依波路(01856) - 2025 - 中期业绩

Financial Highlights The Group reported a 5.1% revenue decrease to HK$38.0 million, a significant drop in gross profit margin to 16.5%, and an expanded loss attributable to owners of HK$21.8 million for H1 2025 Performance Overview For the six months ended June 30, 2025, the Group's revenue decreased by 5.1% to HK$38.0 million, gross profit margin significantly dropped to 16.5%, and loss attributable to owners expanded to HK$21.8 million, with basic and diluted loss per share increasing to HK$6.04 cents 2025 H1 Key Financial Data Comparison (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 38,006 | 40,068 | -5.1% | | Gross Profit | 6,261 | 19,446 | -67.8% | | Gross Profit Margin | 16.5% | 48.5% | -32.0pp | | Loss for the period attributable to owners of the Company | (21,750) | (5,337) | +307.5% | | Basic and Diluted Loss Per Share (HK cents) | (6.04) | (1.48) | +308.1% | - The Group's revenue decreased by 5.1% to HK$38.0 million, with gross profit significantly declining by 67.8% to HK$6.3 million[3] Condensed Consolidated Financial Statements This section presents the Group's condensed consolidated financial statements, including the statement of profit or loss, other comprehensive income, and financial position for the reporting period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the Group reported revenue of HK$38.0 million, with significantly increased cost of sales leading to a gross profit of HK$6.3 million, and loss before tax expanded to HK$21.8 million, compared to a HK$5.3 million loss in the prior period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary (HK$ thousand) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 38,006 | 40,068 | | Cost of sales | (31,745) | (20,622) | | Gross Profit | 6,261 | 19,446 | | Other income and losses, net | 11,405 | 11,914 | | Other income | 225 | 8,127 | | Distribution expenses | (8,810) | (7,615) | | Administrative expenses | (26,320) | (33,743) | | Finance costs | (4,511) | (4,840) | | Loss before tax | (21,750) | (6,711) | | Income tax credit | – | 1,374 | | Loss for the period attributable to owners of the Company | (21,750) | (5,337) | | Exchange differences on translation of foreign operations | 13,790 | (8,103) | | Total comprehensive income for the period | (7,960) | (13,332) | | Basic and diluted loss per share (HK cents) | (6.04) | (1.48) | - The Group's revenue decreased from HK$40.1 million in 2024 to HK$38.0 million in 2025, while cost of sales significantly increased from HK$20.6 million to HK$31.7 million[4] Condensed Consolidated Statement of Financial Position As of June 30, 2025, the Group's total assets less current liabilities were HK$134.3 million, a decrease from December 31, 2024, with net assets declining to HK$93.9 million due to reduced net current assets Condensed Consolidated Statement of Financial Position Summary (HK$ thousand) | Indicator | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | Assets | | | | Non-current assets | 90,161 | 87,399 | | Current assets | 460,576 | 465,602 | | Liabilities | | | | Current liabilities | 416,398 | 409,881 | | Non-current liabilities | 40,394 | 41,215 | | Equity | | | | Net assets | 93,945 | 101,905 | | Total equity | 93,945 | 101,905 | - Total equity decreased from HK$101.9 million as of December 31, 2024, to HK$93.9 million as of June 30, 2025[5] - Non-current assets increased from HK$87.4 million to HK$90.2 million, while current assets decreased from HK$465.6 million to HK$460.6 million[6] Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering basis of presentation, accounting policy changes, segment information, and specific financial line items 1. Basis of Presentation The condensed consolidated financial statements are prepared in Hong Kong dollars under IAS 34 and Appendix D2 of the HKEX Listing Rules, using consistent accounting policies with the 2024 annual financial statements - The financial statements are prepared in Hong Kong dollars in accordance with International Accounting Standard 34 and Appendix D2 of the Listing Rules of The Stock Exchange of Hong Kong Limited[7][8] 2. Changes in Accounting Policies Revisions to IFRS effective for the current period have no material impact on the interim financial report's performance or financial position, and no new standards were early adopted - Revisions to International Financial Reporting Standards effective for the current period have no material impact on the financial position and performance, and no new standards were early adopted[9] 3. Revenue and Segment Information The Group's revenue, primarily from watch and smartwatch accessory sales, is segmented into watch and smartwatch manufacturing businesses, with total revenue of HK$38.0 million in H1 2025, showing significant growth in smartwatch manufacturing but a decline in watch business, particularly in China - The Group's principal activities are watch manufacturing and sales and smartwatch manufacturing, with revenue recognized at a point in time[10] Segment