凯升控股(00102) - 2025 - 中期业绩

Interim Results Announcement Summary The company achieved a 4.3% revenue growth in H1 2024, turning a loss into profit primarily due to fair value gains on derivative financial instruments. Key Financial Highlights Kai Shing Holdings Limited achieved 4.3% total revenue growth in H1 2024, driven by the strong Russian domestic market, and turned a loss into profit primarily due to significant fair value gains on derivative financial instruments, despite foreign exchange losses from ruble fluctuations. Key Financial Data Comparison for H1 2024 | Indicator | H1 2024 (HKD) | H1 2023 (HKD) | Change | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 189,900,000 | 182,000,000 | 7,900,000 | +4.3% | | Adjusted EBITDA | 65,300,000 | 57,000,000 | 8,300,000 | +14.6% | | Profit/(Loss) Attributable to Owners | 156,500,000 | (16,100,000) | 172,600,000 | Turned from Loss to Profit | | Fair Value Gain/(Loss) on Derivative Financial Instruments | 144,500,000 | (53,100,000) | 197,600,000 | Significant Growth | | Foreign Exchange Loss | 22,000,000 | 35,200,000 | (13,200,000) | -37.5% | Condensed Consolidated Financial Statements The condensed consolidated financial statements reflect a significant profit turnaround in H1 2024, driven by fair value gains on derivative financial instruments and improved operational performance. Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The company achieved a significant profit turnaround in H1 2024, primarily due to substantial fair value gains on derivative financial instruments, converting a prior-year loss into profit, with gaming and hotel revenue growth partially offset by expected credit losses and exchange losses. Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Revenue from Gaming and Hotel Operations | 189,910 | 181,974 | 7,936 | +4.36% | | Other Income | 69,260 | 62,835 | 6,425 | +10.23% | | Other Gains and Losses | (66,301) | (34,767) | (31,534) | +90.70% | | Fair Value Gain/(Loss) on Derivative Financial Instruments | 144,470 | (53,057) | 197,527 | Turned from Loss to Profit | | Finance Costs | (2,510) | (5,595) | 3,085 | -55.14% | | Profit/(Loss) Before Tax | 173,799 | (21,001) | 194,800 | Turned from Loss to Profit | | Profit/(Loss) for the Period | 169,676 | (21,099) | 190,775 | Turned from Loss to Profit | | Profit/(Loss) for the Period Attributable to Owners | 156,509 | (16,057) | 172,566 | Turned from Loss to Profit | | Basic Earnings/(Loss) Per Share (HK cents) | 3.471 | (0.356) | 3.827 | Turned from Loss to Profit | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the company's total assets and net assets increased, with improved net current assets and current ratio, indicating a robust financial position, primarily driven by a significant increase in the fair value of derivative financial instruments. Condensed Consolidated Statement of Financial Position (As at June 30) | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Total Non-current Assets | 2,587,761 | 2,497,489 | 90,272 | +3.61% | | Derivative Financial Instruments (Non-current) | 1,587,667 | 1,444,032 | 143,635 | +9.95% | | Total Current Assets | 704,012 | 589,490 | 114,522 | +19.43% | | Bank Balances and Cash | 404,649 | 339,466 | 65,183 | +19.19% | | Total Current Liabilities | 468,229 | 417,720 | 50,509 | +12.09% | | Net Current Assets | 235,783 | 171,770 | 64,013 | +37.27% | | Net Assets | 2,780,912 | 2,622,285 | 158,627 | +6.05% | | Equity Attributable to Owners | 2,583,777 | 2,438,317 | 145,460 | +5.97% | Notes to the Condensed Consolidated Financial Statements These notes provide detailed information on the basis of preparation, significant accounting policies, segment information, and specific financial items within the condensed consolidated financial statements. Basis of Preparation The condensed consolidated financial statements are prepared in accordance with HKAS 34 and Appendix D2 of the Listing Rules, presented in HKD, which is also the functional currency of the principal subsidiary G1 Entertainment. - The condensed consolidated financial statements are presented in HKD, which is also the functional currency of the principal subsidiary G1 Entertainment, as HKD primarily impacts its gaming revenue[8] Significant Accounting Policies and Changes in Accounting Policies The condensed consolidated financial statements for the current period are prepared on a historical cost basis, except for financial instruments, and incorporate the first-time application of revised HKFRSs and HKASs issued by the HKICPA, with no significant impact on the financial statements. - The Group first applied the amendments to HKAS 1, HKAS 7, HKFRS 7, and HKFRS 16, which had no significant impact on the consolidated financial statements for the current and prior periods[9] Segment Information The Group operates a single operating and reportable segment, gaming and hotel operations, with all revenue derived from customers in the Russian Federation and nearly all non-current assets located there. - The Group operates only one operating segment, gaming and hotel operations, with all revenue and most non-current assets derived from the Russian Federation[10] Revenue from Gaming and Hotel Operations In H1 2024, total revenue from gaming and hotel operations increased by 4.36%, with gaming revenue being the largest contributor and hotel revenue also showing growth. Revenue from Gaming and Hotel Operations (For the six months ended June 30) | Business Type | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Gaming Operations | 172,475 | 167,275 | 5,200 | +3.11% | | Hotel Operations | 17,435 | 14,699 | 2,736 | +18.61% | | Total Revenue | 