Longhui International Holdings Limited 龍 輝 國 際 控 股 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：01007 202 年報 ANNUAL REPORT Contents 目 錄 � 2 Corporate Information 公司資料 ◆ 5 Chairman's Statement 主席報告書 ◆ 7 Management Discussion and Analysis 管理層討論與分析 � 20 Board of Directors and Senior Management 董事會及高級管理層 � 25 Directors' Report 董事會報告書 � 40 Corporate Governance Report 企業管治報告 ◆ 56 Environment, Social and Governance Report 環境、社會及管治報告 � 77 Independent Auditors' ...

Revenue and Financial Performance - Revenue for the six months ended June 30, 2020, was RMB 77,318,000, a decrease of 67.6% compared to RMB 237,904,000 in the same period of 2019[8]. - The Group reported a consolidated net loss of approximately RMB 52,774,000 for the six months ended June 30, 2020, and net current liabilities of approximately RMB 200,317,000[36]. - For the six months ended June 30, 2020, the loss from operating activities was RMB 52,465,000 compared to a loss of RMB 55,205,000 for the same period in 2019[97]. - The Group's revenue for the six months ended June 30, 2020, was RMB 77,318,000, a significant decrease from RMB 237,904,000 in the same period of 2019, representing a decline of approximately 67.6%[70]. - The Group's revenue decreased by approximately 67.5% to approximately RMB 77.3 million for the six months ended June 30, 2020, compared to approximately RMB 237.9 million in the same period last year[179]. Loss and Earnings Per Share - Loss for the period was RMB 52,774,000, compared to a loss of RMB 55,490,000 in the same period of 2019, indicating a slight improvement[10]. - Basic loss per share for the period was RMB 0.008, compared to RMB 0.010 in the same period of 2019[8]. - The Group's operating loss before income tax for the six months ended June 30, 2020, was RMB 32,843,000, compared to a loss of RMB 36,023,000 in the same period of 2019[68]. - Loss for the period attributable to owners of the company was approximately RMB 52.5 million, slightly improved from a loss of approximately RMB 55.2 million in the same period last year[197]. Expenses and Cost Management - Employee benefit and related expenses were RMB 34,697,000, down from RMB 92,100,000 in the same period of 2019, reflecting a cost reduction strategy[8]. - Other expenses totaled RMB 41,919,000, down from RMB 94,108,000 in the same period of 2019, indicating improved operational efficiency[8]. - Finance expenses, net, were RMB 3,973,000, a decrease from RMB 9,028,000 in the same period of 2019[8]. - The Group's costs of food ingredients for the hotpot business decreased by approximately 62.3% to approximately RMB 34.7 million for the six months ended June 30, 2020 from approximately RMB 92.1 million in the last corresponding period[176]. - Employee benefits and related expenses decreased by approximately 48.7% to approximately RMB 35.5 million, primarily due to the closure of 41 restaurants during the period[184]. Assets and Liabilities - As of June 30, 2020, total assets decreased to RMB 195,173,000 from RMB 305,324,000 as of December 31, 2019, representing a decline of approximately 36.1%[12]. - Total liabilities amounted to RMB 329,565,000, down from RMB 387,295,000, indicating a reduction of approximately 14.9%[15]. - The company's total equity showed a significant decline, falling to RMB (134,392,000) from RMB (81,971,000), reflecting a worsening financial position[12]. - Current liabilities increased to RMB 263,550,000 compared to RMB 276,350,000, showing a slight decrease of about 4.6%[15]. - Cash and cash equivalents decreased to RMB 40,457,000 from RMB 55,534,000, a decline of approximately 27.2%[12]. Impact of COVID-19 - The outbreak of COVID-19 led to the voluntary closure of most branches in February 2020, negatively impacting revenue and increasing rent concessions from landlords[42]. - The Group's financial position and performance were adversely affected by the pandemic, including a reduction in revenue and increased rent concessions[42]. - The Group is negotiating with landlords for rent concessions due to reduced customer numbers caused by the pandemic[39]. - The Group recognized changes in lease payments resulting from rent concessions of approximately RMB 4,326,000 for the six months ended 30 June 2020[58]. - The Group's related party transactions included the purchase of goods amounting to RMB118,000 during the six months ended 30 June 2020[154]. Operational Strategy - The company is focusing on cost control and operational efficiency to navigate the challenging market conditions[10]. - Management is implementing cost control measures and plans to slow down the opening of new restaurants or close underperforming ones to improve operating results and cash flows[36]. - The company’s subsidiaries are engaged in restaurant operations located in the PRC, indicating a focus on the domestic market for growth opportunities[24]. - The Group operates three brands: Faigo, Xiao Faigo Hotpot, and Hong Yuanwai, targeting high-end and mid-tier market segments[174]. Compliance and Governance - The financial statements have been prepared in accordance with International Accounting Standard 34, ensuring compliance with international financial reporting standards[27]. - The company’s audit committee reviewed the condensed consolidated financial statements, which were approved for issue by the board of directors on August 26, 2020, ensuring transparency and accountability[26]. - The statutory reserve requires the company to transfer 10% of the profit after taxation until it reaches 50% of the registered capital, which is a regulatory requirement for subsidiaries in the PRC[18].

