Financials
CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SECOND HALF YEAR AND FULL YEAR ENDED 31 MARCH 2024
Financials Archive
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Condensed interim financial statements For the second half year and full year ended 31 March 2024
Condensed interim consolidated statement of profit or loss and other comprehensive income for the second half year and full year ended 31 March 2024
Condensed interim statements of financial position as at 31 March 2024
Review of Income Statement of the Group
Second-Half FY2024 (“2H FY2024”) vs Second-Half FY2023 (“2H FY2023”)
Group revenue decreased by 23.1% to RMB309.7 million in 2H FY2024 as compared to RMB402.5 million in 2H FY2023.
The decrease is mainly due to lower revenue from sales of tower cranes and components of RMB107.2 million from RMB285.1 million in 2H FY2023 to RMB177.9 million in 2H FY2024. The decrease was offset by higher rental and service income by RMB14.4 million to RMB131.8 million in 2H FY2024 from RMB117.4 million in 2H FY2023.
Revenue in the PRC reduced by RMB69.5 million to RMB122.6 million in 2H FY2024. The decrease in the PRC is driven by the sluggish domestic economy stemming from an ongoing property market slowdown and weak global demand for manufactured goods. Revenue from Asia (outside of the PRC) has also dropped by RMB24.5 million to RMB136.7 million in 2H FY2024 from RMB161.2 million in 2H FY2023 as delivery of tower cranes has slowed in Singapore attributed to a maturing market, where demand for new units of large and mega size tower cranes has tapered off. Revenue from the Middle East & others has also dropped by RMB22.3 million to RMB24.6 million in 2H FY2024. The decrease was offset by higher revenue in USA & Europe of RMB23.5 million.
Overall, sales in Asia (outside the PRC) and the PRC contributed to 44.1% (2H FY2023: 40.0%) and 39.6% (2H FY2023: 47.7%) respectively of the Group revenue in 2H FY2024.
Gross profit and gross profit margin
In line with lower revenue, gross profit decreased by 24.4% to RMB80.2 million in 2H FY2024 from RMB106.0 million in 2H FY2023.
Average gross profit margin slightly deceased to 25.9% in 2H FY2024 from 26.3% in 2H FY2023.
The decline in gross profit margin results from reduced selling prices and lower margins in the rental sector.
Other income
Other income decreased by RMB2.5 million to RMB6.8 million in 2H FY2024 as compared to RMB9.3 million in 2H FY2023. The decrease is mainly due to non-recurrence of certain government subsidies and rebates of RMB4.0 million. Government subsidies and rebates received in 2H FY2023 pertains to grants from various authorities, as part of the financial assistance to help businesses tide through the pandemic in Hongkong. The decrease was partly offset by higher compensation income of RMB2.6 million in 2H FY2024. The compensation income of RMB2.8 million received in 2H FY2024 pertains to payments from the Hongkong authority for the partial relocation of the Hongkong yard office.
Operating expenses
Total operating expenses decreased 13.3% to RMB84.8 million in 2H FY2024 as compared to RMB97.9 million in 2H FY2023.
Distribution costs increased 19.5% to RMB48.9 million in 2H FY2024 as compared to RMB40.9 million in 2H FY2023 mainly arose from higher employee cost, higher product liability insurance incurred in the PRC and higher rental of yard incurred in Hongkong. The increase in employee cost is due to payment of last year bonus previously not accrued for in 2H FY2024. The increase was partially offset by lower freight and transportation charges.
Administrative expenses decreased by 23.4% to RMB34.1 million in 2H FY2024 as compared to RMB43.2 million in 2H FY2023. The decrease is mainly due to lower employee costs, attributed to lower provision for bonuses.
Other operating expenses reported a credit balance of RMB5.3 million in 2H FY2024 as compared to a debit balance of RMB4.3 million in 2H FY2023. The difference was mainly due to reversal of provision for doubtful debts of RMB7.7 million in 2H FY2024 as compared to provision for doubtful debts of RMB5.0 million.
Finance costs decreased by 11.5% to RMB8.3 million in 2H FY2024 as compared to RMB9.4 million in 2H FY2023 due to lower average borrowings.
Taxation
Income tax expense reported a credit balance of RMB3.7 million in 2H FY2024. The tax credit expense was mainly due to recognition of unabsorbed tax losses previously not recognised in one of the PRC subsidiaries.