189,910 | 181,974 | 7,936 | +4.36% | - Gaming revenue represents the aggregate net difference between gaming wins and losses, recognized at a point in time; hotel revenue is recognized when control is transferred[12][13] Other Income In H1 2024, total other income increased by 10.23%, primarily driven by higher bank interest income and interest income from long-term loans to a fellow subsidiary, despite a slight decrease in interest income from derivative financial instruments. Other Income (For the six months ended June 30) | Income Source | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Interest Income from Derivative Financial Instruments | 49,088 | 51,176 | (2,088) | -4.08% | | Bank Interest Income | 15,048 | 10,902 | 4,146 | +38.03% | | Interest Income from Long-term Loan to a Fellow Subsidiary | 4,679 | – | 4,679 | N/A | | Total | 69,260 | 62,835 | 6,425 | +10.23% | Other Gains and Losses In H1 2024, other gains and losses significantly increased from a loss of HKD 34,767,000 in H1 2023 to a loss of HKD 66,301,000, primarily due to the initial recognition of expected credit losses on financial guarantee contracts and persistent net exchange losses. Other Gains and Losses (For the six months ended June 30) | Item | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Expected Credit Loss on Financial Guarantee Contracts | (44,104) | – | (44,104) | | Net Exchange Loss | (22,047) | (35,152) | 13,105 | | (Loss)/Gain on Disposal of Property, Operating Rights and Equipment | (147) | 319 | (466) | | Total | (66,301) | (34,767) | (31,534) | Other Expenses In H1 2024, total other expenses slightly decreased by 0.9% to HKD 49,769,000, with a significant increase in bank charges offset by reductions in irrecoverable VAT and travel agency expenses. Other Expenses (For the six months ended June 30) | Item | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Bank Charges | 9,049 | 5,090 | 3,959 | +77.78% | | Irrecoverable VAT | 2,598 | 3,765 | (1,167) | -31.00% | | Travel Agency Expenses | – | 6,030 | (6,030) | -100.00% | | Miscellaneous | 10,625 | 8,341 | 2,284 | +27.38% | | Total | 49,769 | 51,904 | (2,135) | -4.11% | Finance Costs In H1 2024, finance costs significantly decreased by 55.14% to HKD 2,510,000, primarily due to a substantial reduction in imputed interest on a loan from a non-controlling shareholder of a subsidiary. Finance Costs (For the six months ended June 30) | Item | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Imputed Interest on Loan from Non-controlling Shareholder of a Subsidiary | 901 | 3,852 | (2,951) | -76.61% | | Imputed Interest on Convertible Bonds | 746 | 694 | 52 | +7.49% | | Interest on Lease Liabilities | 212 | 395 | (183) | -46.33% | | Total | 2,510 | 5,595 | (3,085) | -55.14% | Income Tax Expense Income tax expense significantly increased to HKD 4,123,000 in H1 2024, primarily due to the recognition of Russian withholding tax, while the Group had no taxable profits in Hong Kong and Japan, and Russian gaming activities are exempt from corporate tax. Income Tax Expense (For the six months ended June 30) | Item | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Russian Corporate Tax | (79) | 98 | (177) | | Russian Withholding Tax | 4,044 | – | 4,044 | | Total | 4,123 | 98 | 4,025 | - The Group had no taxable profits in Hong Kong and Japan, thus no tax provision was made; gaming activities in the Russian Federation are exempt from Russian corporate tax[18][19][20] Profit/(Loss) for the Period In H1 2024, the company's profit for the period was HKD 169,676,000, a significant improvement from a loss of HKD 21,099,000 in the prior-year period, primarily due to a reduction in total depreciation and amortization. Factors Affecting Profit/(Loss) for the Period (For the six months ended June 30) | Item | 2024 (HKD thousands) | 2023 (HKD thousands) | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Depreciation of Property, Operating Rights and Equipment | 26,715 | 36,356 | (9,641) | -26.52% | | Depreciation of Right-of-use Assets | 1,922 | 3,465 | (1,543) | -44.53% | | Amortization of Intangible Assets | – | 5 | (5) | -100.00% | | Total Depreciation and Amortization | 28,637 | 39,826 | (11,189) | -28.09% | Dividends For the six months ended June 30, 2024, the company neither declared nor proposed any dividends. - For the six months ended June 30, 2024, the company neither declared nor proposed dividends to ordinary shareholders[23] Earnings/(Loss) Per Share In H1 2024, basic earnings per share were 3.471 HK cents, a significant improvement from a loss of 0.356 HK cents per share in the prior-year period, primarily due to the profit attributable to owners turning from loss to profit. Earnings/(Loss) Per Share (For the six months ended June 30) | Indicator | 2024 (HK cents) | 2023 (HK cents) | Change | | :--- | :--- | :--- | :--- | | Basic Earnings/(Loss) Per Share | 3.471 | (0.356) | Turned from Loss to Profit | | Diluted Earnings/(Loss) Per Share | 3.471 | (0.356) | Turned from Loss to Profit | - Basic earnings per share are calculated based on profit attributable to owners of approximately HKD 156,509,000 and the weighted average of 4,509,444,590 ordinary shares outstanding[24] - The exercise of share options was not assumed for diluted earnings calculation as their exercise price exceeded the average market price, and the exercise of convertible bonds would increase earnings per share or reduce loss per share[24] Long-term Loan to a Fellow Subsidiary The Group provided an unsecured long-term loan of USD 20,000,000 to fellow subsidiary Suntrust at an annual interest rate of 6% for Suntrust to fulfill its loan agreement