Highest Performances Holdings 1H 2024 EPADS $(0.074); Revenue $5M

Author: Benzinga Newsdesk | May 30, 2024 04:04pm

FINANCIAL RESULTS FOR THE FIRST HALF OF THE FISCAL YEAR 2024

The Company obtained control of the Fanhua at the end of December 2023 upon the completion of the transfer of shares according to the written share exchange agreement and when effective control being operationally obtained. The Company started to consolidate Fanhua' s financial statement since December 31, 2023. The financial results for the first half of the fiscal year 2024 do not include any profits of Fanhua. The financial positions as of December 31, 2023 changed significantly mainly due to the acquisition of Fanhua, which also included preliminary purchase price allocation results.

Net revenues

Net revenues for the first half of the fiscal year 2024 were RMB35.6 million (US$5.0 million), representing a 48.0% decrease from RMB68.4 million for the same period of the fiscal year 2023.

 

• Net revenues generated from our wealth management services for the first half of the fiscal year 2024 were RMB30.3 million (US$4.3 million), representing a 43.4% decrease from RMB53.5 million for the same period of the fiscal year 2023. In particular,
  
  
  
  
  • Net revenues generated from the distribution of publicly raised fund products for the first half of the fiscal year 2024 were RMB24.6 million (US$3.5 million), representing a 31.2% decrease from RMB35.8 million for the same period of the fiscal year 2023. The decrease is mainly due to the A-share market experiencing a phase of decline, resulting in a conservative sentiment among investors. The decrease in investor risk appetite has led to a lack of confidence in the market and investment products, negatively impacting the transaction value of publicly raised fund products and leading to a decrease in commission income; and
    
    
    
     
  • Net revenues generated from the distribution of privately raised fund products for the first half of the fiscal year 2024 were RMB5.7 million (US$0.8 million), representing a 67.8% decrease from RMB17.8 million for the same period of the fiscal year 2023. The decrease was primarily because investors were influenced by market volatility and heightened uncertainty about the future so that they adopted a more cautious stance towards riskier products such as private equity funds, or decided to redeem early. Consequently, during the reporting period, both the transaction value and outstanding daily balance of our privately raised fund products decreased, resulting in a decline in commission income (including management fees); and (ii) performance-based fees of RMB0.5 million recognized in the first half of the fiscal year 2024, as compared to RMB1.8 million in the first half of the fiscal year 2023, representing a 69.1% decrease.
    
    
    
     
• Net revenues generated from our asset management services for the first half of the fiscal year 2024 were RMB0.5 million (US$67,000), representing a 59.2% decrease from RMB1.2 million for the same period of the fiscal year 2023. The decrease was primarily due to the reduction in the size of the our actively managed fund of funds.
  
  
  
   
• Net revenues generated from our other services for the first half of the fiscal year 2024 were RMB4.8 million (US$0.7 million), representing a 65.2% decrease from RMB13.7 million for the same period of the fiscal year 2023. The decrease was primarily due to the decline in revenues from insurance consulting services and the consulting services related to trust and family wealth inheritance provided to clients.

Operating costs and expenses

 

Operating costs and expenses for the first half of the fiscal year 2024 were RMB63.0 million (US$8.9million), representing a 41.0% decrease from RMB106.7 million for the same period of the fiscal year 2023. In particular,

• Cost of sales for the first half of the fiscal year 2024 were RMB8.4 million (US$1.2 million), representing a 42.7% decrease from RMB14.6 million for the same period of the fiscal year 2023, which was primarily a combined effect of an decrease in commission expenses as a result of the decrease in the distribution of public raised fund products and privately raised fund products, and a decrease in commission expenses as a result of the decrease from revenues from insurance consulting services and the consulting services related to trust and family wealth inheritance provided to clients;
  
  
  
   
• Selling expenses for the first half of the fiscal year 2024 were RMB11.0 million (US$1.5 million), representing a 73.9% decrease from RMB42.1 million for the same period of the fiscal year 2023. This decrease was primarily due to (i) a reduction of labor costs caused by staff optimization; and (ii) a decrease in rental expenses as a result of the fact that we further focused on our advantageous areas and cutting unnecessary branch offices; and
  
  
  
   
• General and administrative expenses for the first half of the fiscal year 2024 were RMB43.6 million (US$6.1 million), representing a 12.6% decrease from RMB50.0 million for the same period of the fiscal year 2023, primarily due to (i) decrease in labor cost related to the optimization of our admin workforce; (ii) decrease in rental expense; and (iii) partially offset by an increase in expense related to the merger and acquisition transaction.

Investment (loss) income

Investment income for the first half of the fiscal year 2024 was RMB68,000 (US$10,000), investment losses for the first half of fiscal 2023 were RMB0.2 million. Investment income consisted of yields from short-term investments in financial products and is recognized when the investment matures or is disposed of.

 

Interest Income

Interest income for the first half of the fiscal year 2024 was RMB3.1 million (US$0.4 million), representing a 31.8% decrease from RMB4.6 million for the same period of the fiscal year 2023, primarily due to a reduction in interest income resulting from a decrease in the amount of short-term loan receivables to third parties.

Sundry Income (loss)

Sundry loss for the first half of the fiscal year 2024 was RMB1.1 million (US$0.2million), compared to sundry income of RMB0.7 million for the same period of the fiscal year 2023. The sundry loss was primarily related to the provisions for expected credit loss applied.

Income Tax Expense/Benefit

We recognized income tax expense of RMB7.9 million (US$1.1 million) for the first half of the fiscal year 2024 primarily due to the allowance of deferred tax assets recognized in previous fiscal year while we recognized income tax benefit of RMB1.7 million for the same period of the fiscal year 2023.

Net Loss

We recognized a net loss of RMB33.3 million (US$4.7 million) for first half of the fiscal year 2024, representing a 5.7% increase from RMB31.5 million for the same period of the fiscal year 2023. The increase of net loss was mainly due to recognizing an income tax expense of RMB 8.6 million this reporting period, attributable to the impairment of deferred tax assets while we have implemented a series of cost-control measures that have partially offset this increase.

Basic and Diluted Loss per ADS

Basic and diluted loss per ADS for the first half of the fiscal year 2024 was RMB0.526 (US$0.074) and 0.526 (US$0.074), respectively. We recognized basic and diluted loss per ADS of RMB0.522 and RMB0.522, respectively, for the same period of the fiscal year 2023.

Cash and Cash Equivalents

As of December 31, 2023, we had cash and cash equivalents of RMB593.0 million (US$83.5 million), and we had cash and cash equivalents of RMB164.5 million as of June 30, 2023. The increase in cash and cash equivalents was mainly due to cash and cash equivalents brought in through the acquisition of Fanhua.

Posted In: HPH