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Form 425 Iron Spark I Inc. Filed by: Hypebeast Ltd

June 30, 2022 6:08 AM EDT

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Filed by Hypebeast Limited

pursuant to Rule 425 under the Securities Act of 1933,

as amended, and deemed filed pursuant to Rule 14a-12 

under the Securities Exchange Act of 1934,

as amended

Subject Company: Iron Spark I Inc. (SEC File No.: 001-40467)

Date: June 29, 2022

 

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

 

 

Hypebeast Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00150)

 

ANNUAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 MARCH 2022

 

ANNUAL RESULTS

 

The board (the “Board”) of directors (the “Directors”) of Hypebeast Limited (the “Company”) is pleased to present the audited consolidated annual results of the Company and its subsidiaries (collectively, the “Group”) for the year ended 31 March 2022 (“FY2022”), together with the audited comparative figures for the year ended 31 March 2021 (“FY2021”), as follows:

 

FINANCIAL HIGHLIGHTS  

 

   FY2022
HK$’000
   FY2021
HK$’000
 
Revenue   895,632    674,212 
– Media   653,590    447,379 
– E-commerce and Retail   242,042    226,833 
Gross profit   549,313    334,127 
Gross profit margin   61.3%   49.6%
Selling and marketing expenses   (160,391)   (112,791)
Administration and operating expenses   (202,650)   (125,005)
Professional fee related to the Merger   (30,185)    
EBITDA*   174,252    122,596 
Net profit   100,167    70,584 
Net profit margin   11.2%   10.5%
Earnings per share          
–Basic (HK cent)   4.88    3.47 
–Diluted (HK cent)   4.87    3.45 

 

*Earnings before interest, tax, depreciation and amortization (“EBITDA”) is calculated as profit before tax + interest expense + depreciation + amortization expense

 

– 1 –

 

 

The Board does not recommend the payment of a final dividend for FY2022.

 

KEY BUSINESS HIGHLIGHTS

 

The Group recorded strong revenue growth in FY2022 and reported another all-time high in revenue and profitability. Revenue amounted to HK$895.6 million in FY2022, up from HK$674.2 million in FY2021, representing an increase of HK$221.4 million or 32.8%. Gross profit margin rose by 11.7 percentage points from 49.6% in FY2021 to 61.3% in FY2022;

 

The Group delivered net profit of HK$100.2 million for FY2022, a 41.9% increase compared to FY2021. The increase translated to an improvement of net profit margin by 0.7 percentage points, resulting in an increase from 10.5% in FY2021 to 11.2% in FY2022;

 

Demand for the Group’s media and agency services remained strong, with total value in signed contracts for the Media Segment having increased by 31.7% during FY2022 as compared to the prior year; and

 

12-month average website monthly unique visitors (number of user who requests webpages across Hypebeast, Hypebae and Popbee platforms in a month) amounted to 16.4 million, representing a 5.1% increase over FY2021, and aggregated social media following (total number of followers on all third-party social media platforms, including but not limited to Facebook, Instagram, Twitter) increased from 26.1 million as at 31 March 2021 to 32.4 million as at 31 March 2022.

 

BUSINESS OVERVIEW

 

The Group is a media and e-commerce company primarily engaged in (i) the provision of creative advertising services and advertising spaces for global brands (the “Media Segment”); and (ii) the sale of goods through its online and offline retail platform (the “E-commerce and Retail Segment”).

 

– 2 –

 

 

The Group produces and distributes youth-focused digital content centering on fashion, lifestyle, technology, arts & entertainment, culture and music to its visitors and followers. Digital content is distributed via the Group’s media platforms (including its Hypebeast, Hypebae and Popbee websites and mobile apps) and popular third-party social media platforms, including but not limited to Facebook, Instagram, Twitter, TikTok, Youtube, Wechat, Weibo, Kakao and Naver. The Group also maintains multi-language versions of its flagship Hypebeast property across both website and social media platforms, with content available in English, Chinese, Japanese, Korean and Indonesian. The Group delivers bespoke creative solutions through its agency business to its brand clients, with services including but not limited to creative conceptualization, talent curation, technical production, campaign execution, data intelligence and distribution of digital media advertisement via the Group’s digital media platforms.

 

The Group engages in retail of footwear, apparel, accessories, homeware and lifestyle goods under its HBX E-commerce platform and retail shop. The HBX E-commerce platform focuses on delivering the latest, trend-setting apparel, accessories and lifestyle products to its customers, curating and creating fashion-forward pieces and collaborations to include in its merchandise portfolio. Combining the Group’s unique insight into youth culture, and its longstanding reputation in the industry as a community and cultural leader, the Group is able to source and curate products most desired by its target demographic, thereby generating growing popularity and usage amongst shoppers.

 

BUSINESS PROSPECT AND FUTURE DEVELOPMENTS

 

As COVID-19 pandemic’s intensity wanes and pandemic-related restrictions continue to ease, the Group’s events production and offline partnerships under the Media Segment have surpassed pre-COVID-19 and FY2019 levels. The Group noted increasing demand for offline campaigns and activations as global marketing spend continues to expand;

 

COVID-19 pandemic accelerated the digitalization of advertising as global brands shift marketing dollars from traditional marketing channels to digital channels; the Group forecasts a positive effect on the Media Segment going forward with an increase in the number and size of media contracts;

 

The Group aims to attract and reach a wider user-customer base through its development of new editorial properties, such as Hypegolf (focusing on golf and lifestyle), Hypeart (focusing on art and artists) and HYPEMOON (focusing on Web 3.0 projects and technologies). The Group continues to explore similar opportunities by establishing various offline channels and touchpoints in order to drive the Group’s brand awareness and increase engagement with new and existing users and customers;

 

