美佳音控股(06939) - 2024 - 中期财报

Definitions Company Information Financial Highlights The Group experienced a significant decline in revenue and profit in the first half of 2024, primarily due to a decrease in the average selling price of compatible printer consumable chips and the early-stage development of the IoT chip business; total assets slightly increased, but total liabilities rose substantially, leading to a decrease in net assets and current ratio, and an increase in the leverage ratio Condensed Consolidated Statement of Profit or Loss Summary (For the six months ended June 30) | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change Percentage | | :--- | :--- | :--- | :--- | | Revenue | 65,733 | 87,058 | (24.5)% | | Cost of Sales and Services | (44,413) | (51,444) | (13.7)% | | Gross Profit | 21,320 | 35,614 | (40.1)% | | Gross Margin | 32% | 41% | (9) percentage points | | Profit Before Tax | 429 | 17,584 | (97.6)% | | Profit for the Period | 405 | 14,932 | (97.3)% | | Basic and Diluted Earnings Per Share (RMB) | 0.001 | 0.029 | (96.6)% | Condensed Consolidated Statement of Financial Position Summary | Metric | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | Change Percentage | | :--- | :--- | :--- | :--- | | Total Assets | 395,363 | 390,209 | 1.3% | | Total Liabilities | 33,907 | 19,990 | 69.6% | | Net Assets | 361,456 | 370,219 | (2.4)% | Key Financial Ratios | Metric | June 30, 2024 | December 31, 2023 | Percentage Point Change | | :--- | :--- | :--- | :--- | | Current Ratio | 10.8 | 19.3 | (8.5) percentage points | | Quick Ratio | 9.6 | 17.2 | (7.6) percentage points | | Leverage Ratio | 0.03 | 0 | 0.03 percentage points | Management Discussion and Analysis Business Review The Group primarily engages in the research, design, development, and sale of compatible printer consumable chips and other chips, along with providing related services; despite increased sales volume of compatible printer consumable chips, intense competition led to a significant decline in average selling price and gross margin, while the IoT chip business remains in its early stages with unsatisfactory gross margins, prompting the Group to initiate online sales to expand its distribution channels - The Group's primary business involves the research, design, development, and sale of compatible printer consumable chips (for desktop laser, inkjet, and commercial printers) and IoT-related chips (Hall sensors, power management ICs, battery charging management ICs)[9] - Sales volume of compatible printer consumable chips increased by 26.9% year-on-year to approximately 7,136,000 units, but the average selling price fell by 31.3% to RMB 8.1 per piece, with gross margin narrowing from 40.9% to 32.4%[10] Number of New Compatible Printer Consumable Chip Models Developed | Application Product | Number of Chips Successfully Developed by June 30, 2024 | Number of Chips Successfully Developed by June 30, 2023 | | :--- | :--- | :--- | | Desktop Laser Printers | 297 | 98 | | Desktop Inkjet Printers | 51 | 0 | | Commercial Printers | 45 | 8 | | Total | 393 | 106 | - The IoT chip business successfully developed 45 chips, including low-dropout regulators (LDOs), but gross margin is currently unsatisfactory due to early market development and weak recovery in China's manufacturing sector[11] - The Group has launched online sales, primarily offering compatible printer consumables, toner, and other finished printer consumable products to generate additional revenue streams[12] Financial Review Total revenue for the period decreased by 24.5% year-on-year, mainly due to a decline in the average selling price of compatible printer consumable chips and reduced revenue from trading integrated circuits and other printer consumable components; gross profit and net profit both significantly declined, with gross margin narrowing, while other chip sales increased but had a negative gross margin, and the company tightened credit control, leading to reduced revenue in some businesses, though online sales achieved a higher gross margin Revenue Breakdown by Product Category (For the six months ended June 30) | Product Category | 2024 Revenue (RMB thousands) | 2024 % of Total Revenue | 2023 Revenue (RMB thousands) | 2023 % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Sales of Chips | 57,935 | 88.2 | 66,473 | 76.3 | | - Desktop Laser Printers | 44,395 | 67.5 | 52,870 | 60.7 | | - Desktop Inkjet Printers | 12,242 | 18.6 | 12,429 | 14.3 | | - Commercial Printers | 1,298 | 2.1 | 1,174 | 1.3 | | Sales of Other Chips | 2,508 | 3.8 | 2,067 | 2.4 | | Chip Technology and Design Services | – | – | 3,443 | 4.0 | | Trading of Integrated Circuits and Other Printer Consumable Components | 5,290 | 8.0 | 15,075 | 17.3 | | Total | 65,733 | 100 | 87,058 | 100 | - Revenue from sales of compatible printer consumable chips decreased by 12.8% to RMB 57.9 million, primarily due to reduced revenue from desktop laser printer chips, as average selling prices fell by 31.3% due to industry competition despite increased sales volume[15] - Revenue from sales of other chips increased by 21.3% to RMB 2.5 million, mainly driven by the launch of new IoT chips, particularly power chips[16] - Revenue from trading integrated circuits and other printer consumable components