Financial Performance - Revenue increased by approximately 26.5% to approximately RMB957,058,000 for the six months ended 30 June 2022 from approximately RMB756,724,000 for the six months ended 30 June 2021[14] - Profit for the Review Period surged by 5.9 times to approximately RMB84,439,000 for the six months ended 30 June 2022 from approximately RMB12,289,000 for the six months ended 30 June 2021[17] - Profit attributable to the owners of the parent surged by approximately 4.8 times to approximately RMB82,494,000 for the six months ended 30 June 2022 from approximately RMB14,280,000 for the six months ended 30 June 2021[17] - Basic earnings per share increased by 5.5 times to approximately RMB0.13 for the six months ended 30 June 2022 from RMB0.02 for the six months ended 30 June 2021[17] - Gross profit margin improved by approximately 8.7 percentage points to approximately 22.4% for the six months ended 30 June 2022 from approximately 13.7% for the six months ended 30 June 2021[15] - Gross profit increased by approximately 106.1% to approximately RMB214,129,000, with a gross profit margin improvement of 8.7 percentage points to approximately 22.4%[50] - Other income and gains rose significantly to approximately RMB36,884,000, compared to RMB1,471,000 in the same period last year, primarily due to government grants and a net exchange gain[51] Sales and Market Performance - The increase in revenue was mainly attributable to the higher average selling price of linen yarn, particularly organic and REEL linen yarn, benefiting from market recovery and additional production capacity from the Group's factory in Ethiopia[22] - Domestic sales amounted to RMB312,827,000, contributing approximately 32.7% to total revenue, with a year-on-year increase of approximately 2.9%[25] - Overseas sales reached RMB644,231,000, accounting for approximately 67.3% of total revenue, with a significant year-on-year increase of approximately 42.3%[25] - Sales to European Union countries increased by 51.1%, while sales to non-European Union countries rose by 33.6% during the Review Period[25] Production and Capacity - A total of 11,189 tonnes of linen and hemp yarn were produced during the Review Period, with 371 tonnes specifically being hemp yarn[38] - The Group's production capacity is nearly fully utilized across its five production bases in China[30] - The Group's Ethiopian factory commenced production in 2021, with capacity ramping up during the Review Period, aimed at reducing costs and benefiting from the EU's Everything but Arms initiative[40] Financial Position - Total assets of the Group as at 30 June 2022 were approximately RMB3,045,925,000, up from RMB2,789,467,000 as at 31 December 2021[17] - As of 30 June 2022, the Group had net current assets of approximately RMB274,407,000, an increase from approximately RMB178,810,000 as of 31 December 2021[71] - The liquidity ratio of the Group as of 30 June 2022 was approximately 117.7%, up from approximately 113.3% as of 31 December 2021[71] - The Group's cash and cash equivalents as of 30 June 2022 were approximately RMB345,072,000, an increase from approximately RMB249,213,000 as of 31 December 2021[71] Expenses and Costs - Administrative expenses increased by approximately 60.9% to RMB60,087,000, driven by higher staff costs and additional research and development expenses[56] - Selling and distribution expenses amounted to approximately RMB51,257,000, accounting for 5.4% of total revenue, up from 4.3% in the previous year[51] - The Group's total staff costs for the Review Period amounted to approximately RMB97,418,000, compared to RMB66,445,000 for the six months ended 30 June 2021[92] Corporate Governance and Shareholder Information - The Board will continuously review the share award plan to incentivize employees contributing to the Group's success[98] - The Company has established an Audit Committee to review financial reporting processes and internal controls, comprising three independent non-executive Directors[171][172] - The Company has complied with the Corporate Governance Code, except for the separation of the roles of chairman and chief executive officer, which are held by the same individual[166][168] - The Company has not granted any share options under its share option scheme since its adoption on May 30, 2016[147] Future Outlook and Strategic Initiatives - The Company aims to become one of the largest linen yarn manufacturers globally by implementing a strategic global production layout and focusing on sustainable development and technical innovation[144] - The Group confirmed ongoing investment in the Ethiopia factory project and plans for a new warehouse in Heilongjiang, with no other material investment plans as of the report date[82] - The Group has partnered with COTTONCONNECT to develop the REEL Linen Code of Conduct, promoting sustainability in the linen industry[114] Risks and Challenges - The principal risks include demand for linen yarn, trade protectionism, and potential tariffs on products made in China[104] - The Group's operations are gradually returning to normal after two years of the COVID-19 pandemic, although trade tensions between the U.S. and China are expected to persist[112]

Production and Capacity - Kingdom produced 20,756 tonnes of linen yarn in 2021, up from 16,704 tonnes in 2020, maintaining over 40% of China's total pure linen yarn export for 19 consecutive years[15]. - The Kingdom Ethiopia factory commenced production in the second half of 2021, targeting an annual capacity of 5,000 tonnes of linen yarn[17]. - The Group's production capacity for linen and industrial hemp yarn is currently 22,000 tonnes, with high utilization rates across its four production bases in China[61]. - The new production facility in Ethiopia has boosted the Group's annual production capacity by 5,000 tonnes, with production commencing in the second half of 2021[65]. - The Group's annual production capacity in China is now 22,000 tonnes, with utilization rates close to 100% across all four production bases[72]. Financial Performance - The Group's revenue surged by approximately 70.2% year-on-year to RMB 1,799,690,000 in 2021, compared to RMB 1,057,426,000 in 2020[40]. - Gross profit increased by approximately 216.4% year-on-year to RMB 339,528,000, with an overall gross margin rising to 18.9% in 2021 from 10.1% in 2020[40]. - Profit for the year was RMB 90,500,000, a significant recovery from a net loss of RMB 12,678,000 in 2020[40]. - The Group's total revenue for the year reached RMB1,799,690,000, representing a year-on-year increase of 70.2%[51]. - Domestic sales in China increased by approximately 41.3% to RMB673,137,000, accounting for approximately 37.4% of the Group's total revenue[48]. - Revenue from overseas sales amounted to RMB1,126,553,000, representing approximately 62.6% of the Group's total revenue[43]. - The Group recorded a net profit of approximately RMB90,500,000 for the Year, compared to a net loss of approximately RMB12,678,000 for the year ended 31 December 2020[87]. Export and Market Position - The Group exported 14,138 tonnes of pure linen yarn in 2021, a 85.5% increase from 7,640 tonnes in 2020, maintaining over 40% of China's total pure linen yarn exports[39]. - The Group has been the largest pure linen yarn exporter in China for 19 consecutive years[39]. - The top five exporting countries accounted for 80.5% of the Group's total export revenue during the year, up from 76.2% in 2020[45]. - Sales to the EU and non-EU markets grew by 86.1% and 102.4%, respectively, indicating strong international demand[75]. Sustainability and Innovation - Kingdom is committed to achieving carbon neutrality and is collaborating with CottonConnect to develop the REEL Linen Code of Conduct for sustainable practices[19]. - The company aims to promote industrial hemp yarn as an environmentally friendly product alongside its linen offerings[19]. - The trend towards environment-friendliness and the use of natural fibers is growing, with many fashion brands committing to sustainable materials, which will benefit linen yarn[127]. - The Group aims to explore the production of linen fabric and expand the use of hemp yarn to extend its product offerings[129]. - Kingdom is collaborating with CottonConnect to develop the REEL Linen Code of Conduct, promoting sustainability in the linen supply chain[127]. Corporate Governance and Management - The company has a diverse board with members having significant experience in finance, textiles, and corporate governance[146][150][151]. - The management team has been in place since 2003, indicating stability and continuity in leadership[140][141][144][145]. - The board composition reflects a mix of executive, non-executive, and independent directors, ensuring a balanced governance structure[146][150][151]. - The Group's independent non-executive director, Mr. Yan Jianmiao, has extensive experience in international economics and has held various academic and directorial positions[154]. - The Group's chief financial officer, Mr. Chan Yan Kwan Andy, has over 20 years of experience in accounting and finance, previously serving in senior financial roles[157]. Employee Relations and Compensation - The Group is committed to establishing a close relationship with employees, providing a fair workplace, competitive remuneration, and ongoing training and development resources[175]. - The remuneration policy for employees is based on qualifications, experience, responsibilities, and market rates, ensuring competitive compensation[122]. - The Group provides both internal and external training programs for its employees to enhance their skills[122]. - The Directors' remuneration is determined based on the Group's operating results and individual performance, reflecting a performance-driven approach[122]. Risks and Challenges - The principal risks include demand for linen yarn, protectionism, possible punitive tariffs on products made in China, and execution risk of the new expansion project in Ethiopia[174]. - The Group faces risks including demand fluctuations for linen yarn, trade protectionism in various countries, and potential punitive tariffs on Chinese products[177]. Financial Position and Liquidity - The liquidity ratio improved to approximately 113.3%, up from 109.3% in 2020[99]. - Total equity increased to approximately RMB1,350,616,000, compared to RMB1,239,635,000 in 2020[99]. - The gross debt gearing ratio decreased to approximately 65.6%, down from 81.9% in 2020[100]. - The Group's net current assets as of December 31, 2021, were approximately RMB 178,810,000, an increase from RMB 124,115,000 in 2020[103]. - Total cash and deposits amounted to approximately RMB 293,943,000 as of December 31, 2021, compared to RMB 199,771,000 in 2020, with cash and cash equivalents at RMB 249,213,000[103].