Revenue and Results In H1 2025, watch business revenue sharply declined by 46.5% to HK$12.3 million, shifting from profit to a HK$11.0 million loss, while smartwatch manufacturing revenue grew by 50.3% to HK$25.7 million but still incurred a HK$5.7 million loss, expanding the overall loss before tax to HK$21.8 million Segment Revenue and Results Comparison (HK$ thousand) | Segment | 2025 H1 Revenue | 2024 H1 Revenue | Revenue Change (%) | 2025 H1 Segment Result | 2024 H1 Segment Result | | :--- | :--- | :--- | :--- | :--- | :--- | | Watch | 12,266 | 22,965 | -46.5% | (11,038) | 5,285 | | Smartwatch Manufacturing | 25,740 | 17,103 | +50.3% | (5,743) | (3,625) | | Total | 38,006 | 40,068 | -5.1% | (16,781) | 1,660 | - The watch business revenue decreased by 46.5% to HK$12.3 million, resulting in a loss of HK$11.0 million, while the smartwatch manufacturing business revenue increased by 50.3% to HK$25.7 million, incurring a loss of HK$5.7 million[11] - The watch business segment primarily focuses on manufacturing and selling watches, whereas the smartwatch manufacturing business segment designs, develops, and manufactures stainless steel alloy watch cases and smartwatch cases on an ODM/OEM basis[12] Geographical Information China remains the Group's largest market, though H1 2025 revenue decreased to HK$30.7 million, while Hong Kong and Macau saw slight growth, Korea's revenue became zero, and Southeast Asia experienced significant growth Revenue Analysis by Customer Location (HK$ thousand) | Region | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | China | 30,739 | 32,409 | -5.1% | | Hong Kong and Macau | 3,985 | 2,418 | +64.8% | | Korea | – | 1,998 | -100% | | Southeast Asia | 3,034 | 624 | +386.2% | | Others (mainly Europe) | 248 | 2,619 | -90.5% | | Total | 38,006 | 40,068 | -5.1% | - China's revenue decreased by 5.1% to HK$30.7 million, while Hong Kong and Macau revenue increased by 64.8% to HK$4.0 million, and Southeast Asia revenue grew by 386.2% to HK$3.0 million[14] Information about Major Customers In H1 2025, Customer A became the Group's major customer, contributing HK$11.0 million in revenue, while Customer B, a major customer in the prior period with HK$5.9 million, made no contribution this period Major Customer Revenue (HK$ thousand) | Customer | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | | :--- | :--- | :--- | | Customer A | 11,038 | – | | Customer B | – | 5,894 | - Customer A contributed HK$11.0 million in revenue in H1 2025, becoming a major customer, whereas Customer B, a major customer in H1 2024 with HK$5.9 million, made no contribution in the current period[15] 4. Loss Before Tax H1 2025 loss before tax significantly expanded to HK$21.8 million from HK$6.7 million in the prior period, driven by cost of inventories recognized at HK$31.7 million, depreciation of HK$6.8 million, amortization of HK$5.1 million, and staff costs of HK$25.5 million Major Components of Loss Before Tax (HK$ thousand) | Item | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | | :--- | :--- | :--- | | Cost of inventories recognized | 31,745 | 20,622 | | Government grants | (30) | – | | Depreciation of property, plant and equipment | 6,842 | 4,510 | | Amortisation of intangible assets | 5,114 | 6,043 | | Total staff costs | 25,515 | 25,649 | - Loss before tax expanded to HK$21.8 million in H1 2025 from HK$6.7 million in H1 2024, primarily due to increased cost of inventories recognized and depreciation[16] 5. Income Tax Credit The Group had no income tax credit in H1 2025, compared to HK$1.4 million in H1 2024, with no provision for Hong Kong and China subsidiaries due to no taxable profits, while Swiss subsidiaries are taxed at 8.5% federal and 7.2% cantonal/municipal rates - No income tax credit was recorded in H1 2025, compared to HK$1.4 million in H1 2024[18] - Hong Kong and China subsidiaries made no provision for profits tax due to the absence of assessable profits, while Swiss subsidiaries are subject to direct federal tax at 8.5% and cantonal/municipal tax at 7.2%[19] 6. Dividends For the six months ended June 30, 2025, and 2024, the Company neither paid nor proposed any dividends - No dividends were paid or proposed during the reporting period or subsequent to the period end[20] 7. Loss Per Share H1 2025 basic and diluted loss per share significantly increased to HK$6.04 cents from HK$1.48 cents in the prior period, primarily due to the expanded loss attributable to owners of HK$21.8 million, with the weighted average number of ordinary shares remaining unchanged Loss Per Share Comparison | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Loss attributable to owners of the Company (HK$ thousand) | 21,750 | 5,337 | | Weighted average number of ordinary shares in issue (thousand shares) | 360,258 | 360,258 | | Basic and diluted loss per share (HK cents) | (6.04) | (1.48) | - Basic and diluted loss per share increased to HK$6.04 cents in H1 2025 from HK$1.48 cents in H1 2024, driven by the expanded loss attributable to