology (Hong Kong) Limited, with Beijing Teamsun Technology Co., Ltd. as the ultimate controlling company; this interim financial information is presented in HKD and approved for publication by the Board - The Company is incorporated in Bermuda, with its shares listed on the Hong Kong Stock Exchange[21] - The direct controlling company is Teamsun Technology (Hong Kong) Limited, and the ultimate controlling company is Beijing Teamsun Technology Co., Ltd[21] - The interim financial information is presented in HKD (thousand HKD) and was approved for publication by the Board on August 21, 2024[21] 2 Basis of Preparation The interim financial information for the six months ended June 30, 2024, is prepared in accordance with the Listing Rules of the Stock Exchange and Hong Kong Accounting Standard 34 "Interim Financial Reporting," and should be read in conjunction with the Group's annual consolidated financial statements for the year ended December 31, 2023 - The basis of preparation complies with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[22] - It should be read in conjunction with the Group's annual consolidated financial statements for the year ended December 31, 2023[22] 3 Adoption of Revised Hong Kong Financial Reporting Standards The Group adopted revised Hong Kong Financial Reporting Standards effective January 1, 2024, including amendments related to lease liabilities in sale and leaseback transactions, classification of liabilities as current or non-current, and supplier finance arrangements; these revisions had no material impact on the results and financial position for the current and prior periods - Revised Hong Kong Financial Reporting Standards effective January 1, 2024, have been adopted[23] - Key amendments include HKFRS 16 (Amendments) and HKAS 1 (Amendments)[23] - The adoption of these revised HKFRSs had no material impact on the Group's results and financial position prepared and presented for the current and prior periods[23] 4 Critical Accounting Estimates and Judgements The judgements, estimates, and assumptions made by management in preparing the interim financial information, including the primary sources of estimation uncertainty, are consistent with those applied in the Group's financial statements for the year ended December 31, 2023 - The judgements, estimates, and assumptions applied in this interim financial information are consistent with those in the Group's latest financial statements for the year ended December 31, 2023[25] 5 Financial Risk Management The Group's operations are exposed to various financial risks, including market risk (foreign exchange risk, interest rate risk), credit risk, and liquidity risk, with no changes in risk management functions or policies since the year ended December 31, 2023 - The Group's operations are exposed to various financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk, and liquidity risk[26] - There have been no changes in risk management functions or policies since the year ended December 31, 2023[26] - There were no significant differences in the fair value of unlisted preference share investments, and no transfers between Level 1, Level 2, and Level 3[29] 6 Revenue and Segment Information For the six months ended June 30, 2024, the Group's revenue slightly decreased, with product sales declining while service revenue increased, leading to a more balanced proportion of product sales and service revenue in total revenue; the Group's main operating segments are IT products and IT services, with revenue and profit disclosed for each segment | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | Share (2024) | Share (2023) | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales of Goods | 611,325 | 664,085 | -7.9% | 49.9% | 53.5% | | Revenue from Service Contracts | 614,137 | 578,294 | +6.2% | 50.1% | 46.5% | | Total Revenue | 1,225,462 | 1,242,379 | -1.4% | 100% | 100% | - The Group consists of two operating segments: IT products and IT services[31] | Segment | H1 2024 Reportable Segment Profit (thousand HKD) | H1 2023 Reportable Segment Profit (thousand HKD) | | :--- | :--- | :--- | | IT Products | 67,276 | 59,746 | | IT Services | 8,087 | 20,417 | - For the six months ended June 30, 2024, one customer's transactions exceeded 10% of the Group's revenue, amounting to approximately 122,716 thousand HKD[40] 7 Other Income For the six months ended June 30, 2024, the Group's other income significantly increased, primarily driven by a substantial rise in bank interest income | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Other Income | 13,332 | 5,038 | +164.6% | | Bank Interest Income | 11,237 | 1,976 | +468.7% | 8 Other Net (Losses)/Gains For the six months ended June 30, 2024, the Group's other net (losses)/gains switched from a net gain in the prior period to a net loss, primarily due to a significant reduction