Financial Performance - Revenue increased by approximately 78.3% to approximately RMB756,724,000 for the six months ended 30 June 2021 from approximately RMB424,317,000 for the six months ended 30 June 2020[34] - Gross profit margin improved by approximately 0.5 percentage points to approximately 13.7% for the six months ended 30 June 2021 from approximately 13.2% for the six months ended 30 June 2020[35] - Profit for the Review Period increased by 8.4% to approximately RMB12,289,000 for the six months ended 30 June 2021 from approximately RMB11,340,000 for the six months ended 30 June 2020[35] - Profit attributable to the owners of the parent surged by approximately 41.5% to approximately RMB14,280,000 for the six months ended 30 June 2021 from approximately RMB10,093,000 for the six months ended 30 June 2020[35] - Basic earnings per share remained at approximately RMB0.02 for the six months ended 30 June 2021[35] Revenue Breakdown - Domestic sales reached RMB 303,921,000, contributing approximately 40.2% of total revenue, with a year-on-year increase of approximately 127.2%[63] - Overseas sales amounted to RMB 452,803,000, accounting for approximately 59.8% of total revenue, with a year-on-year increase of approximately 55.8%[63] - Sales to European Union countries increased by 44.5%, while sales to non-European Union countries rose by 68.8% during the Review Period[63] - The Group sold a total of 11,370 tonnes of linen yarn, representing an increase of approximately 104% in sales quantity compared to 5,567 tonnes in the same period last year[63] Operational Efficiency - The increase in revenue was mainly attributable to the recovery in demand for linen yarn in all markets during the Review Period[40] - The overall market demand recovery contributed to the significant revenue growth during the Review Period[40] - The Group's operational efficiency improved during the Review Period compared to the partial shutdown of factories in early 2020 due to the pandemic[35] - The Group's production facilities are operating at close to 100% capacity across all five production bases[48] Cost and Expenses - The average procurement unit price for raw materials decreased by approximately 22.3% to RMB 21,291 per tonne, down from RMB 27,430 in the corresponding period last year[49] - Selling and distribution expenses rose to approximately RMB32,281,000, accounting for approximately 4.3% of total revenue, up from approximately 3.8% in the previous period[70] - Administrative expenses increased by approximately 18.2% to approximately RMB37,354,000, mainly due to higher staff costs and bonuses[75] - Other income and gains decreased to approximately RMB1,001,000 from approximately RMB9,463,000 in the corresponding period, primarily due to fewer government grants and subsidies[69] Financial Position - As of 30 June 2021, the Group had net current assets of approximately RMB120,451,000, slightly down from approximately RMB121,545,000 as of 31 December 2020[85] - The liquidity ratio as of 30 June 2021 was approximately 109.5%, compared to approximately 109.1% as of 31 December 2020[86] - As of June 30, 2021, total equity of the Group was approximately RMB1,232,031,000, a slight increase from RMB1,227,235,000 as of December 31, 2020[87] - The Group's interest-bearing bank and other borrowings repayable within 12 months amounted to approximately RMB880,841,000, down from RMB962,399,000 as of December 31, 2020, resulting in a gross debt gearing ratio of approximately 75.7% compared to 82.8% previously[90] Investment and Expansion - The investment in Ethiopia is expected to help the Group save on land, labor, energy, and tax costs, while benefiting from favorable trade agreements[57] - The Group confirmed ongoing investment in the Ethiopia factory project and plans for a new warehouse in Heilongjiang, with no current plans for other material investments[94] - The Group's factory in Ethiopia has gradually commenced production, with the first batch of finished products shipped in August 2021, aiming for increased production in the near future[116] Corporate Governance - The Company has complied with all code provisions of the Corporate Governance Code throughout the Review Period, except for a deviation regarding the separation of roles of chairman and CEO[155][159] - The Audit Committee, comprising three independent non-executive Directors, reviewed the interim results with no disagreements noted[161] Shareholder Information - As of June 30, 2021, Mr. Ren Weiming holds 314,872,000 shares, representing approximately 50.01% of the issued share capital[122] - Mr. Ngan Kam Wai Albert holds 67,418,000 shares, accounting for approximately 10.71% of the issued share capital[122] - Kingdom Investment Holdings Limited holds approximately 302,800,000 shares, representing 48.09% of the issued share capital[128] - Mr. Ren Weiming owns 76.38% of Kingdom Investment (BVI), which holds a controlling interest in the company[128] Risk Factors - The principal risks include demand for linen yarn, trade protectionism, potential punitive tariffs on Chinese products, and stable raw material supply[112] - The Group's raw materials, specifically fiber flax, are imported from Europe, which may impact production costs and supply stability[112] - Trade tensions between the United States and China are anticipated to persist, with unilateral sanctions and retaliation possible[114] Compliance and Reporting - The company has adopted revised International Financial Reporting Standards (IFRSs) for the first time in the current period, which may impact future financial reporting[197] - The interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, indicating compliance with international financial reporting standards[192]

[Corporate Information](index=4&type=section&id=Corporate%20Information%20公司資料) The company is registered in the Cayman Islands, with its principal place of business in Hong Kong and head office in China, primarily banking with Bank of China [Board of Directors](index=4&type=section&id=Board%20of%20Directors%20董事會) The Board of Directors comprises four executive, one non-executive, and three independent non-executive directors, chaired by Mr. Ren Weiming - Board members include Ren Weiming (Chairman), Shen Yueming, Zhang Hongwen, Shen Hong (Executive Directors), Yan Jinwei (Non-executive Director), and Liu Yingkit, Law Kwong Shun, Yan Jianmiao (Independent Non-executive Directors)[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [Committees](index=4&type=section&id=Committees%20委員會) The company has an Audit Committee, Remuneration Committee, and Nomination Committee to ensure effective corporate governance - The Audit Committee is chaired by Mr. Liu Yingkit, the Remuneration Committee by Mr. Yan Jianmiao, and the Nomination Committee by Mr. Law Kwong Shun[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) [Company Details](index=4&type=section&id=Company%20Details%20公司詳情) The company is registered in the Cayman Islands, with its principal place of business in Hong Kong and head office in China, primarily banking with Bank of China - The company's registered office is at Cricket Square, Cayman Islands; China head office is in Henggang Town, Haiyan County, Zhejiang Province; Hong Kong principal place of business is on the 54th Floor, Hopewell Centre, 183 Queen's Road East[16](index=16&type=chunk) - Principal bankers are Bank of China Rugao Branch and Haiyan Branch[16](index=16&type=chunk) - The company's stock code is **00528**, and its website is http://www.kingdom-china.com[16](index=16&type=chunk) [Chairman's Statement](index=6&type=section&id=Chairman's%20Statement%20主席報告書) The Chairman's Statement outlines the company's 2020 performance, strategic initiatives, and future outlook including dividend policy [2020 Performance Overview](index=6&type=section&id=2020%20Performance%20Overview%20二零二零年業績概覽) In 2020, Kingdom, as the world's largest linen yarn manufacturer, saw pure linen yarn exports decrease by 29.9% due to COVID-19, yet maintained over 40% of China's total exports, retaining market leadership - Kingdom produced **16,704 tons of linen yarn** in 2020, making it the world's largest linen yarn manufacturer[20](index=20&type=chunk) - Affected by the COVID-19 pandemic, pure linen yarn exports in 2020 were **7,640 tons**, a decrease of approximately **29.9%** from **10,900 tons** in 2019[21](index=21&type=chunk) - Kingdom continued to account for over **40%** of China's total pure linen yarn exports in 2020, maintaining its leading position as China's largest pure linen yarn exporter for **18 consecutive years**[21](index=21&type=chunk) - The company's top five export markets were Italy, India, Turkey, South Korea, and Portugal[21](index=21&type=chunk) [Strategic Initiatives](index=6&type=section&id=Strategic%20Initiatives%20戰略舉措) The company continues to invest in technological innovation, filing 10 patents, and actively promotes sustainable development by partnering with CottonConnect on the REEL Linen Code of Conduct, while also venturing into industrial hemp yarn production in Heilongjiang and investing in new facilities in Ethiopia for long-term benefits - **10 patents** were applied for in 2020, of which **3 were invention patents**; as of December 31, 2020, there were **60 approved patents** and **31 pending patent applications**[22](index=22&type=chunk) - Partnered with CottonConnect to develop the REEL Linen Code of Conduct, promoting sustainable development in the linen industry[23](index=23&type=chunk) - Began production of industrial hemp yarn through a joint venture in Heilongjiang Province (with a **72.72% stake**), with an annual capacity of **4,000 tons**, marking the Group's first foray into the industrial hemp yarn market[28](index=28&type=chunk) - Acquired **300,000 square meters** of land in Adama Industrial Park, Ethiopia, to invest in new production facilities, expected to save on land lease, labor, energy, and tax costs, and potentially gain export quotas and tariff exemptions[30](index=30&type=chunk) [Outlook and Dividend Policy](index=7&type=section&id=Outlook%20and%20Dividend%20Policy%20前景與股息政策) Despite COVID-19 delaying trial production in Ethiopia, the Board remains confident in the Group's future operations and profitability, thus no final dividend for 2020 is recommended to conserve resources for future expansion - The COVID-19 pandemic caused delays in the trial production of the Ethiopia production facility[31](index=31&type=chunk) - The Board does not recommend a final dividend for 2020 (2019: **HK7.0 cents per ordinary share**) to conserve resources for the Group's near-term and future expansion[32](index=32&type=chunk) [Five Year Financial Summary](index=10&type=section&id=Five%20Year%20Financial%20Summary%20五年財務摘要) The Five Year Financial Summary provides an overview of the Group's historical performance across key financial metrics including revenue, gross profit, assets, and liabilities [Financial Performance](index=10&type=section&id=Financial%20Performance%20財務表現) In 2020, the Group's revenue and gross profit significantly declined, shifting from profit to loss, reflecting the severe impact of the pandemic on operations Five Year Financial Summary - Statement of Profit or Loss (RMB thousands) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | |:---|:---|:---|:---|:---|:---| | Revenue | 1,057,426 | 1,499,560 | 1,245,643 | 1,023,962 | 856,243 | | Cost of sales | (950,129) | (1,136,293) | (987,762) | (907,694) | (704,365) | | Gross profit | 107,297 | 363,267 | 257,881 | 116,268 | 151,878 | | Other income and gains | 23,269 | 17,364 | 24,308 | 25,575 | 54,358 | | Selling and distribution costs | (38,879) | (49,453) | (48,687) | (39,361) | (37,951) | | Administrative expenses | (76,062) | (82,061) | (73,020) | (49,670) | (58,968) | | Other expenses | (16,847) | (10,327) | (6,818) | (38,200) | (643) | | Finance costs | (36,583) | (22,148) | (21,520) | (17,712) | (16,059) | | Gain on disposal of a subsidiary | 11,123 | 235 | – | – | – | | Profit/(Loss) before tax | (26,682) | 216,877 | 132,144 | (3,100) | 92,615 | | Income tax (expense)/credit | 14,692 | (61,112) | (28,957) | 3,722 | (22,586) | | Profit for the year | (11,990) | 155,765 | 103,187 | 622 | 70,029 | | Attributable to owners of the parent | (10,796) | 151,468 | 102,006 | (3,132) | 66,344 | | Non-controlling interests | (1,194) | 4,297 | 1,181 | 3,754 | 3,685 | [Assets and Liabilities](index=10&type=section&id=Assets%20and%20Liabilities%20资产及负债) At the end of 2020, both the Group's total assets and liabilities decreased, yet net assets remained above RMB 1 billion Five Year Financial Summary - Statement of Financial Position (RMB thousands) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | |:---|:---|:---|:---|:---|:---|\n| Total assets | 2,597,130 | 2,725,785 | 2,127,748 | 1,962,416 | 1,930,435 | | Total liabilities | (1,371,027) | (1,444,890) | (974,239) | (912,220) | (843,999) | | Non-controlling interests | (41,886) | (43,085) | (40,620) | (32,439) | (18,685) | | Net assets | 1,184,217 | 1,237,810 | 1,112,889 | 1,017,757 | 1,067,751 | [Management Discussion and Analysis](index=11&type=section&id=Management%20Discussion%20and%20Analysis%20管理層討論及分析) Management Discussion and Analysis details the Group's 2020 business performance, market strategies, production operations, financial position, and future outlook [Business Review](index=11&type=section&id=Business%20Review%20業務回顧) In 