鹰普精密(01286) - 2025 - 中期财报

Company Information The company's board of directors, committees, contact information, and share details are presented Board of Directors The company's board comprises executive directors, including the Chairman and CEO, and independent non-executive directors - Executive Directors include Mr. Lu Ruibo (Chairman and CEO), Mr. Yu Yuepeng, Ms. Zhu Liwei, and Mr. Wang Dong[5] - Independent Non-Executive Directors include Dr. Yan Zhenming, Mr. Li Xiaoming, and Ms. Chow Lok Mei Ki[5] Committee Members Key committees, including Audit, Remuneration, Nomination, and Sustainability, are established with designated chairpersons for effective governance - The Audit Committee is chaired by Ms. Chow Lok Mei Ki[5] - The Remuneration Committee is chaired by Mr. Li Xiaoming[5] - The Nomination Committee is chaired by Mr. Lu Ruibo[5] - The Sustainability Committee is chaired by Dr. Yan Zhenming[5] Company Contact and Registration Information The company is registered in the Cayman Islands with headquarters in Hong Kong and a main operating location in Wuxi, Jiangsu, audited by KPMG - The company's registered office is located in the Cayman Islands[5] - The headquarters and principal place of business in Hong Kong are located at Shui On Centre, Wan Chai, Hong Kong[5] - The auditor is KPMG[6] Share and Dividend Information The company's shares are listed under stock code 1286, with an interim dividend of HKD 0.08 per share declared for 2025 - Stock code: 1286, listing date: June 28, 2019[7] - An interim dividend of 8.0 HK cents per share for 2025 was declared, with an ex-dividend date of August 25, 2025[7] Financial Highlights This section provides a concise overview of the company's financial performance, balance sheet, and key ratios for the period Financial Performance for the Six Months Ended June 30 Revenue increased by 2.0% to HKD 2,449.9 million, with profit attributable to equity holders rising 13.7% to HKD 346.3 million Financial Performance for the Six Months Ended June 30 (HKD million) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,449.9 | 2,402.5 | 2.0% | | Gross Profit | 681.5 | 634.5 | 7.4% | | Gross Margin | 27.8% | 26.4% | 1.4% | | Profit Attributable to Equity Holders of the Company | 346.3 | 304.5 | 13.7% | | Adjusted Profit Attributable to Equity Holders | 359.6 | 322.3 | 11.6% | | Basic Earnings Per Share (HK cents) | 18.35 | 16.13 | 13.8% | | Dividend Per Share (HK cents) | 8.0 | 8.0 | 0.0% | | EBITDA | 715.3 | 694.3 | 3.0% | | EBITDA Margin | 29.2% | 28.9% | 0.3% | | Net Cash Generated from Operating Activities | 555.3 | 497.9 | 11.5% | | Free Cash Flow from Operations | 116.6 | 156.6 | -25.5% | [8] Balance Sheet and Ratios for the Six Months Ended June 30 Cash and cash equivalents increased by 8.9% to HKD 655.2 million, while total equity grew 10.9% to HKD 5,262.2 million Balance Sheet and Ratios for the Six Months Ended June 30 (HKD million) | Metric | As of June 30, 2025 | As of December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 655.2 | 601.7 | 8.9% | | Total Debt | 2,353.4 | 2,196.1 | 7.2% | | Net Debt | 1,698.2 | 1,594.4 | 6.5% | | Total Equity | 5,262.2 | 4,742.9 | 10.9% | | Market Capitalization | 5,567.5 | 3,680.2 | 51.3% | | Enterprise Value | 7,283.1 | 5,296.1 | 37.5% | | Key Financial Ratios | | | | | Adjusted Return on Equity | 13.0% | 12.8% | | | Price-to-Earnings Ratio | 8.1 | 5.7 | | | Enterprise Value to LTM Adjusted EBITDA | 5.4 | 4.0 | | | Net Debt to LTM Adjusted EBITDA | 1.3 | 1.2 | | | Net Gearing Ratio | 32.3% | 33.6% | | | Adjusted Interest Coverage Ratio | 9.8 | 7.4 | | [16] Reconciliation of Non-IFRS Measures Reconciliation of profit for the period to adjusted profit attributable to equity holders and EBITDA to adjusted EBITDA is provided Reconciliation of Profit for the Period to Adjusted Profit Attributable to Equity Holders (HKD million) | Metric | For the Six Months Ended June 30 | | :--- | :--- | :--- | | | 2025 | 2024 | | Profit for the period | 347.4 | 305.5 | | Adjustments: Amortization and depreciation related to past purchase price allocation, net of tax | 13.3 | 17.8 | | Adjusted profit for the period | 360.7 | 323.3 | | Less: Profit attributable to non-controlling interests | (1.1) | (1.0) | | Adjusted profit attributable to equity holders | 359.6 | 322.3 | [17] Reconciliation of EBITDA to Adjusted EBITDA (HKD million) | Metric | For the Six Months Ended June 30 | LTM to June 30, 2025 | For the Year Ended December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | | | | EBITDA | 715.3 | 694.3 | 1,411.9 | 1,390.9 | | Adjustments: Insurance claims received for Nantong fire incident | – | – | (72.3) | (72.3) | | Adjusted EBITDA | 715.3 | 694.3 | 1,339.6 | 1,318.6 | [19] Chairman's Statement The Chairman's statement reviews the company's overall performance, market challenges, and strategic initiatives for future growth Overall Results for the Six Months Ended June 30 The Group achieved a 2.0% revenue increase to HKD 2,449.9 million, with adjusted profit attributable to equity holders up 11.6% - Revenue reached HKD 2,449.9 million, a year-on-year increase of 2.0%[24] - Profit attributable to equity holders of the Company was HKD 346.3 million, a year-on-year increase of 13.7%[24] - Adjusted profit attributable to equity holders was