in the net gain on deemed disposal of partial interests in an associate | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Other Net (Losses)/Gains | (921) | 59,491 | Switched from gain to loss | | Net Gain on Deemed Disposal of Partial Interests in an Associate | 58 | 60,553 | -99.9% | 9 Finance Income Finance income refers to the increase in discounting recognized after initially recognizing finance lease receivables at their fair value - Finance income refers to the increase in discounting recognized after initially recognizing finance lease receivables at their fair value[44] 10 Profit Before Income Tax For the six months ended June 30, 2024, the Group's profit before income tax significantly decreased, primarily affected by changes in other net (losses)/gains; depreciation expenses and employee benefit expenses increased | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Profit Before Income Tax | 47,959 | 100,802 | -52.4% | | Depreciation of Property, Plant and Equipment | 9,879 | 8,725 | +13.2% | | Employee Benefit Expenses | 340,358 | 317,835 | +7.1% | 11 Income Tax Expense For the six months ended June 30, 2024, the Group's income tax expense slightly increased, with Hong Kong profits tax decreasing but overseas tax significantly increasing | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 9,858 | 9,711 | +1.5% | | Hong Kong Profits Tax | 7,663 | 8,624 | -11.2% | | Overseas Tax | 1,959 | 566 | +246.1% | - Hong Kong profits tax is calculated under the two-tiered profits tax rate regime[46] 12 Dividends For the six months ended June 30, 2024, the Group paid a final dividend of 3.0 HK cents per share for the year ended December 31, 2023, totaling 25,011 thousand HKD; the Board does not recommend an interim dividend for the current period | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | | :--- | :--- | :--- | | Dividends Paid (Final) | 25,011 | 25,011 | - The Board does not propose to declare an interim dividend for the six months ended June 30, 2024[47] 13 Earnings Per Share Attributable to Equity Holders of the Company For the six months ended June 30, 2024, basic and diluted earnings per share attributable to equity holders of the Company were 4.57 HK cents, a significant decrease from 10.93 HK cents in the prior period, primarily due to reduced profit for the period | Indicator | H1 2024 (HK cents) | H1 2023 (HK cents) | Change | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share | 4.57 | 10.93 | -58.2% | | Diluted Earnings Per Share | 4.57 | 10.93 | -58.2% | - The weighted average number of ordinary shares remained at 833,696,000 shares[48][49] - Share options and dilutive instruments issued by associates were considered anti-dilutive and not included in diluted earnings per share[49] 14 Property, Plant and Equipment For the six months ended June 30, 2024, the Group's additions to property, plant and equipment significantly increased, primarily for computer equipment; right-of-use assets also increased, mainly related to office properties, and there was no material difference between the carrying amount and fair value of land and buildings | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Additions to Property, Plant and Equipment | 4,331 | 1,292 | +235.2% | - Right-of-use assets increased by approximately 714 thousand HKD, with revaluation of leased right-of-use assets by approximately 2,630 thousand HKD, primarily related to office properties[50] - There was no material difference between the carrying amount and fair value of land and buildings, with the last revaluation date being December 31, 2023[50] - As of December 31, 2023, land and buildings with a carrying amount of approximately 156,000 thousand HKD were pledged to secure bank borrowings[50] 15 Investment Properties As of June 30, 2024, there was no material difference between the carrying amount and fair value of the Group's investment properties, with the last revaluation date being December 31, 2023; investment properties with a carrying amount of 50,800 thousand HKD were pledged to secure bank borrowings - Investment properties were last revalued by independent professional valuers on a market value basis on December 31, 2023[51] - As of June 30, 2024, the directors believe there is no material difference between the carrying amount and fair value of investment properties[51] - As of December 31, 2023, investment properties with a carrying amount of 50,800 thousand HKD were pledged to secure bank borrowings[51] 16 Interests in Associates As of June 30, 2024, the Group's interests in associates slightly decreased, primarily due to a decline in the fair value of listed associate GDH and the impact of share of results of associates and exchange adjustments; the Group's equity interest in GDH was diluted to 19.31% | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Interests in Associates | 