requirements, generating HKD 4,679,000 in interest income in H1 2024. - The Group provided a USD 20,000,000 unsecured long-term loan to Suntrust at an annual interest rate of 6% for Suntrust to fulfill its construction reserve account requirements[25][26] Long-term Loan to a Fellow Subsidiary Related Data | Indicator | June 30, 2024 (approx. HKD thousands) | December 31, 2023 (approx. HKD thousands) | | :--- | :--- | :--- | | Loan Principal Balance | 156,164 | 156,182 | | Interest Receivable Balance | 7,368 | 2,697 | | Interest Income for H1 2024 | 4,679 | – | Derivative Financial Instruments The Group's derivative financial instruments primarily represent investments in convertible bonds issued by Suntrust, designated as fair value through profit or loss, which generated a fair value gain of HKD 143,635,000 in H1 2024, a significant improvement from a prior-year loss. - Derivative financial instruments refer to investments in convertible bonds issued by Suntrust, designated as fair value through profit or loss[29][30] Fair Value of Derivative Financial Instruments (HKD thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 2020 Convertible Bonds | 757,231 | 689,730 | | 2022 Convertible Bonds | 830,436 | 754,302 | | Total | 1,587,667 | 1,444,032 | - In H1 2024, derivative financial instruments generated interest income of approximately HKD 49,088,000 and a fair value gain of approximately HKD 143,635,000 (compared to a loss of approximately HKD 53,072,000 in H1 2023)[35][36] Other Receivables As of June 30, 2024, total other receivables increased to HKD 69,730,000, primarily due to higher prepayments; the Group assessed expected credit losses for short-term receivables as low, thus no impairment provision was made, except for individually irrecoverable prepayments and other receivables. Other Receivables (HKD thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Prepayments | 65,169 | 52,715 | | Other Receivables and Deposits | 4,752 | 3,366 | | Less: Provision | (191) | (191) | | Total | 69,730 | 55,890 | - The Group collectively assesses expected credit losses using a provision matrix, and no impairment provision was made for short-term receivables due to their low probability of default; a provision of approximately HKD 191,000 relates to individually impaired prepayments and other receivables deemed irrecoverable by directors[38] Amounts Due from a Fellow Subsidiary / Amounts Due to a Non-controlling Shareholder of a Subsidiary Amounts due from a fellow subsidiary are unsecured and interest-free, primarily comprising interest receivable from derivative financial instruments, while amounts due to a non-controlling shareholder of a subsidiary are also unsecured and interest-free, mainly representing declared but unpaid repayment amounts. - Amounts due from a fellow subsidiary are unsecured and interest-free, primarily comprising interest receivable arising from derivative financial instruments[39] - Amounts due to a non-controlling shareholder of a subsidiary are unsecured and interest-free, primarily representing declared but unpaid repayment amounts arising from a loan from a non-controlling shareholder of a subsidiary[39] Contract Liabilities, Trade and Other Payables As of June 30, 2024, total contract liabilities, trade and other payables increased to HKD 45,573,000, driven by a significant rise in trade payables, while unredeemed gaming chips and loyalty program liabilities slightly decreased. Contract Liabilities, Trade and Other Payables (HKD thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade Payables | 3,434 | 367 | | Liabilities for VAT Arrangements | 7,100 | 7,255 | | Unredeemed Gaming Chips | 2,192 | 2,495 | | Gaming Tax Payable | 632 | 497 | | Accruals and Other Payables | 32,215 | 25,944 | | Total | 45,573 | 36,558 | - Unredeemed gaming chips and loyalty program liabilities are expected to be recognized as revenue or redeemed within one year[41] Derivative Financial Instruments / Convertible Bonds The company's issued convertible bonds comprise a liability component and a derivative financial instrument (conversion option); the derivative financial instrument is measured at fair value, generating a fair value gain of approximately HKD 835,000 in H1 2024, while the liability component is accounted for at amortized cost with an effective annual interest rate of 7.37%. - Convertible bonds comprise a liability component and a derivative financial instrument (conversion option), with the conversion option classified as a derivative financial instrument due to settlement in a manner other than by the entity's own equity instruments[42] - In H1 2024, derivative financial instruments generated a fair value gain of approximately HKD 835,000, and the imputed interest on the convertible bond liability component was approximately HKD 746,000[43] Convertible Bonds Derivative Financial Instruments Fair Value Estimation Input Data | Input Data | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Company Share Price (HKD) | 0.02 | 0.05 | | Expected Volatility (%) | 43.01% | 58.63% | | Expected Remaining Term (Years) | 1.38 | 1.88 | | Risk-free Interest Rate (%) | 4.27% | 4.30% | Financial Guarantee Contracts The Group provided financial guarantees for Suntrust's bank credit, recognized at fair value, and recorded approximately HKD 44,104,000 in expected credit losses in H1 2024; parent company LET executed a counter-indemnity deed to indemnify the Group for liabilities arising from the Suntrust loan agreement. - The Group's assets are pledged to banks to secure bank credit granted to Suntrust, totaling approximately HKD 1,751,199,000[49] - In H1 2024, expected