Financial Planning & Analysis

Switching From Annual To Ongoing Financial Planning

Published on

CFO Insights/Financial Planning & Analysis

14 March 2023

It is evident that continuous financial planning is a critical component of financial success in today’s fast-paced and complex financial world.

Annual financial planning may no longer be sufficient in today’s ever-changing economic conditions. In recent years, we have seen economic conditions change rapidly and unpredictably. The COVID-19 pandemic, for example, caused widespread disruptions to businesses and economies worldwide. Annual financial planning may not be able to keep up with such rapid changes and may leave businesses unprepared for unexpected events.

The COVID-19 pandemic also brought with it, the rise of technology and globalization, competition has become more intense than ever before. Due to this, businesses need to be agile and adaptable to stay ahead of the competition. Annual financial planning may not provide enough flexibility to respond quickly to changing market conditions.

Customer needs and preferences are also constantly evolving, and businesses need to be able to adapt to these changes to remain relevant. Annual financial planning may not allow businesses to allocate resources effectively to meet changing customer demands. As businesses grow and expand, their financial operations become more complex. Annual financial planning may not be sufficient to address the growing complexity of financial operations and may require more frequent reviews and adjustments.

Adding to that, technology is advancing at an unprecedented pace, and businesses need to keep up with the latest trends to stay competitive. Annual financial planning may not be able to incorporate the latest technological advancements and may result in suboptimal resource allocation.

Limitations Of Traditional Annual Financial Planning

Traditional annual financial planning has several issues that can limit its effectiveness:

Limited flexibility: Annual financial planning is typically based on assumptions about the future, which can be inaccurate or change rapidly. This lack of flexibility can result in plans that are out of date or unrealistic, making it difficult to adjust to changing circumstances.

Lack of agility: Annual financial planning can be slow to respond to changes in the market or in the organization. This can result in missed opportunities or inefficient use of resources.

Short-term focus: Annual financial planning tends to focus on short-term goals and objectives, which can hinder the ability of organizations to achieve long-term success.

Siloed decision-making: Traditional annual financial planning often results in siloed decision-making, with each department or business unit developing its own plan without considering the impact on the organization as a whole. This can result in conflicting priorities and suboptimal resource allocation.

Inability to adapt to uncertainty: In today’s rapidly changing business environment, uncertainty is a constant factor. Traditional annual financial planning may not be able to adequately account for uncertainty or provide the necessary flexibility to adapt to changing circumstances.

These issues with traditional annual financial planning can limit its effectiveness in helping organizations achieve their financial goals and objectives. Businesses may need to adopt more agile, adaptive, and collaborative financial planning approaches to overcome these limitations and stay competitive in today’s rapidly changing business environment.

Benefits Of Continuous Financial Planning

Based on a vast array of data and insights, a continuous approach enables firms to optimize business performance in real-time. Continuous planning enables departments to work cohesively, manage unpredictability, and gain visibility across an organization by providing managers and decision makers with the information they need, when they need it. This is how:

Increase the frequency and method of planning. Continuous planning is forward-looking and dynamic, in contrast to traditional planning, which is static and backward-looking. Organizations should rethink their planning process to allow quick review cycles, analysis, and modifications by switching from a static annual plan to a more continuous periodicity, such as quarterly or monthly. In the end, this enables companies to bridge the gap between planning, execution, and analysis, greatly enhancing agility by enabling course correction based on up-to-date data.

Establishing the appropriate operating rhythm will provide leaders with a complete picture of the company, deeper communication between organizational departments and helps to build the system for better tracking success and identifying possible problems early on. Additionally, it enables improved cross-leadership collaboration. Some companies have started holding bi-weekly meetings to discuss product expenditures, marketing plans, and performance. This gave the larger team a structure to report back by enabling them to more effectively track success.

Reducing cloud-based uncertainty. Three key components make up modern planning: continuous, company-wide, and cloud-based. Adopting technologies in the cloud gives greater accessibility to data, real-time insights and analytics, enabling finance directors with the capacity to review and prioritize short and long term goals.

Summary

In conclusion, continuous financial planning is an essential tool for achieving financial stability and success. The traditional approach of creating a financial plan and revisiting it annually is no longer sufficient in today’s fast-paced and constantly evolving financial landscape.

By adopting continuous financial planning, individuals and organizations can stay on top of their financial goals and adjust their plans to account for changing circumstances, such as fluctuations in income, unexpected expenses, and shifts in the market. This proactive approach to financial planning can help individuals and organizations make more informed decisions, avoid costly mistakes, and ultimately achieve greater financial success.

Furthermore, continuous financial planning enables individuals and organizations to take advantage of technological advancements such as financial software, online investment tools, and digital financial advisors. These resources can provide real-time insights into an individual’s financial situation, allowing for quick and informed decision-making.

Organizational Agility: The Key To Predicting & Responding To Changing Market Trends

by Fatihah Ramzi

Published on

DCFO Spotlight/Financial Planning & Analysis

13 January 2023

Many FP&A businesses today are faced with severe risks because they continue to operate in the old-fashioned manner and are not equipped to fulfill the functions that the leadership requires of them.

Today’s business executives must be very operationally agile in order to anticipate and react to shifting market conditions as well as possible threats and opportunities. Business agility has become a crucial component of success for many, and they want the same of their support and advisory roles. Recent global developments have made it very evident that businesses must be able to quickly analyze new scenarios, change course, and adapt to new circumstances. The CFO’s function as a strategic advisor and keeper of value and long-term performance is crucial in these times of transition. Many Financial Planning & Analysis (FP&A) firms, however, are not (yet) capable of handling the job.

Business leaders need assistance from FP&A as they help to modify a business’ behavior and procedures to flourish in the “new normal”. Together, they can navigate through dynamic and occasionally uncharted waters by spotting potential risks and fresh possibilities early enough to still have time to respond wisely.

The Missing Link

A controlling department’s primary tasks should no longer be historical data analysis, financial report creation, annual planning, and forecasting. In order to uncover hidden value and identify potential dangers, FP&A is required to act as advisors in strategic decision-making by combining data from all areas of the firm.

To meet this expectation, FP&A units are embracing new technology, relocating to the cloud, automating procedures and reporting, or enhancing existing datasets—but these efforts are insufficient to change the role FP&A plays in the value generation and steering process. Instead, in order to optimize their investments in new technology and data, FP&A must completely redesign how they cooperate, manage, empower, and distribute insights. The adoption of business agility is the crucial component needed to connect digitization and business effect for FP&A.

Agility Adds Value

Businesses that deliver quickly and responsibly, innovate and disrupt, and continuously adjust their organizational structures and modes of cooperation are said to be agile in business. The military is one of the most cutting-edge industries for organizational agility. Despite their organizational scale and complexity, armed forces must mobilize resources quickly and effectively to counter ever-evolving physical and digital threats. A traditional chain-of-command culture and a standardized, process-driven strategy are ineffective in this situation. Instead, military officials support the idea of “agile and adaptable leadership,” in which trained soldiers make decisions on the spot to carry out the leadership’s mission.

CFOs and FP&A leaders can learn from the military’s approach to meet business leaders’ expectations for proactive, in-time, and cross-functional decision support despite how far distant it may appear from the day-to-day struggles of a financial controller. Additionally, implementing agility demands teams and leaders to embark on a transition journey, just like in the military. It will need dedication, patience, and guts to experiment with new approaches while continually learning how to work in an agile environment.

Achieving Agility In FP&A

The FP&A organization needs to concentrate on gaining skills in four crucial areas, with agile leadership and digital enablement as its cornerstones.

Business Partnership

Create relationships with company stakeholders that are strategic and value-driven in order to find opportunities, evaluate results, and make investment decisions. Many CFOs are concerned that the finance function is reactive or that data and information sharing methods are not streamlined. CFOs also anticipate that they will still be concerned about these issues in 2023.

Business partners now have insights at their fingertips thanks to technology, and FP&A teams can model more, explore more possibilities, and evaluate potential effects in real time thanks to data and planning tools. Today, FP&A and the company can collaborate digitally or in person to make model changes in real time, see the anticipated results, and then recalibrate to make more accurate judgments. Utilizing an organization’s tribal knowledge from leadership to the front lines for integrated insights is essential today more than ever to achieve agility and respond without being reactionary.

Being A Learning Organization

Many FP&A companies would accurately describe themselves as learning companies. The capacity to switch from a focus on outputs to a focus on outcomes, however, is essential for continuing success as a trusted business advisor. This process is regularly assessing the results of ongoing investments and activities to decide whether to move forward as is, make adjustments, or take a different turn.

Due to the rapid change in the business environment, everyone inside the organization must develop their talents collectively. For instance, in order to advocate the best course of action, businessmen must have a better understanding of the benefits and limitations of technology, and IT professionals must comprehend business processes and desired results. Although it might seem obvious, this calls for an experimental mindset.

Modern Management

An agile FP&A team works with the front line and runs like a “small business” with a focus on a particular result. It determines the talents required (perhaps even a combination of internal and external personnel), gives the team autonomy over choices, secures internal finance, and outlines what it will undertake to accomplish the goal.

For instance, if a company wishes to enhance planning, it may allow teams to work freely within a set of concrete, quantifiable, and strategic objectives. An enormous, international firm that did this by using an inefficient, expensive, and time-consuming annual planning procedure. The organization decreased the time and effort spent on planning from a “all year round” process to a few weeks by radically rethinking the planning methodology, implementing the most recent planning technology, and experimenting with agile approaches (such as sprints).

Collaboration

The FP&A team must work together and draw on knowledge from several departments inside the company. A successful team is self-organized around a goal, given the freedom to decide, and laser-focused on value while using the least amount of effort possible. Collaboration teams assemble the ideal individuals for a predetermined period of time with the sole purpose of completing the task at hand—no long-term commitments. An agile team can quickly disassemble after resolving the business issue or producing the desired outcomes and move to the next location. In a hurried timeframe, FP&A and other business associates can collaborate as a cross-functional team.

Many FP&A businesses today are faced with severe risks because they continue to operate in the old-fashioned manner and are not equipped to fulfill the functions that the leadership requires of them. To direct the company strategically and adapt to shifting market conditions, business leaders constantly strive for quick, proactive, and analytics-driven decision assistance on their side. The introduction of technology by itself hasn’t been sufficient for FP&A to evolve into this position of an “intelligent business partner.”