The Group’s HYPEBEAST building in New York City in the United States of America (the “US”) opened on 17 June 2022 in Chinatown, Manhattan. Our flagship location hosts the Group’s US East Coast office, as well as an HBX’s retail store, a Hypebeans café and multifunctional spaces to host cultural activations, events and Media Segment sales campaigns;

 

– 3 –

 

 

In FY2022, the Group priority remains to monetizing its wide-reaching and ever- growing follower base by encouraging user conversion through the integration of its E-commerce and Retail Segment services directly with the compelling and engaging content produced from the Group’s media platforms. The Group continued to make enhancements and investments on the HBX’s platform and various back-end platforms to enhance the user journey with the ultimate aim to allow our loyal community of readers to enjoy a seamless shopping experience on an integrated site and mobile app; and

 

The Group is and continues to be geographically and strategically well-positioned to capture significant growth opportunities in both its Media and E-commerce and Retail Segments in its key operating regions, through leveraging the Group’s brand popularity and high-profile networks, particularly, in the US, United Kingdom, China, South Korea, Japan and Southeast Asia.

 

BUSINESS AND FINANCIAL REVIEW

 

The Group ended the financial year on a high note as the Group achieved new records for revenue and gross profit.

 

  

FY2022

HK$’000

   FY2021
HK$’000
   % Change 
Revenue   895,632    674,212    32.8%
Gross Profit   549,313    334,127    64.4%
Adjusted EBITDA (Note)   204,437    122,596    66.8%

 

Note: Adjusted EBITDA refers to EBITDA for the year excluding the one-off professional fee related to the Merger.

 

Revenue experienced an overall strong double-digit percentage growth in FY2022 compared to FY2021, with an increase of HK$221.4 million, or 32.8%, to HK$895.6 million. Media Segment recorded an increase in revenue of 46.1% to HK$653.6 million, while revenue from E-commerce and Retail Segment increased by 6.7% to HK$242.0 million as compared to FY2021.

 

Gross profit amounted to HK$549.3 million in FY2022, representing an increase of HK$215.2 million, or 64.4%, as compared to FY2021, resulting in a notable improvement in gross profit margin which increased by 11.7 percentage points to 61.3%.

 

Adjusted EBITDA amounted to HK$204.4 million in FY2022, representing an increase of HK$81.8 million, or 66.8%, as compared to FY2021, resulting in an increase in adjusted EBITDA margin of 4.6 percentage points from 18.2% to 22.8%.

 

– 4 –

 

 

Selling and marketing expenses of the Group increased by 42.2% from HK$112.8 million in FY2021 to HK$160.4 million in FY2022 and, correspondingly as a percentage of revenue, slightly increased from 16.7% in FY2021 to 17.9% in FY2022. The Group’s recovery from the COVID-19 pandemic led to increases in revenue followed by increase in (i) the new headcounts within the Group’s sales and marketing team to drive current and future revenue and business growth; and (ii) spending in the Group’s social media marketing and advertising for digital and e-commerce platforms.

 

Administrative and operating expenses of the Group increased by 62.1% from HK$125.0 million in FY2021 to HK$202.7 million in FY2022 and correspondingly as a percentage of revenue, increased from 18.5% in FY2021 to 22.6% in FY2022. The overall increase was mainly led by (i) staff costs in support of headcount additions to meet increasing demand; and (ii) weaker comparatives in FY2021 due to the government subsidies received and other management led cost-savings measures employed.

 

In April 2022, the Company entered into an agreement and plan of merger (the “Merger”) (the “Merger Agreement”) with Iron Spark I Inc. (the “Iron Spark”). Upon completion of the Merger, the Company will, in addition to remaining as a company listed on the Stock Exchange, become the resulting US-listed company and qualify as a foreign private issuer with its Consolidated Shares listed for trading on Nasdaq. Accordingly, there was approximately HK$30.2 million of one-time legal and professional fees paid for the Merger recorded for the year while no such cost was recognized for FY2021.

 

For the purpose of impairment assessment for amount due from a joint venture, exposure to credit risk for this balance is assessed individually with lifetime expected credit loss. The balance is considered as credit-impaired as there is no realistic prospect of recovery after assessing the recent financial information of the joint venture. Impairment losses under expected credit loss model of HK$8.7 million on amount due from a joint venture was provided by the Group in FY2022.

 

The Group maintained its efforts on the collection of trade receivables and the sell- through of inventories throughout FY2022, which led to the overall health of the treasury position and working capital as of year end.

 

   FY2022   FY2021 
   HK$’000   HK$’000 
Extracts of cash flow        
Net cash from operating activities   158,568    195,715 
Net cash used in investing activities   (70,110)   (12,264)
Net cash used in financing activities   (15,746)   (43,027)
           
Net increase in cash and cash equivalents   72,712    140,424 
           
Cash and cash equivalents at beginning of the year   209,575    67,251 
           
Effect of foreign exchange rate changes   1,982    1,900 
           
Cash and cash equivalents at end of the year, representing bank balances and cash   284,269    209,575 

 

– 5 –

 

 

Media Segment

 

The Media Segment emerged strongly in FY2022.  

 

   FY2022   FY2021 
   HK$’000   HK$’000 
Revenue   653,590    447,379 
Gross Profit   450,916    245,059 

 

– 6 –

 

 

The Media Segment experienced robust strength in the year with revenue increased by HK$206.2 million to HK$653.6 million in FY2022, representing a significant rise of 46.1% from HK$447.4 million in FY2021. The Group is and continues to be well-positioned to capture significant growth opportunities in the Media Segment as indicated by record high total signed contract value (a key operating measure defined as the total dollar value of media contracts signed within a period) and number of signed contracts (a key operating measure defined as the total number of signed media contracts within a period) which represented an increase of 31.7% and 32.1% respectively as compared to FY2021.

 

The Group is and continues to be geographically and strategically well-positioned to capture significant growth opportunities in its key operating regions, through leveraging the Group’s brand popularity and high-profile networks, particularly, in the US, United Kingdom, China, South Korea, Japan and Southeast Asia. The Group recorded strong growth in both North America and EMEA regions, with media revenue increased by 94.6% in US, 84.7% in Italy and 102.0% in United Kingdom.