credit losses of approximately HKD 44,104,000 were recognized on financial guarantee contracts[50] - Parent company LET executed a counter-indemnity deed, agreeing to indemnify the Group for all liabilities arising from the Suntrust loan agreement[49] Loan from a Non-controlling Shareholder of a Subsidiary The non-controlling shareholder of Oriental Regent provided an interest-free, unsecured shareholder loan totaling USD 137,691,000 for the gaming and resort project; the loan has been repeatedly extended and accrues interest at an effective rate, with approximately HKD 901,000 in imputed interest recognized in H1 2024. - The non-controlling shareholder of Oriental Regent provided an interest-free, unsecured shareholder loan totaling USD 137,691,000 for the Russian gaming and resort project[51] - The shareholder loan repayment date was extended to July 15, 2023, with automatic three-year renewals, accruing interest at an effective annual rate of 5.76%[52] - In H1 2024, imputed interest on the loan from a non-controlling shareholder of a subsidiary of approximately HKD 901,000 was recognized[53] Management Discussion and Analysis This section provides an overview of the Group's business operations, financial performance, liquidity, and capital structure, along with future outlook and corporate governance matters. Business Review The Group primarily operates gaming and hotel businesses through its equity in Oriental Regent, holding development rights in the Russian Primorye Integrated Entertainment Zone; the Russia-Ukraine conflict profoundly impacted tourism, leading the company to pivot to the domestic market, while also experiencing director and company secretary resignations, termination of G1 Entertainment's sale, and efforts to meet HKEX resumption guidance. Tigre de Cristal Tigre de Cristal is the Group's first gaming and hotel property in the Russian Primorye Integrated Entertainment Zone, offering a five-star hotel, fine dining, and diverse gaming options, with additional land held for future development. - Tigre de Cristal is the first gaming and hotel property within the Primorye Integrated Entertainment Zone in the Russian Far East, which opened in Q4 2015[55] - The property offers approximately 36,000 square meters of gaming and hotel facilities, including a five-star hotel with 121 rooms and suites, two fine dining restaurants, and three casual bars[56] Impact of Russia-Ukraine Conflict and Response The Russia-Ukraine conflict profoundly impacted Russian tourism, causing a significant decline in inbound and outbound travel, with Western travel restrictions and financial sanctions deterring international visitors; Tigre de Cristal is responding by pivoting to the domestic market, renovating restaurants, and redesigning mass-market loyalty programs. - The Russia-Ukraine conflict led to a significant decline in Russian tourism, with Western travel restrictions and financial sanctions severely impacting the availability of services like Visa and Mastercard[57] - Tigre de Cristal is focusing its strategy on the domestic market, including renovating its fine dining restaurant CASCADE and redesigning mass-market loyalty programs to enhance customer experience[58] Resignation of Directors and Company Secretary Effective January 15, 2024, Mr. Choi Ming Fat resigned as Executive Director and CEO, Mr. Chiu King Yan resigned as Executive Director and Authorized Representative, and Messrs. Lam Kwan Sing, Lau Yau Cheung, and Li Chak Hung resigned as Independent Non-executive Directors; Ms. Mok Ming Wai also resigned as Company Secretary on February 17, 2024, primarily due to their opposition to the proposed disposal of G1 Entertainment. - Mr. Choi Ming Fat resigned as Executive Director and CEO, Mr. Chiu King Yan resigned as Executive Director and Authorized Representative, Messrs. Lam Kwan Sing, Lau Yau Cheung, and Li Chak Hung resigned as Independent Non-executive Directors, and Ms. Mok Ming Wai resigned as Company Secretary[59][61] - The directors' resignations were due to their opposition to the proposed disposal of G1 Entertainment[60] Termination of Disposal of G1 Entertainment Oriental Regent entered into an agreement with independent third party Limited Liability Company "Dalnevostochnyj Aktiv" for the disposal of the entire issued share capital of G1 Entertainment for USD 116,000,000, but the buyer issued a termination notice on February 19, 2024, seeking to terminate the agreement. - Oriental Regent entered into an agreement with the buyer for the disposal of the entire issued share capital of G1 Entertainment for USD 116,000,000, constituting a very substantial disposal[62] - The buyer issued a termination notice on February 19, 2024, seeking to terminate the agreement[62] Resumption Guidance and Continued Suspension of Trading The HKEX has issued resumption guidance for the company, including demonstrating management integrity, publishing financial results, and complying with Listing Rules; the company's shares have been suspended from trading since January 11, 2024, and will remain suspended until all resumption guidance is met, with potential delisting if not resumed by July 10, 2025. - The HKEX issued several resumption guidance points, including demonstrating management integrity, publishing financial results, and complying with Listing Rules 3.05, 3.10, 3.10A, 3.21, 3.25, 3.27A, 3.28, and 13.92[63] - The company's shares have been suspended from trading since January 11, 2024, and will remain suspended until all resumption guidance is met[65] - The HKEX may delist the company if trading is not resumed by July 10, 2025[66] Use of Proceeds The