龙记集团(00255) - 2023 - 中期业绩

Interim Results Announcement The company announced its unaudited consolidated financial results for H1 2023, detailing a significant revenue decline and a shift from profit to loss Company Information Lung Kee (Bermuda) Holdings Limited announced its unaudited consolidated financial results for the six months ended June 30, 2023 - Company name: Lung Kee (Bermuda) Holdings Limited, stock code: 255[14] - Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement[1] Financial Performance Summary For the six months ended June 30, 2023, the Group's revenue decreased by 21.9% year-on-year, turning from profit to a loss of HK$31,506,000, with basic loss per share of 4.99 HK cents Summary of Key Financial Data for the Six Months Ended June 30, 2023 | Indicator | June 30, 2023 (HK$ Thousand) | June 30, 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue | 708,923 | 907,552 | | (Loss) Profit Attributable to Owners of the Company | (31,506) | 40,988 | | Basic (Loss) Earnings Per Share | (4.99) HK Cents | 6.49 HK Cents | Condensed Consolidated Financial Statements This section presents the condensed consolidated statements of profit or loss, comprehensive income, and financial position Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2023, the Group's revenue was HK$708,923 thousand, a decrease from the prior period, resulting in a loss for the period of HK$31,506 thousand and total comprehensive expense of HK$101,331 thousand Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Item | 2023 (HK$ Thousand) | 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue | 708,923 | 907,552 | | Other income, gains and losses | 5,411 | 2,525 | | (Decrease) Increase in fair value of investment properties | (1,500) | 2,000 | | Net impairment loss recognised (reversed) under expected credit loss model | (244) | 2,181 | | Changes in inventories of finished goods and work in progress | 5,000 | 7,468 | | Raw materials and consumables used | (306,019) | (359,766) | | Employee benefit expenses | (204,317) | (238,020) | | Depreciation of right-of-use assets | (3,018) | (2,985) | | Depreciation of property, plant and equipment | (81,720) | (75,359) | | Other expenses | (173,838) | (191,527) | | Interest expense on lease liabilities | (230) | (168) | | (Loss) Profit before tax | (51,552) | 53,901 | | Income tax credit (expense) | 20,046 | (12,913) | | (Loss) Profit for the period | (31,506) | 40,988 | | Exchange differences arising on translation of overseas operations | (69,825) | (81,441) | | Total comprehensive expense for the period | (101,331) | (40,453) | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets less current liabilities were HK$1,951,286 thousand, and net assets were HK$1,847,349 thousand, a decrease from December 31, 2022 Condensed Consolidated Statement of Financial Position (As at June 30, 2023) | Indicator | June 30, 2023 (HK$ Thousand) | December 31, 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Non-current assets | | | | Investment properties | 173,500 | 175,000 | | Property, plant and equipment | 664,151 | 667,715 | | Right-of-use assets | 67,965 | 73,603 | | Deposits paid for acquisition of property, plant and equipment | 43,586 | 78,583 | | Deferred tax assets | 26,067 | 12,508 | | Current assets | | | | Inventories | 594,579 | 606,924 | | Trade, bills and other receivables | 149,180 | 150,501 | | Bank balances and cash | 417,040 | 536,643 | | Current liabilities | | | | Trade, bills and other payables | 120,324 | 135,808 | | Contract liabilities | 25,977 | 21,765 | | Lease liabilities | 3,615 | 3,574 | | Tax payable | 34,526 | 36,264 | | Dividends payable | 340 | 295 | | Non-current liabilities | | | | Deferred tax liabilities | 13,721 | 17,903 | | Lease liabilities | 4,038 | 5,986 | | Other payables | 86,178 | 93,301 | | Total equity | 1,847,349 | 1,986,581 | Notes to the Condensed Consolidated Financial Statements This section provides notes on the basis of presentation, accounting policies, and specific items in the financial statements Basis of Presentation and Principal Accounting Policies The condensed consolidated financial statements are prepared in accordance with HKAS 34 and Appendix 16 of the Listing Rules, using the historical cost basis except for investment properties, with accounting policies consistent with the prior year, save for amendments to HKFRS - The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the HKICPA and the applicable disclosure requirements of Appendix 16 to the Listing Rules of The Stock Exchange of Hong Kong Limited[10] - The condensed consolidated financial statements are prepared on the historical cost basis, except for investment properties which are stated at fair value[10] - The accounting policies and methods of computation used are the same as those followed in the preparation of the annual financial statements for the year ended December 31, 2022, except for changes in accounting policies due to amendments to HKFRS[16] Application of Amendments to Hong Kong Financial Reporting