 

The Group effectively adjusted its production strategies so as to adapt to the COVID-19 pandemic environment. Campaign productions were more streamlined and cost-optimized and such adjustments resulted in a significant improvement in profitability. As a result, campaign production costs incurred during the year impacted by the COVID-19 pandemic were lower than expected, leading to adjustments in the provision for campaign costs. Gross profit of the Media Segment soared in FY2022 and reached a record high of HK$450.9 million, representing an increase of HK$205.9 million, or 84.0%, versus FY2021. The Group recorded a notable rise in gross profit margin of the Media Segment in FY2022, an increase of 14.2 percentage points to 69.0% in FY2022 from 54.8% in FY2021.

 

As the pandemic appears to ease and pandemic-related restrictions begin to be lifted, the Group’s physical campaign productions are expected to resume at nearly full capacity. The Group anticipates a boost in the scale and quantity of production-related campaigns and physical activations.

 

E-commerce and Retail Segment

 

Revenue from the E-commerce and Retail Segment increased from HK$226.8 million in FY2021 to HK$242.0 million in FY2022, or an increase of 6.7%. Gross profit of the E-commerce and Retail Segment amounted to HK$98.4 million in FY2022, representing an increase of HK$9.3 million, or 10.5%, as compared to FY2021. Such increases were mainly driven by the increase in proportion of full price items.

 

– 7 –

 

 

The Group continues to improve and refine its product offerings on HBX.com. The average retail price of products sold (an operating measure defined as the total retail price of products sold divided by the number of products sold within a period) improved from approximately HK$1,050 in FY2021 to approximately HK$1,080 in FY2022, whilst the average order value (an operating measure defined as revenue from the E-commerce and Retail Segment divided by the number of orders within a period) improved by 3.4% from approximately HK$1,929 in FY2021 to HK$1,995 in FY2022. Such increases are indicative of the customers’ focus on value over price and their willingness to spend on a widening range of HBX’s curated and high quality products.

 

The HBX physical retail shop located in Central, Hong Kong remains a strong marketing window and attraction point for customers to participate in the Hypebeast ecosystem in offline. In addition, the Group’s US flagship store opened in June 2022 (subsequent to the reporting financial year), spanning seven floors housing the US East Coast office, the US New York HBX flagship store, a Hypebeans café as well as event spaces. The New York flagship store will support execution and accelerate growth of our strong North American customer base and serve as a focused point of marketing for the E-commerce and Retail Segment.

 

HBX continues to strive to be one of the most curated online destinations for cultural enthusiasts, and the Group’s product offerings expanded into homeware, toys, and other lifestyle products to positive reception from customers.

 

Non-IFRS Measures and Their Adjustment

 

To supplement our consolidated financial statements, which are presented in accordance with the IFRS, we also adopted certain non-IFRS measures such as EBITDA, adjusted EBITDA and adjusted profit for the year as additional financial measures, which is not required by, or presented in accordance with, the IFRS. We believe that such non-IFRS measures facilitate comparisons of operating performance from period to period and company to company by eliminating potential impacts of, for example, one-off professional fee related to the Merger that our management do not consider to be indicative of our operating performance. The Group believes these adjusted measures provide useful information to shareholders and potential investors in understanding and evaluating the Group’s consolidated operating results in the same manner as the Group’s management.

 

The following table sets forth the reconciliation from profit before tax to EBITDA for the years indicated:

 

 

   FY2022
HK$’000
   FY2021
HK$’000
 
   (Audited)   (Audited) 
Profit Before Tax   142,050    93,091 
Add:           
Interest Expense   4,588    1,622 
Depreciation Expense   27,503    27,778 
Amortization Expense   111    105 
EBITDA   174,252    122,596 

 

– 8 –

 

 

The following table sets forth the reconciliation between profit for the year to adjusted profit for the year and EBITDA to adjusted EBITDA for the years indicated:

 

   FY2022 HK$’000   FY2021
HK$’000
 
Profit for the Year   100,167    70,584 
Add:          
One-off Professional Fee related to the Merger   30,185     
Adjusted Profit for the Year   130,352    70,584 

 

   FY2022 HK$’000   FY2021
HK$’000
 
EBITDA   174,252    122,596 
Add:          
One-off Professional Fee related to the Merger   30,185     
Adjusted EBITDA   204,437    122,596 

 

Adjusted profit for the year increased by 84.7% from HK$70.6 million in FY2021 to HK$130.4 million in FY2022, whilst adjusted EBITDA increased by 66.8% from HK$122.6 million in FY2021 to HK$204.4 million in FY2022. Such increases were mainly attributable to increase in revenue from both Media and E-commerce and Retail Segments and production cost savings for FY2022 as discussed above.

 

– 9 –

 

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 March 2022  

 

    NOTES   2022
HK$’000
    2021
HK$’000
 
Revenue   3     895,632       674,212  
Cost of revenue         (346,319 )     (340,085 )
                     
Gross profit         549,313       334,127  
Other income, other gains and losses         4,880       3,177  
Selling and marketing expenses         (160,391 )     (112,791 )
Administrative and operating expenses         (202,650 )     (125,005 )
Professional fee related to the Merger         (30,185 )      
Impairment losses under expected credit losses model, net of reversal         (11,681 )     (4,795 )
Impairment loss recognised on intangible assets         (2,648 )      
Finance costs         (4,588 )     (1,622 )
                     
Profit before tax         142,050       93,091  
Income tax expense   5     (41,883 )     (22,507 )
                     
Profit for the year   6     100,167       70,584  
Other comprehensive income                    
Item that may be reclassified subsequently to profit or loss:                    
Exchange differences arising on translation of foreign operations         2,878       3,934  
                     