1,247,512 | 1,258,056 | -0.8% | - The fair value of listed associate GDH decreased from 1,541,401 thousand HKD as of December 31, 2023, to 1,215,807 thousand HKD as of June 30, 2024[53] - The Group's equity interest in GDH was diluted from 19.51% as of December 31, 2023, to 19.31% as of June 30, 2024, and a net gain of 58 thousand HKD on deemed disposal of partial interests in an associate was recognized[54][55] 17 Trade Receivables As of June 30, 2024, the Group's net trade receivables decreased, primarily due to a reduction in amounts aged 0-30 days; the Group generally grants a 30-day credit period to all customers and implements credit control measures | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Net Trade Receivables | 194,489 | 228,692 | -14.9% | | Ageing | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | 0 to 30 days | 92,430 | 131,852 | | 31 to 60 days | 28,875 | 55,324 | | 61 to 90 days | 34,150 | 19,190 | | Over 90 days | 48,410 | 31,838 | - All of the Group's customers are generally granted a 30-day credit period, and a credit control system is in place[56] 18 Other Receivables, Deposits and Prepayments As of June 30, 2024, the Group's net other receivables, deposits, and prepayments significantly increased, primarily due to growth in other receivables (especially interest receivable) and prepayments (particularly prepayments for purchases, prepaid insurance, and prepaid maintenance fees) | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Net Amount | 63,923 | 44,250 | +44.5% | - Other receivables primarily include interest receivable of 9,990 thousand HKD, a significant increase from December 31, 2023, mainly due to increased time deposits during the period[58] - Prepayments primarily include prepayments for purchases of 19,686 thousand HKD, prepaid insurance expenses of 4,600 thousand HKD, and prepaid maintenance fees of 14,671 thousand HKD[59] 19 Trade Payables As of June 30, 2024, the Group's total trade payables increased, mainly reflected in the growth of current and within 30-day aged amounts | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Total Trade Payables | 341,067 | 302,821 | +12.6% | | Ageing | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | | :--- | :--- | :--- | | Current | 202,601 | 222,681 | | Within 30 days | 91,399 | 51,376 | | 31 to 60 days | 24,730 | 6,132 | 20 Other Payables and Accruals As of June 30, 2024, the Group's total other payables and accruals decreased, primarily due to a reduction in accruals, particularly for employee benefit expenses | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Total Other Payables and Accruals | 140,298 | 179,245 | -21.7% | - Accruals primarily include accrued employee benefit expenses of approximately 94,250 thousand HKD, a decrease from 140,223 thousand HKD as of December 31, 2023[61] 21 Contract Liabilities As of June 30, 2024, the Group's contract liabilities significantly increased, primarily due to a rise in advance receipts for orders and deposits received from customers during the period | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Contract Liabilities | 369,534 | 253,535 | +45.7% | - The increase in contract liabilities is primarily due to an increase in advance receipts for orders and deposits received from customers during the period[16][62] 22 Bank Borrowings For the six months ended June 30, 2024, all of the Group's bank borrowings were fully repaid, resulting in no outstanding borrowings at period-end; previously, bank borrowings were secured by assets such as land and buildings and investment properties - All bank borrowings were fully repaid during the six months ended June 30, 2024[63] - As of December 31, 2023, bank borrowings were secured by land and buildings with a carrying amount of approximately 156,000 thousand HKD and investment properties of 50,800 thousand HKD[63] 23 Share Capital As of June 30, 2024, the Group's authorized and issued and fully paid share capital remained stable, with no change in the number of ordinary shares with a par value of 0.10 HKD | Indicator | Number of Shares | Amount (thousand HKD) | | :--- | :--- | :--- | | Authorized Share Capital | 2,000,000,000 | 200,000 | | Issued and Fully Paid Share Capital | 833,696,492 | 83,370 | - All shares issued during the period or year rank pari passu in all respects with the existing shares of the Company at that time[65] 24 Contingent Liabilities As of June 30, 2024, performance guarantees provided by banks on behalf of the Group to customers as contract collateral amounted to approximately 106,040 thousand HKD, a decrease from December 31, 2023 | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Performance Guarantees | 106,040 | 126,819 | -16.4% | 25 Capital Commitments As of June 30, 2024, the Group's contracted but unprovided capital expenditure for property, plant and equipment was approximately 