owners of HK$21.8 million[21] 8. Trade and Other Receivables As of June 30, 2025, total trade and other receivables were HK$142.5 million, a slight decrease from December 31, 2024, with non-current receivables significantly up due to property, plant, and equipment deposits, while net trade receivables declined, with the largest portion over 270 days Trade and Other Receivables Composition (HK$ thousand) | Item | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | Non-current receivables | 11,871 | 991 | | Trade receivables, net | 117,111 | 134,965 | | Other receivables | 7,334 | 3,029 | | Prepayments | 4,376 | 2,473 | | Total current trade and other receivables | 130,619 | 142,533 | | Total trade and other receivables | 142,490 | 143,524 | - Total trade and other receivables decreased slightly to HK$142.5 million as of June 30, 2025, from HK$143.5 million as of December 31, 2024, with non-current receivables significantly increasing due to deposits for property, plant, and equipment[22] Trade Receivables Ageing Analysis (HK$ thousand) | Ageing | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | 0 to 90 days | 20,284 | 36,911 | | 91 to 180 days | 8,633 | 12,594 | | 181 to 270 days | 15,695 | 6,593 | | Over 270 days | 72,499 | 78,867 | | Total | 117,111 | 134,965 | - Trade receivables decreased to HK$117.1 million as of June 30, 2025, from HK$135.0 million as of December 31, 2024, with the largest portion (HK$72.5 million) aged over 270 days[23] 9. Intangible Assets As of June 30, 2025, the carrying amount of intangible assets decreased to HK$32.7 million from December 31, 2024, primarily comprising technical know-how, customer relationships, and computer software, with declines in technical know-how and customer relationships Intangible Assets Carrying Amount Composition (HK$ thousand) | Item | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | Computer software | 1,143 | 1,181 | | Technical know-how | 26,011 | 26,899 | | Customer relationships | 5,518 | 8,721 | | Total | 32,672 | 36,801 | - The carrying amount of intangible assets decreased to HK$32.7 million as of June 30, 2025, from HK$36.8 million as of December 31, 2024, primarily due to a decline in technical know-how and customer relationships[24] 10. Trade and Other Payables As of June 30, 2025, total trade and other payables decreased by HK$15.9 million to HK$51.9 million from December 31, 2024, with both trade payables and accrued expenses declining Trade and Other Payables Composition (HK$ thousand) | Item | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | Trade payables | 35,678 | 49,225 | | Other payables | 5,518 | 4,885 | | Accrued expenses | 10,228 | 13,146 | | Contract liabilities from sales of goods | 492 | 532 | | Total | 51,916 | 67,788 | - Total trade and other payables decreased by HK$15.9 million to HK$51.9 million as of June 30, 2025, from HK$67.8 million as of December 31, 2024, with both trade payables and accrued expenses declining[24] Management Discussion and Analysis This section provides a comprehensive review of the Group's overall performance, business segments, financial results, and operational strategies, including employee and capital commitments Overall Performance Review In H1 2025, influenced by global economic instability and geopolitical tensions, the Group's revenue decreased by 5.1% to HK$38.0 million, gross profit margin significantly dropped to 16.5%, and loss attributable to owners expanded to HK$21.8 million, with efforts underway for H2 business expansion - Global macroeconomic instability and geopolitical tensions led to a slower-than-expected economic recovery, impacting the watch industry and resulting in the Group's revenue falling short of expectations[25] 2025 H1 Key Financial Indicators Change | Indicator | 2025 H1 | 2024 H1 | Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. HK$38.0 million | Approx. HK$40.1 million | Decreased by approx. 5.1% | | Gross Profit | Approx. HK$6.3 million | Approx. HK$19.4 million | Decreased by approx. 67.8% | | Gross Profit Margin | Approx. 16.5% | Approx. 48.5% | Decreased by approx. 32.0 percentage points | | Loss attributable to equity holders | Approx. HK$21.8 million | Approx. HK$5.3 million | Loss expanded | - The Group's revenue decreased by approximately 5.1% to HK$38.0 million, and gross profit significantly declined by approximately 67.8% to HK$6.3 million, leading to an expanded loss attributable to equity holders of approximately HK$21.8 million[25] Business Review The Group's traditional watch business experienced significant sales decline due to global economic weakness and insufficient recovery in the Chinese market, while smartwatch manufacturing revenue grew, prompting active responses through product R&D, design innovation, and optimized production and sales strategies - The Group demonstrates resilience and adaptability in the face of market challenges, committed to diversifying products, improving profitability, and solidifying its position in the watch industry[28] Traditional