[Supplemental Announcement: Regarding the 2024 Annual Report](index=1&type=section&id=Supplemental%20Announcement%20As%20of%20December%2031%2C%202024%20Annual%20Report) [Share Repurchase and Treasury Share Handling Explanation](index=1&type=section&id=Share%20Repurchase%20and%20Treasury%20Share%20Handling%20Explanation) This announcement clarifies the company's handling of shares repurchased in 2024, held as treasury stock for future disposition Details of 2024 Share Repurchases | Item | Details | | :--- | :--- | | Number of Shares Repurchased | 10,024,000 shares | | Total Consideration (excluding expenses) | HKD 14,833,500 | | Handling Method | Held as treasury shares | - The company will determine the future disposition of treasury shares, including **cancellation, sale at market price, or other compliant uses**, based on market conditions and capital management needs[2](index=2&type=chunk)

Financial Performance - The company's revenue for the year ended December 31, 2024, was HK$3,162,391,000, representing a growth of 1.7%[8] - The profit attributable to owners of the company was HK$96,882,000, reflecting an increase of 11.8%[9] - Earnings per share for the year were HK$17.2 cents, up by 13.2% compared to the previous year[9] - The gross profit margin improved to 23.5%, an increase of 0.8 percentage points[8] - Sales volume reached 264,000 metric tons, marking a growth of 9.6%[11] - The company declared a dividend of 14 HK cents for the year, which is a 16.7% increase[9] - The gearing ratio stood at 16.7%, an increase of 2.7 percentage points[9] - The Group recorded a revenue of HK$3.16 billion for the year, representing a slight decrease of 1.7% compared to the previous year[24] - Profit attributable to owners increased by 11.8% year-on-year to HK$96.9 million[24] - The Group's gearing ratio was at a low level of 16.7% as of December 31, 2024, indicating a healthy financial position[26] - A final dividend of HK11 cents per share was recommended, an increase of HK1 cent compared to the previous year's final dividend[26] - The Group recorded a revenue of HK$3.16 billion and a sales volume of 264,000 metric tonnes, representing a slight decrease of 1.7% and 9.6% respectively compared to the preceding year[42] - Overall gross profit margin decreased to 23.5%, a year-on-year decrease of 0.8 percentage points, with the coatings business suffering from adverse market conditions[42] - Profit attributable to owners increased by 11.8% to HK$96.9 million compared to the corresponding period of the preceding year[42] - The Group's revenue for the year ended December 31, 2024, was HK$87,695,000, a decrease from HK$92,070,000 in 2023[127] - The inks segment reported revenue of HK$77,199,000 in 2024, up from HK$37,861,000 in 2023, indicating significant growth[127] - The coatings segment generated revenue of HK$7,219,000 in 2024, a decline from HK$57,250,000 in 2023[127] Market Challenges and Strategic Initiatives - The operating environment was described as challenging, with external pressures from geopolitical tensions and sluggish consumer sentiment impacting performance[22] - The company anticipates continued challenges in the market, particularly in the real estate and stock markets, which are crucial for economic support[22] - The management is focused on strategic initiatives to navigate the current economic landscape and enhance operational resilience[22] - The Group plans to explore acquisition opportunities to enhance its core businesses and support SMEs in need of resources[30] - The Group expects to initiate one or two pilot projects during the year to refine its development model for ongoing growth[30] - The Group plans to focus additional resources on the growth of industrial coatings and resin products while reassessing the architectural coatings market[46] - The Group aims to establish a "leading development platform for chemical businesses" by leveraging its stable shareholder base, strong reputation, and extensive experience in China[61] - Strategic investment and acquisition opportunities will be actively sought to accelerate the growth of the chemical business platform[62] Product and Business Development - The inks segment recorded a revenue of HK$1.36 billion, an increase of 13%, and a segment profit of HK$77.2 million, marking a significant increase of 104%[49] - The coatings segment's sales volume declined by 16% to 184,000 metric tonnes, with revenue down 8% to HK$1.46 billion[45] - Revenue from the lubricants business decreased by 6% to HK$320 million, while the gross profit margin rose by 1.5 percentage points to 23.3%[54] - The solvents associate recorded a strong growth of 13% in sales volume, reaching a historical high of 1,540,000 metric tonnes, with export sales of approximately 530,000 metric tonnes[56] - The new acetic acid and acetates solvents manufacturing plant in Hubei is expected to commence operation in the second half of 2025, enhancing vertical integration and economies of scale[57] - The Group's resin production is vertically integrated into coatings products, enhancing product quality and competitiveness[88] - The industrial coatings business has actively explored overseas markets, exporting to Southeast Asia, including Vietnam and Malaysia[85] - The lubricants business has diversified its product range under the "Hercules" brand, including engine oils, antifreeze fluids, and hydraulic oils, aiming to secure a solid footing in the Chinese automotive aftermarket[99] - The Group has increased investment in R&D for industrial specialty lubricants, targeting breakthroughs in specialty greases and metal processing oils for the medium to high-end markets[100] Sustainability and ESG Initiatives - The Group's commitment to sustainable development is reflected in its ongoing monitoring of environmental, social, and governance (ESG) performance[158] - The Group continues to develop environmentally friendly products to assist clients in their green transformation efforts[157] - The Group's sustainability initiatives include improving energy efficiency and supporting R&D plans to promote long-term sustainable development[161] - The Group actively collaborates with social enterprises to create shared value and empower disadvantaged communities[160] - The Group has developed a series of eco-friendly products to assist customers in transitioning to greener operations, enhancing its sustainability performance[160] Management and Human Capital - The Group emphasizes the management and development of human capital, offering educational subsidy programs and career development plans for employees[166] - The management team has been developed internally, with a focus on identifying and nurturing talented employees[166] - The Group regularly reviews its remuneration and reward policies to ensure competitive compensation and benefits for its employees[167] - Mr. Ho Sai Hou has over 30 years of experience in accounting, finance, taxation, and company secretarial fields, serving as the Chief Financial Officer since 2010[177] - Mr. Ho Pak Chuen has extensive experience in the chemical industry, having worked for The Dow Chemical Company for 40 years before joining the Group as an Independent Non-executive Director in 2018[180] - Mr. Ku Yee Dao has been appointed as the Finance Director of Johnson Controls Inc. since May 2023 and will become the General Manager for Hong Kong and Macau in April 2024[181] - Ms. Yau Ching Man joined the Group as an Independent Non-executive Director on March 22, 2024, and has over 10 years of corporate management experience in both PRC and Hong Kong[185] - Mr. Yip Long has held various leadership roles within the Group, including Deputy General Manager of the Solvents Group and Chief Operating Officer, and was appointed Vice Chairman of the Inks Group in 2023[186] - The Group's management team includes experienced professionals with extensive backgrounds in the chemical and petrochemical industries[193][195] Corporate Vision and Future Outlook - The Group aims to achieve its corporate vision of "Towards a Century of Revered Leadership" through business development and profitability[200] - The Group's vision includes generating stable returns and long-term value appreciation for shareholders and stakeholders[61] - The Group's initiatives are expected to further fortify profit growth and add new dimensions to its businesses[63] - Important events affecting the Group since the end of the financial year are noted in the consolidated financial statements[200]

Financial Performance - The company's revenue for the year ended December 31, 2024, was HKD 3.16 billion, a slight decrease of 1.7% compared to HKD 3.22 billion in the previous year[3]. - The sales volume decreased by 9.6% to 264,000 tons from 292,000 tons year-on-year[3]. - Shareholders' profit attributable to the company increased by 11.8% to HKD 96.9 million, up from HKD 86.6 million in the previous year[3]. - The overall gross profit margin decreased to 23.5%, down 0.8 percentage points from the previous year due to challenges in the construction paint market[2]. - The group achieved a net profit attributable to shareholders of HKD 96.9 million, an increase of 11.8% compared to the same period last year[16]. - Gross profit for 2024 was HKD 743,646,000, down 4.9% from HKD 782,270,000 in the previous year[45]. - The net profit for the year was HKD 95,694,000, representing a significant increase of 57.9% compared to HKD 60,596,000 in 2023[45]. - The company reported a total of HKD 88,216,000 in segment profit for the year, compared to HKD 96,024,000 from joint ventures[72]. Dividends and Shareholder Returns - The board proposed a final dividend of HKD 0.11 per share, an increase from HKD 0.10 per share in the previous year[3][8]. - The interim dividend for 2024 was declared at HKD 0.03 per share, compared to HKD 0.02 per share in 2023, marking a 50% increase[83]. - The company plans to propose a final dividend of HKD 0.11 per share for the year ending December 31, 2024, up from HKD 0.10 per share in 2023, totaling approximately HKD 61,431,000[84]. - The company has repurchased a total of 10,024,000 shares during the year, with a total cost of HKD 14,834,000[90]. Debt and Financial Position - The company maintained a low debt ratio of 16.7%, compared to 14.0% in 2023, providing flexibility for future investment projects[2][3]. - The group's net bank borrowings increased to HKD 632,336,000 from HKD 547,546,000 in the previous year[27]. - The group's debt ratio increased to 16.7%, up 2.7 percentage points from 14.0% in 2023[25]. - As of December 31, 2024, the group's bank borrowings totaled HKD 1,226,713,000, down from HKD 1,401,793,000 in 2023[27]. - The group plans to continue increasing its RMB bank loans in mainland China to benefit from lower interest costs and mitigate RMB exchange rate fluctuation risks[30]. Business Segments and Performance - The paint business saw a 16% decrease in sales volume to 184,000 tons and an 8% drop in revenue to HKD 1.46 billion, with the construction paint segment facing a sluggish real estate market[16]. - The ink business recorded a revenue of HKD 1.36 billion, an increase of 13% year-on-year, with a significant profit growth of 104% to HKD 77.2 million[18]. - The lubricant business revenue decreased by 6% to HKD 320 million, with a gross margin increase of 1.5 percentage points to 23.3%[19]. - Revenue from paint sales was HKD 1,461,221,000, down 7.8% from HKD 1,584,770,000 in the previous year[67]. - Revenue from ink sales increased to HKD 1,364,529,000, up 13.2% from HKD 1,205,915,000 in 2023[67]. - Revenue from lubricants was HKD 323,580,000, a decrease of 6.0% from HKD 344,282,000[67]. Cash Flow and Investments - The group's net cash inflow was HKD 86,546,000, a decrease from HKD 236,544,000 in the previous year[26]. - The company reported a net cash outflow from investment activities of HKD 226,064 thousand in 2024, compared to a net cash inflow of HKD 655,382 thousand in 2023[53]. - The company reported a foreign exchange loss of HKD 162,612,000 for the year, compared to a loss of HKD 91,885,000 in 2023[45]. - The company recognized an impairment loss of HKD 57,504,000 on goodwill and intangible assets in the previous year, which was not repeated in 2024[45]. Strategic Initiatives and Future Outlook - The group plans to focus resources on industrial paints and resins to drive business growth in these segments while reassessing the construction paint market[17]. - The group is optimistic about the Chinese economy's continued growth and is preparing to seek more business opportunities amid changing market conditions[11]. - The group aims to explore one or two pilot projects this year to enhance its growth model through strategic acquisitions in the chemical sector[11]. - The company is currently assessing the impact of the new Hong Kong Financial Reporting Standard 18 on its consolidated financial statements[65]. - The company operates in four main business segments: paint, ink, lubricants, and property[69]. Human Resources and Employee Management - As of December 31, 2024, the group employs a total of 2,189 staff, a decrease from 2,561 in 2023[31]. - The group emphasizes the management and development of human resources, providing training and educational assistance programs to enhance employee skills and performance[32].

