中联发展控股(00264) - 2025 - 中期业绩

Interim Results Announcement Company Information This announcement presents the unaudited condensed consolidated interim results of China United Development Holdings Group Limited (incorporated in the Cayman Islands) for the six months ended June 30, 2025, with stock code 264 - Company Name: China United Development Holdings Group Limited[2] - Place of Incorporation: Cayman Islands[2] - Stock Code: 264[2] - Reporting Period: Six months ended June 30, 2025[2] Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the Company's revenue significantly increased by 106.7% to HK$17,878 thousand, with gross profit growing by 113.2% to HK$4,373 thousand, while loss attributable to owners of the Company narrowed to HK$7,598 thousand from HK$9,549 thousand in the prior period, resulting in a basic loss per share of 1.77 HK cents Overview of Profit or Loss and Other Comprehensive Income | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 17,878 | 8,651 | 106.7% | | Cost of sales | (13,505) | (6,600) | 104.6% | | Gross profit | 4,373 | 2,051 | 113.2% | | Other income | 57 | 10 | 470.0% | | Other loss | – | (1,224) | -100.0% | | Selling and distribution costs | (605) | (887) | -31.8% | | Administrative and other operating expenses | (12,108) | (8,001) | 51.3% | | Reversal of impairment loss on trade receivables/(Impairment loss) | 569 | (33) | -1824.2% | | Finance costs | (1,650) | (1,465) | 12.6% | | Loss before tax | (9,364) | (9,549) | -1.9% | | Loss attributable to owners of the Company | (7,598) | (9,549) | -20.4% | | Basic loss per share (HK Cents) | (1.77) | (2.31) | -23.38% | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2025, the Company's total assets increased to HK$22,286 thousand, with total current assets rising to HK$21,722 thousand, primarily due to new share placement proceeds, while net current liabilities and deficiency in assets improved, narrowing from HK$(48,866) thousand and HK$(62,021) thousand respectively as of December 31, 2024, to HK$(41,780) thousand and HK$(54,608) thousand Overview of Financial Position | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total non-current assets | 564 | – | N/A | | Total current assets | 21,722 | 10,878 | 99.7% | | Total current liabilities | 63,502 | 59,744 | 6.3% | | Net current liabilities | (41,780) | (48,866) | -14.5% | | Total assets less current liabilities | (41,216) | (48,866) | -15.7% | | Total non-current liabilities | 13,392 | 13,155 | 1.8% | | Net liabilities | (54,608) | (62,021) | -12.0% | | Total deficiency in assets | (54,608) | (62,021) | -12.0% | Notes to Interim Condensed Consolidated Financial Information General Information The Group primarily engages in leather product manufacturing and distribution, fashion/footwear/leather accessories retail, industrial hemp cultivation, and automotive services, with no significant changes in the nature of its principal activities during the reporting period, and Mr. Zhao Jingfei, an executive director and chairman, is the ultimate controlling shareholder - The Group's principal activities include leather manufacturing, leather retail, industrial hemp cultivation, and automotive services[7] - There were no significant changes in the nature of the principal activities during the reporting period[7] - The ultimate controlling shareholder is Mr. Zhao Jingfei, who is also an executive director and the chairman of the Company[8] Basis of Preparation The interim financial statements are prepared in accordance with the HKEX Listing Rules and HKAS 34 on a historical cost basis, and despite significant going concern uncertainties, the Board has implemented measures including director and shareholder loan commitments, external financing facilities, and new share placements to ensure sufficient working capital for at least the next 12 months - The interim financial statements are prepared in accordance with the HKEX Listing Rules and HKAS 34, and on a historical cost basis[9][10] - The Company faces significant going concern uncertainties, including a loss of HK$7,598 thousand for the period, net current liabilities of HK$41,780 thousand, and a deficiency in assets of HK$54,608 thousand[11] - To address going concern risks, the Company has secured an HK$8,000 thousand interest-free, unsecured loan commitment from executive director Mr. Qin Bohan, with an additional HK$30,000 thousand director's financing facility (undrawn)[11] - The ultimate controlling shareholder, Mr. Zhao Jingfei, has provided approximately HK$21,458 thousand in shareholder loans and committed not to demand repayment, while also offering an additional HK$20,000 thousand shareholder financing facility (undrawn)[11] - The Company has secured an external financing facility of up to HK$40,000 thousand from an independent third party (undrawn)[16] - The Company successfully placed 9,024,000 new shares in March 2025, raising net proceeds of approximately HK$15,616 thousand, and plans an August 2025 placing expected to raise up to HK$60.9 million, with HK$20.9 million allocated for general working capital[16][56] Significant Accounting Policies The interim financial statements adopt the same accounting policies as the 2024 annual financial statements, with the first-time adoption of HKAS 21 amendments 