684 thousand HKD, an increase from December 31, 2023 | Indicator | June 30, 2024 (thousand HKD) | December 31, 2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Capital Expenditure for Property, Plant and Equipment | 684 | 369 | +85.4% | 26 Seasonality The Group's business of selling products and providing related services is not significantly affected by seasonal factors - The business of selling products and providing related services is not significantly affected by seasonal factors[68] 27 Related Party Transactions As of June 30, 2024, Teamsun Technology (Hong Kong) Limited held 67.66% of the Company's issued shares, serving as the direct controlling company; the Group engaged in related party transactions with fellow subsidiaries and associates, including service fees, sales of goods, purchases of goods, and rental income, all conducted on normal commercial terms - Teamsun Technology (Hong Kong) Limited holds 67.66% of the Company's issued shares, serving as the direct controlling company, with Teamsun Technology Co., Ltd. as the ultimate controlling company[69] - Transactions included service fees, sales of goods, purchases of goods, and rental income with fellow subsidiaries and associates[70] - Sales and purchases of goods and services were conducted on normal commercial terms applicable to all customers and suppliers, and rental income was determined by reference to current market rental rates[70] | Indicator | H1 2024 (thousand HKD) | H1 2023 (thousand HKD) | | :--- | :--- | :--- | | Key Management Personnel Remuneration | 4,098 | 3,564 | 28 Events After the Reporting Period As of the date of this interim report, the directors have not noted any significant events after the reporting period concerning the Group's business or financial performance - As of the date of this interim report, the directors have not noted any significant events after the reporting period concerning the Group's business or financial performance[71] Management Discussion and Analysis This section provides a detailed discussion and analysis of the Group's H1 2024 financial performance, core business operations, strategic initiatives (such as the "Center of Excellence" and Greater Bay Area layout), associate business progress, and future outlook; it highlights that despite stable revenue and gross profit, profit for the period significantly decreased due to non-recurring items, and the Group is committed to addressing market challenges through technological innovation and market expansion Financial Performance For the six months ended June 30, 2024, the Group's total revenue and gross profit were comparable to the prior period, but profit for the period significantly decreased by 58.2% due to reduced net gain on deemed disposal of partial interests in an associate; nevertheless, the Group maintained a robust financial position with a healthy working capital ratio | Indicator | H1 2024 (million HKD) | H1 2023 (million HKD) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 1,225.5 | 1,242.4 | Comparable | | Gross Profit | 123.2 | Comparable | Comparable | | Profit for the Period | 38.1 | 91.1 | -58.2% | | Adjusted EBITDA | 58.2 | 65.2 | -10.7% | - Product sales decreased by 7.9% to 611.3 million HKD, while service revenue increased by 6.2% to 614.1 million HKD, with product sales and service revenue accounting for 49.9% and 50.1% of total revenue, respectively[72] - New contracts awarded amounted to approximately 1,295.0 million HKD, with an order backlog of approximately 1,569.3 million HKD; bank balances and cash and time deposits totaled approximately 718.7 million HKD, and the working capital ratio was 1.83:1[72] Review of Principal Businesses The Group's principal businesses made progress across all three DevSecOps areas, with new contracts awarded and revenue comparable to the prior period, and adjusted profit achieving growth; each business segment enhanced its service capabilities and market competitiveness through technological innovation and market expansion - New contracts awarded and revenue were 1,295.0 million HKD and 1,225.5 million HKD respectively, comparable to the prior period[74] - Adjusted profit recorded 46.0 million HKD, an increase of 2.2%[74] Innovative Industry Solutions Business (Dev) The innovative industry solutions business saw increased service orders and recorded 249.8 million HKD in revenue, primarily driven by application development and IT outsourcing services, while actively leveraging blockchain technology and overseas delivery centers to support cross-border payment services - Service orders increased compared to the prior year, mainly due to an increase in application development and IT outsourcing service orders[75] - Service revenue for the period reached 249.8 million HKD[75] - Actively promotes Xinchuang brands and technology applications, participates in the "iAM