Antelope Enterprise Holdings Limited

Good day and welcome to the Antelope Enterprise Holdings first half 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to David Rudnick with Precept Investor Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, ladies and gentlemen, and good evening to those of you who are joining us from China. Welcome to Antelope Enterprises' first half 2022 earnings conference call. With us today are Antelope Enterprises' Chief Executive Officer, Ms. Mai-Chuan Huang, and its Chief Financial Officer, Mr. Edmund Henn. Working on the call, Ms. Huang, I would like to address four things that may be discussed on the call. Orderly statements involve risks and uncertainties and include, among others, those regarding revenue, operating expenses, other income and expense, taxes, and future business outlook. Actual performance, outcomes, and results may differ materially from those expressed in ordering statements. The company claims to save harbor protections for such ordering statements as contemplated under the Privacy Securities Litigation Reform Act of 1995. Please refer to the documents filed by the company with the SEC. Specifically, the most reasonable portion of Forms 20F and 6K which identify important risk factors that cause actual results to differ from those contained in the forward-looking statements. We assume no obligation to update any forward-looking statements or information which speak of their respective dates. And now it's my pleasure to turn the call over to Antelope Enterprise's CEO, Ms. Mai-Chung Wong, and Antelope Enterprise's CFO, Mr. Edmund Henn. Charlie Jay will be translating for Ms. Wong. Ms. Wong, you may proceed.

Thank you, David.

On behalf of the company, I would like to welcome everyone to our first half 2022 earnings conference call.

Thank you, David. On behalf of the company, I would like to welcome everyone to our first half 2022 earnings conference call.

Our technical business accounted for 88% of our total revenue in the first six months of this year. After 2021, we accounted for 38% of our total revenue in six months. We are happy with this continuous growth because it has confirmed that we have entered the new technical field and at a large level, we have slowed down the traditional real estate business that has suffered losses due to the Chinese real estate industry's continuous slowdown.

For the first half of the fiscal 2022, we continue to execute upon our strategic plan to diversify our business into new technology sectors. Our technology businesses comprise 88% of the total revenue for the first six months of the year, which followed is comprising 38% of the revenue for the second six months of the fiscal 2021. We are pleased with the sequential growth since it confirms our entry into new technology sectors and largely offsets the operating results from our legacy ceramic tile business, which has suffered due to the continued slowdown of the real estate sectors in China.

Our new technology is a market that our company has established in China and which we believe has a strong growth potential. Our new technology subsidiaries are engaged in selected markets in China.

which we believe has strong growth potential. This includes business management, information system consulting, online social commerce and media, and live broadcast streaming in China. We are encouraged by the market opportunities as represented by these new sectors and are optimistic that the strategic transformation of the company is on course.

Due to the challenging conditions for real estate and building materials in China,

In November 2021, we entered into a five-year lease agreement to lease out the Hangzali facility with a family that has been leasing out just a portion of the plant. This decision was consistent with our resolve to pivot towards the new technology growth sector.

We are committed to our strategic plan to transform the company to operate in selected growth technology sectors and are encouraged by the strong contribution from our new businesses to date. In particular,

We believe the online social commerce and live streaming in China will experience the same growth in the years to come.

With that, I would like to turn off the call to the Company's Chief Finance Officer, Mr. Edward Hunt.

who will discuss the company's first half 2022 earnings results in more detail. Thank you.

