Fenbo Holdings Limited Announces Fiscal Year 2024 First Half Financial Results

Rhea-AI Summary

Fenbo Holdings (Nasdaq: FEBO), an OEM for electrical hair styling products under the 'Remington' brand, announced its unaudited financial results for the six months ended June 30, 2024. Key highlights include:

• Revenues increased 14.2% to HK$66.9 million
• Gross profit rose to HK$14.9 million (22.3% of revenues)
• Net loss of HK$1.9 million
• Basic and diluted loss per share of HK$0.17
• Cash and cash equivalents decreased 44.1% to HK$25.9 million

Despite revenue and gross profit growth, increased administrative expenses led to a net loss. The company is taking actions to reduce costs, enhance efficiency, and diversify its customer base amid market uncertainty. FEBO's recent Nasdaq listing is expected to accelerate geographical expansion and drive future growth.

Positive

• Revenue increased by 14.2% to HK$66.9 million
• Gross profit improved to HK$14.9 million, with margin increasing from 17.9% to 22.3%
• Recently completed initial public offering and listing on Nasdaq
• Efforts to expand operations geographically and drive future growth

Negative

• Net loss of HK$1.9 million compared to net income of HK$0.2 million in the previous year
• Basic and diluted loss per share of HK$0.17 compared to income per share of HK$0.02 in the previous year
• Cash and cash equivalents decreased by 44.1% to HK$25.9 million
• Significant increase in general and administrative expenses by HK$7.4 million

Insights

Financial Analyst

Fenbo Holdings 's financial results for the first half of fiscal year 2024 present a mixed picture. While revenue increased by 14.2% to HK$66.9 million, the company swung to a net loss of HK$1.9 million from a profit in the same period last year. This shift is primarily due to a significant increase in general and administrative expenses, which rose by HK$7.4 million.

The gross profit margin improved from 17.9% to 22.3%, indicating better cost management in production. However, the 44.1% decrease in cash and cash equivalents to HK$25.9 million is concerning and may limit future growth opportunities if not addressed.

The company's recent IPO and Nasdaq listing could provide additional capital for expansion, but the current market challenges and increased administrative costs need to be carefully managed to return to profitability. Investors should monitor the company's cost-cutting measures and efforts to diversify its customer base in the coming quarters.

Market Research Analyst

Fenbo Holdings 's performance reflects broader market trends in the consumer goods sector. The 14.2% revenue increase suggests a recovery in demand for electrical hair styling products, likely due to the easing of COVID-19 restrictions. However, the ongoing geopolitical conflicts and inflationary pressures continue to impact the global supply chain and consumer sentiment.

The company's focus on high-quality products and R&D capabilities could be a differentiator in a competitive market. However, the slow recovery in consumer demand and pressure on retail sales present significant challenges. The company's strategy to expand geographically and diversify its customer base is prudent but may take time to yield results.

Investors should consider the potential for market share growth against the backdrop of persistent macroeconomic uncertainties. The company's ability to navigate these challenges while maintaining product innovation will be important for long-term success in the OEM electrical hair styling products market.

HONG KONG, Oct. 03, 2024 (GLOBE NEWSWIRE) -- Fenbo Holdings Limited (Nasdaq: FEBO) (the “Company”, “we”, “our”, “us” or “FEBO”), an established original equipment manufacturer (OEM) for a global home essential company, producing electrical hair styling products under the “Remington” brand which are sold to overseas markets, today announced its unaudited financial results for the six months ended June 30, 2024.

Fiscal Year 2024 First Half Financial Results Compared to Fiscal Year 2023 First Half Financial Results

	●	Revenues were HK$66.9 million for the six months ended June 30, 2024, a 14.2% increase from HK$58.6 million for the six months ended June 30, 2023;
	●	Gross profit was HK$14.9 million for the six months ended June 30, 2024, or 22.3% of revenues compared to HK$10.5 million, or 17.9% of revenues for the six months ended June 30, 2023;
	●	Net loss was HK$1.9 million for the six months ended June 30, 2024, compared to net income of HK$0.2 million for the six months ended June 30, 2023;
	●	Basic and diluted (loss) per share (“EPS”) was (HK$0.17) per share for the six months ended June 30, 2024 compared to income per share of HK$0.02 for the six months ended June 30, 2023; and
	●	Cash and cash equivalents were HK$25.9 million as of June 30, 2024, a 44.1% decrease from HK$46.3 million as of December 31, 2023.