Watch Business The traditional watch business faces challenges from global economic weakness, declining Swiss watch exports, and a sluggish Chinese market, leading to conservative, value-focused consumer behavior, despite the Group's 169-year history with the "Ernest Borel" brand as a Swiss couple watch leader and 700 sales points as of June 30, 2025, with product R&D and design innovation planned - Ernest Borel, with 169 years of history, upholds "Swiss Made" quality and is positioned as a leader in Swiss couple watches with the brand image of "Dancing Couple"[26] - As of June 30, 2025, the Group operates 700 sales points globally[26] - Global economic weakness led to a significant decline in Swiss watch exports, particularly in the Chinese and Hong Kong markets, with consumers becoming more conservative and prioritizing value for money[26][27] China Market China remains the Group's primary market, but watch business revenue decreased by 49.2% from HK$18.7 million in H1 FY2024 to HK$9.5 million in H1 FY2025, representing 77.3% of total watch business revenue, with 591 sales points as of June 30, 2025 China Market Watch Business Revenue (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | China market revenue | Approx. 9,500 | Approx. 18,700 | -49.2% | | Proportion of total watch business revenue | Approx. 77.3% | - | - | - As of June 30, 2025, the Group has 591 sales points in China[29] - China market watch business revenue decreased by approximately 49.2% to HK$9.5 million in H1 2025, accounting for approximately 77.3% of total watch business revenue[29] Hong Kong and Macau Market Sales in Hong Kong and Macau decreased by 11.1% from HK$1.8 million in H1 FY2024 to HK$1.6 million in H1 FY2025, accounting for 12.7% of total watch business revenue, with 30 sales points as of June 30, 2025 Hong Kong and Macau Market Watch Business Revenue (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Hong Kong and Macau sales | Approx. 1,600 | Approx. 1,800 | -11.1% | | Proportion of total watch business revenue | Approx. 12.7% | - | - | - As of June 30, 2025, the Group has 30 sales points in Hong Kong and Macau[30] - Hong Kong and Macau sales decreased by approximately 11.1% to HK$1.6 million in H1 2025, representing approximately 12.7% of total watch business revenue[30] Other Markets Sales in other markets (primarily Southeast Asia and Europe) decreased by 52.0% from HK$2.5 million in H1 FY2024 to HK$1.2 million in H1 FY2025, representing 10.0% of total watch business revenue, with 79 sales points as of June 30, 2025 Other Markets Watch Business Revenue (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Other market sales | Approx. 1,200 | Approx. 2,500 | -52.0% | | Proportion of total watch business revenue | Approx. 10.0% | - | - | - As of June 30, 2025, the Group has 79 sales points in other markets (primarily Southeast Asia and Europe)[31] - Other market sales decreased by approximately 52.0% to HK$1.2 million in H1 2025, accounting for approximately 10.0% of total watch business revenue[31] Smartwatch Manufacturing Business The smartwatch accessory manufacturing business experienced reduced orders, intense competition leading to extremely low gross profit, and exacerbated losses due to untimely internal human resource adjustments; however, the Group remains confident in its future, expecting it to dominate the watch industry and will continue R&D for patented structural designs - In H1, smartwatch accessory manufacturers experienced a significant reduction in orders, leading to extremely low gross profit due to intense industry competition, and exacerbated losses from untimely internal human resource adjustments[32] - The Group remains confident in the prospects of the smartwatch manufacturing business, believing smart products represent a fashion trend that will eventually dominate the watch industry, and will continue to research and develop patented structural designs[32] Financial Review In H1 2025, the Group's revenue decreased by 5.1% year-on-year, gross profit significantly dropped by 67.8%, leading to a substantial increase in loss attributable to owners; cost of sales rose due to smartwatch manufacturing growth, administrative expenses decreased, and liquidity saw increased bank balances but also higher total bank borrowings Revenue and Segment Information (Financial Review) The Group's total revenue decreased by 5.1% from HK$40.1 million in H1 FY2024 to HK$38.0 million in H1 FY2025, with watch business revenue declining by 46.5% and smartwatch manufacturing revenue growing by 50.3% Revenue Segment Change (HK$ thousand) | Segment | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 38,006 | 40,068 | -5.1% | | Watch Business Revenue | Approx. 12,300 | Approx. 23,000 | -46.5% | | Smartwatch Manufacturing Business Revenue | Approx. 25,700 | Approx. 