Standards This interim period saw the first-time application of certain new and amended HKFRSs issued by the HKICPA, including HKFRS 17 and amendments to HKAS 8 and 12, which had no significant impact on the Group's financial statements, except for clarifying the definition of accounting estimates - During the current interim period, the Group has applied HKFRS 17, and the amendments to HKAS 8 (Definition of Accounting Estimates) and HKAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) for the first time[17][18] - The application of these amendments has had no material impact on the Group's condensed consolidated financial statements, except for the amendment to HKAS 8 which clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors[13][18][19] Revenue and Segment Information The Group primarily manufactures and sells mould bases and related products, recognizing revenue when control of goods transfers to customers, operating as a single segment with consolidated results including all income, expenses, and tax - The Group is principally engaged in the manufacture and sale of mould bases and related products, with revenue representing the invoiced value of goods sold to external customers during the period, net of returns and trade discounts provision[13] - Revenue is recognised when control over the goods has been transferred to the customers, which is at the point in time when the goods are delivered to the customers[35] - The Group has only one operating segment, which is determined based on information reported to the chief operating decision maker for the purposes of resource allocation and performance assessment[21] Revenue by Geographical Location (For the six months ended June 30) | Geographical Location | 2023 (HK$ Thousand) | 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Asia | 611,445 | 787,688 | | Others | 97,478 | 119,864 | | Total Revenue | 708,923 | 907,552 | Other Income, Gains and Losses For the six months ended June 30, 2023, the Group's other income totaled HK$7,453 thousand, primarily from interest and rental income, but net exchange losses resulted in negative other gains and losses Other Income, Gains and Losses (For the six months ended June 30) | Item | 2023 (HK$ Thousand) | 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Other income | | | | Interest income | 4,174 | 7,479 | | Rental income | 2,824 | 2,708 | | Government grants | 0 | 236 | | Miscellaneous income | 455 | 2,090 | | Other gains and losses | | | | Gain on disposal of property, plant and equipment | 1,830 | 4,606 | | Net exchange losses | (3,872) | (14,594) | | Total | 5,411 | 2,525 | Income Tax Hong Kong profits tax operates under a two-tiered system, with the first HK$2 million of assessable profits taxed at 8.25% and the remainder at 16.5%, while Chinese subsidiaries face a 25% tax rate, with a 5% dividend withholding tax under tax treaties - Hong Kong profits tax is calculated under a two-tiered profits tax regime, where the first HK$2 million of assessable profits is taxed at 8.25% and the remaining assessable profits are taxed at 16.5%[25][40] - The tax rate for the Group's subsidiaries in Mainland China is 25%, but the applicable withholding tax rate for the Group under the tax treaty between Hong Kong and Mainland China is 5%[26][41] Components of Income Tax (Expense) Credit (For the six months ended June 30) | Item | 2023 (HK$ Thousand) | 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Hong Kong tax | (631) | (1,088) | | Tax outside Hong Kong | 2,367 | (11,115) | | Deferred tax | 18,310 | (710) | | Total income tax credit (expense) | 20,046 | (12,913) | Loss (Profit) for the Period The loss for the period was HK$31,506 thousand, primarily influenced by factors such as inventory costs, inventory provisions, and depreciation Items Deducted from (Credited to) Loss (Profit) for the Period (For the six months ended June 30) | Item | 2023 (HK$ Thousand) | 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Cost of inventories recognised as an expense | 644,168 | 723,741 | | Provision for (utilisation of) inventories recognised | 2,243 | (4,428) | Dividends The Board resolved to declare an interim dividend of 5 HK cents per share, totaling HK$31,584 thousand, in addition to the final dividend of 6 HK cents per share for 2022 already declared and paid - The Board resolved to declare an interim dividend of 5 HK cents per share (2022: 6 HK cents) for the six months ended June 30, 2023, totaling HK$31,584,000[29] - During the period, a final dividend of 6 HK cents per share (for the six months ended June 30, 2022: 20 HK cents) for the year ended December 31, 2022, totaling HK$37,901,000, was declared and paid to shareholders[62] Loss (Earnings) Per Share For the six months ended June 30, 2023, basic loss per share was 4.99 HK cents, compared to basic earnings per share of 6.49 HK cents in the prior period, with no diluted earnings per share presented due to the absence of potential ordinary shares Basic (Loss) Earnings Per Share (For the six months