The availability of data, performance transparency, and automation made possible by new technology are positive developments, but they do not, by themselves, enable teams to rethink how they work, cooperate to generate cross-functional insights, or partner for results. Incorporating agile principles into daily activities and introducing new working methods made possible by new tools and technologies will elevate FP&A’s position and multiply its influence in providing genuine value for the company. The CFO is in a crucial position to drive this FP&A transformation by challenging the established quo, encouraging employees to think creatively, eschewing conventional methods, and adopting an agile attitude.

Importance Of Investing In Trend Prediction

by Fatihah Ramzi

Published on

DCFO Special Feature/Finance/Financial Planning & Analysis

Fatihah Ramzi, DigitalCFO Asia | 24 November 2022

With the help of trend predictions, businesses can save money by not investing in products that might not appeal to their target market and instead focus on developing goods and services that fulfill the needs and objectives of their consumers.

Business executives that embrace and uphold best practices for financial forecasting or trend prediction are better equipped to expand their businesses and handle unforeseen setbacks. Despite the fact that it is difficult to accurately forecast the future, as the COVID-19 pandemic has shown, the organization has a better chance of adapting if it can properly hedge against the worst-case situations.

The truth is that businesses don’t become well-capitalized, with solid balance sheets and positive cash flows by accident. Rationally analyzing data, being intimately connected with the business, and having the most recent customer and market insights are all essential to financial health. In prosperous times, finance teams that perform accurate forecasts benefit from the company’s success. According to data analytics, business executives are aware of how their finance teams’ careful planning helped them survive a very trying time.

Trend Prediction

By analyzing the past and the present, forecasting is the process of predicting what will happen in the future. Based on anticipated demand for products or services, it serves as a planning tool that enables organizations to respond to unpredictability.

A solid financial forecast or trend prediction includes both macroeconomic considerations and circumstances unique to the organization. Trend prediction is a financial plan that estimates the likelihood of certain disruptions occurring that could affect future income and expenses of a corporation. A comprehensive projection includes, but is not limited to, short- and long-term outlooks on variables that may have an impact on revenues and backup plans for expenses not now considered required.

Organizations that provide accurate financial trend predictions rely on model-building professionals, either employees or consultants, and combine their work with input from individuals who have a thorough grasp of the organization, the sectors it serves, and the communities it works in. Similarly, data collection and software are crucial to the financial forecasting process.

Importance Of Predicting Trends

Trend predictions are crucial for corporate planning, budgeting, operations, and funding; they merely assist executives and external stakeholders in making wiser decisions. A financial projection is an estimation of how much money a firm will make in the future, and it’s an essential step in creating the annual budget. It guides important financial choices like whether to fund a capital project, add employees, or attract investors. Business balance sheets and other disclosures provide significant information from their predictions.

Trend predictions give firms access to unified reports, enabling finance departments to set realistic and doable company goals. Additionally, it offers management important information about past and projected performance of the company. Financial predictions are crucial in investor relations and loan applications, in addition to guiding internal fiscal controls and choices. Predictions are taken into account in the decision-making processes of banks and other funders. Startups are also not exempt. As described, financial projections are a crucial component of any new business plan.

Benefits of Trend Prediction

Along with the previously mentioned practical advantages, creating a financial forecast compels finance teams and line-of-business associates to pause and consider the worth of rolling predictions.

CFOs must decide whether to employ a rolling model or project out a certain number of months. Will the projection be incremental, expanding on last year’s, or will the company start with a clean slate? Which potential new product lines need to be included in a formal prediction since facts supporting their viability exist?

With trend prediction, CFOs can confidently approve a new capital project based on data, make wise judgments even when under time pressure, and have better success securing finance or attracting investors.

Types of Trend Analysis

Numerical data are used to compute trend analysis. It usually consists of historical data, either conventional data (such as a company’s success as reported in its publicly available financial records) or alternative data (such as the number of job openings made by a rival in the previous five years). You may spot three different types of trends when you add numerical data to a chart.

Upward Trend

The company’s data points are growing, which is what an upward trend signifies. This could indicate different things depending on what kind of variable you’re looking at and what you’re trying to accomplish. For instance, if you are a business owner and are looking at the cost of the raw materials needed to make loaves, you see that the cost is rising. You may predict several outcomes using this knowledge, such as rising costs for your company or the requirement to increase ultimate consumer pricing.

At the same time, if a shareholder observes an upward tendency in the share price of a business, it could influence them to buy the company’s stock. An increase in a stock’s price typically denotes a positive situation, assisting you in deciding whether the investment would be wise.

Downward Trend

On the other hand, a downward trend shows that the value of your variable is declining. For instance, if a company’s earnings fall sharply, investors may need to exercise caution since the stock is hazardous because the price is falling. This is true if other economic or financial variables are trending downward. When researching financial assets, investors might perform trend analysis on the asset’s historical data. If the price is falling, a bearish market is present. In other words, investing is not advised in this situation because it could result in a loss if prices continue to fall.

Horizontal Trend

Finally, stagnation is indicated by the horizontal line. In other words, neither the prices nor any other measures are increasing nor decreasing; instead, they are remaining unchanged. In reality, a flat trend may rise for a time before pulling a trend reversal, attaining an overall steady general direction. It’s dangerous to base investment decisions on horizontal trends because you never know what will happen. If you do decide to go ahead with it, you must undertake a detailed income and expense analysis regarding the sales regions to determine the dangers.

With the help of trend predictions, businesses can save money by not investing in products that might not appeal to their target market and instead focus on developing goods and services that fulfill the needs and objectives of their consumers. By taking into consideration market demands, product popularity and improving their chances of producing something that their consumers will like, this can help organizations save time and money. This enables companies to capitalize on consumer preferences by spotting market possibilities as they materialize.

AIA Reports Financial Results For The First Half Of 2022

by DigitalCFO Newsroom

Published on

Banking & Financial Services/Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 25 August 2022

AIA Group Limited today announces financial results for the six months ended 30 June 2022.

Growth rates are shown on a constant exchange rate basis:

New business performance

Value of new business (VONB) reduced by 13 per cent to US$1,536 million
Strong month-on-month improvement in the second quarter with positive VONB growth in June
Robust annualised new premiums (ANP) of US$2,778 million, a decline of 7 per cent
VONB margin of 55.2 per cent
AIA China returned to VONB growth in July as movement restrictions eased

Earnings and capital

Free surplus increased by US$3.6 billion to US$20.6 billion
Underlying free surplus generation (UFSG) up 5per cent⁽¹⁾to US$3,190 million
Operating profit after tax (OPAT) up 4 per cent to US$3,223 million
Very strong Group LCSM cover ratio⁽²⁾ of 277 per cent on the new PCR basisand 567 per cent on the previously reported MCR basis
EV Equity of US$72.3 billion after returning US$3.0 billion to shareholders through the share buy-back programme and dividend
Shareholders’ allocated equity of US$46.8 billion

Interim dividend

Interim dividend increased by 6 per cent to 40.28 Hong Kong cents per share

Lee Yuan Siong, AIA’s Group Chief Executive and President, said:

“AIA has delivered a resilient performance in the first half of 2022. Sales momentum in the second quarter improved as the temporary disruption caused by the initial outbreak of the Omicron variant declined and we delivered positive VONB growth in June.

“Our growing high-quality in-force portfolio supported an increase in both OPAT and UFSG⁽¹⁾. The Group’s financial position remained very strong with free surplus increasing to US$20.6 billion and a Group LCSM cover ratio⁽²⁾ of 277 per cent despite the significant stress in capital markets. EV Equity was US$72.3 billion, representing an increase of 3 per cent in the first half before the return of US$3.0 billion to shareholders through our share buy-back programme and payment of the 2021 final dividend.

“The Board has declared a 6 per cent increase in the interim dividend to 40.28 Hong Kong cents per share. This follows AIA’s established prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the financial flexibility of the Group.

“AIA’s wide adoption of technology, digital and analytics throughout the Group continues to enhance our business capabilities and resilience. Our agents rapidly switched from in-person to digital remote sales, helping to offset the effect of the initial Omicron wave on face-to-face sales activities, and leveraged our social-media-integrated leads management platforms as a powerful way to generate new customer leads. Agency new business momentum increased month-on-month in the second quarter and we returned to VONB growth in June. In July, AIA was ranked the number one global Million Dollar Round Table (MDRT) multinational for a record eighth year in a row, demonstrating our consistent focus on high-quality and professional advice.

“Our strategic partnerships with leading banks delivered double-digit VONB growth in the first half, driven by very strong performances in Hong Kong, Malaysia and India. Overall, our partnership distribution business reported a positive increase in the first half and strong VONB growth in the second quarter, supported by double-digit growth in Malaysia, Indonesia and the Philippines and a material contribution from our partnership with The Bank of East Asia, Limited (BEA).

“While sales activity in the second quarter for AIA China was substantially affected by stringent containment measures in Shanghai, Suzhou and Beijing, we achieved positive VONB growth across our other geographies. In the first half, VONB was lower due to the restrictions and following a record result in the first half of 2021, which was driven by an exceptionally high level of traditional protection sales, as previously reported. Our high-quality Premier Agency model remained resilient with growth in active agent productivity, new recruits and the overall agency force. As restrictions reduced across our operations, AIA China achieved positive VONB growth in July.

“The Mainland Chinese life insurance market remains significantly underpenetrated and offers tremendous growth potential for AIA. We continue to make strong progress in geographical expansion and our new branch in Wuhan, Hubei province, commenced sales in the first half, making a strong contribution to the excellent VONB growth from our new geographies. In May, we received regulatory approval to prepare a new branch in Henan, the third most populous province in Mainland China.

“In the first half of 2022, AIA Hong Kong delivered 3 per cent growth in VONB, supported by growth in both agency and partnership distribution channels. Sales momentum in our domestic customer segment rebounded from May as daily infections subsided. While travel across the Hong Kong border remains limited, we delivered strong VONB growth from sales to Mainland Chinese visitors through our Macau branch.

“The rest of the Group generated close to 50 per cent of total VONB in the first half of 2022 with progressive improvements in sales activities in the second quarter. In June, our market-leading ASEAN businesses returned to growth with a very strong double-digit increase in VONB.

“Tata AIA Life, our joint venture in India, is well positioned to capture the significant opportunities available in the life insurance market. We achieved excellent VONB growth in the first half, supported by the success of our multi-channel distribution platform. Our highly-digitalised Premier Agency delivered very strong increases in recruitment, agency leaders, active agents and productivity. We continued to strengthen relationships with a wide range of bank partners and brokers and generated excellent VONB growth in our partnership channel.