“I’m pleased to report our operating and financial performance of the Company for the six months ended June 30, 2024,” said Mr. Siu Lun Allan Li, Chairman of FEBO, “The performance during the period was satisfactory as we were able to increase the revenue and gross profit by substantial amounts which was not sufficient to cover the significant increase in the administrative expenses. However, we have taken a number of actions to reduce costs, enhance efficiency and increase the diversity of customer base as we navigate market uncertainty. Our innovative products and diversified value-added services, strong cash flow and balance sheet as well as dedicated management are enabling us to navigate the market challenges.”

“Our proven track record of operating history positions us to improve profitability and remain flexible in responding to the market. Our recently completed initial public Offering and listing on Nasdaq is a milestone for us that accelerates our efforts to expand our operation geographically and drive future growth. Looking ahead, as we anticipate challenges in the broader environment to persist during the second half fiscal 2024, we remain committed to providing cost effective packaging solutions to our customers. We are confident in our long-term strategy believe that we have the right team in place to generate sustainable long-term returns for our stakeholders,” Mr. Li concluded.

Unaudited Financial Results for the Six Months Ended June 30, 2024 and 2023
		For the six months ended June 30,
		2023				2024				2024
		HK$’000				HK$’000				US$’000
Revenues			58,567				66,887				8,566
Cost of sales			(48,088	)			(51,948	)			(6,653	)
Gross profit			10,479				14,939				1,913
Operating expenses:
Selling and marketing expenses			(949	)			(1,106	)			(142	)
General and administrative expenses			(8,660	)			(16,050	)			(2,056	)
Total operating expenses			(9,609	)			(17,156	)			(2,198	)
Income (loss) from operations			870				(2,217	)			(285	)
Other (expense) income:
Exchange gain, net			521				216				28
Loss on disposal of property, plant and equipment			(1	)			-				-
Interest income			10				253				32
Interest expense			(936	)			(304	)			(39	)
Government grant			-				140				18
Other income, net			59				87				11
Total other (expense) income			(347	)			392				50
Income (expense) before tax expense			523				(1,825	)			(235	)
Income tax expense			(285	)			(76	)			(10	)
Net income (loss)			238				(1,901	)			(245	)
Other comprehensive income
Foreign currency translation loss, net of taxes			(1,246	)			(600	)			(77	)
Total comprehensive loss			(1,008	)			(2,501	)			(322	)
Net income (loss) per share attributable to ordinary shareholders
Basic and diluted (cents)			2.38				(17.19	)			(2.20	)
Weighted average number of ordinary shares used in computing net income (loss) per share
Basic and diluted			10,000,000				11,057,005				11,057,005

Revenues

Revenue increased by HK$8.3 million, or 14.2%, to HK$66.9 million (US$8.6 million) for the six months ended June 30, 2024 compared to HK$58.6 million for the same period in 2023 primarily because of the increase in revenue for our flat irons and hair straighteners products.

During our six months ended June 30, 2024, the negative impact of the COVID-19 pandemic had greatly subsided, and industries, including consumer confidence, returned to normalcy as compared to the continued negative impact of the COVID-19 pandemic on businesses during the first half of 2023. Despite the COVID-19 pandemic has come to an end, geopolitical conflicts such as the Russia-Ukraine conflict and the Israeli-Palestinian conflict persisted. The consequent disruption of the global supply chain affected the recovery of economic activity and drove inflation up significantly. Moreover, major central banks’ aggressive interest rate hikes significantly increased the complexity and uncertainty of the economic development environment. Against the backdrop of challenging macroeconomic conditions, the consumer goods and manufacturing businesses have been affected and the recovery in consumer demand has been slow. Despite the Company is affected by the weak consumer sentiment and pressure from retails sales, it would continue to put efforts on improving the competitiveness of its high quality products together with bolstering its research and development capabilities with an aim to enhancing its market share in its existing business and achieving a long-term relationship with its customers.