[Management Discussion and Analysis](index=4&type=section&id=Management%20Discussion%20and%20Analysis) [Highlights](index=4&type=section&id=Highlights) The Group achieved significant profit growth in the first half of 2024, with profit attributable to equity holders surging by 109% to HKD 34.06 million year-on-year, and earnings per share increasing by 107% | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 1.557 billion | ▼ 0.6% | | Profit attributable to equity holders | HKD 34.06 million | ▲ 109% | | Earnings per share | HKD 0.06 | ▲ 107% | | Sales volume | 136 thousand tonnes | ▼ 5% | | Interim dividend | HKD 0.03 | ▲ 50% | | Gearing ratio | 18.3% | ▲ 18.2 percentage points | [Chairman's Statement – Review and Outlook](index=5&type=section&id=Chairman's%20Statement%20%E2%80%93%20Review%20and%20Outlook) The Chairman's report highlights a challenging operating environment in H1 2024 due to China's economic transformation, geopolitical factors, and a weak property market, particularly impacting the architectural coatings business - The operating environment during the review period was more challenging than anticipated, influenced by Western suppression of China, a slower pace of China's growth model transformation, geopolitical tensions, and the absence of an interest rate cut cycle[5](index=5&type=chunk)[7](index=7&type=chunk) - The architectural coatings segment faced severe adverse effects on sales and gross profit margin due to an unprecedented and intense price war among peers[5](index=5&type=chunk)[7](index=7&type=chunk) | Financial Indicator | Amount | YoY Change | | :--- | :--- | :--- | | Sales revenue | HKD 1.56 billion | ▼ 0.6% | | Profit attributable to equity holders | HKD 34 million | ▲ 109% | - The Group's financial position remains sound with a low gearing ratio of **18.3%**, and an interim dividend of **HKD 0.03** per share was declared, alongside the first attempt at share repurchases in the market[9](index=9&type=chunk)[10](index=10&type=chunk) - Looking ahead, the Group will focus more on improving and developing its core businesses, actively pursuing mergers and acquisitions and investments in related fine chemical sectors, leveraging its accumulated experience and capital strength[11](index=11&type=chunk)[12](index=12&type=chunk) [Report of the Chief Executive Officer](index=9&type=section&id=Report%20of%20the%20Chief%20Executive%20Officer) Despite a sluggish macroeconomic environment, the Group achieved profit growth in H1 2024 through effective cost and expense control, with profit attributable to equity holders reaching HKD 34 million, a 109% year-on-year increase | Key Performance Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 1.56 billion | ▼ 0.6% | | Total sales volume | 136 thousand tonnes | ▼ 5% | | Gross profit margin | 23.1% | ▼ 0.8 percentage points | | Profit attributable to equity holders | HKD 34 million | ▲ 109% | | Gearing ratio | 18.3% | - | - The solvents associate (Qianxin Chemical) achieved stable growth, contributing **HKD 49.4 million** in profit to the Group[17](index=17&type=chunk)[23](index=23&type=chunk) - Management is confident in the company's long-term development, repurchasing **2.3 million** shares in July 2024 to enhance long-term shareholder value[15](index=15&type=chunk) [Coatings Business](index=11&type=section&id=Coatings) The coatings business faced significant challenges, with sales volume declining by 10%, revenue falling by 6% to HKD 731 million, and gross profit margin decreasing by 2.6 percentage points to 25.5%, resulting in a segment loss of HKD 10.1 million | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Sales volume (tonnes) | 98 thousand tonnes | ▼ 10% | | Revenue | HKD 731 million | ▼ 6% | | Gross profit margin | 25.5% | ▼ 2.6 percentage points | | Segment results | Loss HKD 10.1 million | - | - The architectural coatings business was severely impacted by the sluggish Chinese property market, reduced new projects, and decreased consumer renovation willingness, while industrial coatings and resins achieved stable growth due to technological advancements[18](index=18&type=chunk) [Inks Business](index=12&type=section&id=Inks) The inks business performed strongly, turning a loss into profit through effective sales strategies and strict cost control, with revenue increasing by 16% to HKD 645 million and gross profit margin rising by 2.6 percentage points to 20%, achieving a segment profit of HKD 31.2 million | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 645 million | ▲ 16% | | Gross profit margin | 20% | ▲ 2.6 percentage points | | Segment results | Profit HKD 31.2 million | Turned loss into profit | - The business successfully captured major clients and expanded market share in the food packaging sector, while also developing specialty ink products for electronic products, flooring, and home appliances[22](index=22&type=chunk) [Lubricants Business](index=13&type=section&id=Lubricants) The lubricants business saw revenue decline by 11% to HKD 173 million, but improved its product portfolio by focusing on mid-to-high-end products, increasing gross profit margin by 2.8 percentage points to 23.6%, and leveraging OEM business to absorb fixed costs, ultimately achieving a profit of HKD 6.9 million and maintaining profitability | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 173 million | ▼ 11% | | Gross profit margin | 23.6% | ▲ 2.8 percentage points | | Segment results | Profit HKD 6.9 million | Maintained profitability | [Solvents Associate](index=13&type=section&id=Solvents%20Associate) The Group's 24% owned solvents associate, Qianxin Chemical, performed exceptionally, with sales volume growing by 24% to 776 thousand tonnes, contributing HKD 49.4 million to the Group - The solvents associate (Qianxin Chemical) sales volume increased by **24%** to **776 thousand tonnes**, contributing **HKD 49.4 million** to the Group[23](index=23&type=chunk) - The new 600 thousand tonnes acetic acid and 600 thousand tonnes acetate solvent plant project in Hubei is progressing well, targeting production in H2 2025 to enhance vertical integration and gross profit margin[23](index=23&type=chunk) [Liquidity and Financial Resources](index=15&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2024, the Group's financial position is robust, with a low gearing ratio of 18.3% and net bank borrowings of HKD 693 million - The gearing ratio (net bank borrowings to equity attributable to equity holders) increased to **18.3%** from **0.1%** in the prior year, primarily due to special dividend payments in H2 2023 and business development investments, but remains at a low level[28](index=28&type=chunk) | Financial Position (June 30, 2024) | Amount (HKD) | | :--- | :--- | | Total bank borrowings | 1.186 billion | | Cash and bank balances | 494 million | | Net bank borrowings | 693 million | - The Group has total bank facilities of **HKD 2.616 billion** from 18 banks, with **53%** denominated in HKD and **47%** in RMB, ensuring ample liquidity[34](index=34&type=chunk) - The Group will continue to increase RMB loans to benefit from lower interest costs in mainland China and mitigate exchange rate fluctuation risks, with **47%** of total loans being medium-to-long-term and **35%** fixed-rate to hedge interest rate risk[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [Human Resources](index=18&type=section&id=Human%20Resources) As of June 30, 2024, the Group had 2,308 employees, with the vast majority (2,240) located in mainland China | Region | Number of Employees | | :--- | :--- | | Mainland China | 2,240 | | Hong Kong | 58 | | Other Countries | 10 | | **Total** | **2,308** | [Other Information and Corporate Governance](index=19&type=section&id=Other%20Information%20and%20Corporate%20Governance) [Significant Investments](index=25&type=section&id=Significant%20Investments) As of June 30, 2024, the Group held two significant investments: preferred shares in PAGAC Heisenberg Holding I Limited (fair value HKD 653 million) and an interest in associate Qianxin Chemical (carrying amount HKD 1.222 billion) - Holds preferred shares in PAGAC Heisenberg Holding I Limited with a fair value of approximately **HKD 653 million**, representing **10.8%** of the Group's total assets, and recognized approximately **HKD 11.5 million** in dividend income during the period[57](index=57&type=chunk)[58](index=58&type=chunk) - Holds an interest in the solvents business associate (Qianxin Chemical) with a carrying amount of approximately **HKD 1.222 billion**, representing **20.2%** of the Group's total assets, with a share of associate's results of approximately **HKD 49.4 million** and dividend income of approximately **HKD 33.4 million** received during the period[60](index=60&type=chunk) [Corporate Governance](index=24&type=section&id=Corporate%20Governance) During the reporting period, the company complied with all code provisions of the HKEX Corporate Governance Code - The company complied with the code provisions of the Corporate Governance Code for the six months ended June 30, 2024[60](index=60&type=chunk) - The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited interim financial report, which was also reviewed by external auditor Deloitte[61](index=61&type=chunk) [Shareholder and Director Information](index=19&type=section&id=Shareholder%20and%20Director%20Information) This section discloses the interests of directors, chief executives, and substantial shareholders in the company's shares [Directors' and Chief Executives' Interests in Shares, Underlying Shares and Debentures](index=19&type=section&id=Directors'%20and%20Chief%20Executives'%20Interests) As of June 30, 2024, Chairman Mr. Yip Chi Shing held or was deemed to hold approximately 34.65% of the company's shares | Director Name | Capacity | Total Shares Held | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Yip Chi Shing | Chairman | 197,000,532 | 34.65% | | Mr. Yip Tsz Hin | Director | 40,200,000 | 7.07% | | Mr. Yip Kwan | Director | 26,869,000 | 4.73% | [Share Options](index=21&type=section&id=Share%20Options) The company adopted a new share option scheme on June 6, 2022, with no options granted, exercised, or cancelled during the review period - No share options were granted, exercised, or cancelled under the 2022 Share Option Scheme during the review period[46](index=46&type=chunk) [Substantial Shareholder](index=23&type=section&id=Substantial%20Shareholder) The report did not disclose other substantial shareholder interests or short positions requiring registration