中国智能健康(00348) - 2025 - 中期业绩

Unaudited Interim Results Overview The company achieved a profit for the period, significantly improving from a loss in the prior year, despite a decrease in revenue, while strengthening its financial position Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the company achieved a profit of HKD 1,418 thousand, a significant improvement from a loss of HKD 28,663 thousand in the prior year, with revenue decreasing by 16.2% but gross profit margin remaining stable at 32.4% Key Data from Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | Six Months Ended June 30, 2025 (HKD thousands) | Six Months Ended June 30, 2024 (HKD thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 51,060 | 60,932 | -16.2% | | Cost of sales | (34,527) | (41,271) | -16.3% | | Gross profit | 16,533 | 19,661 | -16.0% | | Other income, gains and losses, net | 12,022 | (5,432) | Turnaround to profit | | Selling and distribution expenses | (14,066) | (14,779) | -4.8% | | General and administrative expenses | (7,860) | (18,069) | -56.5% | | Finance costs | (6,768) | (4,658) | +45.3% | | Reversal of expected credit losses / (impairment losses), net | 3,115 | (5,557) | Turnaround to profit | | Impairment loss on right-of-use assets | (1,444) | – | New | | Profit / (loss) before income tax | 1,532 | (28,834) | Turnaround to profit | | Income tax (expense) / credit | (114) | 171 | Turned to expense | | Profit / (loss) for the period | 1,418 | (28,663) | Turnaround to profit | | Basic and diluted earnings / (loss) per share | 0.18 HKD cents | (3.72) HKD cents | Turnaround to profit | Condensed Consolidated Statement of Financial Position As of June 30, 2025, the Group's net current assets increased to HKD 43,930 thousand, with total assets less current liabilities rising to HKD 54,025 thousand, indicating an improved net liability position and capital deficit Key Data from Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2025 (HKD thousands) | December 31, 2024 (HKD thousands) | Change | | :--- | :--- | :--- | :--- | | Non-current assets | 10,095 | 8,796 | +14.8% | | Current assets | 100,807 | 113,250 | -11.0% | | Current liabilities | 56,877 | 72,998 | -22.1% | | Net current assets | 43,930 | 40,252 | +9.1% | | Total assets less current liabilities | 54,025 | 49,048 | +10.1% | | Non-current liabilities | 70,986 | 67,428 | +5.3% | | Net liabilities | (16,961) | (18,380) | Decreased by 8.0% | | Share capital | 7,705 | 7,705 | 0% | | Reserves | (24,666) | (26,085) | Decreased by 5.4% | | Capital deficit | (16,961) | (18,380) | Decreased by 8.0% | Notes to the Unaudited Condensed Consolidated Interim Financial Statements This section details the accounting policies, significant judgments, and specific financial statement items, providing context for the interim financial results Basis of Preparation and Going Concern The financial statements are prepared in accordance with HKAS 34 and Appendix D2 of the Listing Rules, presented in HKD, with the Board affirming the Group's ability to continue as a going concern despite net liabilities - The Group had net liabilities of HKD 16,961 thousand as of June 30, 2025[9] - The Board has thoroughly reviewed cash flow forecasts covering a period of no less than 12 months into the future[9] - To improve its financial position, the Board is implementing measures including actively recovering loans receivable, considering the realization of financial assets at fair value through profit or loss, and implementing aggressive cost-saving initiatives[10] - The Board considers it appropriate to prepare the financial statements on a going concern basis[11] Principal Accounting Policies and Judgements The financial statements are prepared on a historical cost basis, with certain financial instruments measured at fair value, and the application of new HKFRS amendments had no significant impact - The financial statements are prepared on a historical cost basis, except for certain financial instruments measured at fair value[12] - Amendments to Hong Kong Financial Reporting Standards (e.g., HKAS 21 and HKFRS 1 amendments) were first applied during the period but had no significant impact[13] - Significant judgments and sources of estimation uncertainty made by management in preparing the statements are consistent with those in the 2024 annual financial statements[14] Revenue, Other Income, Gains and Losses, Net and Segment Information The Group's total revenue for the period was HKD 51,060 thousand, a 16.2% decrease year-on-year, primarily from Chinese herbal health products, money lending, and investment in financial instruments, with the latter achieving significant profit - The Group's principal businesses are the sale of Chinese herbal health products, money lending, and investment in financial instruments[15] Revenue Composition (HKD thousands) | Revenue Source | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue from contracts with customers - Trading of Chinese herbal health products | 50,975 | 60,426 | -15.6% | | Interest