HKD 359.6 million, a year-on-year increase of 11.6%[24] - An interim dividend of 8.0 HK cents per share was declared[24] Macroeconomic Environment and Operating Challenges Global economic uncertainties, including US tariff policies and geopolitical tensions, have led to cautious client orders and increased supply chain risks - The global economy is affected by uncertain US tariff policies and geopolitical tensions, leading to cautious client orders and a preference for multi-source suppliers[25] - The new Mexico factory recorded significant losses, and the weak European automotive market impacted the performance of the Turkey factory[26] - Most factories in China demonstrated resilient performance, and lower financing costs contributed to an 11.6% increase in adjusted profit attributable to equity holders[26] Revenue Analysis by End Market Diversified industrial end market revenue grew 13.7%, driven by strong demand for high-horsepower engines, while other segments faced declines Revenue by End Market (HKD million) | By End Market | 2025 | % of Total | 2024 | % of Total | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Diversified Industrial | 1,293.8 | 52.8% | 1,138.2 | 47.4% | 13.7% | | – High-Horsepower Engines | 533.7 | 21.8% | 359.8 | 15.0% | 48.3% | | – Construction Equipment | 339.1 | 13.8% | 334.1 | 13.9% | 1.5% | | – Agricultural Machinery | 154.6 | 6.3% | 177.2 | 7.4% | -12.8% | | – Recreational Boats and Vehicles | 68.7 | 2.8% | 91.8 | 3.8% | -25.2% | | – Others | 197.7 | 8.1% | 175.3 | 7.3% | 12.8% | | Automotive | 802.2 | 32.7% | 866.3 | 36.0% | -7.4% | | – Passenger Vehicles | 423.2 | 17.3% | 444.5 | 18.5% | -4.8% | | – Commercial Vehicles | 379.0 | 15.4% | 421.8 | 17.5% | -10.1% | | Aerospace, Medical & Energy | 353.9 | 14.5% | 398.0 | 16.6% | -11.1% | | – Aerospace | 239.1 | 9.8% | 255.5 | 10.6% | -6.4% | | – Medical | 60.7 | 2.5% | 40.3 | 1.7% | 50.6% | | – Energy | 54.1 | 2.2% | 102.2 | 4.3% | -47.1% | | Total | 2,449.9 | 100.0% | 2,402.5 | 100.0% | 2.0% | [29] - Sales in the high-horsepower engine end market significantly increased by 48.3% year-on-year, driven by surging demand for AI data center construction[27] - Revenue in the medical end market surged by 50.6% year-on-year, benefiting from the mass production of new products[28] Revenue Analysis by Business Segment Sand casting business saw a 35.9% increase in sales, driven by high-horsepower engines, while surface treatment revenue grew 33.8% Revenue by Business Segment (HKD million) | By Business Segment | 2025 | % of Total | 2024 | % of Total | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Investment Castings | 922.6 | 37.7% | 957.0 | 39.8% | -3.6% | | Precision Machined Components and Others | 793.3 | 32.4% | 904.8 | 37.7% | -12.3% | | Sand Castings | 695.2 | 28.4% | 511.7 | 21.3% | 35.9% | | Surface Treatment | 38.8 | 1.5% | 29.0 | 1.2% | 33.8% | | Total | 2,449.9 | 100.0% | 2,402.5 | 100.0% | 2.0% | [32] - Sand casting sales significantly increased by 35.9% year-on-year, primarily due to strong growth in the high-horsepower engine end market[31] - Surface treatment business revenue grew by 33.8% year-on-year, as the Nantong factory completed its restoration[31] Revenue Analysis by Geographical Region Asia region sales increased by 22.1% due to strong performance in China, while Americas and Europe experienced declines Revenue by Geographical Region (HKD million) | By Geographical Region | 2025 | % of Total | 2024 | % of Total | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | 1,156.6 | 47.3% | 1,204.0 | 50.1% | -3.9% | | – United States | 998.1 | 40.8% | 1,090.1 | 45.4% | -8.4% | | – Others | 158.5 | 6.5% | 113.9 | 4.7% | 39.2% | | Europe | 733.2 | 29.9% | 739.9 | 30.8% | -0.9% | | Asia | 560.1 | 22.8% | 458.6 | 19.1% | 22.1% | | – China | 507.5 | 20.7% | 393.0 | 16.4% | 29.1% | | – Others | 52.6 | 2.1% | 65.6 | 2.7% | -19.8% | | Total | 2,449.9 | 100.0% | 2,402.5 | 100.0% | 2.0% | [35] - Overall sales in the Asia region increased by 22.1%, primarily driven by strong sales of high-horsepower engine products in China[34] - Sales in the Americas and Europe markets decreased by 3.9% and 0.9%, respectively, impacted by trade wars, tariff wars, and shrinking end-market demand[34] Corporate Development and Strategy The company maintains a "global footprint, regional manufacturing, and dual-source production" strategy to mitigate trade risks and capitalize on growth markets - The company adheres to a strategy of "global footprint, diversified end markets, and dual-source production" to effectively hedge against trade protectionism impacts[37] - The high-horsepower engine end market has become the largest sub-segment, with sales revenue expected to maintain decent growth over the next two to three years[38] - The Mexico factory's capital expenditure will increase over the next one to two years due to client-requested capacity transfers and increased orders, with expectations to reduce losses and turn profitable[40] - The Nantong factory is in a critical phase of capacity ramp-up and is expected to maintain its growth trajectory in the second half of the year[41] Outlook The company anticipates accelerated sales growth in the second half of 2025, maintaining a mid-to-high single-digit full-year growth forecast - Sales growth rate