2020, COVID-19 severely impacted the global economy, leading to fashion brand bankruptcies and a shift to online shopping; despite growth in China's textile exports, the Group's pure linen yarn exports fell by 29.5%, with revenue and gross profit declining sharply, turning from profit to loss - The COVID-19 pandemic severely impacted the global economy, leading to fashion brand bankruptcies and a shift in consumer behavior towards online shopping[46](index=46&type=chunk) - China's textile industry exports grew by **29.2%** in 2020, and cotton market prices rose by **11.9%**, potentially positively impacting linen yarn demand[47](index=47&type=chunk) - China's total pure linen yarn exports decreased by approximately **24.0%** year-on-year in 2020, with Kingdom exporting **7,640 tons**, accounting for **49%** of China's total exports[48](index=48&type=chunk) 2020 Group Financial Performance | Indicator | 2020 (RMB thousands) | 2019 (RMB thousands) | Year-on-year change | |:---|:---|:---|:---|\n| Revenue | 1,057,426 | 1,499,560 | -29.5% | | Gross profit | 107,297 | 363,267 | -70.5% | | Overall gross profit margin | 10.1% | 24.2% | -14.1 percentage points | | Loss/Net profit for the year | (11,141) | 155,765 | Shift from profit to loss | | Basic loss/earnings per share | (0.02) | 0.25 | Shift from profit to loss | | Final dividend | Not recommended | HK7.0 cents/share | Dividend cancelled | [Major Markets and Customers](index=12&type=section&id=Major%20Markets%20and%20Customers%20主要市場及客戶) The Group's sales network spans over 20 countries and regions globally, with overseas sales accounting for 54.9% of total revenue in 2020, of which EU countries contributed 28.6%; domestic sales decreased by 26.8%, but demand for eco-friendly and sustainable linen products in China is growing - The Group's sales network covers over **20 countries and regions** globally, with a subsidiary in Italy and agents in Turkey, Portugal, Italy, Lithuania, and South Korea[56](index=56&type=chunk) 2020 Sales Analysis by Domestic and Overseas Markets (RMB thousands) | Market | 2020 Revenue | 2020 Share | 2019 Revenue | 2019 Share | Revenue Year-on-Year Change | Revenue Year-on-Year Change (%) | |:---|:---|:---|:---|:---|:---|:---|\n| China | 476,377 | 45.1% | 650,576 | 43.4% | (174,199) | -26.8% | | EU | 302,630 | 28.6% | 349,183 | 23.3% | (46,553) | -13.3% | | Non-EU | 278,419 | 26.3% | 499,801 | 33.3% | (221,382) | -44.3% | | Total Revenue | 1,057,426 | 100.0% | 1,499,560 | 100.0% | (442,134) | -29.5% | - In 2020, the top five export countries were Italy, Portugal, India, Turkey, and South Korea, accounting for **76.2%** of total export revenue (2019: **81.5%**)[61](index=61&type=chunk) - China's domestic sales decreased by **26.8%**, but the market for linen textiles has significant potential as consumers increasingly prefer environmentally friendly and sustainable products[62](index=62&type=chunk) [Raw Material Procurement and Related Strategies](index=14&type=section&id=Raw%20Material%20Procurement%20and%20Related%20Strategies%20原材料採購及相關策略) The Group primarily sources flax fiber from France and Belgium, leveraging its bargaining power as a major buyer to stabilize costs; it also collaborates with local farmers in Heilongjiang to secure industrial hemp fiber supply and plans a warehouse there to establish a national hemp material trading hub, further promoting sustainable procurement through the REEL Linen Code of Conduct - Prices for flax fiber, the main raw material for linen yarn, remained stable, primarily imported from high-quality origins like France and Belgium, where the Group, as one of the largest buyers, has strong bargaining power[67](index=67&type=chunk) - Collaborated with local farmers in Heilongjiang, China, to ensure a stable supply of industrial hemp fiber, and plans to build a warehouse in Heilongjiang, aiming to establish a national trading hub for hemp materials in China[68](index=68&type=chunk) - Partnered with CottonConnect to develop the REEL Linen Code of Conduct, committed to sourcing more sustainable linen and improving environmental, quality, and traceability aspects of the supply chain[69](index=69&type=chunk) [Production Bases and Productivity](index=15&type=section&id=Production%20Bases%20and%20Productivity%20生產基地及產能) As of end-2020, the Group operated four production bases in China with a combined design annual capacity of 22,000 tons of linen and industrial hemp yarn; its first overseas facility in Ethiopia is complete and expected to resume trial production in 2021, further boosting capacity and benefiting from tax incentives - As of December 31, 2020, the Group owned four production bases in China, located in Rugao, Jiangsu; Haiyan, Zhejiang (two phases); and Heilongjiang[73](index=73&type=chunk)[75](index=75&type=chunk) - The combined design annual capacity for linen yarn and industrial hemp yarn at the China production bases reached **22,000 tons** (based on standard **24 count** specifications)[75](index=75&type=chunk) - The Heilongjiang production facility, with a **72.72% stake**, is the Group's first venture into the industrial hemp yarn market, with an annual capacity of **4,000 tons**[76](index=76&type=chunk) - The production facility in Adama Industrial Park, Ethiopia, has completed construction, with Phase I expected to increase annual capacity by **5,000 tons** and resume trial production in 2021[80](index=80&type=chunk) - The Ethiopia project is expected to save on land lease, labor, energy, and taxes, and may also secure export quotas and tariff exemptions[80](index=80&type=chunk) Existing and Planned Production Bases | No. | Plant | Location | Country | Annual Capacity (tons) | Utilization/Status | |:---|:---|:---|:---|:---|:---|\n| 1 | Haiyan Phase I Plant | Zhejiang | China | 7,000 | Close to 100% | | 2 | Rugao Plant | Jiangsu | China | 6,000 | Close to 100% | | 3 | Haiyan Phase II Plant | Zhejiang | China | 5,000 | Close to 100% | | 4 | Qinggang Plant | Heilongjiang | China | 4,000 | Close to 100% | | 5 | Ethiopia | Adama | Ethiopia | 5,000 | Expected to resume trial production in 2021 | [Patents, Awards and Recognition](index=18&type=section&id=Patents%2C%20Awards%20and%20Recognition%20專利%E3%80%81獎項及殊榮) As of December 31, 2020, the Group held 60 registered patents and had 31 patent applications pending, reflecting continuous investment in technological innovation - As of December 31, 2020, the Group held **60 registered patents** and had **31 pending patent applications**[85](index=85&type=chunk) [Financial Review](index=18&type=section&id=Financial%20Review%20財務回顧) In 2020, the Group's financial performance significantly deteriorated, with revenue and gross profit sharply declining, turning from profit to loss, primarily due to falling linen yarn prices, exchange losses, and increased finance costs; liquidity indicators decreased, but total equity remained at a high level 2020 Key Financial Indicators Changes (RMB thousands) | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Revenue | 1,057,426 | 1,499,560 | -29.5% | | Gross profit | 107,297 | 363,267 | -70.5% | | Gross profit margin | 10.1% | 24.2% | -14.1 percentage points | | Other income and gains | 23,208 | 17,364 | +33.6% | | Selling and distribution expenses | 38,879 | 49,453 | -21.4% | | Administrative expenses | 76,062 | 82,061 | -7.3% | | Other expenses | 16,847 | 10,327 | +63.1% | | Finance costs | 36,583 | 22,148 | +65.1% | | Loss/Profit for the year | (11,141) | 155,765 | Shift from profit to loss | | Loss/Profit attributable to owners of the parent | (9,947) | 151,468 | Shift from profit to loss | - The decrease in revenue was primarily due to a decline in the selling price of pure linen yarn[86](index=86&type=chunk) - The increase in other income and gains was mainly from government grants (**RMB 16,598 thousand**, 2019: **RMB 8,161 thousand**) and gains on disposal of non-current assets (**RMB 2,755 thousand**)[86](index=86&type=chunk) - Selling and distribution expenses as a percentage of revenue increased, primarily due to higher sea freight costs caused by the COVID-19 pandemic[89](index=89&type=chunk) - Other expenses primarily included a net exchange loss of approximately **RMB 14,700 thousand** due to the depreciation of the US dollar against the RMB (2019: exchange gain of **RMB 5,186 thousand**)[91](index=91&type=chunk) - Finance costs increased mainly due to higher total interest expenses on bank loans[91](index=91&type=chunk) 2020 Statement of Financial Position Key Indicators (RMB thousands) | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Inventories | 793,825 | 795,592 | -0.2% | | Average inventory turnover days | 305 days | 217 days | +88 days | | Trade and notes receivables | 375,836 | 345,813 | +8.7% | | Average trade receivables turnover days | 125 days | 78 days | +47 days | | Trade and notes payables | 198,863 | 358,817 | -44.6% | | Average trade payables turnover days | 107 days | 97 days | +10 days | | Interest-bearing bank and other borrowings | 1,015,603 | 902,351 | +12.6% | | Net current assets | 121,545 | 178,938 | -32.1% | | Current ratio | 109.1% | 113.3% | -4.2 percentage points | | Total equity | 1,227,235 | 1,280,895 | -4.2% | | Total debt to equity ratio | 82.8% | 70.4% | +12.4 percentage points | [Capital Commitments](index=22&type=section&id=Capital%20Commitments%20資本承擔) As of December 31, 2020, the Group's contractual capital commitments not provided for in the financial statements amounted to approximately RMB 100,889,000, primarily for the purchase of property, plant, and equipment Capital Commitments (RMB thousands) | Indicator | 2020 | 2019 | |:---|:---|:---|\n| Contractual capital commitments outstanding for the purchase of property, plant and equipment | 100,889 | 41,370 | [Material Acquisition and Disposal](index=22&type=section&id=Material%20Acquisition%20and%20Disposal%20重大收購及出售) In 2020, the Group terminated a planned RMB 50,000,000 acquisition of land and buildings, fully recovering RMB 48,000,000 in prepayments due to a change in land use - On October 23, 2020, Zhejiang Jinyuan and Jinda Chuangye entered into a settlement agreement to terminate the planned acquisition of a plot of land and buildings located at No. 192, Xinqiao North Road, Wuyuan Town, Haiyan County, Zhejiang Province, China[110](index=110&type=chunk) - The termination was due to a change in the land use of the property to commercial purposes, making it unsuitable for the original plan of constructing production facilities[110](index=110&type=chunk) - The Group fully recovered the prepayment of **RMB 48,000,000** in October 2020[110](index=110&type=chunk) [Foreign Currency Risk](index=24&type=section&id=Foreign%20Currency%20Risk%20外幣風險) The Group's transactions are primarily denominated in RMB, USD, EUR, and HKD, with exchange rate fluctuations regularly monitored; no foreign exchange forward contracts or cross-currency swap contracts were entered into or outstanding in 2020 - The Group's transactions are primarily denominated in RMB, US dollars, Euros, and Hong Kong dollars, with exchange rate fluctuations regularly monitored[118](index=118&type=chunk) - No foreign exchange forward contracts or cross-currency swap contracts were entered into using credit facilities in 2020, and there were no such outstanding contracts as of December 31, 2020[118](index=118&type=chunk) [Remuneration Policy and Share Option Scheme](index=25&type=section&id=Remuneration%20Policy%20and%20Share%20Option%20Scheme%20薪酬政策及購股權計劃) As of end-2020, the Group's total headcount decreased to 2,890, with total staff costs down 9.7%, mainly due to factory automation and layoffs from the suspended Ethiopia plant trial production; the Group offers comprehensive remuneration, benefits, and training, alongside share option and award schemes to incentivize employees Employee Headcount and Cost Changes | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Total employees | 2,890 people | 3,099 people | -6.7% | | Total staff costs | 184,224 thousand RMB | 204,072 thousand RMB | -9.7% | - The decrease in staff costs was primarily due to reduced personnel requirements from partial factory automation and the termination of local workers due to the suspension of trial production at the Ethiopia factory[124](index=124&type=chunk) - The Group provides comprehensive remuneration, retirement plans, and benefits to employees, along with internal and external training[125](index=125&type=chunk) - The Group has adopted a share option scheme and a share award plan, aiming to incentivize and reward directors and other employees who contribute to the Group's success[127](index=127&type=chunk) [Outlook and Plans](index=26&type=section&id=Outlook%20and%20Plans%20前景及計劃) COVID-19 is expected to significantly improve in H2 2021, with linen yarn demand gradually recovering; the Group will leverage environmental and natural fiber trends, competitive advantages of its Ethiopia plant, and China's domestic market potential, while also exploring entry into the linen fiber/garment market - The impact of the COVID-19 pandemic is expected to continue at least through the first half of 2021, but the situation is anticipated to significantly improve in the second half, with linen yarn demand expected to recover and gradually grow[129](index=129&type=chunk) - The use of environmentally friendly and natural fibers has become a trend, and linen yarn, as an eco-friendly fiber, will benefit from this; the