17,100 | +50.3% | - Total revenue decreased by 5.1% to HK$38.0 million, with watch business revenue declining by 46.5% to HK$12.3 million, while smartwatch manufacturing business revenue increased by 50.3% to HK$25.7 million[33][34][35] Cost of Sales The Group's cost of sales increased by 53.9% from HK$20.6 million in H1 FY2024 to HK$31.7 million in H1 FY2025, with watch business cost of sales rising by 91.7% and smartwatch manufacturing by 45.9% Cost of Sales Segment Change (HK$ thousand) | Segment | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total Cost of Sales | Approx. 31,700 | Approx. 20,600 | +53.9% | | Watch Business Cost of Sales | Approx. 6,900 | Approx. 3,600 | +91.7% | | Smartwatch Manufacturing Business Cost of Sales | Approx. 24,800 | Approx. 17,000 | +45.9% | - Total cost of sales increased by 53.9% to HK$31.7 million, with watch business cost of sales rising by 91.7% to HK$6.9 million, and smartwatch manufacturing business cost of sales increasing by 45.9% to HK$24.8 million[36][37][38] Gross Profit The Group's gross profit significantly decreased by 67.8% from HK$19.4 million in H1 FY2024 to HK$6.3 million in H1 FY2025, with gross profit margin falling from 48.5% to 16.5%, where the watch business contributed HK$5.4 million and smartwatch manufacturing HK$0.9 million Gross Profit and Gross Profit Margin Change (HK$ thousand) | Indicator | 2025 H1 | 2024 H1 | Change (%) | | :--- | :--- | :--- | :--- | | Total Gross Profit | Approx. HK$6.3 million | Approx. HK$19.4 million | -67.8% | | Gross Profit Margin | Approx. 16.5% | Approx. 48.5% | -32.0pp | | Watch Business Gross Profit Contribution | Approx. HK$5.4 million | Approx. HK$19.3 million | -72.0% | | Smartwatch Manufacturing Business Gross Profit Contribution | Approx. HK$0.9 million | Approx. HK$0.1 million | +800.0% | - Total gross profit significantly decreased by 67.8% to HK$6.3 million, and the gross profit margin fell by 32.0 percentage points to 16.5%[39] Net Other Income and Losses The Group recorded net other income of approximately HK$11.4 million in H1 2025, a slight decrease from HK$11.9 million in H1 2024 Net Other Income and Losses (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | | :--- | :--- | :--- | | Other income and losses, net | Approx. 11,400 | Approx. 11,900 | - Net other income and losses decreased slightly to HK$11.4 million in H1 2025 from HK$11.9 million in H1 2024[40] Distribution Expenses The Group's distribution expenses increased by 15.7% from HK$7.6 million in H1 FY2024 to HK$8.8 million in H1 FY2025, with its proportion of total revenue rising from 19.0% to 23.2% Distribution Expenses Change (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Distribution expenses | Approx. 8,800 | Approx. 7,600 | +15.7% | | Proportion of total revenue | Approx. 23.2% | Approx. 19.0% | +4.2pp | - Distribution expenses increased by 15.7% to HK$8.8 million, and their proportion of total revenue rose by 4.2 percentage points to 23.2%[41] Administrative Expenses The Group's administrative expenses decreased by 22.0% from HK$33.7 million in H1 FY2024 to HK$26.3 million in H1 FY2025 Administrative Expenses Change (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Administrative expenses | Approx. 26,300 | Approx. 33,700 | -22.0% | - Administrative expenses decreased by 22.0% to HK$26.3 million in H1 2025[42] Finance Costs The Group's finance costs decreased by 6.8% from HK$4.8 million in H1 FY2024 to HK$4.5 million in H1 FY2025 Finance Costs Change (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Finance costs | Approx. 4,500 | Approx. 4,800 | -6.8% | - Finance costs decreased by 6.8% to HK$4.5 million in H1 2025[43] Loss Attributable to Owners of the Company Loss attributable to owners of the Company expanded to HK$21.8 million in H1 FY2025, compared to a HK$5.3 million loss in H1 FY2024 Loss Attributable to Owners of the Company (HK$ thousand) | Indicator | 2025 H1 (HK$ thousand) | 2024 H1 (HK$ thousand) | | :--- | :--- | :--- | | Loss attributable to owners of the Company | (Approx. 21,800) | (Approx. 5,300) | - Loss attributable to owners of the Company expanded to HK$21.8 million in H1 2025 from HK$5.3 million in H1 2024[44] Inventories As of June 30, 2025, inventories increased by HK$16.3 million to HK$304.4 million, an increase from December 31, 2024 Inventories Change (HK$ thousand) | Indicator | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Inventories | Approx. 304,400 | Approx. 288,100 | Approx. +16,300 | - Inventories increased by HK$16.3 million to HK$304.4 million as of June 30, 2025, from HK$288.1 million as of December 31, 2024[45] Trade and Other Receivables and Payables As of June 30, 2025, trade and other receivables decreased by HK$11.9 million to HK$130.6 million, while trade and other payables decreased by HK$15.9 million to HK$51.9 million Trade and Other Receivables and Payables Change (HK$ thousand) | Indicator | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Trade and other receivables | Approx. 130,600 | Approx. 142,500 | Approx. -11,900 | | Trade and other payables | Approx. 51,900 | Approx. 