is projected to accelerate in the second half of 2025, maintaining a mid-to-high single-digit year-on-year growth forecast for the full year[42] - The capital expenditure budget for the Mexico SLP campus has increased to approximately HKD 600 million, with phase two factory infrastructure expected to be largely completed by the end of 2026[43] - The workshop for producing high-horsepower engine sand castings within the Mexico campus will commence production in the first quarter of next year[43] - The company will continue to vigorously expand into diversified industrial and aerospace, medical, and energy end markets, especially products related to the AI industry[43] Appreciation The Chairman extends gratitude to all stakeholders for their continued support and contributions - The Chairman, on behalf of the Board, expresses gratitude to all stakeholders for their support[44] Management Discussion and Analysis This section provides a detailed analysis of the Group's financial performance, operational results, and financial position Financial Performance Overview The Group's revenue increased by 2.0% to HKD 2,449.9 million, with profit for the period rising 13.7% to HKD 347.4 million Financial Performance Overview for the Six Months Ended June 30 (HKD million) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,449.9 | 2,402.5 | 2.0% | | Gross Profit | 681.5 | 634.5 | 7.4% | | Gross Margin | 27.8% | 26.4% | 1.4% | | Operating Profit | 461.8 | 432.2 | 6.8% | | Operating Profit Margin | 18.8% | 18.0% | 0.8% | | Net Finance Costs | (41.0) | (55.0) | -25.5% | | Profit Before Tax | 420.8 | 377.2 | 11.6% | | Profit for the Period | 347.4 | 305.5 | 13.7% | | Net Profit Margin | 14.2% | 12.7% | 1.5% | [46] Financial Review A detailed review of revenue, gross profit, other income, expenses, and finance costs highlights key drivers of financial performance Revenue Revenue increased by 2.0% to HKD 2,449.9 million for the six months ended June 30, compared to the prior period - Revenue increased by 2.0% to HKD 2,449.9 million year-on-year[48] Gross Profit and Gross Margin Gross profit increased by 7.4% to HKD 681.5 million, with gross margin improving to 27.8%, driven by strong sand casting performance - Gross profit increased by 7.4% to HKD 681.5 million[49] - Gross margin improved from 26.4% to 27.8%[49] - Gross profit from sand casting factories significantly increased by HKD 71.3 million, primarily driven by sales growth in high-horsepower engine end market products[49] Other Income Other income decreased by HKD 0.8 million to HKD 12.7 million, primarily from government grants and technical development incentives - Other income decreased by HKD 0.8 million to HKD 12.7 million, mainly from government subsidies[50] Net Other Gains Net other gains amounted to HKD 24.1 million, a decrease from the prior year, mainly due to net exchange gains - Net other gains were HKD 24.1 million, a year-on-year decrease of 46.2%[51] - This was primarily due to net exchange gains of HKD 23.2 million, resulting from the appreciation of the Euro and US Dollar against the Hong Kong Dollar[51] Selling and Distribution Expenses Selling and distribution expenses increased by 8.5% to HKD 94.4 million, primarily due to higher US tariffs - Selling and distribution expenses increased by 8.5% to HKD 94.4 million[52] - US tariffs increased by HKD 6.3 million to HKD 16.0 million[52] Administrative and Other Operating Expenses Administrative and other operating expenses decreased by 6.6% to HKD 162.1 million, mainly due to reduced amortization and bad debt expenses - Administrative and other operating expenses decreased by 6.6% to HKD 162.1 million[54] - The decrease was primarily due to reduced amortization and depreciation expenses related to past purchase price allocation and lower bad debt expenses[54] Net Finance Costs Net finance costs decreased by 25.5% to HKD 41.0 million, attributed to lower HKD borrowing rates and a higher proportion of RMB borrowings - Net finance costs decreased by 25.5% to HKD 41.0 million[55] - The decrease was mainly due to lower HKD borrowing rates and a higher proportion of RMB borrowings during the period[55] Income Tax Income tax expense increased by 2.4% to HKD 73.4 million, reflecting the higher reported profit for the period - Income tax expense increased by 2.4% to HKD 73.4 million, reflecting the increase in reported profit for the period[56] Working Capital Analysis Total working capital as a percentage of revenue was 32.1%, with slight increases in inventory and trade receivables, and a decrease in trade payables Inventories Inventories increased by HKD 12.9 million to HKD 1,065.1 million, mainly due to higher import tariffs at US warehouses - Inventories increased by HKD 12.9 million to HKD 1,065.1 million[58] - Inventory turnover days decreased by 1 day to 117 days[58] Trade and Bills Receivables Trade and bills receivables increased by HKD 122.8 million to HKD 1,243.4 million, with 96.3% being current or less than 30 days overdue - Trade and bills receivables increased by HKD 122.8 million to HKD 1,243.4 million[59] - Trade receivables turnover days increased by 1 day to 88 days[59] - 96.3% of current and less than 30 days overdue balances accounted for the total trade receivables[59] Trade Payables Trade payables