润歌互动(02422) - 2025 - 中期业绩

Company Information and Financial Highlights This section provides an overview of the company's key information and a summary of its financial performance for the reporting period Disclaimer and Forward-Looking Statements This announcement contains forward-looking statements involving known and unknown risks and uncertainties that may cause actual results to differ materially from expectations, and the company disclaims any obligation to update or revise these statements - This announcement contains forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance, or achievements to differ materially from those expressed or implied by such statements[2] - The company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise[2] Company Overview and Reporting Period Rego Interactive Co., Ltd (stock code: 2422) has released its unaudited condensed interim consolidated financial results announcement for the six months ended June 30, 2025 - The company name is Rego Interactive Co., Ltd, with stock code 2422[3] - This announcement presents interim results for the six months ended June 30, 2025, including comparative figures for the six months ended June 30, 2024[3][4] Financial Summary For the six months ended June 30, 2025, the company's revenue increased by 16.8% year-on-year to RMB 135,766 thousand, but gross profit significantly decreased by 48.0% to RMB 21,543 thousand, resulting in a loss for the period of RMB 19,644 thousand attributable to owners of the company, with an adjusted net loss of RMB 19,116 thousand, and the Board resolved not to declare an interim dividend Financial Performance Highlights | Indicator | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 135,766 | 116,204 | +16.8 | | Gross Profit | 21,543 | 41,467 | -48.0 | | (Loss) / Profit Before Income Tax | (20,786) | 3,184 | -752.8 | | (Loss) / Profit for the Period Attributable to Owners of the Company | (19,644) | 3,457 | -668.2 | | Adjusted Net (Loss) / Profit | (19,116) | 4,031 | -574.2 | - The Board has resolved not to declare any interim dividend for the reporting period ended June 30, 2025 (June 30, 2024: nil)[6] Management Discussion and Analysis This section provides an in-depth analysis of the company's operational performance, financial results, and strategic initiatives Business Review In the first half of 2025, the Group faced challenges from a sluggish Chinese consumer market and reduced corporate marketing budgets, but also seized opportunities from digital transformation and AI technology, actively expanding new products like lottery experience vouchers and reorganizing its business into enterprise digitalization services and industry digitalization services to adapt to market changes and achieve cross-industry empowerment - The Chinese consumer market was sluggish in 2024, with many companies cutting marketing budgets, but digital transformation continued to drive technological development trends, leading to rapid shifts in corporate marketing strategies[7] - The Group leveraged its experience in the advertising market to launch lottery experience vouchers as a new product to achieve client marketing objectives and will continue to market these products to various brand clients in 2025[10] - The Group reorganized its operating segments into two core businesses: enterprise digitalization services and industry digitalization services, aiming to achieve cross-industry empowerment services in the future[16] China Market Overview The Chinese advertising market cooled due to weak client demand and intense competition, but the digital advertising market is rapidly transforming, driven by AI and automation, emphasizing personalized marketing and ad targeting, while the Chinese lottery market continues to grow, reaching RMB 623.5 billion in sales in 2024, a 7.6% year-on-year increase, with its public welfare contribution becoming increasingly important - The Chinese advertising market faces weak client demand and intense competition, with companies cutting advertising spending or shifting to marketing activities that quickly boost sales, leading to a gradual cooling of the market[8] - Driven by AI and automation, China's digital advertising market is rapidly transforming and flourishing, requiring companies to focus on leveraging AI to enhance personalized marketing and ad targeting[8] China Lottery Annual Sales | Indicator | 2024 Sales (RMB billion) | 2023 Sales (RMB billion) | Year-on-Year Growth (%) | | :--- | :--- | :--- | :--- | | China Lottery Annual Sales | 623.5 | 580.0 (estimated) | 7.6 | | Welfare Lottery Sales | 208.0 | 194.4 (estimated) | 7.0 | | Sports Lottery Sales | 415.5 | 385.0 (estimated) | 7.9 | Our Group's Business Since 2015, the Group has specialized in digital marketing services, covering the lottery industry, virtual goods procurement and delivery, and physical goods supply chain, demonstrating strong R&D capabilities in lottery solutions across 23 provinces and over 130,000 sales points, while also integrating supply chain resources to provide employee benefits and O2O marketing solutions for corporate clients, and launching lottery experience vouchers as an innovative marketing tool in 2024 - The Group has been deeply involved in digital marketing services since 2015, with businesses covering the lottery industry, integrated virtual goods procurement and delivery services, and physical goods supply chain[13] - The Group possesses strong R&D capabilities in lottery solutions, having established business relationships with provincial welfare lottery issuance and administration centers in 23 provinces, municipalities, and autonomous regions nationwide, covering over 130,000 lottery sales points[14] - The Group focuses on providing "online-offline integrated" solution services, promoting clients' digital transformation, and building a marketing service operation platform[16] Enterprise Digitalization Services Enterprise digitalization services aim to enhance corporate private domain traffic through promotion, advertising, and user acquisition/retention solutions, with the company continuously developing virtual and physical goods supply chains, actively expanding to new clients in financial services, insurance, and telecom operators, and leveraging innovative lottery experience vouchers to boost consumer activity and brand influence - Enterprise digitalization services focus on providing promotion and advertising services, as well as user acquisition and retention solutions, to help enterprises enhance their private domain traffic[17] - The Group builds a digital service capability matrix through its main business lines, with a one-stop marketing solution as its core product, integrating upstream and