Financial Performance - The group's revenue surged to HKD 1,600,255,000, a 52.7% increase from HKD 1,048,006,000 in 2020[25] - Gross profit rose by 50.4% to HKD 479,224,000, maintaining a gross margin of 29.9%[25] - Shareholders' profit increased by 179.1% to HKD 128,076,000, compared to HKD 45,895,000 in the previous year[25] - Manufacturing revenue increased by 58.2% to HKD 844,256,000, driven by a rapid recovery in customer orders and increased capacity in the Bangladesh factory[26] - Trade business revenue rose by 47.0% to HKD 755,999,000, accounting for 47.2% of total revenue, due to economic rebound in the US and UK[28] Dividends and Shareholder Returns - The group plans to distribute a final dividend of HKD 0.04 per share and a special dividend of HKD 0.02 per share, totaling HKD 0.09 for the year[25] - The interim dividend of HKD 0.03 per share was paid on October 8, 2021, totaling HKD 12.16 million, compared to HKD 0.02 per share in 2020[133] - The board proposed a final dividend of HKD 0.04 per share and a special dividend of HKD 0.02 per share for the year ended December 31, 2021, subject to shareholder approval[133] Financial Position and Capital Expenditures - The group maintains a strong financial position with cash and undrawn bank financing totaling approximately HKD 415,800,000 as of December 31, 2021[25] - As of December 31, 2021, the group's cash and cash equivalents totaled HKD 204.7 million, down from HKD 226 million in 2020[36] - The bank borrowing to equity ratio improved to 30.5% in 2021 from 37.2% in 2020, indicating a stronger financial position[36] - Capital expenditures for the year amounted to approximately HKD 45 million for enhancing manufacturing capabilities, significantly up from HKD 16.6 million in 2020[37] - The group plans to allocate HKD 95.5 million for capital expenditures, with HKD 92.5 million earmarked for expanding manufacturing operations in Bangladesh[38] Employee and Operational Insights - The group employed over 7,200 and 400 staff in Bangladesh and Shenzhen factories, respectively, as of December 31, 2021[27] - Employee expenses for the year were approximately HKD 340.2 million, an increase from HKD 251.8 million in 2020[41] - The group aims to optimize its trade business product mix to enhance operational efficiency and sales performance[32] Risk Management and Governance - The company has implemented a risk management process integrated into strategic planning, business planning, and daily operations[104] - The board is responsible for ensuring the internal control system remains sound and effective to protect shareholders' investments and the company's assets[97] - The company confirmed compliance with the standards set out in the code of conduct for securities trading by all directors as of December 31, 2021[87] - The company has established a board diversity policy with measurable targets, which will be reviewed periodically to ensure appropriateness and progress towards these goals[83] Market and Strategic Initiatives - The group expects a 20% increase in production capacity with new facilities in Bangladesh, set to commence operations in the first half of 2023[31] - The group anticipates continued growth in its trade subsidiaries in the US and UK, benefiting from the shift to online shopping[31] - The company is expanding its market presence in Asia, targeting a D% increase in market share by the end of the next fiscal year[63] - The company is exploring potential acquisitions to strengthen its portfolio and expand its capabilities in the market[63] Environmental and Social Responsibility - The company is committed to reducing waste and emissions in its operations, implementing effective environmental management systems[197] - The company has established environmental standards for its factories to ensure sustainable resource management[198] - The company aims to balance production and environmental protection through various eco-friendly measures, including reducing hazardous substances and promoting resource recycling[199] Stakeholder Engagement - Stakeholder engagement mechanisms have been established to ensure timely communication regarding the company's operations[188] - Key stakeholder concerns include employee welfare, product quality, and business sustainability, with various channels for engagement identified[189] Corporate Structure and Board Composition - The board consists of five executive directors and three independent non-executive directors, ensuring a balanced distribution of power and authority[74] - The company has adopted a board diversity policy, considering various factors such as cultural background, professional experience, and skills to achieve diversity among board members[78] - The company has established a nomination committee to oversee the appointment and re-election of directors, ensuring a transparent and orderly process[81] Related Party Transactions - The company confirmed compliance with the relevant disclosure requirements under the Listing Rules regarding related party transactions[150] - The maximum annual total value of supply transactions under the manufacturing agreement with New Era Cap Hong Kong LLC for the fiscal years ending December 31, 2022, 2023, and 2024 are projected to be HKD 583,500,000, HKD 641,850,000, and HKD 706,035,000 respectively[154]

[Management Discussion and Analysis](index=3&type=section&id=管理層討論及分析) This section provides an overview of the Group's financial performance, business operations, future outlook, liquidity, capital expenditure, foreign exchange risks, and employee policies for the period [Financial Review](index=3&type=section&id=財務回顧) The Group achieved record-high revenue and net profit in H1 2021, driven by global economic recovery, increased factory capacity, and a comprehensive trade business portfolio H1 2021 Financial Performance Overview | Metric | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | Y-o-Y Growth Rate | | :----------- | :-------------------- | :-------------------- | :--------- | | Revenue | 741,658 | 430,952 | 72.1% | | Gross Profit | 242,730 | 129,377 | 87.6% | | Gross Margin | 32.7% | 30.0% | 2.7 percentage points | | Profit Attributable to Shareholders | 66,084 | 757 | 87.3 times | | Interim Dividend | HK 3 cents per share | HK 2 cents per share | 50.0% | | Cash on Hand | 217,300 | 219,500 (December 31, 2020) | -1.0% | | Unutilized Banking Facilities | 204,300 | 219,300 (December 31, 2020) | -6.9% | - Revenue and net profit reached record highs, primarily driven by global economic recovery, eased pandemic lockdowns, increased production capacity at the Bangladesh factory, and a comprehensive trade business product portfolio[7](index=7&type=chunk) - Gross margin increased to **32.7%**, attributed to more fast-track orders, effective cost control, and enhanced automation at the Bangladesh factory[7](index=7&type=chunk) [Business Review](index=4&type=section&id=業務回顧) Manufacturing revenue grew significantly from increased customer procurement and expanded factory capacity, while the trade business turned profitable from eased lockdowns and online shopping trends - Employee numbers changed at Bangladesh and Shenzhen factories: Bangladesh factory employees increased to approximately **6,300** (December 31, 2020: 5,300), while Shenzhen factory employees decreased to approximately **400** (December 31, 2020: 500)[9](index=9&type=chunk) - Bangladesh production contributed **50.1%** of the Group's total revenue, an increase from **47.5%** in the prior year period[9](index=9&type=chunk) - The trade business benefited from the online consumption trend driven by the pandemic and industry consolidation, expanding its licensed brand portfolio[10](index=10&type=chunk) Manufacturing and Trading Business Performance | Business Segment | Metric | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | Y-o-Y Growth Rate/Change | | :------- | :----------- | :-------------------- | :-------------------- | :-------------- | | **Manufacturing Business** | Revenue | 441,302 | 268,469 | 64.4% | | | Revenue from External Customers | 392,618 | 235,980 | 66.4% | | | % of Total Revenue | 52.9% | - | - | | | Operating Profit | 89,087 | 35,237 | 152.8% | | **Trading Business** | Revenue | 349,040 | 194,972 | 79.0% | | | % of Total Revenue | 47.1% | - | - | | | Operating Profit | 7,631 | (18,026) (Loss) | Turned from Loss to Profit | [Outlook](index=5&type=section&id=前景) Despite challenges, management anticipates continued growth by optimizing capacity, improving efficiency, localizing supply chains, and expanding licensed brands - Management expects growth momentum to continue as the market adapts to the 'new normal' of living with the pandemic and customer order demand remains strong[12](index=12&type=chunk) - To meet demand, the Group will continue to optimize its production capacity layout, including improving efficiency and capacity, despite the Bangladesh factory's approximately two-week shutdown due to pandemic lockdowns[12](index=12&type=chunk) - To address raw material shortages, soaring prices, and rising freight costs, management is gradually implementing supply chain and procurement localization strategies[12](index=12&type=chunk) - The trade business is expected to benefit from online shopping trends and market recovery, with the Group planning to strengthen and expand its licensed brand portfolio to consolidate its leading position[12](index=12&type=chunk) [Liquidity and Financial Resources](index=6&type=section&id=流動資金及財政資源) As of June 30, 2021, the Group maintained a robust liquidity position with total cash and bank balances of **HKD 222.2 million**, ample banking facilities, and a reduced bank borrowings to equity ratio Overview of Liquidity and Financial Resources | Metric | June 30, 2021 (million HKD) | December 31, 2020 (million HKD) | Change Rate | | :--------------- | :----------------------- | :------------------------ | :----- | | Total Cash, Bank Balances, and Liquid Investment Portfolio | 222.2 | 226.0 | -1.7% | | Total Banking Facilities | 475.0 | 513.4 | -7.5% | | Unutilized Banking Facilities | 204.3 | 219.3 | -6.9% | | Bank Borrowings to Equity Ratio | 31.9% | 37.2% | -5.3 percentage points | - Approximately **60%** of the liquid funds were denominated in USD, **26%** in RMB, and **7%** in HKD[14](index=14&type=chunk) - The sound financial and liquidity position ensures the Group has sufficient resources to meet its commitments and working capital requirements[14](index=14&type=chunk) [Capital Expenditure](index=6&type=section&id=資本開支) The Group invested **HKD 4.6 million** in equipment and **HKD 1.0 million** in trading business systems, with approved capital commitments totaling **HKD 51.4 million** for production plants and equipment Capital Expenditure Overview | Item | H1 2021 (million HKD) | H1 2020 (million HKD) | Change Rate | | :----------- | :---------------------- | :---------------------- | :----- | | Additions to Equipment | 4.6 | 8.6 | -46.5% | | Trading Business Equipment and Systems | 1.0 | 1.7 | -41.2% | Approved Capital Commitments (as of June 30, 2021) | Item | Amount (million HKD) | | :----------- | :-------------- | | Production Plants and Equipment | 51.4 | | Trading Business Equipment Upgrades | 3.0 | [Foreign Exchange Risk](index=7&type=section&id=外匯風險) The Group's assets and liabilities are primarily denominated in HKD, USD, RMB, or BDT, with a 1% appreciation in RMB or BDT expected to decrease manufacturing gross margin by approximately 0.1% - The majority of the Group's assets and liabilities are denominated in HKD, USD, RMB, or Bangladeshi Taka[17](index=17&type=chunk) - A **1%** appreciation in RMB or Bangladeshi Taka is expected to result in an approximate **0.1%** decrease in the manufacturing business's gross margin[17](index=17&type=chunk) [Employees and Remuneration Policy](index=7&type=section&id=僱員及薪酬政策) As of June 30, 2021, the Group had **6,929** global employees, with a significant increase in Bangladesh, and incurred approximately **HKD 165.5 million** in employee expenses, offering competitive remuneration and share options to key employees Employee Numbers and Expenses | Region | June 30, 2021 (Number of People) | June 30, 2020 (Number of People) | Change Rate | | :----------- | :------------------- | :------------------- | :----- | | China (including Hong Kong) | 482 | 663 | -27.3% | | Bangladesh | 6,290 | 4,087 | 54.0% | | USA and UK | 157 | 148 | 6.1% | | **Total** | **6,929** | **4,898** | **41.5%** | | Employee Expenses | 165.5 million HKD | 113.4 million HKD | 46.0% | - The Group ensures competitive employee remuneration levels, determined by position and performance[18](index=18&type=chunk) - Key employees, including directors, are granted share options under the share option scheme[18](index=18&type=chunk) [Interim Dividend and Closure of Register of Members](index=8&type=section&id=中期股息及暫停辦理股份過戶登記) This section details the interim dividend declaration and the temporary closure of the register of members to determine shareholders' entitlement [Interim Dividend](index=8&type=section&id=中期股息) The Board declared an interim dividend of **HK 3 cents per share**, an increase from the prior year, payable on or after October 8, 2021 Interim Dividend | Item | 2021 (HK cents per share) | 2020 (HK cents per share) | Change Rate | | :------- | :---------------- | :---------------- | :----- | | Interim Dividend | 3 | 2 | 50.0% | - The interim dividend will be paid on or after October 8, 2021[19](index=19&type=chunk) [Closure of Register of Members](index=8&type=section&id=暫停辦理股份過戶登記) To determine eligibility for the interim dividend, the Company will temporarily suspend the registration of share transfers from September 14 to September 16, 2021 - The registration of share transfers will be suspended from September 14, 2021, to September 16, 2021 (both dates inclusive)[20](index=20&type=chunk) - To qualify for the interim dividend, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Hong Kong share registrar by 4:30 p.m. on September 13, 2021[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statement of Profit or Loss](index=9&type=section&id=中期簡明綜合損益表（未經審核）) For H1 2021, the Group's revenue increased by **72.1%** to **HKD 741,658 thousand**, gross profit rose **87.6%** to **HKD 242,730 thousand**, and profit attributable to owners reached **HKD 66,084 thousand** Summary of Unaudited Condensed Consolidated Statement of Profit or Loss | Metric | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | Change Rate | | :--------------- | :-------------------- | :-------------------- | :----- | | Revenue | 741,658 | 430,952 | 72.1% | | Cost of Sales | (498,928) | (301,575) | 65.4% | | Gross Profit | 242,730 | 129,377 | 87.6% | | Operating Profit | 89,549 | 9,614 | 831.4% | | Profit Before Income Tax | 85,878 | 3,568 | 2304.0% | | Income Tax Expense | (15,196) | (2,228) | 581.2% | | Profit for the Period | 70,682 | 1,340 | 5174.8% | | Profit Attributable to Owners of the Company | 66,084 | 757 | 8630.0% | | Basic Earnings Per Share (HK cents) | 16.30 | 0.19 | 8478.9% | [Unaudited Condensed Consolidated Statement of Comprehensive Income](index=10&type=section&id=中期簡明綜合全面收益表（未經審核）) For H1 2021, the Group's profit for the period was **HKD 70,682 thousand**, with total comprehensive income reaching **HKD 71,751 thousand** after exchange differences, significantly improving from the prior year's comprehensive loss Summary of Unaudited Condensed Consolidated Statement of Comprehensive Income | Metric | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | Change | | :--------------- | :-------------------- | :-------------------- | :--- | | Profit for the Period | 70,682 | 1,340 | Increase | | Exchange Differences on Translation of Financial Statements of Overseas Operations | 1,069 | (3,684) | Improvement | | Total Comprehensive Income/(Loss) for the Period, Net of Tax | 71,751 | (2,344) | Turned from Loss to Profit | | Attributable to Owners of the Company | 67,064 | (2,801) | Turned from Loss to Profit | | Attributable to Non-controlling Interests | 4,687 | 457 | Increase | [Unaudited Condensed Consolidated Statement of Financial Position](index=11&type=section&id=中期簡明綜合資產負債表（未經審核）) As of June 30, 2021, the Group's total assets increased to **HKD 1,488,837 thousand** and total equity rose to **HKD 848,227 thousand**, indicating a robust financial position with significantly increased net current assets Summary of Unaudited Condensed Consolidated Statement of Financial Position | Metric | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | Change Rate | | :--------------- | :--------------------- | :---------------------- | :----- | | **Assets** | | | | | Non-current Assets | 553,987 | 564,855 | -1.9% | | Current Assets | 934,850 | 868,643 | 7.6% | | **Total Assets** | **1,488,837** | **1,433,498** | **3.9%** | | **Equity and Liabilities** | | | | | Total Equity | 848,227 | 788,413 | 7.6% | | Non-current Liabilities | 49,205 | 52,799 | -6.8% | | Current Liabilities | 591,405 | 592,286 | -0.1% | | **Total Liabilities** | **640,610** | **645,085** | **-0.7%** | | Net Current Assets | 343,445 | 276,357 | 24.3% | [Unaudited Condensed Consolidated Statement of Changes in Equity](index=13&type=section&id=中期簡明綜合權益變動表（未經審核）) The Group's total equity increased during the period, primarily reflecting the contribution of profit for the period to retained earnings and changes in exchange reserves, with share capital remaining stable and other reserves growing - The statement of changes in equity presents the opening and closing balances and movements during the period for share capital, share premium, capital reserve, share-based payment reserve, other reserves, exchange reserve, retained earnings, total, non-controlling interests, and total equity[35](index=35&type=chunk)[36](index=36&type=chunk) - Profit for the period and exchange differences are the main factors affecting total equity[25](index=25&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Unaudited Condensed Consolidated Statement of Cash Flows](index=15&type=section&id=中期簡明綜合現金流量表（未經審核）) For H1 2021, the Group generated **HKD 66,272 thousand** from operating activities, with net cash outflows from investing and financing, resulting in a slight decrease in cash and cash equivalents to **HKD 217,294 thousand** at period-end Summary of Unaudited Condensed Consolidated Statement of Cash Flows | Metric | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | Change | | :--------------- | :-------------------- | :-------------------- | :--- | | Net Cash Generated from Operating Activities | 66,272 | 63,515 | Increase | | Net Cash (Used in)/Generated from Investing Activities | (23,254) | 11,342 | Turned to Net Outflow | | Net Cash (Used in)/Generated from Financing Activities | (45,324) | 39,507 | Turned to Net Outflow | | Net (Decrease)/Increase in Cash and Cash Equivalents | (2,306) | 114,364 | Turned to Net Decrease | | Cash and Cash Equivalents at End of Period | 217,294 | 223,623 | Decrease | - Net cash outflow from investing activities was primarily due to the purchase of property, plant and equipment and financial assets measured at fair value through profit or loss[40](index=40&type=chunk) - Net cash outflow from financing activities was mainly due to the repayment of bank borrowings and dividends paid, despite proceeds from new bank borrowings[40](index=40&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Information](index=15&type=section&id=未經審核中期簡明綜合財務資料附註) This section provides detailed notes on the Group's general information, accounting policies, financial risk management, revenue, segment information, and other key financial statement items [1. General Information](index=16&type=section&id=1.%20General%20Information) Fei Da Hat Industry Holdings Limited is a Bermuda-incorporated listed company primarily engaged in investment holding, with subsidiaries involved in manufacturing, sales, trading, and distribution of headwear and other products - The Company is a listed limited liability company incorporated in Bermuda, with its shares listed on The Stock Exchange of Hong Kong Limited[41](index=41&type=chunk) - The Company's principal business is investment holding, while its subsidiaries are primarily engaged in the manufacture and sale of headwear, and the trading and distribution of headwear and other products[41](index=41&type=chunk) [2. Basis of Preparation](index=16&type=section&id=2.