Total comprehensive income for the year         103,045       74,518  
                     
Earnings per share   8            
– Basic (HK cent)         4.88       3.47  
                     
–Diluted (HK cent)         4.87       3.45  

 

– 10 –

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 March 2022

 

  

NOTES

 

31/3/2022

HK$’000

   31/3/2021
HK$’000
   1/4/2020
HK$’000
 
Non-current assets                  
Property, plant and equipment      52,701    22,590    12,238 
Intangible assets      11,767    962    988 
Right-of-use assets  9   70,013    78,951    46,254 
Rental and other deposits
  10   7,622    7,465    5,298 
Interest in a joint venture               
Financial assets at fair value through profit or loss (“FVTPL”)      24,258    1,647     
Amount due from a joint venture          9,101    11,870 
Deferred tax assets      1,022    479     
       167,383    121,195    76,648 
Current assets                  

Inventories

      69,702    42,389    71,408 
Trade and other receivables  10   183,018    196,942    221,400 
Tax prepayments      10,510         
Contract assets  11   5,154    1,484    1,855 
Pledged bank deposits      10,000    10,000    15,603 
Bank balances and cash      284,269    209,575    67,251 
       562,653    460,390    377,517 
Current liabilities                  

Trade and other payables

 

12

   145,708    117,886    88,894 
Contract liabilities  13   11,602    9,020    4,429 
Derivative financial instruments      620         
Bank borrowings – due within one year      7,363    5,996    32,836 
Lease liabilities  14   15,919    15,763    15,862 
Tax payables      12,879    5,661    5,976 
       194,091    154,326    147,997 

Net current assets

      368,562    306,064    229,520 

Total assets less current liabilities

      535,945    427,259    306,168 

 

– 11 –

 

 

   NOTES  31/3/2022 HK$’000   31/3/2021 HK$’000   1/4/2020
HK$’000
 
Non-current liabilities                  
Lease liabilities  14   58,029    66,016    30,899 
Deferred tax liabilities              74 
       58,029    66,016    30,973 

Net assets

      477,916    361,243    275,195 
Capital and reserves                  

Share capital

 

15

   20,536    20,459    20,231 
Reserves      457,380    340,784    254,964 
       477,916    361,243    275,195 

 

– 12 –

 

 

NOTES:

 

1.GENERAL

 

The Company was incorporated in the Cayman Islands as an exempted company and registered in the Cayman Islands with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands on 25 September 2015. The Company’s shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

 

Its registered office is located at Second Floor, Century Yard, Cricket Square, P.O. Box 902, Grand Cayman, KY1-1103, Cayman Islands. The address of its principal place of business is 10/F, KC100, 100 Kwai Cheong Road, Kwai Chung, Hong Kong and was subsequently changed to 40/F, Cable TV Tower, No. 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong with effect from 1 February 2022.

 

The Company is an investment holding company and its subsidiaries and variable interest entity (the “VIE”) (hereinafter together with the Company collectively referred to as the “Group”) are principally engaged in the provision of advertising spaces services, provision of services for creative agency projects, publication of magazines and operation of online and offline retail platform. Its parent and ultimate holding company is CORE Capital Group Limited, a private company incorporated in the British Virgin Islands. Its ultimate controlling party is Mr. Ma Pak Wing Kevin (“Mr. Ma”).

 

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which are the same as the functional currency of the Company.

 

2.

APPLICATION OF NEW AND AMENDMENTS TO IFRSs

 

First-time adoption of IFRSs and restatement

 

Prior to 1 April 2021, the Company prepared its financial statements in accordance with the Hong Kong Financial Reporting Standards (the “HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). In the current year, the Company has applied, for the first time, the IFRSs, in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards with a date of transition to IFRSs on 1 April 2021. Accordingly, the Company has prepared its financial statements which comply with IFRSs which are effective for annual accounting periods beginning on 1 April 2021 for each comparative period presented.

 

The first-time adoption of IFRSs and the transition from HKFRSs to IFRSs did not have any other significant effect on the Company’s financial performance, financial position and cash flows for the prior periods set out in the consolidated financial statements as of the date of transition and for the current year.

 

– 13 –

 

 

Amendments to IFRSs that are mandatorily effective for the current year

 

In the current year, the Company has applied the following amendments to IFRSs for the first time, which are mandatorily effective for the annual periods beginning on or after 1 January 2021 for the preparation of the consolidated financial statements:

 

Amendment to IFRS 16 Covid-19-Related Rent Concessions
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2

 

In addition, the Group applied the agenda decision of the IFRS Interpretations Committee (the “Committee”) of the International Accounting Standards Board issued in June 2021 which clarified the costs an entity should include as “estimated costs necessary to make the sale” when determining the net realisable value of inventories.

 

Except as described below, the application of the amendments to IFRSs in the current year has had no material impact on the Group’s financial positions and performance for the current and prior years and/ or on the disclosures set out in these consolidated financial statements.

 

2.1Impacts on application of the agenda decision of the Committee — Cost necessary to sell inventories (IAS2 Inventories)

 

In June 2021, the Committee, through its agenda decision, clarified the costs an entity should include as "estimated costs necessary to make the sale" when determining the net realisable value of inventories. In particular, whether such costs should be limited to those that are incremental to the sale. The Committee concluded that the estimated costs necessary to make the sale should not be limited to those that are incremental but should also include costs that an entity must incur to sell its inventories including those that are not incremental to a particular sale.

 

The Group's accounting policy prior to the Committee's agenda decision was to determine the net realisable value of inventories taking into consideration incremental costs only. Upon application of the Committee's agenda decision, the Group changed its accounting policy to determine the net realisable value of inventories taking into consideration both incremental costs and other cost necessary to sell inventories. The new accounting policy has been applied retrospectively. The application of the Committee's agenda decision has had no material impact on the Group's financial positions and performance.