decreased by HKD 48.1 million to HKD 540.5 million, with a reduction in turnover days - Trade payables decreased by HKD 48.1 million to HKD 540.5 million[59] - Trade payables turnover days decreased by 1 day to 58 days[59] EBITDA and Net Profit The Group's EBITDA was HKD 715.3 million, with an EBITDA margin of 29.2%, and adjusted profit attributable to equity holders was HKD 359.6 million - EBITDA was HKD 715.3 million, with an EBITDA margin of 29.2%[65] - Profit attributable to equity holders of the Company was HKD 346.3 million, with a net profit margin of 14.2%[65] - Adjusted profit attributable to equity holders was HKD 359.6 million, with an adjusted net profit margin of 14.7%[65] Financial Resources and Liquidity Total assets increased by 7.9% to HKD 8,814.2 million, with a liquidity ratio of 1.72, reflecting increased cash flow from operations - Total assets increased by 7.9% to HKD 8,814.2 million, and total equity increased by 10.9% to HKD 5,262.2 million[66] - The current ratio was 1.72, slightly higher than 1.63 as of December 31, 2024[66] Condensed Consolidated Cash Flow Statement (HKD million) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Cash Generated From/(Used In) Operating Activities | 555.3 | 497.9 | | Cash Used In Investing Activities | (438.7) | (341.3) | | Cash Used In Financing Activities | (83.7) | (333.6) | | Net Change in Cash | 32.9 | (177.0) | [67] Condensed Consolidated Cash Flow Statement Net cash generated from operating activities increased to HKD 555.3 million, while cash used in investing activities rose due to capital expenditures - Net cash generated from operating activities was HKD 555.3 million, a year-on-year increase of HKD 57.4 million[68] - Net cash used in investing activities was HKD 438.7 million, a year-on-year increase of HKD 97.4 million, primarily for payments for capital expenditures[68] - Net cash used in financing activities was HKD 83.7 million, a year-on-year decrease of HKD 249.9 million[69] Debt and Capital Commitments Total borrowings increased to HKD 2,353.4 million due to rising working capital and capital expenditures, with a net debt-to-equity ratio of 32.3% - Total borrowings increased by HKD 157.3 million to HKD 2,353.4 million, due to increased working capital and capital expenditures[71] - The net gearing ratio was 32.3% (December 31, 2024: 33.6%)[72] - Capital expenditure was HKD 382.9 million, primarily for capacity expansion at China factories and infrastructure and machinery expenses at the Mexico factory[73] - Contracted but unprovided capital commitments amounted to HKD 542.7 million, mainly related to factory construction and machinery purchases[73] Debt Total borrowings increased to HKD 2,353.4 million, with available bank facilities totaling HKD 2,123.5 million and a net debt-to-equity ratio of 32.3% Total Borrowings (HKD million) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current Bank Loans | 959.3 | 919.2 | | Non-current Bank Loans | 1,381.9 | 1,265.6 | | Current Lease Liabilities | 4.3 | 3.8 | | Non-current Lease Liabilities | 7.9 | 7.5 | | Total Borrowings | 2,353.4 | 2,196.1 | [72] - Total available bank facilities amounted to HKD 2,123.5 million[72] Capital Expenditure and Commitments Capital expenditure for the period was HKD 382.9 million, primarily for capacity expansion in China and Mexico, with unfulfilled capital commitments of HKD 542.7 million - Capital expenditure was HKD 382.9 million, primarily for capacity expansion at China factories and infrastructure and machinery expenses at the Mexico factory[73] - HKD 242.7 million of expenditure was incurred for the construction of the Mexico factory[73] - Contracted but unprovided capital commitments amounted to HKD 542.7 million[73] Pledge of Assets As of June 30, 2025, the Group had no property, plant, and equipment pledged as security for bank borrowings - As of June 30, 2025, no property, plant, and equipment were pledged as security for bank borrowings[74] Contingent Liabilities As of June 30, 2025, there were no significant contingent liabilities - As of June 30, 2025, there were no significant contingent liabilities[75] Further Information About the Group This section provides additional details on the Group's investments, asset changes, treasury and human resources management, and corporate governance Investments and Changes in Assets The Group has no significant future investment plans or major acquisitions/disposals of subsidiaries beyond those disclosed in the Chairman's Statement - Other than those disclosed in the Chairman's Statement, there are no other significant future plans for investments or capital assets[76] - For the six months ended June 30, 2025, there were no significant acquisitions or disposals of subsidiaries[77] Treasury and Human Resources Management The Group adopts a prudent treasury management approach and maintains a competitive compensation structure for its 7,897 full-time employees - The Group adopts a prudent treasury management approach, monitoring foreign exchange rates and adjusting its loan portfolio to mitigate exchange rate fluctuation impacts[78] - As of June 30, 2025, the Group had 7,897 full-time employees, with total staff costs amounting to HKD 644.3 million[79] - The company maintains good relationships with