润歌互动(02422) - 2023 - 中期业绩

Performance Summary The company experienced a significant decline in revenue and profit for H1 2023, with adjusted net profit decreasing by 63.6% and no interim dividend declared Financial Highlights For the six months ended June 30, 2023, the company's total revenue decreased by 36.5% to RMB 68.98 million, gross profit declined by 24.4% to RMB 43.42 million, and profit attributable to owners significantly fell by 59.6% to RMB 11.48 million, with adjusted net profit (non-HKFRS measure) decreasing by 63.6% and no interim dividend declared Financial Highlights (RMB thousands) | Metric | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 68,975 | 108,591 | -36.5% | | Gross Profit | 43,420 | 57,458 | -24.4% | | Profit Before Income Tax | 13,488 | 34,085 | -60.4% | | Profit Attributable to Owners | 11,479 | 28,427 | -59.6% | | Adjusted Net Profit | 10,872 | 29,880 | -63.6% | - The Board of Directors resolved not to declare any interim dividend for the six months ended June 30, 2023[49] Management Discussion and Analysis This section provides an in-depth review of the company's operational performance, financial results, and strategic outlook for the reporting period Business Review and Outlook The company is actively diversifying its business from traditional marketing and promotion services to IT solutions, virtual goods procurement and delivery, and lottery-related businesses, having acquired ASMKT to enhance virtual goods delivery and increased investment in the lottery sector, with future focus on lottery marketing, SaaS platform development, and cross-segment synergies Business Review During the reporting period, the company diversified its business through organic growth and external acquisitions, including acquiring ASMKT for virtual goods procurement and delivery, investing in Mingzhi and Caipingfang while developing data management systems to expand into the lottery industry, and extending services to tangible goods and IT solutions - On May 31, 2023, the Group acquired 100% equity interest in Zaiyingduan Network Technology (ASMKT) to leverage its technological R&D advantages in virtual goods procurement and delivery, promoting the company's related business development in China[24][51] - The company expanded virtual goods delivery services to the lottery industry, investing in "Mingzhi" for sports lottery software solutions and "Caipingfang" for welfare lottery agency sales, aiming to expand market share and establish a nationwide lottery system[36][38][54] - The company continues to focus on lottery-related software and hardware R&D, developing a data management system for lottery operations to enhance operational efficiency[39] - Service scope expanded to procurement and delivery of tangible products (primarily daily necessities) by the end of June 2023, expected to contribute revenue starting in H2 2023[37] Future and Outlook Looking ahead, the company will focus on lottery marketing vouchers to capitalize on sales growth opportunities, plans to develop a SaaS enterprise marketing service platform initially for lottery retail stores to enhance operational efficiency, and will continue prioritizing strategic investments to maximize cross-segment synergies and support business diversification - In H2 2023, the company will focus on lottery marketing vouchers to seize lottery sales growth opportunities and expand market share[78][170] - Plans include developing a SaaS enterprise marketing service platform, initially covering lottery retail stores to improve their operational efficiency and cross-sell other services[77] - Will continue to prioritize strategic investments, maximizing cross-segment synergies between promotion marketing and lottery-related solutions, and supporting business diversification[79][194] Financial Performance Review During the reporting period, the company's overall revenue decreased by 36.5% year-on-year, primarily due to reduced advertising placement and distribution service revenue; despite the revenue decline, gross profit margin increased from 52.9% to 63.0% due to a higher proportion of high-margin businesses and lower traffic acquisition costs, though administrative expenses surged by 98.6%, leading to a 59.5% sharp decline in profit for the period Revenue Analysis Total revenue decreased by 36.5% from RMB 109 million in the prior period to RMB 69 million, primarily due to a 40.0% decline in marketing and promotion services, with advertising placement and distribution services significantly impacted by market weakness and increased competition; however, virtual goods procurement and delivery services revenue grew by 10.0% to RMB 28.1 million, and lottery-related IT solutions revenue increased by 65.8% to RMB 13.3 million, partially offsetting the advertising downturn Revenue by Business Segment (RMB thousands) | Business Segment | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Marketing and Promotion Services | 55,067 | 91,854 | -40.0% | | - Advertising Placement Services | 1,371 | 5,451 | -74.8% | | - Advertising Distribution Services | 21,802 | 56,690 | -61.6% | | - Virtual Goods Procurement and Delivery | 28,145 | 25,583 | +10.0% | | IT Solution Services | 13,905 | 16,689 | -16.7% | | - Lottery-Related Solutions | 13,339 | 8,047 | +65.8% | | - Mobile Game and Software Development | 566 | 8,642 | -93.5% | | Total Revenue | 68,975 | 108,591 | -36.5% | - The decline in advertising placement and distribution service revenue was primarily due to reduced client marketing budgets caused by a weak Chinese consumer market and intensified industry