“I am confident that the long-term prospects for AIA’s broad and diverse business remain exceptional. AIA’s geographical diversity across Asia and our unrivalled distribution platform are key strengths. We are focused on the disciplined execution of our strategic priorities which will continue to deliver long-term sustainable value for all our stakeholders.”

AIA Singapore’s Business Results in the First Half of 2022:

Singapore is steadily emerging from the pandemic’s headwinds but uncertainty about the global economic environment had resulted in a decline in weighted new business premiums for the life insurance industry in the first half of the year (1H2022).

Easing of restrictions in the second quarter of 2022 has helped rebuild business momentum for AIA Singapore.

AIA Singapore delivered double-digit Value of New Business (VONB) growth in the second quarter, recovering strongly from the first quarter.

In the first half, VONB dipped 6 per cent and Annualised New Premium (ANP) contracted 11 per cent, while a shift in product mix increased VONB margin to 65.9 per cent.

Operating Profit After Tax (OPAT) also increased by 13 per cent for the 1H2022, attributed to growth in our in-force portfolio, increased equity operating investment returns and favourable claims experience.

Total Weighted Premium Income (TWPI) also recorded 7 per cent growth for 1H2022 buoyed by strong renewal business.

AIA’s Tied Distribution channel continues to be the key contributor to AIA Singapore’s resilient business despite the challenging external environment. As part of AIA’s strategy embedding Technology, Digital and Analytics in everything we do and transforming AIA into an organisation of the future, we continue to invest in digital tools to enhance AIA insurance representatives’ capabilities and productivity. This transformation enhances AIA’s ability to provide high-touch, high-tech and high-trust services to meet customers’ evolving protection, savings, investments, health, and wealth needs. For instance, AIA’s iSMART mobile application enables insurance representatives to leverage social media for lead generation, contributing to over 10 per cent of our tied distribution sales.

AIA Singapore’s Corporate Solutions continued its growth momentum with excellent business performance including crossing a new milestone of now managing more than S$600 million in-force premiums. AIA eBenefits portal won Singapore Business Review’s Technology Award 2022 in the category of Digital Life Insurance and maintained our reign for sixteen consecutive years as the best employee insurance provider presented by HR Vendors of the Year, reinforcing our leadership position in protecting the holistic health and wellness of the Singapore workforce.

Strong business recovery was also attributed to AIA’s Partnership Distribution channel due to a gradual pick up of offshore business with the reopening of borders towards end April.

Wong Sze Keed, Chief Executive Officer of AIA Singapore, said:

“AIA Singapore’s business remained resilient, as we recovered strongly in the second quarter with double digit growth in Value of New Business (VONB) over the same period last year. Our digital-first ecosystem and strategic focus on Technology, Digital and Analytics has equipped our AIA insurance representatives with the necessary tools to deepen engagement with customers as we navigate through the ongoing COVID-19 pandemic challenges. We also delivered growth in Operating Profit After Tax (OPAT) and Total Weighted Premium Income (TWPI), demonstrating our commitment in managing a resilient and sustainable business while helping our customers achieve their financial priorities with the support of our distributors, partners, and employees.

Our heartfelt thank you to our AIA insurance representatives who remain unwavering in their commitment amidst the challenges faced over the past two years.

Despite the difficulties faced, AIA Singapore attained the #1 MDRT Company for the 8th time, with 1,240 Million Dollar Round Table (MDRT) members in 2022. This is testament to their outstanding dedication to serving our customers. AIA Singapore also topped the charts to achieve the highest retention rate of MDRT members worldwide. Approximately 4 in 5 of our AIA insurance representatives retained their MDRT status this year.

As a leading insurer who has protected generations of Singaporeans, we developed AIA Elite Secure Income to address the evolving concerns of our customers to bridge their insurance gap in retirement. This is a first-in-market affordable, capital-guaranteed investment-linked plan enabling customers to confidently achieve their retirement goals. This comes as an extension of AIA Singapore’s comprehensive range of holistic solutions to help customers achieve their financial goals and live their desired golden years.

In January, we introduced “Wealthbeing by AIA” – the pairing of Wealth and Well-being – offering high-net-worth individuals a well-rounded approach to protecting and growing wealth and health, while helping them and their families live their best lives. Additionally, we took the opportunity to enrich our AIA Altitude programme with specially curated privileges to further elevate their lifestyle and experiences with AIA.

Our customers continue to be the centre of everything we do, as we continue dedicating our efforts to deliver leading customer experiences. We implemented Real-time Customer Survey (RCS) to gather feedback across various touchpoints to help improve business processes and ease customer pain points. A rewards marketplace, AIA Delights, was also introduced to digitalise and offer a wider selection of rewards for our customers.

As a people-first and customer-centric organisation, AIA Singapore remains steadfast in our commitment to enable Healthier, Longer, Better Lives for our customers and the community. We will continue to develop valuable propositions to care for their holistic well-being in both health and wealth.”

XCMG 2021 Annual Report: High-Quality Development Leads to Record-High Revenue and Net Profit Growth

by DigitalCFO Newsroom

Published on

Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 22 April 2022

XCMG has disclosed its 2021 annual report on April 18th, hitting record highs in both revenue and net profit.

In 2021, XCMG has reported an operating revenue of CNY84.328 billion (US$13.2 billion), year-on-year growth of 14.01 percent, and a net profit attributable to parent company of 5.615 billion yuan (US$879.1 million), up 50.57 percent year-on-year. Net cash flow generated by XCMG’s operating activities reached 8.073 billion yuan (US$1.26 billion), jumping 189.43 percent year-on-year for a record high.

XCMG has maintained top position in China’s domestic construction machinery industry for 32 years consecutively, and for the first time in history, ranked among the top three in the world.

In 2021, XCMG’s hoisting machinery was ranked number one worldwide for the first time. Its major product categories all achieved positive growth and sectors including earthmoving, piling, and aerial working machinery have also grown rapidly with increased proportions in operating revenue.

Furthermore, XCMG’s overseas revenue has also increased by 111.81 percent year-on-year to reach 12.94 billion yuan (US$2.03 billion). Despite the impact of the COVID-19 pandemic, XCMG Brazil has achieved a major breakthrough with 200 percent year-on-year growth in production and sales, and 198 percent increase in operating scale.

These emerging industries have also been advancing rapidly:

XCMG has consolidated its leading position in lifting-type fire trucks and boom-type aerial work platforms with significantly improved profitability;
The income generated by compact construction machinery has risen 50 percent year-on-year, and income from forklifts has increased by a whopping 258 percent;
XCMG’s new base for maintenance machinery was put into operation, and products including asphalt stations and chassis maintenance are ranked in the top 2 in the industry;
XCMG’s “Hanyun” industrial internet platform ranked in the top 3 in MIIT’s 2021 list of cross-industry and cross-domain industrial internet platforms.

“Whether circumstances are favorable or adverse, XCMG unremittingly strives to achieve the development goals of ‘advanced quality, efficiency, performance and sustainability.’ We always adhere to our original vision and intention and lead China’s construction machinery companies to continuously challenge the industry’s ‘Mount Everest’ and achieve high-quality development in the international market,” said Wang Min, chairman and CEO of XCMG.

WeTrade Group Inc. Reports Fiscal Year 2021 Financial Results

by DigitalCFO Newsroom

Published on

Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 20 April 2022

WeTrade Group Inc. today reports its financial results for fiscal year 2021 ended December 31, 2021.

WeTrade Group Inc. (“Wetrade” or the “Company”) (US: WETG), an emerging growth company engaged in the business of providing software-as-a-services (SaaS) and cloud intelligent systems for micro-businesses, today reports its financial results for fiscal year 2021 ended December 31, 2021.

Mr. Pijun Liu, Chief Executive Officer of Wetrade, commented, “2021 was another strong year for us, with solid year-over-year growth across our key financial metrics. The COVID-19 pandemic boosted the home-based economy and has further promoted the rapid development of e-commerce, live broadcasting, and short videos. As a result, the market demand for the tools of SaaS and cloud intelligent systems provided by the Company for micro-businesses was strong, which is a significant factor for the Company’s fast growth. The solid financial results for fiscal year 2021 are the best proof. Looking forward, the Company will continue focusing on business development in vertical areas and investing our resources to create value and returns for our shareholders. We strive to achieve breakthrough innovations in the field of e-commerce retail SaaS and promote the sustainable development of enterprise service.”

Mr. Kean Tat Che, Chief Financial Officer of Wetrade, commented, “Our high financial growth in 2021 is contributed by the booming of short video and live-streaming e-commerce and the rapid transition of business from offline to online. However, the resurgence of the COVID-19 pandemic at the beginning of 2022 disrupted our planned operation and expansion. In the future, we will keep optimizing our strategic development plan in a timely and effective manner to mitigate the adverse impact of the COVID-19 pandemic to ensure our financial resilience.”

Revenue

Total revenue was $14.38 million and $6.27 million for fiscal year 2021 and 2020, respectively. The increase was mainly due to the increase in Gross Merchandise Volume (“GMV”) in Ycloud system.

Cost of Revenue

Cost of revenue was $2.68 million for fiscal year 2021, compared with $0.62 million for the same period of last year. The increase is mainly due to more staffs were recruited during the period. The increase is in line with the increase in revenue during the period.

Gross profit and gross margin

Gross profit increased by $6.04 million, or 106.8%, to $11.70 million for fiscal year 2021 from $5.66 million for the same period of last year.

Gross margin was 81.4% for fiscal year 2021, compared with 90.2% for the same period of last year.

Operations Profit

General and administrative expenses increased by $3.80 million, or 200.1%, to $5.71 million for fiscal year 2021 from $1.90 million for the same period of last year. The increase is mainly due to increase in the payroll expenses as a result of more new staffs were recruited during the year.

Operations profit increased by $2.24 million, or 59.7%, to $5.99 million for fiscal year 2021 from $3.75 million for the same period of last year.

Net Income

Net income increased by $2.50 million, or 93.5%, to $5.18 million for fiscal year 2021 from $2.68 million for the same period of last year. The increase is mainly due to increase in Gross Merchandise Volume (“GMV”) in YCloud system and services are collected from YCloud users based on GMV during the year.

Basic and diluted earnings per share was $0.02 for Fiscal year 2021, compared with basic and diluted earnings per share of $0.01 for the same period of last year.