employees, provides training, offers competitive remuneration packages, and discretionary bonuses and share options[79] Dividends and Share-Related Matters The Board declared an interim dividend of HKD 0.08 per share for the six months ended June 30, 2025, with no share repurchases during the period - The Board resolved to declare an interim dividend of 8.0 HK cents per share, totaling approximately HKD 151.0 million[81] Relevant Dates for Interim Dividend Payment | Date | Details | | :--- | :--- | | Ex-dividend Date | August 25, 2025 | | Book Closure Period | August 27 to August 29, 2025 | | Record Date | August 29, 2025 | | Dividend Payment Date | On or before September 10, 2025 | [82] - For the six months ended June 30, 2025, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any listed shares[83] Corporate Governance The company complies with the Corporate Governance Code, with a deviation regarding the combined roles of Chairman and CEO, which the Board deems beneficial - The company has complied with all code provisions of the Corporate Governance Code, except for the deviation where Mr. Lu Ruibo holds both the Chairman and Chief Executive Officer roles[84] - The Board believes that combining the roles of Chairman and CEO is beneficial for the Group's management, supported by an experienced senior management team and a balanced Board[84] - All Directors confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers for the six months ended June 30, 2025[86] Equity Disclosure Mr. Lu Ruibo and his controlled entities hold a significant interest in the company's issued share capital, alongside other major shareholders Directors' and Chief Executive's Interests in Shares of the Company | Director's Name | Nature of Interest/Capacity | Number of Shares | Approximate % of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Lu Ruibo | Interest of controlled corporation | 1,348,118,787 | 71.43 | | | Spouse's interest | 300,000 | 0.02 | | | Beneficial owner | 9,239,000 | 0.49 | [87] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company | Name of Substantial Shareholder | Nature of Interest/Capacity | Number of Shares Held | Approximate % of Issued Share Capital | | :--- | :--- | :--- | :--- | | Impro Development | Beneficial owner | 1,348,118,787 | 71.43 | | Mr. Lu | Interest of controlled corporation and beneficial owner | 1,357,357,787 | 71.92 | | | Spouse's interest | 300,000 | 0.02 | | Tongbai Capital (Hong Kong) Limited | Beneficial owner | 103,989,123 | 5.51 | | Genertec Investment Management Co., Ltd. | Interest of controlled corporation | 103,989,123 | 5.51 | | Genertec Investment Capital Co., Ltd. | Interest of controlled corporation | 103,989,123 | 5.51 | | China General Technology (Group) Holding Co., Ltd. | Interest of controlled corporation | 103,989,123 | 5.51 | [90] Share Option Schemes The company has pre-IPO and post-IPO share option schemes, with no outstanding options under the pre-IPO scheme and no grants under the post-IPO scheme - As of June 30, 2025, there were no outstanding share options under the Pre-IPO Share Option Scheme[92] - No share options have been granted under the Post-IPO Share Option Scheme since its adoption[92] - The Share Option Schemes aim to incentivize eligible participants and comply with the provisions of Chapter 17 of the Listing Rules[93] Post-Reporting Period Events and Review No significant post-reporting period events occurred other than the interim dividend declaration, and the interim financial report was reviewed by KPMG - Other than the interim dividend, there were no other significant events after the reporting period[97] - There were no changes in the information of Directors and chief executives during the period[98] - The Audit Committee has reviewed the interim results, and the external auditor, KPMG, has reviewed the interim financial report[99] Independent Review Report KPMG reviewed the interim financial report for the six months ended June 30, 2025, prepared in accordance with IFRS 34 and Listing Rules Introduction KPMG reviewed the interim financial report of Impro Precision Industries Limited for the six months ended June 30, 2025 - KPMG has reviewed the company's interim financial report for the six months ended June 30, 2025[101] - The interim financial report was prepared in accordance with the Listing Rules and International Accounting Standard 34[101] Scope of Review The review was conducted in accordance with HKSRS 2410, involving inquiries and analytical procedures, and does not constitute an audit opinion - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410[102] - The scope of the review is less than an audit, and therefore, no audit opinion is expressed[102] Conclusion Based on the review, no material matters were identified suggesting the interim financial report was not prepared in accordance with IAS 34 - No matters were identified that caused the reviewer to believe the interim financial report for June 30, 2025, was not prepared in any material respect in accordance with International Accounting Standard 34[103] Consolidated Statement of Profit or Loss This statement presents the Group's revenue, cost of sales, gross profit, other income, expenses, and profit for the six months ended June 30, 2025 - Revenue was HKD 2,449,946 thousand, and