'Lack of Exchangeability' having no material impact, and several new and revised HKFRSs not yet effective are not expected to significantly affect financial performance or position - The Group has first-time adopted the amendments to HKAS 21 'Lack of Exchangeability', which had no material impact on the interim financial statements[14][15] - Several new and revised HKFRSs (e.g., HKFRS 18, 19, amendments to HKFRS 9 and 7, HKFRS 10, and HKAS 28) are not yet effective and are not expected to have a significant impact on the Group's financial performance and position[17][18] Estimates The significant judgments, estimates, and assumptions made by management in preparing the interim financial statements are consistent with those applied in the 2024 annual financial statements, though actual results may differ from these estimates - The significant judgments and key sources of estimation uncertainty made by management in preparing the interim financial statements are consistent with those applied in the 2024 annual financial statements[19] Revenue and Segment Information The Group operates three reportable segments: leather manufacturing, leather retail, and automotive services (commenced in H2 2024); for the six months ended June 30, 2025, leather manufacturing revenue grew significantly by 91.5% to HK$15,999 thousand, accounting for 89.5% of total revenue with a narrowed segment loss, while automotive services generated HK$1,715 thousand in its first reporting period, representing 9.6% of total revenue, and leather retail revenue decreased by 45.0% to HK$164 thousand with an expanded segment loss - The Group has three reportable segments: leather manufacturing business, leather retail business, and automotive services business (commenced in the second half of 2024)[20][21] Reportable Segment Revenue and Loss | Segment | 2025 Revenue (HK$ Thousand) | 2024 Revenue (HK$ Thousand) | Revenue Change (%) | 2025 Segment Loss (HK$ Thousand) | 2024 Segment Loss (HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Leather Manufacturing Business | 15,999 | 8,353 | 91.5% | (348) | (4,869) | | Leather Retail Business | 164 | 298 | -45.0% | (890) | (561) | | Automotive Services Business | 1,715 | – | N/A | (3,610) | – | | Total | 17,878 | 8,651 | 106.7% | (4,848) | (5,430) | Consolidated Total Assets and Liabilities | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Reportable segment assets | 70,863 | 56,343 | | Consolidated total assets | 22,286 | 10,878 | | Reportable segment liabilities | 104,722 | 80,179 | | Consolidated total liabilities | 76,894 | 72,899 | Other Loss For the six months ended June 30, 2025, the Group recorded no other losses, compared to approximately HK$1,224 thousand in the prior period, primarily due to impairment of right-of-use assets in the leather manufacturing business Other Loss | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Impairment loss on right-of-use assets | – | 1,224 | - No other losses were recorded in the first half of 2025, whereas the prior period in 2024 primarily saw impairment of right-of-use assets in the leather manufacturing business[59] Finance Costs For the six months ended June 30, 2025, finance costs increased to HK$1,650 thousand, primarily comprising imputed interest on ultimate controlling shareholder loans (HK$1,445 thousand) and interest on lease liabilities (HK$205 thousand) Finance Costs | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Interest on lease liabilities | 205 | 295 | | Imputed interest on ultimate holding shareholder loans | 1,445 | 1,170 | | Total | 1,650 | 1,465 | Loss Before Tax For the six months ended June 30, 2025, loss before tax was HK$9,364 thousand, a slight narrowing from HK$9,549 thousand in the prior period, with key expenses including cost of inventories recognized as expense of HK$13,505 thousand and employee costs of HK$6,389 thousand, alongside a reversal of impairment loss on trade receivables of HK$569 thousand Components of Loss Before Tax | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Cost of inventories recognized as expense | 13,505 | 6,600 | | Depreciation of property, plant and equipment | 18 | – | | Depreciation of right-of-use assets | – | 111 | | Net foreign exchange (gain)/loss | (49) | 1 | | Employee costs (excluding directors' emoluments) | 6,389 | 5,973 | | (Reversal of impairment loss)/Impairment loss on trade receivables | (569) | 33 | | Short-term lease related expenses | 195 | – | | Provision for onerous short-term lease contracts | 210 | 1,080 | | Interest income | (1) | (1) | Income Tax Expense The Group generated no assessable profits in Hong Kong and Mainland China, or had deductible losses to offset, resulting in no provision for income tax expense for both periods, and no deferred tax assets were recognized due to uncertainty over future profit sources - The Group generated no assessable profits in Hong Kong and Mainland China, thus no provision for income tax expense was made for both periods[27][28] - No deferred tax assets were recognized due to uncertainty over future profit sources[28] Dividends The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025 and 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2025 and 2024[29][112] Loss Per Share For the six months ended June 