%20Basis%20of%20Preparation) This interim condensed consolidated financial information is prepared in accordance with HKAS 34 'Interim Financial Reporting' and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2020 - This interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting'[44](index=44&type=chunk) - This information does not include all the notes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020[44](index=44&type=chunk) [3. Accounting Policies](index=16&type=section&id=3.%20Accounting%20Policies) The accounting policies applied are consistent with the prior year's annual consolidated financial statements, except for income tax estimates and the adoption of new and revised standards, which did not require changes or retrospective adjustments - The accounting policies applied are consistent with those applied in the annual consolidated financial statements for the year ended December 31, 2020, except for income tax estimates and the adoption of new and revised standards[45](index=45&type=chunk) - The Group was not required to change its accounting policies or make retrospective adjustments due to the adoption of new and revised standards[48](index=48&type=chunk) - Standards that have been issued but are not yet effective for the Group are not expected to have a significant impact on the Group in the current or future reporting periods[49](index=49&type=chunk) [4. Estimates](index=17&type=section&id=4.%20Estimates) Preparation of interim financial information requires management's judgment, estimates, and assumptions, which may differ from actual results, with key estimation uncertainties consistent with prior year's annual financial statements - The preparation of interim condensed consolidated financial information requires management to make judgments, estimates, and assumptions, and actual results may differ from these estimates[50](index=50&type=chunk) - The key sources of estimation uncertainty in applying accounting policies and making estimates are the same as those applied in the consolidated financial statements for the year ended December 31, 2020[50](index=50&type=chunk) [5. Financial Risk Management](index=17&type=section&id=5.%20Financial%20Risk%20Management) The Group's operations are exposed to market, credit, and liquidity risks, with no significant changes in contractual undiscounted cash outflows of financial liabilities or risk management policies since the year-end - The Group's operations are exposed to market risk (including foreign exchange risk, interest rate risk, and price risk), credit risk, and liquidity risk[51](index=51&type=chunk) - There have been no significant changes in the contractual undiscounted cash outflows of financial liabilities compared to the year-end, and no changes in any risk management policies since the year-end[52](index=52&type=chunk)[53](index=53&type=chunk) [5.2 Fair Value Estimation](index=18&type=section&id=5.2%20Fair%20Value%20Estimation) The Group estimates fair values of financial instruments using a three-level hierarchy, holding financial assets measured at fair value through profit or loss, primarily unlisted investment funds, unlisted equity investments, and listed securities Financial Assets Measured at Fair Value (June 30, 2021) | Category | Level 1 (thousand HKD) | Level 2 (thousand HKD) | Level 3 (thousand HKD) | Total (thousand HKD) | | :----------- | :------------- | :------------- | :------------- | :------------ | | Unlisted Investment Funds | — | — | 17,855 | 17,855 | | Unlisted Equity Investments | — | — | 8,943 | 8,943 | | Listed Securities | 4,879 | — | — | 4,879 | | **Total Financial Assets** | **4,879** | **—** | **26,798** | **31,677** | - During the period, there were no transfers between fair value hierarchy levels for financial assets, and no other changes in valuation methods[61](index=61&type=chunk) [5.3 Fair Value Measurements Using Significant Unobservable Inputs (Level 3)](index=20&type=section&id=5.3%20Fair%20Value%20Measurements%20Using%20Significant%20Unobservable%20Inputs%20(Level%203)) Level 3 fair value measurements include investments in limited partnership interests and unlisted equity, with fair values approximate to prior reporting dates due to no significant changes - Unlisted investment funds classified as financial assets measured at fair value through profit or loss refer to a **2.2618%** investment in limited partnership interests in a fund[62](index=62&type=chunk) - Unlisted equity investments refer to an **18%** equity investment in an unlisted company incorporated in the USA, primarily engaged in the acquisition and management of retail plazas and related properties[62](index=62&type=chunk) - The Group believes that as of June 30, 2021, the fair values of financial assets measured at fair value through profit or loss are approximate to their values at the previous annual reporting date/acquisition date, as there have been no significant changes in their values since then[62](index=62&type=chunk) [5.4 Fair Value of Financial Assets and Liabilities Measured at Amortized Cost](index=20&type=section&id=5.4%20Fair%20Value%20of%20Financial%20Assets%20and%20Liabilities%20Measured%20at%20Amortized%20Cost) The fair values of the Group's financial assets and liabilities measured at amortized cost, including trade receivables, cash, payables, lease liabilities, and borrowings, are approximate to their carrying amounts - The fair values of other financial assets, trade receivables, cash and cash equivalents, trade and other payables, amounts due to non-controlling interests, lease liabilities, and borrowings measured at amortized cost are approximate to their carrying amounts[64](index=64&type=chunk) [6. Revenue](index=21&type=section&id=6.%20Revenue) The Group's principal activities involve the manufacturing, trading, and retail of headwear, small leather goods, handbags, apparel, and accessories - The Group's principal activities are the manufacturing, trading, and retail of headwear, small leather goods, handbags, apparel, and accessories[66](index=66&type=chunk) [7. Segment Information](index=21&type=section&id=7.%20Segment%20Information) Executive Directors, as chief operating decision-makers, determine operating segments based on reviewed reports, dividing the Group's business into manufacturing and trading, with performance assessed by segment profit/(loss) - The Executive Directors are identified as the chief operating decision-makers, determining operating segments based on reports reviewed for strategic decisions[67](index=67&type=chunk) - The Group's operating segments include manufacturing business (with primary production facilities in Bangladesh and Shenzhen, China) and trading business (operated through subsidiaries focused on European and US markets)[68](index=68&type=chunk) - Segment assets do not include investment properties, deferred income tax assets, financial assets measured at fair value through profit or loss, recoverable taxes, and cash and cash equivalents[69](index=69&type=chunk) [8. Profit Before Income Tax](index=23&type=section&id=8.%20Profit%20Before%20Income%20Tax) This section analyzes amounts deducted from or credited to profit before income tax, including depreciation, amortization, fair value losses, net exchange losses, inventory provisions, and net reversal/(impairment) of trade receivables Adjustments to Profit Before Income Tax | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------------------------- | :-------------------- | :-------------------- | | Fair Value Loss on Financial Assets Measured at Fair Value Through Profit or Loss | 1,677 | 2,029 | | Net Exchange Loss | 324 | 878 | | Depreciation of Property, Plant and Equipment | 18,871 | 19,053 | | Depreciation of Right-of-Use Assets | 10,022 | 7,832 | | Amortization of Other Intangible Assets | 9,218 | 9,336 | | Net Provision for Inventories | 733 | 3,416 | | Net (Reversal of)/Impairment Loss on Trade Receivables | (788) | 3,682 | Finance Costs — Net | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Interest on Bank Loans, Overdrafts and Other Borrowings | (2,706) | (5,009) | | Increase in Interest on Patent Fees Payable | (592) | (851) | | Interest on Lease Liabilities | (619) | (549) | | Finance Costs | (3,917) | (6,409) | | Finance Income | 246 | 363 | | **Finance Costs — Net** | **(3,671)** | **(6,046)** | - Net provision for inventories was **HKD 733 thousand**, a significant decrease from the prior year period, reflecting improved inventory conditions[73](index=73&type=chunk)[74](index=74&type=chunk) - Trade receivables recorded a reversal of **HKD 788 thousand**, indicating an improvement in expected credit loss assessment[73](index=73&type=chunk)[74](index=74&type=chunk) [9. Income Tax Expense](index=25&type=section&id=9.%20Income%20Tax%20Expense) For the six months ended June 30, 2021, the Group's income tax expense significantly increased to **HKD 15,196 thousand**, primarily due to higher overseas taxation and underprovision for Hong Kong profits tax in prior years Breakdown of Income Tax Expense | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Current Year — Hong Kong Profits Tax | 1,001 | — | | Current Year — Overseas Taxation | 11,867 | 2,884 | | Underprovision/(Overprovision) in Prior Years — Hong Kong Profits Tax | 3,500 | (128) | | Deferred Income Tax | (1,172) | (528) | | **Income Tax Expense** | **15,196** | **2,228** | - Income tax expense is recognized based on management's estimate of the expected weighted average annual income tax rate for the entire financial year[79](index=79&type=chunk) - Hong Kong profits tax is provided at a rate of **16.5%**, and overseas profits tax is calculated at the prevailing tax rates in the countries where the Group operates[79](index=79&type=chunk) [10. Earnings Per Share](index=26&type=section&id=10.