income | 323 | 611 | -47.1% | | Loss on disposal of financial instruments, net | (238) | (105) | +126.7% | | Total Revenue | 51,060 | 60,932 | -16.2% | - Other income, gains and losses, net: primarily fair value gains on financial assets at fair value through profit or loss of HKD 12,410 thousand (2024: loss of HKD 5,431 thousand)[15] Segment Revenue and Results This section details the revenue and pre-tax profit or loss for each operating segment, including Chinese herbal health products, money lending, and investment in financial instruments Segment Revenue and Profit/(Loss) Before Income Tax (HKD thousands) | Segment | Six Months Ended June 30, 2025 Revenue | Six Months Ended June 30, 2025 Profit/(Loss) | Six Months Ended June 30, 2024 Revenue | Six Months Ended June 30, 2024 Profit/(Loss) | | :--- | :--- | :--- | :--- | :--- | | Chinese Herbal Health Products | 50,975 | (4,399) | 60,426 | (1,996) | | Money Lending Business | 323 | 869 | 611 | (13,739) | | Investment in Financial Instruments | (238) | 11,369 | (105) | (6,415) | | Total Reportable Segments | 51,060 | 7,839 | 60,932 | (22,150) | - Company revenue and expenses are not included in the segment profit/(loss) measure used by the chief operating decision maker to assess segment performance[16] Segment Assets and Liabilities This section presents the breakdown of assets and liabilities by operating segment, showing changes in each segment's financial position Segment Assets (HKD thousands) | Segment | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Chinese Herbal Health Products | 55,349 | 75,206 | -26.4% | | Money Lending Business | 10,177 | 8,760 | +16.2% | | Investment in Financial Instruments | 43,520 | 35,591 | +22.3% | | Total Segment Assets | 109,046 | 119,557 | -8.8% | Segment Liabilities (HKD thousands) | Segment | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Chinese Herbal Health Products | 34,154 | 45,314 | -24.6% | | Money Lending Business | 2,570 | 806 | +218.9% | | Investment in Financial Instruments | 18,295 | 20,586 | -11.2% | | Total Segment Liabilities | 55,019 | 66,706 | -17.5% | Geographical Information This section provides a geographical breakdown of the Group's revenue, indicating the primary regions contributing to sales Revenue by Geographical Area (HKD thousands) | Region | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Hong Kong | 51,060 | 60,932 | Major Customers Information This section discloses information regarding the Group's major customers, specifically whether any single external customer contributes 10% or more to total revenue - For the six months ended June 30, 2025 and 2024, no external customer contributed 10% or more to the Group's revenue[22] Finance Costs For the six months ended June 30, 2025, the Group's finance costs increased to HKD 6,768 thousand, primarily due to higher interest on bonds issued in 2024 Finance Costs (HKD thousands) | Type of Finance Cost | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Interest on borrowings | 1,692 | 1,535 | +10.2% | | Interest on lease liabilities | 347 | 334 | +3.9% | | Interest on convertible loan notes | 1,061 | 2,789 | -62.0% | | Interest on bonds payable | 3,668 | – | New | | Total | 6,768 | 4,658 | +45.3% | Income Tax (Expense)/Credit For the six months ended June 30, 2025, the Group recorded an income tax expense of HKD 114 thousand, a shift from a credit of HKD 171 thousand in the prior year, with no tax provision for Hong Kong or PRC subsidiaries due to lack of taxable profit - Income tax (expense)/credit: HKD (114) thousand expense in 2025, compared to HKD 171 thousand credit in 2024[23] - Hong Kong subsidiaries did not generate taxable profits, so no Hong Kong profits tax provision was made[23] - PRC subsidiaries did not generate taxable profits, so no enterprise income tax provision was made[24] Profit/(Loss) for the Period The Group's profit for the period was influenced by factors such as cost of goods sold, depreciation, and staff costs Profit/(Loss) for the Period Components (HKD thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cost of goods sold | 31,666 | 41,271 | | Depreciation of right-of-use assets | 2,975 | 3,357 | | Depreciation of property, plant and equipment | 183 | 132 | | Staff costs (including directors' emoluments) | 11,936 | 21,743 | Dividends The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2025 - No interim dividend is recommended for the first half of 2025[27] Earnings/(Loss) Per Share For the six months ended June 30, 2025, basic and diluted earnings per share were HKD 0.18 cents, a significant improvement from a loss of HKD 3.72 cents in the prior year, primarily due to the period's profit Earnings/(Loss) Per Share Calculation Data (HKD thousands) | Indicator | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Profit/(loss) for the purpose of calculating basic and diluted earnings/(loss) per share | 1,418 | (28,663) | | Weighted average number of ordinary shares | 770,480,836 | 770,480,836 | - The convertible loan notes were not assumed to be