Financial Condition

As of December 31, 2021, the Company had cash and cash equivalents for $0.62 million, compared to $4.64 million as of December 31, 2020. Net cash used in operating activities was $3.75 million for fiscal year 2021, compared to net cash provided by operating activities of $1.16 million for the same period of last year. Net cash used in investing activities was $0.42 million for fiscal year 2021, compared with nil for the same period of last year. Net cash provided by our financing activities was $0.08 million for fiscal year 2021, compared to net cash used in financing activities of $3.68 million for the same period of last year.

Jianpu Technology Inc. Reports Second Six Months and Fiscal Year 2021 Unaudited Financial Results

by DigitalCFO Newsroom

Published on

Banking & Financial Services/Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 13 April 2022

Jianpu Technology Inc. today announced its unaudited financial results for the six months and fiscal year ended December 31, 2021.

Jianpu Technology Inc. (“Jianpu,” or the “Company”) (NYSE: JT), a leading independent open platform for discovery and recommendation of financial products in China, today announced its unaudited financial results for the six months and fiscal year ended December 31, 2021.

Second Six Months 2021 Operational and Financial Highlights:

The credit card volume and number of domestic loan applications for recommendation services respectively increased by 75.0% to approximately 2.1 million and 118.4% to approximately 8.3 million in the second six months of 2021. As a result, total revenues of recommendation services for the second six months of 2021 resumed growth, increasing by 71.4% to RMB320.3 million (US$50.3 million) from RMB186.9 million in the same period of 2020.
Revenues from big data and system-based risk management services decreased by 10.4% to RMB67.3 million (US$10.6 million) in the second six months of 2021 from RMB75.1 million in the same period of 2020. The number of paying customers decreased by 27.5% in the second six months of 2021, compared with the same period of 2020.
Revenues from advertising and marketing services and other services increased by 240.6% to RMB73.9 million (US$11.6 million) in the second six months of 2021 from RMB21.7 million in the same period of 2020. The increase was mainly attributable to the growth of insurance brokerage services and initiatives of other new businesses.
Net loss was RMB108.3 million (US$17.0 million) in the second six months of 2021, compared with RMB186.9 million in the second six months of 2020. Net loss margin was 23.5% in the second six months of 2021, compared with 65.9% in the same period of 2020.
Non-GAAP adjusted net loss[1] was RMB96.7 million (US$15.2 million) in the second six months of 2021, compared with Non-GAAP adjusted net loss of RMB215.1 million in the second six months of 2020. Non-GAAP adjusted net loss margin[1] was 21.0 % in the second six months of 2021, compared with 75.8% in the same period of 2020.

Fiscal year 2021 Operational and Financial Highlights:

The credit card volume and number of domestic loan applications for recommendation services respectively increased by 32.1% to approximately 3.7 million and 94.3% to approximately 13.6 million in the fiscal year of 2021. As a result, total revenues of recommendation services for the fiscal year of 2021 resumed growth, increasing by 42.2% to RMB575.2 million (US$90.3 million) from RMB404.4 million in the prior year.
Revenues from big data and system-based risk management services decreased by 9.6% to RMB130.4 million (US$20.5 million) in the fiscal year of 2021 from RMB144.2 million in the prior year. The number of paying customers decreased by 12.2% in the fiscal year of 2021, compared with the prior year.
Revenues from advertising and marketing services and other services increased by 167.2% to RMB99.4 million (US$15.6 million) in the fiscal year of 2021 from RMB37.2 million in the prior year. The increase was mainly attributable to the growth of insurance brokerage services and initiatives of other new businesses.
Net loss was RMB204.1 million (US$32.0 million) in the fiscal year of 2021, compared with RMB312.1 million in the prior year. Net loss margin was 25.4% in the fiscal year of 2021, compared with 53.3% in the prior year.
Non-GAAP adjusted net loss[1] was RMB186.7 million (US$29.3 million) in the fiscal year of 2021, compared with Non-GAAP adjusted net loss of RMB333.4 million in the prior year. Non-GAAP adjusted net loss margin[1] was 23.2% in the fiscal year of 2021, compared with 56.9% in the prior year.

Mr. David Ye, Co-founder, Chairman, and Chief Executive Officer of Jianpu, commented, “We are pleased to announce that we successfully turned our business around in 2021, with total revenue up 37.4% year-on-year. We managed this via a more diversified and balanced revenue structure. By leveraging our integrated marketing capabilities, we have improved our business efficiency, whilst also expanding our business into other Non-financial categories. We continued to expand our efforts in empowering financial institutions’ digital transformation, and now cooperate with 46 banks and have helped the issuance of over 23 million credit cards cumulatively. There were significant client wins for our big data and system-based risk management services, and our cost optimization initiatives drove margin improvements resulting in a narrowing of Non-GAAP adjusted net loss by 44%.

“These results were primarily driven by our experience navigating through turbulence, our readiness to make changes and adapt to a dynamic environment, and the effective execution of strategies and solid technological capabilities. As part of our vision of “Becoming everyone’s financial partner”, we are continuously innovating our technologies and exploring new growth drivers as we push forth our mission of empowering users and enabling the digital transformation of financial service providers to better serve them.”

Mr. Oscar Chen, Chief Financial Officer of Jianpu, said, “Our second-half and full year results reflect our continuous efforts in business development and optimization, as we continue to capitalize on the ongoing digitization of the financial industry. Despite the tightening macro environment and ongoing pandemic, our business made a turnaround with second-half total revenue up 62.7% year-on-year to RMB461.5 million and fiscal year 2021 revenue up 37.4% to RMB805.0 million. As we continue to make solid progress on our business optimization strategy, our Non-GAAP adjusted net loss continued to narrow. We are also pursuing new opportunities to further diversify our business through leveraging our existing foundation and technologies. The application of omnichannel marketing solutions towards other adjacent categories have delivered strong revenue growth. We believe the scalability and resilience of our business model, as well as our team’s capability to navigate through and adapt to the dynamic environment, will ultimately drive long-term value to our shareholders.” 

Second Six months 2021 Financial Results

Total revenues for the second six months of 2021 increased by 62.7% to RMB461.5 million (US$72.4 million) from RMB283.6 million in the same period of 2020.

Total revenues from recommendation services increased by 71.4% to RMB320.3 million (US$50.3 million) in the second six months of 2021 from RMB186.9 million in the same period of 2020.

Revenues from recommendation services for credit cards increased by 84.2% to RMB228.0 million (US$35.8 million) in the second six months of 2021 from RMB123.8 million in the same period of 2020. Credit card volume in the second six months of 2021 and 2020 were approximately 2.1 million and 1.2 million, respectively. The average fee per credit card increased to RMB109.9 (US$17.3) in the second six months of 2021 from RMB106.1 in the same period of 2020.
Revenues from recommendation services for loans increased by 46.4% to RMB92.4 million (US$14.5 million) in the second six months of 2021 from RMB63.1 million in the same period of 2020, primarily due to the increase in number of loan applications on our platform. The number of domestic loan applications on the Company’s platform was approximately 8.3 million in the second six months of 2021, representing an increase of approximately 118.4% from the same period of 2020. The average fee per domestic loan application decreased to RMB10.5 (US$1.6) in the second six months of 2021 from RMB12.7 in the same period of 2020. The recommendation revenue of loans generated from overseas markets accounted for 5.4% of total loan recommendation revenues in the second six months of 2021, less contribution than the same period of 2020. The global COVID-19 pandemic and the associated inability to travel globally has negatively impacted our overseas business.

Revenues from big data and system-based risk management services decreased by 10.4% to RMB67.3 million (US$10.6 million) in the second six months of 2021 from RMB75.1 million in the same period of 2020, primarily due to the decrease of the number of paying customers in the second six months of 2021.

Revenues from advertising and marketing services and other services increased by 240.6% to RMB73.9 million (US$11.6 million) in the second six months of 2021 from RMB21.7 million in the same period of 2020, primarily due to the growth of insurance brokerage services and initiatives of other new businesses.

Cost of promotion and acquisition increased by 72.5% to RMB334.9 million (US$52.5 million) in the second six months of 2021 from RMB194.2 million in the same period of 2020. The increase was in line with the growth of our revenue from recommendation services, advertising and marketing services and other services.

Cost of operation decreased by 11.4 % to RMB45.1 million (US$7.1 million) in the second six months of 2021 from RMB50.9 million in the same period of 2020. The decrease was primarily attributable to the decrease in depreciation expenses, payroll costs and bandwidth and server costs, partially offset by the increase in data acquisition costs.

Sales and marketing expenses increased by 9.0% to RMB68.8 million (US$10.8 million) in the second six months of 2021 from RMB63.1 million in the same period of 2020. The increase was primarily due to the increase in sales and marketing staff for new businesses.

Research and development expenses decreased by 21.2% to RMB62.4 million (US$9.8 million) in the second six months of 2021 from RMB79.2 million in the same period of 2020, primarily due to the continued cost optimization measures.

General and administrative expenses decreased by 0.4% to RMB72.2 million (US$11.3 million) in the second six months of 2021 from RMB72.5 million in the same period of 2020, primarily due to the decrease in professional fees and allowance for credit losses, partially offset by the increase in share-based compensation expenses and payroll expenses.

Others, net increased by 137.9% to RMB15.7 million (US$2.5 million) in the second six months of 2021 from RMB6.6 million in the same period of 2020. The increase was primarily from the realized investment gain of RMB11.1 million from the investment in Conflux Global, a decentralized applications blockchain solution provider.

Net loss was RMB108.3 million (US$17.0 million) in the second six months of 2021 compared with RMB186.9 million in the same period of 2020. Net loss margin was 23.5% in the second six months of 2021 compared with 65.9% in the same period of 2020.

Non-GAAP adjusted net loss, which excluded share-based compensation expenses and impairment loss from net loss, was RMB96.7 million (US$15.2 million) in the second six months of 2021, compared with RMB215.1 million in the same period of 2020.

Non-GAAP adjusted EBITDA, which excluded share-based compensation expenses, impairment loss, depreciation and amortization, interest income and expenses, and income tax benefits from net loss, for the second six months of 2021 was a loss of RMB94.6 million (US$14.8 million), compared with a loss of RMB207.4 million in the same period of 2020.

Fiscal Year 2021 Financial Results

Total revenues for the fiscal year of 2021 increased by 37.4% to RMB805.0 million (US$126.3 million) from RMB585.8 million in the prior year.

Total revenues from recommendation services increased by 42.2% to RMB575.2 million (US$90.3 million) in the fiscal year of 2021 from RMB404.4 million in the prior year.

