Financial Performance - For the six months ended June 30, 2021, the Group's revenue increased by approximately 37.2% to approximately HK$156.4 million compared to HK$114.0 million in the first half of 2020[9]. - Gross profit rose by approximately 14.5% to approximately HK$67.1 million, with a gross profit margin of approximately 42.9%, down from 51.4% in the first half of 2020[9]. - The Group recorded a profit attributable to owners of approximately HK$2.1 million, a turnaround from a loss of approximately HK$11.8 million in the first half of 2020[9]. - Reported net profit for the first half of 2021 was approximately HK$2.1 million, a significant improvement from a net loss of approximately HK$11.8 million in the first half of 2020, attributed to improved demand as the COVID-19 pandemic came under control[36]. - The net profit for the period was HK$2,136,000, compared to a net loss of HK$11,838,000 in the same period last year[110]. - Profit before tax for the period was HK$3,804,000, a significant recovery from a loss of HK$10,602,000 in the prior year[108]. - Earnings per share for the period was HK$0.11, compared to a loss per share of HK$0.66 in the same period last year[108]. Revenue Breakdown - Revenue for the six months ended June 30, 2021, was HK$156,419,000, an increase of 37.2% compared to HK$114,008,000 for the same period in 2020[108]. - Revenue from external customers for the six months ended June 30, 2021, was HK$156,419,000, an increase of 37.2% compared to HK$114,008,000 for the same period in 2020[197]. - Revenue from Mainland China was HK$55,410,000, up 79.8% from HK$30,879,000 in 2020[197]. - Revenue from Bangladesh increased by 47.5% to HK$17,093,000 from HK$11,579,000 in 2020[197]. - The geographical revenue breakdown indicates a decline in revenue from Hong Kong, which was HK$30,158,000 compared to HK$33,284,000 in 2020, a decrease of 9.5%[197]. - Other regions contributed HK$31,533,000 in revenue, an increase from HK$21,978,000 in 2020, reflecting a growth of 43.3%[197]. Cost and Expenses - Selling and distribution expenses increased by approximately 28.0% from approximately HK$17.4 million in the first half of 2020 to approximately HK$22.2 million in the first half of 2021, primarily due to higher marketing consultancy fees and salaries related to sales personnel[24][30]. - Administrative expenses rose by approximately 7.4% from approximately HK$41.7 million in the first half of 2020 to approximately HK$44.8 million in the same period of 2021, mainly due to increased labor costs and operating costs for new subsidiaries[25][31]. - Taxation expenses for the first half of 2021 amounted to approximately HK$1.7 million, representing an increase of approximately 35.0% from approximately HK$1.2 million in the first half of 2020[28][34]. - Finance costs decreased by approximately 5.0% from approximately HK$1.3 million in the first half of 2020 to approximately HK$1.2 million in the first half of 2021, as no new bank borrowings occurred since December 31, 2020[27][33]. Assets and Liabilities - As of June 30, 2021, the Group had net current assets of approximately HK$118.1 million, an increase from approximately HK$111.7 million as of December 31, 2020[37]. - The current ratio remained stable at approximately 2.18 times as of June 30, 2021, compared to approximately 2.10 times as of December 31, 2020[40]. - The gearing ratio decreased to approximately 4.9% as of June 30, 2021, down from approximately 5.9% as of December 31, 2020, reflecting a solid financial position[40]. - Cash and cash equivalents amounted to approximately HK$99.4 million as of June 30, 2021, down from approximately HK$114.7 million as of December 31, 2020[37]. - Total current assets as of June 30, 2021, amounted to HK$218,270,000, an increase from HK$213,436,000 at the end of 2020[116]. - Total non-current assets were HK$140,331,000, down from HK$148,256,000 at the end of 2020[116]. - The company reported total assets less current liabilities of HK$258,425,000, slightly down from HK$259,973,000 in the previous period[116]. - Net current assets increased to HK$118,094,000 from HK$111,717,000 at the end of 2020[116]. Operational Developments - The Group established a sales office in Italy in March 2021, successfully developing a new local customer base[10]. - The Group is constructing a new three-storey factory in Bangladesh with a gross floor area of approximately 10,600 square meters, expected to commence operations in early 2022[14]. - The Group plans to expand its global business presence by establishing sales offices and production bases in regions with development potential, including Eastern Europe and Central and South America[53]. - A new factory in Bangladesh is expected to commence operations in early 2022, providing greater flexibility in resource deployment to meet customer needs[53]. - The Group has increased investment in RFID technology and expanded its business into RFID product solutions, targeting small to medium-sized customers across over 40 markets[54]. Market and Strategic Focus - The Group is focused on expanding its global sales network to capture market recovery opportunities post-pandemic[10]. - The ongoing COVID-19 pandemic has significantly altered consumer habits, prompting apparel brands to adopt digital transformation strategies[8]. - The Group's proactive approach in leveraging global business resources contributed to a slight turnaround in results for the second quarter of 2021[9]. - Despite rising raw material prices and labor costs, effective cost control measures helped maintain a respectable gross profit margin[9]. - New orders for the first half of 2021 increased compared to the same period last year, demonstrating the Group's strength in maintaining production efficiency and product quality amid ongoing pandemic challenges[52]. Corporate Governance - The company complied with all corporate governance codes as per the Hong Kong Stock Exchange regulations[72]. - The Company maintained high standards of corporate governance practices throughout the reporting period[71]. - The Audit Committee reviewed the unaudited interim condensed consolidated financial information for the six months ended June 30, 2021, ensuring compliance with applicable accounting standards[101]. - There were no competing interests reported for the Directors or substantial shareholders for the six months ended June 30, 2021[99]. Shareholder Information - The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2021[69]. - The company had 2,000,000 share options outstanding under the Share Option Scheme, with an exercise price of HK$0.057, valid until September 14, 2025[80]. - Charming International holds 1,404,000,000 shares, representing approximately 70.2% of the total issued share capital of the Company[94]. - Mr. Barry Chan and Ms. Candy Law own 51% and 49% of Charming International, respectively, which holds the aforementioned shares[95]. - The Company maintained a public float of no less than 25% as required under the Listing Rules as of the report date[98].