30, 2025, basic loss per share narrowed to 1.77 HK cents from 2.31 HK cents in the prior period, and diluted loss per share was consistent with basic loss per share due to the absence of potential dilutive ordinary shares Loss Per Share | Metric | 2025 (HK Cents) | 2024 (HK Cents) | | :--- | :--- | :--- | | Basic loss per share | (1.77) | (2.31) | | Diluted loss per share | (1.77) | (2.31) | - Basic loss per share is calculated based on the loss for the period of HK$7,598 thousand and the weighted average of 428,449,481 ordinary shares in issue[30] Property, Plant and Equipment For the six months ended June 30, 2025, additions to property, plant and equipment amounted to approximately HK$572 thousand; assets related to the leather retail business were fully impaired with no recoverable amount assessment performed, while property, plant and equipment and right-of-use assets in the leather manufacturing business showed impairment indicators due to losses, with recoverable amounts estimated at zero, requiring no reversal of impairment losses - For the six months ended June 30, 2025, additions to property, plant and equipment amounted to approximately HK$572 thousand[31] - Property, plant and equipment in the leather retail business were fully impaired in prior years, and no recoverable amount assessment was performed for the current period[32] - Property, plant and equipment and right-of-use assets in the leather manufacturing business showed impairment indicators, with recoverable amounts estimated at zero, and no reversal of impairment losses was required for the current period[33][34] Leases The Group entered into various lease contracts, including for its corporate headquarters; for the six months ended June 30, 2025, there were no retail right-of-use assets, and manufacturing right-of-use assets were fully impaired, with lease liabilities at period-end totaling HK$2,768 thousand, of which HK$2,732 thousand was current, and a provision for onerous short-term lease contracts of HK$210 thousand was recognized - For the six months ended June 30, 2025, the Group entered into a 3-month lease agreement for its corporate headquarters[35] - There were no retail right-of-use assets, and manufacturing right-of-use assets were fully impaired, with no reversal of impairment losses required for the current period[36] Changes in Lease Liabilities | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Beginning of period/year | 4,344 | 6,213 | | Additions | – | 1,681 | | Interest expense | 205 | 588 | | Lease liability payments | (1,870) | (4,006) | | Exchange adjustments | 89 | (132) | | End of period/year balance | 2,768 | 4,344 | | Current portion | 2,732 | 3,957 | | Non-current portion | 36 | 387 | - A provision for onerous short-term lease contracts of HK$210 thousand was recognized in the current period, a decrease from HK$1,080 thousand in the prior period[38] Trade Receivables As of June 30, 2025, the net carrying amount of trade receivables increased significantly to HK$14,232 thousand from HK$5,298 thousand as of December 31, 2024, with impairment loss provision decreasing from HK$2,051 thousand to HK$1,482 thousand, primarily due to a reversal of impairment loss of HK$569 thousand during the period Trade Receivables and Impairment Loss | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Gross trade receivables | 15,714 | 7,349 | | Less: Impairment loss | (1,482) | (2,051) | | Net carrying amount | 14,232 | 5,298 | Ageing Analysis of Trade Receivables (Net of Impairment Loss) | Ageing | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Less than 30 days | 13,538 | 5,168 | | 121 to 365 days | 694 | 130 | | Total | 14,232 | 5,298 | Movement in Provision for Expected Credit Losses on Trade Receivables | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Beginning of period/year | 2,051 | 1,171 | | (Reversal of impairment loss)/Impairment loss | (569) | 880 | | Balance at end of period/year | 1,482 | 2,051 | Trade Payables As of June 30, 2025, total trade payables significantly increased to HK$14,007 thousand from HK$4,766 thousand as of December 31, 2024, primarily concentrated in the less than 30 days and 31 to 60 days ageing categories Ageing Analysis of Trade Payables | Ageing | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Less than 30 days | 3,289 | 445 | | 31 to 60 days | 6,081 | 388 | | 61 to 90 days | 1,332 | 3,155 | | 91 to 120 days | 2,497 | 25 | | 121 to 365 days | 300 | 305 | | Over 365 days | 508 | 448 | | Total | 14,007 | 4,766 | Amounts Due to Ultimate Holding Shareholder, Directors and Related Companies As of June 30, 2025, amounts due to the ultimate controlling shareholder, Mr. Zhao Jingfei, significantly decreased to HK$2,621 thousand from HK$11,470 thousand as of December 31, 2024, while amounts due to directors Mr. Qin Bohan and Mr. Liang Wai Kit were HK$53 thousand and HK$40 thousand respectively, and total amounts due to related companies were HK$1,971 thousand - Amounts due to the ultimate controlling shareholder, Mr. Zhao Jingfei, were HK$2,621 thousand (December 31, 2024: HK$11,470 thousand), which are unsecured, interest-free, and have no fixed repayment terms[43] - Amounts due to director Mr. Qin Bohan were HK$53 thousand (December 31, 2024: HK$307 thousand), and