downstream supply chain resources to create a digital marketing service platform[19] - Lottery experience vouchers were approved by the China Sports Lottery Center in 2023 as a third-party service system provider, offering marketing services to enterprises with redemption capabilities at lottery centers, effectively boosting consumer desire and corporate image[21][22] Physical Goods Procurement and Delivery Services Since 2024, the Group has focused on physical goods procurement and delivery services, building a comprehensive supply chain for clients through its marketing service operation platform, offering group buying and employee welfare procurement services, operating two warehouses with over 3,311 SKUs, and providing customized online shopping center solutions, while also partnering with a renowned liquor sales company for distribution and cross-selling with lottery experience vouchers - Since 2024, the Group has focused on physical goods procurement and delivery services, building a comprehensive supply chain for clients through its marketing service operation platform, offering group buying and employee welfare procurement services[23] - The company operates two warehouses with over 3,311 stock-keeping units (SKUs), ensuring operational efficiency to meet client demands, and provides customized online shopping center solutions[23] - The Group entered into a cooperation agreement with a renowned Chinese liquor sales company to provide liquor distribution services and a lottery experience voucher marketing agreement to help retain clients through cross-selling[24] Industry Digitalization Services The Group's industry digitalization services focus on the lottery sector, leveraging its strengths in serving the welfare lottery industry across over 23 provinces, providing lottery security, information management, and regulatory systems as one of China's leading lottery solution providers, having won over 8 bidding projects for lottery terminals or maintenance services, and will focus on AI digital lottery stores to gather private domain traffic in the future - Industry digitalization services focus on the lottery industry, leveraging the Group's strengths in serving the welfare lottery industry across over 23 provinces[25] - The Group is one of China's leading lottery solution providers, offering lottery security, information management, and regulatory systems, and has won over 8 bidding projects in the first half of 2025[26][27] - The company will focus on AI digital lottery stores for the remainder of 2025 and beyond, gathering private domain traffic from lottery operators and stores[28] Our Group's Development History The Group's development spans from building operator value-added services (2009-2016) to developing digital platforms (e.g., Rego Virtual Goods Platform, 2017-2020), achieving breakthroughs in lottery industry digitalization (2021-2023), expanding and integrating supply chains (2024), and implementing an AI digital lottery store model in 2025 to provide technical support for intelligent development and optimize marketing solutions in the lottery industry - From 2009 to 2016, the Group focused on expanding its marketing service capabilities, starting with traditional offline channels and expanding its service portfolio to online marketing services while accumulating core technologies[31] - From 2017 to 2020, the Group successfully developed and launched a series of digital platforms, including the Rego Virtual Goods Platform and RegoAd SDK, initiating its digital transformation[33] - In 2025, the Group focuses on developing the AI digital lottery store model, aiming to build a large-scale model for the lottery industry, provide technical support for intelligent development, optimize marketing solutions, and promote a comprehensive upgrade of intelligent marketing in the lottery industry[36] Financial Review For the six months ended June 30, 2025, the Group's revenue increased by 16.8% year-on-year to RMB 135.8 million, primarily driven by significant growth in physical goods procurement and delivery services; however, due to a shift in revenue focus towards lower-margin physical goods services, gross profit decreased by 48.2% year-on-year to RMB 21.5 million, with gross margin falling to 15.9%, resulting in a loss for the period of RMB 19.6 million attributable to owners of the company - Total revenue increased by 16.8% from RMB 116.2 million for the six months ended June 30, 2024, to RMB 135.8 million for the six months ended June 30, 2025, primarily due to increased revenue from enterprise digitalization services, particularly physical goods procurement and delivery services[53] - Gross profit decreased by 48.2% to RMB 21.5 million, and gross margin declined from 35.7% to 15.9%, mainly due to a shift in revenue structure towards physical goods procurement and delivery services recognized on a gross basis[55][56] - (Loss) / Profit for the period shifted from a profit of approximately RMB 2.7 million in the prior year to a loss of approximately RMB 20.8 million in 2025, representing an 870.4% decrease[63] Revenue The Group's total revenue increased by 16.8% to RMB 135.8 million, with enterprise digitalization services contributing 92.1% of revenue and growing by 15.7%, primarily driven by strong growth in physical goods procurement and delivery services offsetting a decline in virtual goods, while industry digitalization services revenue increased by 30.5% mainly from lottery-related system and equipment sales Revenue by Business Segment | Business Segment | 2025 (RMB thousand) | 2025 (%) | 2024 (RMB thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Enterprise Digitalization Services | 125,036 | 92.1 | 108,014 | 93.0 | | Enterprise Private Domain Traffic Marketing Services | 30,294 | 22.3 | 24,798 | 21.4 | | Marketing Service Operation Platform Services – Virtual Goods Procurement and Delivery Services | 6,851 | 5.0 | 32,000 | 27.5 | | Marketing Service Operation Platform Services – Physical Goods Procurement and Delivery Services | 87,504 | 64.5 | 50,789 | 43.7 | | Others | 387 | 0.3 | 427 | 0.4 | | Industry Digitalization Services | 10,730 | 7.9 | 8,190 | 7.0 | | Lottery-related Software Systems and Equipment Solutions | 10,730 | 7.9 | 8,190 | 7.0 | | Total | 135,766 | 100.0 | 116,204 | 100.0 | - Revenue from enterprise digitalization services increased by 15.7% from approximately RMB 108.0 million in the prior year to approximately RMB 125.0 million in 2025, primarily due to an increase of RMB 36.7 million in revenue from physical goods procurement and delivery services[38] - Revenue from industry digitalization services increased by 30.5% from approximately RMB 8.2 million in the prior year to