converted for calculating diluted earnings/(loss) per share, as they would result in an increase/decrease in earnings/(loss) per share[30] Property, Plant and Equipment and Right-of-use Assets For the six months ended June 30, 2025, the Group acquired property, plant and equipment costing HKD 84 thousand and recognized additional right-of-use assets of approximately HKD 5,948 thousand, with an impairment loss of HKD 1,444 thousand recognized for right-of-use assets due to loss-making stores - Cost of property, plant and equipment acquired: HKD 84 thousand (2024: HKD 141 thousand)[31] - Additional right-of-use assets recognized: HKD 5,948 thousand (2024: HKD 1,552 thousand), primarily for retail stores and office leases in Hong Kong[31] - Impairment loss on right-of-use assets recognized: HKD 1,444 thousand (2024: nil), mainly due to certain loss-making stores in the Chinese herbal health products segment[34] - Impairment assessment was based on the value-in-use calculation of cash-generating units, using a five-year financial budget and a pre-tax discount rate of 14%[33] Loans Receivable As of June 30, 2025, net loans receivable from the money lending business increased to HKD 10,139 thousand, with all loans unsecured and bearing interest rates between 8% and 13%, including a significant loan to a major shareholder's ultimate holding company Loans Receivable (HKD thousands) | Indicator | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Gross loans receivable from money lending business | 307,111 | 308,655 | -0.5% | | Less: Net provision for expected credit losses | (296,972) | (300,087) | -1.0% | | Net Loans Receivable | 10,139 | 8,568 | +18.3% | - All loans are unsecured, with annual interest rates ranging from 8% to 13%[35] - Loans receivable include a HKD 6,268 thousand loan to the ultimate holding company of a major shareholder[35] Loans Receivable Maturity Profile (HKD thousands) | Maturity Date | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Within one year | 9,609 | 7,719 | | Over one year | 530 | 849 | Financial Assets at Fair Value Through Profit or Loss As of June 30, 2025, total financial assets at fair value through profit or loss increased to HKD 43,520 thousand, primarily comprising Hong Kong-listed equity securities Financial Assets at Fair Value Through Profit or Loss (HKD thousands) | Type | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Listed equity securities in Hong Kong — Current | 42,807 | 35,015 | +22.2% | | Unlisted equity securities — Non-current | 713 | 576 | +23.8% | | Total | 43,520 | 35,591 | +22.3% | - The fair value of listed equity securities is determined based on quotations from the Stock Exchange, while unlisted equity securities are valued using the asset-based approach[36] Trade and Other Receivables, Deposits and Prepayments As of June 30, 2025, total trade and other receivables, deposits, and prepayments decreased to HKD 6,550 thousand, mainly due to a reduction in trade receivables Trade and Other Receivables, Deposits and Prepayments (HKD thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Trade receivables (net of allowance) | 1,595 | 4,064 | -60.7% | | Deposits and other receivables | 3,247 | 3,434 | -5.4% | | Prepayments | 1,708 | 1,347 | +26.8% | | Total | 6,550 | 8,845 | -26.0% | - Trade receivables aging analysis: HKD 1,591 thousand for 0-90 days, and HKD 4 thousand for over 365 days[37] - The normal credit period ranges from 30 to 90 days[37] Trade and Other Payables and Accruals As of June 30, 2025, total trade and other payables and accruals significantly decreased to HKD 16,622 thousand, primarily driven by a substantial reduction in trade payables Trade and Other Payables and Accruals (HKD thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Trade payables | 4,486 | 18,069 | -75.2% | | Other payables and accruals | 12,136 | 15,421 | -21.3% | | Total | 16,622 | 33,490 | -50.3% | - Trade payables aging analysis: HKD 4,347 thousand for 0-90 days, and HKD 139 thousand for over 365 days[39] Borrowings As of June 30, 2025, the Group's total borrowings were HKD 32,391 thousand, slightly lower than December 31, 2024, primarily consisting of margin loans from securities brokers and other loans, all classified as current liabilities Borrowings (HKD thousands) | Type | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Margin loans from securities brokers | 16,581 | 18,872 | -12.1% | | Other loans | 15,810 | 13,700 | +15.4% | | Total | 32,391 | 32,572 | -0.6% | - Margin loans bear interest at 8%-10% per annum and are secured by a portfolio of listed equity securities valued at HKD 42,807 thousand[39] - Other loans bear interest at 12% per annum, are secured by a share charge over issued shares of a subsidiary, and guaranteed by the Company[40] - All borrowings are classified as current liabilities due to the inclusion of a repayment on demand clause[40] Share Capital As of June 30, 2025, the company's issued and fully paid share capital remained unchanged at HKD 7,705 thousand, comprising 770,481 