amounts due to director Mr. Liang Wai Kit were HK$40 thousand (December 31, 2024: nil), both unsecured, interest-free, and with no fixed repayment terms[43] - Total amounts due to related companies were HK$1,971 thousand (December 31, 2024: HK$1,600 thousand), which are unsecured, interest-free, and have no fixed repayment terms[44] Loan from a Director Executive Director Mr. Qin Bohan granted an HK$8,000 thousand unsecured, interest-free, and repayable-on-demand loan to the Company, committing not to demand repayment until the Company is able to do so - Executive Director Mr. Qin Bohan granted an HK$8,000 thousand unsecured, interest-free, and repayable-on-demand loan to the Company[45] - Mr. Qin Bohan committed not to demand repayment of the loan until the Company is able to repay it[45] Loan from Ultimate Holding Shareholder As of June 30, 2025, the total interest-free loans granted by the ultimate controlling shareholder, Mr. Zhao Jingfei, to the Group slightly increased to HK$17,681 thousand from HK$17,226 thousand as of December 31, 2024, with part of the RMB loans extended for repayment until 2027, and Mr. Zhao committed not to demand repayment of shareholder loans until the Group is able to do so Movement in Loan from Ultimate Holding Shareholder | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Beginning of period/year | 17,226 | 19,517 | | Loan extension agreement entered into: nominal interest reduction from interest-free loan | (1,205) | (4,566) | | Imputed interest expense | 1,445 | 2,503 | | Exchange adjustments | 215 | (228) | | Balance at end of period/year | 17,681 | 17,226 | | Less: Current portion | (4,325) | (4,458) | | Non-current portion | 13,356 | 12,768 | - As of June 30, 2025, the total interest-free loans granted by Mr. Zhao Jingfei to the Group amounted to approximately HK$21,458 thousand[46] - Part of the RMB loans (RMB4,500,000) has been extended for repayment until March to June 2027[47] - Mr. Zhao Jingfei has confirmed that he will not demand repayment of the shareholder loans until the Group is able to repay them[48] Share Capital As of June 30, 2025, issued and fully paid share capital increased to HK$4,317 thousand from HK$4,227 thousand as of December 31, 2024, primarily due to the placement of 9,024,000 ordinary shares on March 18, 2025, raising net proceeds of approximately HK$15,616 thousand Share Capital Overview | Metric | June 30, 2025 (HK$ Thousand) | December 31, 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Authorised share capital | 20,000 | 20,000 | | Issued and fully paid share capital | 4,317 | 4,227 | - On March 18, 2025, the Company issued 9,024,000 ordinary shares at HK$1.78 per share, raising net proceeds of approximately HK$15,616 thousand[49][104][106] Commitments On May 15, 2025, the Group entered into an agreement with an independent third party to establish a subsidiary primarily engaged in e-commerce platform operations, with the Company's capital commitment being HK$255 thousand, and no other significant commitments exist for the Group - The Company committed to invest HK$255 thousand to establish a subsidiary primarily engaged in e-commerce platform operations, holding a 51% equity interest[50] - Save for the aforementioned capital commitments and operating lease commitments, the Group had no other significant commitments at the end of the reporting period[50][110] Contingent Liabilities The Group had no significant contingent liabilities as of June 30, 2025, and December 31, 2024 - The Group had no significant contingent liabilities at the end of the reporting period[51][110] Related Party Balances and Transactions Key management personnel remuneration for the period significantly increased to HK$1,551 thousand from HK$450 thousand in the prior period, and the Group had no other significant related party transactions beyond those disclosed Key Management Personnel Remuneration | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | | :--- | :--- | :--- | | Short-term benefits | 1,551 | 450 | | Post-employment benefits | – | – | | Total | 1,551 | 450 | Events After the Reporting Period Subsequent to the reporting period, on August 21, 2025, the Company entered into an agreement to acquire a 20% equity interest in NVTH Limited for HK$100,000 thousand, with HK$40,000 thousand paid in cash and HK$60,000 thousand via new share issuance; NVTH primarily operates a blockchain-based real-world asset tokenization technology platform, and on the same day, the Company also entered into a placing agreement for up to 44,000,000 new shares, expected to raise net proceeds of HK$60.9 million, with HK$40 million allocated for the cash consideration of the NVTH acquisition and the remainder for working capital - On August 21, 2025, the Company entered into an agreement to acquire a 20% equity interest in NVTH Limited for HK$100,000 thousand, with HK$40,000 thousand paid in cash and HK$60,000 thousand through the issuance of 42,253,000 new shares[56] - NVTH Limited primarily provides blockchain-based real-world asset tokenization technology infrastructure platforms, institutional-facing trading and liquidity solutions, and compliance ecosystem services for capital market participants[56] - On the same day, the Company entered into a placing agreement