under Section 336 of the Securities and Futures Ordinance, apart from those of directors and chief executives - Apart from the interests of directors and chief executives already disclosed, no other person has notified the Company of their interests or short positions in the Company's shares requiring registration under Section 336 of the Securities and Futures Ordinance[48](index=48&type=chunk)[49](index=49&type=chunk) [Other Disclosures](index=24&type=section&id=Other%20Disclosures) The Board resolved to declare an interim dividend of HKD 0.03 per share, payable on October 9, 2024 - The Board resolved to declare an interim dividend of **HKD 0.03** per share (H1 2023: HKD 0.02 per share), payable on October 9, 2024[52](index=52&type=chunk)[53](index=53&type=chunk) - During the review period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[54](index=54&type=chunk) [Condensed Consolidated Financial Statements](index=29&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Report on Review of Condensed Consolidated Financial Statements](index=29&type=section&id=Report%20on%20Review%20of%20Condensed%20Consolidated%20Financial%20Statements) Deloitte Touche Tohmatsu, the auditor, reviewed the Group's condensed consolidated financial statements for the six months ended June 30, 2024, concluding no material non-compliance with HKAS 34 - Auditor Deloitte reviewed this condensed consolidated financial report and concluded that it was prepared in all material respects in accordance with Hong Kong Accounting Standard 34[65](index=65&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=31&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the Group reported revenue of HKD 1.557 billion, a slight year-on-year decrease, but profit attributable to equity holders surged by 109% to HKD 34.06 million | Item (HKD thousand) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 1,557,365 | 1,566,874 | | Gross profit | 359,244 | 375,022 | | Share of results of an associate | 49,449 | 32,145 | | Profit before tax | 39,337 | 10,072 | | Profit for the period | 33,551 | 8,895 | | **Profit attributable to equity holders of the Company** | **34,057** | **16,260** | [Condensed Consolidated Statement of Financial Position](index=33&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the Group's total assets were HKD 6.049 billion, total liabilities HKD 2.233 billion, and equity attributable to equity holders was HKD 3.793 billion | Item (HKD thousand) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Non-current assets** | **3,727,335** | **3,765,519** | | Of which: Interests in an associate | 1,222,419 | 1,241,342 | | **Current assets** | **2,321,384** | **2,653,508** | | **Total assets** | **6,048,719** | **6,419,027** | | **Current liabilities** | **1,798,331** | **1,967,212** | | **Non-current liabilities** | **434,297** | **536,713** | | **Total liabilities** | **2,232,628** | **2,503,925** | | **Equity attributable to equity holders of the Company** | **3,792,695** | **3,926,349** | [Condensed Consolidated Statement of Changes in Equity](index=35&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2024, total equity attributable to company shareholders decreased from HKD 3.926 billion at the beginning of the year to HKD 3.793 billion - Equity attributable to equity holders decreased from **HKD 3.926 billion** at the beginning of the year to **HKD 3.793 billion** at the end of the period[76](index=76&type=chunk) - Key factors contributing to the decrease in equity include total comprehensive expense for the period of **HKD 76.85 million** (comprising profit for the period of **HKD 34.06 million** and other comprehensive expense of **HKD 111 million**) and dividends paid of **HKD 56.85 million**[76](index=76&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=38&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) In H1 2024, the Group recorded a net cash outflow of HKD 91.08 million from operating activities, a net cash inflow of HKD 172.09 million from investing activities, and a net cash outflow of HKD 253.24 million from financing activities | Item (HKD thousand) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (91,075) | 51,761 | | Net cash generated from investing activities | 172,089 | 969,321 | | Net cash used in financing activities | (253,242) | (977,723) | | **Net (decrease) increase in cash and cash equivalents** | **(172,228)** | **43,359** | | Cash and cash equivalents at beginning of period | 616,093 | 1,088,116 | | **Cash and cash equivalents at end of period** | **431,177** | **1,111,688** | [Notes to the Condensed Consolidated Financial Statements](index=40&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the basis of preparation, significant accounting policies, and disclosures for revenue, segment information, other income, taxation, dividends, acquisitions and disposals, related party transactions, and fair value of financial instruments - Segment results show a loss of **HKD 10.08 million** for the coatings business, a profit of **HKD 31.17 million** for the inks business, and a profit of **HKD 6.95 million** for the lubricants business[95](index=95&type=chunk) - In January 2024, the Group converted a RMB **31.37 million** loan to Hubei Huima into a **59.91%** equity stake, completing the acquisition and recognizing **HKD 3.98 million** in goodwill[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - In January 2024, the Group disposed of a **61%** equity stake in Hebei Damai and its subsidiaries to non-controlling shareholders for a cash consideration of RMB **1**, resulting in a loss of **HKD 1.04 million** on the transaction[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - The Group engages in transactions with related parties, including rental payments to a company controlled by Director Mr. Yip Chi Shing, and goods procurement and consulting service transactions with an associate[161](index=161&type=chunk)[162](index=162&type=chunk)

[Performance Overview](index=1&type=section&id=%E4%B8%9A%E7%BB%A9%E6%A6%82%E8%A7%88) Despite a challenging macroeconomic environment, the Group's turnover slightly decreased by 0.6% to HKD 1.56 billion, while profit attributable to shareholders significantly increased by 109% to HKD 34 million, maintaining a robust financial position [Performance Highlights](index=1&type=section&id=%E4%B8%9A%E7%BB%A9%E6%91%98%E8%A6%81) Despite a challenging macroeconomic environment, the Group's turnover slightly decreased by 0.6% to HKD 1.56 billion, while profit attributable to shareholders significantly increased by 109% to HKD 34 million, maintaining a robust financial position Performance Summary | Metric | H1 2024 (Unaudited) | H1 2023 (Unaudited) | Change | | :--- | :--- | :--- | :--- | | Turnover (HKD billion) | 1.557 | 1.567 | -0.6% | | Sales Volume (tons) | 136,000 | 143,000 | -5% | | Profit Attributable to Shareholders (HKD million) | 34.06 | 16.26 | +109% | | Earnings Per Share (HKD) | 0.06 | 0.029 | +107% | | Interim Dividend Per Share (HKD) | 0.03 | 0.02 | +50% | | Gearing Ratio | 18.3% | 0.1% | +18.2 percentage points | - Affected by the sluggish Chinese economy, the Group's sales growth was limited, with turnover slightly decreasing by **0.6%** year-on-year and sales volume falling by **5%** year-on-year[1](index=1&type=chunk) - Business gross profit margins showed divergence: ink and lubricants businesses saw year-on-year increases of **2.6** and **2.8 percentage points** respectively, but the coatings business was pressured by the depressed real estate market, leading to a slight **0.8 percentage point** decrease in the Group's overall gross profit margin to **23.1%**[1](index=1&type=chunk) [Management Discussion and Analysis](index=3&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%82%E8%AE%A8%E8%AE%BA%E4%B8%8E%E5%88%86%E6%9E%90) This section provides a comprehensive review of the Group's operational performance, financial position, and future outlook, as discussed by management [Chairman's Report](index=3&type=section&id=%E4%B8%BB%E5%B8%AD%E6%8A%A5%E5%91%8A) The Chairman's report highlights the Group's resilient performance amidst a challenging operating environment, stable financial health, and strategic focus on core business development and M&A opportunities - The operating environment faced multiple challenges, including Western countries' suppression of China, a slower transformation of China's economic growth model, geopolitical tensions, and an unclear recovery in the real estate market, leading to intense market competition, especially in the architectural coatings sector[3](index=3&type=chunk) - Despite challenges, the Group's overall business performance in the first half was close to expectations, with turnover slightly decreasing by **0.6%** to **HKD 1.56 billion**, while profit attributable to shareholders increased to **HKD 34 million**[3](index=3&type=chunk) - The Group's financial position is sound, with the gearing ratio maintained at a low level of **18.3%**. The Board resolved to declare an interim dividend of **HKD 0.03 per share** and initiated a share repurchase program for the first time[4](index=4&type=chunk) - Looking ahead to the second half, the Group will focus more on improving and developing core businesses, and leverage its experience and capital strength in fine chemicals to actively seek M&A and investment opportunities for rapid business development[5](index=5&type=chunk) [CEO's Report](index=5&type=section&id=%E8%A1%8C%E6%94%BF%E6%80%BB%E8%A3%81%E6%8A%A5%E5%91%8A) The CEO's report details the Group's profit growth through cost control and strategic adjustments, analyzing divergent segment performance and outlining future growth strategies [Key Business Highlights](index=5&type=section&id=%E4%B8%BB%E8%A6%81%E4%B8%9A%E5%8A%A1%E6%91%98%E8%A6%81) The Group's turnover and sales volume saw slight declines, but improved gross margins in some segments and stable associate contributions led to a 109% increase in profit attributable to shareholders, maintaining a solid financial position Key Business Highlights | Metric | H1 2024 | Y-o-Y Change | | :--- | :--- | :--- | | Turnover (HKD billion) | 1.56 | -0.6% | | Total Sales Volume (tons) | 136,000 | -5% | | Group Gross Profit Margin | 23.1% | -0.8 percentage points | | Profit Attributable to Shareholders (HKD million) | 34.00 | +109% | - The solvent associate business recorded stable performance growth, contributing **HKD 49.4 million** in profit to the Group[8](index=8&type=chunk) - The Group's gearing ratio remained at a relatively low