Group's REEL Linen Code of Conduct, in collaboration with CottonConnect, will contribute to sustainable development[131](index=131&type=chunk) - China has become one of the largest consumer markets for linen textiles, and the Group will leverage its market-leading position to seize domestic market opportunities[135](index=135&type=chunk) - Phase I of the Ethiopia factory has been completed and is expected to resume trial production in 2021; its export quotas and tariff reductions will enhance the Group's competitiveness[137](index=137&type=chunk) - The Group will explore the possibility of entering the linen fiber/garment market in the future[139](index=139&type=chunk) [Directors and Senior Management](index=30&type=section&id=Directors%20and%20Senior%20Management%20董事及高級管理層) This chapter introduces the background, responsibilities, and key contributions of the company's Board members and senior management [Executive Directors](index=30&type=section&id=Executive%20Directors%20執行董事) Mr. Ren Weiming serves as Chairman and Executive Director, overseeing overall Group management and business development strategy; Mr. Shen Yueming, Mr. Zhang Hongwen, and Ms. Shen Hong, as Executive Directors, are responsible for daily operations, management, and financial control, respectively - Mr. Ren Weiming (**61 years old**) has been involved in the silk and textile industry since 1979, serving as Chairman and General Manager of Zhejiang Jinda Chuangye Co., Ltd. since 2000, and joined the Group in March 2003, responsible for overall management and business development strategy[146](index=146&type=chunk) - Mr. Shen Yueming (**59 years old**) joined the Group in March 2003, responsible for daily operations and management, and participates in decision-making[148](index=148&type=chunk) - Mr. Zhang Hongwen (**54 years old**) joined the Group in 2003, previously serving as Assistant to the General Manager's Office and Head of the Capital Settlement Department at Jinda Chuangye[152](index=152&type=chunk) - Ms. Shen Hong (**54 years old**) joined the Group in March 2003, serving as the Group's Management Director, with over **20 years of financial experience**[153](index=153&type=chunk) [Non-executive Director](index=31&type=section&id=Non-executive%20Director%20非執行董事) Mr. Yan Jinwei, as a Non-executive Director, possesses extensive experience in textile trading and serves as Honorary Permanent President of the Hong Kong Textile Merchants Association - Mr. Yan Jinwei (**71 years old**) joined the Group in September 2004, serving as Chairman of Yiyu Co., Ltd., engaged in linen and linen blend textile trading, and is the Honorary Permanent President of the Hong Kong Textile Merchants Association[154](index=154&type=chunk) [Independent Non-executive Directors](index=32&type=section&id=Independent%20Non-executive%20Directors%20獨立非執行董事) Mr. Liu Yingkit, Mr. Law Kwong Shun, and Mr. Yan Jianmiao, as Independent Non-executive Directors, bring professional backgrounds and extensive experience in finance, accounting, investment banking, and international economics, respectively - Mr. Liu Yingkit (**47 years old**) joined the Group in November 2006, is a Fellow of the Hong Kong Institute of Certified Public Accountants, holds a Master's degree in Finance, and has extensive experience in financial accounting[159](index=159&type=chunk) - Mr. Law Kwong Shun (**47 years old**) joined the Group in May 2010, has over **10 years of experience** in investment banking and corporate finance advisory, and is a member of the American Institute of Certified Public Accountants and the Hong Kong Institute of Certified Public Accountants[160](index=160&type=chunk) - Mr. Yan Jianmiao (**55 years old**) joined the Group in May 2016, is a professor in the Department of International Economics at Zhejiang University, and holds a Ph.D. in Economics[164](index=164&type=chunk) [Senior Management](index=34&type=section&id=Senior%20Management%20高級管理層) Mr. Chan Yan Kwan serves as the company's Financial Controller and Company Secretary, with over 20 years of experience in accounting and finance - Mr. Chan Yan Kwan (**52 years old**) joined the Group in January 2014, serving as Financial Controller and Company Secretary, with over **20 years of experience** in accounting and finance, and is a Fellow of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants of the UK[167](index=167&type=chunk) [Report of the Directors](index=35&type=section&id=Report%20of%20the%20Directors%20董事會報告) The Report of the Directors provides detailed information on the Group's principal activities, results, risks, stakeholder relationships, dividend policy, and corporate governance [Principal Activities and Results](index=35&type=section&id=Principal%20Activities%20and%20Results%20主要業務及業績) The company primarily engages in the production and sale of linen yarn, with 2020 results presented in the consolidated statement of profit or loss - The company is an investment holding company, and its principal subsidiaries are engaged in the production and sale of linen yarn[173](index=173&type=chunk) - The Group's 2020 results are presented in the consolidated statement of profit or loss on page 87[174](index=174&type=chunk) [Business Review and ESG](index=35&type=section&id=Business%20Review%20and%20ESG%20業務回顧及環境%E3%80%81社會及管治) The Group's business review and future development are detailed in the Chairman's Statement and Management Discussion and Analysis; the Group is committed to environmental sustainability, reducing emissions through eco-friendly equipment, and complying with relevant laws and regulations - The Group's business review and future development are elaborated in the Chairman's Statement (page 4) and Management Discussion and Analysis (page 9)[175](index=175&type=chunk) - The Group is committed to environmental sustainability, with factories actively adopting eco-friendly and energy-saving equipment; in 2020, photovoltaic solar energy accounted for **4.3%** of total electricity consumption, and annual consumption of electricity, water, steam, and natural gas decreased by **17.0%**, **11.4%**, **1.2%**, and **12.5%**, respectively[177](index=177&type=chunk) - Except for continuing connected transactions announced on March 12, 2021, the Group complied with relevant laws and regulations materially affecting the company during 2020[179](index=179&type=chunk) [Principal Risks and Uncertainties](index=36&type=section&id=Principal%20Risks%20and%20Uncertainties%20主要風險及不明朗因素) Key risks include linen yarn demand, trade protectionism, raw material supply stability, cotton price volatility, USD depreciation against RMB, Ethiopia project execution risks, and production disruptions from pandemics - Principal risks include demand for linen yarn, trade protectionism in certain countries, and potential punitive tariffs on Chinese-made products[185](index=185&type=chunk) - Other risks include stable supply of raw materials, sustained decline in cotton prices, depreciation of the US dollar against the RMB, execution risks of the new expansion project in Ethiopia, and production disruptions caused by pandemic outbreaks[185](index=185&type=chunk) [Relationship with Stakeholders](index=36&type=section&id=Relationship%20with%20Stakeholders%20與利益相關者的關係) The Group values its relationships with employees, customers, and business partners, providing a fair and safe work environment, competitive remuneration, career development opportunities, and continuous training resources - The Group considers employees, customers, and business partners crucial for sustainable development[186](index=186&type=chunk) - The company provides a fair and safe working environment, promotes employee diversity, and offers competitive remuneration, benefits, and career development opportunities based on performance[186](index=186&type=chunk) - The Group continuously provides training and development resources to employees to enhance their performance and self-fulfillment[186](index=186&type=chunk) [Important Events Since Year-End](index=37&type=section&id=Important%20Events%20Since%20Year-End%20財政年度末後重大事件) No significant events affecting the company have occurred from the end of the financial year up to the date of this report - No significant events affecting the company have occurred from the end of the financial year up to the date of this report[190](index=190&type=chunk) [Dividend and Reserves](index=37&type=section&id=Dividend%20and%20Reserves%20股息及儲備) The Board does not recommend a final dividend for 2020; as of December 31, 2020, the company's distributable reserves were RMB 648,096,000, with charitable and other donations totaling approximately RMB 1,175,000 during the year - The Board decided at its meeting on March 19, 2021, not to recommend a final dividend for 2020[192](index=192&type=chunk) Dividend and Donations (RMB thousands) | Indicator | 2020 | 2019 | |:---|:---|:---|\n| Proposed final dividend | Nil | 39,484 | | Distributable reserves | 648,096 | 646,020 | | Charitable and other donations | 1,175 | 282 | [Share Capital and Property, Plant and Equipment](index=38&type=section&id=Share%20Capital%20and%20Property%2C%20Plant%20and%20Equipment%20股本及物業%E3%80%81廠房及設備) Details of the Group's share capital changes are in note 27 to the financial statements; during 2020, the Group acquired approximately RMB 89,349,000 in property, plant, and equipment - Details of the Group's share capital changes are set out in note 27 to the financial statements[195](index=195&type=chunk) - During 2020, the Group acquired approximately **RMB 89,349,000** in property, plant, and equipment[197](index=197&type=chunk) [Directors' Information and Interests](index=38&type=section&id=Directors'%20Information%20and%20Interests%20董事資料及權益) Board members remained unchanged in 2020 and up to the report date; some directors are subject to retirement by rotation and eligible for re-election; directors confirmed their independence and no service contracts terminable within one year; directors and chief executive hold interests in company shares, with Mr. Ren Weiming holding 50.01% - The Board members remained unchanged during 2020 and up to the date of this annual report, comprising four executive directors, one non-executive director, and three independent non-executive directors[200](index=200&type=chunk) - In accordance with the company's articles of association, Ms. Shen Hong, Mr. Liu Yingkit, and Mr. Law Kwong Shun will retire by rotation at the upcoming Annual General Meeting and are eligible for re-election[201](index=201&type=chunk) - The company has received confirmation of independence from its independent non-executive directors, and the Board considers all independent non-executive directors to be independent[206](index=206&type=chunk) - The directors have not entered into any service contracts with the Group that are not terminable by the Group within one year without payment of compensation[204](index=204&type=chunk) Directors' Long Positions in Company Shares (as of December 31, 2020) | Director Name | Personal Interests (shares) | Corporate Interests (shares) | Total Shares Held (shares) | Approximate Percentage of Issued Share Capital (%) | |:---|:---|:---|:---|:---|\n| Mr. Ren Weiming | 12,072,000 | 302,800,000 | 314,872,000 | 50.01 | | Mr. Yan Jinwei | 418,000 | 67,000,000 | 67,418,000 | 10.71 | | Ms. Shen Hong | 504,000 | – | 504,000 | 0.08 | - Mr. Ren Weiming is deemed to have an interest in the shares held by Kingdom Investment, which holds approximately **76.38%** of the issued share capital[226](index=226&type=chunk) [Interests and Short Positions of Substantial Shareholders](index=43&type=section&id=Interests%20and%20Short%20Positions%20of%20Substantial%20Shareholders%20主要股東的權益及淡倉) As of December 31, 2020, excluding directors, substantial shareholders included Kingdom Investment Holdings Limited (BVI) and Millionfull International Co., Ltd., holding 48.09% and 10.29% of the company's shares, respectively Substantial Shareholders' Long Positions in Company Shares (as of December 31, 2020) | Shareholder Name | Capacity | Number of Shares (shares) | Approximate Percentage of Issued Share Capital (%) | |:---|:---|:---|:---|\n| Kingdom Investment Holdings Limited (BVI) | Beneficial owner | 302,800,000 | 48.09 | | Millionfull International Co., Ltd. | Beneficial owner | 64,800,000 | 10.29 | - Kingdom Investment (BVI) is **76.38%** owned by Mr. Ren Weiming, an executive director and substantial shareholder[236](index=236&type=chunk) - Millionfull International is owned **51.00%** by Mr. Yan Jinwei, a non-executive director, and **23.00%** by his spouse, respectively[236](index=236&type=chunk) [Share Option Scheme and Share Award Plan](index=44&type=section&id=Share%20Option%20Scheme%20and%20Share%20Award%20Plan%20購股權計劃及股份獎勵計劃) The company has a share option scheme and a share award plan to incentivize employees; no share options were granted or exercised in 2020; under the share award plan, 5,159,250 vested shares were transferred to employees, and 1,000,000 shares returned to the pool due to resignations, with 12,200,750 shares remaining unvested as of end-2020 - The share option scheme was adopted on May 30, 2016, aiming to provide incentives to directors, employees, and others; the exercise price of share options shall not be less than a specified market price, and the exercise period shall not exceed **10 years**[241](index=241&type=chunk)[242](index=242&type=chunk)[247](index=247&type=chunk) - No