SU Group Holdings Reports First Half Fiscal Year 2024 Results
SU Group Holdings (Nasdaq: SUGP) announced its fiscal results for the first half of 2024, ending March 31.
Key highlights include an 11.7% year-over-year increase in revenue from security guarding and screening services, contributing to a gross profit rise of 4.4%.
Total revenues decreased by 5.4%, mainly due to timing shifts in contract recognition and the absence of a significant non-recurring government contract.
Cash and cash equivalents surged nearly 200% year-over-year, bolstered by the company's IPO in January 2024, providing resources for long-term growth.
Increased expenses in selling, general, and administrative areas were noted, along with a 26.8% drop in other income due to reduced government subsidies.
Despite these challenges, net income remained stable at HK$10.1 million (US$1.3 million).
The company aims to leverage its core platform for accelerated growth and higher-margin opportunities.
- 11.7% YoY increase in revenue from security guarding and screening services.
- Gross profit increased by 4.4%.
- Cash and cash equivalents increased nearly 200% YoY.
- Net income remained stable at HK$10.1 million.
- Total revenue decreased by 5.4%.
- Revenues from project and maintenance decreased 12.4%.
- Revenues from equipment leasing decreased 34.1%.
- Selling, general and administrative expenses increased by 12.7%.
- Other income decreased by 26.8%.
Insights
SU Group Holdings' financial results for the first half of fiscal year 2024 offer a mixed bag for investors. One notable area is the 11.7% increase in revenues from the security guarding and screening services segment. This indicates a robust demand in this sector and validates the company's strategic focus. However, the overall revenue declined by
On the positive side, gross profit increased by 4.4% due to a decrease in the cost of revenues. This boost in gross profit indicates improved operational efficiency and effective cost management. However, the 12.7% increase in SG&A expenses is a concern, primarily because these are attributed to higher professional fees related to the company's public entity status. Investors should watch if these expenses stabilize or continue to rise.
Another strong point is the nearly 200% increase in cash and cash equivalents following the IPO. This gives the company a solid liquidity position and the ability to invest in growth opportunities. However, the net income remained flat year-over-year, suggesting that the company has not yet fully capitalized on its increased revenues and cash position.
The security-related engineering services market is highly competitive, but SU Group's solid performance in the guarding and screening services segment indicates they have carved out a niche for themselves. The 11.7% increase in revenues in this segment reflects strong operational capabilities and a growing market presence. Nevertheless, the overall
The shift in contract timing might not be a long-term issue but highlights the company's vulnerability to cyclical government contracts. The increase in SG&A expenses is another area of concern. If not addressed, these rising costs could erode profitability in the long run. Investors should also consider the company's strategy to expand its portfolio through new strategic partnerships as a potential catalyst for future growth. This could help mitigate the risks associated with revenue concentration in specific segments.
From a technological standpoint, SU Group's focus on enhancing its core business platform to drive accelerated growth is promising. The company's ability to integrate advanced security technologies and improve service efficiency can be a significant competitive advantage. The decreased cost of revenues indicates effective implementation of cost-saving technologies and optimized operational processes.
The 20.7% decrease in losses from the disposal of property and equipment, particularly X-ray machines, suggests effective asset management. This could imply a shift towards more durable, cost-efficient technology solutions, which can have a long-term positive impact on the company's financial health.
Moreover, the company's move to capture increased revenue opportunities in higher-margin segments could be tied to the introduction of innovative security solutions. Implementing cutting-edge technology not only enhances service quality but also opens avenues for premium pricing, thereby boosting margins.
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- Cash and Cash Equivalents Increase Nearly
SU Group's Chairman and CEO, Dave Chan, commented, "Our business fundamentals remain strong, supported by our expanding portfolio of security-related engineering services and a strengthened balance sheet following our successful IPO on Nasdaq in January 2024. On a segment basis, we achieved an
SU Group's Chief Financial Officer, Calvin Kong, noted, "We continue to execute our financial model effectively, with increased revenue from higher-margin segments driving a
"We are in an exciting phase of our company's development, working to leverage our core business platform to drive accelerated growth," added SU Group's Chairman and CEO, Dave Chan. "We will continue to expand our portfolio of security-related engineering services, enhance our position through new strategic partnerships, and capture increased revenue opportunities in our target higher-margin segments. We aim to build upon our advantaged position with customers as we move forward."
