南华集团控股(00413) - 2023 - 中期业绩

Unaudited Interim Results Announcement This section presents the Group's unaudited interim financial results, including the income statement, comprehensive income, and financial position Consolidated Income Statement The Group's revenue decreased by 48% to HKD 1,138 million, resulting in a loss of HKD 84.315 million, driven by reduced sales, higher finance costs, and lower disposal gains Consolidated Income Statement | Indicator | 2023 (thousand HKD) | 2022 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 1,137,892 | 2,199,680 | | Gross Profit | 124,861 | 303,644 | | Other Income and Gains, Net | 102,975 | 54,364 | | Operating Profit | 54,717 | 125,596 | | Finance Costs | (138,269) | (88,644) | | (Loss)/Profit Before Tax | (83,702) | 36,749 | | (Loss)/Profit for the Period | (84,315) | 37,731 | | (Loss)/Profit Attributable to Owners of the Company | (79,281) | 46,693 | | Non-controlling Interests | (5,034) | (8,962) | | Basic (Loss)/Earnings Per Share | (0.6) HK cents | 0.4 HK cents | - Current period revenue decreased by 48% compared to the prior period, primarily due to reduced toy product sales orders, increased finance costs, and lower gains from disposal of vessel space bonds[52] Consolidated Statement of Comprehensive Income Total comprehensive income for the period was a loss of HKD 334.197 million, widening from the prior year, primarily due to period loss and foreign exchange differences Consolidated Statement of Comprehensive Income | Indicator | 2023 (thousand HKD) | 2022 (thousand HKD) | | :--- | :--- | :--- | | (Loss)/Profit for the Period | (84,315) | 37,731 | | Exchange Differences on Translating Financial Statements of Overseas Operations | (249,923) | (306,328) | | Exchange Reserve Reclassified to Profit or Loss upon Disposal of a Subsidiary | 41 | – | | Total Comprehensive Income for the Period | (334,197) | (268,597) | | Attributable to Owners of the Company | (309,826) | (237,648) | | Non-controlling Interests | (24,371) | (30,949) | Consolidated Statement of Financial Position Total non-current assets were HKD 10,067 million, with net current assets at HKD 58 million, a decrease driven by reduced investment properties and higher borrowings Consolidated Statement of Financial Position | Indicator | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Total Non-current Assets | 10,067,354 | 10,343,535 | | Total Current Assets | 3,407,541 | 3,193,691 | | Total Current Liabilities | 3,349,512 | 2,771,488 | | Net Current Assets | 58,029 | 422,203 | | Total Assets Less Current Liabilities | 10,125,383 | 10,765,738 | | Total Non-current Liabilities | 3,970,375 | 4,276,533 | | Net Assets | 6,155,008 | 6,489,205 | | Total Equity Attributable to Owners of the Company | 5,853,563 | 6,163,389 | | Total Equity | 6,155,008 | 6,489,205 | Notes to the Consolidated Financial Statements This section provides detailed explanatory notes to the consolidated financial statements, covering accounting policies, segment information, and key financial items Basis of Preparation Interim financial statements are prepared under HKAS 34, adopting new HKFRSs with no significant impact on the Group's financial position or performance - The interim financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and were authorized for issue on August 22, 2023[11] - The Group has adopted amendments to HKAS 1, HKAS 8, and HKAS 12, but these amendments have had no significant impact on the Group's results and financial position for the current or prior periods[13][14][17] Revenue and Segment Information Total revenue decreased significantly to HKD 1,137.892 million, with the US region experiencing the largest decline and a shift to operating loss Revenue and Segment Information | Region | 2023 Revenue (thousand HKD) | 2022 Revenue (thousand HKD) | 2023 Operating Profit Contribution (thousand HKD) | 2022 Operating Profit Contribution (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | People's Republic of China (including Hong Kong and Macau) | 131,160 | 230,897 | 65,145 | 23,310 | | United States of America | 594,463 | 1,353,565 | (3,918) | 69,681 | | Europe | 286,021 | 411,963 | (4,642) | 21,890 | | Japan | 7,332 | 8,916 | (128) | 476 | | Others | 118,916 | 194,339 | (1,740) | 10,239 | | Total | 1,137,892 | 2,199,680 | 54,717 | 125,596 | - In the first half of 2023, the Group's total revenue decreased by 48% year-on-year, with revenue from the US region falling from HKD 1,353,565 thousand to HKD 594,463 thousand, and its operating profit contribution shifting from HKD 69,681 thousand to a loss of HKD 3,918 thousand[20] Other Income and Gains, Net The Group recognized a HKD 78,197,000 gain from subsidiary disposal, while other non-current asset disposal gains decreased significantly - In the first half of 2023, the gain on disposal of a subsidiary was HKD 78,197,000 (2022: nil)[21] - The gain on disposal of other non-current assets was HKD 980,000 (2022: HKD 32,678,000)[21] Operating Profit Operating profit for H1 2023 significantly decreased to HKD 54,717 thousand from HKD 125,596 thousand, mainly due to reduced revenue Operating Profit | Indicator | 2023 (thousand HKD) | 2022 (thousand HKD) | | :--- | :--- | :--- | | Operating Profit | 54,717 | 125,596 | | Cost of Sales | 911,102 | 1,725,076 | | Provision for Inventories | 7,970 | 65,996 | | Depreciation of Property, Plant and Equipment | 18,924 | 25,245 | | Depreciation of Right-of-use Assets | 39,363 | 42,993 | Finance Costs Finance costs surged by 56% to HKD 138.269 million in H1 2023, mainly driven by increased interest on bank loans and other borrowings Finance Costs | Indicator | 2023 (thousand HKD) | 2022 (thousand HKD) | | :--- | :--- | :--- | | Interest on Bank Loans, Overdrafts and Other Borrowings | 126,617 | 74,935 | | Interest on Lease Liabilities | 11,652 | 14,986 | | Less: Amount Capitalized | – | (1,277) | | Total Finance Costs | 138,269 | 88,644 | - The increase in finance costs was primarily due to the rise in HIBOR during the period[52] Income Tax Income tax includes current and deferred tax, with Hong Kong profits tax at 16.5% and China corporate income tax at 25% - Hong Kong profits tax rate is 16.5%, and China corporate income tax rate is 25%[61] - Deferred tax is provided for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements[40] Interim Dividend The Board resolved not to declare an interim dividend for the six months ended June 30, 2023, consistent with the prior period - The Board resolved not to declare an interim dividend for the six months ended June 30, 2023 (2022: nil)[41][62] Loss/Earnings Per Share Basic and diluted loss per share was HKD 0.6 cents, a shift from HKD 0.4 cents earnings in the prior period, due to the period's loss Loss/Earnings Per Share | Indicator | 2023 (thousand HKD) | 2022 (thousand HKD) | | :--- | :--- | :--- | | (Loss)/Profit Attributable to Owners of the Company | (79,281) | 46,693 | | Weighted Average Number of Ordinary Shares for Basic (Loss)/Earnings Per Share Calculation | 12,982,892 thousand shares | 12,982,892 thousand shares | | Weighted Average Number of Ordinary Shares for Diluted (Loss)/Earnings Per Share Calculation | 12,982,892 thousand shares | 13,409,004 thousand shares | | Basic (Loss)/Earnings Per Share | (0.6) HK cents | 0.4 HK cents | | Diluted (Loss)/Earnings Per Share | (0.6) HK cents | 0.4 HK cents | - The diluted loss per share for the first half of 2023 is the same as the basic loss per share because the outstanding potential ordinary shares had an anti-dilutive effect[66][97] Investment Properties and Non-current Assets Held for Sale Properties valued at approximately HKD 46,242,000 were reclassified from investment properties to non-current assets held for sale - As of June 30, 2023, properties amounting to approximately HKD 46,242,000 were reclassified from investment properties to non-current assets held for sale[67] Trade Receivables Trade receivables increased to approximately HKD 545,466,000, net of loss allowance, with strict control maintained over outstanding amounts Trade Receivables | Indicator | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Trade Receivables | 545,466 | 343,591 | - The Group's trade terms with customers are primarily on credit, with credit periods generally ranging from one to three months, and a credit control department monitors credit risk[49] Trade Payables Trade payables slightly decreased to approximately HKD 553,968,000, with most accounts aged within six months Trade Payables | Indicator | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Trade Payables | 553,968 | 576,316 | - The majority of trade payables are aged within six months[69] Share Capital Total authorized share capital was HKD 260,000 thousand, with issued and fully paid capital at HKD 134,413 thousand, unchanged from prior period Share Capital | Indicator | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Total Authorized Share Capital | 260,000 | 260,000 | | Total Issued and Fully Paid Share Capital | 134,413 | 134,413 | - The number of ordinary shares and redeemable convertible preference shares issued by the Company remained unchanged for the six months ended June 30, 2023 and 2022[72] - Redeemable convertible preference shares are redeemable by the Company at any time, entitle holders to dividends or distributions at the discretion of the Board on a pro-rata basis, and have priority over ordinary shares in liquidation[25] Management Discussion and Analysis This section offers management's review of the Group's