%20Earnings%20Per%20Share) For H1 2021, profit attributable to owners was **HKD 66,084 thousand**, with basic EPS of **HK 16.30 cents**, and no diluted EPS for H1 2020 due to anti-dilutive share options Basic Earnings Per Share | Metric | H1 2021 | H1 2020 | | :--------------- | :----------- | :----------- | | Profit Attributable to Owners of the Company (thousand HKD) | 66,084 | 757 | | Weighted Average Number of Ordinary Shares in Issue | 405,323,284 | 405,323,284 | | Basic Earnings Per Share (HK cents) | 16.30 | 0.19 | Diluted Earnings Per Share | Metric | H1 2021 | | :--------------- | :----------- | | Profit Attributable to Owners of the Company (thousand HKD) | 66,084 | | Weighted Average Number of Ordinary Shares for Diluted EPS Calculation | 405,463,756 | | Diluted Earnings Per Share (HK cents) | 16.30 | - For the six months ended June 30, 2020, the outstanding share options were not assumed to have been exercised as they would have an anti-dilutive effect on basic earnings per share[85](index=85&type=chunk) [11. Dividends](index=28&type=section&id=11.%20Dividends) During the period, the Board declared an interim dividend of **HK 3 cents per share** and paid a final dividend of **HK 3 cents per share** for 2020 Dividends Attributable to the Period | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Interim Dividend Declared of HK 3 cents per share (2020: HK 2 cents) | 12,160 | 8,106 | Dividends Approved and Paid During the Period Attributable to Prior Financial Year | Item | 2021 (thousand HKD) | 2020 (thousand HKD) | | :--------------- | :-------------- | :-------------- | | Final Dividend Paid for 2020 of HK 3 cents per share (2019: HK 3 cents) | 12,160 | 12,160 | [12. Capital Expenditure](index=28&type=section&id=12.%20Capital%20Expenditure) For H1 2021, the Group acquired **HKD 5,645 thousand** in property, plant, and equipment and **HKD 6,247 thousand** in intangible assets, with investment properties not revalued due to no significant value change Capital Expenditure | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Acquisition of Property, Plant and Equipment | 5,645 | 10,289 | | Acquisition of Intangible Assets | 6,247 | 22,871 | - Other intangible assets include acquired customer relationships of **HKD 1,615 thousand** and patent rights of **HKD 21,337 thousand**[90](index=90&type=chunk) - Investment properties were not revalued during the period as there were no indications of significant changes in value since the last annual reporting date[90](index=90&type=chunk) [13. Right-of-Use Assets and Lease Liabilities](index=29&type=section&id=13.%20Right-of-Use%20Assets%20and%20Lease%20Liabilities) As of June 30, 2021, total right-of-use assets were **HKD 43,514 thousand** and lease liabilities **HKD 45,810 thousand**, with right-of-use assets increasing by **HKD 11,353 thousand** and total cash outflow from leases at **HKD 10,394 thousand** Right-of-Use Assets and Lease Liabilities | Item | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | | :----------- | :--------------------- | :---------------------- | | Right-of-Use Assets | 43,514 | 42,183 | | Lease Liabilities (Non-current) | 29,970 | 27,374 | | Lease Liabilities (Current) | 15,840 | 16,294 | | **Total Lease Liabilities** | **45,810** | **43,668** | Lease-Related Statement of Profit or Loss Items | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Depreciation Expense of Right-of-Use Assets | 10,022 | 7,832 | | Interest Expense | 619 | 549 | | Short-term Lease Expenses | 564 | 213 | - The Group's lease liabilities of **HKD 322 thousand** as of June 30, 2021, are secured by right-of-use assets for a motor vehicle[92](index=92&type=chunk) - Lease contracts typically range from **2 to 10 years**, and the lease agreements impose no terms other than the lessor's security interest in the leased assets[95](index=95&type=chunk) [14. Trade Receivables and Other Financial Assets Measured at Amortized Cost](index=31&type=section&id=14.%20Trade%20Receivables%20and%20Other%20Financial%20Assets%20Measured%20at%20Amortized%20Cost) As of June 30, 2021, the Group's net trade receivables were **HKD 350,778 thousand**, and other financial assets measured at amortized cost were **HKD 11,071 thousand**, with most trade receivables due within 90 days Trade Receivables and Other Financial Assets | Item | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | | :--------------- | :--------------------- | :---------------------- | | Net Trade Receivables | 350,778 | 335,320 | | Other Financial Assets Measured at Amortized Cost | 11,071 | 9,743 | Ageing Analysis of Trade Receivables | Ageing | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | | :----------- | :--------------------- | :---------------------- | | 0–30 Days | 129,479 | 117,463 | | 31–60 Days | 91,122 | 78,436 | | 61–90 Days | 63,350 | 52,138 | | 91–120 Days | 30,308 | 27,068 | | Over 120 Days | 44,371 | 68,097 | | **Total** | **358,630** | **343,202** | - The credit period for most of the Group's sales ranges from **30 to 180 days**[97](index=97&type=chunk) [15. Share Capital](index=32&type=section&id=15.%20Share%20Capital) The Company's authorized share capital is **HKD 100,000 thousand**, with issued and fully paid share capital of **HKD 40,532 thousand**, and **31,400 thousand** outstanding share options as of June 30, 2021, with **27,726 thousand** exercisable Share Capital Overview | Item | Number of Shares (thousands) | Amount (thousand HKD) | | :----------- | :-------------- | :------------ | | Authorized Share Capital | 1,000,000 | 100,000 | | Issued and Fully Paid Share Capital | 405,323,284 | 40,532 | Share Option Movements | Item | 2021 (thousands of shares) | Weighted Average Exercise Price (HKD) | | :----------- | :------------ | :-------------------- | | At January 1 | 31,400 | 1.365 | | At June 30 | 31,400 | 1.365 | | Share Options Vested at Closing | 27,726 | 1.343 | - The share option scheme aims to allow the Group to grant share options to selected participants as a reward or return for their contributions to the Group[137](index=137&type=chunk) - For the six months ended June 30, 2021, no new share options were granted, and no share options were exercised[105](index=105&type=chunk)[111](index=111&type=chunk) - As of June 30, 2021, the weighted average contractual life of the share options was **4.9 years**[110](index=110&type=chunk) [16. Trade and Other Payables](index=35&type=section&id=16.%20Trade%20and%20Other%20Payables) As of June 30, 2021, total trade and other payables were **HKD 293,899 thousand**, with a current portion of **HKD 279,870 thousand**, most trade payables due within 60 days, and contract liabilities increasing to **HKD 2,186 thousand** Trade and Other Payables | Item | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | | :--------------- | :--------------------- | :---------------------- | | Trade Payables | 159,585 | 140,232 | | Accruals and Other Payables | 134,314 | 150,817 | | **Total** | **293,899** | **291,049** | | Current Portion | 279,870 | 270,187 | Ageing Analysis of Trade Payables | Ageing | June 30, 2021 (thousand HKD) | December 31, 2021 (thousand HKD) | | :----------- | :--------------------- | :---------------------- | | 0–30 Days | 75,089 | 51,593 | | 31–60 Days | 40,513 | 43,910 | | 61–90 Days | 31,527 | 19,394 | | Over 90 Days | 12,456 | 25,335 | | **Total** | **159,585** | **140,232** | - Contract liabilities increased to **HKD 2,186 thousand** (December 31, 2020: HKD 471 thousand), and the Group expects to deliver goods within one year or less to satisfy the remaining performance obligations for these contract liabilities[113](index=113&type=chunk) [17. Borrowings](index=36&type=section&id=17.%20Borrowings) As of June 30, 2021, the Group's total borrowings decreased to **HKD 270,343 thousand**, with **HKD 38,334 thousand** in bank borrowings repaid and **HKD 15,000 thousand** in new bank borrowings obtained during the period Analysis of Borrowing Movements | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Opening Balance | 293,677 | 272,919 | | Repayment of Bank Borrowings | (38,334) | (50,763) | | Proceeds from Bank Borrowings | 15,000 | 110,523 | | **Closing Balance** | **270,343** | **332,679** | [18. Capital Commitments](index=37&type=section&id=18.%20Capital%20Commitments) As of the reporting date, the Group had contracted but not provided for capital expenditure amounting to **HKD 38,330 thousand** Capital Commitments | Item | December 31, 2020 (thousand HKD) | | :----------- | :---------------------- | | Contracted but Not Provided For | 38,330 | [19. Significant Related Party Transactions](index=37&type=section&id=19.%20Significant%20Related%20Party%20Transactions) During the period, the Group engaged in significant related party transactions, including sales to a shareholder's affiliate, rental payments, and claims paid, with trade receivables from an affiliate totaling **HKD 126,438 thousand** at period-end Sales and Purchases of Goods and Services | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :--------------- | :-------------------- | :-------------------- | | Sales of Goods to an Affiliate of a Shareholder | 281,907 | 146,735 | | Rental Paid for Office Premises to a Director and a Company Controlled by a Director | 881 | 881 | | Claims Paid to an Affiliate of a Shareholder | 660 | 664 | Period-End Balances for Sales of Goods and Services | Item | June 30, 2021 (thousand HKD) | December 31, 2020 (thousand HKD) | | :--------------- | :--------------------- | :---------------------- | | Trade Receivables from an Affiliate of a Shareholder | 126,438 | 171,961 | Key Management Personnel Remuneration | Item | H1 2021 (thousand HKD) | H1 2020 (thousand HKD) | | :----------- | :-------------------- | :-------------------- | | Short-term Employee Benefits | 16,617 | 13,784 | | Retirement Scheme Contributions | 77 | 81 | | **Total** | **16,694** | **13,865** | [20. Approval of Interim Condensed Financial Information](index=38&type=section&id=20.