level of **18.3%**, indicating a solid financial position and providing flexibility for future investments in new projects[9](index=9&type=chunk) [Segment Business Review](index=6&type=section&id=%E5%88%86%E9%83%A8%E4%B8%9A%E5%8A%A1%E5%9B%9E%E9%A1%BE) Segment performance varied, with coatings facing losses due to real estate downturns, while inks turned profitable, lubricants maintained profit, and solvent associates provided significant returns with new capacity plans Segment Performance | Business Segment | Turnover (HKD billion) | Y-o-Y Change | Gross Profit Margin | Y-o-Y Change (percentage points) | Segment Results (HKD million) | | :--- | :--- | :--- | :--- | :--- | :--- | | Coatings | 0.731 | -6% | 25.5% | -2.6 | -10.10 (Loss) | | Inks | 0.645 | +16% | 20.0% | +2.6 | 31.20 (Profit) | | Lubricants | 0.173 | -11% | 23.6% | +2.8 | 6.90 (Profit) | - The coatings business faced significant challenges, primarily due to the depressed real estate market, and despite the Group's continuous brand promotion and channel expansion efforts, its performance was significantly impacted[10](index=10&type=chunk) - The ink business successfully gained market share in food packaging and expanded special ink applications in niche areas such as electronic products and flooring, achieving a turnaround to profitability[11](index=11&type=chunk) - Qianxin Chemical, the solvent associate company in which the Group holds a **24%** stake, saw a **24%** increase in sales volume in the first half, contributing **HKD 49.4 million** in returns to the Group. Its new plant construction in Hubei is progressing well and is expected to commence operations in the second half of **2025**[13](index=13&type=chunk)[14](index=14&type=chunk) [Outlook](index=8&type=section&id=%E5%B1%95%E6%9C%9B) The Group plans to focus on new product development and brand enhancement in core businesses, while actively seeking strategic investment opportunities for accelerated long-term growth - Key strategies for the second half include promoting new product development in inks, industrial coatings, resins, and lubricants, enhancing the 'Bauhinia' brand's recognition, and leveraging a healthy financial position to seek strategic investment opportunities[15](index=15&type=chunk) [Liquidity and Financial Resources](index=9&type=section&id=%E6%B5%81%E5%8A%A8%E8%B5%84%E9%87%91%E5%8F%8A%E8%B4%A2%E5%8A%A1%E8%B5%84%E6%BA%90) The Group maintains a robust financial position with a low gearing ratio and ample bank facilities, prudently managing foreign exchange risks and optimizing financing costs Financial Position | Financial Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Gearing Ratio | 18.3% | 14.0% (Year-end data) | | Total Bank Borrowings (HKD billion) | 1.186 | 1.402 | | Net Bank Borrowings (HKD billion) | 0.693 | 0.548 | | Net Cash Flow from Operating Activities (HKD million) | -91.08 | 51.76 (Prior period) | - The Group prudently managed foreign exchange risks by increasing RMB bank loans to benefit from lower interest costs in mainland China and mitigate RMB exchange rate fluctuation risks[16](index=16&type=chunk)[19](index=19&type=chunk) - As of the period end, the Group secured **HKD 2.616 billion** in bank facilities from **18** banks, indicating ample liquidity[19](index=19&type=chunk) [Human Resources](index=10&type=section&id=%E4%BA%BA%E5%8A%9B%E8%B5%84%E6%BA%90) The Group employs 2,308 staff, primarily in mainland China, and prioritizes human resource development through comprehensive training, competitive compensation, and talent retention strategies - As of June 30, **2024**, the Group had **2,308** employees, with **2,240** from mainland China[20](index=20&type=chunk) - The Group implements a comprehensive talent management strategy, including providing training, development programs, and competitive compensation and benefits, to motivate employees and drive business development[20](index=20&type=chunk) [Other Disclosures](index=11&type=section&id=%E5%85%B6%E4%BB%96%E6%8A%AB%E9%9C%B2%E4%BF%A1%E6%81%AF) This section provides information on securities repurchases, corporate governance practices, and the audit committee's review of the interim financial report [Securities Repurchase, Corporate Governance and Audit Committee](index=11&type=section&id=%E8%AF%81%E5%88%B8%E5%9B%9E%E8%B4%AD%E3%80%81%E4%BC%81%E4%B8%9A%E7%AE%A1%E6%B2%BB%E5%8F%8A%E5%AE%A1%E6%A0%B8%E5%A7%94%E5%91%98%E4%BC%9A) The company confirmed no securities repurchases, compliance with corporate governance codes, and the Audit Committee's review of the unaudited interim financial report - During the review period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[21](index=21&type=chunk) - The Company complied with the code provisions of the HKEX Corporate Governance Code during the reporting period[22](index=22&type=chunk) - The Audit Committee reviewed the unaudited interim financial report for this period, which was also reviewed by the Company's auditor, Deloitte Touche Tohmatsu[23](index=23&type=chunk) [Condensed Consolidated Financial Statements](index=12&type=section&id=%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8) This section presents the Group's condensed consolidated financial statements, including the income statement, balance sheet, and cash flow statement, along with their accompanying notes [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=12&type=section&id=%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E6%8D%9F%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) The Group reported a slight 0.6% turnover decrease to HKD 1.557 billion, but a 109% increase in profit attributable to owners to HKD 34.06 million, driven by associate contributions and cost control Statement of Profit or Loss and Other Comprehensive Income | Item (HKD thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Turnover | 1,557,365 | 1,566,874 | | Gross Profit | 359,244 | 375,022 | | Operating Expenses (Selling and Administrative) | (358,527) | (399,237) | | Share of Results of Associates | 49,449 | 32,145 | | Profit Before Tax | 39,337 | 10,072 | | Profit for the Period | 33,551 | 8,895 | | **Profit Attributable to Owners of the Company** | **34,057** | **16,260** | [Condensed Consolidated Statement of Financial Position](index=14&type=section&id=%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E8%B4%A2%E5%8A%A1%E7%8A%B6%E5%86%B5%E8%A1%A8) As of June 30, 2024, total assets decreased to HKD 6.049 billion, with total liabilities at HKD 2.233 billion, while equity attributable to owners remained robust at HKD 3.793 billion Statement of Financial Position | Item (HKD thousand) | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | **Non-current Assets** | **3,727,335** | **3,765,519** | | **Current Assets** | **2,321,384** | **2,653,508** | | **Total Assets** | **6,048,719** | **6,419,027** | | **Current Liabilities** | **1,798,331** | **1,967,212** | | **Non-current Liabilities** | **434,297** | **536,713** | | **Total Liabilities** | **2,232,628** | **2,503,925** | | **Equity Attributable to Owners of the Company** | **3,792,695** | **3,926,349** | [Condensed Consolidated Statement of Cash Flows](index=16&type=section&id=%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E7%8E%B0%E9%87%91%E6%B5%81%E8%A1%A8) Operating activities resulted in a net cash outflow of HKD 91.08 million, while investing activities generated HKD 172.09 million, leading to a period-end cash balance of HKD 431.18 million Statement of Cash Flows | Item (HKD thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (91,075) | 51,761 | | Net Cash Generated from Investing Activities | 172,089 | 969,321 | | Net Cash Used in Financing Activities | (253,242) | (977,723) | | **Net Decrease in Cash and Cash Equivalents** | **(172,228)** | **43,359** | | Cash and Cash Equivalents at Beginning of Period | 616,093 | 1,088,116 | | **Cash and Cash Equivalents at End of Period** | **431,177** | **1,111,688** | [Notes to the Financial Statements](index=18&type=section&id=%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8%E9%99%84%E6%B3%A8) This section details segment performance, with inks profitable and coatings at a loss, outlines the interim dividend, and describes the period's acquisition and disposal activities [Segment Information](index=19&type=section&id=%E5%88%86%E9%83%A8%E4%BF%A1%E6%81%AF) Segment performance varied, with the ink segment turning profitable at HKD 31.17 million, while the coatings segment incurred a loss of HKD 10.08 million, and lubricants remained profitable Segment Results | Segment Results (HKD thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Coatings | (10,076) | 15,596 | | Inks | 31,171 | (4,012) | | Lubricants | 6,949 | 5,726 | | Property | 101 | (1,391) | [Dividends](index=24&type=section&id=%E8%82%A1%E6%81%AF) The Board declared an interim dividend of HKD 0.03 per share for H1 2024, totaling approximately HKD 16.99 million, an increase from the prior year - The Board resolved to declare an interim dividend of **HKD 0.03 per share** (prior period: **HKD 0.02 per share**), payable on or around October 9, **2024**[47](index=47&type=chunk) [Acquisition and Disposal](index=27&type=section&id=%E6%94%B6%E8%B4%AD%E4%B8%8E%E5%87%BA%E5%94%AE) The Group acquired a 59.91% stake in Hubei Huima via debt-to-equity conversion, generating goodwill, and disposed of a 61% stake in Hebei Damai, incurring a loss - In January **2024**, the Group acquired a **59.91%** equity stake in Hubei Huima through a debt-to-equity swap, resulting in goodwill of **HKD 3.98 million**[56](index=56&type=chunk)[57](index=57&type=chunk) - In January **2024**, the Group disposed of a **61%** equity stake in Hebei Damai, recording a loss on disposal of **HKD 1.036 million**[59](index=59&type=chunk)[60](index=60&type=chunk) [Dividends and Other Announcements](index=29&type=section&id=%E8%82%A1%E6%81%AF%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%AC%E5%91%8A) This section provides details on the interim dividend declaration and related arrangements, along with other significant announcements [Interim Dividend and Arrangements](index=29&type=section&id=%E4%B8%AD%E6%9C%9F%E8%82%A1%E6%81%AF%E5%8F%8A%E5%AE%89%E6%8E%92) The company announced an interim dividend of HKD 0.03 per share, payable around October 9, 2024, with share transfer registration suspended from September 6-11 for eligibility determination - The Board resolved to declare an interim dividend of **HKD 0.03 per share** (prior period: **HKD 0.02 per share**), payable on or around October 9, **2024**[62](index=62&type=chunk) - To determine eligibility for the interim dividend, the company will suspend registration of the register of members from September 6 to September 11, **2024** (both dates inclusive)[63](index=63&type=chunk)