competition[68][91][113] - The total GMV for virtual goods procurement and delivery services increased from RMB 477 million to RMB 728 million, primarily benefiting from an expanded product portfolio from 92 to 776 items and the acquisition of ASMKT[73][92][110] Cost and Gross Profit Analysis Cost of sales significantly decreased by 50.0% year-on-year to RMB 25.6 million, primarily due to a 52.3% reduction in traffic acquisition costs; gross profit margin notably improved from 52.9% to 63.0%, driven by effective cost control and an increased revenue contribution from higher-margin IT solutions and virtual goods businesses - Total cost of sales decreased by 50.0% from RMB 51.1 million to RMB 25.6 million[1] - Traffic acquisition cost, the largest component of cost of sales (84.4%), decreased by 52.3% from RMB 45.3 million to RMB 21.6 million[1] - Gross profit margin increased from 52.9% to 63.0%, primarily due to an increased proportion of high-margin IT solution services and higher revenue contribution from virtual goods procurement and delivery services recognized on a net basis[30] Operating Expenses and Other Income/Expenses Analysis During the reporting period, operating expenses significantly increased, with administrative expenses surging by 98.6% year-on-year to RMB 13.9 million due to higher staff welfare and professional fees for maintaining listing status, R&D expenses growing by 24.9% to RMB 9.4 million for platform system development, while sales and distribution expenses decreased by 17.9%, and other income sharply declined by 58.5% due to reduced government grants Operating Expenses (RMB millions) | Item | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Sales and Distribution Expenses | 3.9 | 4.8 | -17.9% | | Administrative Expenses | 13.9 | 7.0 | +98.6% | | Research and Development Expenses | 9.4 | 7.5 | +24.9% | - The increase in administrative expenses was primarily due to a RMB 2.9 million increase in staff welfare expenses, a RMB 1.0 million increase in directors' remuneration, and a RMB 1.5 million increase in professional fees for maintaining listing status, driven by business development[6] - Other income decreased by 58.5% from RMB 6.6 million to RMB 2.8 million, mainly due to a RMB 5.0 million reduction in government grants[4] Profitability Analysis The company's profitability significantly weakened due to declining revenue and surging administrative expenses, with profit for the period decreasing by 59.5% year-on-year to RMB 11.5 million; adjusted net profit (excluding listing expenses and exchange differences) was RMB 10.9 million, a 63.6% year-on-year decrease, and income tax expense fell by 64.5% due to reduced taxable profit - Profit for the period decreased by 59.5% from RMB 28.4 million in the prior period to RMB 11.5 million[11] Reconciliation of Adjusted Net Profit (RMB thousands) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit for the Period Attributable to Owners | 11,479 | 28,427 | | Add: Listing Expenses | – | 1,453 | | Add: Translation Differences | (607) | – | | Adjusted Net Profit | 10,872 | 29,880 | - Income tax expense decreased by 64.5% from RMB 5.7 million to RMB 2.0 million, primarily due to a reduction in taxable profit[10] Liquidity, Capital Resources, and Investments This section details the company's financial liquidity, capital structure, and significant investment activities, including the use of IPO proceeds Financial Position and Capital Structure As of June 30, 2023, the company's financial position remained acceptable, though liquidity tightened, with cash and cash equivalents decreasing to RMB 148 million due to acquisition payments, and bank borrowings increasing to RMB 90 million to support business expansion, raising the gearing ratio from 12.9% to 29.6%, while the capital structure has seen no significant changes since listing - Cash and cash equivalents decreased from RMB 187 million at the end of 2022 to RMB 148 million, primarily due to the cash consideration of RMB 41.8 million paid for the ASMKT acquisition[23] - Interest-bearing bank borrowings increased from RMB 38 million at the end of 2022 to RMB 90 million[20][22] - The gearing ratio increased from 12.9% at the end of 2022 to 29.6%[22][99] - The company's capital structure has not undergone significant changes since its listing[121] Significant Investments and Acquisitions During the reporting period, the company's most significant investment was the acquisition of 100% equity interest in Zaiyingduan Network Technology (ASMKT) on May 31, 2023, aimed at leveraging ASMKT's technological advantages in virtual goods procurement and delivery to expand related businesses in China, with an outstanding capital commitment of RMB 10 million for this acquisition as of period-end - On May 31, 2023, the Group acquired 100% equity interest in ASMKT, a company primarily engaged in loyalty marketing services through virtual goods procurement and delivery[24][51] - As of June 30, 2023, the Group had a capital commitment of RMB 10 million for the remaining consideration of the ASMKT acquisition, to be settled on or before March 31, 2024[25] Use of Proceeds from Initial Public Offering The company listed in October 2022, raising net proceeds of approximately HKD 101 million; as of June 30, 2023, HKD 60.2 million has been utilized primarily for developing marketing channels, expanding supplier base, and acquisitions, with HKD 40.5 million remaining unutilized and expected to be fully deployed by December 31, 2024, as planned Use of IPO Proceeds and Utilization (HKD millions) | Purpose | Allocated