[Corporate Information](index=2&type=section&id=Corporate%20Information) [Corporate Information](index=2&type=section&id=2%20Corporate%20Information) This section lists the basic corporate information of Cirtek Holdings Limited and its subsidiaries - The Board of Directors consists of six members, including three executive directors (Mr Chan Sze Ming, Ms Lo Miu Lan, Mr Chan Tsz Fung) and three independent non-executive directors (Mr Lam Chor Ki, Mr Li Tak Cheong, Dr Wong Chi Wing)[17](index=17&type=chunk) - The principal bankers include The Hongkong and Shanghai Banking Corporation Limited and Dah Sing Bank, Limited, and the auditor is Ernst & Young[19](index=19&type=chunk) - The company's stock code is **1433**, and its website is http://www.cirtek.com[19](index=19&type=chunk) [Financial Highlights](index=2&type=section&id=Financial%20Highlights) [Financial Highlights](index=4&type=section&id=4%20Financial%20Highlights) This section outlines the consolidated performance and financial position of Cirtek Holdings Limited over the past five years Consolidated Results (HK$'000) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 259,314 | 352,937 | 371,883 | 305,021 | 241,628 | | Profit for the year | 1,647 | 26,482 | 33,735 | 25,748 | 19,556 | | Profit for the year attributable to owners of the Company | 1,647 | 25,331 | 31,940 | 24,208 | 19,229 | Financial Position (HK$'000) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | 361,692 | 286,400 | 270,846 | 235,683 | 172,639 | | Total liabilities | 125,566 | 142,430 | 154,130 | 151,770 | 99,509 | | Equity attributable to owners of the Company | 236,126 | 143,970 | 116,716 | 83,913 | 73,130 | [Chairman's Statement](index=2&type=section&id=Chairman's%20Statement) [Chairman's Statement](index=6&type=section&id=5%20Chairman's%20Statement) The Chairman's statement reviews the severe impact of the 2020 global pandemic on the Group's business and outlines future strategies - The 2020 global pandemic severely impacted the supply chain and consumer market, leading to delays in some customer orders and product shipments[24](index=24&type=chunk)[27](index=27&type=chunk) - The Group successfully **turned a first-half loss into a full-year profit** through strategic plant layout, flexible capacity allocation, and strict cost control[25](index=25&type=chunk)[28](index=28&type=chunk) - New high-margin products drove up the gross profit margin, and **RFID product sales soared 1.3 times**, indicating successful product development[25](index=25&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) - The Board of Directors recommended a **final dividend of HK0.075 cents per ordinary share** to reward shareholder support[25](index=25&type=chunk)[28](index=28&type=chunk) - Looking ahead, the Group plans to expand its sales markets, construct a new plant in Bangladesh (expected to commence production by the end of 2021), and explore opportunities in other regions[31](index=31&type=chunk)[32](index=32&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - The Group will increase investment in the development of eco-friendly products and RFID/NFC technology to diversify its product portfolio and revenue streams[33](index=33&type=chunk)[36](index=36&type=chunk) [Management Discussion and Analysis](index=2&type=section&id=Management%20Discussion%20and%20Analysis) [Management Discussion and Analysis](index=8&type=section&id=7%20Management%20Discussion%20and%20Analysis) This section details the Group's 2020 operating results, strategic responses to the pandemic, and outlook for 2021 Key Financial Indicators for 2020 | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 259,300 | 352,900 | -26.5% | | Gross Profit | 130,200 | 174,800 | -25.5% | | Gross Profit Margin | 50.2% | 49.5% | +0.7 p.p. | | Profit attributable to owners of the Company | 1,600 | 25,300 | -93.5% | - The COVID-19 pandemic led to reduced global market demand, particularly for apparel labels and decorative products in the first half, but orders began to rebound in the second half[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - The Group implemented strict epidemic prevention measures, rapidly resumed work, and adopted cost control measures such as a job rotation system[41](index=41&type=chunk)[44](index=44&type=chunk) - Construction of the new Bangladesh plant began in October 2020, with a total GFA of approximately 10,600 sq.m., expected to commence production by the end of 2021[46](index=46&type=chunk)[49](index=49&type=chunk) - **RFID product sales volume reached 15.7 million pieces, a year-on-year increase of 130%**, contributing HK$8.2 million in revenue, and Cirtek Link (Shenzhen) Limited was established to focus on RFID technology R&D[47](index=47&type=chunk)[50](index=50&type=chunk) - In early 2021, the Group won top honors in the "Most Popular RFID Enterprise Award" and the "Excellent Solution Award," affirming its capabilities in RFID technology R&D and innovation[54](index=54&type=chunk)[56](index=56&type=chunk) - Future plans include consolidating relationships with international apparel brands, adding sales offices in potential customer locations (especially Europe), and exploring manufacturing possibilities in other parts of Asia, Eastern Europe, and South America[53](index=53&type=chunk)[56](index=56&type=chunk) - The Group will continue to invest in the R&D and production of eco-friendly products to enrich its product portfolio and support environmental protection[54](index=54&type=chunk)[56](index=56&type=chunk) [Financial Review](index=11&type=section&id=Financial%20Review) This section provides a detailed analysis of the Group's financial performance in 2020 and key financial indicators Comparison of Key Financial Data for 2020 (HK$'000) | Indicator | 2020 | 2019 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Revenue | 259,300 | 352,900 | (93,600) | -26.5% | | Cost of Sales as % of Total Revenue | 49.8% | 50.5% | -0.7 p.p. | - | | Gross Profit Margin | 50.2% | 49.5% | +0.7 p.p. | - | | Gross Profit | 130,200 | 174,800 | (44,600) | -25.5% | | Other Income and Gains | 9,700 | 