share options were granted or exercised under the share option scheme during 2020[249](index=249&type=chunk) - The share award plan was adopted on August 26, 2016, aiming to incentivize, recognize, and reward eligible persons who contribute to the Group's success[250](index=250&type=chunk) - During 2020, **5,159,250 vested shares** were transferred to employees, and **1,000,000 granted shares** were returned to the share pool due to employee resignations[256](index=256&type=chunk) - As of December 31, 2020, a total of **12,200,750 granted shares** are expected to vest between 2021 and 2022, with an additional **1,030,000 shares** available for future grants to employees[256](index=256&type=chunk) [Connected Transactions](index=47&type=section&id=Connected%20Transactions%20關連交易) The Group has multiple continuing connected transactions with director-controlled companies, including office and plant leases, procurement of electricity, chemicals, additives, and tools, and sales of finished goods and electricity; some transactions were exempt from disclosure due to small amounts, but chemical and tool procurement transactions were not timely disclosed due to oversight, with a framework agreement retroactively effective from March 12, 2021 - The Group has multiple continuing connected transactions with Jinda Chuangye and its associated companies (such as Zhejiang Yuyuan Photovoltaic Co., Ltd., Jinxiu Jiangnan Silk Co., Ltd., Huitong Financial Leasing (Shanghai) Co., Ltd.), in which Mr. Ren Weiming holds controlling interests[269](index=269&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk) - Transaction types include leasing offices and plants (as lessee), leasing motor vehicles (as lessee), leasing offices (as lessor), purchasing electricity, purchasing chemicals and additives, purchasing tools and accessories, and selling finished goods and electricity[269](index=269&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk) - In 2020, the Group's operating lease expenses for leasing offices and plants from Jinda Chuangye amounted to **RMB 476,000**[269](index=269&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group purchased electricity from Zhejiang Yuyuan Photovoltaic Co., Ltd. for **RMB 2,166,000**, with electricity prices discounted by approximately **3.5%** compared to market prices[278](index=278&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group purchased chemicals, additives, and tools from Jinxiu Jiangnan Silk Co., Ltd. totaling **RMB 8,367,000**[281](index=281&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group sold finished goods to Jinxiu Jiangnan Silk Co., Ltd. for **RMB 75,000**[278](index=278&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group and Jinda Chuangye agreed to cancel the acquisition of buildings and land use rights for **RMB 50,000,000**, with the prepayment of **RMB 48,000,000** fully refunded[110](index=110&type=chunk)[1026](index=1026&type=chunk) - The independent non-executive directors have reviewed the continuing connected transactions and confirmed they were conducted in the ordinary course of business on normal commercial terms and in the overall interests of the shareholders[292](index=292&type=chunk)[296](index=296&type=chunk) - Due to oversight, the procurement transactions with Jinxiu Jiangnan in 2020 were not timely disclosed; a framework agreement was entered into on March 12, 2021, with retroactive effect, to comply with Listing Rules reporting, announcement, and annual review requirements[289](index=289&type=chunk) [Other Financial Information](index=53&type=section&id=Other%20Financial%20Information%20其他財務信息) Details of the Group's bank and other borrowings are in note 26 to the financial statements; neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities in 2020; the company's articles of association and Cayman Islands Companies Law contain no pre-emptive rights; details of the Group's pension schemes are in notes 2.4 and 7 to the financial statements - Details of the Group's bank and other borrowings are set out in note 26 to the financial statements[304](index=304&type=chunk) - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any listed securities during 2020[304](index=304&type=chunk) - There are no pre-emptive rights provisions in the company's articles of association or the Cayman Islands Companies Law[304](index=304&type=chunk) - Details of the Group's pension schemes are set out in notes 2.4 and 7 to the financial statements[304](index=304&type=chunk) [Directors' Interests in Competing Business](index=54&type=section&id=Directors'%20Interests%20in%20Competing%20Business%20董事於競爭業務中的權益) As of December 31, 2020, no director or their associates held interests in businesses directly or indirectly competing with the Group; Mr. Ren Weiming holds interests in "excluded businesses" such as silk, banking, and finance leasing, which differ from the Group's products, and he has committed not to compete with the Group's business - As of December 31, 2020, no director or their respective associates had any interest in any business that directly or indirectly competes or may compete with the Group's business[308](index=308&type=chunk) - Mr. Ren Weiming holds interests in private companies engaged in the silk and/or silk product manufacturing and/or trading industry, banking, and financial leasing, which are considered "excluded businesses" as they differ from the products manufactured by the Group[309](index=309&type=chunk) - Mr. Ren Weiming has undertaken not to directly or indirectly participate in or engage in any business that competes with the Group's business[310](index=310&type=chunk) - The Group has received annual confirmations from Kingdom Investment and Mr. Ren Weiming, confirming their full compliance with the non-competition undertaking[317](index=317&type=chunk) [Corporate Strategy and Long Term Business Model](index=55&type=section&id=Corporate%20Strategy%20and%20Long%20Term%20Business%20Model%20公司策略及長期業務模式) The company is committed to sustainable development and technological innovation, developing proprietary intellectual property, building product brands, and pursuing advanced management to become one of the world's largest linen yarn manufacturers, achieving long-term value creation - The company is committed to sustainable development and technological innovation, developing proprietary intellectual property, product brand marketing, and pursuing excellent management to become one of the world's largest linen yarn manufacturers[318](index=318&type=chunk) - The Board regularly reviews progress on ESG-related objectives to achieve sustainable development of the Group's business, thereby creating or maintaining long-term value[319](index=319&type=chunk)[320](index=320&type=chunk) [Dividend Policy](index=55&type=section&id=Dividend%20Policy%20股息政策) The company adopted a dividend policy on December 14, 2018, stipulating annual dividends of no less than 20% of the Group's profit attributable to shareholders, though distribution remains at the Board's sole discretion, considering various financial and business factors - The company adopted a dividend policy on December 14, 2018, stipulating annual dividends of no less than **20%** of the Group's profit attributable to shareholders[321](index=321&type=chunk) - Dividend distribution is at the sole discretion of the Board, considering factors such as the Group's financial performance, shareholder interests, business conditions, working capital requirements, future expansion plans, creditworthiness, and economic conditions[324](index=324&type=chunk) - The dividend policy does not constitute a legally binding commitment, and the company reserves the right to update, revise, and amend the policy at any time[325](index=325&type=chunk) [Corporate Governance](index=56&type=section&id=Corporate%20Governance%20企業管治) The Group's principal corporate governance practices are set out in the Corporate Governance Report on page 58 - The Group's principal corporate governance practices are set out in the Corporate Governance Report on page 58[326](index=326&type=chunk) [Closure of Register of Members](index=56&type=section&id=Closure%20of%20Register%20of%20Members%20暫停股份過戶登記手續) To determine eligibility for attending and voting at the Annual General Meeting, the company will suspend share transfer registration from May 14, 2021, to May 21, 2021 (both dates inclusive) - To determine eligibility for attending and voting at the Annual General Meeting, the company will suspend share transfer registration from Friday, May 14, 2021, to Friday, May 21, 2021 (both dates inclusive)[327](index=327&type=chunk) - Unregistered share holders must submit all transfer documents to Tricor Investor Services Limited, the company's Hong Kong share registrar, by 4:30 p.m. on Thursday, May 13, 2021[327](index=327&type=chunk) [Auditors](index=57&type=section&id=Auditors%20核數師) Ernst & Young will retire, and a resolution for their re-appointment will be proposed at the upcoming Annual General Meeting; the company has not changed auditors in the past three years - Ernst & Young will retire, and a resolution for their re-appointment will be proposed at the upcoming Annual General Meeting[332](index=332&type=chunk) - The company has not changed auditors in the past three years[332](index=332&type=chunk) [Corporate Governance Report](index=60&type=section&id=Corporate%20Governance%20Report%20企業管治報告) The Corporate Governance Report details the company's 2020 corporate governance practices, Board operations, committee functions, internal controls, and shareholder rights [Corporate Governance Practices](index=60&type=section&id=Corporate%20Governance%20Practices%20企業管治常規) The company adopted the Corporate Governance Code in Appendix 14 of the Listing Rules and complied with all code provisions in 2020, except for the non-segregation of Chairman and Chief Executive roles - The company has adopted the Corporate Governance Code as set out in Appendix 14 of the Listing Rules as its own code[342](index=342&type=chunk) - During 2020, the company's corporate governance practices complied with all code provisions, except for the non-segregation of the roles of Chairman and Chief Executive[343](index=343&type=chunk) [Model Code for Directors' Securities Transactions](index=60&type=section&id=Model%20Code%20for%20Directors'%20Securities%20Transactions%20董事進行證券交易的標準守則) The company adopted the Model Code for Securities Transactions by Directors, and all directors confirmed compliance with the code in 2020 - The company has adopted the Model Code for Securities Transactions by Directors and has established a code of conduct no less exacting than the Model Code[344](index=344&type=chunk) - All directors have confirmed their compliance with the provisions of the Model Code throughout 2020 and up to the date of this annual report[344](index=344&type=chunk) [The Board](index=60&type=section&id=The%20Board%20董事會) The Board comprises eight directors, overseeing Group business, strategic decisions, and performance; in 2020, the Board met regularly and met Listing Rules requirements for independent non-executive directors; while Chairman and CEO roles are not segregated, the Board believes this structure facilitates efficient operations - The Board of Directors comprises **eight directors**, including **four executive directors**, **one non-executive director**, and **three independent non-executive directors**[345](index=345&type=chunk) - The Board is responsible for overseeing the Group's business, strategic decisions, and performance, and holds regular meetings[345](index=345&type=chunk)[350](index=350&type=chunk) 2020 Board and Committee Meeting Attendance | Director | Board | Remuneration Committee | Audit Committee | Nomination Committee | Annual General Meeting | |:---|:---|:---|:---|:---|:---|\n| Mr. Ren Weiming | 5/5 | – | – | – | 1/1 | | Mr. Shen Yueming | 5/5 | – | – | 1/1 | 1/1 | | Mr. Zhang Hongwen | 5/5 | 1/1 | – | – | 1/1 | | Ms. Shen Hong | 5/5 | – | – | – | 1/1 | | Mr. Yan Jinwei | 5/5 | – | – | – | 1/1 | | Mr. Liu Yingkit | 5/5 | – | 2/2 | 1/1 | 1/1 | | Mr. Law Kwong Shun | 5/5 | 1/1 | 2/2 | 1/1 | 1/1 | | Mr. Yan Jianmiao | 5/5 | 1/1 | 2/2 | – | 1/1 | - During 2020, the Board complied with the Listing Rules' requirements for at least **three independent non-executive directors**, with at least one possessing appropriate professional accounting or financial management expertise, and independent non-executive directors constituting at least **one-third** of the Board members[356](index=356&type=chunk) - Mr. Ren Weiming, the company's Chairman, also oversees the Group's general operations; the Board believes this structure helps establish strong and stable leadership, enabling the company to operate effectively[372](index=372&type=chunk) - Mr. Liu Yingkit and Mr. Law Kwong Shun have served as independent non-executive directors for over **nine years** and will be re-appointed through separate resolutions[364](index=364&type=chunk) [Directors' Continuous Training and Development](index=65&type=section&id=Directors'%20Continuous%20Training%20and%20Development%20董事持續培訓及發展) The company regularly updates directors with information and encourages continuous professional development; in 2020, all directors attended training covering corporate governance, latest Listing Rule changes, and case studies - Directors are regularly informed of the company's latest