Financial Information

Latest Results Announcement

Condensed Interim Financial Information For the Six Months and Financial Year Ended 31 December 2023

Condensed Consolidated Statement Of Profit Or Loss For The Six Months And Financial Year Ended 31 December 2023

Condensed Consolidated Statement Of Profit Or Loss And Other Comprehensive Income For The Six Months And Financial Year Ended 31 December 2023

Condensed Statements Of Financial Position At 31 December 2023

Review of Performance

Profit and Loss

Revenue

The Group’s overall revenue decreased by HK$228.2 million or 17.0%, from HK$1,341.4 million in FY 2022 to HK$1,113.2 million in FY 2023. The decrease in revenue was mainly due to the reduced orders of some customers arising from slower pace of macroeconomic recovery.

Gross profit and gross profit margin

In FY 2023, the Group’s gross profit decreased by 10.1% or HK$14.4 million, generating gross profit margin of 11.5% (FY 2022: 10.7%). This increase in gross profit margin was mainly due to the personnel optimisation and production management.

Other Income

The Group’s other income increased by 30.9% or HK$8.5 million, from HK$27.6 million in FY 2022 to HK$36.1 million in FY 2023. This was mainly due to fair value recovery of FVTPL.

Selling and distribution expenses

The Group’s selling and distribution expenses decreased by 34.1% or HK$6.3 million, from HK$18.6 million in FY 2022 to HK$12.3 million in FY 2023. This was mainly due to the decreased sale commission expenses and import & export fees which is the consequence of revenue decrease recognised and variations in the destinations of product distribution.

Administrative expenses

The Group’s administrative expenses increased by 8.4% or HK$5.8 million, from HK$68.4 million in FY 2022 to HK$74.2 million in FY 2023. This was mainly due to corporate management fee paid to Mayuanda for plush toys production management, higher directors’ fees and increased travel to Indonesia in FY2023 by personnel involved in the expansion of manufacturing operations there.

Finance Costs

Finance costs increased by 29.1% or HK$6.6 million, from HK$22.7 million in FY 2022 to HK$29.3 million in FY 2023, mainly due to increased interest rate in FY 2023.

Income Tax Expenses

Income tax expense decreased 64.9% or HK$11.7 million, from HK$18.0 million in FY 2022 to HK$6.3 million in FY 2023. This was mainly due to the profit before tax decrease and underprovision of tax expenses from prior years recognised in 2022.

Balance Sheet

Non-current assets

The Group’s non-current assets stood at HK$561.5 million as at 31 December 2023, decreased by 0.5% or HK$2.6 million, from HK$564.1 million at 31 December 2022. This was due to an increase in capital expenditure on lands of HK$35.3 million invested in Indonesia recognised as deposit paid and net new property, plant and equipment and right-of-use assets of HK$64.9 million for manufacturing operations, which were partially offset by total depreciation and exchange difference of HK$102.8 million.

Current assets

The Group’s current assets stood at HK$869.5 million as at 31 December 2023, a decrease of HK$109.0 million or 11.1%, from HK$978.5 million as at 31 December 2022, mainly due to:

  • a decrease in contract assets of HK$25.3 million;
  • a decrease in inventories of HK$5.1 million;
  • a decrease in trade and bills receivables of HK$36.0 million;
  • a decrease in prepayments, deposits and other receivables of HK$38.3 million; and
  • a decrease in bank and cash balances of HK$5.7 million;

which were partially offset by:

  • an increase in financial assets at FVTPL of HK$1.4 million.
Current liabilities

The Group’s current liabilities stood at HK$633.6 million at 31 December 2023, decreased by HK$121.0 million or 16.0%, from HK$754.6 million at 31 December 2022, mainly due to:

  • a decrease in current tax liabilities of HK$3.6 million
  • a decrease in trade and bills payables of HK$51.7 million;
  • a decrease in accruals and other payables of HK$39.7 million; and
  • a decrease in short-term borrowings of HK$28.7 million to finance working capital requirements;

which were partially offset by:

  • an increase in lease liabilities of HK$2.7 million.
Non-current liabilities

The Group’s non-current liabilities stood at HK$51.3 million as at 31 December 2023, a decrease of HK$16.6 million or 24.4%, from HK$67.9 million as at 31 December 2022 mainly due to decreases in lease liabilities of HK$15.7 million, deferred tax liabilities of HK$2.7 million and long-term borrowings of HK$6.0 million, which were partially offset by an increase in redemption liability of HK$7.8 million.

Cash Flow Analysis

As at 31 December 2023, the Group’s cash resources of HK$126.4 million are considered adequate for current operational needs. The net decrease in cash and cash equivalents of HK$4.6 million held by the Group comprised:

  • Net cash generated from operating activities of HK$135.3 million to finance the working capital needs;
  • Net cash used in investing activities of HK$88.5 million mainly due to additions of deposit paid for new lands in Indonesia, property, plant and equipment; and
  • Net cash used in financing activities of HK$51.4 million, mainly due to the repayment of loans.

Commentary

The Group demonstrated resilience in 2023 in the face of economic headwinds and uncertainties, arising from escalating geopolitical tensions as well as sustained inflationary pressures. Our resilience is marked by our customer-driven philosophy of prioritising quality management with sustainable material applications and strong relationships with existing customers to drive a stable order flow. As we navigated the challenges, we continued to proactively pursue potential new customers to expand market reach and diversify both our customer base and product range.

TDuring the year under review, the Group continued to reap benefits from operational optimisation. We had further strengthened both our operational capabilities and capacity with the commencement of paper and plush toys production in Indonesia in February and September respectively. In collaboration with an established plush toys manufacturer, we diversified into plush toy production, employing approximately 1,500 employees in our new plush toys manufacturing facilities, enlarging our pool of talents and workers in the Group to over 10,000 as at end 2023 compared to around 7,800 in 2022.

The Group's sustainable manufacturing journey is gaining momentum. With the increasing use of green raw materials, the Group intends to dedicate greater focus and attention to its sustainable manufacturing segment, attesting to our commitment to sustainable manufacturing. This will also facilitate the Group in unlocking new financing opportunities with financial institutions to scale our business ambitions.

Moving ahead, to cater to increasing demand, the Group plans to further expand our plush toys manufacturing facilities in Indonesia, targeted to be completed by end 2024, barring any unforeseen circumstances. The Group has placed deposits to purchase approximately 130,000 square metres of additional land, which will double our manufacturing capacity in Indonesia. To enhance supply chain resilience, the Group’s Procurement Team has identified potential material suppliers, primarily in Indonesia, Taiwan, South Korea and Vietnam and will undertake due diligence to ensure their adherence to quality standards and regulatory requirements. The Group will also leverage on its newly-established subsidiary in Singapore, Combine Will (Singapore) Pte. Ltd., to serve as its business hub in South East Asia to enhance customer serving efficiency and tap into new opportunities for growth.

With all the above, we believe the Group has strengthened our competitive edge and is well-positioned to tap into business opportunities with both existing and potential new customers.

The Group remains committed to prioritising the attainment of our ESG targets and incorporating a DE&I approach into our overarching business strategy, encompassing three crucial business driver areas: compliance & risk management, employer of choice and competitive advantage, to deliver sustainable value to all stakeholders in our growth journey.

The Group is also in active discussions with potential new customers which will further diversify our product range and customer base. Barring unforeseen circumstances, we are optimistic that our marketing efforts will bear fruit in the coming years.