Longhui International Holdings Limited 龍 輝 國 際 控 股 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：01007 2019 #* ANNUAL REPORT Contents 目 錄 2 Corporate Information 公司資料 4 Chairman's Statement 主席報告書 6 Management Discussion and Analysis 管理層討論與分析 19 Board of Directors and Senior Management 董事會及高級管理層 23 Directors' Report 董事會報告書 35 Corporate Governance Report 企業管治報告 51 Environment, Social and Governance Report 環境、社會及管治報告 67 Independent Auditors' Report 獨立核數師報告 ...

Financial Performance - Revenue for the six months ended June 30, 2019, was RMB 237,904,000, a decrease of 25.5% compared to RMB 319,707,000 in the same period of 2018[8]. - Loss from operating activities for the period was RMB 60,704,000, compared to a loss of RMB 36,144,000 in the prior year, representing an increase of 68.1%[8]. - Loss for the period attributable to owners of the company was RMB 55,205,000, compared to RMB 27,426,000 in 2018, indicating a year-over-year increase of 100.5%[11]. - Total comprehensive loss for the period was RMB 54,403,000, significantly higher than RMB 27,708,000 in the previous year, reflecting a 96.2% increase[11]. - The company reported a comprehensive loss of RMB 27,708,000 for the period, reflecting ongoing financial challenges[19]. - For the six months ended June 30, 2019, the Group recorded a loss of approximately RMB 55,490,000[46]. Cost Management - Employee benefit and related expenses decreased to RMB 69,229,000 from RMB 86,035,000, a reduction of 19.5% year-over-year[8]. - Other expenses for the period were RMB 16,775,000, down from RMB 28,349,000 in 2018, showing a decrease of 40.8%[8]. - The Group's employee wages and salaries for the six months ended June 30, 2019, were RMB 8,322,000, a decrease of 58.3% from RMB 19,970,000 in the same period of 2018[165]. Assets and Liabilities - Total assets increased to RMB 375,423,000 as of June 30, 2019, compared to RMB 323,450,000 as of December 31, 2018, reflecting a growth of approximately 16.1%[13]. - Current liabilities rose to RMB 263,069,000, up from RMB 258,287,000, indicating a slight increase of about 1.0%[16]. - Total equity showed a significant decrease to RMB (91,603,000) as of June 30, 2019, from RMB (36,633,000) as of December 31, 2018, indicating a deterioration in equity position[13]. - Non-current liabilities increased to RMB 203,957,000 from RMB 101,796,000, marking an increase of approximately 100.5%[16]. - The company’s net current liabilities increased to RMB (111,747,000) from RMB (53,482,000), indicating worsening liquidity conditions[16]. Cash Flow - Net cash generated from operating activities was RMB 25,660,000 for the six months ended June 30, 2019, compared to a cash outflow of RMB 19,296,000 in the same period of 2018[24]. - Cash and cash equivalents at the end of the period decreased to RMB 50,222,000 from RMB 71,860,000, representing a decline of approximately 30.1%[24]. - Total cash outflow for leases during the six months ended June 30, 2019, was approximately RMB 38,033,000, included in net cash used in financing activities[193]. Acquisition and Financing - The Company completed the acquisition of Longhui International Catering Management Holdings Limited on July 4, 2018, which constituted a very substantial acquisition[37]. - The substantial shareholders have agreed to provide continuous financial support to the Group to meet its obligations when due[46]. - On July 25, 2019, the Company entered into a credit financing letter agreeing to provide a loan of HK$ 35,000,000 for a term of three years[43]. - The Company entered into a credit facility letter with United Target Finance Company Limited for a term loan facility of HK$35 million for a term of 3 years[48]. IFRS Adoption - The application of new IFRS standards, including IFRS 16 on Leases, has been implemented, resulting in changes in accounting policies and adjustments in the financial statements[55]. - The Group recognized full lease liabilities for leases previously classified as operating leases, measured at the present value of remaining lease payments[60]. - The Group has adopted a modified retrospective approach for the application of IFRS 16, affecting the recognition of lease liabilities and right-of-use assets[62]. - The initial application of IFRS 16 resulted in a remeasurement of right-of-use assets by RMB 162,242,000 and lease liabilities by RMB 186,732,000[75]. Impairment and Depreciation - Impairment of right-of-use assets amounted to RMB 41,953,000 for the six months ended June 30, 2019, with no impairment recorded in the same period of 2018[171]. - An impairment loss of approximately RMB 13,342,000 was recognized for property, plant, and equipment during the period, compared to RMB 8,955,000 for the year ended December 31, 2018, indicating a 49% increase in impairment losses[187]. - The Group's depreciation expense for right-of-use assets during the six months ended June 30, 2019, was RMB 41,953,000[72]. Revenue Breakdown - Revenue from external customers in the PRC for the six months ended June 30, 2019, was RMB 237,904,000, a decrease of 25.5% from RMB 319,707,000 in the same period of 2018[156]. - The Group's hotpot business revenue for the six months ended June 30, 2019, was RMB 237,904,000, down from RMB 319,707,000 in 2018, indicating a significant decline in sales[161]. - The Group's customer base is diversified, with no individual customer exceeding 10% of the total revenue for the six months ended June 30, 2019[157].