Financial Performance - The company's revenue for the year ended December 31, 2023, was HK$3,217,138,000, representing a 4% increase compared to the previous year[6]. - Sales volume reached 292,000 metric tons, marking a 9% increase year-over-year[7]. - The gross profit margin improved to 24.3%, an increase of 2.9 percentage points from the previous year[8]. - Profit attributable to owners of the company was HK$86,623,000, reflecting a significant increase of 93%[9]. - Earnings per share rose to 15.2 HK cents, also up by 93% compared to the prior year[9]. - The annual dividend declared was 12 HK cents per share, an increase of 87% from the previous year[9]. - The gearing ratio decreased to 14.0%, down by 10.8 percentage points, indicating improved financial stability[9]. - The Group recorded a revenue of HK$3.22 billion and a sales volume of 292,000 metric tonnes, representing a decrease of 4% and an increase of 9% year-on-year respectively[30]. - Profit attributable to owners was HK$86.6 million, a decrease of 93% year-on-year; however, excluding one-off gains and write-downs, profit increased by 328% year-on-year[30]. - The Group's gearing ratio improved significantly to 14.0%, down from 24.8% at the end of the previous year, due to cash inflow from the disposal of 51% interest in the solvents business[31]. - The profit before taxation for 2023 was HK$83,865, significantly down from HK$1,534,704 in 2022, reflecting a decline of approximately 94.5%[131]. - The profit attributable to owners of the Company for 2023 was HK$86,623, a decrease of 92.9% compared to HK$1,217,774 in 2022[131]. - The total assets as of December 31, 2023, were HK$6,419,027, down from HK$8,011,501 in 2022, indicating a decrease of 19.9%[131]. - The net bank borrowings to shareholders' funds ratio improved to 14% in 2023, down from 25% in 2022[131]. - The Group recorded a net cash inflow of HK$236,544,000 for the year, down from HK$413,892,000 in 2022, primarily due to the impact of the disposal of 51% effective interest in the solvents business[161]. Strategic Initiatives - The company is focused on enhancing its product offerings and expanding its market presence as part of its strategic initiatives[19]. - Future outlook includes continued investment in new technologies and market expansion efforts to drive growth[19]. - The Group plans to continue investing in expanding the store network and brand reach of "Bauhinia" and "Camel" in the coming year[59]. - The Group plans to leverage its reputation to seek strategic investments or acquisitions in niche areas to enhance core businesses[78]. - A new manufacturing plant with a capacity of 600,000 tonnes of acetic acid and 600,000 tonnes of acetate solvents is planned in Hubei, targeting operation in 2025[72]. - The Group will continue to increase its RMB bank borrowings in Mainland China to benefit from lower interest costs and mitigate currency fluctuation risks[173]. Business Segments Performance - The coatings segment recorded a sales volume growth of 11% to 219,000 metric tonnes, while sales revenue slightly declined by 3% to HK$1.58 billion[57]. - The coatings segment's gross profit margin improved to 27.8%, representing a year-on-year increase of 3.9 percentage points, leading to a segment profit increase of 571% to HK$57.3 million[58]. - The inks segment recorded a revenue of HK$1.21 billion in 2023, a slight decrease of 10% compared to the previous year, but the gross profit margin increased by 1.9 percentage points to 18.8%[63][64]. - The inks business achieved a segment profit of HK$37.9 million, marking a significant increase of 302% year-on-year[63]. - The lubricants business revenue grew by 15% to HK$0.34 billion, with a gross profit margin improvement of 1.7 percentage points to 21.8%[66]. - The lubricants segment recorded a profit of HK$10.8 million, returning to profitability in 2023[66]. - The properties segment revenue increased by 3% to HK$11 million, with operating results improving by 394% to HK$30.9 million due to net increases in fair values of investment properties[70]. - The solvents associate achieved a sales volume growth of 15% in 2023, reaching a historical high of 1,368,000 metric tonnes, contributing HK$94.7 million in returns to the Group[71]. Corporate Governance and Management - A new Senior Leadership Team was established in the first half of 2023 to enhance corporate governance and execute the Group's development plans[50]. - The Group emphasizes the management and development of human capital, providing educational subsidy programs and career development plans for employees[188]. - The Group's management team has been developed internally, with a focus on promoting talented employees to management positions[188]. - The Group regularly reviews its remuneration and reward policies to ensure competitive compensation and benefits for employees[189]. - The Group's commitment to corporate governance is reflected in its structured management and oversight by experienced directors[199]. Sustainability and Innovation - The Group integrates sustainability concepts into its development strategies and daily operations to manage risks and opportunities[181]. - The Group's ESG report outlines management policies, progress, and achievements in environmental, social, and governance aspects for the year[183]. - The company has reduced volatile organic compounds (VOC) emissions during production and developed eco-friendly products, earning the "Corporate Environmental Leadership Awards"[112]. - The Group's commitment to innovation aims to lead the household paints market in China, focusing on health and environmental sustainability[93]. Market Position and Recognition - The Group's coatings subsidiary was ranked 57th globally and 7th in Mainland China in terms of sales revenue among international coatings companies in 2023[184]. - The Group's inks subsidiary was ranked 17th globally and 1st in Mainland China in terms of sales revenue among international ink companies in 2023[184]. - The Group has become the official supporting brand of the China Women's National Football Team, promoting health-conscious products[99].

Revenue and Profitability - Revenue for the year ended December 31, 2023, was HKD 3,217,138,000, a decrease of 4% compared to HKD 3,358,509,000 in 2022[2] - Net profit attributable to shareholders was HKD 86,623,000, a significant decline of 93% from HKD 1,217,774,000 in 2022[2] - Earnings per share dropped to HKD 15.2, down 93% from HKD 214.2 in the prior year[2] - The group recorded a revenue of HKD 3.22 billion and a sales volume of 292,000 tons, representing a 4% decrease in revenue but a 9% increase in sales volume compared to the previous year[51] - Shareholders' net profit was HKD 86.6 million, a 93% decrease year-on-year; however, excluding one-time gains from the solvent business sale and one-time write-offs related to the car maintenance business, profit increased by 328%[51] - The group’s attributable net profit was HKD 86.6 million, a significant decline of 93% compared to the same period last year, mainly due to a one-time sale related to the disposal of a 51% stake in a subsidiary[62] - Total comprehensive income attributable to shareholders for the year was HKD 25,566,000, a significant decrease from HKD 763,318,000 in the previous year[116]. Dividends and Shareholder Returns - The company proposed a final dividend of HKD 0.10 per share, representing a 100% increase from HKD 0.05 in 2022[2] - The board proposed a final dividend of HKD 0.10 per share, up from HKD 0.05 per share last year[57] Debt and Financial Management - The company's debt ratio decreased to 14.0%, down from 24.8% in the previous year, reflecting effective capital management[2] - The group maintained a low debt ratio of 14.0% at the end of 2023, down 10.8 percentage points from 24.8% at the end of 2022, providing financial flexibility for future investments[64][80] - As of December 31, 2023, the total bank borrowings of the group amounted to HKD 2,180,475,000, a decrease from HKD 1,401,793,000 at the end of 2022[81] - The net bank borrowings after deducting short-term bank deposits and cash were HKD 547,546,000, down from HKD 1,092,359,000 at the end of 2022[81] - The company’s current liabilities decreased to HKD 930,787,000 in 2023 from HKD 1,820,317,000 in 2022, reflecting improved liquidity management[119]. Operational Performance - Sales volume increased by 9% to 292,000 tons, up from 269,000 tons in the previous year[7] - The gross profit margin improved by 2.9 percentage points to 24.3% due to effective product mix optimization and cost control measures[7] - The paint business achieved a sales volume growth of 11% to 219,000 tons, while revenue slightly decreased by 3% to HKD 1.58 billion, with a gross profit margin rising to 27.8%, an increase of 3.9 percentage points[65] - The ink business recorded a revenue of HKD 1.21 billion, a slight decline of 10%, but the gross profit margin increased by 1.9 percentage points to 18.8%, resulting in a significant profit increase of 302%[74] - The lubricants business saw a revenue growth of 15% to HKD 340 million, with a gross profit margin improvement of 1.7 percentage points to 21.8%, returning to profitability with a profit of HKD 10.8 million[76] Acquisitions and Investments - The company acquired a 70% stake in Shanxi Yanyu E-commerce Co., Ltd. for RMB 3,750,000 (approximately HKD 4,590,000) to expand its market share in the automotive maintenance business[24] - The acquisition resulted in a net cash outflow of HKD 8,568,000[39] - The company expects future benefits from the acquisition related to synergies, revenue growth, and market development, which contributed to the goodwill recognized[41] - The group completed the acquisition of a controlling stake in a printed circuit board ink manufacturer in January 2024, aiming for growth in a new market segment[66] Market and Economic Conditions - The group anticipates ongoing challenges from geopolitical tensions and economic uncertainties, but remains cautiously optimistic about future growth opportunities[58] - The group has made strategic adjustments to focus on core business development after the significant structural changes following the sale of the solvent business[51][56] Cash Flow and Liquidity - Cash and cash equivalents at the end of the year were HKD 616,093, down from HKD 1,076,006 in the previous year[103] - The company reported a net cash outflow of HKD 1,343,158 from financing activities, compared to an outflow of HKD 147,381 in 2022[103] - Net cash generated from operating activities was HKD 236,544,000 in 2023, down from HKD 413,892,000 in 2022, indicating a decline in operational efficiency[120]. Employee and Workforce Management - The group employed a total of 2,561 employees as of December 31, 2023, a decrease from 2,642 employees in 2022[92] Taxation and Regulatory Compliance - The effective tax rate for subsidiaries in China is 25%, with certain high-tech enterprises eligible for a reduced rate of 15% from 2021 to 2030[46][49] - The withholding tax rate on interest income from loans to Chinese subsidiaries is 7%, while the rate on dividends from certain profits is 5%[46]

