Bluefocus Intelligent Communications Group Co.,Ltd. (300058.SZ), a leading domestic advertising company, recently released its interim 2025 performance report showing revenue growth but profit decline. Affected by a significant drop in Chinese business revenue in the first half and substantial credit impairment provisions during the reporting period, the company's net profit attributable to shareholders plummeted nearly 50% year-on-year.
Due to the expanding revenue share of low-margin overseas advertising business, Bluefocus has faced significant pressure on gross margins in recent years, with poor earnings stability. Limited by its business model, accounts receivable soared nearly 30% year-on-year in the first half, while net operating cash flow plunged over 160%. Against this backdrop, Bluefocus has embarked on its Hong Kong listing application journey. However, the overseas business that the company plans to focus on has been mired in low-margin difficulties in recent years, with the gross margin of this business further declining to merely 1.52% in the first half of this year. Facing multiple development concerns, whether Bluefocus can reverse its performance decline through the Hong Kong listing remains uncertain.
**Q2 Performance Severely Declined**
Financial reports show that in the first half of this year, Bluefocus achieved revenue of 32.36 billion yuan, up 4.87% year-on-year, compared to 40.33% growth in the same period last year; net profit attributable to shareholders reached 96.44 million yuan, down 47.33% year-on-year, compared to a 35.74% decline in the same period last year.
The substantial credit impairment provisions during the reporting period significantly dragged down Bluefocus's first-half profitability.
In the first half of this year, Bluefocus's accounts receivable balance reached 12.79 billion yuan, surging 27.64% year-on-year, far exceeding the 4.87% revenue growth rate for the same period. The main cause behind this situation is that Bluefocus needs to advance funds when placing advertisements for clients, while client payment cycles are relatively long.
In the first half of this year, Bluefocus made bad debt provisions for some accounts receivable with longer aging and higher collection risks, causing its credit impairment losses to surge to 79.44 million yuan, up 179.49% year-on-year, accounting for 82% of the net profit attributable to shareholders for the same period.
Looking at quarterly performance, although Bluefocus's Q1 revenue declined year-on-year, its net profit attributable to shareholders grew 16.01% year-on-year. However, Q2 performance was poor. While Q2 revenue increased 20.07% year-on-year, net profit attributable to shareholders plummeted from 95.5 million yuan in the same period last year to merely 9.378 million yuan, down 99.07% year-on-year.
Two factors led to significant Q2 performance decline: first, the company made credit impairment provisions of 45.73 million yuan, up 179.49% year-on-year; second, due to declining fair value of financial assets held, fair value change gains were -40.92 million yuan, down 263.8% year-on-year.
Beyond performance decline, Bluefocus's cash flow also seriously deteriorated in the first half.
In the first half, affected by simultaneous increases in client collections and payments to media, Bluefocus's net operating cash flow plummeted to -859.3 million yuan, down 163.49% year-on-year. In the first half of 2023 and 2024, this indicator was also negative, showing the company's operating cash flow has remained persistently negative, indicating its core business "cash generation capability" faces severe challenges.
As of the first half of this year, Bluefocus held 3.552 billion yuan in monetary funds and 206.6 million yuan in trading financial assets, with short-term borrowings and non-current liabilities due within one year totaling 2.108 billion yuan. Behind seemingly abundant liquidity, its accounts payable reached 11.95 billion yuan.
In the first half, Bluefocus's total liabilities reached 15.67 billion yuan, with an asset-liability ratio of 67.11%, further rising from 63.23% in the same period last year. Meanwhile, comparable companies Yeahmobi and Tianyu Media had asset-liability ratios of only 40.56% and 31.35% respectively for the same period.
Dragged down by high debt levels, in 2024 and the first half of this year, Bluefocus's interest expenses reached 104.4 million yuan and 45.47 million yuan respectively, representing -35.9% and 47.1% of net profit attributable to shareholders for the respective periods.
**Three Major Business Segments All Face Pressure**
From a main business perspective, all three major business segments of Bluefocus faced pressure in the first half of this year.
Founded in 1996, Bluefocus is one of China's earliest established public relations companies. Currently, the company's main businesses include overseas advertising placement, integrated marketing services, and integrated advertising agency services.
The overseas advertising business is Bluefocus's core business, accounting for 79.5% of revenue in 2024.
This business operates by having Bluefocus serve as an official authorized agent for media platforms like Meta and Google domestically, providing overseas advertising services to Chinese companies in cross-border e-commerce and other fields. In recent years, benefiting from sustained rapid growth in China's cross-border e-commerce export volumes, Bluefocus has continuously expanded this business's revenue scale.