financial performance, business segments, liquidity, capital structure, and future outlook Financial Review and Key Performance Indicators H1 2023 revenue decreased by 48% to HKD 1,138 million, resulting in a HKD 84.3 million post-tax loss and HKD 0.6 cents loss per share - The Group's revenue for the first half of 2023 was approximately HKD 1,138 million, a 48% decrease compared to the same period in 2022[52] - The post-tax loss for the current period was approximately HKD 84.3 million, compared to a post-tax profit of approximately HKD 37.7 million in the same period of 2022[52] - Loss per share attributable to owners of the Company was HKD 0.6 cents (2022: earnings per share of HKD 0.4 cents)[74] Business Review The Group's core businesses are trading, property, and agriculture; H1 2023 saw declines in trading and property revenue, but growth in agriculture - The Group's principal businesses are trading and manufacturing, property investment and development, and agriculture and forestry businesses[75] Trading and Manufacturing Trading and Manufacturing revenue decreased by 48% to HKD 1,041 million, resulting in an operating loss, primarily due to reduced OEM toy orders - The Trading and Manufacturing segment's revenue decreased by 48% to approximately HKD 1,041 million, recording an operating loss of approximately HKD 9.4 million (2022: operating profit of approximately HKD 107.7 million)[30] OEM Toy Manufacturing OEM toy revenue decreased by 50% to HKD 924 million due to global economic factors and cautious client ordering, with cost control efforts underway - OEM toy business revenue was approximately HKD 924 million, a 50% decrease compared to the same period in 2022[106] - The decline in revenue was mainly due to major customers actively pushing shipment plans in the first half of 2022 to avoid logistics bottlenecks, followed by cautious ordering strategies, leading to fewer orders in the current period[52][77][107] - The Group is committed to controlling costs through capacity diversification and relocating its supply chain from Guangdong Province to Guangxi Province in mainland China[78] Footwear Trading Footwear trading revenue decreased by 29% to HKD 108 million, but operating profit remained stable at HKD 5.6 million through production diversification - Footwear trading business revenue decreased by 29% to approximately HKD 108 million (2022: approximately HKD 152.7 million)[53] - The overall operating profit for this segment remained stable at approximately HKD 5.6 million (2022: approximately HKD 5.5 million), offsetting the impact of reduced demand through production diversification in low-cost countries[53] Branded Ball Products Sales Branded ball product sales revenue decreased by 12% to HKD 6.4 million due to RMB depreciation, but overall segment performance remained stable - Branded ball products sales revenue decreased by 12% to approximately HKD 6.4 million (2022: approximately HKD 7.3 million), primarily due to the depreciation of RMB[109] - The overall performance of this segment remained stable[109] Property Investment and Development Property investment revenue decreased by 48% to HKD 96.4 million, with operating profit at HKD 32.5 million, impacted by lower rents and RMB depreciation - Property Investment and Development segment revenue significantly decreased by 48% to approximately HKD 96.4 million (2022: approximately HKD 184.7 million)[31] - The operating profit for this segment (including fair value changes of investment properties) was approximately HKD 32.5 million (2022: approximately HKD 33.5 million)[31] - Rental income was HKD 86.5 million, a decrease of approximately 13% compared to the same period in 2022, mainly affected by lower rents in previous years before the pandemic and RMB depreciation[111] - Approximately 60% of the total saleable area of the residential towers and serviced apartments of the Group's flagship property project "Central Plaza" has been sold, and management is cautiously optimistic about its sales and rental contributions[112] Agriculture and Forestry Business Agriculture and Forestry revenue grew to HKD 698,000, with operating profit of HKD 67.7 million, including a HKD 78.2 million disposal gain - Agriculture and Forestry business revenue increased to approximately HKD 698,000 (2022: approximately HKD 77,000)[113] - The operating profit for the current period was HKD 67.7 million, which includes a gain of HKD 78.2 million from the disposal of a subsidiary[113] - Excluding the disposal gain, the operating loss for the current period decreased by approximately 24% to approximately HKD 10.5 million (2022: approximately HKD 13.8 million)[113] Liquidity and Financial Resources Current ratio was 1.0 and gearing ratio 33%, both decreased