performance, condition, and outlook, and are encouraged to participate in continuous professional development[380](index=380&type=chunk) - In 2020, the company arranged training covering corporate governance, latest Listing Rule changes, and case studies, which all directors attended[380](index=380&type=chunk) [Directors' and Officers' Liability Insurance and Indemnity](index=65&type=section&id=Directors'%20and%20Officers'%20Liability%20Insurance%20and%20Indemnity%20董事及高級職員的責任保險及彌償保險) The company has arranged liability insurance for directors and officers to indemnify them against potential legal proceedings; no claims occurred in 2020 - The company has arranged liability insurance to indemnify directors and officers against potential legal proceedings[382](index=382&type=chunk) - No claims were made against directors and officers during 2020[382](index=382&type=chunk) [Company Secretary](index=65&type=section&id=Company%20Secretary%20公司秘書) Company Secretary Mr. Chan Yan Kwan completed no less than 15 hours of relevant professional training in 2020 - Company Secretary Mr. Chan Yan Kwan completed no less than **15 hours** of relevant professional training in 2020[383](index=383&type=chunk) [Board Committees](index=65&type=section&id=Board%20Committees%20董事委員會) The Board has a Remuneration Committee, Nomination Committee, and Audit Committee, each with clear written terms of reference, reporting regularly to the Board; most members of each committee are independent non-executive directors, ensuring their independence - The Board has established an Audit Committee, Remuneration Committee, and Nomination Committee to oversee specific aspects of the company's affairs[384](index=384&type=chunk) - All Board committees have clear written terms of reference and report regularly to the Board[384](index=384&type=chunk) - The majority of members on each Board committee are independent non-executive directors[387](index=387&type=chunk) [Remuneration Committee](index=66&type=section&id=Remuneration%20Committee%20薪酬委員會) The Remuneration Committee reviews and recommends directors' and senior management's remuneration and benefits to the Board, ensuring their appropriateness; one meeting was held in 2020 to review and approve director remuneration - The primary function of the Remuneration Committee is to review and recommend to the Board the remuneration and other benefits of directors and senior management, and to monitor them regularly to ensure their appropriateness[389](index=389&type=chunk) - The Remuneration Committee comprises one executive director (Mr. Zhang Hongwen) and two independent non-executive directors (Mr. Yan Jianmiao, Mr. Law Kwong Shun)[390](index=390&type=chunk) - One meeting was held in 2020 to review and approve director remuneration[393](index=393&type=chunk) [Nomination Committee](index=67&type=section&id=Nomination%20Committee%20提名委員會) The Nomination Committee reviews the Board Diversity Policy and recommends director candidates based on skills, knowledge, and experience; one meeting was held in 2020 to review the Board's structure, size, composition, and diversity policy - The primary function of the Nomination Committee is to review the Board Diversity Policy and provide recommendations to the Board regarding the appointment or re-appointment of directors and succession planning for directors, based on their skills, knowledge, and experience[397](index=397&type=chunk) - The Nomination Committee members include one executive director (Mr. Shen Yueming) and two independent non-executive directors (Mr. Liu Yingkit, Mr. Law Kwong Shun)[397](index=397&type=chunk) - One meeting was held in 2020 to review the Board's structure, size, composition, and diversity policy[399](index=399&type=chunk) - Measurable objectives for Board diversity include: at least **half** of the Board members having textile industry experience, at least one director holding a position in a textile industry association, and gender not being a primary consideration[427](index=427&type=chunk)[428](index=428&type=chunk)[430](index=430&type=chunk) [Audit Committee](index=71&type=section&id=Audit%20Committee%20審核委員會) The Audit Committee reviews and monitors the Group's financial reporting process, risk management, and internal control systems, providing recommendations to the Board; two meetings were held in 2020 to review financial results, external auditor relationship, and internal audit reports - The primary responsibilities of the Audit Committee are to review and monitor the Group's financial reporting process, risk management and internal control systems, and internal audit function, and to provide advice to the Board[433](index=433&type=chunk) - The Audit Committee comprises three independent non-executive directors: Mr. Liu Yingkit (Chairman), Mr. Law Kwong Shun, and Mr. Yan Jianmiao[437](index=437&type=chunk) - Two meetings were held in 2020 to review the company's relationship with external auditors, 2019 final results, 2020 interim results, and continuing connected transactions, and two communications with external auditors were conducted without management present[441](index=441&type=chunk) - The Audit Committee also reviewed and approved the internal audit report and considered the effectiveness of the internal audit function[441](index=441&type=chunk) [Internal Control and Risk Management](index=73&type=section&id=Internal%20Control%20and%20Risk%20Management%20內部監控及風險管理) The company established a sound and effective internal control and risk management system, comprising the Board, Audit Committee, management team, and all departments as three lines of defense; in 2020, the Audit Committee conducted two reviews and evaluations of the internal control system, finding no material deficiencies or weaknesses - The company has established sound and effective internal controls to safeguard shareholders' investments and company assets[447](index=447&type=chunk) - The company has implemented an optimized risk management and internal control system, including the Board, Audit Committee, management team, and all departments[449](index=449&type=chunk) - The risk management system is structured into three lines of defense: individual departments as the first line, internal control and management teams as the second line, and the Audit Committee under the Board as the third line[449](index=449&type=chunk) - During 2020, the Audit Committee conducted two reviews and evaluations of the effectiveness of the internal control system, finding no material deficiencies or weaknesses[454](index=454&type=chunk)[459](index=459&type=chunk) [Inside Information](index=75&type=section&id=Inside%20Information%20內幕消息) The company has established procedures and internal controls for handling and disseminating inside information, strictly prohibiting unauthorized use of confidential information; the Chairman and Financial Controller are the primary spokespersons for external media communications - The company is aware of its obligations under Chapter 13 of the Listing Rules and the Securities and Futures Ordinance, and should announce any inside information as soon as reasonably practicable[462](index=462&type=chunk) - The company's policy strictly prohibits unauthorized use of confidential information or inside information[463](index=463&type=chunk) - The Chairman and Financial Controller are the primary spokespersons for all external media communications of the company[463](index=463&type=chunk) [Annual Remuneration Payable to Senior Management](index=75&type=section&id=Annual%20Remuneration%20Payable%20to%20Senior%20Management%20應付高級管理層成員的年度薪酬) For the year ended December 31, 2020, one senior management member's annual remuneration ranged between RMB 1,000,001 and RMB 1,500,000 2020 Senior Management Member Annual Remuneration Range | Remuneration Range (RMB) | Number of Individuals | |:---|:---|\n| 1,000,001 – 1,500,000 | 1 | [Auditors' Remuneration](index=75&type=section&id=Auditors'%20Remuneration%20核數師薪酬) In 2020, the company paid external auditor Ernst & Young RMB 1,950,000 for audit services and RMB 84,000 for tax services 2020 Auditor's Remuneration (RMB thousands) | Service Type | Fees Paid | |:---|:---|\n| Audit services | 1,950 | | Tax services | 84 | - Apart from audit and tax services, the company did not engage Ernst & Young for any other non-audit services during 2020[469](index=469&type=chunk) [Accountability and Audit](index=76&type=section&id=Accountability%20and%20Audit%20問責及審核) The Board is responsible for preparing true and fair consolidated financial statements in compliance with accounting standards and Listing Rules; the Board believes the Group can continue as a going concern and has no disagreements with the Audit Committee on external auditor selection and appointment - Directors are aware of their responsibility to prepare true and fair consolidated financial statements and ensure compliance with all applicable accounting standards and Listing Rules[470](index=470&type=chunk) - Directors believe the financial statements have been prepared on a going concern basis, and no material uncertainties have been identified that may cast significant doubt on the Group's ability to continue as a going concern[470](index=470&type=chunk) - The directors had no disagreements with the Audit Committee regarding the selection and appointment of external auditors[444](index=444&type=chunk) [Shareholders' Rights](index=76&type=section&id=Shareholders'%20Rights%20股東權利) Shareholders holding at least one-tenth of the company's paid-up capital may request the Board in writing to convene an extraordinary general meeting or propose resolutions; shareholders can send inquiries to the Board via mail or email - Any one or more shareholders holding not less than **one-tenth** of the company's paid-up capital have the right to request the Board in writing to convene an extraordinary general meeting or propose resolutions[474](index=474&type=chunk) - Shareholders can send inquiries and questions to the Board via mail to the principal place of business in Hong Kong or by email to ir@kingdom-china.com[484](index=484&type=chunk) [Constitutional Documents and Investor Relations](index=78&type=section&id=Constitutional%20Documents%20and%20Investor%20Relations%20章程文件及投資者關係) No changes to the company's constitutional documents occurred in 2020, with the latest version available on the company and Stock Exchange websites; the company maintains communication with investors and shareholders through various channels to enhance transparency and confidence - No changes to the company's constitutional documents occurred in 2020, and the latest version is available on the company's and the Stock Exchange's websites[491](index=491&type=chunk) - The company maintains contact with analysts and fund managers through various channels, including one-on-one meetings, telephone communications, and press releases[487](index=487&type=chunk) - The company's general meetings provide a platform for shareholders to communicate with the Board, and the Chairman of the Board and chairmen of various committees or their representatives will attend to answer questions[487](index=487&type=chunk) - As of December 31, 2020, the company's market capitalization was approximately **HK$812,284,620**[492](index=492&type=chunk) [Independent Auditor's Report](index=82&type=section&id=Independent%20Auditor's%20Report%20獨立核數師報告) The Independent Auditor's Report provides an opinion on the Group's consolidated financial statements as of December 31, 2020, outlining the basis, key matters, and responsibilities of the audit [Opinion](index=82&type=section&id=Opinion%20意見) The auditor believes Kingdom Holdings Limited's consolidated financial statements present a true and fair view of the Group's financial position as of December 31, 2020, and its financial performance and cash flows for the year then ended, in compliance with IFRS and Hong Kong Companies Ordinance disclosure requirements - The auditor believes the consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards[502](index=502&type=chunk) - The consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[502](index=502&type=chunk) [Basis for Opinion](index=82&type=section&id=Basis%20for%20Opinion%20意見的基礎) The auditor conducted the audit in accordance with Hong Kong Standards on Auditing and complied with the HKICPA's Code of Ethics, deeming the audit evidence obtained sufficient to support their opinion - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants[503](index=503&type=chunk) - The auditor is independent of the Group and has fulfilled other ethical responsibilities in accordance with the Code of Ethics for Professional Accountants[503](index=503&type=chunk) - The audit evidence obtained is sufficient and appropriate to provide a basis for the audit opinion[503](index=503&type=chunk) [Key Audit Matters](index=83&type=section&id=Key%20Audit%20Matters%20關鍵審計事項) Key audit matters include the impairment assessment of non-current assets, which involves highly subjective management assumptions regarding cash flow forecasts, future growth rates, and discount rates - One of the key audit matters is the impairment assessment of non-current assets[508](index=508&type=chunk) - As of December 31, 2020, the carrying amount of property, plant and equipment, right-of-use assets, and other intangible assets was **RMB 1,127 million**, accounting for **43%** of the Group's total assets[512](index=512&type=chunk) - The impairment assessment requires management to make key assumptions, such as five-year cash flow forecasts, future growth rates, and discount rates, which are highly subjective[512](index=512&type=chunk) [Other Information in the Annual Report](index=84&type=section&id=Other%20Information%20in%20the%20Annual%20Report%20年報內的其他信息) The company's directors are responsible for other information in the annual report; the auditor's opinion does not cover this information but they review it for material inconsistencies with the consolidated financial statements - The company's directors are responsible for other information in the annual report, including the Chairman's Statement, Management Discussion and Analysis, Report of the Directors, and Corporate Governance Report[515](index=515&type=chunk) - The auditor's opinion on the consolidated financial statements does not cover other information, and they do not express any form of assurance conclusion thereon[517](index=517&type=chunk) - The auditor reviews other information to consider whether it is materially inconsistent with the consolidated financial statements or the knowledge obtained in the audit, or otherwise appears to be materially misstated[518](index=518&t