Thank you, Ms. Huang. I will now move on to a more detailed discussion of our financial results for the six months ending June 30th, 2022. Our revenue for the six months end June 30th, 2022 Was RMB 135 million or U.S. dollar 20.9 million? A 169.3% increase from RMB 50.1 million or U.S. dollar 7.7 million for the same period of 2021. The increase in revenue was due to the generation of RMB 118.2 million or U.S. dollar 18.3 million. in our business management and consulting segment, and which accounted for 87.6% of the company's total revenue in the current period. However, the contribution from our business management and consulting segment was partially offset by RMB $25.5 million or US $3.9 million. Decrease in Suramikao sales, which were RMB 16.7 million or US dollar 2.6 million for the six months end June 30th, 2020. A 16.4% decrease from RMB 42.2 million or US dollar 6.5 million for the same period in 2021. Reproduce it and sell only porcelain towers for the six-month pivot and June 30, 2020, to position our sales efforts on as realistic a basis as possible to address the difficult business conditions attributable to uncertainties in China's real estate market, as well as the continued efforts of the COVID-19 pandemic. The decrease in ceramic tile sales was due to a 65.7% decrease in ceramic tiles sales volume to 0.7 million square meters of ceramic tiles from the year-ago six-month period, which was partially offset by a 15.4% increase in average selling price to RMB 23.8 or US dollar 3.67. Gross loss for the six-month end June 30, 2020 was RMB $404,000, or US$62 million, as compared to a gross loss of RMB $6.5 million, or US$1 million, for the same period of 2021. The planned gross loss margin was 0.3%, as compared to a gross loss margin of 15%. for the same period of 2021, which mostly consisted of ceramic tile segments. During the first half of 2022, we had a gross profit margin of 13.8% for the ceramic tile segment and a gross profit margin of 1.6% for the business management and consulting segment. Other income for the 6th month and June 30, 2022, was RMB 10.4 million, or US dollar, 1.6 million. As compared to RMB 7.2 million, or US dollar, 1.1 million, for the comparable period of 2021. Other income primarily consists of rental income that the company receives by leasing out its painted facilities in the entirety of which include buildings. and all of its production lines. In addition, we received RMB $632,000 in government grants from a local authority for attracting outside the region enterprises to invest it to help develop the local economy, and RMB $807,000 in a past subsidy due to the impact of COVID-19, which occurred via I will hang high non-claim fee subsidiary. Selling and distribution expenses for the six months end of June 30th, 2022 were RMB 6.9 million or US dollar 0.7 million as compared to RMB 3.2 million or US dollar 0.5 million for the comparable period of 2021. Increase in selling and distribution expenses was primarily due to an increase in commission expenses of RMB 1.9 million. Administrative expenses for the six months end June 30, 2022 for RMB 16.5 million or USD 2.5 million as compared to RMB 17.2 million or USD 2.7 million for the same period of 2021. The decrease in administrative expenses was mainly due to a decrease in consultant fees of RMB 4.7 million. The net loss for the six months and the two and a third years 2022 was RMB 25.7 million or US dollar 4 million as compared to a net loss of RMB 7.8 million or US dollar 10.9 million. for the same period of 2021. The decrease in net loss was mainly due to the decrease in bad debt expense. The decrease in gross loss and the increase in our other income as compared to the same period for 2021. The loss per basic share and fully diluted share for the six months and June 30th, 2022 for RMB 4.88 or USD 0.75 as compared to a low per basic and fully diluted share of RMB 16.24 or USD 2.51 for the same period of 2021. Turning to our balance sheet, as of June 30, 2022, we had a cash and bank balances of RMB 15 million or USD 2.2 million as of June 30th, 2022, compared with RMB 27.9 million US dollars, 4.4 million as of December 31st, 2021. As of June 3rd, 2022, our inventory term was 227 days as of June 30th, 2022, as compared to 183 days of December 31, 2021. The increase in inventory turnover was primarily due to the continuous slowdown of real assets and the building materials sector in China during the six-month end of June 30, 2022. We believe that the value of our current inventory is realizable. The trade receivable turnover of our ceramic tile segment net profit value at the time was 329 days as of June 30, 2022, as compared to 168 days as of December 31, 2021. The increase in trade receivables turnover was primarily due to the slow collection of our trade receivables as a result of high cash flow. as reported by our customers due to the COVID-19 pandemic. Trade receivable turnover of our business management and consulting segment was 0.3 days of June 30th, 2022, as compared with 11 days of December 31st, 2021. The decrease in trade receivable turnover from our business management and consulting segment was primarily due to the timely collection of outstanding accounts receivables including payment receipts in advance from our clients. The trade payables however of our ceramic tile segment net of value at the test was 32 days as of June 30th, 2022. as compared to the 20 days as of December 31, 2021. The average turnover days was within the normal credit period of one to four months granted by our suppliers. Trade payable turnover of our business management and consulting segment was five days as of June 30, 2022, as compared to the seven days as of December 31st, 2021. In terms of our plant utilization and capacity, we utilize this plant's capacity capable of producing 0.7 million square meters of ceramic tiles for the six months and through June 30th, 2022, as compared to the comparable 2 million square meters for the same period of 2021. Our reduced utilization during the current period was primarily attributed to the continuous slowdown of the real estate industry in China, which was still being impeded by the continued effects of the COVID-19 pandemic. All of the current period production at Chippewa Depot to our hangar facility, which has a total annual production capacity is 2021. 