%20Approval%20of%20Interim%20Condensed%20Financial%20Information) This interim condensed consolidated financial information was approved by the Board of Directors on August 24, 2021 - This interim condensed consolidated financial information was approved by the Board of Directors on August 24, 2021[126](index=126&type=chunk) [Other Information Required by the Listing Rules](index=38&type=section&id=根據上市規則提供之其他資料) This section provides additional information as required by the Listing Rules, including directors' and substantial shareholders' interests, details of the share option scheme, pre-emptive rights, and compliance with corporate governance codes [Directors' Interests in Shares and Underlying Shares](index=39&type=section&id=董事於股份及相關股份之權益) As of June 30, 2021, directors held interests in the Company's shares and underlying shares, with Mr. Yan Hei Cheung and Ms. Yan Po Ling collectively holding **65.70%** of interests, including personal, other direct, and share option-related shares Directors' Long Positions in Shares and Underlying Shares of the Company (as of June 30, 2021) | Name of Director | Personal Interests (shares) | Other Direct Interests (shares) | Underlying Shares (shares) | Total (shares) | Percentage of Interest | | :----------------- | :------------ | :---------------- | :------------ | :---------- | :------------- | | Mr. Yan Hei Cheung | — | 221,508,000 | 44,800,000 | 266,308,000 | 65.70% | | Ms. Yan Po Ling | 37,808,000 | 183,700,000 | 44,800,000 | 266,308,000 | 65.70% | | Mr. James S. Patterson | — | — | 1,000,000 | 1,000,000 | 0.25% | | Mr. Yan Chiu Hon | — | — | 2,000,000 | 2,000,000 | 0.49% | | Mr. Lai Man Sing | — | — | 1,000,000 | 1,000,000 | 0.25% | - Mr. Yan Hei Cheung and Ms. Yan Po Ling ultimately and beneficially own **183,700,000** shares through Successful Years International Co., Ltd[130](index=130&type=chunk) - Mr. Yan Hei Cheung and Ms. Yan Po Ling are entitled to subscribe for **2,000,000** and **3,000,000** shares, respectively, under the outstanding share options granted under the share option scheme[132](index=132&type=chunk) [Share Option Scheme](index=40&type=section&id=購股權計劃) The Company adopted a share option scheme on December 29, 2011, to reward eligible contributors, with an authorized limit of **40,532,828 shares**, an exercise price based on the highest of three criteria, and a ten-year validity - The share option scheme was adopted on December 29, 2011, to grant share options to eligible employees, directors, suppliers, and customers[135](index=135&type=chunk) - The scheme's authorized limit is **40,532,828 shares**, representing **10%** of the Company's issued shares as of May 16, 2018[135](index=135&type=chunk) - The exercise price of the share options is the highest of the nominal value of the shares, the closing price of the shares as quoted on the Stock Exchange on the date of grant, and the average closing price of the shares as quoted on the Stock Exchange for the five trading days immediately preceding the date of grant[137](index=137&type=chunk) Details of Outstanding Share Options (as of June 30, 2021) | Date of Grant | Exercisable Period | Exercise Price (HKD) | Number of Outstanding Shares (thousands) | Fair Value Per Share at Grant Date (HKD) | | :--------------- | :--------------------------- | :------------ | :---------------------- | :------------------------------ | | July 15, 2015 | July 15, 2016 to July 14, 2025 | 1.120 | 1,000 | 1.12 | | April 13, 2017 | April 13, 2017 to April 12, 2027 | 1.534 | 8,000 | 1.50 | | December 30, 2011 | December 30, 2012 to December 29, 2021 | 0.800 | 1,000 | 0.80 | | July 15, 2015 | July 15, 2016 to July 14, 2025 | 1.120 | 10,030 | 1.12 | | April 13, 2017 | April 13, 2017 to April 12, 2027 | 1.534 | 11,370 | 1.50 | [Substantial Shareholders](index=43&type=section&id=主要股東) As of June 30, 2021, Ms. Yan Po Ling and Successful Years International Co., Ltd. were substantial shareholders, holding **54.65%** and **45.32%** interests respectively, with Mr. Christopher Koch and NEHK also holding significant interests and short positions Substantial Shareholders' Long Positions in Shares and Underlying Shares (as of June 30, 2021) | Name | Capacity | Personal Interests (shares) | Other Interests (shares) | Underlying Shares (shares) | Total (shares) | Percentage of Interest | | :------------------- | :--------------- | :------------ | :------------ | :------------ | :---------- | :------------- | | Ms. Yan Po Ling | Beneficial Owner | 37,808,000 | — | — | 37,808,000 | 9.33% | | | Interest in Controlled Corporation | — | 183,700,000 | — | 183,700,000 | 45.32% | | **Total** | | | | | **221,508,000** | **54.65%** | | Successful Years International Co., Ltd. | Beneficial Owner | 183,700,000 | — | — | 183,700,000 | 45.32% | | Mr. Christopher Koch | Interest in Controlled Corporation | — | 79,601,000 | — | 79,601,000 | 19.64% | | NEHK | Interest in Controlled Corporation | 79,601,000 | — | — | 79,601,000 | 19.64% | Substantial Shareholders' Short Positions in Underlying Shares (as of June 30, 2021) | Name | Number of Underlying Shares (shares) | Percentage of Interest | | :------------------- | :---------------- | :------------- | | Mr. Christopher Koch | 39,800,000 | 9.82% | | NEHK | 39,800,000 | 9.82% | - Mr. Christopher Koch holds a **75%** interest in the issued share capital of NEHK and is therefore deemed to be interested in **79,601,000** shares[144](index=144&type=chunk) - NEHK has the right to sell up to **39,800,000** shares to Mr. Yan Hei Cheung and Ms. Yan Po Ling under the terms of a contingent purchase deed, constituting a short position[145](index=145&type=chunk) [Pre-emptive Rights](index=44&type=section&id=優先權) The Company's bye-laws contain no pre-emptive rights provisions, and Bermuda law imposes no restrictions requiring the Company to offer new shares proportionally to existing shareholders - The Company's bye-laws contain no provisions for pre-emptive rights, nor does Bermuda law impose any restrictions requiring the Company to offer new shares proportionally to existing shareholders[147](index=147&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=44&type=section&id=購買%E3%80%81出售或贖回本公司之上市證券) For the six months ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[148](index=148&type=chunk) [Corporate Governance Code](index=44&type=section&id=企業管治常規守則) The Board believes the Company complied with the code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2021 - The Board believes that for the six months ended June 30, 2021, the Company complied with the code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules[149](index=149&type=chunk) [Model Code for Securities Transactions by Directors](index=45&type=section&id=董事進行證券交易之標準守則) The Company adopted the Model Code for Securities Transactions by Directors as set out in Appendix 10 of the Listing Rules, and all directors confirmed compliance for the period ended June 30, 2021 - The Company has adopted the Model Code for Securities Transactions by Directors as set out in Appendix 10 of the Listing Rules[151](index=151&type=chunk) - Following enquiry by the Company, all Directors have confirmed their compliance with the required standards set out in the Model Code for the period ended June 30, 2021[151](index=151&type=chunk) [Audit Committee](index=45&type=section&id=審核委員會) The Company complied with Listing Rule 3.21 regarding the Audit Committee, comprising all independent non-executive directors, responsible for reviewing and monitoring financial reporting and internal controls, and has reviewed the interim financial information - The Company has complied with Listing Rule 3.21 regarding the establishment of an Audit Committee[152](index=152&type=chunk) - The Audit Committee comprises all independent non-executive directors, with primary responsibilities to review and monitor the Group's financial reporting and internal control procedures[152](index=152&type=chunk) - The Audit Committee has reviewed the interim condensed consolidated financial information for the period ended June 30, 2021[152](index=152&type=chunk)

Financial Performance - The company's revenue from continuing operations decreased by 8.8% to HKD 1,048,006,000 in 2020, compared to HKD 1,146,834,000 in 2019[16] - The gross profit from continuing operations declined by 7.9% to HKD 318,689,000, while the gross profit margin slightly increased to 30.4% from 30.2% in the previous year[16] - The operating profit from the manufacturing segment fell by 16.5% to HKD 87,625,000, down from HKD 104,951,000 in 2019[19] - The company reported a net profit attributable to shareholders of HKD 45,895,000, a decrease of 21.2% from HKD 58,213,000 in 2019[16] - The trading business achieved a revenue growth of 7.9% to HKD 514,278,000, accounting for 49.1% of the group's total revenue[23] - The operating loss for the trading segment was HKD 21,984,000, slightly improved from a loss of HKD 21,986,000 in the previous year[23] - Cash and cash equivalents totaled HKD 226,000,000, an increase from HKD 127,800,000 in the previous year[32] - The company reported a significant increase in revenue, achieving a total of $X million for the fiscal year, representing a Y% growth compared to the previous year[47] Dividends and Shareholder Returns - The company declared a final dividend of HKD 0.03 per share, maintaining the same level as the previous year, resulting in a total annual dividend of HKD 0.05 per share[18] - The interim dividend of HKD 0.02 per share was paid on October 8, 2020, totaling HKD 8,106,000, consistent with the previous year[127] - The proposed final dividend is HKD 0.03 per share for the year ended December 31, 2020, which is the same as the previous year[127] Cash Flow and Financing - Cash and undrawn bank financing as of December 31, 2020, reached approximately HKD 219.5 million and HKD 219.3 million, respectively, compared to HKD 112.5 million and HKD 306.3 million in 2019[18] - The bank credit facility was HKD 513,400,000, with HKD 219,300,000 unused, compared to