Cost of sales

Cost of sales included cost of raw materials (such as costs of electrical components, packaging materials, metal materials, plastic particles, and painting materials), direct labor (including wages and social security contributions), manufacturing overhead (such as consumables, depreciation, direct rental expense and utilities) and other taxes. We currently do not hedge our raw materials position, and we monitor raw material price trends closely to manage our production needs.

For the six months ended June 30, 2024, cost of sales increased to HK$51.9 million (US$6.7 million), representing an increase by HK$3.9 million from HK$48.1 million in the same period in 2023. The fluctuation of cost of sales was in line with the increase in our revenue during the same period.

Gross profit

As a result of the foregoing, gross profit for the six months ended June 30, 2024, was HK$14.9 million (US$1.9 million), an increase of HK$4.5 million from HK$10.5 million for the same period in 2023.

Selling and marketing expenses

Major components of selling and marketing expenses are packaging expenses, transportation costs and custom declarations. For the six months ended June 30, 2024, selling and marketing expenses was HK$1.1 million (US$0.1 million), which increased by HK$0.2 million from HK$0.9 million in the same period in 2023. The increase during the six months ended June 30, 2024 from the same period in 2023 was due mainly to an increase in overall level of shipping of products.

General and administrative expenses

General and administrative expenses consist primarily of staff costs for our accounting and administrative support personnel and executives, depreciation, office and insurance expenses, motor vehicles and travelling expenses, stamp duty and other taxes, utility expenses, office rental and management fee, legal and professional fee and auditor’s remuneration and others. General and administrative expenses increased by HK$7.4 million from HK$8.7 million for the six months ended June 30, 2023 to HK$16.1 million (US$2.1 million) for the six months ended June 30, 2024. This increase was due mainly to the increase in (i) staff costs and insurance expenses to provide support for the business expansion and (ii) listing annual fee and legal and professional fees for post-listing administrative support during the six months ended June 30, 2024.

Income (loss) from operations

The income from operations decreased by HK$3.1 million from the income from operations of HK$0.9 million for the six months ended June 30, 2023 to the loss from operations of HK$2.2 million for the six months ended June 30, 2024. The deterioration in the financial performance from operations during the six months ended June 30, 2024 were primarily due to the combined effects of the increase of gross profit of HK$4.5 million and the increase of general and administrative expenses of HK$7.4 million during the six months ended June 30, 2024.

Other income (expenses), net

Major components of other income (expense) are exchange gain and loss, gain/loss on disposal of property, plant and equipment, sundry income, government grant and bank interest income. For the six months ended June 30, 2024, net income was HK$0.4 million (US$0.1 million), which increased by HK$0.7 million from net expenses of HK$0.3 million in the same period in 2023. The increase was due mainly to the decrease in interest expenses recognized during the six months ended June 30, 2024.

Net income (loss)

The net income decreased by HK$2.1 million from a net income of HK$0.2 million for the six months ended June 30, 2023 to a net loss of HK$1.9 million (US$0.2 million) for the six months ended June 30, 2024. The decrease in the net income during the six months ended June 30, 2024 was mainly attributable to the cumulative effect of the reasons set out above.

Earnings per Share - Basic and Diluted

Loss per basic and diluted share for the six months ended June 30, 2024 was HK$0.17, compared to earnings per basic and diluted share of HK$0.02 for the comparable period of 2023.

Liquidity and Capital Resources

The Company financed its daily operations and business development through cash generated from the operations of the Company’s wholly owned subsidiaries, consisting of Able Industries Limited, Fenbo Industries Limited and Fenbo Plastic Products Factory (Shenzhen) Limited. As of June 30, 2024 and 2023, its cash balance was HK$25.9 million (US$3.3 million) and HK$21.3 million, respectively.