Smart+" platform construction, and innovatively uses blockchain technology to enhance technical support and applications for cross-institutional platforms and apps[75] Intelligent Cybersecurity Services Business (Sec) The intelligent cybersecurity services business experienced growth in new service orders, with revenue reaching 105.4 million HKD, primarily driven by sustained demand for cybersecurity services, Security Operations Center (SOC), and security management services, while utilizing AI to enhance SOC platform efficiency - New service orders showed growth compared to the prior period, with service revenue for the period reaching 105.4 million HKD[76] - The main business growth stemmed from sustained demand for cybersecurity services, Security Operations Center (SOC), and security management services[76] - Artificial intelligence (AI) is being leveraged to enhance the SOC platform for faster response and resolution of evolving cyber threats and security incidents[76] IT Integrated Management Services Business (Ops) The IT integrated management services business saw an increase in new service orders, with service revenue reaching 244.6 million HKD, driven by demand for ITSM, DevSecOps, and managed services, successfully providing large-scale critical system migration services for an entertainment organization and undertaking a private cloud expansion project - New service orders increased compared to the prior period, with service revenue reaching 244.6 million HKD, driven by demand for ITSM, DevSecOps, and managed services[77] - Successfully provided large-scale business-critical system migration services for an entertainment organization, demonstrating service integration capabilities[77] - A private cloud expansion project is underway to provide Infrastructure-as-a-Service[77] Building a "Center of Excellence" to Promote Xinchuang Products The Group established a "Center of Excellence" to foster the integration and innovative application of domestic and international IT products in solutions, serving clients in Hong Kong and the Greater Bay Area, supported by over 70 international and 30 Xinchuang IT vendors, making it a leading industry player - The "Center of Excellence" aims to promote the integration and innovative application of domestic and international IT products in IT solutions to better serve clients in Hong Kong and the Greater Bay Area[78] - The center is supported by over 70 international IT vendors and over 30 Xinchuang IT vendors, making its scale leading in the industry[78] Industry-Oriented, Greater Bay Area Layout The Group actively participates in industry events to promote digital Greater Bay Area financial development opportunities and Chinese Xinchuang technology, enhancing brand awareness and introducing clients to the latest industry technology trends, including Large Language Models (LLM) - Actively participates in industry events to expand brand awareness and bring the latest industry technology trends to clients[79] - Promotes digital Greater Bay Area financial orientation to the financial industry and introduces government departments to innovative applications and integrated practices of Chinese technology, including Large Language Models (LLM)[79] Associate Businesses The Group's European and American associate GDH made significant strides in AI technology, offering customized solutions to Fortune 500 companies, while Asia Pacific associate i-Sprint achieved revenue and EBITDA growth through optimized management and technical certifications, strengthening its industry position - European and American associate Grid Dynamics Holdings, Inc. (GDH) significantly enhanced its artificial intelligence technology, providing approximately 30 tailored solutions and services to Fortune 500 companies across various industries[80] - Key Asia Pacific associate i-Sprint Holdings Limited drove business growth through optimized management, deepening engagement with key clients, and replicating successful cases, leading to revenue and EBITDA of 68.7 million HKD and 15.8 million HKD, respectively[80] - i-Sprint's Universal Authentication System (UAS) obtained FIDO2 certification and received multiple awards in cybersecurity and other fields[80] Prospects and Outlook Facing current market challenges, the Group will accelerate the construction of a Chinese-funded brand ecosystem, establish an offshore development center on the west bank of the Pearl River Estuary, and leverage AI to enhance management services; it will continue to enrich DevSecOps integration capabilities, focus on advantageous industries like government and banking, and strive to become a leading converged technology service partner in the region - Accelerate the construction of a Chinese-funded brand ecosystem, forging partnerships with Chinese vendors to jointly open up markets and ensuring compatibility and