thousand ordinary shares with a par value of HKD 0.01 each - Issued and fully paid ordinary shares: 770,481 thousand shares, par value HKD 0.01 per share, totaling HKD 7,705 thousand[42] - Authorized share capital includes USD 40 thousand in convertible redeemable cumulative preference shares with a par value of USD 100,000 per share, and 150,000,000 thousand ordinary shares with a par value of HKD 0.01 per share[42] Share Option Scheme The Group adopted a new share option scheme on August 15, 2024, to recognize contributions from eligible participants, with a total of 77,048,083 options available for grant, representing 10% of issued shares, and no options were granted or exercised during the period - The 2012 Share Option Scheme expired on September 14, 2022, with no outstanding options as of June 30, 2025[41] - A new share option scheme was adopted on August 15, 2024, to acknowledge and recognize contributions from eligible participants to the Group[43] - Eligible participants include directors, employees, suppliers, contractors, distributors, agents, consultants, and advisors[43] - The total number of options available for grant under the new scheme is 77,048,083, representing 10% of the issued shares[43][44] - Maximum entitlement for each participant: the total number of shares after exercise shall not exceed 1% of the issued shares within any 12-month period[44] - Grants to a substantial shareholder or independent non-executive director and their associates exceeding 0.1% require shareholder approval[45] - The exercise period for share options is determined by the Board, not exceeding ten years from the date of grant[46] - Grantees must hold the options for at least 12 months before they can be exercised[46] - The exercise price shall not be less than the highest of the closing price on the grant date, the average closing price for the preceding five days, and the nominal value[46] - The new share option scheme will terminate on August 15, 2034[46] - As of June 30, 2025, no share options were granted, exercised, lapsed, or cancelled under the new scheme[47] Contingent Liabilities As of June 30, 2025, and December 31, 2024, the Group had no contingent liabilities - The Group had no contingent liabilities at the end of the reporting period[48] Related Party Transactions For the six months ended June 30, 2025, the Group with related parties (primarily the ultimate holding company of a major shareholder) engaged in short-term lease expenses and interest income transactions, and maintained outstanding loan balances Related Party Transactions (HKD thousands) | Type of Transaction | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Short-term lease expenses | 180 | 796 | | Interest income | 270 | 380 | Related Party Balances (HKD thousands) | Type of Balance | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Loans receivable (ultimate holding company of a major shareholder) | 6,268 | 7,092 | Comparative Figures Certain comparative figures have been reclassified to ensure consistency with the current period's presentation - Some comparative figures have been reclassified for consistency[51] Management Discussion and Analysis This section provides an in-depth review of the Group's financial performance, business operations, and future outlook, including strategies for growth and risk management Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2025 - No interim dividend is recommended for the first half of 2025[52] Results, Business Review and Prospects The Group's revenue declined due to reduced contributions from Chinese herbal health products and money lending, but effective cost control, expected credit loss reversals, and fair value gains on financial assets led to a turnaround to profit Results Overview This section provides a high-level summary of the Group's financial performance, highlighting key changes in revenue, gross profit margin, and profit attributable to owners - Revenue decreased by approximately 16% year-on-year to approximately HKD 51 million[53] - Gross profit margin remained stable at approximately 32%[53] - Profit attributable to owners was approximately HKD 1 million, compared to a loss of approximately HKD 29 million in the prior year[53] Business Review This section reviews the performance of the Group's core business segments, including Chinese herbal health products, money lending, and investment in financial instruments - Revenue decreased by approximately 16%, primarily due to reduced revenue from Chinese herbal health products (from approximately HKD 60 million to approximately HKD 51 million) and money lending business (from approximately HKD 1 million to approximately HKD 0.3 million)[54] - Gross profit margin remained stable at approximately 32%[54] - Other income, gains and losses, net, turned from a loss of HKD 5 million in 2024 to a net gain of HKD 12 million in 2025, mainly from fair value gains on financial assets[55] - Selling and distribution expenses remained stable at approximately HKD 14 million, reflecting