 

2.2Impacts on application of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform — Phase 2

 

The Group has applied the amendments for the first time in the current year. The amendments relate to changes in the basis for determining the contractual cash flows of financial assets, financial liabilities and lease liabilities as a result of interest rate benchmark reform, specific hedge accounting requirements and the related disclosure requirements applying IFRS 7 Financial Instruments: Disclosures (“IFRS 7”).

 

– 14 –

 

 

As at 1 April 2021, the Group has one bank borrowing, the interests of which is indexed to benchmark rate that will or may be subject to interest rate benchmark reform. The carrying amount of the bank borrowing is as follow:

 

HKD

Hong Kong

Interbank

Offered Rate

(“HIBOR”)

HK$'000

 

Bank borrowing 610

 

The amendments have had no impact on the consolidated financial statements as the Group had confirmed with the relevant counterparty that HIBOR will continue to maturity.

 

New and amendments to IFRSs in issue but not yet effective

 

The Group has not early applied the following new and amendments to IFRSs standards that have been issued but are not yet effective:

 

IFRS 17 Insurance Contracts and the related Amendments2
Amendments to IFRS 3 Reference to the Conceptual Framework1
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies2
Amendments to IAS 8 Definition of Accounting Estimates2
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction2
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use1
Amendments to IAS 37 Onerous Contracts — Cost of Fulfilling a Contract1
Amendments to IFRS Standards Annual Improvements to IFRS Standards 2018–20201

 

1Effective for annual periods beginning on or after 1 January 2022
2Effective for annual periods beginning on or after 1 January 2023
3Effective for annual periods beginning on or after a date to be determined

 

Except for the amendments to IFRSs mentioned below, the directors of the Company (the “Directors”) anticipate that the application of all other new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

 

– 15 –

 

 

Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction

 

The amendments narrow the scope of the recognition exemption of deferred tax liabilities and deferred tax assets in paragraphs 15 and 24 of IAS 12 Income Taxes so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.

 

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies IAS 12 requirements to the relevant assets and liabilities as a whole. Temporary differences relating to relevant assets and liabilities are assessed on a net basis.

 

Upon the application of the amendments, the Group will recognize a deferred tax asset (to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized) and a deferred tax liability for all deductible and taxable temporary differences associated with the right-of-use assets and the lease liabilities.

 

The amendments are effective for annual reporting periods beginning on or after 1 April 2023, with early application permitted. As at 31 March 2022, the carrying amounts of right-of-use assets and lease liabilities which are subject to the amendments amounted to HK$70,013,000 and HK$73,948,000, respectively. The Group is still in the process of assessing the full impact of the application of the amendments.

 

3.REVENUE

 

Disaggregation of revenue from contracts with customers

 

  Media   E-commerce and retail   Total 
   2022   2021   2022   2021   2022   2021 
Segments  HK$’000   HK$’000   HK$’000   HK$’000   HK$’000   HK$’000 
Sales of goods through online and offline retail platform           232,435    224,432    232,435    224,432 
Commission fee from consignment sales           4,869    2,401    4,869    2,401 
Provision of advertising spaces   382,990    215,633            382,990    215,633 
Provision of services for creative agency projects   270,600    231,536            270,600    231,536 
Publication of magazines       210                210 
Beverage income           4,738        4,738     
Total revenue from contracts with customers   653,590    447,379    242,042    226,833    895,632    674,212 

 

– 16 –

 

 

  Media   E-commerce and retail   Total 
   2022   2021   2022   2021   2022   2021 
Segments  HK$’000   HK$’000   HK$’000   HK$’000   HK$’000   HK$’000 
Geographical markets                              
Hong Kong   38,374    36,729    46,012    32,017    84,386    68,746 
The People’s Republic of China (the “PRC”)   137,125    141,166    26,406    17,060    163,531    158,226 
United States (“US”)   229,421    117,875    51,814    58,680    281,235    176,555 
Other countries   248,670    151,609    117,810    119,076    366,480    270,685 
Total   653,590    447,379    242,042    226,833    895,632    674,212 
                               
Timing of revenue recognition                              
A point in time   237,433    130,513    242,042    226,833    479,475    357,346 
Over time   416,157    316,866            416,157    316,866 
Total   653,590    447,379    242,042    226,833    895,632    674,212 

 

4.SEGMENT INFORMATION

 

Information reported to the Chief Executive Officer of the Group, being the chief operating decision maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on types of goods delivered, or service provided. The CODM has chosen to organise the Group’s results according to the category of the business segment and differences in nature of the goods and services that each segment delivers. No operating segments identified by CODM have been aggregated in arriving at the reportable segments of the Group.

 

Specifically, the Group’s reportable and operating segments under IFRS 8 Operating Segment are as follows:

 

Media segment Provision of advertising spaces, provision of services for creative agency projects and publication of magazines
     
E-commerce and retail segment Operation of online and offline retail platform for the sale of third- party branded clothing, shoes and accessories, commission fee from consignment sales and beverage income

 

– 17 –

 

 

The following is an analysis of the Group’s revenue and results by operating and reportable segments:

 

  Media   E-commerce
and retail
   Consolidated 
Year ended 31 March 2022  HK$’000   HK$’000   HK$’000 
Total segment revenue   653,590    242,042    895,632 
                
Segment results   295,222    (16,014)   279,208 
                
Finance costs             (4,588)
Share-based payment expense             (6,285)
Gain on fair value changes of financial assets at FVTPL             4,181 
Loss on fair value changes of derivative financial instruments             (620)
Impairment losses recognized on intangible assets             (2,648)
Impairment losses recognized on amount due from a joint venture             (8,694)
Professional fee related to the Merger             (30,185)
Central administration costs             (55,331)
Unallocated expenses             (32,988)
Profit before tax             142,050 

 

  Media   E-commerce
and retail
   Consolidated 
Year ended 31 March 2021  HK$’000   HK$’000   HK$’000 
Total segment revenue   447,379    226,833    674,212 
                