5,700 | 4,000 | +70.2% | | Selling and Distribution Expenses | 36,500 | 44,100 | (7,600) | -17.3% | | Administrative Expenses | 78,200 | 83,800 | (5,600) | -6.6% | | Other Expenses | 7,400 | 900 | 6,500 | +722.2% | | Finance Costs | 2,400 | 2,700 | (300) | -12.9% | | Listing Expenses | 10,600 | 11,000 | (400) | -3.6% | | Tax Expense | 3,100 | 11,400 | (8,300) | -72.5% | | Profit for the year | 1,600 | 26,500 | (24,900) | -93.8% | - The increase in other income and gains was mainly due to a government grant of approximately **HK$3.7 million** from the Hong Kong government's COVID-19-related "Employment Support Scheme"[60](index=60&type=chunk) - The significant increase in other expenses was primarily due to increased impairment of trade receivables, exchange losses, and fair value losses on financial assets at FVTPL[62](index=62&type=chunk) Liquidity and Capital Resources for 2020 (HK$'000) | Indicator | 2020 | 2019 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Net Assets | 236,100 | 144,000 | 92,100 | +63.9% | | Cash and Bank Balances | 114,700 | 43,800 | 70,900 | +161.9% | | Interest-bearing Bank Borrowings | 21,200 | 20,700 | 500 | +2.4% | | Total Banking Facilities | 67,900 | - | - | - | | Utilised Banking Facilities | 23,900 | - | - | - | | Unutilised Banking Facilities | 44,000 | - | - | - | | Property, Plant and Equipment | 91,000 | 76,600 | 14,400 | +18.8% | | Net Current Assets | 111,700 | 41,500 | 70,200 | +169.2% | | Current Ratio | 2.1 times | 1.4 times | +0.7 times | - | | Gearing Ratio | 23.1% | 43.5% | -20.4 p.p. | - | | Goodwill | 1,500 | - | - | - | | Intangible Assets | 300 | - | - | - | - Cash and bank balances were mainly denominated in HKD (approx **HK$85.9 million**), USD (approx **HK$20.5 million**), and RMB (approx **HK$4.9 million**) to support core operational needs[64](index=64&type=chunk) - The increase in property, plant and equipment was mainly due to the acquisition of plant and machinery of approximately **HK$29 million** in 2020 to strengthen market position and increase market share[64](index=64&type=chunk) - The Group recognised goodwill of approximately **HK$1.5 million** and intangible assets of approximately **HK$0.3 million** from a business combination in December 2020[64](index=64&type=chunk) - The treasury policy adopts a prudent financial management approach, maintaining a healthy liquidity position and centralising treasury activities, with cash primarily held in major licensed banks in Hong Kong and denominated in HKD[67](index=67&type=chunk)[68](index=68&type=chunk)[71](index=71&type=chunk)[75](index=75&type=chunk) - The Group currently does not use derivative financial instruments to hedge against foreign exchange risk, and the Board will closely monitor exchange rate and government policy changes[69](index=69&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - As of December 31, 2020, the Group had **no significant contingent liabilities**[74](index=74&type=chunk) - There were no significant events after the reporting period that require disclosure[74](index=74&type=chunk) [Employees and Remuneration Policies](index=15&type=section&id=Employees%20and%20Remuneration%20Policies) This section outlines the Group's employee numbers and remuneration policies Employee and Remuneration Data (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Total Employees | 990 | 1,075 | | Employee Benefit Expenses (excluding directors' remuneration) | 98,900 | 116,500 | - Remuneration packages are generally determined by reference to market terms and individual qualifications, with salaries and wages reviewed annually based on performance appraisals and other relevant factors[78](index=78&type=chunk) [Final Dividend and Date of Annual General Meeting](index=15&type=section&id=Final%20Dividend%20and%20Date%20of%20Annual%20General%20Meeting) The Board recommends a final dividend of HK0.075 cents per ordinary share for the year ended December 31, 2020, subject to approval at the AGM - The Board recommends the payment of a final dividend of **HK0.075 cents per ordinary share** for the financial year ended December 31, 2020 (2019: Nil)[78](index=78&type=chunk) - The final dividend is subject to approval at the upcoming Annual General Meeting on Friday, June 18, 2021[78](index=78&type=chunk) - The proposed final dividend, if approved, is expected to be paid on Friday, July 9, 2021, to shareholders on the register of members on Friday, June 25, 2021[78](index=78&type=chunk) [Significant Investments and Future Plans for Material Investments and Capital Assets](index=15&type=section&id=Significant%20Investments%20and%20Future%20Plans%20for%20Material%20Investments%20and%20Capital%20Assets) The Group held no significant investments during the year and has no definite future plans for material investments or capital assets - Other than as disclosed in the Prospectus and this annual report, the Group did not hold any significant investments in the equity of any other company during the year[78](index=78&type=chunk) - The Group also had no definite future plans for material investments and capital assets during the year[78](index=78&type=chunk) [Pledge of Assets](index=15&type=section&id=Pledge%20of%20Assets) Details of the Group's assets pledged for bank loans are set out in Note 27 to the financial statements in this annual report - Details of the Group's assets pledged for bank loans are set out in Note 27 to the financial statements in this annual report[78](index=78&type=chunk) [Material Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures](index=15&type=section&id=Material%20Acquisitions%20and%20Disposals%20of%20Subsidiaries,%20Associates%20and%20Joint%20Ventures) The Group had no material acquisitions or disposals of subsidiaries, associates, or joint ventures during the year ended December 31, 2020 - Other than as disclosed in this annual report, the Group had no material acquisitions or disposals of subsidiaries, associates or joint ventures during the year ended December 31, 2020[78](index=78&type=chunk) [Corporate Governance Report](index=2&type=section&id=Corporate%20Governance%20Report) [Corporate Governance Report](index=16&type=section&id=15%20Corporate%20Governance%20Report) This section describes the company's commitment to maintaining high standards of corporate governance practices and procedures - The company has complied with all applicable code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited since its listing date on March 12, 2020[81](index=81&type=chunk)[87](index=87&type=chunk) - The Board consists of six directors, including