profit for the period was HKD 347,451 thousand[105] - Profit attributable to equity holders of the Company was HKD 346,335 thousand, with basic earnings per share of 18.35 HK cents[105] Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement details the Group's profit for the period and other comprehensive income, including items not reclassified to profit or loss and those that may be reclassified - Profit for the period was HKD 347,451 thousand[107] - Exchange differences on translation of financial statements of entities with functional currencies other than HKD amounted to HKD 332,564 thousand[107] - Total comprehensive income for the period was HKD 675,662 thousand[107] Consolidated Statement of Financial Position This statement outlines the Group's assets, liabilities, and equity as of June 30, 2025, with total equity amounting to HKD 5,262.2 million - Total non-current assets were HKD 5,529,979 thousand, with property, plant and equipment at HKD 4,822,179 thousand[109] - Total current assets were HKD 3,284,203 thousand, including inventories of HKD 1,065,066 thousand, trade and bills receivables of HKD 1,243,412 thousand, and cash and cash equivalents of HKD 655,234 thousand[109] - Total current liabilities were HKD 1,913,154 thousand, and total non-current liabilities were HKD 1,638,813 thousand[109][110] - Total equity was HKD 5,262,215 thousand[110] Consolidated Statement of Changes in Equity This statement tracks changes in the Group's equity components, including share capital, reserves, and retained profits, for the six months ended June 30, 2025 - Total equity as of January 1, 2025, was HKD 4,742,914 thousand[114] - Profit for the period was HKD 346,335 thousand, and other comprehensive income was HKD 327,999 thousand[114] - Total equity as of June 30, 2025, was HKD 5,262,215 thousand[114] Condensed Consolidated Cash Flow Statement This statement summarizes the Group's cash flows from operating, investing, and financing activities, resulting in a net increase in cash and cash equivalents - Net cash generated from operating activities was HKD 555,347 thousand[116] - Net cash used in investing activities was HKD 438,711 thousand, primarily for the purchase of property, plant and equipment[116] - Net cash used in financing activities was HKD 83,684 thousand[116] - Cash and cash equivalents increased by HKD 32,952 thousand, with an ending balance of HKD 655,234 thousand[116] Notes to the Unaudited Interim Financial Report This section provides detailed notes to the unaudited interim financial report, covering general information, basis of preparation, and accounting policies General Information Impro Precision Industries Limited is incorporated in the Cayman Islands and listed in Hong Kong, primarily engaged in manufacturing casting products and precision machined parts - The Company is incorporated in the Cayman Islands, and its shares are listed on the Main Board of the Stock Exchange of Hong Kong[117] - The Group is principally engaged in the development and production of casting products, precision machined parts, and provision of surface treatment services[117] Basis of Preparation The interim financial report is prepared in accordance with Listing Rules and IAS 34, applying consistent accounting policies with the 2024 annual financial statements - The interim financial report is prepared in accordance with the Listing Rules and International Accounting Standard 34[118] - It adopts the same accounting policies as the 2024 annual financial statements, except for changes in accounting policies expected to be reflected in the 2025 annual financial statements[118] - The interim financial report is unaudited but has been reviewed by KPMG[119] Changes in Accounting Policies The Group adopted amendments to IAS 21, "The Effects of Changes in Foreign Exchange Rates—Lack of Exchangeability," with no material impact on this interim report - The Group has applied the amendments to IAS 21, "The Effects of Changes in Foreign Exchange Rates—Lack of Exchangeability," but these amendments have no material impact on this interim report[120] Revenue and Segment Reporting The Group's revenue is segmented by business line and geographical location, and presented across four reportable segments: investment castings, precision machined components and others, sand castings, and surface treatment Revenue The Group's revenue for the six months ended June 30, 2025, was HKD 2,449.9 million, primarily from casting products and precision machined parts - The Group is principally engaged in the development and production of various casting products and precision machined parts[122] Revenue from Contracts with Customers by Business Line (HKD thousand) | Revenue | 2025 | 2024 | | :--- | :--- | :--- | | Investment Castings | 922,601 | 956,983 | | Precision Machined Components and Others | 793,351 | 904,839 | | Sand Castings | 695,164 | 511,663 | | Surface Treatment | 38,830 | 29,059 | | | 2,449,946 | 2,402,544 | [123] Segment Reporting Segment reporting categorizes revenue by business line and geography, showing strong growth in sand castings and increased non-current assets in Mexico - The Group presents four reportable segments: investment castings, precision machined components and others, sand castings, and surface