In the first half of this year, Bluefocus's overseas advertising business achieved revenue of 27.005 billion yuan, up 13.51% year-on-year, with its revenue share rising from 77.1% in the same period last year to 83.45%. However, due to significant increases in operating costs, the gross margin fell further from 1.61% in the same period last year to 1.52%. Business profits therefore achieved only marginal growth.
Due to the further expansion of low-margin overseas advertising business revenue share, Bluefocus's overall gross margin also declined from 2.97% in the same period last year to 2.83% in the first half of this year.
For Chinese business, the situation is even less optimistic.
The domestic marketing communication services industry has been exceptionally competitive in recent years. Bluefocus believes this industry is an intellectual services sector with characteristics of talent intensity, low industry concentration, and light assets, with relatively low market entry barriers. Particularly in internet advertising, the emergence of numerous digital media platforms in recent years has intensified industry competition.
In the first half of this year, Bluefocus's Chinese business achieved combined revenue of 5.355 billion yuan, plummeting 24.23% year-on-year, with its revenue share also declining from 22.9% in the same period last year to 16.55%. In 2024, this business's revenue declined over 18% year-on-year.
Specifically within Chinese business, integrated marketing services (11.32% revenue share) achieved revenue of 3.664 billion yuan in the first half, down 27% year-on-year. Integrated advertising agency services (5.22% revenue share) achieved revenue of 1.691 billion yuan in the first half, down 17.43% year-on-year.
From a gross margin perspective, both integrated marketing services and integrated advertising agency services achieved some cost control effectiveness in the first half, with gross margins both increasing to 9.67% and 8.96% respectively. However, both businesses' gross margin improvements remained modest at 2.56% and 0.34% respectively. Affected by significant revenue declines, both businesses' profit contributions still declined year-on-year.
**Company Profitability Has Continued Declining in Recent Years**
Bluefocus has submitted its Hong Kong listing application. Overseas cross-border marketing business will be one of the company's key focus areas going forward. However, this business has been persistently mired in low-margin difficulties in recent years. Dragged down by this, the company's profitability has also significantly weakened, casting a shadow over its Hong Kong listing journey.
In June this year, Bluefocus announced it had submitted an application to the Hong Kong Stock Exchange for H-share issuance and main board listing. This move aims to deeply advance the company's "global development" strategic deployment, build an international capital operation platform, support continuous upgrading of global industry layout, and accelerate construction of a domestic-international dual circulation pattern.
According to application documents disclosed by Bluefocus, at the strategic planning level, "Globalization Going Overseas 2.0" is one of the company's future development strategies. The documents state that in recent years, overseas cross-border marketing has become one of the fastest-growing sub-segments in China's marketing industry. The overseas cross-border marketing industry is expected to maintain strong growth momentum in coming years, bringing enormous growth opportunities for the company.
Regarding funding usage, the disclosed documents only briefly outlined general directions, with one funding purpose being overseas global business network construction.
Although Bluefocus has high hopes for its overseas business, this business has been persistently mired in low-margin difficulties in recent years, with concerning profitability.
Financial reports show that from 2021-2024, Bluefocus's overseas advertising business gross margins were only 1.74%, 1.5%, 1.66%, and 1.73% respectively, consistently hovering at low levels. Meanwhile, its Chinese integrated marketing services business gross margins for the same periods were 17.22%, 12.77%, 8.37%, and 6.78% respectively.
Notably, as low-margin overseas advertising business revenue share has significantly increased in recent years, Bluefocus's overall gross margin has shown a significant declining trend, with company earnings stability also facing severe challenges.
From 2022-2024, Bluefocus's gross margins were 4.69%, 3.44%, and 2.56% respectively, continuously declining. Net profits attributable to shareholders for the same periods were -2.175 billion yuan, 116.6 million yuan, and -290.7 million yuan respectively.
Bluefocus's involvement with Meta and Google businesses has relatively low gross margins, which is the main reason for its overseas business's poor margin performance. In the first half of this year, Bluefocus stated that the ideal revenue structure for future overseas advertising business would be: Meta and Google revenue share around 50%, small and medium media revenue share around 30%, and AI platform-driven business revenue share at 10%-20%. If this structure can be established, the business's gross margin could further improve in the future. Otherwise, margin growth for this business would not be sustainable. This means significant uncertainty remains regarding whether this business can effectively grow margins in the future.
Comments