three executive directors and three independent non-executive directors, all of whom possess appropriate professional qualifications and have confirmed their independence[82](index=82&type=chunk)[84](index=84&type=chunk)[88](index=88&type=chunk) - The Board is responsible for formulating the Group's strategy, overseeing business management, monitoring operational and financial performance, and ensuring the effectiveness of internal control and risk management systems[92](index=92&type=chunk)[95](index=95&type=chunk) - All directors are covered by directors' and officers' liability insurance and are encouraged to participate in continuous professional development training[95](index=95&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk) - The Remuneration Committee and Nomination Committee are both composed of a majority of independent non-executive directors and are responsible for reviewing and recommending remuneration policies and director selection[123](index=123&type=chunk)[125](index=125&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk)[133](index=133&type=chunk) - The Audit Committee, comprising three independent non-executive directors, is responsible for reviewing the effectiveness of internal controls, risk management systems, financial information, and compliance[142](index=142&type=chunk) Auditor's Remuneration (HK$'000) | Service Type | 2020 | 2019 | | :--- | :--- | :--- | | Audit services | 2,152 | 1,611 | | Non-audit services (Tax services) | 226 | 608 | - The company has adopted a dividend policy and a shareholder communication policy to ensure timely information dissemination and encourage shareholder participation[146](index=146&type=chunk)[147](index=147&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - The company's website features an investor relations section providing corporate information, press releases, and financial highlights to facilitate communication with shareholders and investors[160](index=160&type=chunk)[163](index=163&type=chunk) [Report of the Directors](index=2&type=section&id=Report%20of%20the%20Directors) [Report of the Directors](index=27&type=section&id=26%20Report%20of%20the%20Directors) This section reports the company's principal business as investment holding and the Group's activities in the production and sale of apparel labels and decorative products - The company's principal business is investment holding, and the Group is principally engaged in the production and sale of apparel labels and decorative products[166](index=166&type=chunk)[169](index=169&type=chunk) - The Group's financial risk management objectives and policies are set out in Note 39 to the financial statements[168](index=168&type=chunk) - During the year ended December 31, 2020, the company declared a special dividend of **HK$10 million**, which was paid to the then shareholders in February 2020 prior to listing[168](index=168&type=chunk) - The directors have recommended a final dividend of **HK0.075 cents per ordinary share**, or approximately HK$1.5 million, for 2020, subject to shareholder approval at the 2021 AGM[168](index=168&type=chunk) [Use of Proceeds from the Company's Initial Public Offering](index=28&type=section&id=Use%20of%20Proceeds%20from%20the%20Company's%20Initial%20Public%20Offering) This section discloses the net proceeds from the IPO were approximately HK$69.9 million, with HK$4.315 million utilized as of December 31, 2020 Use of Net Proceeds from Initial Public Offering (HK$'000) | Use | % of Net Proceeds | Net Proceeds | Amount Utilised | Remaining Amount | Expected Utilisation Time | | :--- | :--- | :--- | :--- | :--- | :--- | | Construction of new Bangladesh plant and purchase of machinery | 98.4% | 68,800 | 3,215 | 65,585 | On or before December 31, 2022 | | General working capital | 1.6% | 1,100 | 1,100 | 0.0 | N/A | | **Total** | **100%** | **69,900** | **4,315** | **65,585** | | - The net proceeds from the listing were approximately **HK$69.9 million**[172](index=172&type=chunk) - The construction of the new Bangladesh plant was delayed until October 2020 due to the COVID-19 outbreak and is expected to be completed within 365 calendar days from the commencement date[174](index=174&type=chunk)[178](index=178&type=chunk) [Summary Financial Information](index=28&type=section&id=Summary%20Financial%20Information) A summary of the Group's financial information for the past five financial years is set out on page 4 of this annual report - A summary of the Group's financial information for the past five financial years is set out on page 4 of this annual report[176](index=176&type=chunk)[180](index=180&type=chunk) [Property, Plant and Equipment](index=28&type=section&id=Property,%20Plant%20and%20Equipment) Details of movements in the Group's property, plant and equipment during the year are set out in Note 14 to the financial statements - Details of movements in the Group's property, plant and equipment during the year are set out in Note 14 to the financial statements[177](index=177&type=chunk)[181](index=181&type=chunk) [Share Capital](index=29&type=section&id=Share%20Capital) Details of movements in the company's share capital during the year are set out in Note 29 to the financial statements - Details of movements in the company's share capital during the year are set out in Note 29 to the financial statements[183](index=183&type=chunk) [Directors' Interests in Competing Businesses](index=29&type=section&id=Directors'%20Interests%20in%20Competing%20Businesses) No director had an interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group - During the year, other than the business of the Group, no director had an interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group pursuant to Rule 8.10 of the Listing Rules[183](index=183&type=chunk) [Connected Transactions](index=29&type=section&id=Connected%20Transactions) The company had no connected transactions subject to the requirements under Chapter 14A of the Listing Rules during the year - During the year, the company had no connected transactions subject to the requirements under Chapter 14A of the Listing Rules[183](index=183&type=chunk) - Related party transactions are disclosed in Note 31 to the consolidated financial statements[183](index=183&type=chunk) [Management Contracts](index=29&type=section&id=Management%20Contracts) No contracts concerning the management and administration of the whole or any substantial part of the business of the company were entered into or existed during the year - No contracts concerning the management and administration