approximately RMB 10.7 million in 2025, mainly because related contracts were signed near the end of the 2024 financial year, and sales were transferred to clients in the first half of 2025[52] Enterprise Digitalization Services Revenue Enterprise digitalization services revenue increased by 15.7% to RMB 125.0 million, primarily driven by a significant RMB 36.7 million increase in physical goods procurement and delivery services revenue, which offset a RMB 25.1 million decrease in virtual goods procurement and delivery services revenue, leading to a lower proportion of online service revenue and a higher proportion of hybrid model revenue, with advertising agency clients' revenue share significantly increasing while enterprise clients' share decreased Revenue by Marketing Channel Type | Marketing Channel Type | 2025 (RMB thousand) | 2025 (%) | 2024 (RMB thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Online | 37,532 | 30.0 | 57,225 | 53.0 | | Hybrid | 87,504 | 70.0 | 50,788 | 47.0 | | Total | 125,036 | 100.0 | 108,014 | 100.0 | Revenue by Client Type | Client Type | 2025 (RMB thousand) | 2025 (%) | 2024 (RMB thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Advertising Agencies | 60,088 | 48.1 | 33,172 | 30.7 | | Enterprises | 64,948 | 51.9 | 74,842 | 69.3 | | Total | 125,036 | 100.0 | 108,014 | 100.0 | - The proportion of revenue from enterprise clients decreased from 69.3% in the prior year to 51.9% in 2025, mainly due to the Group maintaining a prudent policy in selecting high-quality clients to control credit risk[41] Industry Digitalization Services Revenue Industry digitalization services revenue, primarily from lottery-related software systems and equipment solutions, increased by 30.5% from approximately RMB 8.2 million in the prior year to approximately RMB 10.7 million in 2025, mainly due to certain lottery-related system and equipment sales contracts signed at the end of the 2024 fiscal year and transferred in the first half of 2025 - Industry digitalization services revenue primarily provides lottery-related software systems and equipment solutions, including lottery security and payment systems[51] - Revenue increased by 30.5% to RMB 10.7 million, mainly due to an increase of RMB 2.0 million in revenue recognized at a point in time, with related contracts signed near the end of the 2024 financial year and transferred to clients in the first half of 2025[52] Cost of Sales Total cost of sales increased by 52.9% year-on-year to RMB 114.2 million, primarily due to a significant RMB 61.0 million increase in inventory costs for physical goods procurement and delivery services and lottery system and equipment sales, with inventory costs being the largest component of cost of sales, accounting for approximately 53.5% - Total cost of sales increased by 52.9% from approximately RMB 74.7 million in the prior year to approximately RMB 114.2 million in 2025[54] - This was primarily due to an increase of RMB 61.0 million in inventory costs for physical goods procurement and delivery services and lottery system and equipment sales for the six months ended June 30, 2025, compared to the same period last year[54] - Inventory costs accounted for approximately 53.5% and 63.7% of the cost of sales for the periods ended June 30, 2025, and 2024, respectively, constituting the largest portion of cost of sales[54] Gross Profit and Gross Margin Gross profit decreased by 48.2% year-on-year to RMB 21.5 million, with gross margin falling from 35.7% to 15.9%, primarily attributed to a shift in revenue structure in 2025 towards physical goods procurement and delivery services, which are recognized on a gross basis and accounted for 64.5% of total revenue, leading to increased inventory costs and a lower overall gross margin - Gross profit was approximately RMB 21.5 million, a decrease of approximately 48.2% compared to approximately RMB 41.5 million in the prior year[55] - Gross margin decreased from 35.7% in the prior year to 15.9% in 2025[56] - This was mainly due to an increase in revenue from physical goods procurement and delivery services recognized on a gross basis, which accounted for 64.5% of total revenue (2024: 43.7%), leading to increased inventory costs and a decrease in gross profit[56] Other Income and Other Gains or Losses For the six months ended June 30, 2025, total other income and other gains or losses amounted to approximately RMB 1.8 million, consistent with the prior year, primarily comprising bank interest income, government grants, exchange gains, and miscellaneous income - Other income and other gains or losses primarily include bank interest income, government grants, exchange gains, and miscellaneous income[57] - Other income for the six months ended June 30, 2025, was approximately RMB 1.8 million, consistent with approximately RMB 1.8 million for the six months ended June 30, 2024[57] Selling and Distribution Expenses Selling and distribution expenses slightly decreased by 0.9% year-on-year to approximately RMB 10.8 million, primarily including staff welfare, travel and entertainment, advertising and promotion, rent depreciation, and technical support service fees, maintaining a stable level in the first half of 2025 - Selling and distribution expenses decreased by 0.9% from approximately RMB 10.9 million in the prior year to approximately RMB 10.8 million in 2025[58] - These primarily include staff welfare expenses, travel and entertainment expenses, advertising and promotion expenses, rent, depreciation and impairment of right-of-use assets, and service fees related to technical support, software development, and equipment installation for lottery-related software systems and equipment solutions[58] Administrative Expenses Administrative expenses decreased by 3.4% year-on-year to approximately RMB 14.1 million, primarily comprising staff welfare, travel and entertainment, professional fees, and general office expenses, maintaining a stable level in the first half of 2025 - Administrative expenses decreased by 3.4% from approximately RMB 14.6 million in the prior year to approximately RMB 14.1 million in 2025[59] - These primarily include staff welfare expenses, travel and entertainment expenses, professional fees, and general office expenses[59] Research and Development Expenses Research and development expenses decreased by 6.8% year-on-year to approximately RMB 9.6 million, primarily including R&D staff salaries, technical services and license fees, and depreciation of property, plant, and equipment, consistent with the trend of decreasing revenue from secondary business software development and maintenance services - Research and development expenses decreased by 6.8% from approximately RMB 10.3 