Financial Performance - For the six months ended June 30, 2023, the Group reported a profit of HK$576,022,000, reflecting a significant increase compared to the previous period[41] - The total comprehensive income for the period was HK$5,752,000, indicating a positive performance despite fluctuations in foreign exchange[41] - The Group's total equity as of June 30, 2023, was HK$4,727,499,000, showing a robust financial position[41] - For the six months ended June 30, 2023, the net decrease in profit for the period was HK$147,000, compared to HK$19,000 in 2022[62] - The increase in income tax expense for the same period was HK$147,000, up from HK$19,000 in the previous year[62] - Total comprehensive expense for the period attributable to owners of the company increased by HK$88,000, while non-controlling interests increased by HK$59,000[62] - For the six months ended June 30, 2023, the reported basic and diluted earnings per share were HK$2.9, a decrease of 84.8% compared to HK$19.1 in 2022[65] - Revenue for the same period was HK$1,566,874,000, representing a 12% increase year-over-year[75] - The Group recorded a substantial exchange loss of HK$23,000,000 due to fluctuations in the Renminbi, which depreciated by up to 3.75% during the review period[77] - The Group's revenue decreased by 12% to HK$1.567 billion, while sales volume increased by 7% to 143,000 tonnes compared to the same period last year[80] - Profit attributable to owners of the Company amounted to HK$16.3 million, representing a decrease of 85% compared to the same period last year[80] Cash Flow and Liquidity - The Group's cash flow statement showed a net cash inflow from operating activities of HK$3,546,000 for the six months ended June 30, 2023[42] - Net cash from operating activities for the six months ended June 30, 2023, was HK$51,761,000, compared to a cash outflow of HK$31,337,000 in the same period of 2022[43] - The company reported a net increase in cash and cash equivalents of HK$43,359,000 for the six months ended June 30, 2023, reversing a decrease of HK$48,869,000 in the prior year[45] - Cash and cash equivalents at the end of the period stood at HK$1,111,688,000, up from HK$686,864,000 at the end of June 2022[45] - The Group's liquidity position improved with cash and cash equivalents totaling HK$1,239,673,000, up from HK$1,088,116,000 at the end of 2022[145] - The group recorded a 3.75% depreciation in the RMB exchange rate during the review period, prompting a cautious approach to foreign exchange risk management[144] Investments and Acquisitions - The Group acquired the remaining 8.24% interest in Bauhinia Variegata Ink & Chemical (Zhejiang) Limited during the period, enhancing its stake in the subsidiary[39] - The company acquired an additional 8.24% equity interest in Bauhinia Variegata for approximately RMB 69,320,000 (equivalent to approximately HK$ 78,137,000) on March 10, 2023, making it an indirect wholly-owned subsidiary[159] - The company also entered into an agreement to acquire approximately 0.53% equity interest in Bauhinia Variegata from Zhongshan Yumao for approximately RMB 4,468,000 (equivalent to approximately HK$ 5,036,000) on the same date[162] - The acquisition of the additional equity interests was completed on March 22, 2023[162] - On March 27, 2023, the company subscribed for two redeemable non-voting preferred shares for a total subscription price of US$ 85 million (approximately HK$ 667.3 million or RMB 583.5 million)[162] - The Group received substantial cash from the disposal of a 51% effective interest in the solvents business, impacting its business structure and development strategy[100] Business Strategy and Outlook - Future outlook includes plans for market expansion and potential new product launches to drive growth[41] - The Group's strategic focus remains on enhancing operational efficiency and exploring acquisition opportunities to strengthen its market position[41] - The management anticipates continued challenges in the market environment, necessitating strategic adjustments moving forward[77] - The Group plans to invest in the construction of a new acetic acid plant, aiming for production before mid-2025, which is expected to enhance the solvent business's profitability[82] - The Group will focus on restructuring and optimizing its core businesses, leveraging the latest national and market conditions[82] - The Group maintains a cautious outlook for the second half of 2023, anticipating continued global economic weakness and low consumer confidence in China[82] Segment Performance - The coatings business generated revenue of HK$780 million, also a 12% decline year-on-year, but the gross profit margin improved significantly by 5.2 percentage points to 28.1%[109] - The inks business revenue declined by 18% year-on-year to HK$550 million, resulting in an operating loss of HK$4 million compared to an operating profit of HK$17.8 million in the same period last year[112] - The lubricants business revenue increased by 12% to HK$190 million, with a gross profit margin of 20.8%, turning an operating loss of HK$2.9 million into a profit of HK$5.7 million[114] - The property segment recorded a 4% increase in revenue to HK$5.6 million, but faced an operating loss of HK$1.4 million due to a decrease in the fair value of the leased portion of the Wanchai office[114] Human Capital Management - The total number of employees as of June 30, 2023, was 2,837, with 2,764 from Mainland China, 63 from Hong Kong, and 10 from other countries[187] - The Group emphasizes the management and development of human capital, offering training programs and educational subsidies to enhance employee skills and performance[188] - The Group regularly reviews its remuneration and reward policy to ensure competitive compensation and benefits, including performance-based bonuses[189]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) The Group's H1 2023 performance saw a 12% turnover decrease to HKD 1.567 billion, an 85% drop in profit attributable to shareholders, but improved gross margin and a significantly reduced gearing ratio [Financial and Business Summary](index=1&type=section&id=Financial%20and%20Business%20Summary) For the six months ended June 30, 2023, the Group's turnover decreased by 12% to HKD 1.567 billion, while sales volume increased by 7%, gross profit margin improved by 2.8 percentage points, and profit attributable to shareholders significantly decreased by 85% to HKD 16.3 million Key Financial Indicators for H1 2023 | Indicator | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Turnover | HKD 1,566,874,000 | HKD 1,770,874,000 | -12% | | Sales Volume | 143,000 tonnes | 134,000 tonnes | +7% | | Profit Attributable to Company Shareholders^ | HKD 16,260,000 | HKD 108,313,000 | -85% | | Earnings Per Share^ | 2.9 HK cents | 19.1 HK cents | -85% | | Interim Dividend Per Share | 2.0 HK cents | 10.0 HK cents | -80% | | Gearing Ratio* | 0.1% | 46.6% | -46.5 percentage points | - Despite the decline in sales, the Group's core business improved cost efficiency, leading to a **2.8 percentage point year-on-year increase in gross profit margin to 23.9%**[110](index=110&type=chunk)[31](index=31&type=chunk) - The Group's overall financial position remains strong, with the gearing ratio significantly reduced to **0.1%** at period-end, benefiting from proceeds from the disposal of a 51% effective interest in the solvent business[110](index=110&type=chunk)[71](index=71&type=chunk)[46](index=46&type=chunk) [Management Discussion and Analysis](index=3&type=section&id=Management%20Discussion%20and%20Analysis) The Group navigated a challenging H1 2023 with strategic shifts, including a new acetic acid plant, core business optimization, and M&A exploration, while improving core continuing operations profitability [Chairman's Report: Review and Outlook](index=3&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A%EF%BC%8D%E5%9B%9E%E9%A1%A7%E5%8F%8A%E5%B1%95%E6%9C%9B) The Chairman highlighted a challenging H1 2023 due to global interest rate hikes, weak domestic recovery, and RMB depreciation, while outlining future strategies focused on new acetic acid plant construction, core business optimization, and strategic investments - During the reporting period, the operating environment was challenging due to multiple adverse factors including weak global economy, insufficient domestic consumer confidence, and RMB depreciation of **3.75%** (resulting in **HKD 23 million exchange loss**)[112](index=112&type=chunk) - Due to the disposal of a **51% effective interest** in the solvent business, the Group's business structure underwent significant changes, with related performance reported as an associate of continuing operations[119](index=119&type=chunk)[15](index=15&type=chunk) - Future development strategies include: - **New Product Construction**: Accelerating the construction of a new acetic acid plant, expected to commence production by mid-2025[120](index=120&type=chunk) - **Core Business Optimization**: Allocating more resources to restructure and optimize core businesses[15](index=15&type=chunk) - **Strategic Investment**: Seeking M&A targets and direct investments in high-quality SMEs [CEO's Report](index=5&type=section&id=%E8%A1%8C%E6%94%BF%E7%B8%BD%E8%A3%81%E5%A0%B1%E5%91%8A) The CEO's report details the Group's turnaround in core continuing operations despite external challenges and reduced profit from the solvent business, driven by product mix improvements, cost reductions, and new business initiatives Overall Performance Overview for H1 | Indicator | Amount | Year-on-year Change | | :--- | :--- | :--- | | Turnover | HKD 1.567 billion | -12% | | Gross Profit Margin | 23.9% | +2.8 percentage points | | Operating Profit from Core Continuing Operations | HKD 1.9 million | Turnaround to profit | | Profit Attributable to Shareholders | HKD 16.3 million | -85% | - The Group formed a new senior leadership team in H1 2023, integrating members with business operations and investment development backgrounds to strategize for future growth[17](index=17&type=chunk) [Coatings Business](index=6&type=section&id=%E5%A1%97%E6%96%99) The coatings business achieved a turnaround to profitability despite a 12% sales decline, driven by a 5.2 percentage point gross margin improvement through cost control and a higher-margin product mix Coatings Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 780 million | HKD 880 million (-12%) | | Gross Profit Margin | 28.1% | 22.9% (+5.2pp) | | Operating Profit/(Loss) | HKD 15.6 million | (HKD 26.5 million) | - In terms of business expansion, domestic architectural coatings retail stores exceeded **2,600**, and the brand became an official supporter of China Women's National Football Team to enhance brand image[115](index=115&type=chunk) [Ink Business](index=7&type=section&id=%E6%B2%B9%E5%A2%A8) The ink business experienced an 18% sales decline and turned to a loss due to slower-than-expected food packaging industry recovery and intensified market competition, prompting a strategic shift to new product lines like electronic circuit board ink Ink Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 550 million | HKD 676 million (-18%) | | Operating Profit/(Loss) | (HKD 4 million) | HKD 17.8 million | - Future plans include developing new product lines, with a strategic partnership formed in July 2023 with a Hubei enterprise to invest in electronic circuit board ink business[27](index=27&type=chunk) [Lubricants Business](index=8&type=section&id=%E6%BD%A4%E6%BB%91%E6%B2%B9) The lubricants business showed strong performance with a 12% sales increase and a return to profitability, driven by sales network expansion, new dealer development, and OEM collaborations, capitalizing on the large traditional automotive market Lubricants Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 190 million | HKD 172 million (+12%) | | Gross Profit Margin | 20.8% | 20.2% (+0.6pp) | | Operating Profit/(Loss) | HKD 5.7 million | (HKD 2.9 million) | - Business strategies include deepening focus on automotive and diesel engine lubricants, developing new dealers nationwide, and engaging in OEM collaborations with other brands[82](index=82&type=chunk) [Property Business](index=8&type=section&id=%E7%89%A9%E6%A5%AD) The property segment's turnover increased by 4% from Shanghai R&D building rentals, but a fair value decrease of HKD 5.2 million for the Hong Kong Wan Chai office resulted in an operating loss of HKD 1.4 million Property Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Turnover | HKD 5.6 million | HKD 5.4 million (+4%) | | Operating Profit/(Loss) | (HKD 1.4 million) | HKD 2.2 million | [Other Businesses and Outlook](index=9&type=section&id=%E5%85%B6%E4%BB%96%E6%A5%AD%E5%8B%99%E5%8F%8A%E5%B1%95%E6%9C%9B) The Group is transforming towards "environmentalization," "terminalization," and "service-oriented" models, investing USD 85 million in upstream acetic acid and expanding the "Da Mai Car Care" brand, while cautiously optimistic for H2 market recovery - The Group invested in upstream acetic acid business by subscribing to **USD 85 million** in preferred shares, partnering with PAG[29](index=29&type=chunk) - The automotive aftermarket brand "Da Mai Car Care" has expanded its store network to **122 stores**, covering six provinces and serving over **467,000 vehicles**[29](index=29&type=chunk) [Liquidity and Financial Resources](index=9&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) The Group's financial position significantly improved, with the gearing ratio dramatically reduced to 0.1% and operating cash flow turning positive, primarily due to proceeds from the solvent business disposal - The gearing ratio (net bank borrowings as a percentage of shareholders' equity) significantly decreased from **46.6%** in the prior period to **0.1%**[46](index=46&type=chunk)[14](index=14&type=chunk) Financial Position Summary (as of June 30, 2023) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Bank Borrowings | HKD 1.244 billion | HKD 2.180 billion | | Cash and Bank Balances | HKD 1.240 billion | HKD 1.088 billion | | Net Bank Borrowings | HKD 4.012 million | HKD 1.092 billion | - Net cash inflow from operating activities was **HKD 51.76 million**, compared to a net outflow of **HKD 31.34 million** in the prior period[39](index=39&type=chunk)[7](index=7&type=chunk) - Proceeds from the solvent business disposal were partly used to repay loans, subscribe to **USD 85 million** in preferred shares, and acquire a minority interest in the ink business, with the remainder for dividends and future investments[41](index=41&type=chunk) [Human Resources](index=11&type=section&id=%E4%BA%BA%E5%8A%9B%E8%B3%87%E6%BA%90) As of June 30, 2023, the Group had 2,837 employees, predominantly in mainland China, with a focus on human resource development through training, job rotation, education subsidies, and competitive compensation to attract and retain talent - As of June 30, 2023, the Group had a total of **2,837 employees**, with **2,764** from mainland China[44](index=44&type=chunk) - The Group offers competitive compensation and benefits, including base salary and performance-linked bonuses, with regular reviews of remuneration policies[53](index=53&type=chunk) [Condensed Consolidated Financial Statements](index=13&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The Group's H1 2023 financial statements show a 12% turnover decrease, stable gross profit, and a significant drop in net profit due to the prior period's discontinued operations, but a turnaround to profitability for continuing operations [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=13&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) The Group's H1 2023 turnover was HKD 1.567 billion, with gross profit stable at HKD 375 million, and net profit significantly decreased to HKD 8.9 million due to prior period discontinued operations, while continuing operations achieved HKD 16.26 million in profit attributable to shareholders Condensed Consolidated Statement of Profit or Loss (HKD thousands) | Indicator | H1 2023 (Unaudited) | H1 2022 (Unaudited and Restated) | | :--- | :--- | :--- | | Turnover | 1,566,874 | 1,770,874 | | Gross Profit | 375,022 | 373,445 | | Profit (Loss) Before Tax | 10,072 | (57,134) | | Profit for the Period | 8,895 | 164,355 | | **Attributable to** | | | | Profit Attributable to Company Shareholders | 16,260 | 108,313 | | - From continuing operations | 16,260 | (62,047) | | - From discontinued operations | – | 170,360 | | **Earnings Per Share** | | | | Basic and Diluted (from continuing and discontinued operations) | 2.9 HK cents | 19.1 HK cents | [Condensed Consolidated Statement of Financial Position](index=16&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2023, the Group's total assets decreased to HKD 6.545 billion, total liabilities significantly reduced to HKD 2.748 billion due to loan repayments, and equity attributable to shareholders decreased to HKD 3.825 billion Condensed Consolidated Statement of Financial Position Summary (HKD thousands) | Indicator | June 30, 2023 (Unaudited) | December 31, 2022 (Restated) | | :--- | :--- | :--- | | Non-current assets | 3,547,166 | 3,038,893 | | Current assets | 2,998,152 | 4,972,608 | | **Total assets** | **6,545,318** | **8,011,501** | | Current liabilities | 2,682,059 | 3,144,534 | | Non-current liabilities | 66,152 | 408,054 | | **Total liabilities** | **2,748,211** | **3,552,588** | | **Equity attributable to company shareholders** | **3,824,927** | **4,406,955** | | **Total equity** | **3,797,107** | **4,458,913** | [Condensed Consolidated Statement of Cash Flows](index=18&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) The Group generated net cash inflow of HKD 51.76 million from operating activities and HKD 969 million from investing activities, while financing activities resulted in a net outflow of HKD 978 million, with period-end cash and cash equivalents at HKD 1.112 billion Condensed Consolidated Statement of Cash Flows Summary (HKD thousands) | Indicator | H1 2023 (Unaudited) | H1 2022 (Unaudited) | | :--- | :--- | :--- | | Net cash generated from operating activities | 51,761 | (31,337) | | Net cash generated from investing activities | 969,321 | (122,336) | | Net cash used in financing activities | (977,723) | 104,804 | | Net increase (decrease) in cash and cash equivalents | 43,359 | (48,869) | | Cash and cash equivalents at beginning of period | 1,088,116 | 758,317 | | **Cash and cash equivalents at end of period** | **1,111,688** | **686,864** | [Notes to the Condensed Consolidated Financial Statements](index=20&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the basis of preparation, significant accounting policies, and specific financial information for various segments, income, taxation, dividends, discontinued operations, earnings per share, and receivables/payables [Basis of Preparation and Significant Accounting Policies](index=20&type=section&id=%E7%B7%A8%E8%A3%BD%E5%9F%BA%E6%BA%96%E5%8F%8A%E4%B8%BB%E8%A6%81%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96) This condensed consolidated financial report is prepared under HKAS 34, with accounting policies consistent with the prior year's annual report, and includes the first application of HKAS 12 amendments on deferred tax, which had no impact on EPS - The financial report is prepared in accordance with **HKAS 34 "Interim Financial Reporting"**[11](index=11&type=chunk) - The Group first applied amendments to **HKAS 12 "Deferred Tax related to Assets and Liabilities arising from a Single Transaction"** and retrospectively restated comparative figures[83](index=83&type=chunk)[84](index=84&type=chunk)[90](index=90&type=chunk) Impact of Accounting Policy Changes on Statement of Financial Position as of December 31, 2022 (HKD thousands) | Item | Before adjustment | Adjustment | After adjustment (restated) | | :--- | :--- | :--- | :--- | | Deferred tax assets | 6,812 | 515 | 7,327 | | Deferred tax liabilities | (23,615) | – | (23,615) | | Equity attributable to company shareholders | 4,406,572 | 383 | 4,406,955 | [Turnover and Segment Information](index=25&type=section&id=%E7%87%9F%E6%A5%AD%E9%A1%8D%E5%8F%8A%E5%88%86%E9%A1%9E%E8%B3%87%E6%96%99) The