of the whole or any substantial part of the business of the company were entered into or existed during the year[183](index=183&type=chunk) [Purchase, Redemption or Sale of Listed Securities of the Company](index=29&type=section&id=Purchase,%20Redemption%20or%20Sale%20of%20Listed%20Securities%20of%20the%20Company) Neither the company nor any of its subsidiaries purchased, redeemed or sold any of the company's securities during the year - Neither the company nor any of its subsidiaries purchased, redeemed or sold any of the company's securities during the year[183](index=183&type=chunk) [Pre-emptive Rights](index=29&type=section&id=Pre-emptive%20Rights) There are no provisions for pre-emptive rights under the Articles of Association or the laws of the Cayman Islands - There are no provisions for pre-emptive rights under the Articles of Association or the laws of the Cayman Islands which would oblige the company to offer new shares on a pro-rata basis to existing shareholders[183](index=183&type=chunk) [Reserves](index=29&type=section&id=Reserves) Details of movements in the reserves of the Group and the company during the year are set out in the consolidated statement of changes in equity and Note 31 to the financial statements - Details of movements in the reserves of the Group and the company during the year are set out in the consolidated statement of changes in equity and Note 31 to the financial statements, respectively[183](index=183&type=chunk) [Distributable Reserves](index=29&type=section&id=Distributable%20Reserves) As of December 31, 2020, the company had no reserves available for distribution to shareholders - As at December 31, 2020, the company had no reserves available for distribution to shareholders as calculated under the provisions of the Companies Law of the Cayman Islands (December 31, 2019: Nil)[183](index=183&type=chunk) - The company's share premium account of approximately **HK$0.3 million** may be distributed in the form of fully paid bonus shares[183](index=183&type=chunk) [Directors](index=30&type=section&id=Directors) This section lists the members of the Board of Directors as of the report date and notes their eligibility for re-election - The executive directors are Mr Chan Sze Ming, Ms Lo Miu Lan, and Mr Chan Tsz Fung[185](index=185&type=chunk) - The independent non-executive directors are Mr Lam Chor Ki, Mr Li Tak Cheong, and Dr Wong Chi Wing[186](index=186&type=chunk) - Mr Lam Chor Ki and Dr Wong Chi Wing will retire at the 2021 AGM and, being eligible, offer themselves for re-election[194](index=194&type=chunk) [Closure of Register of Members](index=30&type=section&id=Closure%20of%20Register%20of%20Members) The register of members will be closed on two separate occasions to determine eligibility for attending the 2021 AGM and receiving the proposed final dividend - To be eligible to attend and vote at the 2021 AGM, the register of members will be closed from June 15 to June 18, 2021, with a deadline of 4:30 p.m. on June 11, 2021[187](index=187&type=chunk)[191](index=191&type=chunk) - To qualify for the proposed final dividend, the register of members will be closed from June 24 to June 25, 2021, with a deadline of 4:30 p.m. on June 23, 2021[188](index=188&type=chunk)[191](index=191&type=chunk) [Major Customers and Suppliers](index=30&type=section&id=Major%20Customers%20and%20Suppliers) This section discloses the sales and purchase concentration of the Group's top five customers and suppliers during the review year Major Customer and Supplier Concentration | Indicator | 2020 (%) | 2019 (%) | | :--- | :--- | :--- | | Sales to top five customers as % of total sales | 18.6% | 21.6% | | Sales to largest customer as % of total sales | 12.0% | 11.0% | | Purchases from top five suppliers as % of total purchases | 10.7% | 9.8% | | Purchases from largest supplier as % of total purchases | 3.7% | 3.0% | - None of the directors of the company, their associates, or any shareholder (who to the knowledge of the directors owns more than 5% of the company's issued share capital) had any beneficial interest in the Group's five largest customers and suppliers[190](index=190&type=chunk)[192](index=192&type=chunk) [Directors' and Senior Management's Profiles](index=31&type=section&id=Directors'%20and%20Senior%20Management's%20Profiles) This section provides detailed biographies of the executive directors, independent non-executive directors, and senior management members - Executive directors Mr Chan Sze Ming (Chairman), Ms Lo Miu Lan (CEO), and Mr Chan Tsz Fung are responsible for the Group's overall management, corporate development, strategic planning, operations, product development, marketing, and European sales activities[194](index=194&type=chunk)[196](index=196&type=chunk) - Mr Chan Sze Ming and Ms Lo Miu Lan are spouses, and Mr Chan Tsz Fung is their son; all three executive directors have extensive experience in the apparel label and decorative product manufacturing industry[194](index=194&type=chunk)[196](index=196&type=chunk) - Independent non-executive directors Mr Lam Chor Ki, Mr Li Tak Cheong, and Dr Wong Chi Wing possess rich professional backgrounds and industry experience and serve as members or chairmen of the audit, remuneration, and nomination committees[196](index=196&type=chunk)[198](index=198&type=chunk) - Senior management members include Mr Chow Wing Fook, Mr Lau Kwok Shing, Mr Fung Hong Keung, Mr Richard Phillip Ringeisen, and Mr Liu Man Wai, who have many years of experience in their respective fields[200](index=200&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - The Company Secretary, Mr Chan Wai Shing, has experience in accounting and company secretarial functions and meets the requirements of the Listing Rules[207](index=207&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) [Directors' Service Contracts](index=35&type=section&id=Directors'%20Service%20Contracts) No director proposed for re-election at the 2021 AGM has a service contract with the company which is not determinable by the company within one year without payment of compensation - No director proposed for re-election at the 2021 AGM has a service contract with the company which is not determinable by the company within one year without payment of compensation (other than statutory compensation)[209](index=209&type=chunk)[212](index=212&type=chunk) [Directors' Remuneration](index=36&type=section&id=Directors'%20Remuneration) Directors' fees are subject to shareholders' approval at general meetings, while other emoluments are determined by the Board with reference