company raised significant funds through the 2019 placing and rights issue; due to the suspension of Tigre de Cristal Phase II expansion, a portion of the proceeds originally allocated for this project was re-allocated on July 14, 2023, with shareholder approval, for the acquisition of Richer Mighty Limited and Joyful Award Limited, design and planning for future development of a Japan land plot, and general working capital or potential investment opportunities. - The 2019 placing raised net proceeds of approximately HKD 297,000,000, and the rights issue raised net proceeds of approximately HKD 1,618,400,000[67] - Due to the suspension of Tigre de Cristal Phase II, the use of approximately HKD 479,300,000 in proceeds originally intended for this project has been changed[68] Changes in Use of Proceeds and Unutilized Amounts (HKD millions) | Item | Unutilized Amount as of January 1, 2023 | Approved Change in Use of Proceeds on July 14, 2023 | Unutilized Amount as of December 31, 2023 and June 30, 2024 | Expected Timeline for Utilizing Unutilized Amounts | | :--- | :--- | :--- | :--- | :--- | | Tigre de Cristal Phase II (Original Use) | 486.5 | (479.3) | – | – | | Acquisition of Richer Mighty Limited and Joyful Award Limited | – | 280.0 | – | – | | Design and Planning for Future Development of Land Plot in Japan | – | 125.0 | 125.0 | Before December 31, 2026 | | General Working Capital or Potential Investment Opportunities for the Group | – | 74.3 | – | – | | Total | 486.5 | – | 125.0 | – | Outlook Despite the ongoing Russia-Ukraine conflict, the Group remains committed to adapting to market changes, actively seeking opportunities to support local tourism, and diversifying investments into the fast-growing Philippine gaming market through Suntrust convertible bond subscriptions, aiming to secure existing investments while increasing ownership for capital appreciation. - The Group will actively seek business opportunities to support local tourism and prepare for future recovery[69] - By subscribing to Suntrust's convertible bonds, the Group is diversifying its investments into the fast-growing Philippine gaming market, aiming to secure existing investments and achieve capital appreciation[69] Financial Review This section provides a detailed review of the company's H1 2024 financial performance, encompassing adjusted EBITDA, operational data across gaming segments, hotel performance, operating expenses, interest income, fair value gains on derivative financial instruments, expected credit losses, depreciation and amortization, finance costs, gaming tax, and income tax expense, ultimately leading to a significant increase in profit attributable to owners. Tigre de Cristal's Adjusted EBITDA In H1 2024, Tigre de Cristal's adjusted EBITDA grew by 14.6% to HKD 65,300,000, primarily due to increased total revenue from gaming and hotel operations; adjusted EBITDA is management's primary measure of operational performance, excluding corporate expenses and non-cash items. - In H1 2024, the Group recorded an adjusted EBITDA of HKD 65,300,000, a 14.6% increase from HKD 57,000,000 in H1 2023, primarily due to increased total revenue from gaming and hotel operations[70] - Adjusted EBITDA is management's primary measure of operating performance for gaming and hotel operations, excluding interest, income tax, depreciation and amortization, as well as corporate expenses and non-cash items[70] Tigre de Cristal Adjusted EBITDA Reconciliation (HKD thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Total Revenue from Gaming and Hotel Operations | 189,910 | 181,974 | | Total Operating Expenses | (124,977) | (126,089) | | Tigre de Cristal's Adjusted EBITDA | 65,260 | 56,971 | | Profit/(Loss) for the Period Attributable to Owners | 156,509 | (16,057) | Gaming Operations In H1 2024, the Group's total gaming revenue increased by 12.09% to HKD 220,854,000, with strong performance in mass-market operations showing significant growth in both rolling chip turnover and net revenue, while slot machine turnover and net revenue decreased, and VIP operations generated no revenue. Composition of Total Gaming Revenue (HKD thousands) | Business Type | H1 2024 | % of Total Gaming Revenue | H1 2023 | % of Total Gaming Revenue | | :--- | :--- | :--- | :--- | :--- | | VIP Operations | – | 0.0% | (170) | 0.0% | | Mass Market Operations | 138,954 | 63.0% | 101,371 | 51.4% | | Slot Machine Operations | 81,900 | 37.0% | 95,826 | 48.6% | | Total Gaming Revenue | 220,854 | 100.0% | 197,027 | 100.0% | VIP Operations VIP operations, primarily targeting foreign customers, generated no revenue in Q1 2024; in H1 2023, VIP rolling chip turnover was HKD 7,300,000, with a net loss of HKD 100,000 after rebates. - VIP operations generated no revenue in Q1 2024, primarily targeting foreign customers[75] VIP Operations Performance Indicators (HKD millions) | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | VIP Rolling Chip Turnover | – | 7.3 | | Net Loss After Rebates | – | (0.1) | | Gross Loss Rate Percentage | – | (2.33)% | Mass Market Operations Mass market operations, primarily targeting the local Russian market, showed strong performance in H1 2024, with rolling chip turnover increasing by 39% to HKD 536,000,000 and net gaming revenue growing by 27% to HKD 98,000,000. - Mass market operations primarily target the local Russian market[77] Mass Market Operations Key Performance Indicators (HKD millions) | Indicator | H1 2024 | H1 2023 | Change Rate | | :--- | :--- | :--- | :--- | | Mass Market Rolling Chip Turnover | 536 | 385 | +39% | | Net Gaming Revenue | 98 | 77 | +27% | | Net Win Rate % | 18.3% | 