HKD 581,300,000 and HKD 306,300,000 respectively in the previous year[32] - The company has a strong financial position, with a bank borrowing to equity ratio of 37.2%, up from 36.1% in the previous year[32] Operational Performance - The manufacturing segment's revenue from external customers decreased by 20.4% to HKD 533,728,000, accounting for approximately 50.9% of total revenue from continuing operations[19] - The company experienced a significant rebound in orders starting from June 2020, achieving one of its best sales performances in recent years during the last quarter[11] - Employee expenses for the year were approximately HKD 251,800,000, a decrease from HKD 288,300,000 in the previous year[38] - Capital expenditure for the year was approximately HKD 16.6 million, down from HKD 37.8 million in the previous year[33] - The capital expenditure budget for the upcoming year is HKD 48,600,000, with HKD 45,600,000 allocated for expanding manufacturing in Bangladesh[35] E-commerce and Market Strategy - The pandemic accelerated the shift towards online shopping, benefiting the company's established e-commerce business, which saw a significant increase in sales volume[14] - The company plans to enhance its e-commerce business to capitalize on the ongoing online shopping trend[26] - The company aims to expand its licensed brand portfolio to strengthen its competitive advantage amid industry consolidation[26] Corporate Governance - The company is committed to high standards of corporate governance to enhance shareholder value[62] - The board of directors approved a dividend of $K per share, reflecting a commitment to returning value to shareholders[47] - The board is responsible for overseeing the company's affairs to promote its success and protect shareholder interests[63] - The company has established a policy for providing independent professional advice to directors to assist them in fulfilling their responsibilities[67] - The company has adopted a board diversity policy, considering factors such as cultural background, race, and professional experience to achieve board diversity[76] Risk Management and Internal Controls - The board is responsible for the overall risk management and internal control systems of the group[100] - The company has implemented a robust risk management process integrated into strategic planning and daily operations[105] - The audit committee consists of three independent non-executive directors and held two meetings in 2020[94] - The company ensures compliance with corporate governance codes and maintains effective internal control systems[104] Environmental Sustainability - The company is committed to environmental sustainability, implementing ISO 14001 standards across its factories[182] - The company focuses on minimizing the use of hazardous materials and promotes recycling and resource conservation[190] - The company has established a wastewater treatment station to process industrial and domestic wastewater[194] - The company actively collaborates with brand clients and suppliers to select environmentally friendly materials for production[197] Share Capital and Options - The company has adopted a new share option plan allowing the issuance of up to 40,532,828 shares, equivalent to 10% of the issued share capital as of May 16, 2018[158] - The company has granted share options to directors and employees, with a total of 22,400,000 options remaining unexercised as of the reporting date[162] - The company has a total of 266,308,000 shares held by key executives, representing 65.70% of the total equity[152] Employee and Director Compensation - The remuneration committee, consisting mainly of independent non-executive directors, reviewed the compensation policies for directors and senior management in 2020[88] - The company ensures that the compensation levels for employees, including directors and senior management, are competitive and based on their positions and performance[88]

Financial Performance - The company's revenue from continuing operations decreased by 17.3% to HKD 430,952,000 compared to HKD 521,181,000 in the same period last year[6]. - Gross profit from continuing operations fell by 14.0% to HKD 129,377,000, with a gross margin improvement to 30.0% from 28.9% in the previous year[6]. - Profit attributable to shareholders decreased by 97.8% to HKD 757,000, down from HKD 34,578,000 in the prior period[6]. - Manufacturing revenue dropped by 33.5% to HKD 268,469,000, with external customer revenue also down by 33.5% to HKD 235,980,000, accounting for approximately 54.8% of total revenue[8]. - Trade business revenue surged by 17.4% to HKD 194,972,000, representing 45.2% of total revenue, driven by the acquisition of Aquarius Ltd. and growth in e-commerce[12]. - The group reported a revenue of HKD 430.95 million for the six months ended June 30, 2020, down from HKD 521.18 million in the same period of 2019, representing a decrease of approximately 17.3%[24]. - The gross profit for the same period was HKD 129.38 million, compared to HKD 150.39 million in 2019, indicating a decline of about 13.9%[24]. - The operating profit decreased significantly to HKD 9.61 million from HKD 46.70 million year-on-year, reflecting a drop of approximately 79.5%[24]. - The company reported a profit of HKD 1,340,000 for the six months ended June 30, 2020, a significant decrease from HKD 35,314,000 in the same period of 2019, representing a decline of approximately 96.2%[26]. - Total comprehensive loss for the period was HKD 2,344,000, compared to a total comprehensive income of HKD 34,889,000 in the previous year, indicating a shift from profit to loss[27]. Financial Position - The company maintained a strong financial position with cash and undrawn bank credit facilities of approximately HKD 223,600,000 and HKD 224,200,000, respectively[7]. - As of June 30, 2020, the group's cash and bank balances totaled HKD 228.9 million, an increase from HKD 127.8 million as of December 31, 2019[17]. - The group has a bank borrowing to equity ratio of 44.8% as of June 30, 2020, up from 36.1% at the end of 2019, indicating increased leverage[17]. - The company's total liabilities increased from HKD 572,160,000 to HKD 587,696,000, an increase of about 2.2%[32]. - Total equity decreased from HKD 755,934,000 to HKD 741,932,000, a decline of approximately 1.9%[32]. - Cash and cash equivalents increased significantly from HKD 112,549,000 to HKD 223,623,000, representing an increase of about 98.5%[28]. - The total borrowings increased to HKD 332,679,000 as of June 30, 2020, compared to HKD 272,919,000 at the beginning of the year, reflecting a rise of 21.9%[111]. Operational Changes - The workforce in Bangladesh and Shenzhen decreased to approximately 4,000 and 600 employees, respectively, due to operational restrictions and reduced order needs[11]. - The company has ceased its retail operations in Hong Kong and mainland China, allowing it to focus more resources on manufacturing and trade[13]. - The management has implemented effective cost control measures and increased automation in the Bangladesh factory, leading to improved production efficiency despite workforce reductions[6]. - The company has successfully pivoted to e-commerce, which has shown significant growth during the pandemic, indicating the effectiveness of its strategic investments over the past two years[12]. - The group’s main business includes hat manufacturing, trading, and retail, with significant production facilities located in Bangladesh and Shenzhen, China[60]. - The group’s trading business focuses on the European market through Drew Pearson International (Europe) Ltd. and the U.S. market through H3 Sportgear LLC, San Diego Hat Company, and Aquarius Ltd.[63]. - The group’s retail operations in Hong Kong and China have been terminated, reflecting a strategic shift in business focus[64]. Cash Flow and Investments - Operating cash flow for the six months ended June 30, 2020, was HKD 72,012,000, a significant increase of 138% compared to HKD 30,248,000 in the same period of 2019[36]. - Net cash generated from operating activities reached HKD 63,515,000, up from HKD 23,412,000, reflecting a growth of 171% year-over-year[36]. - The net cash from investing activities was HKD 11,342,000, a recovery from a net cash outflow of HKD 79,678,000 in the same period last year[36]. - The company plans to invest approximately HKD 8.6 million in equipment to upgrade and expand production capacity, down from HKD 14.5 million in the same period of 2019[18]. - The company did not acquire any subsidiaries during the reporting period, contrasting with a cash outflow of HKD 54,279,000 for acquisitions in the same period of 2019[36]. Shareholder Information - Mr. Yan Xiang holds a total of 266,308,000 shares, representing 65.70% of the company's equity[124]. - Ms. Yan Bao Ling holds 183,700,000 shares, which is part of the total shares held by Successful Years International Co., Ltd., of which she owns 60%[125]. - Major shareholder Yan Baoling holds 37,808,000 shares, representing 9.33% of total equity[136]. - Successful Years International Co., Ltd. owns 183,700,000 shares, accounting for 45.32% of total equity[136]. - Christopher Koch has a controlling interest in NEHK, which holds 79,601,000 shares, equivalent to 19.64% of total equity[137]. Corporate Governance - The company has complied with the corporate governance code as per the listing rules during the six months ending June 30, 2020[142]. - The audit committee, consisting of all independent non-executive directors, reviewed the financial reporting procedures for the period ending June 30, 2020[145]. - The company did not purchase, sell, or redeem any of its listed securities during the six months ending June 30, 2020[141]. - The company has adopted the standard code of conduct for securities transactions, and all directors confirmed compliance during the reporting period[143]. - The board consists of eight directors, including five executive directors and three independent non-executive directors[147].