million in the prior year to approximately RMB 9.6 million in 2025[60] - These primarily include salaries, bonuses, and other benefits for R&D personnel; technical services and license fees; and depreciation of property, plant, and equipment[60] - This decrease is consistent with the trend of decreasing revenue from the Group's secondary business software development and maintenance services[60] Finance Costs Finance costs decreased by 36.0% year-on-year to approximately RMB 1.6 million, primarily due to the company's efforts to secure financing at lower effective interest rates, resulting in a reduction of approximately RMB 1.0 million in bank borrowing interest expenses - Finance costs decreased by 36.0% from approximately RMB 2.5 million in the prior year to approximately RMB 1.6 million in 2025[61] - This was primarily due to the company's efforts in 2025 to obtain financing at lower effective interest rates, resulting in a reduction of approximately RMB 1.0 million in bank borrowing interest expenses[61] Income Tax Expense Income tax expense significantly decreased by 94.7% year-on-year to approximately RMB 24 thousand, primarily due to a reduction in taxable profit, with the effective income tax rate falling from 14.2% to -0.12% as most subsidiaries were in a loss position in the first half of 2025 - Income tax expense decreased by 94.7% from approximately RMB 453 thousand in the prior year to approximately RMB 24 thousand in 2025, primarily due to a decrease in taxable profit[62] - The effective income tax rate decreased from 14.2% in the prior year to -0.12% in 2025, as most subsidiaries were in a loss position for the period ended June 30, 2025[62] (Loss) / Profit for the Period (Loss) / Profit for the period shifted from a profit of approximately RMB 2.7 million in the prior year to a loss of approximately RMB 20.8 million in 2025, representing an 870.4% year-on-year decrease - (Loss) / Profit for the period decreased by approximately RMB 23.5 million or 870.4% from a profit of approximately RMB 2.7 million for the six months ended June 30, 2024, to a loss of approximately RMB 20.8 million for the six months ended June 30, 2025[63] Non-HKFRS Measure: Adjusted Net (Loss) / Profit To supplement HKFRS, the company uses adjusted net (loss) / profit as an additional financial measure to help investors understand and assess operating performance by eliminating items management believes do not reflect performance, such as translation differences and fair value changes of financial assets at fair value through profit or loss; as of June 30, 2025, the adjusted net loss was RMB 19,116 thousand, compared to a profit of RMB 4,031 thousand in the prior year - The company uses adjusted net (loss) / profit as an additional financial measure to eliminate the potential impact of items management believes do not reflect performance, helping to compare performance across different years and companies[64] Adjusted Net (Loss) / Profit | Indicator | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :--- | :--- | | (Loss) / Profit for the Period Attributable to Owners of the Company | (19,644) | 3,457 | | Add: Translation Differences | 26 | (4) | | Add: Fair Value Changes of Financial Assets at Fair Value Through Profit or Loss | 502 | 578 | | Adjusted Net (Loss) / Profit | (19,116) | 4,031 | Liquidity, Financial and Capital Resources As of June 30, 2025, the Group had 229 full-time employees with total staff costs of approximately RMB 23.5 million, total interest-bearing borrowings of RMB 98.5 million, and a gearing ratio of 34.0%; cash and cash equivalents decreased to RMB 103.7 million primarily due to increased advances to suppliers for business development, with capital expenditures and working capital funded by bank borrowings, global offering, and rights issue proceeds, while significant investments include the acquisition of Shanghai Maichun Brand Management Co., Ltd (Target Company A) (due diligence extended) and the completed acquisition of the remaining equity in Cai Ping Fang Technology Co., Ltd (Target Company B); controlling shareholders have pledged shares as collateral for a subsidiary's bank borrowings, and the company maintains a prudent financial management approach, closely monitoring liquidity and foreign exchange risks without using financial instruments for hedging - As of June 30, 2025, the Group had 229 full-time employees, with total staff costs of approximately RMB 23.5 million[66][67] - As of June 30, 2025, the Group had interest-bearing borrowings of approximately RMB 98.5 million, and its gearing ratio was 34.0% (December 31, 2024: 28.0%)[69][70] - Cash and cash equivalents decreased from RMB 139.0 million as of December 31, 2024, to RMB 103.7 million, primarily due to an increase of RMB 53.0 million in advances to suppliers for business development[71] - The company completed the acquisition of the remaining equity in Cai Ping Fang Technology Co., Ltd (Target Company B) for RMB 18,300,000, with the transaction finalized in July 2025[77][79] - Controlling shareholders have pledged a portion of the company's shares (approximately 3.95% of total issued share capital) as collateral for a RMB 18,500,000 bank borrowing by Hangzhou Rego Network Co., Ltd, a wholly-owned subsidiary[82][83] Key Financial Ratios | Financial Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Gross Margin | 15.9% | 26.9% | | Net Profit Margin | -15.3% | -16.1% | | Adjusted Net Profit Margin | -14.9% | -12.5% | | Return on Equity | -6.2% | -11.0% | | Return on Total Assets | -3.5% | -7.4% | | Current Ratio | 2.0 times | 2.7 times | | Quick Ratio | 2.0 times | 2.7 times | | Gearing Ratio | 34.0% | 28.0% | | Debt to Equity Ratio | 3.2% | Not Applicable | Employees and Remuneration Policy As of June 30, 2025, the Group had 229 full-time employees primarily located in Hangzhou, Shanghai, and Xi'an, China, with remuneration based on performance, experience, capabilities, and market levels, offering competitive salaries, performance bonuses, housing allowances, and career development opportunities, with total staff costs of approximately RMB 23.5 million and contributions to mandatory social security funds, and while an employee share option scheme was adopted in 2022, no options were granted during the reporting period - As of June 30, 2025, the Group had 229 full-time employees, primarily located in Hangzhou, Shanghai, and Xi'an, China[66] - Employee remuneration is determined based on performance, experience, capabilities, and market comparable levels, offering competitive salaries, performance bonuses, housing allowances, team-building activities, and career development opportunities[66] - For the six months ended June 30, 2025, the Group's