20.0% | -1.7% | | Average Daily Number of Tables in Operation | 30 | 27 | +11.1% | Slot Machine Operations Slot machine operations, primarily targeting the local Russian market, experienced a decrease in both rolling chip turnover and net gaming revenue in H1 2024, falling by 2% and 18% respectively, with the net win rate also declining from 3.7% to 3.1%. - Slot machine operations primarily target the local Russian market[79] Slot Machine Operations Key Performance Indicators (HKD millions) | Indicator | H1 2024 | H1 2023 | Change Rate | | :--- | :--- | :--- | :--- | | Slot Machine Rolling Chip Turnover | 2,361 | 2,418 | -2% | | Net Gaming Revenue | 74 | 90 | -18% | | Net Win Rate % | 3.1% | 3.7% | -0.6% | | Average Daily Number of Slot Machines in Operation | 318 | 307 | +3.6% | Hotel Operations In H1 2024, hotel revenue increased by 19% to HKD 17,400,000, primarily driven by improved domestic demand, with both weekend and weekday average hotel occupancy rates significantly increasing. - Hotel revenue increased to HKD 17,400,000 in H1 2024, a 19% increase from H1 2023, primarily due to improved domestic demand[81] Average Hotel Occupancy Rate | Period | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Weekend Average Occupancy Rate | 78% | 63% | +15% | | Weekday Average Occupancy Rate | 43% | 30% | +13% | Operating Expenses In H1 2024, Tigre de Cristal's total operating expenses slightly decreased by 0.9% to HKD 125,000,000, reflecting the company's continued strict cost control amidst the Russia-Ukraine conflict. - In H1 2024, Tigre de Cristal's total operating expenses were HKD 125,000,000, a 0.9% decrease from H1 2023, reflecting strict cost control[82] - Management fees payable to the company are calculated at 3% of Tigre de Cristal's net total gaming revenue and are eliminated within the consolidated financial statements[82] Interest Income In H1 2024, the Group's total interest income increased, primarily due to significant growth in bank interest income (driven by higher key interest rates from Russian banks) and new interest income from long-term loans to Suntrust, despite a slight decrease in interest income from derivative financial instruments. Composition of Interest Income (HKD thousands) | Item | H1 2024 | H1 2023 | Change (HKD thousands) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Interest Income from Derivative Financial Instruments | 49,100 | 51,200 | (2,100) | -4.10% | | Bank Interest Income | 15,000 | 10,900 | 4,100 | +37.61% | | Interest Income from Long-term Loan to Suntrust | 4,700 | – | 4,700 | N/A | - The Russian bank increased its key interest rate from 7.5% in H1 2023 to 16% in H1 2024, leading to an increase in bank interest income[83] Fair Value Gain on Derivative Financial Instruments In H1 2024, the company recorded a net fair value gain of HKD 143,600,000 on derivative financial instruments, a significant improvement from a loss of HKD 53,100,000 in the prior-year period; fair value is determined by an independent professional valuer using a discounted cash flow model, with the discount rate as a key input parameter. - In H1 2024, the company recorded a net fair value gain on derivative financial instruments of HKD 143,600,000, compared to a loss of approximately HKD 53,100,000 in H1 2023[84] - Fair value is determined by an independent professional valuer using a discounted cash flow model, with the discount rate being a key input parameter[84] Expected Credit Loss on Financial Guarantee Contracts The Group provided financial guarantees for Suntrust's bank credit and recognized approximately HKD 44,100,000 in expected credit losses in H1 2024; parent company LET executed a counter-indemnity deed to protect the Group. - In H1 2024, expected credit losses of approximately HKD 44,100,000 were recognized on financial guarantee contracts[86] - The Group's assets are pledged to banks to secure bank credit granted to Suntrust, totaling approximately HKD 1,751,100,000[85] - Parent company LET executed a counter-indemnity deed, agreeing to indemnify the Group for all liabilities arising from the Suntrust loan agreement[86] Depreciation and Amortization In H1 2024, depreciation and amortization expenses decreased by 28% to approximately HKD 28,600,000, primarily due to an impairment loss of approximately HKD 483,100,000 recognized on property, operating rights, and equipment in 2023. - Depreciation and amortization expenses decreased by 28% from approximately HKD 39,800,000 in H1 2023 to approximately HKD 28,600,000 in H1 2024[87] - The decrease was primarily due to an impairment loss of approximately HKD 483,100,000 recognized on property, operating rights, and equipment in 2023[87] Finance Costs The Group's finance costs decreased in H1 2024, primarily due to a reduction in non-cash imputed interest on the Oriental Regent non-controlling shareholder loan, attributed to partial loan repayment in 2023. - The decrease in finance costs was primarily due to a reduction in non-cash imputed interest on the Oriental Regent non-controlling shareholder loan, attributed to partial loan repayment in 2023[88] - The Group had no outstanding bank borrowings in both H1 2024 and H1 2023[88] Gaming Tax Gaming tax in the Russian Federation is levied as a fixed monthly amount per operating gaming table and slot machine, rather than a percentage of gaming revenue; in response to the pandemic and Russia-Ukraine conflict, the Primorye regional government implemented gaming tax relief measures in 2023. - Gaming tax in the Russian Federation is levied as a fixed monthly amount per operating gaming table and slot machine, rather than a percentage of gaming