to their duties and performance - Directors' fees are subject to shareholders' approval at general meetings[214](index=214&type=chunk)[219](index=219&type=chunk) - Other emoluments are determined by the Board with reference to the directors' duties, responsibilities, and performance, as well as the Group's results[214](index=214&type=chunk)[219](index=219&type=chunk) [Permitted Indemnity Provision](index=36&type=section&id=Permitted%20Indemnity%20Provision) The company has taken out appropriate directors' and officers' liability insurance to provide cover for the directors and officers of the Group - Pursuant to the Articles of Association and the Companies Law of the Cayman Islands, every director or other officer of the company shall be entitled to be indemnified out of the assets of the company against any loss or liability incurred or sustained by him in or about the execution of his duties[215](index=215&type=chunk)[220](index=220&type=chunk) - The company has taken out appropriate directors' and officers' liability insurance to provide cover for the directors and officers of the Group[215](index=215&type=chunk)[220](index=220&type=chunk) [Directors' Interests in Transactions, Arrangements or Contracts](index=36&type=section&id=Directors'%20Interests%20in%20Transactions,%20Arrangements%20or%20Contracts) No director or a connected entity of a director had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to the business of the Group - No director or a connected entity of a director had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to the business of the Group to which the company or any of its subsidiaries was a party during the year[216](index=216&type=chunk)[218](index=218&type=chunk) [Disclosure of Interests](index=36&type=section&id=Disclosure%20of%20Interests) This section discloses the interests and/or short positions of directors, chief executives, substantial shareholders, and other persons in the shares and underlying shares of the company Directors' Long Positions in Shares of the Company (as at December 31, 2020) | Director's Name | Company/Associated Corporation | Nature of Interest & Capacity | Number and Class of Securities | Approximate % of Total Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | | Mr Chan Sze Ming | The Company | Interest of controlled corporation | 1,404,000,000 Shares | 70.2% | | Mr Chan Sze Ming | Charming International Limited | Beneficial owner | 51 shares of US$1.00 each | 51.0% | | Ms Lo Miu Lan | The Company | Interest of controlled corporation | 1,404,000,000 Shares | 70.2% | | Ms Lo Miu Lan | Charming International Limited | Beneficial owner | 49 shares of US$1.00 each | 49.0% | | Mr Chan Tsz Fung | – | Beneficial owner | 12,000,000 Shares | 0.6% | - Mr Chan Sze Ming and Ms Lo Miu Lan own 51% and 49% of the issued share capital of Charming International, respectively, which in turn holds 1,404,000,000 Shares; therefore, they are deemed to be interested in the Shares held by Charming International[227](index=227&type=chunk)[228](index=228&type=chunk) - Mr Chan Sze Ming is the spouse of Ms Lo Miu Lan, and therefore they are deemed to be interested in the Shares held by each other[228](index=228&type=chunk) Substantial Shareholders' Long Positions in Ordinary Shares of the Company (as at the date of this report) | Shareholder's Name | Capacity/Nature of Interest | Number of Shares | Approximate % of the Company's Total Issued Share Capital | | :--- | :--- | :--- | :--- | | Charming International | Beneficial interest | 1,404,000,000 | 70.2% | - As at the date of this report, other than the directors and chief executive, no other person had an interest or short position in the shares or underlying shares of the company recorded in the register required to be kept by the company under section 336 of the SFO[235](index=235&type=chunk)[238](index=238&type=chunk) [Share Option Scheme](index=38&type=section&id=Share%20Option%20Scheme) This section introduces the Share Option Scheme approved and adopted by the company on February 21, 2020, to provide incentives to eligible participants - The company approved and adopted a Share Option Scheme on February 21, 2020, to provide incentives or rewards to selected participants[236](index=236&type=chunk)[239](index=239&type=chunk) - Options may be granted to eligible participants, including employees, directors, consultants, suppliers, customers, and shareholders[241](index=241&type=chunk)[245](index=245&type=chunk) - The maximum number of shares to be issued upon exercise of all outstanding options granted under the Scheme shall not in aggregate exceed **30% of the issued share capital** of the company from time to time[242](index=242&type=chunk)[246](index=246&type=chunk) - The total number of shares issued and to be issued upon exercise of options granted to each participant in any 12-month period shall not exceed **1% of the then issued shares**[243](index=243&type=chunk)[247](index=247&type=chunk) - The exercise price of an option shall not be less than the highest of the average closing price for the five business days immediately preceding the date of grant, the closing price on the date of grant, and the nominal value of a share[249](index=249&type=chunk)[250](index=250&type=chunk) - The Scheme shall be valid and effective for a period of **10 years** from the Listing Date[251](index=251&type=chunk)[255](index=255&type=chunk) - On September 15, 2020, the company granted **2,000,000 share options** to a senior management member at an exercise price of HK$0.057 per share[251](index=251&type=chunk)[255](index=255&type=chunk)[714](index=714&type=chunk) - As of December 31, 2020, the company had **2,000,000 outstanding share options**, representing approximately 0.1% of the issued shares[719](index=719&type=chunk)[723](index=723&type=chunk) [Equity-Linked Agreements](index=40&type=section&id=Equity-Linked%20Agreements) No equity-linked agreements were entered into or existed during the year, other than as disclosed in this annual report - During the year, other than as disclosed in this annual report, the company did not enter into, nor did there exist, any equity-linked agreements, nor were there any provisions for entering into any agreement that would or might result in the company issuing shares[252](index=252&type=chunk)[256](index=256&type=chunk) [Director's Rights to Acquire Shares or Debentures](index=40&type=section&id=Director's%20Rights%20to%20Acquire%20Shares%20or%20Debentures) No arrangements were entered into by the company or its subsidiaries to enable directors