treatment[124] - The sand castings segment showed strong revenue growth, with reportable segment profit of HKD 205,885 thousand[127] - Revenue from external customers was 47.3% from Americas, 29.9% from Europe, and 22.8% from Asia[131] - Designated non-current assets in Mexico increased from HKD 1,634,630 thousand as of December 31, 2024, to HKD 2,005,672 thousand as of June 30, 2025[131] Other Income and Net Other Gains Other income totaled HKD 12.7 million, mainly from government grants, while net other gains were HKD 24.1 million, primarily from exchange gains Other Income Other income amounted to HKD 12.7 million, predominantly comprising government grants Other Income (HKD thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Rental income | 868 | 700 | | Government grants | 10,089 | 12,200 | | Others | 1,741 | 636 | | | 12,698 | 13,536 | [132] Net Other Gains Net other gains totaled HKD 24.1 million, primarily driven by net exchange gains Net Other Gains (HKD thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net exchange gains | 23,231 | 42,953 | | Net loss on disposal of property, plant and equipment | (643) | (188) | | Others | 1,470 | 2,084 | | | 24,058 | 44,849 | [133] Profit Before Tax Profit before tax is derived after accounting for net finance costs and other items, including inventory costs, depreciation, and amortization expenses Net Finance Costs Net finance costs decreased to HKD 41.0 million, mainly due to reduced interest expenses on bank borrowings Net Finance Costs (HKD thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Interest income | (6,179) | (4,562) | | Interest expense on bank loans | 46,932 | 59,309 | | Interest expense on lease liabilities | 282 | 302 | | | 47,214 | 59,611 | | Net finance costs | 41,035 | 55,049 | [134] Other Items Other items include inventory costs recognized as expenses, depreciation, amortization of intangible assets, and R&D expenses Other Items (HKD thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Cost of inventories recognized as expense | 1,768,427 | 1,768,026 | | Depreciation expense — owned property, plant and equipment | 196,601 | 197,580 | | Depreciation expense — right-of-use assets | 4,135 | 5,531 | | Amortization of intangible assets | 9,913 | 15,028 | | Amortization of deferred expenses | 42,855 | 43,890 | | Research and development expenses | 83,096 | 82,895 | | Provision for impairment loss on trade receivables | 593 | 4,095 | | Reversal of inventory write-down | (4,158) | (10,219) | [135] Income Tax Income tax expense increased to HKD 73.3 million, reflecting the higher reported profit for the period, including taxes from mainland China and Hong Kong Income Tax (HKD thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Current tax — Mainland China corporate income tax | 40,057 | 42,264 | | — Super deduction for R&D expenses | (7,266) | (14,183) | | — Under/(over) provision in prior years | 14,090 | (1,331) | | Current tax — Hong Kong profits tax | 15,107 | 11,013 | | Current tax — Tax jurisdictions outside Mainland China and Hong Kong | 14,387 | 15,786 | | | 76,375 | 53,549 | | Deferred tax | (3,026) | 18,179 | | | 73,349 | 71,728 | [136] - Income tax expense increased by 2.4% to HKD 73,349 thousand, reflecting the increase in reported profit for the period[136] Earnings Per Share Basic and diluted earnings per share for the six months ended June 30, 2025, were both 18.35 HK cents Basic Earnings Per Share Basic earnings per share were 18.35 HK cents, calculated based on profit attributable to ordinary equity holders and weighted average shares outstanding - Basic earnings per share were 18.35 HK cents[137] Diluted Earnings Per Share Diluted earnings per share were 18.35 HK cents, identical to basic EPS, as potential dilutive ordinary shares had an anti-dilutive effect - Diluted earnings per share were 18.35 HK cents, the same as basic earnings per share[138] Property, Plant and Equipment The Group recognized additions to right-of-use assets and acquired property, plant, and equipment items during the six months ended June 30, 2025 Right-of-use assets Additions to right-of-use assets amounted to HKD 3.0 million for the six months ended June 30, 2025 - Additions to right-of-use assets amounted to HKD 3,008 thousand[139] Acquisition and disposal of own assets The Group acquired property, plant, and equipment items at a cost of HKD 421.8 million during the six months ended June 30, 2025 - Property, plant and equipment items were acquired at a cost of HKD 421,838 thousand[140] Goodwill The carrying amount of goodwill increased to HKD 226.1 million as of June 30, 2025, primarily due to exchange adjustments Goodwill (HKD thousand) | Metric | HKD thousand | | :--- | :--- | | As of December 31, 2024 and January 1, 2025 | 222,654 | | Exchange adjustments | 3,439 | | As of June 30, 2025 | 226,093 | | Accumulated impairment losses | – | | Carrying amount as of June 30, 2025 | 226,093 | [141] Inventories Total inventories amounted to HKD 1,065.1 million, including raw materials, work-in-progress, and finished goods, with a reversal of inventory write-down Inventories (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | 227,017 | 209,460 | | Work-in-progress | 445,471 | 414,174 | | Finished goods | 475,308 | 511,700 | | | 1,147,796 | 1,135,334 | | Inventory