ended June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Basic (Loss) Earnings Per Share | (4.99) HK Cents | 6.49 HK Cents | | (Loss) Profit Attributable to Owners of the Company | (31,506,000) HK$ | 40,988,000 HK$ | | Number of ordinary shares in issue | 631,677,303 Shares | 631,677,303 Shares | - No diluted (loss) earnings per share for both periods are presented as there were no potential ordinary shares outstanding during the period or at the end of the reporting period[63] Trade, Bills and Other Receivables As of June 30, 2023, trade receivables amounted to HK$80,110 thousand and bills receivable to HK$12,217 thousand, with credit terms for trade customers ranging from 30 to 90 days - Trade, bills and other receivables include trade receivables of HK$80,110,000 (net of allowance for credit losses) and bills receivable of HK$12,217,000[45] - The Group grants credit terms to trade customers ranging from 30 to 90 days[64] Ageing Analysis of Trade and Bills Receivables (As at the end of the reporting period) | Ageing | June 30, 2023 (HK$ Thousand) | December 31, 2022 (HK$ Thousand) | | :--- | :--- | :--- | | 0 to 60 days | 78,348 | 86,508 | | 61 to 90 days | 16,253 | 12,187 | | Over 90 days | 6,531 | 6,248 | | Total | 101,132 | 104,943 | Trade, Bills and Other Payables As of June 30, 2023, trade payables were HK$34,448 thousand with no bills payable, and credit terms for purchases ranged from 30 to 150 days - Trade, bills and other payables include trade payables of HK$34,448,000 and no bills payable[46] - In general, the credit terms for purchases of goods range from 30 to 150 days[47] Ageing Analysis of Trade and Bills Payables (As at the end of the reporting period) | Ageing | June 30, 2023 (HK$ Thousand) | December 31, 2022 (HK$ Thousand) | | :--- | :--- | :--- | | 0 to 60 days | 27,952 | 23,494 | | 61 to 90 days | 4,547 | 4,334 | | Over 90 days | 1,949 | 3,554 | | Total | 34,448 | 31,382 | Management Discussion and Analysis This section discusses the Group's business and financial performance, liquidity, human resources, and future outlook Business Review During the review period, the global economy and business environment faced significant challenges, including COVID-19 impacts, US-China trade disputes, interest rate hikes, and geopolitical tensions, leading to a substantial decrease in total orders, declining sales revenue, and a shift from profit to loss - Factors such as global economic slowdown, US-China trade disputes, interest rate hikes in major economies, and geopolitical tensions negatively impacted the Group's operating environment[48][49] - A significant reduction in total orders led to underutilized processing volume and capacity, a substantial decline in sales revenue, and, coupled with relatively fixed operating costs, resulted in the Group's first-half performance turning from profit to loss[48][49] - The recovery of the domestic sales market in China has been slow, with consumer sentiment and confidence still needing restoration, leading to weak demand for consumer goods[69] - Raw material prices for mould steel remained relatively stable, with narrowing short-term fluctuations[70] Financial Review For the six months ended June 30, 2023, the Group's revenue decreased by 21.9% year-on-year, raw materials and consumables cost as a percentage of revenue increased, employee benefits and other expenses decreased, but depreciation of property, plant and equipment increased, resulting in a loss of HK$31,506 thousand - Revenue decreased by 21.9% compared to the same period last year, primarily due to a significant reduction in total market orders caused by a challenging operating environment[51] - Cost of raw materials and consumables used decreased by 14.6%, but its percentage of revenue increased to 42.5% (2022: 38.8%)[51] - Employee benefit expenses and other expenses decreased by 14.2% and 9.2% respectively, while depreciation of property, plant and equipment increased by 8.4%[51] - The change in fair value of investment properties decreased by HK$3,500,000 compared to the same period last year, while other income increased by HK$2,886,000[72] - For the six months ended June 30, 2023, the net impairment loss recognised under the expected credit loss model was HK$244,000 (2022: net impairment loss reversed of HK$2,181,000)[72] - Income tax credit of HK$20,046,000 (2022: income tax expense of HK$12,913,000), including a tax refund of HK$3,646,000 for over-provision in prior years[72] Liquidity and Financial Resources As of June 30, 2023, the Group's total equity was HK$1,847,349 thousand, with bank balances and cash of HK$417,040 thousand and no borrowings, indicating ample cash to meet operational and capital commitments Liquidity Position (As at period end) | Indicator | June 30, 2023 (HK$ Thousand) | December 31, 2022 (HK$ Thousand) | | :--- | :--- | :--- | | Total equity | 1,847,349 | 1,986,581 | | Bank balances and cash | 417,040 | 536,643 | | Borrowings | Nil | Nil | - Bank balances and cash are placed as short-term deposits