Financial Performance - The company's revenue from continuing operations increased by 29.4% to HKD 1,146,834,000, compared to HKD 885,933,000 in 2018[19] - Gross profit from continuing operations rose by 30.0% to HKD 346,212,000, with a gross margin improvement to 30.2% from 30.1% in 2018[19] - The company reported a net profit attributable to shareholders of HKD 58,213,000, a decrease of 6.9% from HKD 62,513,000 in 2018[19] - Trade business revenue surged by 123.6% to HKD 476,507,000, accounting for 41.5% of total revenue, driven by double-digit growth from a multinational retail client and the consolidation of AQ's financial performance since June 2019[24] - Cash and cash equivalents totaled HKD 127,800,000 as of December 31, 2019, an increase from HKD 112,200,000 in 2018, with bank credit facilities amounting to HKD 581,300,000[32] Manufacturing and Operations - The manufacturing business generated revenue of HKD 743,161,000, with external customer revenue slightly declining by 0.4% to HKD 670,327,000, accounting for approximately 58.5% of total revenue[22] - The second phase of the Bangladesh factory was substantially completed by the end of 2019, increasing production capacity by over 12% to approximately 4.5 million units per month[18] - A five-year manufacturing agreement was signed with New Era Cap Co., Inc., with a minimum product supply value of USD 47,000,000 in the first year[23] - The introduction of automation and information technology in production is aimed at mitigating rising labor costs and improving efficiency[22] - The group plans to allocate HKD 26,800,000 for capital expenditures, with HKD 21,800,000 earmarked for expanding manufacturing operations in Bangladesh[37] Strategic Initiatives - The company exited the retail business, allowing it to focus resources on manufacturing and trading operations[18] - The group anticipates steady growth in trade business, benefiting from investments made in previous years and the rise of e-commerce, particularly during the COVID-19 pandemic[29] - The acquisition of AQ was completed for USD 8,751,000 (approximately HKD 68,086,000), with expected synergies in sales and cost savings contributing to goodwill[39] - Market expansion plans include entering H and I markets, aiming for a market share increase of J% within the next two years[15] - The company is considering strategic acquisitions to bolster its market position, with potential targets identified in the K sector[15] Employee and Compensation - Employee expenses for the year amounted to approximately HKD 288.3 million, an increase from HKD 250.2 million in 2018, reflecting a year-on-year growth of 15.3%[41] - The group ensures competitive salary levels for employees, with compensation determined by position and performance, and key employees are granted stock options under the company's stock option plan[41] - The remuneration committee reviewed the annual salary review policy, stock option grants as part of long-term incentive plans, and performance-linked bonuses[90] - The company ensures competitive remuneration levels for employees, including directors and senior management, based on their positions and performance[90] Corporate Governance - The board has adopted a diversity policy to enhance the achievement of strategic goals and sustainable development[76] - The company has established a nomination committee to ensure a formal and transparent process for appointing new directors[80] - The board believes that the experience of independent directors in accounting, finance, and business will benefit the board significantly[74] - The company has a structured succession plan for directors to ensure orderly re-election[78] - The audit committee recommended the reappointment of the current external auditor for 2020[99] Environmental Commitment - The company is committed to reducing emissions and waste, implementing ISO 14001 environmental management standards across its operations[185] - The company has made investments in green infrastructure, including 50 permeable parking spaces and rainwater collection systems at its Shenzhen facility[193] - The company achieved an average water recycling rate of approximately 24% at its Shenzhen facility in 2019[195] - The group emphasizes environmental protection and resource conservation, ensuring compliance with environmental laws and regulations without any significant violations reported during the period[199] Shareholder Information - The company declared a final dividend of HKD 0.03 per share, maintaining the total dividend for the year at HKD 0.05 per share[20] - The company declared an interim dividend of HKD 0.02 per share, totaling HKD 8,106,000, paid on October 10, 2019[130] - As of December 31, 2019, the company's available reserves for cash distribution amounted to HKD 556,356,000, an increase from HKD 489,752,000 in 2018[139] - The largest customer accounted for 37.2% of sales, while the top five customers collectively represented 61.5% of sales[135] Risk Management - The board is responsible for maintaining a sound internal control system to protect shareholder investments and the company's assets[95] - The company has established a risk register to monitor and regularly update identified key risks[104] - The internal audit team assists the board and audit committee in monitoring internal control processes, with no significant deficiencies noted in the 2019 audit[110] - Major capital investments or acquisition decisions require board approval[107]

Financial Performance - For the six months ended June 30, 2019, the company reported revenue of HKD 521,181,000, a significant increase of 19.6% compared to HKD 435,838,000 in the same period last year[7] - The gross profit from continuing operations rose by 12.5% to HKD 150,386,000, while the gross margin decreased by 1.8 percentage points to 28.9% due to rising material and labor costs[7] - The operating profit from the manufacturing segment increased by 7.7% to HKD 55,853,000, benefiting from a higher production ratio at the Bangladesh facility, which accounted for approximately 85% of total production[8] - The trade business recorded a revenue of HKD 166,128,000, representing a 43.3% increase, but faced an operating loss of HKD 9,164,000 due to cautious purchasing behavior and increased discounts[10] - The total comprehensive income for the period, after tax, was HKD 34,889,000, an increase of 11.9% from HKD 31,399,000 in the previous year[27] - The profit attributable to the owners of the company was HKD 34,153,000, compared to HKD 31,010,000 in the previous year, reflecting a growth of 10.3%[27] - The basic earnings per share from continuing operations decreased to 9.67 HKD for the six months ended June 30, 2019, from 10.32 HKD in the prior year[24] - For the six months ended June 30, 2019, the profit attributable to owners of the company from continuing operations was HKD 39,210,000, compared to HKD 41,815,000 for the same period in 2018, representing a decrease of approximately 6.3%[97] - The diluted earnings per share from continuing operations was 9.66 HK cents, down from 10.19 HK cents year-on-year[98] Business Operations - The company completed the acquisition of Aquarius Ltd. on May 30, 2019, expanding its business from hats to accessories, which is expected to enhance revenue sources and product offerings[10] - Management anticipates that the new phase of the Bangladesh facility will commence production by the end of the year, increasing employee count to approximately 8,000 and monthly production capacity to 5 million hats[13] - The company expects the contribution from the Bangladesh facility to increase from approximately 85% to 90% of total production capacity upon full operation[13] - The company is in the process of terminating its retail operations, with revenue from this segment decreasing to HKD 22,157,000, and operating loss narrowing to HKD 4,643,000[12] - The company plans to exit the retail business due to ongoing losses and uncertain market prospects, actively negotiating the sale of its 75% stake in a subsidiary[48] - The acquisition of Aquarius was completed on May 30, 2019, for a total consideration of USD 7,000,000 (approximately HKD 54,460,000) plus a contingent consideration of up to USD 2,000,000 (approximately HKD 15,560,000)[19][136] - Aquarius contributed revenue of HKD 25,157,000 and a net profit of HKD 1,803,000 to the consolidated income statement for the period since acquisition[141] Financial Position - The total assets increased to HKD 1,276,352,000, up from HKD 1,071,593,000, representing a growth of 19.1%[33] - The current assets amounted to HKD 551,822,000, compared to HKD 487,693,000 in the previous year, indicating an increase of 13.1%[35] - The company's equity attributable to owners was HKD 728,198,000, an increase from HKD 705,326,000, showing a growth of 3.3%[36] - The total liabilities rose to HKD 538,250,000, compared to HKD 357,099,000, reflecting a significant increase