revenue[89] - From January to June 2023, gaming tax rates were temporarily reduced to RUB 85,000 per gaming table and RUB 5,500 per slot machine; from July to December, they increased to RUB 105,000 per gaming table and RUB 6,500 per slot machine[90] Income Tax Expense The Group had no taxable profits in both H1 2024 and H1 2023, thus no tax provisions were made for Hong Kong and Japan; G1 Entertainment's gaming operation profits are exempt from Russian corporate tax, but non-gaming revenue is subject to a 20% Russian corporate tax rate. - The Group had no taxable profits in both H1 2024 and H1 2023, thus no tax provisions were made for Hong Kong and Japan[91] - G1 Entertainment's gaming operation profits are exempt from Russian corporate tax, but non-gaming revenue is subject to a 20% Russian corporate tax rate[92] Profit/(Loss) Attributable to Owners of the Company In H1 2024, profit attributable to owners of the company was approximately HKD 156,500,000, representing a significant turnaround from a loss of HKD 16,100,000 in H1 2023. - Profit attributable to owners of the company was approximately HKD 156,500,000 in H1 2024, compared to a loss of HKD 16,100,000 in H1 2023[93] Liquidity, Financial Resources and Capital Structure The Group maintains a robust financial position, with equity attributable to owners of HKD 2,583,800,000 as of June 30, 2024; net current assets and the current ratio improved, and cash and cash equivalents are ample, primarily denominated in Rubles and USD, with operations and growth primarily supported by operating cash flow and equity financing. - Equity attributable to owners of the company was HKD 2,583,800,000 as of June 30, 2024, indicating a strong financial position[94] Liquidity Indicators | Indicator | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Net Current Assets | HKD 235,800,000 | HKD 171,800,000 | +37.25% | | Current Ratio | 1.5 | 1.4 | +0.1 | | Cash and Cash Equivalents | HKD 404,600,000 | HKD 339,500,000 | +19.18% | - Of cash and cash equivalents, 83% were denominated in Rubles, 14% in USD, 1% in HKD, and 2% in RMB[96] Cash Flow Summary (HKD thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 48,681 | 35,065 | | Net Cash from Investing Activities | 4,902 | 565 | | Net Cash Used in Financing Activities | (2,092) | (62,566) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 51,491 | (26,936) | Pledged Assets As of June 30, 2024, and December 31, 2023, the Group's long-term loan to a fellow subsidiary and derivative financial instruments were pledged or encumbered. - The Group's long-term loan to a fellow subsidiary and derivative financial instruments are pledged or encumbered[99] Exchange Rate Risk The company's functional currency is HKD, and consolidated financial statements are presented in HKD; the risk of Ruble exchange rate fluctuations on the Group's results is significantly mitigated by operating costs being denominated in the same currency, creating a natural hedge. - The company's functional currency is HKD, and consolidated financial statements are presented in HKD; the risk of Ruble exchange rate fluctuations on the Group's results is significantly reduced as operating costs are denominated in the same currency[100] Capital Commitments As of June 30, 2024, the Group's capital commitments for Tigre de Cristal maintenance, decoration, and renovation works were approximately HKD 2,714,000, a significant increase from December 31, 2023. Capital Commitments (HKD thousands) | Item | June 30, 2024 | December 31, 2023 | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Tigre de Cristal Maintenance, Decoration and Renovation Works | 2,714 | 392 | +592.3% | Contingent Liabilities As of June 30, 2024, and December 31, 2023, the Group had no contingent liabilities. - As of June 30, 2024, and December 31, 2023, the Group had no contingent liabilities[102] Employees As of June 30, 2024, the Group had 941 employees, with over 97% being Russian citizens; the company provides remuneration, training programs, provident fund contributions, medical insurance, and a share option scheme. Number of Employees | Date | Total Employees | | :--- | :--- | | June 30, 2024 | 941 | | December 31, 2023 | 971 | - Over 97% of full-time employees are Russian citizens; the company provides remuneration and benefits, training programs, provident fund contributions, medical insurance, and a share option scheme[103] Anti-Money Laundering Policy The Russian gaming industry is strictly regulated by anti-money laundering and counter-terrorist financing laws; Tigre de Cristal must implement various AML procedures, including mandatory scrutiny of large winnings and reporting to the Russian Federal Financial Monitoring Service, and has adopted its own AML policy and internal control systems. - The Russian gaming industry is strictly regulated by anti-money laundering and counter-terrorist financing laws, with a legal framework largely consistent with international standards[104] - Tigre de Cristal must conduct mandatory scrutiny of winnings exceeding RUB 600,000 (approximately HKD 55,000) and submit reports to the Russian Federal Financial Monitoring Service[105] - Tigre de Cristal has adopted its own anti-money laundering and counter-terrorist financing policies and key elements, including internal control systems, dedicated officer oversight, customer identification and screening, and reporting of unusual transactions[105] Corporate Governance This section addresses the company's compliance with corporate governance codes and Listing Rules, including board composition, securities dealing, and interim results review. Non-compliance with