Company Overview - Longhui International Holdings Limited was formerly known as Daqing Dairy Holdings Limited[1] - The Company changed its name to "Longhui International Holdings Limited" on 30 July 2018, which does not affect its operations or financial position[118] - The Company underwent a change in directors effective from 6 July 2018, with several resignations and new appointments[110] Financial Performance - The Group's revenue decreased by approximately 10.8% from approximately RMB 700.4 million in 2017 to approximately RMB 624.7 million in 2018[17] - Loss for the year attributable to owners of the Company for 2018 was approximately RMB 451.1 million, compared to a profit of approximately RMB 25.7 million in 2017[17] - Basic loss per share for 2018 was approximately RMB 0.1 cents, compared to basic earnings per share of approximately RMB 0.01 cents in 2017[17] - The net loss was mainly due to listing expenses, decreased revenue from existing restaurants, thin profit margins, delays in opening new restaurants, and impairment provisions[22] - The Group reported a loss attributable to owners of approximately RMB 451.1 million for 2018, compared to a profit of approximately RMB 25.7 million in 2017, marking a significant decline in performance[75] - Other expenses increased by approximately 43.1% from approximately RMB 35.5 million in 2017 to approximately RMB 50.8 million in 2018, primarily due to professional fees related to the resumption of trading and listing application[70] Market Strategy and Operations - The company is focused on expanding its market presence and exploring new strategies for growth[4] - The company aims to enhance its product offerings through new product development and technological advancements[4] - The Group plans to open about 14 new restaurants in first and second-tier cities in the PRC in 2019, continuing its expansion strategy[76] - The Group aims to refine current operations to enhance same-store sales growth and profitability through improved marketing, new product development, and optimized workflows[87] - The Group will continue to seek opportunities for opening more restaurants under the Faigo brand, which currently has 7 locations[86] Governance and Corporate Structure - Longhui International is committed to maintaining high corporate governance standards as outlined in their corporate governance report[4] - There were notable changes in the audit and remuneration committees, indicating a restructuring of governance[9] - The Group plans to strengthen corporate governance and internal controls to safeguard shareholder investments[22] Business Performance Metrics - The average daily restaurant sales nationwide decreased to RMB 15,317.8 in 2018 from RMB 17,111.5 in 2017, reflecting a decline of 10.5%[38] - The average customer per day per restaurant nationwide was 122.3 in 2018, down from 143.7 in 2017, indicating a decline of 14.8%[35] - The average daily customer count in Shanghai dropped to 132.8 in 2018 from 170.2 in 2017, a decrease of 22%[35] - The average spending per customer nationwide was RMB 125.2 in 2018, slightly down from RMB 119.0 in 2017, reflecting a decrease of 5.2%[38] - The seat turnover rate per day per restaurant nationwide decreased to 1.2 in 2018 from 1.6 in 2017, indicating a decline of 25%[38] Employee and Management - The company had a total of 3,057 employees as of December 31, 2018, representing an increase of approximately 8.2% from 2,826 employees in 2017[143] - Employee compensation is reviewed annually based on performance evaluations and other relevant factors, ensuring competitive remuneration packages for eligible employees[143] - The board of directors includes experienced professionals with extensive backgrounds in management and operations within the catering sector[156] Future Outlook - Future outlook includes strategic initiatives aimed at increasing operational efficiency and market share[4] - The Group is optimistic about the future prospects of the hotpot business, expecting it to generate satisfactory income[22] - The company aims to become the brand with the highest market capitalization in the Asia-Pacific catering industry through transformation and product quality improvements[61] Financial Position and Capital Management - As of December 31, 2018, the Group recorded cash and bank balances of approximately RMB 51.6 million, down from RMB 60.4 million in 2017[94] - The net current liabilities increased to approximately RMB 53.5 million as of December 31, 2018, compared to RMB 25.2 million in 2017[94] - The board resolved not to recommend the payment of any dividend for the year ended December 31, 2018[93] - The Company had no charges on its assets as of December 31, 2018, maintaining a clean balance sheet[109]