Revenues from recommendation services for credit cards increased by 38.4% to RMB407.8 million (US$64.0 million) in the fiscal year of 2021 from RMB294.6 million in the prior year. Credit card volume in the fiscal year of 2021 and 2020 were approximately 3.7 million and 2.8 million, respectively. The average fee per credit card increased to RMB109.8 (US$17.2) in the fiscal year of 2021 from RMB106.8 in the prior year.

Revenues from recommendation services for loans increased by 52.6% to RMB167.5 million (US$26.3 million) in the fiscal year of 2021 from RMB109.8 million in the prior year, primarily due to the increase in number of loan applications on our platform. The number of domestic loan applications on the Company’s platform was approximately 13.6 million in the fiscal year of 2021, representing an increase of approximately 94.3% from fiscal year 2020. The average fee per domestic loan application decreased to RMB11.4 (US$1.8) in the fiscal year of 2021 from RMB13.3 in the prior year. The recommendation revenue of loans generated from overseas markets was 7.6% of total loan recommendation revenues in the fiscal year of 2021, less contribution than prior year. The global COVID-19 pandemic and the associated inability to travel globally has negatively impacted our overseas business.

Revenues from big data and system-based risk management services decreased by 9.6% to RMB130.4 million (US$20.5 million) in the fiscal year of 2021 from RMB144.2 million in the prior year, primarily due to the decrease of the number of paying customers in the fiscal year of 2021.

Revenues from advertising and marketing services and other services increased by 167.2% to RMB99.4 million (US$15.6 million) in the fiscal year of 2021 from RMB37.2 million in the prior year, primarily due to the growth of insurance brokerage services and initiatives of other new businesses.

Cost of promotion and acquisition increased by 48.2% to RMB562.1 million (US$88.2 million) in the fiscal year of 2021 from RMB379.4 million in the prior year. The increase was primarily in line with the growth of our revenue from recommendation services, advertising and marketing services and other services.

Cost of operation decreased by 4.2% to RMB88.0 million (US$13.8 million) in the fiscal year of 2021 from RMB91.9 million in the prior year. The decrease was primarily attributable to the decrease in depreciation expenses, and bandwidth and server costs, partially offset by the increase in data acquisition costs.

Sales and marketing expenses increased by 11.6% to RMB143.5 million (US$22.5 million) in the fiscal year of 2021 from RMB128.6 million in the prior year. The increase was primarily due to the increase in sales and marketing staff for new businesses.

Research and development expenses decreased by 14.5% to RMB132.4 million (US$20.8 million) in the fiscal year of 2021 from RMB154.8 million in the prior year, primarily due to the continued cost optimization measures.

General and administrative expenses increased by 0.7% to RMB137.5 million (US$21.6 million) in the fiscal year of 2021 from RMB136.6 million in the prior year. The increase was primarily attributable to the increase in payroll expenses and share-based compensation expenses, partially offset by the decrease in professional fees and allowance for credit losses.

Others, net increased by 417.9% to RMB58.0 million (US$9.1 million) in the fiscal year of 2021 from RMB11.2 million in the prior year. The increase was primarily from the realized investment gain of RMB51.2 million from the investment in Conflux Global, a decentralized applications blockchain solution provider.

Net loss was RMB204.1 million (US$32.0 million) in the fiscal year of 2021 compared with RMB312.1 million in the prior year. Net loss margin was 25.4% in the fiscal year of 2021 compared with 53.3% in the prior year.

Non-GAAP adjusted net loss, which excluded share-based compensation expenses and impairment loss from net loss, was RMB186.7 million (US$29.3 million) in the fiscal year of 2021, compared with RMB333.4 million in the prior year.

Non-GAAP adjusted EBITDA, which excluded share-based compensation expenses, impairment loss, depreciation and amortization, interest income and expenses, and income tax benefits from net loss, for the fiscal year of 2021 was a loss of RMB179.2 million (US$28.1 million), compared with a loss of RMB315.8 million in the prior year.

As of December 31, 2021, the Company had cash and cash equivalents, time deposits, restricted cash and time deposits and short-term investment of RMB762.8 million (US$119.7 million), and working capital of approximately RMB424.9 million (US$66.7 million). Compared to as of December 31, 2020, cash and cash equivalents, restricted cash, time deposits and investment and short-term investment decreased by RMB233.2 million (US$36.6 million), which was attributable to net cash used in operating activities.

Weidai Ltd. Announces Full Year 2021 Financial Results

by DigitalCFO Newsroom

Published on

Banking & Financial Services/Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 12 April 2022

Weidai Ltd. today announced its financial results for the year ended December 31, 2021.

Weidai Ltd. (“Weidai” or the “Company”) (NYSE: WEI), a leading auto-backed financing solution provider in China, today announced its financial results for the year ended December 31, 2021, which have not been audited or reviewed by the Company’s independent registered accounting firm.

Full Year 2021 Operational Results

Loan balance
Total loan balance as of December 31, 2021 was RMB853.0 million (US$133.9 million).

Full Year 2021 Financial Results

Net revenues in 2021 were RMB707.5 million (US$111.0 million). Among net revenues, loan service fee was RMB698.8 million (US$109.7 million), other revenues were RMB10.2 million (US$1.6 million) and net financing income was RMB1.2 million (US$183 thousand).

Provision for loans and advances in 2021 was RMB807.3 million (US$126.7 million).

Operating costs and expenses in 2021 were RMB644.3 million (US$101.1 million). Among operating costs and expenses, provision for financial guarantee liabilities was RMB76.1 million (US$11.9 million), origination and servicing expenses were RMB380.6 million (US$59.7 million), sales and marketing expenses were RMB3.4 million (US$0.5 million), general and administrative expenses were RMB162.0 million (US$25.4 million), and research and development expenses were RMB22.2 million (US$3.5 million). Share-based compensation expense in 2021 were RMB10.3 million (US$1.6 million).

Loss from operations in 2021 was RMB744.1 million (US$116.8 million).

Income tax expenses in 2021 were RMB403.9 million (US$63.4 million).

Net loss in 2021 was RMB1,144.0 million (US$179.5 million).

Comprehensive loss attributable to Weidai Ltd.’s ordinary shareholders in 2021 was RMB1,140.7 million (US$179.0 million).

Adjusted net loss in 2021 was RMB1,133.8 million (US$177.9 million).

Regulatory Developments

The Company commenced the process to exit the peer-to-peer lending business in May 2020. From July 2020 to December 2021, the Company closely cooperated with government authorities to promote a smooth exit of peer-to-peer investments. In July 2021, the Company, in cooperation with the relevant governmental authorities, repaid all outstanding net principal balances (the aggregate principal invested by a certain investor minus the aggregate amount that has been withdrawn by such investor) to investors on its platform. From December 2021 to date, the Company continues to cooperate with government authorities to complete its exit of the peer-to-peer lending industry.

Use of Non-GAAP Financial Measures

The Company uses adjusted net loss, a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes. The Company believes that adjusted net loss helps identify underlying trends in its business by excluding the impact of share-based compensation expenses. The Company believes that adjusted net loss provides useful information about its operating results, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.

Adjusted net loss is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as an analytical tool, and when assessing the Company’s operating performance, cash flows or liquidity, investors should not consider it in isolation, or as a substitute for net loss, cash flows provided by operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

Budgeting, Planning and Forecasting in 2022

by Fatihah Ramzi

Published on

DCFO Spotlight/Financial Planning & Analysis

Fatihah Ramzi, DigitalCFO Newsroom | 11 April 2022

Finance professionals will be able to rapidly and efficiently adjust future budgets if they focus on a good forecasting strategy and use scalable FP&A software.

Inflation, supply chain disruptions, and other reasons are pushing FP&A executives to be more proactive and nimble in their planning. A rigid, walled, spreadsheet-based model to financial planning, on the other hand, will significantly limit their potential to provide improved foresight and planning agility. Making a yearly budget is similar to playing chess. Every decision must be logical, calculated, and deliberate.

In today’s uncertain environment, accurate planning and forecasting have never been more important for a company. Unfortunately, as we’ve seen with this worldwide pandemic, the only certainty for businesses is that unpredictability will always exist. Companies must be proactive in their strategy development and modify for what-if situations, changes in the market, or even a worldwide crisis so that they are able to easily embrace these ever-changing conditions. So, how can businesses think beyond the box and be ready for anything? By creating a more effective financial budget.

If CFOs and financial leaders throughout the world want to enhance their budget execution, they must change the way companies do business. Finance professionals will be able to rapidly and efficiently adjust future budgets if they focus on a good forecasting strategy and use scalable FP&A software.

Creating A More Agile Budget

Is your CFO armed with all the financial data they will need to produce an annual comprehensive financial report? The CFO must have a clear perspective of the organization’s overall financial reports and indicators in order to establish a robust annual budget. The strategic plan can then be tweaked as needed by top management.

Take a minute to reflect on the previous few years before you begin creating a budget. What was your team’s response to the COVID crisis? Were you able to swiftly adjust your forecasts, or did you lag behind and become disoriented during the most tough months? Your team can recognize where they need to adapt in the future through reflection of the past.

Take Into Account Of Assumptions & Do Stress Tests

How many stress tests and what-if scenarios were part of your budgeting process? If your finance team skips this stage when preparing a financial report, it’s time to rethink your approach. Consider how your company’s performance and growth have been affected during the last two years. Was your accounting department ready? Were you able to keep control of your financial flow, or did it suffer as a result? COVID’s rollercoaster of instability frequently caught FP&A teams completely off guard.

Senior management can adjust their financial estimates as needed by adopting a more aggressive financial planning and analysis methodology. Finance teams will be able to provide more value-driven data for financial budgets and forecasts if they invest in the correct technology and take an active part in strategic planning. To emphasize this point, make sure that senior management from all departments runs stress testing before finalizing a financial report. The entire organization will be able to pivot together as needed by coordinating all teams and enhancing communication across departments.

Consider Zero-Based Budgeting

Zero-based budgeting, according to Investopedia, is a strategy in which all spending is justified for each period. This strategy ensures that every operation that corresponds to a company’s needs and costs is examined. Budgets can then be established on top of this basis, including what is required for the following period. In general, zero-based budgets are more thorough than other budgeting methods. As a result, professionals who employ this strategy can cut expenses and change estimates as needed based on historical performance and present situations.

A zero-based budgeting technique may be the ideal way for businesses to stay on their toes and adapt their budgets. CFOs and finance teams will be obliged to collaborate closely to assess existing spending and reallocate funds as needed. Overall, teams must have a thorough awareness of their financial picture every month if they wish to respond rapidly.