Financial Results for the Six Months Ended March 31, 2024
Revenues decreased by approximately
Cost of revenues decreased by
Gross profit increased by
Selling, general and administrative expenses increased by
Losses on disposal of property and equipment decreased by
Other income decreased by
Income tax expenses decreased by
Net income was
The Company had a balance of cash and cash equivalents of
About SU Group Holdings Limited
SU Group (Nasdaq: SUGP) is an integrated security-related services company that primarily provides security-related engineering services, security guarding and screening services, and related vocational training services in Hong Kong. Through its subsidiaries, SU Group has been providing turnkey services to the existing infrastructure or planned development of its customers through the design, supply, installation, and maintenance of security systems for over two decades. The security systems that SU Group provides services include threat detection systems, traffic and pedestrian control systems, and extra-low voltage systems in private and public sectors, including commercial properties, public facilities, and residential properties in
Forward-Looking Statements
Certain statements in this press release are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company's current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "we believe," "we intend," "may," "should," "will," "could" and similar expressions. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company's ability to renew contracts with recurring customers; the Company's ability to secure new contracts; the Company's ability to accurately estimate risks and costs and perform contracts based on the Company's estimates; the Company's relationship with the Company's suppliers and ability to manage quality issues of the systems; the Company's ability to obtain or renew the Company's registrations, licenses, and certificates; the Company's ability to manage the Company's subcontractors; the labor costs and the general condition of the labor market; the Company's ability to effectively manage inventories; the Company's ability to compete effectively; the Company's dependence on a small number of suppliers for a substantial portion of the Company's supplies; the Company's ability to successfully manage the Company's capacity expansion and allocation in response to changing industry and market conditions; implementation of the Company's expansion plans and the Company's ability to obtain capital resources for planned growth; the Company's ability to acquire sufficient products and obtain equipment and services from the Company's suppliers in suitable quantity and quality; the Company's dependence on key personnel; the Company's ability to expand into new businesses, industries, or internationally and to undertake mergers, acquisitions, investments, or divestments; changes in technology and competing products; general economic and political conditions, including those related to the security-related engineering services industry; possible disruptions in commercial activities caused by events such as natural disasters, terrorist activities, political, economic, and social instability, and fluctuations in foreign currency exchange rates, and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission (the "SEC"), including the Company's most recently filed Annual Report on Form 20-F and its subsequent filings. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and other filings with the SEC.
(Financial Tables Follow)
SU GROUP HOLDINGS LIMITED | |||||||||
As of September 30, | As of March 31, | As of March 31, | |||||||
HK$ | HK$ | US$ | |||||||
Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents | 16,400,123 | 47,221,060 | 6,034,100 | ||||||
Trade receivables, net | 34,978,153 | 30,647,497 | 3,916,263 | ||||||
Inventories | 40,919,214 | 44,977,581 | 5,747,420 | ||||||
Prepaid expenses and other current assets | 1,590,259 | 6,645,049 | 849,132 | ||||||
Contract assets | 3,187,403 | 6,176,549 | 789,265 | ||||||
Prepaid income tax | — | 907,025 | 115,903 | ||||||