Group's turnover primarily originates from mainland China (96.8%), with coatings and inks as major revenue sources, and coatings and lubricants businesses achieving operating profits while ink business recorded a loss Turnover by Geographical Region (HKD thousands) | Region | H1 2023 | H1 2022 | | :--- | :--- | :--- | | China | 1,516,604 | 1,711,603 | | Hong Kong | 33,894 | 30,899 | | Overseas | 16,376 | 28,372 | | **Total** | **1,566,874** | **1,770,874** | Segment Results by Business Segment (H1 2023, HKD thousands) | Business Segment | External Sales | Segment Results (Operating Profit/Loss) | | :--- | :--- | :--- | | Coatings | 775,063 | 15,596 | | Ink | 553,880 | (4,012) | | Lubricants | 193,761 | 5,726 | | Property | 5,419 | (1,391) | | Others | 38,751 | (14,012) | | **Total Reportable Segments** | **1,566,874** | **1,895** | [Other Income and Other Gains and Losses](index=29&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5%E5%8F%8A%E5%85%B6%E4%BB%96%E6%94%B6%E7%9B%8A%E5%8F%8A%E虧%E6%90%8D) The Group recorded HKD 48.2 million in other income, mainly from interest, but also HKD 17.65 million in other losses, primarily due to a HKD 22.94 million net exchange loss from foreign currency balances and transactions - Other income primarily included interest income of **HKD 29.91 million**, a significant increase from **HKD 3.08 million** in the prior period[146](index=146&type=chunk) - Other losses primarily stemmed from a net exchange loss of **HKD 22.94 million**, compared to a net exchange gain of **HKD 4.39 million** in the prior period[152](index=152&type=chunk) [Taxation](index=30&type=section&id=%E7%A8%85%E9%A0%85) The Group's H1 2023 tax expense was HKD 1.18 million, significantly lower than the prior period, with Chinese subsidiaries benefiting from preferential tax rates and no profits tax provision in Hong Kong Composition of Tax Expense (HKD thousands) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Current tax | 4,565 | 9,371 | | Over-provision in prior years | (4,999) | – | | Deferred tax expense | 1,611 | 1,981 | | **Total tax expense** | **1,177** | **11,352** | - Certain of the Group's subsidiaries operating in China enjoy a **preferential income tax rate of 15%**[156](index=156&type=chunk) [Dividends](index=32&type=section&id=%E8%82%A1%E6%81%AF) The Board declared an interim dividend of HKD 0.02 per share for H1 2023, totaling HKD 11.37 million, a significant decrease from the prior period, in addition to HKD 455 million in final and special dividends paid for year-end 2022 Dividend Distribution | Dividend Type | Amount Per Share | Total Amount (Approx.) | | :--- | :--- | :--- | | 2023 Interim Dividend | 2 HK cents | HKD 11.37 million | | 2022 Interim Dividend | 10 HK cents | HKD 56.85 million | | 2022 Final and Special Dividends (Paid during the period) | 80 HK cents | HKD 455 million | [Discontinued Operations](index=32&type=section&id=%E5%B7%B2%E7%B5%82%E6%AD%A2%E7%B6%93%E7%87%9F%E6%A5%AD%E5%8B%99) The Group completed the disposal of a 51% effective interest in the solvent business at year-end 2022, leading to its presentation as discontinued operations, which significantly impacted the current period's overall net profit compared to H1 2022's HKD 233 million contribution - Completed the disposal of a **51% effective interest** in Qianxin Chemical Development Group, engaged in manufacturing and trading monomer solvents and related products, in 2022[159](index=159&type=chunk) - In H1 2022, the discontinued solvent business recorded turnover of **HKD 5.946 billion** and net profit of **HKD 233 million**[161](index=161&type=chunk) [Earnings Per Share](index=34&type=section&id=%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Basic and diluted earnings per share from continuing operations were HKD 0.029, calculated based on HKD 16.26 million net profit and 568 million weighted average shares, a turnaround from a HKD 0.109 loss per share in the prior period Earnings Per Share Calculation | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit (Loss) used for calculation (HKD thousands) | 16,260 | (62,047) | | Weighted average number of shares (thousands) | 568,484 | 568,484 | | Basic and diluted earnings (loss) per share | 2.9 HK cents | (10.9) HK cents | [Trade and Other Receivables and Prepayments](index=35&type=section&id=%E8%B2%BF%E6%98%93%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85%E3%80%81%E5%85%B6%E4%BB%96%E6%87%89%E6%94%B6%E8%B3%87%E6%AC%BE%E5%8F%8A%E9%A0%90%E4%BB%98%E6%AC%BE%E9%A0%85) At period-end, net trade receivables were HKD 1.257 billion, largely stable, with approximately 75% within three months, while other receivables and prepayments significantly decreased due to the recovery of HKD 2.04 billion from the Qianxin Chemical disposal Trade Receivables Ageing Analysis (HKD thousands) | Ageing | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0 to 3 months | 706,879 | 580,917 | | 4 to 6 months | 175,068 | 216,299 | | Over 6 months | 59,798 | 76,414 | | **Total** | **941,745** | **873,630** | - Other receivables and prepayments significantly decreased from **HKD 2.214 billion** to **HKD 134 million**, primarily due to the recovery of **HKD 2.04 billion** in receivables from the disposal of Qianxin Chemical Development Group during the period[3](index=3&type=chunk)[169](index=169&type=chunk) [Trade and Other Payables and Accruals](index=37&type=section&id=%E6%87%89%E4%BB%98%E8%B3%87%E6%AC%BE%E5%8F%8A%E6%87%89%E8%A8%88%E8%B2%BB%E7%94%A8) At period-end, total trade and other payables and accruals were HKD 935 million, a decrease from year-end 2022, with trade payables at HKD 676 million and approximately 77% due within three months Trade Payables Ageing Analysis (HKD thousands) | Ageing | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0 to 3 months | 522,257 | 538,853 | | 4 to 6 months | 148,981 | 147,991 | | Over 6 months | 5,186 | 2,285 | | **Total** | **676,424** | **689,129** |

Financial Performance - Total revenue for the year was HK$14,025,180, a decrease from HK$17,805,397 in the previous year[14]. - Profit for the year was HK$1,295,910, compared to HK$574,551 in the previous year[14]. - Earnings per share (diluted) increased to HK$214.2 from HK$72.8 in the previous year[14]. - The profit attributable to owners of the Company for 2022 was HK$1,217,830, compared to HK$184,805 in 2021[19]. - Revenue for the same period was HK$3,358,509,000, reflecting a 16% growth[172]. - The Group's net profit attributable to shareholders was HK$1.22 billion, showing a significant increase compared to the previous year[188]. - The Group's revenue for the year under review was HK$3.36 billion, a decrease of 16% compared to the previous year[188]. Dividends and Shareholder Returns - The company declared a dividend per share of HK$90.0, up from HK$40.0 in the previous year[14]. - The Company declared a final dividend of HK$90.0 cents per share, including a special dividend of HK$75.0 cents[21]. - The company declared an interim dividend of HKD 0.10 per share and proposed a final dividend of HKD 0.05 per share along with a special dividend of HKD 0.75 per share, totaling approximately HKD 28,424,000 and HKD 426,363,000 respectively[115]. - The company declared a full-year dividend of HK$0.90, which is a 125% increase compared to the previous year[162]. Business Operations and Strategy - The lubricants business is focused on re-building and repositioning the Hercules brand to strengthen its presence in the automotive aftermarket[1]. - The company has increased investment in R&D for industrial specialty lubricant technologies to achieve breakthroughs in specialty greases and metal processing oils for medium to high-end markets[1]. - The company sold a controlling interest in its solvents business to Taima, retaining a 24% stake for further investment[5]. - The Group aims to extend its service offerings to consumers through strategic investments and market expansion initiatives[38]. - The company aims to enhance its market presence and operational efficiency through strategic adjustments in its business segments[60]. - Future strategies include enhancing shareholder returns and developing next-generation products[168]. Employee and Management - The Group emphasizes the management and development of human capital, providing training programs and educational subsidies to enhance employee skills and performance[40]. - The Group's management team has been developed internally, with a focus on promoting talented employees and attracting external talents[40]. - Management emphasized the importance of employee health and recovery from COVID-19 during the challenging operational environment[187]. Market and Economic Conditions - The Group's operations are primarily concentrated in mainland China, making it susceptible to economic and political developments in the region[80]. - The company faced significant challenges during the year, including geopolitical tensions and supply chain disruptions due to the Russia-Ukraine conflict[187]. - The overall economic environment is expected to improve in the new year, with anticipated easing of interest rate hikes in Western countries[189]. - The Chinese government's measures to stabilize the economy and promote growth are expected to create favorable conditions for the Group's operations[189]. Revenue by Segment - Coatings revenue for 2022 was HK$1,639,448,000, down from HK$2,036,898,000 in 2021, representing a decline of approximately 19.5%[59]. - Inks revenue for 2022 was HK$1,340,198,000, compared to HK$1,498,448,000 in 2021, reflecting a decrease of about 10.6%[59]. - Lubricants revenue decreased to HK$299,026,000 in 2022 from HK$333,214,000 in 2021, a decline of approximately 10.3%[59]. - Properties segment revenue for 2022 was HK$10,685,000, slightly up from HK$10,163,000 in 2021[59]. - Other segments generated revenue of HK$74,015,000 in 2022, down from HK$139,329,000 in 2021, indicating a significant decline of about 46.8%[59]. Risk Management and Compliance - The Group's financial instruments are exposed to market risks, including foreign exchange risk, interest rate risk, and liquidity risk, with policies in place to mitigate these risks[80]. - The Group has implemented effective internal controls and risk management procedures to ensure compliance with relevant laws and regulations[83]. Awards and Recognition - The Company received multiple awards in 2022, including recognition as the top brand in Hong Kong and Mainland China in various categories[36].