Create a Financial Safety Net

Did your team have a plan in place to deal with 2021’s unanticipated twists and turns? Companies may find it impossible to stay afloat through their most difficult months if they do not prepare properly. Companies can have peace of mind knowing they are protected if a blockage arises by setting up financial reserves.

Building an adaptable budget will enable the finance team to transfer resources as required during this time of uncertainty. What kind of variable costs can your organization face if a new epidemic breaks out? Evaluate the supplementary resources that will be required if your team is just getting started on a new venture. Your team will be able to postpone or move forward with a project if resources are available, regardless of the current scenario. This strategy increases organizational openness and aligns top management on current and future resource allocation.

Streamline Your Financial Planning & Analysis Process

Too many financial departments are trapped in the past, relying on manual data entry. Your team has to adopt scalable FP&A software if they want realistic budgets and more time for value-driven analyses. Finding the correct FP&A solution, whether it’s an Excel automation tool or another sort of financial automation software, can allow your team to remain nimble during the most uncertain circumstances. Teams will be able to put their best foot forward when preparing budgets and projections if they know which FP&A software components to look for and keep up to date on all the current FP&A trends.

The company must engage and source for the ideal solution if they wish to take a more proactive approach to their FP&A plan. Find FP&A software that is more than simply a forecasting tool; it should be a complete solution that transforms finance teams from number crunchers to decision-makers. Outsourced solution businesses can act as the missing element that revolutionizes the entire budget process from A to Z by integrating the solution with a broad variety of data systems and providing vital collaboration capabilities.

[Survey Report] xP&A Business Partnering Roadmap: Understanding breakthroughs, opportunities and determining the end goal

by Digital CFO Asia

Published on

CFO Insights/Financial Planning & Analysis/Resources

By: DigitalCFO & Jedox | 5 April 2022

Rapid tech innovations, dynamic customer demands and a global pandemic – We live in a world that is volatile and susceptible to disruptions. Leaders today need to know sooner, act faster, and adapt more quickly to changing business conditions.

To that end, the value of planning and analysis has never been more crucial. Businesses may have made decisions in the past using spreadsheets, siloed procedures, and unlinked end-to-end systems. However, with the emergence of digitisation and constant volatility of the market, these traditional ways may now lead to more delays, errors, and frustrations.

DigitalCFO & Jedox jointly organised a physical CFO Executive Roundtable discussion with more than 10 senior finance leaders sharing valuable insights with each other.

Download the survey report to get further xP&A insights from the industry’s leading finance leaders

X Financial Reports Fourth Quarter and Fiscal Year 2021 Unaudited Financial Results

by DigitalCFO Newsroom

Published on

Banking & Financial Services/Business News/Financial Planning & Analysis

DigitalCFO Newsroom | 31 March 2022

X Financial Approved a Share Repurchase Plan

X Financial, a leading online personal finance company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2021.

Fourth Quarter 2021 Financial Highlights

Total net revenue in the fourth quarter of 2021 was RMB823.4 million (US$129.2 million), representing an increase of 15.0% from RMB716.3 million in the same period of 2020.
Income from operations in the fourth quarter of 2021 was RMB311.6 million (US$48.9 million), compared with loss from operations of RMB857.3 million in the same period of 2020.
Net income attributable to X Financial shareholders in the fourth quarter of 2021 was RMB145.5 million (US$22.8 million), compared with net loss attributable to X Financial shareholders of RMB655.5 million in the same period of 2020.
Non-GAAP adjusted net income attributable to X Financial shareholders in the fourth quarter of 2021 was RMB183.0 million (US$28.7 million), compared with Non-GAAP adjusted net loss attributable to X Financial shareholders of RMB630.8 million in the same period of 2020.
Net income per basic and diluted American depositary share (“ADS”)[2] in the fourth quarter of 2021 was RMB2.64 (US$0.41) and RMB2.58 (US$0.40), compared with net loss per basic and diluted ADS of RMB12.24 and RMB12.24, respectively, in the same period of 2020.
Non-GAAP adjusted net income per basic and adjusted diluted ADS in the fourth quarter of 2021 was RMB3.30 (US$0.52) and RMB3.24 (US$0.51), compared with Non-GAAP adjusted net loss per basic and diluted ADS of RMB11.76 and RMB11.76, respectively, in the same period of 2020.

Fourth Quarter 2021 Operational Highlights

The total loan amount facilitated and provided[3] in the fourth quarter of 2021 was RMB13,084 million, representing an increase of 50.9% from RMB8,673 million in the same period of 2020 and a decrease of 13.3% from RMB15,085 million in the previous quarter. Xiaoying Credit Loan[4] accounted for 100.0% of the Company’s total loan amount facilitated and provided in the fourth quarter of 2021, compared with 92.2% in the same period of 2020.
The total outstanding loan balance[5] as of December 31, 2021 was RMB24,912 million, compared with RMB24,509 million as of September 30, 2021 and RMB13,218 million as of December 31, 2020.
The delinquency rate for all outstanding loans that are past due for 31-60 days as of December 31, 2021 was 1.48%, compared with 0.96% as of September 30, 2021 and 0.79% as of December 31, 2020.
The number of cumulative borrowers[6] was 8.2 million as of December 31, 2021.
Total cumulative registered users reached 67.0 million as of December 31, 2021.

Fiscal Year 2021 Financial Highlights

Total net revenue in 2021 was RMB3,626.5 million (US$569.1 million), representing an increase of 65.4% from RMB2,193.0 million in 2020.
Income from operations in 2021 was RMB1,311.0 million (US$205.7 million), compared with loss from operations of RMB1,430.3 million in 2020.
Net income attributable to X Financial shareholders in 2021 was RMB825.4 million (US$129.5 million), compared with net loss attributable to X Financial shareholders of RMB1,308.5 million in 2020.
Non-GAAP adjusted net income attributable to X Financial shareholders in 2021 was RMB913.8 million (US$143.4 million), compared with non-GAAP adjusted net loss attributable to X Financial shareholders of RMB1,228.4 million in 2020.
Net income per basic and diluted American depositary share (“ADS”) was RMB15.06 (US$2.36) and RMB14.70 (US$2.31) in 2021, compared with net loss per basic and diluted American depositary share (“ADS”) of RMB24.42 and RMB24.42, respectively, in 2020.
Non-GAAP adjusted net income per basic and adjusted diluted ADS was RMB16.68 (US$2.62), and RMB16.26 (US$2.55) in 2021, compared with non-GAAP adjusted net loss per basic and adjusted diluted ADS of RMB22.92 and RMB22.92, respectively, in 2020.

Fiscal Year 2021 Operational Highlights

The total loan amount facilitated and provided in 2021 was RMB51,859 million, representing an increase of 74.7% from RMB29,676 million in 2020.
The total loan amount facilitated and provided of Xiaoying Credit Loan in 2021 was RMB51,859 million, representing an increase of 115.6% from RMB24,058 million in 2020. Xiaoying Credit Loan accounted for 100.0% of the Company’s total loan amount facilitated and provided in 2021, compared with 81.1% in 2020.

Mr. Justin Tang, the Founder, Chief Executive Officer and Chairman of the Company, commented, “We are very pleased to conclude 2021 with another solid quarter of financial results, delivering profitability for the full year. Both our top and bottom lines for the fourth quarter significantly improved over the same period of 2020. Despite a challenging macro economy and regulatory environment in 2021, we have successfully turned our business back on track and maintained steady growth momentum compared with 2020. The total loan amount facilitated and provided in 2021 increased by 75% year-over-year to RMB52 billion from RMB30 billion. With a very focused product strategy and effective cost control initiatives, we turned profitable in 2021 and our bottom line outperformed the full year of 2019, the year before the COVID-19 outbreak.”

“In the fourth quarter of 2021, we invested RMB315 million and become an indirect minority shareholder of Newup Bank of Liaoning, a PRC company and non-state-owned bank (“Newup Bank”). We are exploring opportunities to cooperate with Newup Bank to better serve Small-Medium Companies (“SMEs”) and we are confident that, based on our advantages in technology and risk management capabilities, the co-operation with Newup Bank could bring more possibilities to our business to jointly empower and support the development of the economy in China.”

“Heading into 2022, we expect regulatory uncertainties to subside with clearer guidelines from authorities. The Chinese government has affirmed the value of Fintech industry to address people’s inclusive financial needs and support the development of SMEs. We remain cautiously optimistic about our business outlook while being prepared for any macro uncertainties that may emerge in 2022.”

“In order to pass on our confidence to the market and increase shareholders value, our board has been timely evaluating, based on current market environment, regulatory policy and condition of business operation, multiple ways of returning profits to our shareholders, including share repurchase as well as cash dividend distribution. Recently, our board approved a US$15 million share repurchase plan, which reflects our confidence in the Company’s fundamentals, strategy and sustainable growth. We are looking forward to an increase of shareholder value in the future.”

Mr. Kent Li, President of the Company, added, “During the fourth quarter, our total loan amount facilitated and provided reached RMB13 billion, an increase of 51% year-over-year. As mentioned in our previous guidance, we saw a moderate sequential decline in the loan volume in the fourth quarter, which was mainly attributed to the year-end outstanding loan balance requirements of our institutional funding partners. In the first quarter of 2022, the level of available funds has resumed its normal pattern. Since 2020, we have shifted our product focus to Xiaoying Card Loan, which contributed 100% to the total loan amount facilitated and provided in 2021. With this focused and proven product strategy, we are confident in our ability to sustain steady growth in the loan facilitation business in 2022.”

“Regarding asset quality, the delinquency rate for all outstanding loans that are past due for 31-60 days as of December 31, 2021 was 1.48%, higher than 0.96% as of September 30, 2021 and 0.79% as of December 31, 2020. This fluctuation is mainly attributed to the liquidity tightening in the fourth quarter of 2021. Since February 2022, we have seen our asset quality gradually improving as a result of ample liquidity in financial markets and our stricter risk management measures.”

“In 2021, we officially commenced operation of our microcredit business in the third quarter after we received regulatory approval for our microcredit license, and during the fourth quarter, we further increased its registered capital to RMB1 billion in compliance with the regulations. We are on track with our microcredit business and look forward to creating more value for our shareholders.”