67,800 | Approx. -15,900 | - Trade and other receivables decreased by HK$11.9 million to HK$130.6 million, and trade and other payables decreased by HK$15.9 million to HK$51.9 million as of June 30, 2025[46] Liquidity, Financial Resources and Capital Structure As of June 30, 2025, the Group's cash and bank balances increased to HK$12.5 million, and total bank and other borrowings rose to HK$360.2 million, with most repayable within one year at interest rates ranging from 1.5% to 7% Liquidity and Borrowings (HK$ thousand) | Indicator | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--- | :--- | :--- | | Cash and bank balances | Approx. 12,500 | Approx. 10,200 | | Total bank and other borrowings | Approx. 360,200 | Approx. 338,100 | | Of which: repayable within one year | Approx. 358,600 | - | | Of which: repayable after one year | Approx. 1,600 | - | - Cash and bank balances increased to HK$12.5 million as of June 30, 2025, from HK$10.2 million as of December 31, 2024[47] - Total bank and other borrowings increased to HK$360.2 million, with HK$358.6 million repayable within one year[48] - Bank and other borrowings bear interest at rates ranging from 1.5% to 7% (December 31, 2024: 1.5% to 6%)[48] Foreign Exchange Risk The Group faces foreign exchange fluctuation risk due to foreign currency sales by some member companies and foreign-denominated trade receivables, payables, and bank balances, with management monitoring trends and considering hedging as needed - The Group is exposed to foreign exchange fluctuation risk due to foreign currency sales and foreign-denominated trade receivables, payables, and bank balances[49] - Management will monitor foreign exchange trends and consider hedging when necessary[50] Pledge of Assets As of June 30, 2025, and December 31, 2024, the Group had no significant assets pledged - No significant assets were pledged during the reporting period[51] Material Acquisitions and Disposals of Subsidiaries or Associates In H1 FY2025, the Group did not undertake any investments, acquisitions, or disposals of subsidiaries, associates, or joint ventures - No material acquisitions or disposals of subsidiaries or associates occurred during the reporting period[52] Future Plans for Material Investments and Capital Assets As of June 30, 2025, the Group had no definite future plans for material investments or acquisitions of property, plant, and equipment - As of June 30, 2025, the Group has no definite future plans for material investments or acquisitions of property, plant, and equipment[53] Contingent Liabilities During the reporting period, the Group had no significant contingent liabilities - No significant contingent liabilities existed during the reporting period[54] Interim Dividend The Board of Directors resolved not to declare any interim dividend for H1 FY2025 - The Board of Directors resolved not to declare any interim dividend for H1 FY2025[55] Employees and Remuneration Policy As of June 30, 2025, the Group's full-time employees decreased to 457, with total staff costs maintained at approximately HK$25.5 million; the Group offers fixed salaries, allowances, sales commissions, and year-end bonuses, alongside regular training and annual performance reviews Employee Count and Costs (HK$ thousand) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of full-time employees | 457 | 542 | | Total staff costs (2025 H1) | Approx. HK$25.5 million | Approx. HK$25.6 million (2024 H1) | - The number of full-time employees decreased to 457 as of June 30, 2025, from 542 as of December 31, 2024, while total staff costs remained at approximately HK$25.5 million for H1 2025[56] - The remuneration policy includes fixed salaries, allowances, sales commissions, and year-end bonuses, complemented by annual performance reviews and regular training[57] Capital Commitments As of June 30, 2025, the Group had no significant capital commitments - No significant capital commitments existed at the end of the reporting period[58] Events After Reporting Period No significant events occurred after the reporting period - No significant events occurred after the reporting period[59] Prospects This section outlines the Group's strategic outlook for its watch and smartwatch accessory manufacturing businesses, focusing on product innovation, market expansion, and operational efficiency to drive future growth Watch Business (Prospects) The Group's watch business will maintain "Swiss Made" quality, align with market trends, enhance performance and competitiveness through product design innovation, youth-oriented and international brand promotion, optimized online/offline distribution, multi-platform e-commerce, supply chain coordination, slow-moving inventory management, brand pricing, and inventory structure optimization Product Aspects The Group will uphold "Swiss Made" quality, follow market trends, analyze consumer behavior and purchasing power, and leverage professional design capabilities to develop men's, women's, and couple watch series tailored for target customers - The Group will uphold "Swiss Made" high quality, closely follow