write-down | (82,730) | (83,101) | | | 1,065,066 | 1,052,233 | [142] - For the six months ended June 30, 2025, a reversal of inventory write-down of HKD 4,158 thousand was recognized[142] Trade and Bills Receivables Trade and bills receivables totaled HKD 1,243.4 million, with a significant portion due within one to three months Trade and Bills Receivables (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade receivables | 1,211,418 | 1,062,905 | | Bills receivables | 45,290 | 70,180 | | | 1,256,708 | 1,133,085 | | Less: Loss allowance | (13,296) | (12,483) | | | 1,243,412 | 1,120,602 | [143] Ageing Analysis of Trade and Bills Receivables (HKD thousand) | Ageing | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Within 1 month | 555,783 | 507,337 | | 1 to 3 months | 571,859 | 478,504 | | Over 3 months but within 12 months | 115,770 | 134,761 | | | 1,243,412 | 1,120,602 | [144] Prepayments, Deposits and Other Receivables Prepayments, deposits, and other receivables totaled HKD 312.6 million, primarily comprising recoverable value-added tax Prepayments, Deposits and Other Receivables (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepayments | 75,538 | 77,176 | | Recoverable value-added tax | 186,463 | 175,817 | | Other deposits and receivables | 50,639 | 85,229 | | | 312,640 | 338,222 | [145] Cash and Cash Equivalents Cash and cash equivalents amounted to HKD 655.2 million, with a substantial portion held in mainland China Cash and Cash Equivalents (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash at bank | 655,108 | 601,562 | | Cash on hand | 126 | 185 | | | 655,234 | 601,747 | [146] - Cash and cash equivalents located in Mainland China amounted to HKD 506,649 thousand[146] Bank Loans Total interest-bearing bank loans amounted to HKD 2,341.2 million, with no bank loans pledged as security at period-end Maturity of Interest-Bearing Bank Loans (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Short-term bank loans | 430,804 | 468,170 | | Current portion of long-term bank loans | 528,487 | 451,064 | | Within one year or on demand | 959,291 | 919,234 | | After one year but within two years | 612,537 | 551,719 | | After two years but within five years | 769,339 | 713,929 | | | 1,381,876 | 1,265,648 | | | 2,341,167 | 2,184,882 | [147] - As of June 30, 2025, none of the Group's bank loans were pledged[148] Trade Payables Trade payables totaled HKD 540.5 million, with the majority due within one month Trade Payables (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade payables | 540,517 | 588,573 | [149] Ageing Analysis of Trade Payables (HKD thousand) | Ageing | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Within 1 month | 365,490 | 350,413 | | 1 to 3 months | 127,647 | 166,508 | | Over 3 months | 47,380 | 71,652 | | | 540,517 | 588,573 | [150] Other Payables and Accrued Charges Other payables and accrued charges amounted to HKD 367.7 million, primarily including salaries, wages, bonuses, and benefits payable Other Payables and Accrued Charges (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Other payables | 281,339 | 299,031 | | Accrued charges | 86,381 | 79,027 | | | 367,720 | 378,058 | [151] Analysis of Other Payables (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Deferred consideration payable | 21,763 | 21,432 | | Salaries, wages, bonuses and benefits payable | 96,263 | 100,307 | | Payables for purchase of property, plant and equipment | 31,071 | 52,018 | | Contract liabilities | 28,380 | 23,154 | | Other tax payables | 46,298 | 36,043 | | Advances received for factory relocation | 7,823 | 8,621 | | Maintenance costs payable | 4,230 | 4,820 | | Freight costs payable | 10,859 | 7,775 | | Others | 34,652 | 44,861 | | | 281,339 | 299,031 | [152] Dividends The Board declared an interim dividend of HKD 0.08 per share, totaling HKD 151.0 million, for the six months ended June 30, 2025 Interim dividends payable to equity holders An interim dividend of HKD 0.08 per share, totaling HKD 151.0 million, was declared after the reporting period - An interim dividend of HKD 0.08 per share, totaling HKD 150,983 thousand, was declared after the end of each reporting period[153] Dividends payable to equity holders of the Company approved and paid during the interim period in the previous financial year A second interim dividend of HKD 0.08 per share, totaling HKD 151.0 million, was approved and paid in the previous financial year - A second interim dividend of HKD 0.08 per share, totaling HKD 150,983 thousand, was approved and paid during the interim period in the previous financial year[154] Commitments Unprovided capital commitments totaled HKD 542.7 million, primarily for plant construction and machinery acquisition Unfulfilled Capital Commitments (HKD thousand) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Contracted: | 542,652 | 425,442 | | Construction of plant | 220,231 | 344,840 | | Acquisition of machinery | 322,421 | 80,602 | | | 542,652 | 425,442 | [155] Non-adjusting events after the reporting period The Board resolved to declare an interim dividend of HKD 0.08 per share, which is a non-adjusting event after the reporting period - The Board resolved to declare an interim dividend of HKD 0.08 per share, which is a non-adjusting event after the reporting period[156]