performance of Xinchuang solutions through the "Center of Excellence"[81] - Prepare to establish an offshore development center on the west bank of the Pearl River Estuary to undertake software development tasks for Hong Kong, Macau, and overseas, and build a remote omnichannel 24/7 management service support system[82] - Continue to enrich DevSecOps integration capabilities and expand the talent pool, including introducing professionals from mainland China, while persistently advancing management services using the DevSecOps management service maturity model[82] - Focus on developing advantageous industries such as government and banking sectors, enhancing pre-sales and after-sales service capabilities for specific industries, and striving to become a leading converged technology service partner in the region[82] Financial Resources and Liquidity As of June 30, 2024, the Group's total assets were 3,227.4 million HKD, with a working capital ratio of approximately 1.83:1, indicating a robust financial position; all bank borrowings were fully repaid, resulting in a capital gearing ratio of 0.0%, demonstrating good liquidity and low leverage - As of June 30, 2024, the Group's total assets were 3,227.4 million HKD, with a working capital ratio of approximately 1.83:1[82] - All bank borrowings were fully repaid during the six months ended June 30, 2024, resulting in a capital gearing ratio of 0.0% (December 31, 2023: 0.5%)[83] - The Group obtained total comprehensive bank facilities of approximately 215.3 million HKD, with performance guarantees of approximately 106.0 million HKD[83] Material Acquisitions and Disposals For the six months ended June 30, 2024, neither the Company nor any of its subsidiaries had any other material acquisitions or disposals - For the six months ended June 30, 2024, neither the Company nor any of its subsidiaries had any other material acquisitions or disposals[84] Treasury Policy The Group's operations are primarily funded by internal resources and bank credit facilities, including trust receipt loans, unsecured import loans, overdrafts, and term loans, with interest rates generally referenced to interbank offer rates; bank deposits are mainly denominated in HKD and USD - The Group's operations are generally funded by internal resources and bank credit facilities[85] - Bank facilities include trust receipt loans, unsecured import loans, overdrafts, and term loans, with interest rates mostly referenced to relevant country's interbank offer rates[85] - Bank deposits are primarily denominated in HKD and USD[85] Foreign Exchange Risk The Group's revenue and costs are primarily denominated in HKD and USD, and given the Hong Kong SAR Government's linked exchange rate policy, the Group's exposure to USD foreign exchange risk is minimal; for the six months ended June 30, 2024, there was no significant exchange rate fluctuation risk, thus no hedging financial instruments were employed - The Group's revenue earned and costs incurred are primarily denominated in HKD and USD[86] - If the Hong Kong Special Administrative Region Government maintains the linked exchange rate policy between HKD and USD, the Group's exposure to USD foreign exchange risk will remain minimal[86] - For the six months ended June 30, 2024, there was no significant risk of exchange rate fluctuations, thus no related hedging financial instruments were applied[86] Contingent Liabilities As of June 30, 2024, performance guarantees provided by banks on behalf of the Group to customers as contract collateral amounted to approximately 106.0 million HKD, a decrease from December 31, 2023 | Indicator | June 30, 2024 (million HKD) | December 31, 2023 (million HKD) | Change | | :--- | :--- | :--- | :--- | | Performance Guarantees | 106.0 | 126.8 | -16.4% | Capital Commitments As of June 30, 2024, the Group's contracted capital commitments for property, plant and equipment amounted to approximately 0.7 million HKD, an increase from December 31, 2023 | Indicator | June 30, 2024 (million HKD) | December 31, 2023 (million HKD) | Change | | :--- | :--- | :--- | :--- | | Contracted Capital Commitments | 0.7 | 0.4 | +75.0% | Employees and Remuneration Policy As of June 30, 2024, the Group (excluding associates) employed 1,458 staff globally, a slight decrease from the prior period; remuneration is determined based on employee performance, experience, and market conditions, with benefits including bonuses, Mandatory Provident Fund, insurance, medical insurance, and share option schemes | Indicator | June 30, 2024 | June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Number of Employees | 1,458 | 1,499 | -41 | - Employees are located in Hong Kong, mainland China, Taiwan, Macau, and Thailand[89] - Remuneration is determined based on employee performance, work experience, and prevailing market conditions, with benefits including