market trends, and leverage professional design capabilities to develop men's, women's, and couple watch series that cater to target customers[60] Brand Promotion Aspects The Group will enhance "Ernest Borel" brand awareness through coordinated online and offline promotion, targeting younger and international consumers by leveraging social media (Xiaohongshu, TikTok, Instagram, Facebook), increasing influencer collaborations, restructuring online sales teams, and establishing international market teams to expand overseas - The Group will enhance brand awareness through coordinated online and offline promotion, utilizing social media platforms (Xiaohongshu, TikTok, Instagram, Facebook) and collaborating with influencers to attract younger and international consumers[61] - The Group plans to restructure its online sales team, establish a dedicated international market team, enhance online marketing skills for overseas markets, develop international clients, and increase participation in overseas exhibitions and proactive client visits[61] Distribution Channel Aspects Offline sales growth in 2025 will focus on new development of quality clients and stores, alongside performance growth in existing client stores, adhering to "stabilize scale, increase profit" principles, implementing "one policy per region/client" sales strategies, enhancing customer service, and aiming to expand sales, capture market share, boost profits, and accelerate cash flow - Offline sales performance in 2025 will be driven by the development of new quality clients and stores, as well as performance growth in existing client stores, implementing "one policy per region" and "one policy per client" sales strategies[62] - The objectives are to expand sales scale, capture market share, enhance sales profit, accelerate cash flow, and strengthen customer service awareness[62] E-commerce Aspects E-commerce will implement multi-platform operational management, segmenting products across Tmall, JD, Vipshop, optimizing page content, actively expanding to live-streaming platforms like Douyin and other e-commerce channels to boost brand exposure and sales efficiency, while also strengthening brand image maintenance, sales guidance, replenishment mechanisms, and customer relationship management - The Group will implement multi-platform operational management, segmenting products across platforms like Tmall, JD, and Vipshop, and optimizing page content to improve conversion rates[63][65] - It will actively expand to live-streaming platforms like Douyin and other e-commerce channels to enhance brand exposure and sales efficiency[63][65] - The Group will also strengthen brand image maintenance, sales guidance, replenishment mechanisms, and deep customer relationship management[64] Supply Chain Coordination and Slow-Moving Inventory Strategy The Group will actively coordinate supply chain departments to ensure stable and orderly product supply, focusing on clearing low-stock, diverse slow-moving products in overseas markets, and high-volume slow-moving items in e-commerce and offline channels to effectively improve inventory turnover - The Group will strengthen supply chain communication to ensure stable product supply, focusing on clearing diverse, low-stock slow-moving products in overseas markets, and high-volume slow-moving items in e-commerce and offline channels to improve inventory turnover[66] Brand Pricing System and Positioning Maintenance The Group will continue to advance its brand pricing system, solidifying Ernest Borel's high-end positioning, extending its pricing strategy in 2025 with precise planning and coordination across sales channels to ensure product value, enhance core competitiveness, categorize products into "regular pricing" and "disposal products," strictly control prices for online-offline consistency, and leverage e-commerce for overseas market price support - The Group will continue to advance its brand pricing system, solidifying its high-end brand positioning, with precise planning and coordination of pricing strategies across all sales channels to ensure product value and enhance core competitiveness[67] - Products will be categorized into "regular pricing" and "disposal products," with strict price control to achieve online-offline price consistency, and the e-commerce department will provide price support for overseas markets[67] Inventory Structure Optimization and Cost Control The Group will continuously optimize its overall inventory structure to reduce total stock, strictly controlling ordering cycles, rationally planning production and customs clearance processes to minimize capital tie-up and inventory backlog, and regularly analyzing slow-moving costs and raw material inventory for relevant departments - The Group will optimize its inventory structure to reduce total stock, strictly controlling ordering cycles, rationally planning production and customs clearance processes to minimize capital tie-up and inventory backlog[68] Management Aspects