Interim report for the six months ended 30 september 2024

(incorporated in Cayman Islands with limited liability)

(Stock code: 8331)

2024

INTERIM REPORT

CONTENTS

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MANAGEMENT DISCUSSION AND ANALYSIS

The board of Directors (the "Board") of the Company hereby presents the unaudited condensed consolidated financial information of the Group for the six months ended 30 September 2024 (the "Reporting Period") together with the comparative figures for the corresponding period in 2023.

BUSINESS REVIEW

Bentonite Mining

China's economy has continued to grow in the second and third quarters of 2024, although the growth rate has slowed. Overall, the economy remains relatively healthy. In response to new economic challenges, the government has implemented timely macroeconomic control measures, which appear to be gradually taking effect. However, global market volatility has also impacted China's macroeconomy, particularly in commodities. During this Reporting Period, underlying factors have remained stable, with supply exceeding demand. As a result, revenue from our bentonite product has seen a slight decline, dropping from approximately CNY20.5 million for the six months ended 30 September 2023 to approximately CNY19.6 million for the Reporting Period, and our profit margin has decreased from approximately 36.3% to approximately 31.8% compared to the same period in 2023.

Financial Services

Apart from the production and sale of bentonite products in the People's Republic of China (the "PRC"), the Group has also carried out its business on financial services in Hong Kong through its wholly-owned subsidiaries - P.B. Nikyo Wealth Management Limited ("P.B. Nikyo") and P.B. Credit Limited ("P.B. Credit") as well as generating financial guarantee fee income through Wuhu Feishang Non-metal Material Co., Limited*（蕪湖飛尚非金屬材料有限公司）("Wuhu Subsidiary"), a wholly-owned subsidiary of the Company in the PRC. The financial services of the Group include the wealth management services, money lending business and financial guarantee services.

P.B. Nikyo is a company incorporated in Hong Kong with limited liability and is a licensed insurance intermediary under the Insurance Ordinance (Cap. 41 of the Laws of Hong Kong). It is also registered as an MPF Corporate Intermediary with the Mandatory Provident Fund Schemes Authority in accordance with the Mandatory Provident Fund Intermediary Certificate issued by the Mandatory Provident Fund Schemes Authority. P.B. Credit is a company incorporated in Hong Kong with limited liability and has been carried on business as a money lender under the Money Lenders Ordinance.

• For identification purpose only

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Wealth Management Services

The insurance brokerage business in Hong Kong is poised for continued growth in 2024, driven by a combination of increasing premiums, evolving consumer preferences, and regulatory changes. The overall insurance market is expected to expand, reflecting both the resilience of the sector and the changing dynamics within it. In the first half of 2024, Hong Kong's insurance industry reported a 5.1% year-on-year increase in total gross premiums, reaching approximately HK$310.9 billion compared to the same period in 2023. This growth was primarily fueled by the long-term insurance sector, particularly individual life and annuity products, which saw a notable 6.9% increase in premiums. The long-term business segment recorded total premiums of approximately HK$273 billion, with individual life and annuity (non- linked) products leading the charge. However, linked policies experienced a decline of 16%, indicating a shift in consumer preference towards more stable investment options. The general insurance sector also showed resilience, with gross premiums reaching about HK$37.9 billion. Notably, the accident and health insurance segment surged by 12.5%, driven by increased demand for group medical and travel insurance. In conclusion, while the outlook for the insurance brokerage business in Hong Kong for 2024 appears optimistic due to robust premium growth and evolving consumer preferences, the Group will remain vigilant regarding regulatory compliance and market competition to fully capitalize on emerging opportunities.

For the six months ended 30 September 2024, our Group's wealth management and insurance brokerage services demonstrated significant growth and resilience despite market fluctuations. The value of new business increased from approximately HK$1.4 million for the six months ended 30 September 2023 to approximately HK$2.7 million for the Reporting Period, marking a substantial growth of approximately 99.0%. This increase reflects our enhanced marketing strategies. The persistency rate of insurance policies improved from approximately 98.4% for the six months ended 30 September 2023 to approximately 99.9% for the Reporting Period. The persistency rate was also maintained at a high level which indicated a high level of customer satisfaction and trust in our services. The number of agents decreased from 53 to 46. Despite this reduction, our strategic focus on productivity and efficiency has ensured that service levels and client satisfaction remain high.

Key performance indicator of wealth management services

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Note 1:

The value of new business is defined as the annualised first year commission, which is the basic commission paid to agency force, generated from the insurance policy issued during the financial year.

Money Lending Business

The money lending market in Hong Kong faces multiple challenges and opportunities in 2024, influenced by factors such as interest rate changes, the pace of economic recovery, and market demand from small and medium-sized enterprises (SMEs). Lending demand in Hong Kong is influenced by various factors, including consumer confidence and business investment willingness. As per press release of reputable credit agency in September 2024, while inquiries for personal loans increased by 1% in the first quarter of 2024, the actual loan issuance volume decreased by 4.9%. As per the Half-Yearly Monetary and Financial Stability Report (September 2024) issued by Hong Kong Monetary Authority, the first half of 2024 saw a modest decline in total loans and advances from authorized institutions (the "AIs") by 1.9% on a half-yearly basis, continuing a trend from previous periods due to subdued credit demand amid high interest rates. For the delinquency rates, the gross classified loan ratio for the AIs rose to 1.89% at the end of June 2024 from 1.57% at the end of 2023, signaling potential increases in defaults. This indicates that despite existing market demand, lending institutions have become more cautious in their assessments of new customers due to rising credit risks. Looking ahead to 2024, Hong Kong's lending market will continue to be influenced by global economic conditions, interest rate changes, and the economic recovery situation in mainland China. The Group needs to closely monitor these factors to adjust our credit strategies and maintain stable business growth.

The loan interest income decreased from approximately CNY1.0 million for the six months ended 30 September 2023 to approximately CNY0.8 million during the Reporting Period. The decrease was due to the cautious money lending strategy resulted in lower amount of loan being approved and granted. As at 30 September 2024, a total principal amount and accrued interest of approximately decreased to CNY12.2 million (31 March 2024: approximately CNY14.2 million).

Financial Guarantee Services

The Group generated guarantee service fee income through Wuhu Subsidiary, a wholly-owned subsidiary of the Company in the PRC. Wuhu Subsidiary has been providing financial guarantee services to a borrower since 2018. The guarantee service fee income was approximately CNY566,000 during the Reporting Period (six months ended 30 September 2023: approximately CNY566,000).

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Property Investment

The Group holds the property for investment purpose and has leased out the property for generating stable rental income and gaining from long-term capital appreciation. The rental income derived from the investment property is approximately CNY47,000 during the Reporting Period (six months ended 30 September 2023: approximately CNY45,000).

Mine Property Summary

The Group holds the mining rights to Huanghu Bentonite Mine. The following table sets out certain information of the mine and details of the mining licence.

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Notes:

1. The reserve data as of 31 December 2020 is extracted from the independent technical report dated 29 March 2021 (the "SRK report") prepared by SRK Consulting (Hong Kong) Limited under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy.
2. The reserve data as of 30 September 2024 has been substantiated by the Group's internal expert by adjusting those reserve extracted by the Group's mining activities from January 2021 to September 2024 from the proved reserve figure as of 31 December 2020. All assumptions and technical parameters set out in the SRK report have not been materially changed and are continued to apply to the reserve data as of 30 September 2024.
3. There is no exploration activity carried out by the Group during the Reporting Period.

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FINANCIAL REVIEW

Revenue

Breakdown of the Group's Revenue

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