for up to 44,000,000 new shares, with expected net proceeds of HK$60.9 million[56] - Of the net proceeds from the placing, HK$40 million will be used to pay the cash consideration for the NVTH acquisition, and the remaining HK$20.9 million will be used to replenish the Group's general working capital[56] Comparative Amounts Certain comparative amounts have been reclassified to conform with the current period's presentation - Certain comparative amounts have been reclassified to conform with the current period's presentation[55] Management Discussion and Analysis Financial Performance Review For the six months ended June 30, 2025, the Group's revenue increased by 106.7% year-on-year to HK$17,878 thousand, gross profit grew by 113.2% to HK$4,373 thousand, and gross profit margin rose from 23.7% to 24.5%; despite significant revenue and gross profit growth, administrative and other operating expenses increased due to new director appointments, higher staff costs in automotive services, and increased professional fees, resulting in a net loss attributable to owners of the Company of HK$7,598 thousand, which was a narrowing from the prior period Key Financial Performance Indicators | Metric | 2025 (HK$ Thousand) | 2024 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 17,878 | 8,651 | 106.7% | | Gross profit | 4,373 | 2,051 | 113.2% | | Gross profit margin | 24.5% | 23.7% | 0.8 percentage points | | Other income | 57 | 10 | 470.0% | | Selling and distribution costs | 605 | 887 | -31.8% | | Administrative and other operating expenses | 12,108 | 8,001 | 51.3% | | Other loss | – | 1,224 | -100.0% | | Net loss attributable to owners of the Company | 7,598 | 9,549 | -20.4% | | Loss per share (HK Cents) | 1.77 | 2.31 | -23.38% | - The increase in revenue was primarily due to a significant increase in sales volume and sales activities[57] - The increase in administrative and other operating expenses was mainly due to the appointment of new directors, increased staff costs in the automotive services business, and higher professional fees for corporate activities[58] Business Review The Group's business primarily comprises leather manufacturing, leather retail, and automotive services; leather manufacturing revenue grew significantly by 91.5%, driven by Mainland China market expansion and a business model shift, while leather retail revenue declined by 45.0% due to economic uncertainties and high outbound travel by Hong Kong residents, and the new automotive services business recorded HK$1,715 thousand in revenue but remained in a loss-making position - The leather manufacturing business, leather retail business, and automotive services business accounted for 89.5%, 0.9%, and 9.6% of the Group's total revenue, respectively[60] Leather Manufacturing Business For the six months ended June 30, 2025, leather manufacturing business revenue increased by 91.5% year-on-year to HK$15,999 thousand, with segment loss significantly narrowing to HK$348 thousand, primarily driven by active expansion into the Mainland China market, a business model shift from 'production-heavy' to 'sales and trade-heavy', and deepening traditional belt business while expanding to small and medium-sized customers - Leather manufacturing business revenue increased by 91.5% year-on-year to HK$15,999 thousand, and segment loss decreased from HK$4,869 thousand to HK$348 thousand[62] - Revenue improvement was primarily attributable to: (i) active expansion into the Mainland China market to offset declining demand in European and American markets; (ii) a business model shift towards 'sales and trade-heavy', strengthening outsourcing cooperation and supply chain management; and (iii) deepening traditional belt business and expanding to small and medium-sized customers, startups, and e-commerce partners[62][63] Leather Manufacturing Business Revenue by Geographical Location | Geographical Location | 2025 (HK$ Thousand) | 2025 (%) | 2024 (HK$ Thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | United States | – | – | 807 | 9.6 | | Europe | 2,743 | 17.1 | 3,046 | 36.5 | | Hong Kong, China | 1,371 | 8.6 | 91 | 1.1 | | Mainland China | 11,779 | 73.6 | 408 | 4.9 | | Others | 106 | 0.7 | 4,001 | 47.9 | | Total | 15,999 | 100.0 | 8,353 | 100.0 | Leather Manufacturing Business Revenue by Product Category | Product Category | 2025 (HK$ Thousand) | 2025 (%) | 2024 (HK$ Thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Belts | 8,039 | 50.3 | 7,780 | 93.1 | | Leather goods and other accessories | 7,960 | 49.7 | 573 | 6.9 | | Total | 15,999 | 100.0 | 8,353 | 100.0 | Leather Retail Business For the six months ended June 30, 2025, leather retail business revenue decreased by 45.0% year-on-year to HK$164 thousand, with operating loss expanding to HK$890 thousand, primarily due to economic uncertainties in Hong Kong and Mainland China and high outbound travel by Hong Kong residents; the Company plans to improve business through e-commerce platforms and the launch of low-priced and co-branded products - Leather retail business revenue decreased by 45.0% year-on-year to HK$164 thousand, and operating loss expanded to HK$890 thousand[66][67] - The decrease in revenue was mainly due to economic uncertainties in Hong Kong and Mainland China and the high number