Segment results   144,798    7,947    152,745 
                
Finance costs             (1,622)
Share-based payment expense             (7,003)
Impairment losses recognized on amount due from a joint venture              (4,019)
Central administration costs             (23,396)
Unallocated expenses             (23,614)
Profit before tax             93,091 

 

– 18 –

 

 

5.INCOME TAX EXPENSE

 

   2022
HK$’000
   2021
HK$’000
 
Current tax:          
– Hong Kong Profits Tax   18,146    9,240 
– The PRC Enterprise Income Tax (“EIT”)   20,609    12,274 
–  Other jurisdictions    3,195    1,678 
Overprovision in prior year          
–  Hong Kong Profits Tax   (132)   (132)
PRC withholding tax on distributed profits from PRC subsidiaries   608     
Deferred tax:   42,426    23,060 
Credit for the year   (543)   (553)
    41,883    22,507 

 

Income tax expense at concessionary rate    

 

Under the two-tiered profits tax rates regime of Hong Kong Profits Tax, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

 

Accordingly, the Hong Kong Profits Tax of the qualifying group entity is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.

 

Basis income tax expense

 

The basic tax rate of the Company’s PRC subsidiaries is 25% for both years under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulations of the EIT Law.

 

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdiction.

 

– 19 –

 

 

 

6. PROFIT FOR THE YEAR

 

   2022
HK$’000
   2021
HK$’000
 
Profit for the year has been arrived at after charging:          
Directors’ remuneration   6,985    2,582 
Other staff costs          
– salaries and allowances   204,057    130,215 
– discretionary bonus   24,853    97 
– retirement benefits scheme contribution   6,887    5,609 
– share-based payment expenses   5,107    6,545 
           
Total directors and other staff costs   247,889    145,048 
Auditor’s remuneration   1,400    1,385 
Cost of inventories recognised as an expense (included in cost of revenue)   127,768    128,929 
Depreciation of property, plant and equipment   6,186    6,525 
Depreciation of right-of-use assets   21,317    21,253 
Amortization of intangible assets   111    105 
Website content update expense (Note)   2,103    1,706 
Write-down of inventories   1,825    1,038 

 

Note:Amounts represent expenses incurred and paid to freelance bloggers for content update in the web pages and were recorded as “administrative and operating expenses”.

 

7.DIVIDENDS

 

No dividend was paid or proposed for ordinary shareholders of the Company during both years, nor has any dividend been proposed since the end of the reporting period.

 

– 20 –

 

 

8.EARNINGS PER SHARE

 

The calculation of the basic and diluted earnings per share for the years ended 31 March 2022 and 2021 is based on the following data:

 

  

2022

HK$’000

  

2021

HK$’000

 
Earnings          
Earnings for the purpose of basic and diluted earnings per share (profit for the year attributable to the owners of the Company)   100,167    70,584 

 

  

2022

’000

   2021
’000
 
Number of shares          
Weighted average number of ordinary shares for the purpose of basic earnings per share   2,052,921    2,035,502 
           
Effect of dilutive potential ordinary shares: Share options issued by the Company   5,911    11,790 
           
Weighted average number of ordinary shares for the purpose of diluted earnings per share   2,058,832    2,047,292 

 

9. RIGHT-OF-USE ASSETS

 

 

   Leased
properties
   Motor vehicle   Total 
   HK$’000   HK$’000   HK$’000 
As at 1 April 2021               

Carrying amount

   78,951        78,951 
                
As at 31 March 2022               

Carrying amount

   70,013        70,013 
                
For the year ended 31 March 2021               

Depreciation charge

   20,974    279    21,253 
                
For the year ended 31 March 2022               

Depreciation charge

   21,317        21,317 

 

– 21 –

 

 

   2022
HK$’000
   2021
HK$’000
 
Expenses relating to short-term leases   3,297    5,006 
           
Variable lease payments not included in the measurement of lease liabilities (Note)   1,842    1,100 
           
Total cash outflow for leases   29,399    26,327 
           
Additions to right-of-use assets   12,037    56,239 

 

Note:Leases of a retail store contain variable lease payment that are based on 12.5% (2021: 12.5%) of sales over the lease term. The amount of variable lease payments paid/payable to relevant lessor for the year ended 31 March 2022 amounted to HK$1,842,000 (2021: HK$1,100,000). The overall financial effect of using variable payment term is that higher rental costs are incurred by the store with higher sales. Variable rent expenses are expected to continue to represent a similar proportion of store sales in future years.

 

The above right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the respective lease terms ranging from 1 to 7 years.

 

During the year ended 31 March 2022, the Group leases offices and warehouses for its operations. Lease contracts are entered into for fixed term of 1 to 5 years.

 

During the year ended 31 March 2021, the Group leases offices and a motor vehicle for its operations. Lease contracts are entered into for fixed term of 1 to 7 years.

 

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable.

 

The Group regularly entered into short-term leases for properties. As at 31 March 2022 and 31 March 2021, the portfolio of short-term leases is similar to the portfolio of short-term leases to which the short-term lease expense disclosed above.

 

Restrictions on assets

 

As at 31 March 2022, lease liabilities of approximately HK$73,948,000 (2021: HK$81,779,000) is recognized with related right-of-use assets of approximately HK$70,013,000 (2021: HK$78,951,000). The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor and the relevant leased assets may not be used as security for borrowing purposes.