The following table sets forth a summary of its cash flows for the periods indicated:

		For the six months ended June 30,
		2023				2024				2024
		HK$’000				HK$’000				US$’000
Net cash provided by (used in) operating activities			7,232				(23,299	)			(2,985	)
Net cash used in investing activities			(50	)			(37	)			(5	)
Net cash provided by financing activities			376				2,769				355

Capital Expenditures

The Company had capital expenditures of HK$37,000 and HK$50,000 for the six months ended June 30, 2024 and 2023, respectively. Our capital expenditures were mainly for office equipment. Management intends to fund future capital expenditures from working capital, bank borrowings, lease financing and other financings. The Company will continue to make capital expenditures as appropriate to support its business growth.

About Fenbo Holdings Limited

The Company’s operating history began in 1993 when Fenbo Industries Limited was founded in Hong Kong by Mr. Li Kin Shing as a toy manufacturer and distributor. As the toy market deteriorated, he founded Able Industries Limited in 2005 in Hong Kong and shifted the operations to the manufacturing and sales of personal care electric appliances. The manufacturing subsidiary, Fenbo Plastic Products Factory (Shenzhen) Ltd., located in Guangdong, PRC, was formed in the PRC in 2010 and is capable of producing over three million units per year. The Company currently act as both an original equipment manufacturer and historically have also served as an original design manufacturer. For more information, please visit the Company’s website at http://www.fenbo.com.

Forward-Looking Statements

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; financial condition and results of operations; product and service demand and acceptance; reputation and brand; the impact of competition and pricing; changes in technology; government regulations; fluctuations in general economic and business conditions in U.S., Hong Kong and China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

Fenbo Holdings Limited

Li Siu Lun Allan
Chief Executive Officer and Chairman of the Board of Directors
Telephone: +(852) 2343-3328
Email: allanli@fenbo.com

FENBO HOLDINGS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Amount in thousands, except for share and per share data, or otherwise noted)
		As of
		December 31				June 30
		2023				2024				2024
		HK$’000				HK$’000				US$’000
Assets
Current assets:
Cash			46,342				25,900				3,317
Accounts receivable, net			31,486				45,301				5,802
Deferred initial public offering cost			-				-				-
Inventories			14,088				14,802				1,896
Prepaid expenses and other current assets			6,017				10,116				1,296
Total current assets			97,933				96,119				12,311
Property, plant and equipment, net			1,244				1,013				130
Right-of-use assets			3,801				1,101				141
Total non-current assets			5,045				2,114				271
TOTAL ASSETS			102,978				98,233				12,582
Liabilities
Current liabilities
Bank loan – current			11,000				11,000				1,409
Accounts payable			18,482				20,963				2,685
Other payables and accrued liabilities			7,049				2,770				355
Lease liabilities – current			4,060				1,043				134
Amounts due to related parties			2,413				3,106				398
Total current liabilities			43,004				38,882				4,981
Non-current liabilities
Lease liabilities – non-current			198				-				-
TOTAL LIABILITIES			43,202				38,882				4,981
Commitments and contingencies			-				-				-
Shareholders’ equity
Preference shares US$0.0001 par value per share; 3,000,000 authorized capital; nil shares issued and outstanding			-				-				-
Ordinary shares US$0.0001 par value per share; 300,000,000 authorized capital; 11,062,500 shares issued and outstanding (2023: 11,000,000 shares issued and outstanding)			9				9				1
Additional paid-in capital			28,494				30,570				3,915
Statutory reserve			2,806				2,806				359
Retained earnings			28,721				26,820				3,435
Accumulated other comprehensive income			(254	)			(854	)			(109	)
Total shareholders’ equity			59,776				59,351				7,601
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			102,978				98,233				12,582