decreased by 64.9% to RMB 5.3 million, primarily due to the Group's tightened credit control, with online sales contributing RMB 2.3 million in revenue[17] Gross Profit and Gross Margin by Product Category (For the six months ended June 30) | Product Category | 2024 Gross Profit (RMB thousands) | 2024 Gross Margin (%) | 2023 Gross Profit (RMB thousands) | 2023 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Sales of Chips | 20,707 | 35.7 | 31,827 | 47.9 | | - Desktop Laser Printers | 21,629 | 48.7 | 30,242 | 57.2 | | - Desktop Inkjet Printers | (1,483) | (13.8) | 1,059 | 8.5 | | - Commercial Printers | 561 | 60.9 | 526 | 44.8 | | Sales of Other Chips | (117) | (4.7) | 328 | 15.9 | | Chip Technology and Design Services | – | – | 2,661 | 77.3 | | Trading of Integrated Circuits and Other Printer Consumable Components | 730 | 13.8 | 798 | 5.3 | | Total | 21,320 | 32.4 | 35,614 | 40.9 | - Gross profit from sales of compatible printer consumable chips decreased, with gross margin falling from 47.9% to 35.7%, primarily due to industry competition and a higher proportion of older chip models sold, while desktop inkjet printer chips recorded a negative gross margin of 13.8%[21] - Gross margin for sales of other chips was negative 4.7%, reflecting the early development stage of the IoT business and the need for competitive pricing to attract customers[22] - Gross margin from trading integrated circuits and other printer consumable components increased from 5.3% to 13.8%, primarily benefiting from the higher gross margin of online sales at 31.5%[23] - Net other income decreased by 31.6% to RMB 4.2 million, mainly due to reduced exchange gains resulting from fluctuations in the RMB against the USD[25] - Selling and distribution expenses increased by 42.2% to RMB 4.2 million, primarily for strengthening marketing activities for new businesses such as IoT chips and online sales[27] - Profit for the period significantly decreased by 97.3% to RMB 0.4 million, with net profit margin falling from 17.2% to 0.6%, mainly due to the decline in gross margin of the compatible printer consumable chip business[30] - Net current assets decreased from RMB 345.6 million to RMB 330.2 million, primarily due to a reduction in trade receivables and an increase in trade payables and bank borrowings[31] Debt Details | Debt Category | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Bank borrowings due within one year | 10,000 | – | | Current lease liabilities | 813 | 1,411 | | Non-current lease liabilities | 250 | 467 | | Total | 11,063 | 1,878 | Outlook and Future Plans Despite ongoing global economic uncertainties and industry competition, management anticipates improved performance in the second half of 2024 compared to the first half, driven by new product launches, reduced production costs, market expansion, and increased fixed asset investments - Management expects performance in the second half of 2024 to be better than the first half due to the following reasons[39] - More new models of compatible printer chips will be launched, which are expected to command higher gross margins[39] - The Group has successfully designed its own raw material integrated circuits, which is expected to significantly reduce production costs[39] - Enhanced market development efforts, increased headcount, establishment of online sales platforms, expansion of product categories, and building a more complete industry chain[39] - Consideration will be given to increasing fixed asset investments to enhance production efficiency[39] - As of June 30, 2024, the Group had no significant plans for investments or acquisitions of capital assets[39] Other Financial Information The Group primarily funds its operations through cash generated from operations, debt financing, and proceeds from its listing; cash and cash equivalents increased, but net current assets and net assets slightly decreased, and the leverage ratio rose due to increased bank borrowings, though the overall financial position remains sound, with no significant asset pledges, contingent liabilities, or major acquisitions/disposals, and foreign exchange risks are closely monitored - The Group primarily funds its operations through cash generated from operations, debt financing, and proceeds from its listing[40] - As of June 30, 2024, cash and cash equivalents were approximately RMB 230.9 million (December 31, 2023: RMB 183.8 million)[40] - As of June 30, 2024, net current assets were approximately RMB 330.2 million (December 31, 2023: RMB 345.6 million), and net assets were approximately RMB 361.5 million (December 31, 2023: RMB 370.2 million)[40] - As of June 30, 2024, total bank borrowings were approximately RMB 10 million (December 31, 2023: zero), denominated in RMB, unsecured, and interest-bearing[40] - As of June 30, 2024, the leverage ratio was approximately 2.8% (December 31, 2023: 0.0%), primarily due to increased bank borrowings, but the financial position remains sound[41] - The Group had no asset pledges or significant contingent liabilities at the end of the reporting period[42] - The Group is exposed to foreign exchange risk from fluctuations in the RMB against the USD or HKD, but there were no significant translation impacts during the period, and no hedging activities are