effective cost control measures[55] - General and administrative expenses significantly decreased by 56.5% to approximately HKD 8 million, primarily due to streamlined management team structure and salary adjustments[56] - Finance costs increased by approximately 45.3% to approximately HKD 7 million, mainly due to changes in the calculation method for bond interest in 2024[57] - Net reversal of impairment losses under the expected credit loss model was approximately HKD 3 million, compared to an impairment loss of approximately HKD 6 million in the prior year, reflecting improved customer credit risk and repayment of some impaired loans[58] - Impairment loss on right-of-use assets was approximately HKD 1 million, due to certain loss-making stores in the Chinese herbal health products segment[59] - The turnaround to profit was primarily driven by the reversal of expected credit losses, a significant reduction in general and administrative expenses, and unrealized fair value gains on financial assets[60] Chinese Herbal Health Products The Chinese herbal health products segment experienced a decrease in revenue and an increase in loss due to a challenging retail environment in Hong Kong, despite the "Nam Pei Hong" brand's recognition - Segment revenue was approximately HKD 51 million (2024: HKD 60 million), with a segment loss (pre-tax) of approximately HKD 4 million (2024: HKD 2 million)[62] - The decrease in revenue and increase in loss were mainly due to the challenging economic environment in Hong Kong's local retail sector, with consumers being more budget-conscious and tending to spend in mainland China[62] - The "Nam Pei Hong" brand is widely recognized in Hong Kong and Southern mainland China, with 10 retail stores as of June 30, 2025[61] Money Lending Business The money lending business saw a decrease in interest income but achieved a segment profit due to a net reversal of expected credit loss impairment, with ongoing efforts to recover outstanding loans - Loan interest income was approximately HKD 0.3 million (2024: HKD 1 million), with a segment profit (pre-tax) of approximately HKD 1 million (2024: loss of HKD 14 million)[63] - The decrease in interest income was mainly because loans receivable previously classified as Stage 3 (credit-impaired) no longer generated interest income[63] - The segment's turnaround to profit was primarily due to a reduction in impairment losses on loans receivable under the expected credit loss model, with a net reversal of impairment losses of approximately HKD 3 million recognized during the period[63] - No new loans were granted during the period, but the repayment date for a revolving loan of approximately HKD 9 million provided to the ultimate holding company of a major shareholder was extended[64] - Customers repaid approximately HKD 3 million in loan principal and interest, while the ultimate holding company of a major shareholder drew down approximately HKD 1 million[64] - As of June 30, 2025, out of 11 outstanding loans, 2 loans (approximately HKD 8 million) were classified as Stage 1, and 9 loans (approximately HKD 299 million) were classified as Stage 3[65] - The cumulative net provision for expected credit losses was approximately HKD 297 million, a decrease of approximately HKD 3 million from December 31, 2024, mainly due to improved credit risk profiles of certain customers and repayment of some impaired loans[67][68] - Customer E has sold properties and parking spaces, with the Group receiving net proceeds of HKD 3.5 million and actively pursuing the remaining balance[70] - Customer I: Discussions are ongoing with a third party to acquire the loans receivable through the transfer of properties in Guangzhou and mainland China[71] - Customers J, G, F, and K have settled part of their outstanding debts, and the Group is negotiating settlement arrangements[72][74][76][78] - Customer L entered into a deed of settlement in May 2024 and has partially repaid the amounts in installments[81] Investment in Financial Instruments The investment in financial instruments segment generated a pre-tax profit, primarily driven by fair value gains on financial assets at fair value through profit or loss, with active portfolio management to enhance performance - Segment gain (pre-tax) was approximately HKD 11 million (2024: loss of HKD 6 million)[82] - Key influencing factors: net fair value gains on financial assets at fair value through profit or loss of approximately HKD 12 million (2024: loss of HKD 5 million), and realized losses on disposal of financial assets of approximately HKD 0.2 million (2024: HKD 0.1 million)[82] Equity Investment Changes (HKD thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning/End of period | 35,591 | 40,420 | | Acquisitions | – | 1,866 | | Gains/(losses) from fair value changes | 12,410 | (4,187) | | Disposals | (4,481) | (2,508) | | End/Beginning of period | 43,520 | 35,591 | - Significant listed equity investments include Huanxi Media Group, Grand Harbour Development, Yunfeng Financial