METROPOLIS CAP issued a profit warning, expecting an annual pre-tax loss to increase by approximately 400%
METROPOLIS CAP issued a profit warning, expecting a pre-tax loss to increase by approximately 400% in the fiscal year 2024, reaching about RMB 2 million. The increase in losses is mainly due to a loss provision of approximately RMB 7.1 million for financing lease receivables and sale-leaseback arrangements, as well as loss provisions for other receivables and financial guarantee contract liabilities. Despite an increase in revenue and a reduction in some costs, the rise in the default loss rate of credit losses has led to a decrease in expected recovery rates, affecting overall financial performance
According to the announcement from METROPOLIS CAP (08621), the group expects to incur a pre-tax loss increase of approximately 400% in the fiscal year 2024, compared to approximately RMB 2 million for the fiscal year ending December 31, 2023.
The increase in pre-tax loss is mainly due to a provision for losses of approximately RMB 7.1 million related to the recognition of receivables from finance lease receivables and sale-leaseback arrangements in the fiscal year 2024, compared to a reversal of provisions for losses of approximately RMB 10.4 million in the fiscal year 2023; a provision for losses of approximately RMB 3.1 million related to financial guarantee contract liabilities; a provision for losses of approximately RMB 1.4 million related to other receivables (advances to supporting service providers); and an increase in other operating expenses, partially offset by a decrease in provisions for losses on confirmed factoring receivables; an increase in revenue; and a reduction in employee costs and financing costs.
The provision for losses on lease receivables is due to an increase in the default loss rate used to calculate the expected credit losses for the fiscal year 2024. The increase in the default loss rate is mainly due to the group's expectation of a lower recovery rate of accounts receivable from customers, primarily caused by the decline in the prices of leased assets (vehicles). On the other hand, the reversal of provisions for losses on lease receivables of approximately RMB 10.4 million in the fiscal year 2023 was mainly due to a large amount of repayments during the same period. Similar to the reasons for the provision for losses on lease receivables recognized by the group in the fiscal year 2024, the group also recognized provisions for losses on other receivables (advances to supporting service providers) and financial guarantee contract liabilities related to automotive financing leases in the fiscal year 2024. Despite a decrease in factoring receivables in the fiscal year 2024, a provision for losses on factoring receivables of approximately RMB 5.3 million was still recognized due to several factoring receivables being overdue for a long time. Since the group recognized a large provision for losses on factoring receivables of approximately RMB 12.2 million in the fiscal year 2023 due to an increase in factoring receivables and several overdue factoring receivables, the provision for losses on factoring receivables recognized in the fiscal year 2024 has decreased compared to the fiscal year 2023.
In the fiscal year 2024, the group's expansion in automotive financing lease business involving financial guarantees and financing lease consulting services has slowed down. The group's current focus is on actively taking measures to recover receivables, such as selling mortgaged vehicles and suing defaulting customers