Amount (HKD millions) | Utilized Amount (HKD millions) | Unutilized Balance (HKD millions) | | :--- | :--- | :--- | :--- | | Development and Expansion of Online Marketing Channels | 42.5 | 24.7 | 17.8 | | Development and Expansion of Supplier Base | 26.9 | 15.8 | 11.1 | | Acquisition of Marketing and Related Industry Companies | 15.0 | 15.0 | – | | Development and Operation of SaaS Platform | 6.3 | – | 6.3 | | General Working Capital | 10.0 | 4.7 | 5.3 | | Total | 100.7 | 60.2 | 40.5 | - The remaining unutilized net proceeds are expected to be fully utilized on or before December 31, 2024[178] Other Important Information This section covers key operational details including major customer and supplier concentration, employee information, and a summary of key financial ratios Major Customers and Suppliers The company exhibits high reliance on its major customers and suppliers, with the top five customers accounting for 69.2% of total revenue and the largest customer contributing 31.1%, while the top five suppliers represented 73.8% of total cost of sales and the largest supplier 58.8% during the reporting period - For the six months ended June 30, 2023, the top five customers accounted for 69.2% of total revenue, with the largest customer contributing 31.1%[27] - For the six months ended June 30, 2023, the top five suppliers accounted for 73.8% of total cost of sales, with the largest supplier contributing 58.8%[28] Employees and Remuneration As of June 30, 2023, the company had 215 full-time employees, with total staff costs for the reporting period approximately RMB 20.7 million, an increase from RMB 19.3 million in the prior year, and while an employee share option scheme was adopted for incentives, no options were granted during the period - As of June 30, 2023, the company had 215 full-time employees[14] - For the six months ended June 30, 2023, total staff costs (including directors' remuneration) were approximately RMB 20.7 million[18] - The company adopted a share option scheme in July 2022, but no share options were granted during the reporting period[19] Key Financial Ratios Compared to the end of 2022, the company's financial ratios showed mixed performance, with gross profit margin improving from 52.0% to 63.0%, but net profit margin, adjusted net profit margin, return on equity, and return on total assets all significantly declined, while liquidity ratios decreased and the gearing ratio sharply rose from 12.9% to 29.6%, indicating increased leverage Key Financial Ratios | Ratio | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Profitability Ratios | | | | Gross Profit Margin | 63.0% | 52.0% | | Net Profit Margin | 16.6% | 26.7% | | Return on Equity | 3.8% | 23.0% | | Liquidity Ratios | | | | Current Ratio | 2.6x | 3.7x | | Capital Adequacy Ratios | | | | Gearing Ratio | 29.6% | 12.9% | Condensed Consolidated Financial Statements This section presents the unaudited interim condensed consolidated financial statements for the six months ended June 30, 2023, including the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, and related notes, prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement details the company's revenue, costs, various expenses, profit before tax, and profit for the period, showing revenue of RMB 68.98 million, cost of sales of RMB 25.56 million, gross profit of RMB 43.42 million, and profit for the period of RMB 11.48 million Consolidated Statement of Profit or Loss Summary (RMB thousands) | Item | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 68,975 | 108,591 | | Cost of Sales | (25,555) | (51,133) | | Gross Profit | 43,420 | 57,458 | | Administrative Expenses | (13,898) | (6,981) | | Research and Development Expenses | (9,385) | (7,513) | | Profit Before Income Tax | 13,488 | 34,085 | | Income Tax Expense | (2,009) | (5,658) | | Profit for the Period | 11,479 | 28,427 | Interim Condensed Consolidated Statement of Financial Position This statement presents the company's assets, liabilities, and equity as of June 30, 2023, showing total assets of RMB 462 million, total liabilities of RMB 156 million, and net assets of RMB 305 million, with non-current assets increasing due to goodwill and current liabilities rising due to increased bank borrowings Consolidated Statement of Financial Position Summary (RMB thousands) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Non-Current Assets | 57,664 | 35,599 | | Current Assets | 403,931 | 364,101 | | Total Assets | 461,595 | 399,700 | | Current Liabilities | 152,772 | 97,476 | | Non-Current Liabilities | 3,504 | 4,763 | | Total Liabilities | 156,276 | 102,239 | | Net Assets/Total Equity | 305,319 | 297,461 | Notes to Financial Statements The notes provide detailed information on the basis of financial statement preparation, accounting policies, segment information, revenue breakdown, and tax matters, highlighting that the company primarily operates in China with three reporting segments (marketing and promotion services, IT solution services, and others), most revenue derived from mainland Chinese customers, and certain subsidiaries benefiting from a 15% preferential tax rate as high-tech enterprises - The interim condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of the Listing Rules of the Stock Exchange[127] - The Group has three reporting segments: (i) Marketing and Promotion Services; (ii) IT Solution Services; and (iii) Others[154] - Certain subsidiaries of the Group operating in China are certified as "High-Tech Enterprises" and are subject to a preferential corporate income tax rate of 15%[141]