or chief executives to acquire benefits by means of the acquisition of shares in or debentures of the company - Other than as disclosed under the section "Share Option Scheme" above, at no time during the year was the company or any of its subsidiaries a party to any arrangement to enable the directors or chief executive of the company or any of their spouses or children under 18 years of age to acquire benefits by means of the acquisition of shares in or debentures of the company or any other body corporate[253](index=253&type=chunk)[257](index=257&type=chunk) [Interest of the Compliance Adviser](index=40&type=section&id=Interest%20of%20the%20Compliance%20Adviser) The company has appointed Innovax Capital Limited as its compliance adviser, and Innovax holds no interest in the share capital of the company - The company has appointed Innovax Capital Limited ("Innovax") as its compliance adviser[254](index=254&type=chunk)[258](index=258&type=chunk) - As at the date of this report, neither Innovax nor any of its close associates, directors or employees had any interest in the share capital of the company or any member of the Group which is required to be notified to the company under the Listing Rules[254](index=254&type=chunk)[258](index=258&type=chunk) [Sufficiency of Public Float](index=41&type=section&id=Sufficiency%20of%20Public%20Float) At least 25% of the company's total issued share capital was held by the public as at the date of this report - Based on information that is publicly available to the company and within the knowledge of the directors, at least 25% of the company's total issued share capital was held by the public as at the date of this report[260](index=260&type=chunk)[262](index=262&type=chunk) [Auditors](index=41&type=section&id=Auditors) Ernst & Young has been appointed as the auditor of the company for the year ended December 31, 2020, and a resolution for their reappointment will be proposed at the 2021 AGM - The company has appointed Ernst & Young as the auditor of the company for the year ended December 31, 2020[261](index=261&type=chunk)[263](index=263&type=chunk) - A resolution for their reappointment as the company's auditor will be proposed at the 2021 AGM[261](index=261&type=chunk)[263](index=263&type=chunk) [Independent Auditor's Report](index=2&type=section&id=Independent%20Auditor's%20Report) [Independent Auditor's Report](index=42&type=section&id=41%20Independent%20Auditor's%20Report) Ernst & Young issued a true and fair opinion on the consolidated financial statements of Cirtek Holdings Limited for the year ended December 31, 2020 - The auditor is of the opinion that the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at December 31, 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[265](index=265&type=chunk) - Key audit matters included the **impairment assessment of trade receivables** and **provision for inventories**, as they involve significant judgement and estimation[267](index=267&type=chunk)[271](index=271&type=chunk)[273](index=273&type=chunk) - For the impairment assessment of trade receivables, audit procedures included assessing monitoring controls, evaluating the expected credit loss (ECL) calculation methodology, inputs, and assumptions, and reviewing post-year-end settlements and economic indicators[270](index=270&type=chunk) - For the provision for inventories, audit procedures included understanding management's controls for identifying and valuing obsolete, damaged, and slow-moving inventories, assessing the provision calculation methodology, inputs, and assumptions, and reviewing post-year-end sales and usage and performing physical inventory checks[274](index=274&type=chunk) - The Board of Directors is responsible for preparing consolidated financial statements that comply with HKFRSs and for ensuring effective internal controls, with the Audit Committee assisting in overseeing the financial reporting process[280](index=280&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk) [Consolidated Statement of Profit or Loss](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) [Consolidated Statement of Profit or Loss](index=48&type=section&id=47%20Consolidated%20Statement%20of%20Profit%20or%20Loss) This section presents the consolidated statement of profit or loss for Cirtek Holdings Limited for the year ended December 31, 2020 Key Data from Consolidated Statement of Profit or Loss for 2020 (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 259,314 | 352,937 | | Cost of sales | (129,117) | (178,168) | | Gross profit | 130,197 | 174,769 | | Other income and gains | 9,694 | 5,701 | | Selling and distribution expenses | (36,451) | (44,053) | | Administrative expenses | (78,247) | (83,808) | | Other expenses | (7,413) | (928) | | Finance costs | (2,381) | (2,735) | | Listing expenses | (10,607) | (11,030) | | Profit before tax | 4,792 | 37,916 | | Income tax expense | (3,145) | (11,434) | | Profit for the year | 1,647 | 26,482 | | Profit for the year attributable to owners of the Company | 1,647 | 25,331 | | Non-controlling interests | – | 1,151 | | Basic earnings per share (HK cents) | 0.09 | 1.69 | | Diluted earnings per share (HK cents) | 0.09 | 1.69 | [Consolidated Statement of Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) [Consolidated Statement of Comprehensive Income](index=49&type=section&id=48%20Consolidated%20Statement%20of%20Comprehensive%20Income) This section presents the consolidated statement of comprehensive income for Cirtek Holdings Limited for the year ended December 31, 2020 Key Data from Consolidated Statement of Comprehensive Income for 2020 (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Profit for the year | 1,647 | 26,482 | | Other comprehensive income: Net exchange differences on translation of foreign operations | 4,938 | 772 | | Total comprehensive income for the year | 6,585 | 27,254 | | Attributable to owners of the Company | 6,585 | 26,178 | | Non-controlling interests | – | 1,076 | [Consolidated Statement of Financial Position](index=2&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) [Consolidated Statement of Financial Position](index=50&type=section&id=49%20Consolidated%20Statement%20of%20Financial%20Position) This section presents the consolidated statement of financial position for Cirtek Holdings Limited as at December 31, 2020 Key Data from Consolidated Statement of Financial Position as at December 31, 2020 (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | **Non-current assets** | | | | Property, plant and equipment | 90,980 | 76,559 | | Right-of-use