currently undertaken[43] - As of June 30, 2024, the Group had approximately 156 full-time employees and provides regular training and share option schemes as incentives[44] - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2024[45] Other Information Disclosure of Interests This section discloses the interests and short positions of directors, chief executives, and substantial shareholders in the Company's shares, with Mr. Zheng Xianhui and Mr. Yu holding significant shares through controlled corporations, and Mr. Lin being a beneficial owner Directors' and Chief Executives' Interests in Shares (As of June 30, 2024) | Director's Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Zheng Xianhui | Interest in controlled corporation | 151,812,500 (L) | 29.27% | | Mr. Lin Ziliang | Beneficial owner | 86,250,000 (L) | 16.63% | Major Shareholders' Interests in Shares (As of June 30, 2024) | Shareholder's Name/Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | GMTL | Beneficial owner | 151,812,500 (L) | 29.27% | | Mr. Zheng Xianhui | Interest in controlled corporation | 151,812,500 (L) | 29.27% | | Zhonghao | Beneficial owner | 97,500,000 (L) | 18.80% | | Mr. Yu Yiding | Interest in controlled corporation | 97,500,000 (L) | 18.80% | | Mr. Lin Ziliang | Beneficial owner | 86,250,000 (L) | 16.63% | Share Option Scheme The Company adopted a share option scheme on February 26, 2021, to grant options to eligible persons to subscribe for shares, but no options have been granted under the scheme to date - The Company adopted a share option scheme on February 26, 2021, with a ten-year validity, allowing the grant of share options to employees, directors, consultants, suppliers, customers, and shareholders[49] - No share options have been granted by the Company under the scheme since its adoption[49] Arrangements for Directors to Purchase Shares or Debentures During the reporting period, no directors or their associates were granted or exercised any rights to benefit from purchasing the Company's shares or debentures, nor did the Company enter into any such arrangements - During the relevant period, no directors of the Company or their respective spouses or minor children were granted or exercised any rights to benefit from purchasing the Company's shares or debentures[50] - Neither the Company, its holding company, nor any of its subsidiaries entered into any arrangements enabling directors to acquire benefits by purchasing shares or debt securities (including debentures) of the Company or any other corporation[50] Directors' and Major Shareholders' Competing Interests During the reporting period, no directors or their close associates, other than members of the Group, held any interests in businesses that compete or might compete with the Group's business - During the relevant period, no directors or their respective close associates (other than members of the Group) were required to disclose any interests in businesses that compete or might directly or indirectly compete with the Group's business under Listing Rule 8.10[51] Sufficiency of Public Float The Company maintained a sufficient public float as required by the Listing Rules during the reporting period - The Company maintained the public float required by the Listing Rules during the relevant period[52] Purchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the Company nor any of its subsidiaries engaged in any activities involving the purchase, sale, or redemption of the Company's listed securities - During the relevant period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[52] Going Concern Based on its current financial position and available financing, the Group possesses sufficient financial resources to continue as a going concern for the foreseeable future - Based on its current financial position and available financing, the Group has sufficient financial resources to continue as a going concern for the foreseeable future[53] Use of Net Proceeds from Listing The Group received approximately RMB 98.5 million in net proceeds from its global offering, with approximately RMB 54.5 million utilized and RMB 44.0 million remaining unutilized as of June 30, 2024; the expected utilization timetable for the net proceeds has been extended to December 31, 2024, primarily due to the impact of the pandemic, intense competition for semiconductor R&D talent, and a cautious approach to acquisition strategies - The Group received net proceeds of approximately HKD 118 million (equivalent to approximately RMB 98.5 million) from its global offering and the exercise of the over-allotment option[54] Use and Application of Net Proceeds from Listing (As of June 30, 2024) | Use of Proceeds | Allocation as disclosed in Prospectus (RMB millions) | Actual Amount Utilized (RMB millions) | Unutilized Amount (RMB millions) | | :--- | :--- | :--- | :--- | | Enhancing product development capabilities and product diversification | 50.7 | 40.9 | 9.7 | | - Development of software components | 7.5 | 3.4 | 4.1 | | - Development of hardware components | 40.7 | 36.0 | 4.7 | | - Acquisition of new models of original brand printers from the market | 2.5 | 1.5 | 0.9 | | Acquisition of integrated circuit design companies to accelerate hardware design capabilities | 16.6 | – | 