of outbound travelers from Hong Kong[66] Leather Retail Business Revenue by Geographical Location | Geographical Location | 2025 (HK$ Thousand) | 2025 (%) | 2024 (HK$ Thousand) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Hong Kong | 164 | 100.0 | 298 | 100.0 | - The Company believes the revenue decline is a temporary downturn and has formulated strategies to reduce reliance on the US market, optimize factory efficiency, advance e-commerce business, expand customized services, and develop new automotive services business[69][70][71][72][74] Automotive Services Business The Group expanded into automotive services through a joint venture in December 2024, recording HK$1,715 thousand in revenue for the six months ended June 30, 2025, but still incurring a loss of HK$3,610 thousand; nevertheless, the Company believes this business will provide a stable revenue stream in the future - The automotive services business commenced in December 2024 through a joint venture, recording revenue of HK$1,715 thousand and a loss of HK$3,610 thousand for the current period[75] - The Company believes that the development of the automotive services business will provide a stable source of revenue for the Group in the future[75] Outlook and Business Strategies and Plans The Group plans to enhance the performance of its business segments through multiple strategies: the leather manufacturing business will strengthen traditional belt products and launch a customized product line, focusing on the Mainland China market; the leather retail business will expand online sales through an e-commerce joint venture with East Shack Limited, leveraging social media traffic networks, and introduce low-priced and co-branded products; and the automotive services business will continue to expand its hydrogen cleaning system service station network, introduce new environmentally friendly products, and develop mobile applications to achieve Asia-Pacific expansion - The Group will enhance its long-term profitability and financial position through product portfolio and revenue source diversification[96] Leather Manufacturing Business Strategy The leather manufacturing business will pursue a dual strategy: strengthening its traditional belt product line and launching a customized product line in Q2 2025, focusing on high-end craftsmanship services for handbags, accessories, and automotive interiors, targeting European and Mainland China markets with an online and offline dual-track sales model, with an initial investment of approximately HK$0.7 million - Strengthen traditional belt products by enhancing joint design and supply chain upgrades to increase customer order rates[76] - Launch a customized product line in Q2 2025, focusing on high-end craftsmanship services for handbags, accessories, and automotive interiors, introducing new materials and e-commerce virtual try-on, with the goal of achieving growth in Mainland China[76][77] - Adopt a combined in-house and outsourced production model, and reduce costs and inventory risks by entering into long-term agreements with suppliers and utilizing a build-to-order model[77] - The initial investment for the customized product line is approximately HK$0.7 million[78] Leather Retail Business Strategy The leather retail business plans to expand into UK offline supermarkets and Mainland China retail networks, and enter online retail in 2025; the Company has established an e-commerce joint venture with East Shack Limited, leveraging AI toolchains and social media traffic networks (TikTok, Facebook, Instagram) to promote products, aiming to reduce operating and advertising costs and accelerate global brand awareness, and will also launch low-priced and co-branded products with designers/IP, expected to be available in stores and digital channels from mid-November 2025 - Plans to expand retail network to UK offline supermarkets and Mainland China, and enter online retail in 2025[79] - Established an e-commerce joint venture with East Shack Limited, with the Group holding a 51% stake, leveraging AI toolchains and social media traffic networks (TikTok, Facebook, Instagram) to promote products[80][81] - The e-commerce joint venture is expected to be established in Q3 2025, and will establish logistics channels and implement KOL marketing campaigns[82] - Plans to launch low-priced products and co-branded products with designers/IP, primarily through e-commerce platforms, expected to be launched from mid-November 2025[83][84] Automotive Services Business Strategy The automotive services business operates through Flex Fuel Environmental Cleaning Limited and its Shenzhen subsidiary, providing Flex Fuel brand hydrogen injection cleaning system services, with over 60 hydrogen decarbonization and cleaning stations installed at more than 20 locations in Mainland China; the Company plans to acquire an Australian company to enter the Australian market, with revenue streams including providing hydrogen cleaning systems, and selling and leasing cleaning stations; over the next five years, the plan is to expand services across the Asia-Pacific region, continue launching new environmentally friendly products, and refine R&D, with working capital funded by external resources and credit lines applied from banks - The automotive services business operates through the joint venture Flex Fuel Environmental Cleaning Limited and its Shenzhen subsidiary, providing Flex Fuel brand hydrogen injection cleaning system services[85][86] - Over 60 hydrogen decarbonization and cleaning stations have been installed at more than 20 locations in Mainland China, and service agreements have been entered into with several large enterprise groups[86] - Plans to acquire a majority stake in an Australian company to enter the Australian market[87][88] - Revenue will be generated through providing hydrogen injection cleaning systems, and selling and leasing hydrogen decarbonization and cleaning stations[88] - Working capital will be funded by external resources, with ongoing negotiations with investment funds, institutions, and individual investors, and credit lines applied from banks[89] - Management includes Mr. Fong Sze Chun and Mr. Jerome Jean Jacques Loubert, who possess extensive experience in the hydrogen energy industry[90] - Plans to introduce and launch new products such as the Hy Carbon X3 DPF cleaning system, and develop mobile and desktop applications allowing customers to arrange services, make payments, and calculate emission reduction benefits[93][94] - Over the next five years, plans to expand services across the entire Asia-Pacific region through a partnership model with customer repair shops, and continue launching new environmentally friendly products and refining R&D[95] Liquidity, Financial Resources and Capital Structure As of June 30, 2025, the Group's cash and bank balances increased to HK$1,310 thousand; the current ratio rose from 0.18 times to 0.34 times, and the debt-to-asset ratio decreased from 670.2% to 345.0%, primarily due to funds raised from share placements; although the deficiency in assets narrowed, it still recorded HK$54,608 thousand, with trade receivables turnover days increasing to 145 days while inventory turnover days remained stable Liquidity and Capital Structure Indicators | Metric | June 30, 2025 (HK$ Thousand/Times/%) | December 31, 2024 (HK$ Thousand/Times/%) | Change | | :--- | :--- | :--- | :--- | | Cash and bank balances | 1,310 | 829 | 58.0% | | Total current assets | 21,722 | 10,878 | 99.7% | | Total current liabilities | 63,502 | 59,744 | 6.3% | | Current ratio | 0.34 times | 0.18 times | 0.16 times | | Total assets | 22,286 | 10,878 | 104.9% | | Total liabilities | 76,894 | 72,899 | 5.5% | | Debt-to-asset ratio | 345.0% | 670.2% | -325.2 percentage points | | Deficiency in assets | 54,608 | 62,021 | -12.0% | | Inventories | 3,311 | 2,010 | 64.7% | | Trade receivables | 14,232 | 5,298 | 168.6% | | Inventory turnover days | 45 days | 48 days | -3 days | | Trade receivables turnover days | 145 days | 88 days | +57 days | - The increase in current ratio and decrease in debt-to-asset ratio were primarily due to funds raised through share placements[98] - The Group has no bank borrowings or bank financing, relying primarily on internal resources, financial assistance from directors and the ultimate controlling shareholder, and external financing facilities[99][101] Treasury Policy The Group's cash and bank balances are primarily denominated in HKD, USD, and RMB; with HKD pegged to USD, no significant changes in USD to HKD exchange rates are expected, but RMB fluctuations against other currencies may result in foreign exchange gains or losses; the Group currently has no foreign currency hedging policy, but management will continuously monitor foreign exchange risks and consider hedging when necessary - The Group's cash and bank balances are primarily denominated in HKD, USD, and RMB, and transactions are mainly denominated in HKD, USD, and RMB[101] - The Group currently has no foreign currency hedging policy, but management will continuously monitor foreign exchange risks and consider hedging when necessary[101] Pledge of Assets As of June 30, 2025, the Group had not pledged any assets - As of June 30, 2025, the Group had not pledged any assets[102] Placing of New Shares Under General Mandate On March 18, 2025, the Company completed the placing of 9,024,000 new ordinary shares at HK$1.78 per share, raising net proceeds of approximately HK$15.62 million, which were fully utilized for purchasing materials, equipment, and indirect costs (approximately HK$6 million), general working capital (approximately HK$6 million), and settling outstanding payables (approximately HK$3.62 million) - On March 18, 2025, the Company completed the placing of 9,024,000 new ordinary shares at HK$1.78 per share, raising net proceeds of approximately HK$15.62 million[104][106] - The net proceeds were fully utilized for: (i) purchasing materials, equipment, and indirect costs (approximately HK$6 million); (ii) general working capital (approximately HK$6 million); and (iii) settling outstanding payables (approximately HK$3.62 million)[106][107] Material Investments and Acquisitions of Capital Assets Save for what is disclosed in Note 12 to the interim financial statements, the Group had no material investments or acquisitions of capital assets for the six months ended June 30, 2025 - For the six months ended June 30, 2025, the Group had no material investments or acquisitions of capital assets (save for what