Zhongzheng International Company Limited Issues Profit Warning: Loss Narrows Despite Revenue Decline

Key Highlights from the Latest Financial Announcement

• Significant Reduction in Loss: The Group expects a consolidated loss attributable to owners from continuing operations in the range of HK\$13.5 million to HK\$14.5 million for the six months ended 31 December 2025 (HY2025/26), a marked improvement from the HK\$36.9 million loss recorded during the corresponding period in the previous year (HY2024/25).
• Revenue Decline: Total revenue fell sharply by approximately 35.3%, dropping from HK\$64.0 million (HY2024/25) to HK\$41.4 million (HY2025/26). This was mainly due to a significant reduction in revenue from the healthcare and household business segment, which decreased from HK\$62.6 million to HK\$41.2 million over the same period.
• Gross Profit Impacted: Gross profit for HY2025/26 amounted to HK\$10.4 million, down from HK\$16.3 million in HY2024/25, reflecting the impact of the revenue decrease.

Details and Factors Affecting the Results

• Absence of Impairment Losses: Unlike HY2024/25, which saw impairment losses on other receivables (HK\$16.1 million) and loan and interest receivables (HK\$2.6 million), HY2025/26 did not record such losses. The absence of these non-cash charges was a key factor in narrowing the loss.
• Debt Capitalisation Gain: The Group recognised a gain of approximately HK\$9.6 million from the capitalisation of shareholder loans owed to two substantial shareholders. This non-cash gain further contributed to reducing the overall loss for the period. Details of this transaction were previously disclosed in the Company’s circular dated 19 June 2025.

Shareholder-Focused, Price-Sensitive Information

• Share Price Sensitivity:
  • The significant narrowing of losses, despite a steep revenue and gross profit decline, is primarily due to the absence of one-off impairment losses and the recognition of a gain on debt capitalisation.
  • Investors should note that the revenue decline—especially in the core healthcare and household business segment—remains a negative factor, potentially indicating ongoing challenges in the Group’s operations.
  • The profit warning, while indicating an improved bottom line, also discloses that the loss reduction is not from operational improvement, but from accounting gains and elimination of impairment charges. This distinction is crucial for assessing the sustainability of the improvement.
• Upcoming Disclosure: The unaudited interim results for HY2025/26 will be published on 27 February 2026. Investors are advised to review the full results for more comprehensive details.
• Board Composition: As of the announcement date, the Board comprises two executive directors, one non-executive director, and four independent non-executive directors, highlighting a diverse governance structure.
• Caution Advised: The Company has explicitly advised shareholders and potential investors to exercise caution when dealing in its shares, acknowledging the uncertainties and potential impact on share value.

Conclusion

Zhongzheng International Company Limited has issued a profit warning indicating a substantial reduction in losses for the six months ended 31 December 2025. This improvement is driven by the absence of impairment losses and a gain on debt capitalisation, rather than operational recovery, as revenue and gross profit have both declined significantly. The upcoming release of the interim results will provide further insight into the Group’s performance and outlook.

Investors are strongly encouraged to remain cautious and closely monitor the Company’s disclosures, as the underlying operational challenges and the nature of loss reduction could have ongoing implications for the share price.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisers before making investment decisions. The author and publisher accept no liability for any loss arising from reliance on the information contained herein.

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