from prior period, with operations funded by internal resources and bank borrowings Liquidity and Financial Resources | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Current Ratio | 1.0 | 1.2 | | Gearing Ratio | 33% | 35% | - The gearing ratio is calculated based on the Group's long-term bank borrowings of HKD 2,006 million against the Group's equity of HKD 6,155 million[84] Capital Structure The Group's capital structure remains largely unchanged compared to the most recently published annual report - The Group's capital structure has not undergone significant changes compared to the most recently published annual report[115] Exchange Rate Fluctuation Risk and Related Hedging The Group manages foreign currency exchange rate risks, including RMB and USD, through close monitoring and timely forward contracts - The Group faces foreign currency exchange rate risks, including RMB and USD, arising from future commercial transactions, recognized assets, liabilities, and net investments in mainland China operations[165] - The Group manages foreign currency exchange rate risks by closely monitoring exchange rate movements and entering into forward contracts when appropriate[165] Significant Acquisitions and Disposals of Subsidiaries and Associates The Group completed the disposal of Genius Year Limited for a HKD 78,197,000 gain and has an pending agreement to dispose of Kunshan Huiqiang Footwear Co., Ltd - Thousand China Investments Limited, an indirect wholly-owned subsidiary of the Company, completed the disposal of 100% equity interest in Genius Year Limited on January 13, 2023, for a total consideration of HKD 89,840,000, recognizing a gain on disposal of approximately HKD 78,197,000[116] - Huiqiang Footwear Co., Ltd., an indirect wholly-owned subsidiary of the Company, has entered into an agreement to dispose of 100% equity interest in Kunshan Huiqiang Footwear Co., Ltd. for a consideration of RMB 61,500,000 (approximately HKD 68,333,000), which has not yet been completed as of the announcement date[87] Contingent Liabilities A PRC subsidiary provided guarantees of approximately RMB 171 million (HKD 185 million) for Central Plaza property buyers, to be released upon property certificate issuance - A PRC subsidiary of the Company provided guarantees totaling approximately RMB 171,000,000 (approximately HKD 185,000,000) to financial institutions for independent buyers of Central Plaza properties[118] - The aforementioned guarantees will be released upon the issuance of property ownership certificates to these buyers[118] - Save for the above, there were no other significant changes in the Group's pledged assets and contingent liabilities[89] Outlook H2 2023 presents challenges and opportunities; the Group will control costs, expand customer base, and explore property and agriculture business opportunities - In the second half of 2023, Sino-US relations and the Russia-Ukraine war will continue to pose uncertainties to the business environment, and major central banks' tightening monetary policies will have adverse spillover effects on the global economy, requiring time for recovery[119] - China's relaxed COVID-19 measures and the reopening of the Hong Kong-mainland border, along with the central government's policies to achieve economic growth targets, will have a direct and favorable impact on the performance of the Group's various business segments[119] - The Group will control manufacturing costs and expenses through restructuring actions, including expanding production scale in Guangxi Province and reducing production scale in high-cost areas of Guangdong Province, and identifying key customer needs to provide one-stop solutions[120] - The Group will continue to explore converting some land reserve assets in Nanjing and Tianjin from industrial to commercial use and remains cautiously optimistic about the sales of residential units at Shenyang Central Plaza[94][56] - The agriculture and forestry business will continue to explore opportunities to cultivate high-margin varieties and focus on improving harvests, sales distribution channels, and implementing cost controls[124] Key Risks and Uncertainties The Group faces diverse risks including economic recession, cost increases, property market volatility, policy changes, and natural disasters, which are regularly reviewed and mitigated - The Group's financial results depend on the level of discretionary consumer spending in the end markets for its products; economic recession, credit crises, and other economic downturns can lead to reduced disposable income for consumers, thereby affecting customer orders[167] - Increased costs may affect product profit margins, including increases in raw materials, transportation, minimum wage legislation, or