The one-time profit generated from the sale of virtual banks helped China Ping An's fintech company, OCFT. N; 06638. HK, turn losses into profits for the first time since its establishment in the first half of the year.
According to the first half of 2024 performance report released by Financial One Account on August 16, thanks to the one-time delivery income from the sale of virtual banking business in the second quarter, its ongoing operations (excluding data from the virtual banking business sector) and terminated operations in the first half of the year have turned from a net loss of 190 million yuan in the same period last year to profit. The net profit attributable to the parent company during the period was 139 million yuan, a year-on-year increase of 173%, and the net profit margin attributable to the parent company was 9.8%, a year-on-year increase of 20.2 percentage points.
Excluding the one-time gains mentioned above, the net profit attributable to the parent company of Financial OneConnect's continuing operations still shows a loss state. However, due to cost reduction measures taken, the net loss also narrowed by 38.0% year-on-year to 70 million yuan.
At the performance conference held on the evening of August 16th, Shen Chongfeng, Chairman and CEO of Financial One Account, and Luo Yongtao, CFO of Financial One Account, stated that this is the first time in the company's history that it has achieved profitability. Although it includes one-time gains, it is also a significant part of the company's operations. In order to further achieve the strategic goal of mid-term profitability in sustainable business operations, the development keywords will be focused on increasing third-party revenue, continuously improving gross profit margins, and expanding overseas business.
When asked if the company has a dividend plan after achieving profitability, Luo Yongtao responded that the dividend plan will be considered from multiple aspects such as the company's development needs, financial situation, regulatory requirements, and feedback to shareholders. If there is further progress, an announcement will be made.
From the perspective of revenue, in the first half of 2024, Financial One Account achieved a continuous operating business revenue of 1.416 billion yuan, a year-on-year decrease of 22.8%. Financial OneConnect stated that the main reason is the focus on high-value products, which has led to strategic adjustments in the income portfolio.
It is worth mentioning that in May, Financial One Account announced that it had received notices from several subsidiaries and affiliated companies of Ping An Group of China on May 7th to stop using the cloud services provided by the company on the Gama Financial Cloud Platform. In this semi annual report, Financial One Account stated that in response to this incident, it has decided to gradually cease operating cloud services from July 2024 and discuss transitional arrangements with customers.
According to the data, cloud service revenue is an important business sector of Financial One Account. In 2023 and the first half of 2024, cloud service revenue was 1.246 billion yuan and 607 million yuan respectively, accounting for approximately 34.0% and 42.9% of the total revenue for the same period. More than 99% of cloud service revenue came from Ping An Group, its subsidiaries, and affiliated companies in China.
Financial OneConnect stated that it expects a significant decrease in revenue from its cloud service business in the second half of 2024 and for the full year ending December 31, 2024, due to the termination of operations. However, this will not affect the company's other business operations, including its ongoing strategic business relationship with Ping An Group.
However, the above-mentioned events will undoubtedly make it more urgent for Financial One Account to increase third-party business revenue. The semi annual report shows that although revenue from related parties and third-party businesses has shown a year-on-year decline, the latter has a relatively slower decline rate. As a result, in the first half of this year, the proportion of third-party customer revenue on Financial One Account increased by 2.8 percentage points year-on-year, reaching 33.9%.
In third-party business, Financial One Account has placed overseas business in an important position. According to the data, in the first half of 2024, the contribution of overseas customer revenue to financial OneConnect increased by 14.8% year-on-year, and its proportion in third-party revenue increased to 21.2% (excluding data from the virtual banking business sector), an increase of 5.6 percentage points year-on-year.
Shen Chongfeng stated that the overseas fintech market has broad prospects, and the IT investment growth rate of financial institutions in Southeast Asia, Hong Kong, South Africa, and the Middle East exceeds that of mainland China. The potential of banking and insurance technology is enormous, and he believes that the rapid development of overseas business will continue to provide vitality for the company's business growth. We are confident that the revenue of our overseas clients will continue to achieve double-digit growth in the future, "Shen Chongfeng said at the performance conference.