 

– 22 –

 

 

10. TRADE AND OTHER RECEIVABLES

 

 

   2022
HK$’000
   2021
HK$’000
 
Trade receivables   128,898    83,793 
Unbilled receivables (Note (b))   23,747    89,876 
Trade and unbilled receivables   152,645    173,669 
           
Less: allowance for credit losses   (945)   (928)
           
Trade and unbilled receivables (net carrying amount)   151,700    172,741 
Advance to staff   1,106    410 
Rental and utilities deposits   11,401    9,101 
Prepayments   22,404    21,284 
Deposit paid for long term investment   1,950     
Deferred issue costs related to the Merger   1,665     
Other receivables   414    871 
           
Total   190,640    204,407 
Analysed as:          
Current   183,018    196,942 
Non-current (Note (a))   7,622    7,465 
           
Total   190,640    204,407 

 

 

Notes:

 

(a)The amounts included certain rental deposit and deposit paid for long term investment.

 

(b)Certain tax bureaus in the PRC have set monthly quotas on the aggregate invoice amounts for transactions in the media segment. The unbilled receivables represent the amount of unconditional right to the consideration for completed performance obligations but the related invoices have not yet been issued as at year end as the quota limit has been exceeded.

 

As at 1 April 2020, trade and unbilled receivables from contracts with customers amounted to HK$188,386,000.

 

– 23 –

 

 

The Group allows credit periods ranging from 30 to 60 days to its trade customers derived from provision of advertising spaces and creative agency projects, whereas no credit period is granted to customers from online and offline retail platforms, consignor from consignment sales commission income and subscribers of magazines. The following is an aging analysis of trade receivables presented based on the invoice date at the end of the reporting period:

 

   2022
HK$’000
   2021
HK$’000
 
Within 60 days   72,316    75,238 
61 – 90 days   35,363    2,785 
91 – 180 days   16,347    4,608 
181 – 365 days   4,589    762 
Over 365 days   283    400 
           
    128,898    83,793 

 

11. CONTRACT ASSETS

 

   2022
HK$’000
   2021
HK$’000
 
Provision of advertising spaces  5,154   1,484 

 

The contract assets primarily relate to the Group’s right to consideration for the advertisement launched in the online platform or social media platform but not billed because the rights are conditioned on the satisfaction of the target impression rate or click rate pursuant to the contract. The contract assets are transferred to trade and unbilled receivables upon the satisfaction of the target impression rate or click rate and the end of advertising period.

 

As at 31 March 2022 and 2021, all contract assets are expected to be settled within 1 year, and accordingly classified as current.

 

12.TRADE AND OTHER PAYABLES

 

   2022
HK$’000
   2021
HK$’000
 
Trade payables   14,639    18,669 
Commission payable to staff   23,161    20,312 
Accrual for campaign cost (Note)   33,025    61,880 
Accrual for staff bonus   23,557     
Accrual for professional fee related to Merger   16,738     
Other payables and accrued expenses   34,588    17,025 
           
    145,708    117,886 

 

– 24 –

 

 

Note:Accrual for campaign cost represents the best estimate of accrual for expenses incurred for rendering the creative agency campaign and media project which include video shooting and photography.

 

The average credit period on purchases of goods is 30 days. The aging analysis of the Group’s trade payables below is presented based on the invoice date at the end of the reporting period:

 

  

2022

HK$’000

   2021
HK$’000
 
Within 30 days   10,240    12,502 
31–60 days   1,401    1,462 
61–90 days   404    53 
Over 90 days   2,594    4,652 
           
    14,639    18,669 

 

13. CONTRACT LIABILITIES

 

  

2022

HK$’000

   2021
HK$’000
 
Provision of advertising spaces (Note (a))   5,891    7,694 
Sales of goods through online retail platform (Note (b))   4,872    1,326 
Customer loyalty scheme (Note (c))   839     
           
    11,602    9,020 

 

Notes:

 

(a)The Group receives 50% of the contract value as deposits from new customers when they sign the contracts for provision of advertising spaces and services for creative agency projects. The deposits and advance payment schemes result in contract liabilities being recognised until the advertisement launched in relevant spaces and relevant benefits received by the customers.

 

During the year ended 31 March 2022, the Group has recognised revenue of HK$7,694,000 (2021: HK$3,701,000) that was included in the contract liabilities balance at the beginning of the respective year. All contract liabilities attributable to the provision of advertising spaces and services for creative agency projects as at 31 March 2022 are expected to be recognised as revenue within one year.

 

– 25 –

 

 

(b)When the Group receives the payment in full before the goods is shipped/delivered, this will give rise to contract liabilities at the start of a contract, until the revenue recognised when the goods is shipped/delivered to the customers.

 

During the year ended 31 March 2022, the Group has recognised revenue of HK$1,326,000 (2021: HK$728,000) that was included in the contract liabilities balance at the beginning of the respective year. All contract liabilities attributable to the sales of goods through online retail platform as at 31 March 2022 are expected to be recognised as revenue within one year.

 

(c)The Group grants award credits for customers for sales under the Group’s customer loyalty scheme. The customers can use the award credits to purchase the goods through the Group’s online retail platform in future purchases. The award credits have no expiration.

 

14. LEASE LIABILITIES

 

  

2022

HK$’000

   2021
HK$’000
 
Lease liabilities payable:          

Within one year

   15,919    15,763 
In more than one year but not more than two years   19,352    14,408 
In more than two years but not more than five years   35,122    37,926 
More than five years   3,555    13,682 
           

 
   73,948    81,779 
Less: Amount due for settlement with 12 months shown under current liabilities   (15,919)   (15,763)
           
Amount due for settlement after 12 months shown under non-current liabilities   58,029    66,016 

 

Weighted average incremental borrowing rates applied to lease liabilities range from 2.85% to 3.50% (2021: 2.85% to 3.50%).

 

– 26 –

 

 

15.SHARE CAPITAL

 

The movements in the Company’s authorised and issued ordinary share capital are as follows:

 

   Number of
shares
  

Share
capital

HK$

 
Ordinary shares of HK$0.01 each          
Authorised:          
At 1 April 2020, 31 March 2021 and 31 March 2022   6,000,000,000    60,000,000 
           
Issued:          
At 1 April 2020   2,023,062,500    20,230,625 
Exercise of share options   22,866,667    228,667 
           
At 31 March 2021   2,045,929,167    20,459,292 
Exercise of share options   1,166,667    11,667 
Issuance of ordinary shares   6,533,397    65,334 
           
At 31 March 2022   2,053,629,231    20,536,292 

 

The new shares rank pari passu with the existing shares in all respect.