The Group will implement a regional budget responsibility system, strengthen accounts receivable collection and customer credit risk management to ensure robust cash flow, and continuously promote internal training to enhance all employees' understanding and execution of brand positioning and market strategies - The Group will implement a regional budget responsibility system, strengthen accounts receivable collection and customer credit risk management to ensure robust cash flow[69] - It will also continuously promote internal training to enhance employees' understanding and execution of brand philosophy, cultural values, product advantages, and market strategies[69] Smartwatch Accessory Manufacturing Business (Prospects) The smartwatch accessory manufacturing business aligns well with the Group's traditional watch manufacturing, providing key components and creating industrial synergy; this business is expected to gradually become a significant revenue source, driving overall business structure enhancement and revenue growth, particularly in smartwatch technology breakthroughs and market expansion - The smartwatch accessory manufacturing business is highly compatible with the Group's traditional watch manufacturing business, providing key components and creating industrial synergy[70] - This business is expected to gradually become a significant source of revenue for the Group, driving overall business structure enhancement and revenue growth, particularly in technological breakthroughs and market expansion within the smartwatch sector[71] Conclusion Facing global economic challenges and a slower-than-expected Chinese economic recovery, watch business revenue is under pressure; the Group remains confident in the smartwatch manufacturing business as a key growth driver, planning to expand overseas markets, optimize sales channels, and control operating costs to increase revenue, reduce expenses, and generate sustainable shareholder returns - Global economic challenges and shifts in customer consumption patterns, coupled with a slower-than-expected economic recovery in China, have put pressure on watch business revenue[72] - The Group remains confident in the prospects of the smartwatch manufacturing business, believing smart products represent a fashion trend that will eventually dominate the watch industry, and plans to actively research and develop patented structural designs[72] - The Group will strive to expand overseas markets, diversify revenue channels, and control operating costs such as administrative expenses to increase revenue, reduce expenses, and create sustainable returns for the Group[72] Other Information This section covers corporate governance compliance, directors' securities trading, review of financial statements, and other statutory disclosures Compliance with Corporate Governance Code The Board believes the Company has complied with all code provisions of the Corporate Governance Code in Appendix 14 of the Listing Rules for the six months ended June 30, 2025 - The Company has complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules throughout the reporting period[73] Code for Securities Transactions by Directors The Company adopted the Model Code for directors' securities transactions, and all directors confirmed compliance throughout the reporting period - The Company has adopted the Model Code as the code of conduct for directors' securities transactions, and all directors confirmed compliance during the reporting period[74] Review of Condensed Consolidated Financial Statements The Audit Committee reviewed the unaudited interim results and report for the six months ended June 30, 2025, deeming them prepared according to applicable accounting standards with sufficient disclosure, and recommended adoption by the Board; the committee comprises three independent non-executive directors, with Mr. Yu Chi Kit as chairman - The Audit Committee has reviewed the unaudited interim results and interim report, deeming them prepared in accordance with applicable accounting standards and regulations with sufficient disclosure, and recommended their adoption by the Board[75] - The Audit Committee comprises three independent non-executive directors, with Mr. Yu Chi Kit serving as the committee chairman[75] Purchase, Sale or Redemption of Listed Securities Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended June 30, 2025 - Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the reporting period[76] Publication of Interim Results Announcement and Interim Report This announcement has been published on the HKEX and the Company's website, and the interim report for the six months ended June 30, 2025, will be published on the same websites and dispatched to shareholders in due course - This announcement has been published on the HKEX website and the Company's website[77] - The interim report for the six months ended June 30, 2025, will be published on the aforementioned websites and dispatched to shareholders in due course[77]