16.6 | | Expanding footprint in the compatible printer consumables industry through forward vertical expansion | 16.6 | – | 16.6 | | Strengthening sales and marketing efforts | 2.5 | 2.5 | – | | Strengthening back-office functions to support business growth | 2.5 | 1.3 | 1.3 | | General working capital | 9.9 | 9.9 | – | | Total | 98.5 | 54.5 | 44.0 | - The unutilized net proceeds of approximately RMB 44.0 million have an expected utilization period extended from December 31, 2023, to December 31, 2024[57][58] - Key reasons for the delay in utilization include the slowdown in overall business development due to the COVID-19 pandemic, intense competition for semiconductor R&D talent in industries like AI, and a cautious approach to acquisitions amid an uncertain economic outlook[59][60] Corporate Governance Practices The Board of Directors is committed to adhering to the Corporate Governance Code set out in Appendix C1 of the Listing Rules and has adopted various measures to enhance internal controls and improve corporate governance standards - The Board is committed to upholding the Corporate Governance Code set out in Appendix C1 of the Listing Rules and has complied with its provisions[61] - The Company has adopted various measures to strengthen its internal control system, ongoing professional training for directors, and other regular practices[61] Standard Code for Securities Transactions The Company has adopted the Standard Code set out in Appendix C3 of the Listing Rules and confirms that all directors have fully complied with the code during the reporting period - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules[62] - All directors have confirmed their full compliance with the required dealing standards set out in the Standard Code during the relevant period[62] Review by Audit Committee The Audit Committee has reviewed the Company's unaudited financial statements, interim results announcement, and interim report for the reporting period, affirming that the adopted accounting treatments comply with applicable standards and Listing Rules - The Audit Committee comprises three independent non-executive directors, with Mr. Li Wah Hung as Chairman[62] - The Audit Committee has reviewed the Company's unaudited financial statements, interim results announcement, and interim report for the relevant period with management[62] - The Committee is satisfied that the accounting treatments adopted by the Company comply with applicable accounting standards and the requirements of the Listing Rules, and that adequate disclosures have been made[62] Events After the Reporting Period As of the approval date of this interim report, no significant events have occurred subsequent to the reporting period for the Group - No significant events occurred after the relevant period up to the date of approval of this interim report[63] Review Report on Condensed Consolidated Interim Financial Statements The independent auditor has reviewed the Group's condensed consolidated interim financial statements in accordance with Hong Kong Standard on Review Engagements 2410 and found no material matters inconsistent with Hong Kong Accounting Standard 34 - The auditor has reviewed the Group's condensed consolidated interim financial statements, which were prepared in accordance with Hong Kong Accounting Standard 34[64] - The scope of the review is substantially less than that of an audit, and therefore no audit opinion is expressed[65] - Based on the review, the auditor has not found any matters that cause them to believe the condensed consolidated interim financial statements are not prepared in all material respects in accordance with Hong Kong Accounting Standard 34[66] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group's revenue was RMB 65,733 thousand, gross profit was RMB 21,320 thousand, profit for the period was RMB 405 thousand, and basic and diluted earnings per share were RMB 0.001, representing a significant decrease from the prior year Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 65,733 | 87,058 | | Cost of sales and services | (44,413) | (51,444) | | Gross profit | 21,320 | 35,614 | | Net other income | 4,210 | 6,143 | | Research and development expenses | (9,034) | (9,011) | | Selling and distribution expenses | (4,222) | (2,970) | | Administrative expenses | (11,155) | (12,025) | | Finance costs | (130) | (86) | | Profit before tax | 429 | 17,584 | | Income tax | (24) | (2,652) | | Profit for the period attributable to owners of the Company | 405 | 14,932 | | Total comprehensive income for the period attributable to owners of the Company | 523 | 16,692 | | Earnings per share – basic and diluted | RMB 0.001 | RMB 0.029 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were RMB 395,363 thousand, with current assets accounting for RMB 363,853 thousand; total liabilities were RMB 33,907 thousand, and net assets were RMB 361,456 thousand, showing a significant increase in total liabilities and a slight decrease in net assets compared to the end of 2023 Condensed Consolidated Statement of Financial Position (As of June 30, 2024) | Metric | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 6,405 | 4,886 | | Intangible assets | 21,288 | 15,919 | | Deferred tax assets | 1,196 | 1,132 | | Total