is disclosed in Note 12)[108] Material Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures Save for the NVTH acquisition disclosed in Note 23 to the interim financial statements and the establishment of a joint venture discussed in the 'Outlook and Business Strategies and Plans' section, the Group had no specific plans for material acquisitions or disposals of subsidiaries, associates, and joint ventures as of the date of this announcement - Save for the NVTH acquisition and the establishment of a joint venture, the Group had no other material acquisition or disposal plans as of the date of this announcement[109] Commitments and Contingent Liabilities Save for operating lease commitments disclosed in Note 13 to the interim financial statements, the Group had no significant commitments or contingent liabilities as of June 30, 2025, and December 31, 2024 - Save for operating lease commitments, the Group had no significant commitments or contingent liabilities at the end of the reporting period[110] Other Information Employees and Remuneration Policy As of June 30, 2025, the Group employed 122 staff members; employee remuneration is determined by job nature, performance, and length of service, with discretionary bonuses, pension schemes, medical plans, and other social insurance provided, and the Company offers training to new employees - As of June 30, 2025, the Group employed 122 staff members (December 31, 2024: 109 staff members)[111] - Employee remuneration is determined by job nature, performance, and length of service, with discretionary bonuses, pension schemes, medical plans, and other social insurance provided[111] - The Company provides regular on-the-job training for new employees, covering relevant regulations, safety awareness, and job responsibilities[111] Dividends The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2025 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2025[112] Purchase, Redemption or Sale of Listed Securities Neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the six months ended June 30, 2025 - Neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the reporting period[113] Corporate Governance The Company has complied with the Corporate Governance Code in Appendix C1 of the Listing Rules, with certain deviations; the Company has not established an internal audit function but plans to engage an independent third party, and due to the passing of an independent non-executive director and new appointments, the Company temporarily failed to comply with Listing Rules requirements regarding the number of independent non-executive directors and audit committee members, but has since regained compliance after subsequent appointments - The Company has complied with the Corporate Governance Code during the reporting period, except for not establishing an internal audit function, for which it plans to engage an independent third party[114][115] - The Company temporarily failed to comply with Listing Rules 3.10(1) and 3.21 due to the passing of an independent non-executive director and new director appointments, but has since regained compliance after subsequent appointments[116] Directors' Securities Transactions Following specific enquiries, all Directors confirmed compliance with the required standards set out in the Model Code for securities transactions during the six months ended June 30, 2025 - All Directors confirmed compliance with the required standards for securities transactions set out in the Model Code during the reporting period[118] Events After the Reporting Period (Other) Save for what is disclosed in Note 23 to the interim financial statements, no other significant events affecting the Group occurred after the reporting period and up to the date of this announcement - Save for what is disclosed in Note 23 to the interim financial statements, no other significant events affecting the Group occurred after the reporting period and up to the date of this announcement[119] Audit Committee The Audit Committee, comprising three independent non-executive directors, has reviewed and discussed the Group's interim financial statements and this announcement for the six months ended June 30, 2025, and is satisfied that they were prepared in accordance with applicable accounting standards, though the interim financial statements were not audited or reviewed by external auditors - The Audit Committee, comprising three independent non-executive directors, has reviewed and discussed the interim financial statements and this announcement[120] - The Audit Committee is satisfied that the interim financial statements were prepared in accordance with applicable accounting standards, but they were not audited or reviewed by external auditors[120] Publication of Interim Results and Interim Report This results announcement has been published on the Company's website and the HKEX website; the interim report for the six months ended June 30, 2025, will be dispatched to shareholders in due course and will be available on the aforementioned websites - This results announcement has been published on the Company's website and the HKEX website[121] - The interim report will be dispatched to shareholders in due course and will be available on the aforementioned websites[121]