total staff costs were approximately RMB 23.5 million (prior year: approximately RMB 25.3 million)[67] Contingent Liabilities and Indebtedness As of June 30, 2025, the Group had interest-bearing borrowings of approximately RMB 98.5 million, including unsecured and secured, secured and unsecured, and unsecured and unsecured portions, all repayable within one year or on demand, in addition to lease liabilities of RMB 6.2 million, with no other significant contingent liabilities - As of June 30, 2025, the Group had interest-bearing borrowings of approximately RMB 98.5 million, of which approximately RMB 32.0 million were unsecured and guaranteed, RMB 9.0 million were secured and guaranteed, and RMB 57.5 million were unsecured and unguaranteed[69] - As of June 30, 2025, the Group had lease liabilities of RMB 6.2 million[69] - Save as disclosed above, as of June 30, 2025, the Group had no other significant contingent liabilities[69] Liquidity, Financial and Capital Resources The Group primarily funds capital expenditures and working capital through bank borrowings, proceeds from the 2022 global offering, and the 2023 rights issue; as of June 30, 2025, bank borrowings were approximately RMB 98.5 million with effective interest rates ranging from 2.7% to 4.8%, and the gearing ratio was 34.0%; cash and cash equivalents decreased to RMB 103.7 million mainly due to increased advances to suppliers, and the company has not engaged in any financial instrument hedging - The Group primarily funds capital expenditures and working capital requirements through bank borrowings, proceeds from the company's global offering in October 2022, and proceeds from the rights issue in December 2023[70] - As of June 30, 2025, bank borrowings were approximately RMB 98.5 million, with effective interest rates ranging from 2.7% to 4.8% per annum[70] - The Group's gearing ratio as of June 30, 2025, was 34.0% (December 31, 2024: 28.0%)[70] - Cash and cash equivalents decreased by RMB 35.3 million from RMB 139.0 million as of December 31, 2024, to RMB 103.7 million, primarily due to an increase of RMB 53.0 million in advances to suppliers for business development[71] Significant Investments, Acquisitions and Disposals of Major Subsidiaries, Associates and Joint Ventures The Group is undertaking two significant acquisitions: the due diligence for the 100% equity acquisition of Shanghai Maichun Brand Management Co., Ltd (Target Company A) has been repeatedly extended to June 30, 2026, due to Target Company A's failure to meet expected business performance, while the acquisition of the remaining equity in Cai Ping Fang Technology Co., Ltd (Target Company B) for RMB 18,300,000 was completed in July 2025, aiming to enhance existing client service capabilities and improve resource utilization efficiency - The company will acquire 100% equity in Shanghai Maichun Brand Management Co., Ltd (Target Company A), with due diligence extended to June 30, 2026, as Target Company A failed to achieve expected business performance in the last fiscal year[73][75] - A wholly-owned subsidiary of the company entered into a share transfer agreement with three sellers to acquire all shares of Cai Ping Fang Technology Co., Ltd (Target Company B) for RMB 18,300,000, with the transaction completed in July 2025[77][79] - The Directors believe that the acquisition of Target Company B is an attractive investment opportunity consistent with the Group's business development strategy, which will enhance its ability to serve existing clients and improve resource utilization efficiency[77] Capital Commitments As of June 30, 2025, the Group had capital commitments of RMB 18,300,000, primarily for the acquisition of equity in Cai Ping Fang Technology Co., Ltd, with 50% of the consideration, RMB 9,150,000, paid in July 2025, and the remaining portion due by December 31, 2025 - As of June 30, 2025, the Group had capital commitments of RMB 18,300,000, primarily for the acquisition of equity in Cai Ping Fang Technology Co., Ltd[80] - The Group was required to pay 50% of the consideration for the acquisition of Cai Ping Fang Technology Co., Ltd's equity, RMB 9,150,000, by July 31, 2025, and the remaining 50%, RMB 9,150,000, by December 31, 2025[80] - The Group paid 50% of the consideration, RMB 9,150,000, in July 2025[80] Controlling Shareholders' Pledged Shares As of June 26, 2025, the company's three controlling shareholders (Weichen Investment, Tianhuan Investment, and Yunshan Investment) have pledged approximately 2.44%, 1.02%, and 0.49% of the company's total issued shares, respectively, as collateral for a RMB 18,500,000 bank borrowing by Hangzhou Rego Network Co., Ltd, a wholly-owned subsidiary, with ownership, voting rights, and dividend rights not transferred during the pledge period, but their exercise must not harm the pledgee's interests - The company's controlling shareholders, Weichen Investment Co., Ltd, Tianhuan Investment Co., Ltd, and Yunshan Investment Co., Ltd, have pledged shares of the company, representing approximately 2.44%, 1.02%, and 0.49% of the total issued shares, respectively[82] - The shares pledged by the three controlling shareholders serve as collateral for a RMB 18,500,000 bank borrowing by Hangzhou Rego Network Co., Ltd, a wholly-owned subsidiary of the company[83] - During the pledge period, the pledged shares do not involve the transfer of ownership, voting rights, or dividend rights, but the exercise of such rights shall not prejudice the interests of the pledgee[83] Major Customers For the six months ended June 30, 2025, the Group's top five customers accounted for 60.1% of revenue, with the largest customer contributing 23.3%, indicating an increase in concentration for both the top five and the largest customer compared to the prior year - For the period ended June 30, 2025, the Group's top five customers accounted for 60.1% of revenue (prior year: 57.3%)[85] - For the period ended June 30, 2025, the Group's largest customer accounted for 23.3% of revenue (prior year: 30.2%)[85] Major Suppliers For the six months ended June 30, 2025, the Group's top five suppliers accounted for 66.0% of total cost of sales, with the largest supplier contributing 31.0%, showing a decrease in concentration for both the top five and the largest supplier compared to the prior year - For the period ended June 30, 2025, the Group's top five suppliers accounted for 66.0% of total cost of sales (prior year: 80.3%)[86] - For the period ended June 30, 2025, the Group's largest supplier accounted for 31.0% of total cost of sales (prior year: 36.6%)[86] Key Financial Ratios As of June 30, 2025, the Group's profitability ratios (gross margin, net profit margin, return on equity, and