non-current assets | 31,510 | 25,731 | | Current assets | | | | Inventories | 40,416 | 40,454 | | Trade receivables | 55,573 | 58,433 | | Deposits, prepayments and other receivables | 26,648 | 21,765 | | Financial assets at fair value through profit or loss | 10,000 | 60,000 | | Cash and cash equivalents | 230,853 | 183,826 | | Total current assets | 363,853 | 364,478 | | Current liabilities | | | | Trade payables | 13,369 | 6,187 | | Accruals and other payables | 6,231 | 8,084 | | Bank borrowings | 10,000 | – | | Lease liabilities | 813 | 1,411 | | Total current liabilities | 33,657 | 18,874 | | Net current assets | 330,196 | 345,604 | | Net assets | 361,456 | 370,219 | | Total equity | 361,456 | 370,219 | Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, the Group's total equity decreased from RMB 370,219 thousand at the beginning of the year to RMB 361,456 thousand, primarily due to lower profit contribution for the period and dividend payments Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30, 2024) | Item | Share Capital (RMB thousands) | Share Premium (RMB thousands) | Other Reserves (RMB thousands) | Statutory Reserve (RMB thousands) | Exchange Reserve (RMB thousands) | Retained Earnings (RMB thousands) | Total Reserves (RMB thousands) | Total Equity (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2024 | 4,325 | 141,923 | 8,460 | 34,500 | 5,043 | 175,968 | 365,894 | 370,219 | | Profit for the period | – | – | – | – | – | 405 | 405 | 405 | | Exchange differences arising from translation of foreign operations | – | – | – | – | 118 | – | 118 | 118 | | Dividends paid for prior year | – | (9,286) | – | – | – | – | (9,286) | (9,286) | | Balance at June 30, 2024 | 4,325 | 132,637 | 8,460 | 34,500 | 5,161 | 176,373 | 357,131 | 361,456 | Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30, 2023) | Item | Share Capital (RMB thousands) | Share Premium (RMB thousands) | Other Reserves (RMB thousands) | Statutory Reserve (RMB thousands) | Exchange Reserve (RMB thousands) | Retained Earnings (RMB thousands) | Total Reserves (RMB thousands) | Total Equity (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2023 | 4,325 | 159,872 | 8,460 | 31,186 | 3,879 | 156,070 | 359,467 | 363,792 | | Profit for the period | – | – | – | – | – | 14,932 | 14,932 | 14,932 | | Exchange differences arising from translation of foreign operations | – | – | – | – | 1,760 | – | 1,760 | 1,760 | | Transfer to statutory reserve | – | – | – | 1,985 | – | (1,985) | – | – | | Dividends paid for prior year | – | (17,949) | – | – | – | – | (17,949) | (17,949) | | Balance at June 30, 2023 | 4,325 | 141,923 | 8,460 | 33,171 | 5,639 | 169,017 | 358,210 | 362,535 | Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2024, the Group's net cash from operating activities was RMB 3,900 thousand, net cash from investing activities was RMB 42,804 thousand, and net cash used in financing activities was RMB 239 thousand, with cash and cash equivalents at period-end significantly increasing to RMB 230,853 thousand from the beginning of the year Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Cash Flow Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Net cash from operating activities | 3,900 | 12,385 | | Net cash from investing activities | 42,804 | 1,859 | | Net cash used in financing activities | (239) | (20,008) | | Net increase/(decrease) in cash and cash equivalents | 46,465 | (5,764) | | Cash and cash equivalents at January 1 | 183,826 | 277,131 | | Effect of exchange rate changes | 562 | 1,746 | | Cash and cash equivalents at June 30 | 230,853 | 273,113 | Notes to the Condensed Consolidated Interim Financial Statements 1. General Information Megaforce Holdings Limited was incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange, with its principal business being investment holding and its subsidiaries primarily engaged in the research, design, development, and sale of compatible printer consumable chips in China - The Company was incorporated in the Cayman Islands on June 22, 2016, and its shares are listed on the Main Board of The Stock Exchange of Hong Kong[73] - The Group is principally engaged in the research, design, development, and sale of compatible printer consumable chips[73] 2. Basis of Preparation These condensed consolidated interim financial statements are prepared in accordance with the Hong Kong Listing Rules and Hong Kong Accounting Standard 34, presented in RMB, and have been reviewed by an independent auditor but are unaudited - The condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[74] - The statements are presented in RMB, with all amounts rounded to the nearest thousand[74] - These statements are unaudited but have been reviewed by BDO Limited, Hong Kong[74] 3. Changes in Accounting Policies The Group has applied several revised Hong Kong Financial Reporting Standards, including amendments related to supplier finance arrangements, lease liabilities in sale and leaseback transactions, and the classification of liabilities as current or non-current, none of which had a material impact on these condensed consolidated interim financial statements - The Group has applied several revised Hong Kong Financial Reporting Standards issued by the HKICPA, but these had no impact on the condensed consolidated