Financial Performance - Revenue decreased by approximately 42.0% to approximately RMB424,317,000 for the six months ended 30 June 2020 from approximately RMB731,167,000 for the same period in 2019[19] - Gross profit margin dropped by approximately 13.4 percentage points to approximately 13.2% for the six months ended 30 June 2020 from approximately 26.6% for the same period in 2019[20] - Profit for the Review Period decreased by approximately 87.5% to approximately RMB11,340,000 for the six months ended 30 June 2020 from approximately RMB90,729,000 for the same period in 2019[20] - Profit attributable to the owners of the parent decreased by approximately 88.5% to approximately RMB10,093,000 for the six months ended 30 June 2020 from approximately RMB87,814,000 for the same period in 2019[21] - Basic earnings per share dropped by approximately 85.7% to approximately RMB0.02 for the six months ended 30 June 2020 compared to approximately RMB0.14 for the same period in 2019[21] - The Group's gross profit decreased by approximately 71.2% to approximately RMB56,198,000, with a gross profit margin dropping by approximately 13.4 percentage points to approximately 13.2%[58] - Profit before tax decreased significantly to RMB 11,004,000, compared to RMB 126,279,000 in the previous year, representing a decline of approximately 91%[195] - Total comprehensive income for the period was RMB 11,576,000, down from RMB 90,670,000 in 2019, indicating a decrease of about 87.2%[197] Sales Performance - Domestic sales recorded a decrease of approximately 56.7% to RMB133,763,000, contributing approximately 31.5% of total revenue[28] - Overseas sales decreased by approximately 31.2% to RMB290,554,000, contributing approximately 68.5% of total revenue[28] - Sales to European Union countries reported a drop of 16.3% year-on-year, while sales to non-European Union countries dropped by 42.9%[28] - Sales quantity of linen yarn dropped by approximately 40.4%, resulting in total sales of only 5,567 tonnes during the Review Period, down from 9,340 tonnes in 2019[52] - Revenue from domestic sales decreased by approximately 56.7%, while sales to the European Union and non-European Union regions dropped by approximately 16.3% and 42.9%, respectively[55] Production and Capacity - A total of 7,754 tonnes of linen and hemp yarn were produced during the Review Period, including 611 tonnes of hemp yarn, marking the Group's first venture into the hemp yarn market[44] - The Group's total annual production capacity is 27,000 tonnes across five production bases, with the Adama factory in Ethiopia having a designed capacity of 5,000 tonnes, which is currently delayed due to COVID-19[40][47] - Preparatory works for the factory in Ethiopia were completed, with a designed annual production capacity of 5,000 tonnes, but the project will be delayed until the pandemic is under control[124] Costs and Expenses - Selling and distribution expenses amounted to approximately RMB15,947,000, accounting for approximately 3.8% of total revenue, compared to 3.2% in the previous year[63] - Administrative expenses decreased by approximately 13.4% to RMB31,592,000, attributed to cost control measures during the COVID-19 pandemic[66] - Total finance costs for the Review Period amounted to approximately RMB11,481,000, an increase from RMB9,275,000 in the same period last year[73] - Other income and gains increased to approximately RMB9,463,000, up from RMB6,177,000 in the previous year, primarily due to government grants and subsidies[60] Assets and Liabilities - As of 30 June 2020, the Group had net current assets of approximately RMB133,984,000, down from approximately RMB178,938,000 as of 31 December 2019[80] - The Group's cash and cash equivalents as of 30 June 2020 were approximately RMB153,654,000, an increase from approximately RMB144,798,000 as of 31 December 2019[87] - The liquidity ratio as of 30 June 2020 was approximately 109.6%, compared to 113.3% as of 31 December 2019[87] - Total equity of the Group as of 30 June 2020 was approximately RMB1,248,692,000, down from approximately RMB1,280,895,000 as of 31 December 2019[88] - Current liabilities increased to RMB 1,390,462,000 as of June 30, 2020, compared to RMB 1,345,869,000 at the end of 2019, marking an increase of approximately 3.3%[199] - Inventories rose to RMB 943,066,000 as of June 30, 2020, up from RMB 795,592,000 at the end of 2019, reflecting an increase of approximately 18.6%[199] Shareholder Information - As of June 30, 2020, Mr. Ren Weiming holds a total of 314,872,000 shares, representing approximately 50.01% of the issued share capital[132] - Mr. Ngan Kam Wai Albert holds 67,418,000 shares, which is about 10.71% of the issued share capital[132] - Kingdom Investment Holdings Limited is the beneficial owner of 302,800,000 shares, accounting for approximately 48.09% of the issued share capital[149] - Millionfull International Co., Ltd. holds 64,800,000 shares, representing approximately 10.29% of the issued share capital[149] - The Board has resolved not to recommend any interim dividend for the six months ended 30 June 2020, consistent with the previous year[158] Risks and Challenges - The Group's principal risks include demand for linen yarn, trade protectionism, and potential punitive tariffs on products made in China[117] - The COVID-19 pandemic has led to weak demand for linen yarn, with recovery expected only by the end of the year, depending on the development of effective treatments[120] Corporate Governance - The company has established an Audit Committee to review and supervise the financial reporting process and internal control systems[190]

Production and Export - Kingdom produced 20,618 tonnes of linen yarn during the year, maintaining its position as the world's largest manufacturer of linen yarn[12]. - The Group's pure linen yarn exports amounted to 10,900 tonnes, a decrease of approximately 5% compared to 11,472 tonnes in 2018, while Kingdom accounted for over 40% of China's total pure linen yarn exports[13]. - Approximately 400 tonnes of organic linen fiber were produced in 2019, supporting Kingdom's leadership in organic linen manufacturing[15]. - The Group's pure linen yarn exports amounted to 10,900 tonnes, accounting for more than 40% of the total pure linen yarn export from China, maintaining its position as the largest exporter for 17 consecutive years[54]. - The total volume of pure linen yarn exports from China dropped by approximately 21.7% year-on-year, with a significant 58.0% decline in exports to the Indian market[50]. - The Group's production capacity across four bases in China totals 22,000 tonnes, with utilization rates close to 100% during the Year[67]. - The Group holds a 72.72% equity interest in a flax and industrial hemp yarn manufacturing facility in Heilongjiang, targeting growth in the industrial hemp yarn market[73]. Financial Performance - The Group's revenue for the year increased by approximately 20.4% year-on-year to RMB1,499,560,000, compared to RMB1,245,643,000 in 2018[55]. - Gross profit surged by approximately 40.9% year-on-year to RMB363,267,000, with an overall gross margin increase to 24.2% in 2019 from 20.7% in 2018[55]. - Profit for the year was RMB155,765,000, representing a surge of 51.0% compared to RMB103,187,000 in 2018[55]. - Basic earnings per share amounted to RMB0.25, up from RMB0.17 in 2018[55]. - Total assets increased to RMB2,725,785,000 in 2019 from RMB2,127,748,000 in 2018[44]. - Total liabilities rose to RMB1,444,890,000 in 2019 from RMB974,239,000 in 2018[44]. - Other income and gains for the year amounted to RMB17,364,000, down from RMB24,308,000 in 2018, primarily due to a decrease in net exchange gains[83]. - The net profit for the year was approximately RMB155,765,000, an increase of approximately 51.0% compared to RMB103,187,000 in 2018[91]. - Profit attributable to owners of the parent was approximately RMB151,468,000, representing an increase of approximately 48.5% compared to RMB102,006,000 in 2018[93]. Investments and Expansion - Kingdom is investing in a new production facility in Ethiopia, having acquired 300,000 square meters of land, which is expected to generate savings on land lease, labor, energy, and tax[28][29]. - The new production facility in Ethiopia is expected to boost annual production capacity by 5,000 tonnes, with trial production commencing in the second quarter of 2020[76]. - The construction of the Ethiopian factory is completed, and machinery has been installed despite delays due to COVID-19[76]. - The first phase of the Ethiopia factory, with an annual production capacity of 5,000 tonnes, is completed and expected to commence trial production in the second quarter of 2020[129]. Challenges and Risks - The geopolitical environment poses challenges, with India's anti-dumping duties on flax yarn impacting pricing, while the China-US trade tension is expected to have limited indirect effects on the Group[22]. - The market price of cotton dropped by 13.0% in 2019, which may negatively influence the demand for linen yarn[49]. - The uncertainties from 2019, including the trade war and COVID-19 outbreak, are expected to impact operations and supply chains into 2020[125]. - The Group imports raw materials (fiber flax) from Europe, which exposes it to risks related to supply chain stability[174]. - The execution risk of the new expansion project in Ethiopia is a significant concern for the Group[174]. Corporate Governance and Management - Mr. Ren Weiming is the chairman and executive director, responsible for overall management and business development strategy since 2000[135]. - Mr. Shen Yueming oversees day-to-day operations and management, participating in decision-making since joining the Group in March 2003[136]. - Mr. Zhang Hongwen has been an executive director since 2003, involved in various subsidiaries including Zhejiang Jinyuan and Jiangsu Jinyuan[140]. - Ms. Shen Hong, with over 20 years of finance experience, serves as the management controller and joined the Group in March 2003[141]. - Mr. Ngan Kam Wai Albert, a non-executive director since September 2004, is the chairman of Millionfull Company Limited, engaged in linen trading[142]. - Mr. Lau Ying Kit, an independent non-executive director since November 2006, has extensive financial and accounting experience in China and Hong Kong[148]. - Mr. Lo Kwong Shun Wilson, an independent non-executive director since May 2010, has over 10 years of experience in investment banking and corporate finance[149]. Sustainability and Environmental Initiatives - The Group's factories adopted various environmental protection and energy conservation equipment, with photovoltaic solar energy accounting for 3.6% of total electricity consumed[166]. - The consumption of steam per tonne of yarn manufactured reduced by 4.5% during the Year[166]. - The Group is committed to supporting environmental sustainability while pursuing excellent operating results[166]. - The Group's commitment to sustainable development is highlighted alongside its operational performance[166]. - The Company has published a separate ESG report detailing its performance on environmental, social, and governance aspects[167]. Dividends and Shareholder Returns - The Board has recommended a final dividend of HK7.0 cents per ordinary share for the year, an increase from HK6.0 cents per share in 2018, reflecting confidence in future operations and profitability[34][35]. - The Board recommended a final dividend of HK7.0 cents per ordinary share for the year, pending approval at the upcoming annual general meeting[187]. Employee and Operational Insights - The Group's workforce increased to 3,099 employees as of December 31, 2019, compared to 3,048 employees in 2018[119]. - The Group's total staff costs increased by approximately 11.0% to RMB204,072,000, up from RMB183,823,000 in 2018, primarily due to additional headcount for the new Ethiopia factory[119]. - Traffic and crowd controls implemented during the epidemic resulted in only partial operation of the Group's factories initially[183]. - Full capacity operation of the Group's factories resumed in March 2020 after disruptions caused by the epidemic[183].