return on total assets) all decreased, with gross margin falling from 26.9% to 15.9%; both the current ratio and quick ratio decreased from 2.7 times to 2.0 times, while the gearing ratio increased from 28.0% to 34.0%, and the debt-to-equity ratio was 3.2% Key Financial Ratios | Financial Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Gross Margin | 15.9% | 26.9% | | Net Profit Margin | -15.3% | -16.1% | | Adjusted Net Profit Margin | -14.9% | -12.5% | | Return on Equity | -6.2% | -11.0% | | Return on Total Assets | -3.5% | -7.4% | | Current Ratio | 2.0 times | 2.7 times | | Quick Ratio | 2.0 times | 2.7 times | | Gearing Ratio | 34.0% | 28.0% | | Debt to Equity Ratio | 3.2% | Not Applicable | Treasury Policy The Group adopts a prudent financial management approach to maintain a robust liquidity position, continuously assessing client creditworthiness to mitigate credit risk and closely monitoring liquidity to ensure sufficient financial resources for its funding needs and commitments - The Group adopts a prudent financial management approach in formulating its treasury policy, thereby maintaining a robust liquidity position throughout the review period[89] - The Group continuously conducts credit assessments and financial condition assessments of its clients to mitigate credit risk[89] - The Board closely monitors the Group's liquidity position to ensure sufficient available financial resources to meet its funding needs and commitments from time to time[89] Foreign Exchange Risk The Group's operations are primarily in China, with most transactions denominated and settled in RMB, thus foreign exchange risk is not significant; for the six months ended June 30, 2025, the Group did not use any financial instruments to hedge foreign exchange risk and will continue to monitor and take measures to ensure foreign exchange risk remains controllable - The Group's business primarily operates in China, with most transactions denominated and settled in RMB, thus foreign exchange risk is not significant[90] - For the six months ended June 30, 2025, the Group did not use any financial instruments to hedge its foreign exchange risk exposure, nor did it commit to using any financial instruments for such purpose[92] - The company's directors and senior management will continue to closely monitor foreign exchange risk and take measures as necessary to ensure foreign exchange risk remains within controllable limits[92] Capital Structure The company's shares were listed on the Main Board of the Stock Exchange on October 17, 2022; in December 2023, the company conducted a rights issue, raising approximately HKD 100 million in gross proceeds, with 40,263,600 unsubscribed rights shares sold to independent placees through a placing arrangement - The company's shares were listed on the Main Board of the Stock Exchange on the listing date[93] - In December 2023, the rights issue raised total gross proceeds of approximately HKD 100 million (before deducting expenses)[94] - 40,263,600 rights shares under the rights issue were undersubscribed, representing approximately 8.05% of the total rights shares available for subscription, and were sold to independent placees through a placing arrangement[93][94] Condensed Interim Consolidated Financial Statements This section presents the Group's condensed interim consolidated financial statements, including the statement of profit or loss and other comprehensive income, and the statement of financial position Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the Group's revenue was RMB 135,766 thousand, a 16.8% year-on-year increase; however, due to a significant increase in cost of sales, gross profit decreased by 48.0% year-on-year to RMB 21,543 thousand, resulting in a loss for the period of RMB 19,644 thousand attributable to owners of the company, with a basic loss per share of RMB 0.03 Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 135,766 | 116,204 | | Cost of Sales | (114,223) | (74,737) | | Gross Profit | 21,543 | 41,467 | | (Loss) / Profit Before Income Tax | (20,786) | 3,184 | | (Loss) / Profit for the Period | (20,810) | 2,731 | | (Loss) / Profit for the Period Attributable to Owners of the Company | (19,644) | 3,457 | | Basic and Diluted (Loss) / Earnings Per Share (RMB) | (0.03) | 0.01 | Condensed Interim Consolidated Statement of Financial Position As of June 30, 2025, the Group's total assets increased to RMB 599,589 thousand compared to December 31, 2024, but net current assets decreased from RMB 287,262 thousand to RMB 267,103 thousand, while total liabilities significantly increased to RMB 263,160 thousand, leading to a decrease in net assets and equity attributable to owners of the company, with trade receivables and prepayments notably increasing and cash and cash equivalents decreasing Condensed Interim Consolidated Statement of Financial Position | Indicator | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 74,963 | 78,709 | | Current Assets | 524,626 | 453,240 | | Total Assets | 599,589 | 531,949 | | Liabilities | | | | Current Liabilities | 257,523 | 165,978 | | Non-current Liabilities | 5,637 | 7,187 | | Total Liabilities | 263,160 | 173,165 | | Equity | | | | Equity Attributable to Owners of the Company | 338,435 | 359,624 | | Non-controlling Interests | (2,006) | (840) | | Total Equity | 336,429 | 358,784 | | Net Current Assets | 267,103 | 287,262 | - Trade receivables increased from RMB 153,396 thousand as of December 31, 2024, to RMB 205,246 thousand as of June 30, 2025[97] - Cash and cash equivalents decreased from RMB 138,994 thousand as of December 31, 2024, to RMB 103,673 thousand as of June 30, 2025[97] Notes to the Condensed Interim Consolidated Financial Statements This section provides detailed notes and explanations supporting the condensed interim consolidated financial statements General Information Rego Interactive Co., Ltd, incorporated in the Cayman Islands on August 8, 2017, is an investment holding company whose subsidiaries primarily engage in enterprise digitalization services and industry digitalization services in China, with its shares listed on the Main Board of the Hong Kong Stock Exchange, and its controlling shareholders being Mr. Tian Huan, Mr. Chen Ping, and Mr. Zhang Yongli, along with their controlled entities Tianhuan Investment, Weichen Investment, and Yunshan Investment - Rego Interactive Co., Ltd was incorporated as an exempted company in the Cayman Islands on August 8, 2017, under the Companies Law of Cayman, and its shares are listed on the Main Board of the Hong Kong Stock Exchange[99] - The company is an investment holding company, and the Group is engaged in enterprise digitalization services and industry digitalization services