 

– 27 –

 

 

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

 

On 25 March 2021 (after trading hours), the Company entered into an investment agreement with Avex Investment Inc. (the “Investor”) pursuant to which the Company agreed to issue and the Investor agreed to subscribe 6,533,397 Shares at HK$1.05924 per Share (the “Subscription”). Completion of the Subscription took place on 9 April 2021. As at the date of this announcement, the proceeds from the Subscription of approximately HK$6.9 million had already been applied as general working capital of the Group. Please refer to the announcement of the Company dated 25 March 2021 for details.

 

Save as disclosed above, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the year ended 31 March 2022.

 

CORPORATE GOVERNANCE PRACTICE

 

The Company recognizes the importance of corporate transparency and accountability. The Company is committed to achieving and maintaining a high standard of corporate governance, as the Board believes that effective corporate governance practices are key to obtaining and maintaining the trust of the shareholders and other stakeholders of the Company, and are essential for encouraging accountability and transparency so as to sustain the success of the Group in its creation of long-term value for the shareholders of the Company.

 

To the best knowledge of the Board, the Company has met the code provisions set out in the Corporate Governance Code (the “CG Code”) contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) during the year ended 31 March 2022, save for the deviations from the code provisions C.2.1.

 

Code provision C.2.1 of the CG Code stipulates that the roles of chairman and chief executive should be separate and should not be performed by the same individual. The division of responsibilities between the chairman and chief executive should be clearly established. Mr. Ma Pak Wing Kevin currently assumes the role of both chairman and chief executive officer of the Company. The Board considers that consolidation of these roles by Mr. Ma provides strong and consistent leadership to the Company which facilitates effective planning and efficient management of the Company.

 

Furthermore, having considered Mr. Ma’s extensive experience in the digital media industry, the relationships Mr. Ma has built with the customers and the historical development of the Group, the Board considers that it is beneficial for the Group for Mr. Ma to continue to act as both Chairman and Chief Executive Officer of the Company.

 

– 28 –

 

 

DIRECTORS’ SECURITIES TRANSACTIONS

 

The Company adopted the required standard of dealings set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, as part of its code of conduct regarding Directors’ transactions in the securities of the Company. Specific enquiry has been made of all the Directors and all Directors confirmed that they had fully complied with the required standard of dealings and there was no event of non-compliance throughout the period from 1 April 2021 to the date of this announcement.

 

AUDIT COMMITTEE

 

The audit committee of the Company consists of three members, being the three independent non-executive Directors, namely Mr. Wong Kai Chi (Chairman), Ms. Poon Lai King and Ms. Kwan Shin Luen Susanna. The audit committee has reviewed the consolidated financial statements of the Group for the year ended 31 March 2022 and is of the opinion that the consolidated financial statements of the Group for the year ended 31 March 2022 comply with applicable accounting standards, the Listing Rules and that adequate disclosures have been made.

 

EVENTS AFTER THE REPORTING PERIOD

 

On 3 April 2022, the Company, Iron Spark, and Hypebeast WAGMI Inc. (the “Merger Sub”), a wholly-owned subsidiary of the Company, entered into the Merger Agreement, pursuant to which, subject to satisfaction of the conditions precedent stipulated under the Merger Agreement, (a) Merger Sub will merge with and into Iron Spark, with Iron Spark being the surviving entity in the Merger, and after giving effect to the Merger, Iron Spark will become a wholly-owned subsidiary of the Company; and (b) each Iron Spark Share issued and outstanding immediately before completion of the Merger will be cancelled and automatically converted into the right to receive, without interest, one consolidated share at completion of the Merger.

 

Concurrently with the signing of the Merger Agreement, several investors (the “PIPE Investors”) have entered into the PIPE Share Subscription Agreements with the Company, pursuant to which the PIPE Investors have conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, the subscription shares at the subscription price, being an issue price identical to the consideration share issue price, for an aggregate subscription price of US$13,335,000 (equivalent to approximately HK$104,013,000), substantially concurrently with (and subject to) completion of the Merger.

 

– 29 –

 

 

On 5 May 2022, the Company has filed with the U.S. Securities and Exchange Commission a registration statement on Form F-4 for the consideration shares to be issued.

 

Details of the above are set out in the announcements of the Company dated 3 April 2022 and 6 May 2022.

 

Save for the above, there has been no important events subsequent to 31 March 2022 and up to the date of this announcement, which would affect the Group’s business operations in material aspects.

 

SCOPE OF WORK OF MESSRS. DELOITTE TOUCHE TOHMATSU

 

The figures in respect of the Group’s consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income and the related notes thereto for the year ended 31 March 2022 as set out in the preliminary announcement have been agreed by the Group’s auditor, Messrs. Deloitte Touche Tohmatsu, to the amounts set out in the audited consolidated financial statements of the Group for the year as approved by the Board of Directors on 29 June 2022. The work performed by Messrs. Deloitte Touche Tohmatsu in this respect did not constitute an assurance engagement and consequently no opinion or assurance conclusion has been expressed by Messrs. Deloitte Touche Tohmatsu on the preliminary announcement.

 

  By Order of the Board
  Hypebeast Limited
  Ma Pak Wing Kevin
  Chairman and executive Director

 

Hong Kong, 29 June 2022

 

As at the date of this announcement, the executive Directors are Mr. Ma Pak Wing Kevin and Ms. Lee Yuen Tung Janice; and the independent non-executive Directors are Ms. Poon Lai King, Mr. Wong Kai Chi and Ms. Kwan Shin Luen Susanna.

 

– 30 –

 

 



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