compliance with regulatory requirements[147] - The majority of the Group's property portfolio is located in mainland China, facing risks related to the mainland China real estate market, including policy changes, RMB exchange rate fluctuations, interest rate changes, supply-demand imbalances, and overall economic conditions[57][148] - The agriculture and forestry business is susceptible to natural disasters and adverse weather conditions such as droughts, floods, earthquakes, and environmental disasters, which may lead to reduced yields or production delays[35][150] Corporate Governance and Other Information This section details the Company's corporate governance practices, director information updates, and significant litigation progress Corporate Governance Code The Company generally complied with the Corporate Governance Code, with minor deviations regarding director attendance at EGM and AGM due to other engagements - The Company complied with the Corporate Governance Code in Appendix 14 of the Listing Rules during the first half of 2023[130] - Messrs. Ng Hung Sang, Ng Yuk Yeung, Ng Yuk Fung, and Kam Yiu Sing were unable to attend the extraordinary general meeting and annual general meeting due to other important engagements, constituting a deviation from Code Provisions F.2.2 and C.1.6 of the Corporate Governance Code[130][155] Interim Dividend The Board resolved not to declare an interim dividend for the six months ended June 30, 2023, consistent with the prior period - The Board resolved not to declare an interim dividend for the six months ended June 30, 2023 (2022: nil)[152] Purchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor its subsidiaries purchased, sold, or redeemed any listed securities during the six months ended June 30, 2023 - During the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed shares[153] Litigation Progress The Group is involved in several lawsuits, including an appealed copyright case and a withdrawn Tianjin land case, with no other significant changes in litigation progress - In the copyright infringement case, the Jiangsu Provincial Higher People's Court ruled that two computer software copyrights belong to Nanjing Nanhua Qingtian Information Technology Co., Ltd., and Nanhua Qingtian has filed an appeal[156] - The Tianjin Binhai land infringement case has been withdrawn, and the legal team is exploring initiating a new case from a perspective more favorable to protecting the interests of Huanwei and Tianjin Nanhua Real Estate Development Co., Ltd[133] - There were no significant changes in the corporate interest liability dispute case and the Nansha land arbitration case during the six months ended June 30, 2023[134][157] Update on Directors' Information Mr. Ng Yuk Yeung was appointed INED and committee member of China Rongzhong Financial, and Ms. Li Yuen Yu joined the Company's Audit Committee - Mr. Ng Yuk Yeung was appointed as an independent non-executive director and a member of the audit committee, nomination committee, and remuneration committee of China Rongzhong Financial Holdings Co., Ltd. (stock code: 03963), effective April 28, 2023[37] - Ms. Li Yuen Yu was appointed as a member of the Company's Audit Committee on July 7, 2023[159] Directors | Position | Name | | :--- | :--- | | Executive Directors | Mr. Ng Hung Sang, Ms. Cheung Sai Oi, Mr. Ng Yuk Yeung | | Non-executive Directors | Ms. Ng Yuk Mo, Mr. Ng Yuk Fung, Ms. Li Yuen Yu, Mr. Yu Pui Hang | | Independent Non-executive Directors | Mr. Kam Yiu Sing, Ms. Tse Wong Siu Yin, Ms. Pong Oi Lan, BBS, JP, Mr. Wong Chun Tat, JP | Audit Committee The Audit Committee, comprising INEDs and a NED, reviewed and confirmed the Group's unaudited interim results comply with accounting standards - The Audit Committee comprises Mr. Kam Yiu Sing (Chairman), Ms. Tse Wong Siu Yin, Ms. Pong Oi Lan, BBS, JP, and Mr. Wong Chun Tat, JP (all independent non-executive directors), and Ms. Li Yuen Yu (non-executive director)[162] - The Audit Committee has reviewed the Group's unaudited interim results for the six months ended June 30, 2023, and is of the opinion that their preparation complies with applicable accounting standards and requirements, and that adequate disclosures have been made[161] Publication of Interim Results and Interim Report This announcement is published on HKEX and Company websites; the interim report for H1 2023 will be published and dispatched to shareholders - This announcement is published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the Company's website (www.scholding.com)[163](index=163&type=chunk) - The Company's interim report for the six months ended June 30, 2023, will be published on the aforementioned websites and dispatched to the Company's shareholders in due course[163]