Mandatory Provident Fund, insurance, medical insurance, and share option schemes[89] Other Information This section provides other important information for the six months ended June 30, 2024, including dividend policy, disclosure of directors' and major shareholders' interests, share schemes, dealings in listed securities, Audit Committee review, updates on directors' information, and compliance with the Corporate Governance Code Dividends The directors do not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The directors do not recommend the payment of an interim dividend for the six months ended June 30, 2024[90] Disclosure of Interests This section discloses the interests of directors and the Company's chief executive, as well as major shareholders, in the shares and underlying shares of the Company and its associated corporations as of June 30, 2024, including personal, family, and corporate interests - Discloses the interests or short positions of directors and the Company's chief executive in the shares, underlying shares, and debentures of the Company or any of its associated corporations[91] - Discloses the interests or short positions of major shareholders in the shares or underlying shares of the Company[94] - Disclosures are made in accordance with Part XV of the Securities and Futures Ordinance and Appendix C3 of the Listing Rules of the Stock Exchange[91][94] Directors' Interests in Shares and Underlying Shares As of June 30, 2024, Directors Wang Weihang and Zhang Bingxia held shares in Teamsun Technology, while Wang Weihang and Wang Yueou held shares in GDH; Wang Yueou also held share options in the Company and GDH | Company Name | Director | Personal Interests (shares) | Approximate Percentage of Equity | | :--- | :--- | :--- | :--- | | Teamsun Technology | Wang Weihang | 43,717,039 | 3.99% | | Teamsun Technology | Zhang Bingxia | 250,000 | 0.02% | | GDH | Wang Weihang | 30,954 | 0.04% | | GDH | Wang Yueou | 30,954 | 0.04% | | Company Name | Director | Personal Interests (shares) | Approximate Percentage of Equity | | :--- | :--- | :--- | :--- | | The Company | Wang Yueou | 4,620,000 | 0.55% | | GDH | Wang Yueou | 42,397 | 0.06% | - The Company's share options are from the 2017 Share Option Scheme, and GDH's share options are from GDH's Equity Incentive Plan effective March 4, 2020[92] Major Shareholders' Interests in Shares and Underlying Shares As of June 30, 2024, Teamsun Technology (Hong Kong) Limited, as beneficial owner, held 67.66% of the Company's shares, while its ultimate controlling company, Teamsun Technology, held the same number of shares through controlled corporate interests | Shareholder Name | Capacity | Nature | Number of Shares | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | | Teamsun Technology (Hong Kong) Limited | Beneficial Owner | Long Position | 564,110,657 | 67.66% | | Teamsun Technology | Interests in Controlled Corporations | Long Position | 564,110,657 | 67.66% | - Teamsun Technology has an interest in the entire issued share capital of Teamsun Technology (Hong Kong) Limited, and is therefore deemed to have an interest in the Company's shares held by Teamsun Technology (Hong Kong) Limited[94] Share Schemes This section details the Company's Share Option Scheme adopted on March 13, 2017, designed to incentivize eligible participants; the scheme outlines the total number of shares that may be granted, individual limits, acceptance conditions, exercise price determination, and changes in share options during the period - The Company adopted a share option scheme on March 13, 2017, to grant share options to eligible participants as an incentive or reward[96] - The total number of shares that may be granted shall not exceed 10% of the total issued shares as of March 13, 2017, and all outstanding share options shall not exceed 30% of the Company's total issued shares from time to time[96] - The exercise price is determined by the Board, but shall not be less than the higher of the closing price on the offer date, the average closing price for the five business days immediately preceding the grant date, and the nominal value of one Company share[97] A. 2017 Share Option Scheme The 2017 Share Option Scheme aims to incentivize employees, stipulating the total number of shares that may be granted, individual limits, exercise price determination, and vesting and exercise periods; as of June 30, 2024, a total of 22,437,125 share options were granted but unexercised under the scheme, with some options lapsing during the period - The 2017 Share Option Scheme will expire on March 12, 2027, with a total of 52,618,335 Company shares available for issuance, representing 6.31% of the total issued shares as of the report date[96] | Indicator | January 1, 2024 (shares) | Granted During Period (shares) | Exercised During Period (shares) | Lapsed During Period (shares)