Group, and Geowave Technology Holdings, with Yunfeng Financial Group contributing HKD 9,008 thousand in fair value gains[83] - The Group's investment objective is to achieve capital gains and dividend income, actively adjusting its investment portfolio to enhance performance[83] Prospects This section outlines the future outlook and strategic initiatives for each of the Group's business segments, addressing challenges and opportunities Chinese Herbal Health Products Prospects The Chinese herbal health products segment faces challenges from a weak retail market and changing consumer behavior, but plans to counter this with product innovation, targeted promotions, strategic partnerships, and stringent cost management - Challenges faced: sluggish retail market, weak consumer sentiment, mainland economic downturn, changing spending patterns of visitors to Hong Kong, local residents' preference for mainland shopping, price competition, customs regulations, labor shortages, and rising operating costs[84] - Strategies: prioritize promotion of seasonal health products like soup packs, launch trial packs for Lingzhi capsules, Platycodon Grandiflorum soothing throat lozenges, and black and white immune essence extracts, and expand own-brand portable health products[85] - Marketing: participate in SOGO and YATA VIP day promotions, launch an official account on Xiaohongshu, and introduce "Tuesday Senior Discounts" and member package discount coupons[86] - Strategic cooperation: partner with MAME LAB to launch pre-natal and post-natal care packages[86] - Cost management: strengthen overseas procurement, optimize supply chain, strictly control headcount and staff costs, and optimize sales incentive mechanisms[87] - Future outlook: continue strong promotional activities, launch innovative products and tailored promotional campaigns to maintain and strengthen market position[87] Money Lending Business Prospects The money lending business anticipates a challenging operating environment due to economic uncertainty, requiring close monitoring of repayment habits, proactive recovery plans, and enhanced credit risk management - Operating environment faces challenges: gloomy economic conditions, cautious potential borrowers, increased default risks, and geopolitical tensions affecting borrower demand[89] - Strategies: closely monitor customer repayment habits, develop action plans for recovery (revising repayment terms, increasing collateral/guarantees, reaching settlements, legal actions, enforcing collateral/guarantees)[89] - Strengthen credit policies and risk management[89] Investment in Financial Instruments Prospects The investment in financial instruments segment will focus on closely monitoring global economic conditions and investment sentiment, actively adjusting its portfolio to improve performance and realize gains - Strategies: closely monitor global economy, investment sentiment, investor base, and future outlook[90] - Actively adjust investment portfolio to improve performance and realize equity holdings in a timely manner[90] Portfolio Management The Group's business strategy aims to optimize resource utilization, enhance overall performance, and diversify its investment portfolio by actively seeking opportunities for investment or acquisition in promising ventures to create shareholder value - Strategy: optimize resource utilization, improve overall performance, and promote portfolio diversification[91] - Actively seek business opportunities to diversify income sources through investment/acquisition of promising businesses or projects to create shareholder value[91] Group Resources and Liquidity As of June 30, 2025, the Group had cash and bank balances of approximately HKD 4 million, with total borrowings, convertible loan notes, and bonds payable totaling approximately HKD 97 million, an improved liquidity ratio of 1.8, and a reduced net liability position, affirming sufficient working capital for the next 12 months Resources and Liquidity (HKD thousands) | Indicator | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and bank balances | 4,000 | 10,000 | -60.0% | | Total borrowings | 32,000 | 33,000 | -3.0% | | Convertible loan notes | 15,000 | 14,000 | +7.1% | | Bonds payable | 50,000 | 49,000 | +2.0% | | Total Borrowings, Convertible Loan Notes, and Bonds Payable | 97,000 | 96,000 | +1.0% | - Some financial assets (approximately HKD 43 million) have been pledged as collateral for borrowings of approximately HKD 17 million[93] - Approximately HKD 15 million in borrowings are secured by a share charge over subsidiary shares and guaranteed by the Company[93] - All borrowings (HKD 32 million) are classified as current liabilities[94] - The 2024 bonds (approximately HKD 55 million in ordinary bonds and approximately HKD 17 million in convertible bonds) were issued to offset the outstanding principal of the 2018 convertible bonds[95] - Inventories decreased by approximately 28% to approximately HKD 36 million, mainly due to winter being the traditional peak season