interim financial statements[75] - Amendments include disclosure requirements for supplier finance arrangements under HKAS 7 and HKFRS 7[75] - Amendments also relate to the recognition of lease liabilities in sale and leaseback transactions under HKFRS 16, and the substance and existence of the right to classify liabilities as current or non-current under HKAS 1[75] 4. Revenue and Segment Reporting The Group considers its business as a single operating segment, with primary revenue derived from chip sales and trading integrated circuits and other printer consumable components; while the Chinese market contributes most revenue, overseas revenue proportion has increased, and non-current assets are mainly concentrated in China - The Group's chief operating decision-maker views the business as a single operating segment, hence no segment information is presented[76] Revenue from Contracts with Customers Breakdown (For the six months ended June 30) | Product/Service | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Sales of chips | 60,443 | 66,473 | | Trading of integrated circuits and other printer consumable components | 5,290 | 17,142 | | Chip technology and design services | – | 3,443 | | Total | 65,733 | 87,058 | | Timing of revenue recognition: At a point in time | 65,733 | 87,058 | External Revenue by Customer Location (For the six months ended June 30) | Location | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | China | 52,331 | 80,422 | | Overseas | 13,402 | 6,636 | | Total | 65,733 | 87,058 | Non-current Assets by Asset Location | Location | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | China | 27,075 | 19,965 | | Overseas | 618 | 840 | | Total | 27,693 | 20,805 | 5. Seasonality of Operations The Group's business is seasonal, with higher sales revenue typically expected in the fourth quarter of each year, primarily due to marketing effects from industry exhibitions and customer demand for pre-stocking products ahead of potential supply disruptions during the Lunar New Year - The Group's principal business typically experiences higher sales revenue in the last quarter of each year[80] - Seasonality is primarily attributed to the marketing effect of the Zhuhai industry exhibition (usually held in October each year) and customer demand for stocking up products due to potential supply interruptions during the Lunar New Year period[80] 6. Net Other Income The Group's net other income primarily includes bank interest income, net exchange gains, and government grants; for the six months ended June 30, 2024, net other income was RMB 4,210 thousand, a decrease from the prior year, mainly due to reduced exchange gains Net Other Income Analysis (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Bank interest income | 2,074 | 2,960 | | Net exchange gains | 474 | 2,011 | | Government grants | 1,619 | 1,068 | | Impact of lease modifications | – | 6 | | Miscellaneous income | 43 | 98 | | Total | 4,210 | 6,143 | - Government grants primarily include funding for the Group's innovation projects and VAT refunds, with no unfulfilled attached conditions[81] 7. Finance Costs For the six months ended June 30, 2024, the Group's finance costs amounted to RMB 130 thousand, primarily comprising interest on bank borrowings and lease liabilities, representing an increase from the prior year Finance Costs Analysis (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Interest on bank borrowings | 94 | 20 | | Interest on lease liabilities | 36 | 66 | | Total | 130 | 86 | 8. Profit Before Tax For the six months ended June 30, 2024, the Group's profit before tax was RMB 429 thousand, a significant decrease from the prior year, with key deductions including cost of inventories sold, amortization of intangible assets, depreciation of property, plant and equipment, and staff costs Items Deducted From/(Credited To) Profit Before Tax (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories recognised as an expense | 39,236 | 43,485 | | Amortisation of intangible assets | 1,725 | 1,217 | | Auditor's remuneration | 757 | 646 | | Depreciation of property, plant and equipment | 1,042 | 833 | | Depreciation of right-of-use assets | 788 | 989 | | Net provision for impairment losses on trade receivables | 560 | 81 | | Short-term lease expenses | 307 | 7 | | Research and development expenses (non-staff costs) | 4,594 | 4,929 | | Staff costs (including directors' emoluments) | 12,193 | 11,721 | 9. Income Tax For the six months ended June 30, 2024, the Group's income tax expense was RMB 24 thousand, a significant decrease from the prior year; Chinese entities are subject to a 25% corporate income tax rate, with Zhuhai Megaforce enjoying a preferential 15% rate as a high-tech enterprise, while Hong Kong subsidiaries are subject to a two-tiered profits tax rate Income Tax Analysis (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Current tax – PRC Enterprise Income Tax | 42 | 2,515 | | Current tax – Underprovision in prior years | 46 | – | | Deferred tax – (Credited to)/charged to profit or loss for the period | (64) | 137 | | Income tax expense | 24 | 2,652 | - The Group's PRC entities are subject to a 25% income tax rate, with Zhuhai Megaforce enjoying a preferential 15% rate as a high-tech enterprise[85] - Hong