of 50.7%[36] - The cash and cash equivalents stood at HKD 136,319,000, up from HKD 97,254,000, marking an increase of 40.2%[35] - The total borrowings as of June 30, 2019, increased to HKD 288,883,000, compared to HKD 127,348,000 as of June 30, 2018, indicating a significant increase of approximately 126%[130] Capital Expenditures and Investments - Capital expenditure during the period included approximately HKD 18,600,000 for constructing a factory in Bangladesh and HKD 14,500,000 for equipment upgrades[16] - The company recognized acquisition-related costs of HKD 4,069,000 in the administrative expenses for the period[139] - The company has committed but not yet incurred capital expenditures amounting to HKD 3,775,000 as of June 30, 2019[18] Debt and Financing - The group’s bank credit facilities increased to HKD 533,600,000 as of June 30, 2019, compared to HKD 381,300,000 at the end of 2018, with HKD 239,000,000 unused[15] - The capital debt ratio was reported at 39.1% as of June 30, 2019, up from 21.0% at the end of 2018, indicating increased leverage[15] - The company reported a significant increase in bank borrowings, which rose to HKD 136,664,000 from HKD 45,000,000, marking a 203.7% increase[42] - The net cash from financing activities was HKD 95,568,000, a substantial rise from HKD 2,805,000 in the prior year[42] Employee and Management Information - The group employed 1,076 staff in China and 5,432 in Bangladesh as of June 30, 2019, with total employee expenses of approximately HKD 138,600,000[18] - The total remuneration for key management personnel for the first half of 2019 was HKD 12,341,000, up from HKD 12,156,000 in the same period of 2018, representing an increase of approximately 1.5%[158] - The remuneration for short-term employee benefits for key management personnel increased to HKD 12,230,000 in 2019 from HKD 12,054,000 in 2018, reflecting a growth of approximately 1.5%[158] Shareholder Information - As of June 30, 2019, the company’s directors held a total of 266,308,000 shares, representing 65.70% of the total equity[162] - Major shareholders include Ms. Yan Baoling with 37,808,000 shares (9.33%) and Successful Years International Co., Ltd. with 183,700,000 shares (45.32%)[175] - The total shareholding of major shareholders amounts to 221,508,000 shares, representing 54.65% of the company[175] Accounting and Compliance - New accounting policies were adopted, including the implementation of HKFRS 16 on leases, affecting the recognition of lease liabilities and right-of-use assets[51] - The adoption of HKFRS 16 resulted in an increase of HKD 14,462,000 in both right-of-use assets and lease liabilities as of January 1, 2019[60] - The company confirmed that there were no loss-making lease contracts requiring adjustments to right-of-use assets upon initial application[60] - The company complied with the corporate governance code as per the listing rules during the six months ending June 30, 2019[181] Risk Management - The financial risk factors include market risk (foreign exchange risk, interest rate risk, and price risk), credit risk, and liquidity risk[66] - The company expects that newly issued accounting standards will not have a significant impact on its financial statements in the foreseeable future[62] - The company's financial data should be read in conjunction with the annual financial statements as of December 31, 2018, for comprehensive risk management information[66]

Financial Performance - The company reported a revenue of HKD 941,493,000 for the year, an increase of 5.7% compared to HKD 890,707,000 in the previous year[24]. - Gross profit was HKD 291,524,000, reflecting a 1.3% increase from HKD 287,794,000, but the overall gross margin decreased by 1.3 percentage points to 31.0%[24]. - The overall profit attributable to shareholders decreased to HKD 62,513,000 from HKD 77,228,000 in the previous year[24]. - Retail segment revenue decreased to HKD 55,560,000 in 2018 from HKD 71,601,000 in 2017, with an operating loss of HKD 13,677,000 compared to HKD 8,447,000 in 2017[28]. - The group’s debt-to-equity ratio increased to 21.0% in 2018 from 16.7% in 2017, indicating a stronger financial position[35]. - As of December 31, 2018, the group's cash and cash equivalents totaled HKD 112,200,000, down from HKD 207,100,000 in 2017, with a bank credit facility of HKD 381,300,000[35]. Revenue Segmentation - Manufacturing business revenue reached HKD 728,934,000, with external customer revenue growing 6.0% to HKD 672,790,000, accounting for 71.5% of total revenue[26]. - Trade business revenue grew by 15.5% to HKD 213,143,000, despite challenges in the retail market[27]. Production and Capacity - The monthly production capacity increased over 30% to approximately 4 million hats, supported by nearly 5,000 employees in the Bangladesh factory[26]. - The group plans to complete the construction of a new factory in Bangladesh by the end of 2019, aiming to increase workforce to approximately 6,000 and monthly production capacity to 5 million hats, raising Bangladesh's production share from 75% to 90%[29]. - The company is focusing on enhancing production efficiency and expanding its workforce to meet strong order demand from partners[23]. - The group is actively introducing automation and information technology in production to mitigate rising labor costs in Bangladesh[29]. Investments and Expenditures - The group invested HKD 118,600,000 in commercial buildings in the US and a factory in Bangladesh, with an additional HKD 18,500,000 for facility upgrades in Bangladesh[36]. - The capital expenditure budget for the group is set at HKD 64,300,000, primarily for manufacturing expansion in Bangladesh[39]. - The group invested HKD 137,744,000 in office and warehouse construction in the US and a factory building in Bangladesh during the year, compared to HKD 116,750,000 in 2017[139]. Corporate Governance - The company emphasizes high standards of corporate governance to enhance shareholder value[63]. - The board of directors held a total of 4 meetings during the year, with all executive directors attending all meetings[64]. - The company has a total of 5 executive directors and 3 independent non-executive directors, ensuring a balanced composition for effective independent judgment[71]. - The independent non-executive directors have served for over nine years, but the board believes they still meet the independence criteria[72]. - The company has adopted a board diversity policy, considering various factors such as cultural background, professional experience, and skills to achieve diversity[75]. - The chairman and the CEO roles are clearly separated to ensure a balance of power and authority within the company[69]. Risk Management - The company has implemented a risk management process integrated into strategy formulation, business planning, and daily operations[104]. - The board is responsible for the overall risk management and internal control systems of the group[104]. - The company conducts monthly operational updates and financial reporting discussions to manage operational and financial risks[106]. - The company has established effective risk management and internal control systems to safeguard significant assets and monitor business risks[114]. Shareholder Information - The company reported a mid-term dividend of HKD 0.02 per share, totaling HKD 8,106,000, paid on October 12, 2018[131]. - The board proposed a final dividend of HKD 0.03 per share for the year ending December 31, 2018, subject to shareholder approval[131]. - The largest customer accounted for 47.5% of sales, while the top five customers collectively represented 71.3% of sales[137]. - The largest supplier contributed 23.03% to procurement, with the top five suppliers accounting for 58.35%[137]. Environmental Commitment - The company is committed to reducing its environmental impact and enhancing workplace safety as part of its sustainable development efforts[182]. - The company emphasizes environmental protection and energy conservation, implementing measures to reduce greenhouse gas emissions and improve resource utilization efficiency[193]. - The energy management strategy focuses on phasing out high-pollution, high-carbon fossil fuels in favor of electricity or cleaner fuels[200]. - The company promotes clean production and pollution reduction by optimizing production processes and implementing pollution control measures[197]. - The company engages all employees in environmental protection efforts, enhancing their awareness and responsibility towards sustainability[196]. Management and Leadership - James S. Patterson has been appointed as the Executive Director since April 2009, with over 20 years of experience in global marketing and production at New Era Cap Co., Inc.[45]. - The company has a strong management team with diverse backgrounds in finance, marketing, and operations, including individuals with over 20 years of industry experience[46][56][60].