with major banks in Hong Kong and China[73] - The COVID-19 pandemic did not affect the Group's financial position[53] Employees and Remuneration Policy As of June 30, 2023, the Group employed approximately 2,900 staff, implementing a competitive remuneration system where promotions and salary increments are performance-based, with share options also granted - As of June 30, 2023, the Group employed approximately 2,900 staff[54] - The Group maintains a competitive remuneration system for its employees, with promotions and salary increments based on performance evaluations, and share options granted according to individual performance[54] Outlook The Group anticipates that second-half performance will not be worse than the first half, with consumer spending and market orders expected to recover due to China's economic normalization and government stimulus measures, while actively expanding markets, optimizing operations with automation, and managing costs - The Group expects that the second-half performance will not be worse than the first half, as China's economic activities normalize, consumer confidence and spending power will gradually improve, and the Chinese economy will recover positively[55] - The Chinese government is expected to introduce macro-economic stimulus measures, which are anticipated to boost consumption and strengthen the development of the domestic sales market[55] - The Group expects demand for consumer goods such as environmentally friendly new energy vehicles, high-end electronic technology products, and smart home appliances to gradually recover, leading to an increase in market order volume[55] - The Group will actively expand into the Chinese market and other overseas markets to achieve stable development and revenue[55] - The Group will continue to optimize and strengthen its internal operating structure, adopting automated production lines to enhance overall processing capabilities, production speed, and product quality, while striving to control cost fluctuations[77] - Despite the uncertain business outlook, the Group will strive for stable and healthy business growth and maintain its competitive advantages amidst adversity[56][76] Other Information This section covers the review of interim financial statements, dividend, share transfer, securities, corporate governance, and board composition Review of Interim Financial Statements The Audit Committee, in conjunction with management and external auditor Deloitte Touche Tohmatsu, reviewed the Group's accounting principles and practices, discussing internal controls and financial reporting matters - The Audit Committee, together with management and the external auditor, Deloitte Touche Tohmatsu, has reviewed the accounting principles and practices adopted by the Group and discussed internal control and financial reporting matters[79] Interim Dividend The Board has resolved to declare an interim dividend of 5 HK cents per share for the six months ended June 30, 2023, payable on or about September 25, 2023 - The Board has resolved to declare an interim dividend of 5 HK cents per share (2022: 6 HK cents) for the six months ended June 30, 2023[80] - The interim dividend will be paid on or about September 25, 2023, to shareholders whose names appear on the register of members of the Company on September 13, 2023[80] - Shareholders whose shares of the Company are deposited in securities accounts with The Central Depository (Pte) Limited in Singapore will be entitled to the interim dividend[82] Closure of Register of Members To qualify for the interim dividend, the Company will suspend its share transfer registration from September 12, 2023, to September 13, 2023 - The Company's register of members will be closed from September 12, 2023, to September 13, 2023 (both days inclusive)[81] - All duly completed transfer forms, together with the relevant share certificates, must be lodged with the Company's Hong Kong Share Registrar by 4:30 p.m. on September 11, 2023[57] Purchase, Sale or Redemption of Securities Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's shares or other securities 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 shares or other securities during the six months ended June 30, 2023[83] Corporate Governance Throughout the review period, the Company complied with all code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited - Throughout the review period, the Company complied with all code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited[84] Board of Directors As of the announcement date, the Board of Directors comprises six executive directors, including Mr. Shao Tie Lung (Chairman), and four independent non-executive directors, including Dr. Li Tat Yee - The executive directors of the Company are Mr. Shao Tie Lung (Chairman), Mr. Shao Yuk Lung, Mr. Wai Lung Shing, Mr. Ding Zong Hao, Mr. Shao Xu Tong and Mr. Shao Yu Heng[85] - The independent non-executive directors of the Company are Dr. Li Tat Yee, Mr. Li Yu Hoi, Mr. Wong Hak Kan and Ms. Ho Lap Mei[85]