Kong operating subsidiaries are subject to a two-tiered profits tax rate, with the first HKD 2 million taxed at 8.25% and the remainder at 16.5%[85] 10. Dividends The Company paid a final dividend of RMB 9,286 thousand for the year ended December 31, 2023, to its owners on June 28, 2024, and the Board does not recommend any interim dividend for the six months ended June 30, 2024 Dividends Paid (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Final dividend | 9,286 | 17,949 | - The Board does not recommend the payment of any dividends for the six months ended June 30, 2024, and 2023[86] 11. Basic and Diluted Earnings Per Share For the six months ended June 30, 2024, profit for the period attributable to owners of the Company was RMB 405 thousand, resulting in basic and diluted earnings per share of RMB 0.001; diluted earnings per share are the same as basic earnings per share due to the absence of potential dilutive ordinary shares Basic and Diluted Earnings Per Share Calculation (For the six months ended June 30) | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company | 405 | 14,932 | | Weighted average number of ordinary shares (thousands of shares) | 518,750 | 518,750 | | Basic and diluted earnings per share (RMB) | 0.001 | 0.029 | - As there were no potential dilutive ordinary shares for the Group for the six months ended June 30, 2024, and 2023, diluted and basic earnings per share are the same[90] 12. Property, Plant and Equipment For the six months ended June 30, 2024, the Group's net book value of property, plant and equipment increased to RMB 6.4 million, primarily due to the acquisition of office equipment, with no disposals during the period - For the six months ended June 30, 2024, the Group acquired office equipment items with a total cost of RMB 3,348,000[91] - There were no disposals of property, plant and equipment for the six months ended June 30, 2024[91] - The Group entered into a lease for its Shenzhen office during the six months ended June 30, 2024, but no new leases were entered into during the period[91] 13. Intangible Assets For the six months ended June 30, 2024, the Group's net book value of intangible assets increased, primarily due to additions of circuit technology patents, electronic chip analysis machine software, and computer software, totaling RMB 7,095 thousand - For the six months ended June 30, 2024, the Group added circuit technology patents, software installed in electronic chip analysis machines, and computer software with a total cost of RMB 7,095,000[92] 14. Inventories For the six months ended June 30, 2024, the Group reversed an inventory impairment loss of RMB 20 thousand, primarily due to an increase in the estimated net realizable value of certain printer consumable chips - For the six months ended June 30, 2024, RMB 20,000 was recognized in profit or loss as a reduction in the amount of inventories recognized as an expense, representing a reversal of the write-down of inventories to their estimated net realizable value[93] - This reversal was due to an increase in the estimated net realizable value of certain printer consumable chips[93] 15. Trade Receivables As of June 30, 2024, the Group's net trade receivables amounted to RMB 55,573 thousand, a decrease from the end of 2023; the Group offers credit terms of 30 to 120 days and regularly reviews customer credit quality, with most trade receivables concentrated within 90 days Trade Receivables (As of June 30, 2024) | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Trade receivables | 58,548 | 60,889 | | Less: Loss allowance for trade receivables | (2,975) | (2,456) | | Net | 55,573 | 58,433 | - The Group offers credit terms of 30 to 120 days to customers and regularly reviews customer credit quality[95] Ageing Analysis of Trade Receivables (By invoice date) | Ageing | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Within 90 days | 37,079 | 41,425 | | 91 to 180 days | 10,001 | 10,016 | | Over 180 days | 8,493 | 6,992 | | Total | 55,573 | 58,433 | 16. Deposits, Prepayments and Other Receivables As of June 30, 2024, the Group's total deposits, prepayments, and other receivables amounted to RMB 29,269 thousand, an increase from the end of 2023, primarily due to higher prepayments to suppliers Details of Deposits, Prepayments and Other Receivables | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Deposits and other receivables | 2,358 | 1,876 | | Other recoverable taxes | 5,009 | 3,735 | | Subtotal (Current) | 7,367 | 5,611 | | Prepayments – non-current | 2,621 | 3,794 | | Prepayments – current | 19,281 | 16,154 | | Subtotal (Prepayments) | 21,902 | 19,948 | | Total | 29,269 | 25,559 | 17. Financial Assets at Fair Value Through Profit or Loss As of June 30, 2024, the Group's financial assets at fair value through profit or loss amounted to RMB 10,000 thousand, primarily wealth management products held with licensed banks, which are fair valued based on the present value of estimated future cash flows and are due on or before July 9, 2024 Financial Assets at Fair Value Through Profit or Loss | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Wealth management products | 10,000 | 60,000 | - Wealth management products refer to deposits held with licensed banks whose interest rates