22.8 million square meters of ceramic tiles. Since the effective November 1st, 2021, we entered into a five-year lease agreement for our handheld lease facilities in its entirety, which includes buildings, funds, and all of its machinery, equipment, and production lines. We revealed the level of capital expenditure throughout the year and next adjustments subject to market conditions. Although business transitions are subject to change, we anticipate a modest level of capital expenditure for the remainder of 2022 other than those associated with minimal upgrades, small repairs, and maintenance of equipment. Moving to our business outlook, during the first six months of 2022, we continued to execute on our strategic plan to transform our business to diversify our operations due to the difficulties of our legacy ceramic tile business, which has suffered due to continuous slowdown of the real estate sector in China. Therefore, beginning in the first half of fiscal year 2022, we entered into a new technology sector and continue to practically ram our effort over the last two years. For the first six months of fiscal 2022, we generated RMB $418.2 million or US dollar $18.3 million in revenue from our new subsidiaries in business management, information system consulting, and included the sales of software used right of digital data storage platform and asset management system, and online social media platforms, including short video, live broadcast, e-commerce platform, development and consulting. This new business accounts for 87.6% of the company's revenue in the first six months of 2022 and enables us to realize 169.3% increase in total revenue for the first six months of 2022, as compared to the same period of 2021. In particular, we expect rapid growth to continue in show-sell e-commerce and broadcast industry in China over the next few years, which is the largest in the world, and that we believe has strong growth potential. Such markets include new formats such as live broadcasting, short video, social e-commerce, enterprise management, and new stream media, where we believe our SaaS and PaaS system platforms have the capacity to capitalize upon these new modalities. We are optimistic as to the market opportunities represented by this new sector. and I encourage the strong contribution to revenue of our new technology business to date. In terms of our ceramic tile segment, for the 6th month and June 30, 2022, its operating results continue to be impacted by the slowdown of China's real estate sector. This is attributable to several factors, including the continued effect of COVID-19 pandemic. China's central government bringing in real estate developers to restrict financial rules due to the factors over-leveraging homebuyer mortgage boycotts on unfinished homes. The contraction in new home building staff overbuilding in some lower tier cities, and continued drop in home prices. Due to this challenging condition, for the six months ending June 30, 2022, we developed a plan to produce and sell only our processing ceramic house, which is our best selling and highest margin ceramic house in order to address the market on as realistic a basis as possible However, the announcement of this plan was not able to surmount the difficult market conditions of the first six months of 2022. The sales of petroleum thermostats and therefore our entire thermostats segment declined 60.4% for the first six months of fiscal 2022 as compared to the year-ago period. Looking forward, we will continue to evaluate any improvement in the market conditions of some real estate sector and development product strategies as needed. The business outlook reflects the company's current and preliminary views and is based on information currently available to us, which are subject to change and subject to risks and uncertainties, as well as risks and uncertainties identified an incumbent as public finance. At this point, we would like to open up the call to any questions pertaining to our first half 2022 financial results. Operator.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We'll pause momentarily to assemble our roster.

And ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one at this time. And ladies and gentlemen, this concludes our question and answer session.

I'd like to turn the conference back over to the management team for any final remarks.

Thank you, Rocco. On behalf of the entire Antelope Enterprise manager team, I want to thank all of you for your interest and participation on the call. This concludes Antelope Enterprise's first half 2022 earnings call. Thank you.

Thank you, ladies and gentlemen. Today's conference has now concluded. You may disconnect your lines and have a wonderful day.