FENBO HOLDINGS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(Amount in thousands, except for share and per share data, or otherwise noted)
		For the six months ended June 30,
		2023				2024				2024
		HK$’000				HK$’000				US$’000
Revenues			58,567				66,887				8,566
Cost of sales			(48,088	)			(51,948	)			(6,653	)
Gross profit			10,479				14,939				1,913
Operating expenses:
Selling and marketing expenses			(949	)			(1,106	)			(142	)
General and administrative expenses			(8,660	)			(16,050	)			(2,056	)
Total operating expenses			(9,609	)			(17,156	)			(2,198	)
Income (loss) from operations			870				(2,217	)			(285	)
Other (expense) income:
Exchange gain, net			521				216				28
Loss on disposal of property, plant and equipment			(1	)			-				-
Interest income			10				253				32
Interest expense			(936	)			(304	)			(39	)
Government grant			-				140				18
Other income, net			59				87				11
Total other (expense) income			(347	)			392				50
Income (expense) before tax expense			523				(1,825	)			(235	)
Income tax expense			(285	)			(76	)			(10	)
Net income (loss)			238				(1,901	)			(245	)
Other comprehensive income
Foreign currency translation loss, net of taxes			(1,246	)			(600	)			(77	)
Total comprehensive loss			(1,008	)			(2,501	)			(322	)
Net income (loss) per share attributable to ordinary shareholders
Basic and diluted (cents)			2.38				(17.19	)			(2.20	)
Weighted average number of ordinary shares used in computing net income (loss) per share
Basic and diluted			10,000,000				11,057,005				11,057,005

FENBO HOLDINGS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amount in thousands, except for share and per share data, or otherwise noted)
		For the six months ended June 30,
		2023				2024				2024
		HK$’000				HK$’000				US$’000
Operating activities
Net income (loss)			238				(1,901	)			(245	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			241				255				33
Amortization of right to use assets			2,654				2,721				348
Interest on lease liabilities			182				60				8
Loss on disposal of property, plant and equipment			1				-				-
Change in operating assets and liabilities:
Change in accounts receivable			1,539				(14,573	)			(1,866	)
Change in inventories			2,427				(962	)			(123	)
Change in prepaid expenses and other current assets			(809	)			(4,269	)			(547	)
Change in accounts payable			4,792				2,832				363
Change in other payables and accrued liabilities			(1,043	)			(4,233	)			(542	)
Payments on lease			(2,990	)			(3,229	)			(414	)
Net cash provided by (used in) operating activities			7,232				(23,299	)			(2,985	)
Investing activities
Purchase of property, plant and equipment			(50	)			(37	)			(5	)
Net cash used in investing activities			(50	)			(37	)			(5	)
Financing activities
Proceeds from issuance of ordinary shares			-				2,076				266
Advances from related parties			376				693				89
Net cash provided by financing activities			376				2,769				355
Net increase (decrease) in cash			7,558				(20,567	)			(2,635	)
Effect on exchange rate change on cash			(114	)			125				19
Cash as of beginning of the period			13,853				46,342				5,933
Cash as of the end of the period			21,297				25,900				3,317
Supplementary Cash Flows Information
Cash paid for interest			936				304				39
Cash paid for taxes			565				62				8

FAQ

What was Fenbo Holdings' (FEBO) revenue for the first half of fiscal year 2024?

Fenbo Holdings (FEBO) reported revenues of HK$66.9 million for the six months ended June 30, 2024, representing a 14.2% increase from the same period in 2023.

How did Fenbo Holdings' (FEBO) gross profit margin change in the first half of fiscal year 2024?

Fenbo Holdings' (FEBO) gross profit margin improved to 22.3% for the six months ended June 30, 2024, compared to 17.9% for the same period in 2023.

What was Fenbo Holdings' (FEBO) net income or loss for the first half of fiscal year 2024?

Fenbo Holdings (FEBO) reported a net loss of HK$1.9 million for the six months ended June 30, 2024, compared to a net income of HK$0.2 million for the same period in 2023.

How much cash and cash equivalents did Fenbo Holdings (FEBO) have as of June 30, 2024?

Fenbo Holdings (FEBO) reported cash and cash equivalents of HK$25.9 million as of June 30, 2024, representing a 44.1% decrease from HK$46.3 million as of December 31, 2023.