Other comprehensive income/(expenses)
The Group reported other comprehensive expense of RMB17.8 million in 2H FY2024 as compared to other comprehensive income of RMB17.5 million in 2H FY2023. The difference mainly pertains to the fair value loss on financial assets, FVOCI of RMB14.7 million in 2H FY2024 as compared to a fair value gain of RMB21.7 million in 2H FY2023.
Other comprehensive (expenses)/income also include loss on exchange translation arose from translation of the net assets of our Hong Kong and Singapore subsidiaries.
HKD depreciated 1.7% and SGD appreciated 0.1% respectively against RMB as at 31 March 2024 as compared to the previous period under review.
Profit before taxation and net profit attributable to equity holders of the Company
As a result of the above, the Group recorded a profit before taxation of RM2.2 million in 2H FY2024 as compared RMB17.5 million in 2H FY2023.
Net profit attributable to equity holders of the Company amounts to RMB2.8 million in 2H FY2024 decreased from RMB13.0 million in 2H FY2023.
Full Year FY2024 (“FY2024”) vs Full Year FY2023 (“FY2023”)
Revenue
Group revenue decreased by 13.6% to RMB790.8 million in FY2024 as compared to RMB915.7 million in FY2023.
The decrease is mainly due to lower revenue from sales of tower cranes and components of RMB147.2 million from RMB664.2 million in FY2023 to RMB517.0 million in FY2024. The decrease was offset by higher rental and service income by RMB22.3 million to RMB273.8 million in FY2024 from RMB251.5 million in FY2023.
Revenue in the PRC also reduced by RMB89.2 million to RMB313.0 million in FY2024 driven by the sluggish domestic economy stemming from an ongoing property market slowdown and weak global demand for manufactured goods. Revenue from Asia (outside of the PRC) has also dropped significantly by RMB86.3 million from RMB399.9 in FY2023 to RMB313.6 million in FY2024 as delivery of tower cranes has slowed in Singapore attributed to a maturing market, where demand for new units of large and mega size tower cranes has tapered off. Sales in the Middle East & others dropped by RMB11.4 million. The decrease was offset by higher revenue in USA & Europe of RMB62.0 million.
Overall, sales in the PRC and Asia (outside the PRC) contributed to 39.6% (FY2023: 43.9%) and 39.7% (FY2023: 43.7%) respectively of the Group revenue in FY2024. The USA & Europe increased from 0.4% to 8.2%.
Gross profit and gross profit margin
Although revenue dropped by 13.6%, gross profit decreased by 9.9% to RMB228.9 million in FY2024 from RMB254.0 million in FY2023 due to higher average gross profit margin in FY2024.
Average gross profit margin increased to 28.9% in FY2024 from 27.7% in FY2023.
The higher gross profit margin in FY2024 is due to higher sales proportion of luffing tower cranes as well as higher proportion of rental income in FY2024 which generate higher sales margin. The low gross profit margin in FY2023 is also due to loss of disposal of tower cranes previously held as rental cranes for the amount approximately to RMB6.6 million arising from exercising of option to purchase under rental agreement in the PRC.
Other income
Other income decreased by RMB4.9 million to RMB11.0 million in FY2024 as compared to RMB15.9 million in FY2023. The decrease is mainly due to non-recurrence of certain government subsidies and rebates of RMB7.0 million, debts no longer required to pay of RMB0.8 million and insurance compensation of RMB0.3 million. Government subsidies and rebates received in FY2023 pertains to grants from various authorities, as part of the financial assistance to help businesses tide through the pandemic. The decrease was partly offset by higher interest income of RMB2.1 million and higher compensation income of RMB2.6 million. The compensation income of RMB2.8 million received in 2H FY2024 pertains to payments from the Hongkong authority for the partial relocation of the Hongkong yard office.
Operating expenses
Total operating expenses decreased 10.7% to RMB180.3 million in FY2024 as compared to RMB201.9 million in FY2023.
Distribution costs decreased 7.9% to RMB90.1 million in FY2024 as compared to RMB97.9 million in FY2023. The reduction primarily from reduced freight and transportation costs, as the supply has returned to its normalcy after the abrupt surge during the pandemic. The decrease was partly offset by higher employee expenses due to payment of last year bonus previously not accrued for in FY2024, higher product liability insurance incurred in the PRC and higher rental of yard incurred in Hongkong.
Administrative expenses decreased 10.8% to RMB75.8 million in FY2024 as compared to RMB85.0 million in FY2023 mainly due to lower employee expenses as lower bonuses provision. The decrease is partly offset by higher legal fee and transportation expenses.