Mr. Frank Fuya Zheng, Chief Financial Officer of the Company, added, “We are pleased to deliver solid financial results for both the fourth quarter and the full year of 2021. Total net revenue increased by 15% year-over-year to RMB823 million in the fourth quarter. We saw a significant improvement in our bottom line. In the fourth quarter, net income improved to RMB146 million from a loss of RMB656 million in the same period of 2020, and Non-GAAP adjusted net income improved to RMB183 million from a loss of RMB631 million in the same period of 2020. For the full year 2021, total net revenue increased by 65% to RMB3,626 million. Thanks to our relentless efforts on cost management, total operating costs and expenses decreased by 36% to RMB2,315 million. Net income improved to RMB825 million in 2021 from a loss of RMB1,309 million, and Non-GAAP adjusted net income improved to RMB914 million in 2021 from a loss of RMB1,228 million a year ago.”

“In conclusion, we are greatly encouraged by the strong results we delivered in 2021, which fully demonstrate the resilience and growth potential of our business. Going forward, we will continue to expand and deepen our cooperation with more institutional funding partners to meet the needs of consumers and SMEs, and execute our proven strategy to drive sustainable long-term growth and returns for our partners and shareholders.”

Fourth Quarter 2021 Financial Results

Total net revenue in the fourth quarter of 2021 increased by 15.0% to RMB823.4 million (US$129.2 million) from RMB716.3 million in the same period of 2020, primarily due to an increase in the total loan amount facilitated and provided of Xiaoying Card Loan this quarter compared with the same period of 2020.

Loan facilitation service fees under the direct model in the fourth quarter of 2021 increased by 3.2% to RMB487.8 million (US$76.5 million) from RMB472.6 million in the same period of 2020, primarily due to an increase in the amount of Xiaoying Card Loan facilitated through the direct model compared with the same period of 2020.

Post-origination service fees in the fourth quarter of 2021 increased by 129.0% to RMB94.8 million (US$14.9 million) from RMB41.4 million in the same period of 2020, primarily due to the cumulative effect of increased volume of loans facilitated in the previous quarters. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing income in the fourth quarter of 2021 increased by 27.6% to RMB219.1 million (US$34.4 million) from RMB171.7 million in the same period of 2020, primarily due to a change in the product mix resulting from an increase in revenue generated by Xiaoying Card Loan this quarter compared with the same period of 2020, which carried a higher service fee rate; and also partially offset by a decrease in average loan balances held by the Company.

Other revenue in the fourth quarter of 2021 decreased by 28.6% to RMB21.8 million (US$3.4 million) from RMB30.5 million in the same period of 2020, primarily due to a decrease in commission fees from our online shopping mall.

Origination and servicing expenses in the fourth quarter of 2021 decreased by 29.9% to RMB385.8 million (US$60.5 million) from RMB550.7 million in the same period of 2020, primarily due to the decline in collection expenses resulting from the asset quality improvement and a decrease in insurance fee paid to insurance company.

General and administrative expenses in the fourth quarter of 2021 increased by 71.0% to RMB62.2 million (US$9.8 million) from RMB36.4 million in the same period of 2020, primarily due to an increase in share-based compensation expenses in the fourth quarter of 2021.

Sales and marketing expenses in the fourth quarter of 2021 increased by 9.5% to RMB5.3 million (US$0.8 million) from RMB4.9 million in the same period of 2020, primarily due to an increase in marketing expenses resulting from the business expansion.

Provision for accounts receivable and contract assets in the fourth quarter of 2021 was RMB19.5 million (US$3.1 million), compared with reversal of provision for accounts receivable and contract assets of RMB13.2 million in the same period of 2020, primarily due to an increase in accounts receivable from facilitation services as a result of the increase in total loan facilitation amount in the fourth quarter of 2021 compared with the same period of 2020.

Provision for loans receivable in the fourth quarter of 2021 was RMB40.3 million (US$6.3 million), compared with RMB33.7 million in the same period of 2020, primarily due to an increase in loans receivable held by the Company as a result of the increase in total loan amount facilitated and provided in the fourth quarter of 2021 compared with the same period of 2020.

Income from operations in the fourth quarter of 2021 was RMB311.6 million (US$48.9 million), compared with loss from operations of RMB857.3 million in the same period of 2020.

Income before income taxes and loss from equity in affiliates in the fourth quarter of 2021 was RMB301.1 million (US$47.3 million), compared with loss before income taxes and loss from equity in affiliates of RMB877.2 million in the same period of 2020.

Income tax expense in the fourth quarter of 2021 was RMB154.2 million (US$24.2 million), compared with income tax benefit of RMB227.0 million in the same period of 2020.

Net income attributable to X Financial shareholders in the fourth quarter of 2021 was RMB145.5 million (US$22.8 million), compared with net loss attributable to X Financial shareholders of RMB655.5 million in the same period of 2020.

Non-GAAP adjusted net income attributable to X Financial shareholders in the fourth quarter of 2021 was RMB183.0 million (US$28.7 million), compared with Non-GAAP adjusted net loss attributable to X Financial shareholders of RMB630.8 million in the same period of 2020.

Net income per basic and diluted ADS in the fourth quarter of 2021 was RMB2.64 (US$0.41), and RMB2.58 (US$0.40), compared with net loss per basic and diluted ADS of RMB12.24 and RMB12.24, respectively, in the same period of 2020.

Non-GAAP adjusted net income per basic and diluted ADS in the fourth quarter of 2021 was RMB3.30 (US$0.52), and RMB3.24 (US$0.51), compared with Non-GAAP adjusted net loss per basic and diluted ADS of RMB11.76 and RMB11.76, respectively, in the same period of 2020.

Cash and cash equivalents was RMB584.8 million (US$91.8 million) as of December 31, 2021, compared with RMB971.8 million as of September 30, 2021.

Long-term investments were RMB560.0 million (US$87.9 million) as of December 31, 2021, compared with RMB295.6 million as of December 31, 2020, primarily due to an acquisition, with a total consideration of RMB315 million, of 45% outstanding shares of Shenyang Tianxinhao Technology Limited, a PRC company, which holds 28% equity interest of Newup Bank. The Company does not have ability to take in the control or management of the affairs or the conduct of the business of Newup Bank.

Fiscal Year 2021 Financial Results

Total net revenue in 2021 increased by 65.4% to RMB3,626.5 million (US$569.1 million) from RMB2,193.0 million in 2020, primarily due to an increase in the total loan amount facilitated and provided of Xiaoying Card Loan this year compared with 2020.

Loan facilitation service fees under the direct model in 2021 increased by 101.0% to RMB2,545.4 million (US$399.4 million) from RMB1,266.5 million in 2020, primarily due to an increase in the amount of Xiaoying Card Loan facilitated through the direct model during the year compared with 2020.

Loan facilitation service fees under the intermediary model in 2021 decreased by 99.6% to RMB0.2 million (US$0.03 million), compared with RMB41.4 million in the same period of 2020, primarily due to the fact that substantially all of the institutional funding partners invested their funds in the loans facilitated under the direct model and/or the trust model, depending on their investment strategies.

Post-origination service fees in 2021 increased by 54.8% to RMB315.6 million (US$49.5 million) from RMB203.8 million in 2020, primarily due to the cumulative effect of increased volume of loans facilitated during the year. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing income in 2021 increased by 9.6% to RMB671.9 million (US$105.4 million) from RMB612.9 million in 2020, primarily due to a change in the product mix resulting from an increase in revenue generated by Xiaoying Card Loan in 2021 compared with 2020, which carried a higher service fee rate; and also partially offset by a decrease in average loan balances held by the Company.

Other revenue in 2021 increased by 36.6% to RMB93.4 million (US$14.7 million) from RMB68.3 million in 2020, primarily due to an increase in technology service fees received for providing assistant technology development services and referral service fee for introducing borrowers to other platforms.

Origination and servicing expenses in 2021 decreased by 5.2% to RMB1,963.0 million (US$308.0 million) from RMB2,071.5 million in 2020, primarily due to the decline in collection expenses resulting from the asset quality improvement and a decrease in interest expenses related to a decline in average loan balances held by the Company, and partially offset by the increase in commission fees resulting from the increased in total loan amount facilitated and provided this year compared with 2020.

General and administrative expenses in 2021 increased by 4.8% to RMB187.9 million (US$29.5 million) from RMB179.2 million in 2020, primarily due to the increase in share-based compensation expenses in 2021.

Sales and marketing expenses in 2021 decreased by 41.5% to RMB20.8 million (US$3.3 million) from RMB35.6 million in 2020, primarily due to a continuing cost reduction in promotional and advertising activities in the first half of 2021.

Provision for accounts receivable and contract assets in the fourth quarter was RMB77.2 million (US$12.1 million), compared with RMB121.5 million in 2020, primarily due to a decrease in the average estimated default rate compared with 2020.

Provision for loans receivable in 2021 was RMB76.0 million (US$11.9 million), compared with RMB245.2 million in 2020, primarily due to a decrease in the average estimated default rate compared with 2020, and partially offset by an increase in loans receivable held by the Company as a result of the increase in total loan amount facilitated and provided in 2021 compared with 2020.

Income from operations in 2021 was RMB1,311.0 million (US$205.7 million), compared with loss from operations of RMB1,430.3 million in 2020.

Income before income taxes and gain from equity in affiliates in 2021 was RMB1,190.8 million (US$186.9 million), compared with loss before income taxes and loss from equity in affiliates of RMB1,601.5 million in 2020.

Income tax expense in 2021 was RMB368.7 million (US$57.9 million), compared with income tax benefit of RMB299.9 million in 2020.

Net income attributable to X Financial shareholders in 2021 was RMB825.4 million (US$129.5 million), compared with net loss attributable to X Financial shareholders of RMB1,308.5 million in 2020.

Non-GAAP adjusted net income attributable to X Financial shareholders in 2021 was RMB913.8 million (US$143.4 million), compared with Non-GAAP adjusted net loss attributable to X Financial shareholders of RMB1,228.4 million in 2020.

Net income per basic and diluted ADS in 2021 was RMB15.06 (US$2.36), and RMB14.70 (US$2.31), compared with net loss per basic and diluted ADS of RMB24.42 and RMB24.42, respectively, in 2020.

Non-GAAP adjusted net income per basic and diluted ADS in 2021 was RMB16.68 (US$2.62), and RMB16.26 (US$2.55), compared with Non-GAAP adjusted net loss per basic and diluted ADS of RMB22.92 and RMB22.92, respectively, in 2020.

Cash and cash equivalents was RMB584.8 million (US$91.8 million) as of December 31, 2021, compared with RMB746.4 million as of December 31, 2020.