are linked to various market indices[97] - All wealth management products will mature on or before July 9, 2024[97] 18. Trade Payables As of June 30, 2024, the Group's trade payables were RMB 13,369 thousand, a significant increase from the end of 2023, primarily due to increased raw material purchases; supplier credit terms typically range from 30 to 60 days Trade Payables (As of June 30, 2024) | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Trade payables | 13,369 | 6,187 | - Credit terms granted by suppliers typically range from 30 to 60 days[99] Ageing Analysis of Trade Payables (By invoice date) | Ageing | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Within 30 days | 11,380 | 4,478 | | 31 to 90 days | 1,986 | 1,683 | | Over 90 days | 3 | 26 | | Total | 13,369 | 6,187 | 19. Accruals and Other Payables As of June 30, 2024, the Group's total accruals and other payables amounted to RMB 6,231 thousand, a decrease from the end of 2023 Details of Accruals and Other Payables | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Accrued expenses | 3,610 | 5,179 | | Other payables | 1,503 | 1,517 | | Refund liabilities | 1,118 | 1,388 | | Total | 6,231 | 8,084 | 20. Bank Borrowings As of June 30, 2024, the Group incurred new bank borrowings of RMB 10,000 thousand, which are unsecured, denominated in RMB, repayable by September 26, 2024, and bear an annual interest rate of 2.90% Bank Borrowings (As of June 30, 2024) | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Bank loans repayable within one year | 10,000 | – | - The bank loan is denominated in RMB, unsecured, repayable by September 26, 2024, and bears interest at an annual rate of 2.90%[101] 21. Share Capital As of June 30, 2024, the Company's issued and fully paid ordinary shares totaled 4,325 thousand shares, amounting to RMB 4,325 thousand, consistent with the end of 2023 Issued and Fully Paid Ordinary Shares | Date | Number of Shares (thousands of shares) | Amount (RMB thousands) | | :--- | :--- | :--- | | At January 1, 2023, December 31, 2023 and June 30, 2024 | 4,325 | 4,325 | 22. Capital Commitments As of June 30, 2024, the Group's capital commitments primarily consisted of commitments for the acquisition of intangible assets, totaling RMB 2,651 thousand, a decrease from the end of 2023 Capital Commitments (As of June 30, 2024) | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Commitments for acquisition of intangible assets | 2,651 | 3,864 | 23. Summary of Financial Assets and Liabilities by Category The Group's financial assets primarily include financial assets at fair value through profit or loss (wealth management products) and financial assets measured at amortized cost (trade receivables, deposits and other receivables, cash and cash equivalents); financial liabilities mainly comprise trade payables, accruals and other payables, bank borrowings, and lease liabilities, all measured at amortized cost Summary of Carrying Amounts of Financial Assets and Liabilities (As of June 30, 2024) | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Financial assets | | | | Financial assets at fair value through profit or loss | 10,000 | 60,000 | | Trade receivables | 55,573 | 58,433 | | Deposits and other receivables | 2,358 | 1,876 | | Cash and cash equivalents | 230,853 | 183,826 | | Financial liabilities | | | | Trade payables | 13,369 | 6,187 | | Accruals and other payables | 5,113 | 6,696 | | Bank borrowings | 10,000 | – | | Lease liabilities | 1,063 | 1,878 | - The carrying amounts of financial instruments measured at amortized cost approximate their fair values due to their short-term nature[105] 24. Fair Value Measurement The Group's financial instruments measured at fair value are primarily wealth management products, classified as Level 3 within the fair value hierarchy; their fair value is calculated based on the present value of estimated future cash flows linked to underlying interest rates, floating rates, and participation rates - The fair values of the Group's financial assets and liabilities measured at amortized cost do not differ significantly from their carrying amounts[107] Financial Assets at Fair Value Through Profit or Loss (As of June 30, 2024) | Item | Level 1 (RMB thousands) | Level 2 (RMB thousands) | Level 3 (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Wealth management products (June 30, 2024) | – | – | 10,000 | 10,000 | | Wealth management products (December 31, 2023) | – | – | 60,000 | 60,000 | - The fair value of wealth management products is calculated based on the present value of estimated future cash flows linked to underlying interest rates (0% to 1.1%), floating rates (0% to FR007 rate multiplied by participation rate), and participation rates (0% to 100%)[108][109] - The Group's wealth management products are classified as Level 3 within the fair value hierarchy, with no transfers between levels during the period/year[109] 25. Events After the Reporting Period As of the approval date of these financial statements, no significant events requiring disclosure have occurred subsequent to the reporting period for the Group - As of the approval date of these financial statements, no significant events requiring disclosure have occurred subsequent to the reporting period for the Group[110]