Listing Rules Requirements In H1 2024, the company failed to fully comply with several Corporate Governance Code and Listing Rules requirements, including the unseparated roles of Chairman and CEO, insufficient independent non-executive directors, vacancies on audit/remuneration/nomination committees, and vacant authorized representative and company secretary positions; these non-compliances were rectified by new appointments and committee restructuring on March 11, 2025. Chairman and Chief Executive Officer Following the resignation of former CEO Mr. Choi, the company did not appoint a separate individual to fill the CEO vacancy, with the role and functions performed by an executive director, thus failing to comply with Corporate Governance Code Provision C.2.1. - Following the resignation of former CEO Mr. Choi, the company did not appoint a separate individual to fill the CEO vacancy, with the role and functions performed by an executive director, thus failing to comply with Corporate Governance Code Provision C.2.1[106] Independent Non-executive Directors Following the resignations of Messrs. Lam, Lau, and Li, the company's number of independent non-executive directors fell below the minimum Listing Rules requirement, resulting in vacancies on the audit, remuneration, and nomination committees; these issues were rectified by new appointments and committee restructuring on March 11, 2025. - The number of independent non-executive directors fell below the requirement of Listing Rule 3.10(1) and failed to maintain at least one-third of the board members[107] - Vacancies existed on the Audit Committee, Remuneration Committee, and Nomination Committee, failing to meet Listing Rules requirements for committee composition and chairpersons[107] - The aforementioned Listing Rules were complied with on March 11, 2025, through the appointment of Ms. Ng Sin Kwan, re-appointment of Messrs. Lau and Li as independent non-executive directors, and committee restructuring[108] Authorized Representatives Following Mr. Chiu's resignation as authorized representative, the company failed to meet the Listing Rule 3.05 requirement for two authorized representatives in H1 2024; this was rectified by the appointment of Ms. Mak Sin Man as authorized representative on March 11, 2025. - Following Mr. Chiu's resignation as authorized representative, the company failed to meet the Listing Rule 3.05 requirement for two authorized representatives[109] - The aforementioned Listing Rule was re-complied with on March 11, 2025, through the appointment of Ms. Mak Sin Man as authorized representative[109] Company Secretary Following Ms. Mok's resignation as Company Secretary, the company failed to comply with Listing Rule 3.28; this was rectified by the appointment of Ms. Mak Sin Man as Company Secretary on March 11, 2025. - Following Ms. Mok's resignation as Company Secretary, the company failed to comply with Listing Rule 3.28[110] - The aforementioned Listing Rule was complied with on March 11, 2025, through the appointment of Ms. Mak Sin Man as the company's Company Secretary[110] Standard Code for Securities Transactions by Directors and Employees The company has adopted a code for securities transactions no less exacting than the Listing Rules' Model Code, and all directors have confirmed their compliance with this code during H1 2024. - The company has adopted a code for securities transactions no less exacting than the Listing Rules' Model Code[111] - All directors have confirmed their compliance with the Model Code and the code for securities transactions during H1 2024[111] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities, and the company held no treasury shares. - For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[112] - As of June 30, 2024, the company held no treasury shares[112] Review of Interim Results The Group's unaudited interim results for the six months ended June 30, 2024, have been reviewed by the company's Audit Committee in accordance with relevant standards issued by the HKICPA. - The Group's unaudited interim results for the six months ended June 30, 2024, have been reviewed by the company's Audit Committee in accordance with Hong Kong Standard on Review Engagements 2410 issued by the HKICPA[113] Board of Directors As of the announcement date, the company's Board of Directors comprises Executive Directors Mr. Lo Yan Yee (Chairman) and Mr. Lam Hung Tuan, Non-executive Director Mr. Tsang Hing Kit, and Independent Non-executive Directors Mr. Lau Yau Cheung, Mr. Li Chak Hung, and Ms. Ng Sin Kwan. - The Board of Directors includes Executive Directors Mr. Lo Yan Yee (Chairman) and Mr. Lam Hung Tuan; Non-executive Director Mr. Tsang Hing Kit; and Independent Non-executive Directors Mr. Lau Yau Cheung, Mr. Li Chak Hung, and Ms. Ng Sin Kwan[114] Other Information This section provides information regarding the continued suspension of trading of the company's shares. Continued Suspension of Trading The company's shares have been suspended from trading on the Stock Exchange since 9:00 a.m. on January 11, 2024, and will remain suspended until the company meets all resumption guidance, remedies the issues leading to its suspension, and fully complies with the Listing Rules to the satisfaction of the Stock Exchange. - Trading in the shares has been temporarily suspended on the Stock Exchange since 9:00 a.m. on January 11, 2024, and will remain suspended[115] - The suspension will continue until the company meets all resumption guidance, remedies the issues leading to its suspension, and fully complies with the Listing Rules to the satisfaction of the Stock Exchange[115]