Share Repurchase Plan

The board of directors of the Company has approved a share repurchase plan under which the Company may repurchase up to US$15 million worth of its Class A ordinary shares in the form of American depositary shares (“ADSs”) over the next eighteen months, effective until September, 2023. Under the share repurchase plan, the repurchase may be made from time to time through various means, including open market transactions, privately negotiated transactions, and through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The manner, timing and amount of any share repurchases will be determined by the Company’s management in its discretion based on its evaluation of various factors. The Company expects to fund repurchases out of its existing cash balance.

Business Outlook

The Company expects total loan amount facilitated and provided for the first quarter of 2022 to be between RMB15.0 billion and RMB15.4 billion, and the range of increment in total loan amount facilitated and provided for 2022 to be from 15% to 25%. This forecast reflects the Company’s current and preliminary views, which are subject to changes.

China Automotive Systems Reports Fourth Quarter And Fiscal Year 2021 Results

by DigitalCFO Newsroom

Published on

Business News/Financial Planning & Analysis/Supply Chain Management

DigitalCFO Newsroom | 31 March 2022

China Automotive Systems Inc., today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended December 31, 2021.

China Automotive Systems Inc., a leading power steering components and systems supplier in China, today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended December 31, 2021.

Fourth Quarter 2021 Highlights

Net sales declined by 5.3% to $138.8 million from $146.5 million in the fourth quarter of 2020
Gross margin was 14.2% compared with 15.6% in the fourth quarter of 2020
Income from operations was $0.6 million compared to loss from operations of $4.0 million in the fourth quarter of 2020
Net income attributable to parent company’s common shareholders was $5.0 million, or diluted net income per share of $0.16, compared to a net loss of $3.2 million, or diluted loss per share of $0.10 in the fourth quarter of 2020.

Fiscal Year 2021 Highlights

Net sales were $498.0 million compared to $417.6 million in 2020
Gross profit increased by 30.4% to $72.1 million compared to $55.3 million in 2020. Gross margin increased to 14.5% from 13.3% in 2020
Operating income was $5.5 million compared to operating loss of $8.1 million in 2020
Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020
Total cash and cash equivalents, pledged cash and short-term investments were $161.3 million
Net cash flow provided by operating activities was $28.3 million.

Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, “We are pleased to report that our operations returned to profitability in the fourth quarter in a challenging macroeconomic environment. According to the China Association of Automobile Manufacturers, overall sales of automobiles in China only grew by 3.8% in 2021. Our net sales increased by 19.3% year-over-year to $498.0 million in 2021 as sales in the domestic Chinese passenger market, our revenue from North America and our Brazilian operations all had strong growth. Our electric power steering (“EPS”) revenue increased 86.0% year-over-year and represented 23.2% of total revenues in 2021 compared with 14.8% a year ago. To enhance our New Energy Vehicle (“NEV”) products, we purchased a 40% interest in Sweden’s Sentient AB, and we also developed new steering for Alfa Romeo’s first luxury plug-in-hybrid SUV, the model 2021 Tonale.”

“We are encouraged for the 2022 year as passenger vehicle sales have risen in the first two months of 2022 and government policies have become more growth oriented,” Mr. Wu concluded.

Mr. Jie Li, Chief Financial Officer of CAAS, commented, “We maintained our financial strength as total cash and cash equivalents, pledged cash and short-term investments were $161.3 million, or approximately $5.23 per share at year end. We continued to generate strong free cashflow.”

Fourth Quarter of 2021

In the fourth quarter of 2021, net sales decreased by 5.3% to $138.8 million compared to $146.5 million in the same quarter of 2020. The net sales decrease was mainly due to a change in the product mix and lower demand for automobiles in the fourth quarter of 2021 compared with the fourth quarter of 2020.

Gross profit was $19.7 million in the fourth quarter of 2021, compared to $22.8 million in the fourth quarter of 2020. Gross margin in the fourth quarter of 2021 was 14.2% compared to 15.6% in the fourth quarter of 2020, primarily due to lower sales volume and a change in product mix.

Gain on other sales was $1.8 million in the fourth quarter of 2021, compared to $1.4 million in the fourth quarter of 2020.

Selling expenses were $3.4 million in the fourth quarter of 2021, compared to $5.6 million in the fourth quarter of 2020. Selling expenses represented 2.4% of net sales in the fourth quarter of 2021, compared to 3.8% in the fourth quarter of 2020.

General and administrative expenses (“G&A expenses”) were $7.6 million in the fourth quarter of 2021, compared to $14.3 million in the same period in 2020. G&A expenses represented 5.5% of net sales in the fourth quarter of 2021, compared to 9.8% of net sales in the fourth quarter of 2020. The significantly higher G&A expenses in the fourth quarter of 2020 were mainly attributable to a one-time, non-recurring expected credit loss provision of $6.4 million related to a customer’s bankruptcy reorganization proceeding.

Research and development expenses (“R&D expenses”) were $9.9 million in the fourth quarter of 2021, compared to $8.3 million in the fourth quarter of 2020. R&D expenses represented 7.1% of net sales in the fourth quarter of 2021, compared to 5.7% in the fourth quarter of 2020. Higher R&D expenses were mainly related to higher investments in EPS and NEV products.

Income from operations was $0.6 million in the fourth quarter of 2021, compared with a loss from operations of $4.0 million in the fourth quarter of 2020. Increase in the income from operations in the fourth quarter of 2021 was mainly due to a 25.9% year-over-year decrease in total operating expenses as both selling and G&A expenses declined significantly.

Interest expense was $0.5 million in the fourth quarter of 2021, compared to $0.4 million in the fourth quarter of 2020.

Financial expense was $1.5 million in the fourth quarter of 2021, compared with $2.0 million in the fourth quarter of 2020.

Loss before income tax expenses and equity in earnings of affiliated companies was $0.4 million in the fourth quarter of 2021, compared to a loss of $5.7 million in the fourth quarter of 2020.

Income tax expense was $0.7 million in the fourth quarter of 2021, compared to an income tax expense of $1.9 million for the fourth quarter of 2020, mainly due to a change in the valuation allowance recognized in the fourth quarter of 2021.

Net income attributable to parent company’s common shareholders was $5.0 million in the fourth quarter of 2021 compared to net loss attributable to parent company’s common shareholders of $3.2 million in the fourth quarter of 2020. The net loss in the fourth quarter of 2020 was mainly due to a one-time, non-recurring $6.4 million expected credit loss provision for a customer’s bankruptcy reorganization, net of minority interests. Diluted income per share was $0.16 in the fourth quarter of 2021, compared to diluted loss per share of $0.10 in the fourth quarter of 2020.

The weighted average number of diluted common shares outstanding was 30,853,822 in the fourth quarter of 2021, compared to 31,851,776 in the fourth quarter of 2020.

Fiscal Year 2021

Net sales increased by 19.3% to $498.0 million in 2021, compared to $417.6 million in 2020. The increase was mainly due to the recovery in net sales in the first half of 2021 from the COVID-19 pandemic’s impact on automobile sales in China and North America. In 2021, sales of hydraulic products increased by 7.6% year-over-year while total sale of EPS systems increased by 86.0% year-over-year. EPS sales represented 23.2% of total revenue in 2021 compared with 14.8% in 2020. Net sales of vehicle steering systems to the Company’s North American customers increased by 10.4% year-over-year in 2021.

Gross profit in 2021 increased by 30.4% to $72.1 million, compared to $55.3 million in 2020. The gross margin increased to 14.5% from 13.3% in 2020 mainly due to changes in the product mix.

Gain on other sales amounted to $4.4 million, generally consistent with $4.3 million in 2020.

Selling expenses were $18.3 million in 2021 compared to $14.5 million in 2020, mainly due to higher transportation expenses. Selling expenses represented 3.7% of net sales in 2021, compared to 3.5% in 2020.

G&A expenses declined 11.6% to $24.4 million in 2021 from $27.6 million in 2020. The decrease was mainly due to a decreased provision of allowance for doubtful accounts related to one customer’s bankruptcy reorganization in November 2020, which was partially offset by higher personnel costs. G&A expenses represented 4.9% of net sales in 2021 compared to 6.6% of net sales in 2020.

R&D expenses were $28.2 million in 2021, compared to $25.7 million in fiscal year 2020. The increase was primarily due to higher investment in EPS products. R&D expenses were 5.7% of net sales in 2021, compared to 6.2% of net sales in 2020.

Income from operations was $5.5 million in 2021, compared to a loss from operations of $8.1 million in 2020. The income was mainly due to a 30.4% increase in gross profit, with an offsetting impact of a 4.6% increase in total operating expenses in 2021. The loss in 2020 was primarily due to lower net sales and a one-time, non-recurring expected credit loss provision related to a customer’s bankruptcy reorganization.

Interest expense was $1.4 million in 2021, a slight decline from the $1.6 million in 2020.

Net financial expense was $2.4 million in 2021, compared with $4.9 million in 2020, primarily due to a decrease in foreign exchange losses.

Income before income tax expenses and equity in earnings of affiliated companies was $8.4 million, compared to a loss before income tax expenses and equity in earnings of affiliated companies of $12.2 million in fiscal year 2020. The change was primarily due to generating income from operations and lower net financial expense in 2021.

Net income attributable to parent company’s common shareholders was $11.1 million in 2021 compared to net loss attributable to parent company’s common shareholders of $5.0 million in 2020. The loss in 2020 was mainly due to lower sales and a one-time, non-recurring $6.4 million expected credit loss provision from a customer’s bankruptcy reorganization, net of minority interests. Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020.

The weighted average number of diluted common shares outstanding was 30,855,431 in 2021 compared to 31,077,196 in 2020.

Balance Sheet

As of December 31, 2021, total cash and cash equivalents, pledged cash and short-term investments were $161.3 million. Total accounts receivable including notes receivable were $210.3 million. Accounts payable including notes payable were $228.0 million and short-term bank loans were $47.6 million. Total parent company stockholders’ equity was $321.0 million as of December 31, 2021, compared to $303.2 million as of December 31, 2020. Net cash flow from operating activities was $28.3 million in 2021, compared with $57.4 million in 2020. Cash paid to acquire property, plant and equipment and land use rights was $9.3 million in 2021, compared with $15.8 million in 2020.

Business Outlook

Management provides revenue guidance for the fiscal year 2022 of $510 million. This target is based on the Company’s current views on operating and market conditions, which are subject to change.

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