Total current assets | 97,075,152 | 136,574,761 | 17,452,082 | ||||||
Non-current assets | |||||||||
Property and equipment, net | 8,405,563 | 7,563,170 | 966,453 | ||||||
Intangible assets, net | 144,879 | 102,379 | 13,082 | ||||||
Goodwill | 1,271,160 | 1,271,160 | 162,434 | ||||||
Prepaid expenses and other non-current assets | — | 2,485,909 | 317,660 | ||||||
Deferred offering expenses | 3,853,500 | — | — | ||||||
Operating lease right-of-use assets, net | 1,113,926 | 2,441,475 | 311,982 | ||||||
Investment in key management insurance policy | 1,157,520 | 1,157,520 | 147,913 | ||||||
Deferred tax assets | 1,418,419 | 1,595,125 | 203,832 | ||||||
Total non-current assets | 17,364,967 | 16,616,738 | 2,123,356 | ||||||
TOTAL ASSETS | 114,440,119 | 153,191,499 | 19,575,438 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities | |||||||||
Trade payables | 16,104,581 | 6,826,897 | 872,369 | ||||||
Notes payables | 3,503,768 | 2,738,293 | 349,910 | ||||||
Other payables | 2,633,447 | 3,669,077 | 468,850 | ||||||
Accrued payroll and welfare | 8,228,964 | 7,706,548 | 984,774 | ||||||
Operating lease liabilities – current | 204,156 | 1,012,762 | 129,415 | ||||||
Income tax payable | 1,058,040 | — | — | ||||||
Contract liabilities | 22,748,443 | 37,570,236 | 4,800,879 | ||||||
Total current liabilities | 54,481,399 | 59,523,813 | 7,606,197 | ||||||
Non-current liabilities | |||||||||
Operating lease liabilities – non-current | 61,229 | 591,272 | 75,555 | ||||||
Other payables – non-current | 996,069 | 600,525 | 76,738 | ||||||
Deferred tax liabilities | 1,468,575 | 1,299,223 | 166,020 | ||||||
Other liabilities | 1,008,306 | 590,917 | 75,510 | ||||||
Total non-current liabilities | 3,534,179 | 3,081,937 | 393,823 | ||||||
Total liabilities | 58,015,578 | 62,605,750 | 8,000,020 | ||||||
Commitments and contingencies | |||||||||
Shareholders' equity | |||||||||
Ordinary shares (par value of shares authorized and 12,000,000 and 13,647,500 ordinary shares issued and outstanding as of September 30, 2023 and March 31, 2024, respectively.) | 120,000 | 132,500 | 16,931 | ||||||
Shares subscription receivables | (119,990) | (90) | (12) | ||||||
Additional paid-in capital | 14,642,029 | 39,691,720 | 5,071,971 | ||||||
Retained earnings | 41,782,502 | 50,761,619 | 6,486,528 | ||||||
Total SU Group Holdings Limited shareholders' equity and total shareholders' equity | 56,424,541 | 90,585,749 | 11,575,418 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 114,440,119 | 153,191,499 | 19,575,438 | ||||||
SU GROUP HOLDINGS LIMITED | |||||||||
For the Six Months Ended March 31, | |||||||||
2023 | 2024 | 2024 | |||||||
HK$ | HK$ | US$ | |||||||
Revenues | 97,043,825 | 91,845,615 | 11,736,409 | ||||||
Cost of revenues | (71,545,676) | (65,231,088) | (8,335,496) | ||||||
Gross profit | 25,498,149 | 26,614,527 | 3,400,913 | ||||||
Operating expenses | |||||||||
Selling, general and administrative expenses | (13,835,332) | (15,598,350) | (1,993,221) | ||||||
Losses on disposal of property and equipment | (802,010) | (636,289) | (81,308) | ||||||
Income from operations | 10,860,807 | 10,379,887 | 1,326,384 | ||||||
Other income (expenses) | |||||||||
Other income | 1,053,080 | 771,005 | 98,522 | ||||||
Finance expenses | (36,798) | (50,854) | (6,498) | ||||||
Total other income, net | 1,016,282 | 720,151 | 92,024 | ||||||
Income before income tax expenses | 11,877,089 | 11,100,038 | 1,418,408 | ||||||
Income tax expenses | (1,773,354) | (976,169) | (124,739) | ||||||
Net income | 10,103,735 | 10,123,869 | 1,293,669 | ||||||
Less: Net income attributable to non-controlling interests | (105,775) | — | — | ||||||
Net income attributable to SU Group Holdings Limited's ordinary shareholders | 9,997,960 | 10,123,869 | 1,293,669 | ||||||
Net income per share | |||||||||
Basic and diluted | 0.83 | 0.81 | 0.10 | ||||||
Weighted average number of shares | |||||||||
Basic and diluted | 12,000,000 | 12,464,481 | 12,464,481 | ||||||
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SOURCE SU Group Holdings Limited
FAQ
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