for the industry[96] - Trade receivables decreased to approximately HKD 2 million, consistent with reduced revenue from Chinese herbal health products and improved collection management[97] - Trade payables significantly decreased to approximately HKD 4 million, due to subsequent settlements and reduced procurement[97] - Gearing ratio: 88% (December 31, 2024: 79%)[98] - Current ratio: 1.8 (December 31, 2024: 1.6)[98] - Net liability position decreased from approximately HKD 18 million to approximately HKD 17 million, primarily due to operating profit during the period[98] - The Board believes the Group has sufficient working capital for the next 12 months[99] - The Group will continue to review existing businesses, improve operational and financial performance, and identify potential business and investment opportunities[100] Foreign Exchange Risk The Group is exposed to currency risk primarily from receivables, payables, and bank balances denominated in non-functional currencies, with management monitoring and considering hedging significant exposures despite no current foreign currency hedging policy - Currency risk primarily arises from receivables/payables and bank balances denominated in non-functional currencies[101] - There is currently no foreign currency hedging policy, but management will monitor and consider hedging significant risks[101] Share Capital Structure There were no changes to the Group's share capital structure during the period - No changes to the share capital structure occurred during the period[102] Significant Investments and Acquisitions The Group did not undertake any significant investments, acquisitions, or disposals of subsidiaries during the period - No significant investments, acquisitions, or disposals of subsidiaries occurred during the period[103] Employees As of June 30, 2025, the Group employed approximately 77 staff and contract workers, with staff costs of approximately HKD 12 million, and compensation determined by experience, performance, and market conditions, including discretionary bonuses, MPF, and training - Approximately 77 employees and contract workers were employed[104] - Staff costs (including directors' emoluments) were approximately HKD 12 million (2024: HKD 22 million)[105] - Remuneration is determined based on experience, performance, market conditions, industry practices, and applicable labor laws[105] - Discretionary bonuses, MPF contribution schemes, insurance, and various training programs are provided[105] Share Option Scheme The Group's new share option scheme, adopted on August 15, 2024, complies with the requirements of Rule 17.03 of the Listing Rules - The new share option scheme was approved and adopted on August 15, 2024, complying with Rule 17.03 of the Listing Rules[106] - Details are provided in Note 17 to the financial statements[106] Purchase, Sale or Redemption of Listed Securities Neither the company nor its subsidiaries purchased, redeemed, or sold any of the company's listed securities during the six months ended June 30, 2025 - No purchase, redemption, or sale of the company's listed securities occurred during the period[107] Contingent Liabilities As of June 30, 2025, the Group had no other significant contingent liabilities or guarantees beyond those already disclosed - As of the end of the reporting period, the Group had no other significant contingent liabilities or guarantees[108] Corporate Governance Code The Board confirms that the company has complied with all code provisions of the Corporate Governance Code set out in Appendix C1 of the Listing Rules for the six months ended June 30, 2025 - The company complied with all provisions of the Corporate Governance Code set out in Appendix C1 of the Listing Rules[109] Standard Code for Securities Transactions by Directors The company has adopted a code of conduct for directors' securities transactions no less exacting than the Standard Code in Appendix C3 of the Listing Rules, and all directors confirmed compliance during the period - The company has adopted a code of conduct for directors' securities transactions, and all directors confirmed compliance[110] Audit Committee The Audit Committee has reviewed the unaudited condensed consolidated interim financial statements, risk management, and internal control systems for the six months ended June 30, 2025, and concurred with the accounting policies and practices adopted by the company - The Audit Committee reviewed the interim financial statements, risk management, and internal control systems, and concurred with the accounting policies and practices[111] By Order of the Board This announcement is issued by Mr. Li Xiongwei, Chairman and Executive Director, on behalf of the Board of Directors - Mr. Li Xiongwei, Chairman and Executive Director, issued the announcement on behalf of the Board[112] - Executive Directors include Li Xiongwei, Zhang Guowei, Liang Yixi, Lao Mingyun, Yuan Huixia, Yang Qiangsheng; Independent Non-executive Directors include Li Xuejian, Zeng Zhanpeng[113]