in China[99][103] - The ultimate shareholders of the company are Mr. Tian Huan, Mr. Chen Ping, and Mr. Zhang Yongli, who, together with their controlled entities Tianhuan Investment, Weichen Investment, and Yunshan Investment, are collectively referred to as the "Controlling Shareholders"[100] Basis of Preparation of Condensed Interim Consolidated Financial Statements and Adoption of HKFRSs The condensed interim consolidated financial statements for the six months ended June 30, 2025, are prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the HKICPA and the applicable disclosure requirements of the Listing Rules of the Hong Kong Stock Exchange, with accounting policies consistent with the 2024 annual consolidated financial statements, except for the adoption of new standards effective January 1, 2025 (e.g., amendments to HKAS 21), which did not have a significant impact on the Group's condensed interim consolidated financial statements - The condensed interim consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[102] - The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2024, except for the adoption of new standards effective January 1, 2025[104] - Certain amendments first applied in 2025 (e.g., amendments to HKAS 21) did not have any significant impact on the Group's condensed interim consolidated financial statements[104][105] Critical Accounting Judgements and Key Sources of Estimation Uncertainty The preparation of condensed interim consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses, with actual results potentially differing from these estimates, and other significant judgments and key sources of estimation uncertainty in applying accounting policies are consistent with those used in the 2024 annual financial statements - The preparation of condensed interim consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expenses[107] - In preparing these condensed interim consolidated financial statements, other significant judgments made by management in applying the Group's accounting policies and key sources of estimation uncertainty are the same as those applied in the annual financial statements for the year ended December 31, 2024[107] Segment Information The Group's operating and reportable segments are enterprise digitalization services and industry digitalization services, with the chief operating decision maker assessing segment performance based on segment profit, which is equivalent to the Group's gross profit, and all major external customers and significant non-current assets are located in mainland China - The Group's operating and reportable segments are enterprise digitalization services and industry digitalization services[110] - The chief operating decision maker assesses the performance of operating segments based on segment profit, which is the same as the Group's gross profit, and a reconciliation of segment profit to profit before income tax is presented in the consolidated statement of profit or loss and other comprehensive income[111] - All of the Group's major external customers and significant non-current assets are located in mainland China[113][114] Segment Performance | Segment | 2025 Revenue (RMB thousand) | 2025 Cost of Sales (RMB thousand) | 2025 Segment Profit (RMB thousand) | | :--- | :--- | :--- | :--- | | Enterprise Digitalization Services | 125,036 | (108,334) | 16,702 | | Industry Digitalization Services | 10,730 | (5,889) | 4,841 | | Consolidated Total | 135,766 | (114,223) | 21,543 | | Segment | 2024 Revenue (RMB thousand) | 2024 Cost of Sales (RMB thousand) | 2024 Segment Profit (RMB thousand) | | :--- | :--- | :--- | :--- | | Enterprise Digitalization Services | 108,014 | (70,712) | 37,302 | | Industry Digitalization Services | 8,190 | (4,025) | 4,165 | | Consolidated Total | 116,204 | (74,737) | 41,467 | Revenue For the six months ended June 30, 2025, the Group's total revenue from contracts with customers was RMB 135,766 thousand, with RMB 127,399 thousand recognized at a point in time (primarily from enterprise digitalization services) and RMB 8,367 thousand recognized over time (primarily from industry digitalization services) Revenue Recognition Timing | Revenue Recognition Timing | 2025 Enterprise Digitalization Services (RMB thousand) | 2025 Industry Digitalization Services (RMB thousand) | 2025 Total (RMB thousand) | | :--- | :--- | :--- | :--- | | At a point in time | 125,036 | 2,363 | 127,399 | | Over time | – | 8,367 | 8,367 | | Total Revenue from Contracts with Customers | 125,036 | 10,730 | 135,766 | | Revenue Recognition Timing | 2024 Enterprise Digitalization Services (RMB thousand) | 2024 Industry Digitalization Services (RMB thousand) | 2024 Total (RMB thousand) | | :--- | :--- | :--- | :--- | | At a point in time | 108,014 | 323 | 108,337 | | Over time | – | 7,867 | 7,867 | | Total Revenue from Contracts with Customers | 108,014 | 8,190 | 116,204 | Other Income and Net Other Gains or Losses For the six months ended June 30, 2025, other income and net other gains or losses amounted to RMB 1,830 thousand, consistent with RMB 1,828 thousand in the prior year, with other income primarily comprising government grants (RMB 445 thousand) and miscellaneous income (RMB 1,875 thousand), while net other gains/losses were mainly affected by a net fair value loss of financial assets at fair value through profit or loss (RMB 502 thousand) Other Income and Net Other Gains or Losses | Item | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :--- | :--- | | Other Income | | | | Bank interest income | 38 | 259 | | Government grants | 445 | 1,723 | | Miscellaneous income | 1,875 | 420 | | Subtotal | 2,358 | 2,402 | | Net Other Gains / (Losses) | | | | Exchange (loss) / gain | (26) | 4 | | Net fair value loss of financial assets at fair value through profit or loss | (502) | (578) | | Subtotal | (528) | (574) | | Total | 1,830 | 1,828 | - For the six months ended June 30, 2025, and 2024, the Group enjoyed tax benefits on input VAT and received government grants from local Chinese government authorities as reimbursement for R&D activities[116] Income Tax Expense For the six months ended June 30, 2025, income tax expense was RMB 24 thousand, a significant decrease from the prior year, primarily due to reduced taxable profit and most subsidiaries being in a loss position, with Chinese subsidiaries subject to a 25% corporate income tax rate, certain high-tech enterprises (e.g., Hangzhou Rego and Xi'an Tiantai) enjoying a preferential 15% rate, and companies engaged in R&D activities eligible for a 175% super deduction for R&D expenses Income Tax Expense | Item | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :--- | :--- | | Current income tax – China | | | | – Tax for the period | 72 | 3,081 | | – Over-provision in prior years | (6) | (523) | | Subtotal | 66 | 2,558 | | Deferred tax | (42) | (2,105) | | Income Tax Expense | 24 | 453 | - The tax rate for the Group's subsidiaries operating in China is 25% of taxable profit[119] - Certain subsidiaries (e.g., Hangzhou Rego and Xi'an Tiantai) are certified as "High and New Technology Enterprises" and are eligible for a preferential corporate income tax rate of 15% from January 1, 2016, to December 31, 2025[120] - Enterprises engaged in R&D activities are entitled to deduct 175% of the R&D expenses incurred for such activities as deductible expenses ("super deduction") when determining their taxable profit[121] Dividends No dividends were paid or proposed for the company's ordinary shares for the six months ended June 30, 2025, and 2024 - No dividends were paid or proposed for the company's ordinary shares for the six months ended June 30, 2025, and 2024[122] (Loss) / Earnings Per Share For the six months ended June 30, 2025, the loss attributable to owners of the company was RMB 19,644 thousand, resulting in a basic and diluted loss per share of RMB 0.03, compared to a profit of RMB 3,457 thousand and basic and diluted earnings per share of RMB 0.01 in the prior year, with no potential dilutive shares exercised during the reporting period, making basic and diluted (loss) / earnings per share identical (Loss) / Earnings Per Share | Indicator | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :--- | :--- | | (Loss) / Profit Attributable to Owners of the Company | (19,644) | 3,457 | | Weighted average number of ordinary shares for basic (loss) / earnings per share (thousand shares) | 732,396 | 732,396 | | Basic and Diluted (Loss) / Earnings Per Share (RMB) | (0.03) | 0.01 | - There were no diluted (loss) / earnings per share as no potential dilutive shares were exercised for the six months ended June 30, 2025, and 2024; therefore, diluted (loss) / earnings per share are the same as basic (loss) / earnings per share[124] Trade Receivables As of June 30, 2025, net trade receivables significantly increased to RMB 205,246 thousand from RMB 153,396 thousand as of December 31, 2024, with amounts due from third parties totaling RMB 239,271 thousand, and credit loss provisions increasing to RMB 34,025 thousand; customer credit terms range from 5 to 60 days, and the aging analysis shows the highest proportion of receivables within one month Trade Receivables | Item | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :--- | :--- | | Trade receivables – due from third parties | 239,271 | 179,161 | | Trade receivables – due from related companies | – | 90 | | Subtotal | 239,271 | 179,251 | | Less: Provision for credit losses | (34,025) | (25,855) | | Net Trade Receivables | 205,246 | 153,396 | Aging Analysis of Trade Receivables | Aging | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :--- | :--- | | Within one month | 146,099 | 121,748 | | Over one month but less than three months | 41,299 | 14,095 | | Over three months but less than six months | 1,734 | 2,975 | | Over six months but less than one year | 2,594 | 5,180 | | Over one year | 13,520 | 9,398 | | Total | 205,246 | 153,396 | - At the end of the reporting period, credit terms granted to customers ranged from 5 to 60 days[125] Trade Payables As of June 30, 2025, trade payables significantly increased to RMB 87,119 thousand from RMB 27,896 thousand as of December 31, 2024, with credit terms for purchases from suppliers generally ranging from 10 to 60 days, and the aging analysis showing the highest proportion of payables within one month Trade Payables | Item | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :--- | :--- | | Trade payables | 87,119 | 27,896 | Aging Analysis of Trade Payables | Aging | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :--- | :--- | | Within one month | 52,878 | 22,211 | | Over one month but less than three months | 18,255 | 1,776 | | Over three months but less than six months | 11,030 | 2,567 | | Over six months but less than one year | 3,616 | 1,022 | | Over one year | 1,340 | 320 | | Total | 87,119 | 27,896 | - At the end of the period, credit terms for purchases from suppliers generally ranged from 10 to 60 days[126] Events After the Reporting Period As of June 30, 2025, the Group entered into a share transfer agreement with three independent third parties to acquire the remaining equity in Cai Ping Fang for RMB 18,300,000, with the transaction completed in July 2025 - As of June 30, 2025, the Group entered into a share transfer agreement with three independent third parties to acquire the remaining equity in Cai Ping Fang for RMB 18,300,000[128] - The transaction was completed in July 2025[128] Future and Outlook This section outlines the Group's strategic direction, future plans, and market outlook Overall Strategy and Risk Management Facing a sluggish global economy in 2025, the Group will closely monitor economic trends and market competition, focusing on boosting core businesses and developing the AI digital lottery store model, streamlining capital allocation, and enhancing operational efficiency, while strengthening risk awareness, adhering to prudent risk management strategies, actively expanding its strategic vision, seizing new business opportunities, and achieving cross-industry empowerment services to promote sustained and stable corporate development - In 2025, the global economic situation remains challenging, with persistent economic slowdown[129] - The Group's strategy is to closely monitor economic development trends and changes in market competition, focusing on boosting core businesses and developing the AI digital lottery store model, streamlining capital allocation, and enhancing operational efficiency[129] - The Group plans to strengthen awareness of potential risks, adhere to prudent risk management strategies, actively expand its strategic vision, keenly observe and seize new business opportunities, aiming to achieve cross-industry empowerment services in the future[129] Outlook for Enterprise Digitalization Services The Group will strive to identify stable and reliable new clients and suppliers, adopt an omnichannel marketing strategy, actively explore new growth areas, and deepen its enterprise welfare business; in the second half of the year, it will focus on lottery marketing vouchers, seizing opportunities from growing lottery sales to expand its market share in welfare and sports lotteries - The Group will strive to identify stable and reliable new clients and suppliers, use an omnichannel marketing strategy to precisely reach various client groups, and actively explore new growth points[130](index=130&type=