Other operating expenses reported at credit balance of RMB2.0 million in FY2024 as compared to a debit balance of RMB1.1 million in FY2023. The difference was mainly due to an exchange gain of RMB5.2 million in FY2024 as compared to RMB14.6 million in FY2023. In addition, a reversal of provision for expected credit loss (“ECL”) of RMB0.3 million was made in FY2024 whilst provision for ECL of RMB12.1 million was made in FY2023.
The exchange gain for FY2024 arose mainly from the strengthening of Singapore Dollars (“SGD”) and Hong Kong Dollars (“HKD”) against Renminbi (“RMB”) due to net RMB liabilities in the Singapore subsidiary’s book and Hong Kong subsidiary’s book; and the strengthening of USD against RMB and SGD due to net USD assets in the PRC’s and Singapore’s subsidiary’s book.
Finance costs decreased by 4.7% to RMB16.5 million in FY2024 as compared to RMB17.3 million in FY2023 due to lower average borrowings.
Taxation
Income tax expense decreased to RMB6.1 million in FY2024 as compared to RMB9.0 million in FY2023 in line with lower profits for the financial year under review.
Other comprehensive income/(expenses)
The Group reported other comprehensive expense of RMB12.9 million in FY2024 as compared to other comprehensive income of RMB43.3 million in FY2023. The difference was mainly due to a fair value loss of RMB27.0 million in financial assets, FVOCI in FY2024 and compared to a fair value gain of RMB24.3 million in FY2023.
Other comprehensive (expense)/income also include gain on exchange translation of RMB14.1 million in FY2024 (FY2023: RMB19.0 million) arose from translation of the net assets of our Hong Kong and Singapore subsidiaries.
HKD and SGD appreciated 5.7% and 3.7% respectively against RMB as at 31 March 2024 as compared to last financial year end.
Profit before taxation and net profit attributable to equity holders of the Company
As a result of the above, the Group recorded a profit before taxation of RMB59.6 million in FY2024 as compared to RMB68.0 million in FY2023.
Net profit attributable to equity holders of the Company decreased to RMB43.0 million in FY2024 from RMB51.3 million in FY2023.
Review of Financial Position of the Group
Non-current assets increased by RMB121.3 million to RMB838.9 million as at 31 March 2024 mainly due to higher property, plant and equipment, partly offset by lower financial assets, at FVOCI.
The increase of RMB140.6 million in the Group’s net carrying amount of property, plant and equipment was mainly attributable to the increase in rental fleets and exchange translation differences from Yongmao Hong Kong as HKD appreciated significantly by 5.7% against RMB as compared to last financial year end. The increase is partly offset by net depreciation charges and disposals.
Deferred tax assets arose mainly from provisions and elimination of unrealised profits in intragroup sales and the various provisions made.
Financial assets, at FVOCI recorded fair value loss of RMB27.0 million as at 31 March 2024.
Current Assets
Current assets decreased by RMB92.1 million to RMB1,224.5 million as at 31 March 2024 mainly due to by lower cash and cash equivalents (see Note on Review on Cash Flow Statement below), lower trade and other receivables and lower inventory, partly offset by higher amount owing by related parties.
Trade and other receivables decreased by RMB9.6 million to RMB594.1 million as at 31 March 2024. Lower trade receivables is due to lower sales.
Inventories decreased by RMB7.6 million to RMB408.7 million as at 31 March 2024 as compared to RMB416.3 million as at 31 March 2023. This lower inventory is mainly due to transfer of inventory to property, plant and equipment for additional rental fleet of tower cranes.
Amount owing by related parties marginally increased by RMB0.3 million to RMB47.1 million as at 31 March 2024 due to higher sales over repayment to related parties.
Non-current Liabilities
Non-current liabilities increased to RMB74.8 million as at 31 March 2024 from RMB70.2 million as at 31 March 2023. The increase was due to higher deferred tax liabilities by RMB6.3 million to RMB53.2 million, partly offset by lower trade and other payables of RMB1.2 million to RMB9.9 million as at 31 March 2024.
Deferred tax provision was mainly made for withholding tax levied on dividends of undistributed earnings of PRC subsidiaries, accelerated tax depreciation on inter-company sales of tower cranes used as rental fleet.
Current Liabilities
Current liabilities increased by RMB26.3 million to RMB1,002.2 million as at 31 March 2024 as compared to RMB975.9 million as at 31 March 2023 mainly due to higher trade and other payables and amount owing to a corporate shareholder of a subsidiary. Partly offset by lower borrowings.