Financial Performance - Revenue increased by approximately 42.4% to approximately RMB731,167,000 for the six months ended 30 June 2019 from approximately RMB513,401,000 for the six months ended 30 June 2018[12] - Profit for the Review Period increased by 303.6% to approximately RMB90,729,000 for the six months ended 30 June 2019 from approximately RMB22,481,000 for the six months ended 30 June 2018[12] - Profit attributable to the owners of the parent surged by approximately 280.2% to approximately RMB87,814,000 for the six months ended 30 June 2019 from approximately RMB23,099,000 for the six months ended 30 June 2018[12] - Basic earnings per share grew approximately 2.5 times to approximately RMB0.14 for the six months ended 30 June 2019 compared to approximately RMB0.04 for the six months ended 30 June 2018[12] - The Group's gross profit rose by approximately 136.9% to approximately RMB194,835,000, with a gross profit margin improvement of approximately 10.6 percentage points to approximately 26.6%[44] - Profit before tax increased to RMB 126,279,000, compared to RMB 24,580,000 in the prior year, reflecting a growth of 414.5%[162] - Total comprehensive income for the period was RMB 90,670,000, up from RMB 22,226,000, reflecting a growth of 308% year-over-year[166] Sales and Market Performance - The Group accounted for over 40% of the total pure linen yarn exports from China by volume during the Review Period[12] - Domestic sales contributed approximately 42.2% of total revenue, with a remarkable increase of about 90.0% compared to the previous year, while overseas sales accounted for approximately 57.8% and grew by approximately 20.4% year-on-year[25] - Total sales to European Union countries reported a strong growth of 35.0% year-on-year during the Review Period, with key markets including Italy, Portugal, and Lithuania[25] - The quantity of linen yarn sold increased by approximately 13.3%, totaling 9,340 tonnes during the Review Period, up from 8,243 tonnes in the previous year[39] - Sales in the domestic market grew approximately 90.0%, while sales to the European Union and non-European Union regions increased by approximately 35.0% and 10.9%, respectively[39] Production and Capacity - The Group produced a total of 10,030 tonnes of linen and hemp yarn during the Review Period, with 415 tonnes of hemp yarn produced as part of its entry into the hemp yarn market[34] - The Group's production capacity reached 22,000 tonnes across four production bases, with advanced equipment for unique spinning techniques[33] - The first phase of the Ethiopia project, with a designed annual production capacity of 5,000 tonnes, is expected to commence trial production in early 2020, aiming to reduce costs and benefit from favorable trade agreements[35] Costs and Expenses - The average procurement unit price for raw materials increased by approximately 28.0% to RMB 25,928 per tonne, with total procurement of approximately 14,734 tonnes, reflecting a year-on-year increase of about 4.0%[27] - Selling and distribution costs amounted to approximately RMB23,070,000, accounting for approximately 3.2% of total revenue, down from 4.1% in the previous year[44] - Administrative expenses increased by approximately 21.6% to RMB36,461,000, driven by additional R&D costs and staff expenses[44] - Net finance costs for the Review Period were approximately RMB9,275,000, slightly up from RMB9,253,000 in the previous year[47] - Income tax expense surged to approximately RMB35,550,000, with an effective tax rate of approximately 28.2%, compared to 8.5% in the previous year[48] Assets and Equity - As of June 30, 2019, the Group had net current assets of approximately RMB267,909,000, down from approximately RMB314,058,000 as of December 31, 2018[55] - The Group's cash and cash equivalents as of June 30, 2019, were approximately RMB219,724,000, compared to RMB241,826,000 as of December 31, 2018, with a liquidity ratio of approximately 124.5%[55] - Total equity of the Group as of June 30, 2019, was approximately RMB1,212,115,000, an increase from approximately RMB1,153,509,000 as of December 31, 2018[55] - The Group's gross debt gearing ratio as of June 30, 2019, was approximately 55.4%, up from approximately 48.5% as of December 31, 2018[55] Corporate Governance - The company has committed to good corporate governance practices, with a focus on transparency and accountability to shareholders[150] - The roles of chairman and chief executive officer are not separated, as the chairman oversees general operations, which the board believes does not impair the balance of power[155] - The company has complied with the corporate governance code throughout the review period, except for a deviation in the separation of roles as noted[150] Future Outlook and Risks - The Group is cautiously optimistic about the future of the linen textile industry and aims to maintain production scale and secure steady production volumes going forward[27] - The Group faces risks including demand for linen yarn, protectionism, and potential punitive tariffs on products made in China[84] - The Group is confident in the sustainable demand for linen yarn due to the trend towards environmental-friendliness and the Chinese government's encouragement of domestic consumption[86] Share Options and Awards - The Group has adopted share option schemes and a share award plan to incentivize directors and employees contributing to the Group's success[80] - The company awarded 19,400,000 shares under the Share Award Plan, with 19,370,000 shares accepted by selected persons[147] - No Share Option under the Old Scheme was exercised during the Review Period, and no option was granted under the New Scheme during the Review Period[143] IFRS Adoption - The Group adopted IFRS 16 using the modified retrospective method with an initial application date of January 1, 2019[195] - The cumulative effect of initial adoption of IFRS 16 was recognized as an adjustment to the opening balance of retained earnings at January 1, 2019[198] - Comparative information for 2018 was not restated and continues to be reported under IAS 17[195]

Production and Market Performance - Kingdom produced 18,523 tonnes of linen yarn in 2018, accounting for over 10% of the global supply[14]. - The Group's pure linen yarn exports amounted to 11,472 tonnes in 2018, slightly down from 11,734 tonnes in 2017, maintaining a market share of approximately 44.4% of China's total pure linen yarn exports[15]. - Total turnover of the Group increased by 21.6% despite similar quantities of linen yarn sold compared to 2017, driven by a rebound in global demand and historical selling prices[17]. - Kingdom produced 620 tonnes of organic linen yarn in 2018, reinforcing its position as a leader in organic and sustainable linen production[16]. - The average selling price of linen yarn reached a historical high during the year due to constrained capacity expansion in 2017 and growing demand in the Chinese market[17]. - The total volume of pure linen yarn exports from China in 2018 dropped by approximately 1.0% year-on-year[40]. - The demand for linen yarn has rebounded since the end of 2017, with no significant production capacity added to the market since 2016, leading to a robust market environment[113]. Financial Performance - The Group's revenue for 2018 was RMB 1,245,643, an increase of 21.6% from RMB 1,023,962 in 2017[35]. - Gross profit for 2018 was RMB 257,881, representing a significant increase from RMB 116,268 in 2017[35]. - The profit for the year 2018 was RMB 103,187, a substantial increase from RMB 622 in 2017[35]. - Gross profit surged by approximately 121.8% year-on-year to RMB257,881,000, with an overall gross margin rebounding to 20.7% in 2018, compared to 11.4% in 2017[44]. - The Group's basic earnings per share amounted to RMB0.17, compared to a loss per share of RMB0.01 in 2017[44]. - The Group recorded a net profit of approximately RMB103,187,000, representing a surge of approximately 165 times compared to the previous year[82]. - Profit attributable to owners of the parent was approximately RMB102,006,000, a significant recovery from a loss of RMB3,132,000 in the previous year[84]. Investments and Expansion - Kingdom Holdings has invested in a new production facility in Ethiopia, covering 300,000 square meters, expected to commence trial production in late 2019/early 2020[24]. - The Group has established a new production facility in Heilongjiang Province, China, with an annual capacity of 4,000 tonnes, focusing on flax and industrial hemp yarn[63][64]. - The Group is investing in a new production facility in Ethiopia, which will increase annual production capacity by 5,000 tonnes, with trial production expected to commence in late 2019 or early 2020[66][67]. - The Group owns 72.72% equity interest in the Heilongjiang facility, marking its entry into the industrial hemp yarn market, which is anticipated to grow rapidly due to supportive national policies in China[63][64]. Raw Material Procurement and Supply Chain - The Group has a systematic procurement strategy for raw materials, primarily sourcing flax fiber from France, Belgium, and the Netherlands, which helps stabilize costs and mitigate price fluctuations[57]. - The Group's procurement strategy is influenced by factors such as flax harvest conditions and market prices, ensuring a stable supply of raw materials[57]. Dividends and Shareholder Returns - The Board has recommended a final dividend of HK6.0 cents per share for the year, compared to HK2.0 cents per share in 2017[25]. - The Board recommended a final dividend of HK 6.0 cents per ordinary share for the Year, pending approval at the upcoming annual general meeting[163]. Risks and Challenges - The Indian government initiated an anti-dumping investigation on linen yarn from China, proposing duties ranging from USD0.5 to USD4.83 per kilogram, which may affect pricing in that market[18]. - The geopolitical environment remains a concern, with potential impacts from the ongoing China-US trade tensions, although most of the Group's customers are not US-based[18]. - The Group faces risks including demand fluctuations for linen yarn, trade protectionism, and execution risks related to the new expansion project in Ethiopia[111]. Sustainability and Environmental Commitment - The Group is committed to environmental sustainability while pursuing excellent operating results, as highlighted in the separate ESG report[157]. - The Group's factories reduced steam, water, and electricity consumption per tonne of yarn manufactured by 13%, 8%, and 2% respectively during the Year[156]. Patents and Innovation - In 2018, Kingdom Holdings applied for 14 patents, including 8 invention patents, with 7 patents granted, enhancing its core competitiveness[28]. - As of December 31, 2018, the Group holds 64 registered patents and has 28 pending patent applications, reflecting its commitment to technology and innovation[72]. Employee and Management Information - The total staff costs for the year increased by approximately 9.4% to RMB183,823,000, with the headcount rising to 3,048 employees due to recruitment for the new Heilongjiang factory[105]. - The remuneration of senior management during the year ranges from RMB 1,000,001 to RMB 1,500,000, with one individual in this range[196]. - The Remuneration Committee regularly monitors the remuneration levels of all Directors and senior management to ensure appropriateness[194]. Financial Position and Assets - The total assets of the Group as of December 31, 2018, were RMB 2,127,748, up from RMB 1,962,416 in 2017[35]. - The Group's net current assets as of December 31, 2018, were approximately RMB314,058,000, with cash and cash equivalents increasing to approximately RMB241,826,000 from RMB173,824,000 in 2017[95]. - Total equity as of December 31, 2018, was approximately RMB1,153,509,000, compared to RMB1,050,196,000 in 2017[95].