Trade and other payables increased by RMB37.0 million mainly due to collection of advances and deposits from customers.
Borrowings decreased by RMB46.4 million mainly due to net loan repayment.
Total Equity
As at 31 March 2024, the Group’s total equity amounted to RMB986.4 million. The increase was mainly due to total comprehensive income of RMB40.6 million for 9M FY2024, partly offset by dividends paid in FY2024.
Review of Cash Flow Statement
2H FY2024 vs 2H FY2023
The Group reported a net decrease in cash and cash equivalents amounting to RMB1.4 million in 2H FY2024 mainly due to:
- Net cash from operating activities of RMB1.8 million resulted from operating profit before working capital changes, increase in operating payables and decrease in operating receivables, partly offset by increase in inventories and taxes paid.
- Net cash used in investing activities of RMB8.6 million from acquisition of property, plant and equipment, partly offset by interested received; and
- Net cash generated from financing activities of RMB5.4 million mainly from higher net proceed from borrowings, loan from shareholders of a subsidiary and repayment from a related party, partly offset by dividend paid to non-controlling shareholders, repayment of principal portion of lease liabilities and interest paid.
Full Year FY2024 vs Full Year FY2023
The Group reported a net decrease in cash and cash equivalents amounting to RMB58.5 million in FY2024 mainly due to:
- Net cash generated from operating activities of RMB5.0 million resulted from operating profit before working capital changes increase in operating payables and decrease in operating receivables, offset by increase in inventories and interest and taxes paid.
- Net cash used in investing activities of RMB24.8 million from acquisition of property, plant and equipment, partly offset by interested received; and
- Net cash used in financing activities of RMB38.7 million mainly from net repayment of bank borrowings, net repayment of principal portion of lease liabilities, and dividend paid to non-controlling shareholders and shareholders, partly offset by lower restricted bank balances, loan from shareholders of a subsidiary and repayment from a related party.
Commentary
China’s gross domestic product expanded by 5.3% in the first quarter compared to the previous year, as reported by the National Bureau of Statistics. This provided some reassurance to officials amidst efforts to bolster growth amid prolonged challenges in the property sector and increasing local government debt. However, various indicators released alongside the GDP data for March, such as property investment, retail sales, and industrial output, indicated that domestic demand continues to be weak, exerting pressure on overall economic momentum.
The International Monetary Fund stated that the forecast for Asia and the Pacific in 2024 has improved. It is anticipated that the region's economic slowdown will be less pronounced than previously expected, as inflationary pressures continue to ease although China’s property market correction and geoeconomic fragmentation remain key risks. Global disinflation and the potential for lower central bank interest rates have made a soft landing more likely, hence risks to the near-term outlook are now broadly balanced.
Currently, global trade is experiencing a shortage of ocean containers, leading to a substantial rise of around 30% in freight rates in recent weeks, with expectations of further increases. The increase in shipping costs has been attributed to a variety of factors, including geopolitical tensions in Middle East, adverse weather conditions in Asia, supply chain disruption and rising fuel prices.
The Group expects the operating environment to be challenging and the reasons as stated above. The Group remains vigilant and committed to exercising cost discipline and will take necessary remedial actions, where possible.
As announced by the Company on 8 September 2023, 13 March 2024, 22 March 2024, 3 April 2024 and 2 May 2024 the Company’s 60% owned subsidiary, Yongmao Machinery (H.K.) Company Limited (“YMHK”) and YMHK’s 100% wholly-owned subsidiary, Eastime Engineering Limited (“EEL”), have been served with summonses to appear before the magistrate of Magistrate Court of Hong Kong on 30 June 2024 to answer to various alleged offences under, inter alia, (i) the Factories and Industrial Undertakings Ordinance, Cap. 59, Law of Hong Kong and (ii) the Occupational Safety and Health Ordinance, Cap. 509. Pending the appearances to be made by YMHK and EEL before the magistrate on 30 June 2024 and on the basis of the information available to us at the moment, there have been no material developments in relation to the tower cranes accident in Hong Kong. The Company will provide further updates as and when there are any material developments.
There is no significant development in respect to the Writ of Summons and Statement of Claim filed by CMNT Investment Pty Ltd, an Australian company since the last announcement dated 15 September 2023. Mediation is scheduled to be carried in June 2024. The Company will provide further updates as and when there are any material developments.