assets | 43,117 | 58,486 | | Prepayments and deposits | 6,560 | 1,307 | | Goodwill | 1,523 | – | | Other intangible assets | 270 | – | | Financial asset at fair value through profit or loss | 5,404 | – | | Deferred tax assets | 402 | – | | **Total non-current assets** | **148,256** | **136,352** | | **Current assets** | | | | Inventories | 52,943 | 44,565 | | Trade receivables | 36,724 | 48,327 | | Prepayments, deposits and other receivables | 8,143 | 12,972 | | Cash and cash equivalents | 114,743 | 43,807 | | Tax recoverable | 883 | 65 | | **Total current assets** | **213,436** | **150,048** | | **Current liabilities** | | | | Trade payables | 34,651 | 35,381 | | Other payables and accruals | 30,665 | 32,557 | | Interest-bearing bank borrowings | 20,530 | 18,257 | | Lease liabilities | 12,107 | 11,626 | | Tax payable | 3,766 | 10,353 | | **Total current liabilities** | **101,719** | **108,577** | | **Net current assets** | **111,717** | **41,471** | | **Total assets less current liabilities** | **259,973** | **177,823** | | **Non-current liabilities** | | | | Other payables | 750 | 841 | | Interest-bearing bank borrowings | 633 | 2,469 | | Lease liabilities | 21,340 | 30,209 | | Deferred tax liabilities | 1,124 | 334 | | **Total non-current liabilities** | **23,847** | **33,853** | | **Net assets** | **236,126** | **143,970** | | **Equity** | | | | Share capital | 20,000 | –* | | Reserves | 216,126 | 143,970 | | **Total equity** | **236,126** | **143,970** | [Consolidated Statement of Changes in Equity](index=2&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) [Consolidated Statement of Changes in Equity](index=51&type=section&id=50%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This section presents the consolidated statement of changes in equity for Cirtek Holdings Limited for the year ended December 31, 2020 Consolidated Statement of Changes in Equity for 2020 (HK$'000) | Indicator | Share Capital | Share Premium | Merger Reserve | Share Option Reserve | Exchange Fluctuation Reserve | Retained Profits | Total (Attributable to owners of the Company) | Non-controlling Interests | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | At 1 January 2019 | – | – | 2,920 | – | (6,373) | 116,215 | 112,762 | 3,564 | 116,716 | | Profit for the year | – | – | – | – | – | 25,331 | 25,331 | 1,151 | 26,482 | | Other comprehensive income | – | – | – | – | 847 | – | 847 | (75) | 772 | | Total comprehensive income for 2019 | – | – | – | – | 847 | 25,331 | 26,178 | 1,076 | 27,254 | | At 31 December 2019 and 1 January 2020 | – | 201,488 | (193,538) | – | (5,526) | 141,546 | 143,970 | – | 143,970 | | Profit for 2020 | – | – | – | – | – | 1,647 | 1,647 | – | 1,647 | | Other comprehensive income for 2020 | – | – | – | – | 4,938 | – | 4,938 | – | 4,938 | | Total comprehensive income for 2020 | – | – | – | – | 4,938 | 1,647 | 6,585 | – | 6,585 | | Issue of new shares by capitalisation | 15,000 | (15,000) | – | – | – | – | – | – | – | | Issue of new shares under Share Offer | 5,000 | 120,000 | – | – | – | – | 125,000 | – | 125,000 | | Share issue costs | – | (29,437) | – | – | – | – | (29,437) | – | (29,437) | | Equity-settled share option arrangements | – | – | – | 8 | – | – | 8 | – | 8 | | Special dividend | – | – | – | – | – | (10,000) | (10,000) | – | (10,000) | | At 31 December 2020 | 20,000 | 277,051 | (193,538) | 8 | (588) | 133,193 | 236,126 | – | 236,126 | [Consolidated Statement of Cash Flows](index=2&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) [Consolidated Statement of Cash Flows](index=52&type=section&id=51%20Consolidated%20Statement%20of%20Cash%20Flows) This section presents the consolidated statement of cash flows for Cirtek Holdings Limited for the year ended December 31, 2020 Key Data from Consolidated Statement of Cash Flows for 2020 (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Net cash flows from operating activities | 20,379 | 59,594 | | Net cash flows used in investing activities | (21,794) | (10,110) | | Net cash flows from/(used in) financing activities | 71,919 | (28,549) | | Net increase in cash and cash equivalents | 70,504 | 20,935 | | Cash and cash equivalents at beginning of year | 43,807 | 22,958 | | Effect of foreign exchange rate changes, net | 432 | (86) | | Cash and cash equivalents at end of year | 114,743 | 43,807 | | Cash and bank balances | 55,510 | 43,807 | | Time deposits | 59,233 | – | [Notes to Financial Statements](index=2&type=section&id=Notes%20to%20Financial%20Statements) [Notes to Financial Statements](index=54&type=section&id=53%20Notes%20to%20Financial%20Statements) This section provides detailed information on Cirtek Holdings Limited and its subsidiaries, including their principal activities and corporate structure - The company was incorporated in the Cayman Islands, with its principal place of business located in Lai Chi Kok, Kowloon, Hong Kong[314](index=314&type=chunk) - The company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on March 12, 2020[314](index=314&type=chunk) - The company is an investment holding company, and its subsidiaries are principally engaged in the production and sale of printed products[314](index=314&type=chunk) - Charming International Limited is the immediate and ultimate holding company of the company[314](index=314&type=chunk) Principal Subsidiaries Information | Company Name | Place of incorporation/registration and business | Issued ordinary shares/registered capital | Percentage of equity attributable to the Company (indirect) | Principal Activities | | :--- | :--- | :--- | :--- | :--- | | Charming Printing Limited | Hong Kong | HK$10,000 | 100 | Sale of printed products | | Charming Printing (Boluo) Ltd. | China | US$6,234,178 | 100 | Production of printed products | | Charming Trim & Packaging (VN) Co., Ltd | Vietnam | US$3,100,000 | 100 | Production of printed products | | Charming Trim & Packaging (BD) Ltd | Bangladesh | BDT50,000,000 | 100 | Production of printed products | | Charming Trim (BD) Co. Ltd | Bangladesh | BDT5,000,000 | 100 | Sale of printed products | | Charming Trim India Private Limited | India | INR100,000 | 100 | Sale of printed products | | Charming Trim & Packaging (PVT.) Limited | Pakistan | PKR100,000 | 100 | Sale of printed products | | Charming Trim & Packaging, Inc | USA | US$10,000 | 100 | Sale of printed products and provision of customer services | | Charming Europe BVBA | Belgium | EUR50,000 | 100 | Provision of customer services | | Cirtek Link (Shenzhen) Limited | China | US$1,000,000 | 100 | Provision of customer services | [Basis of Presentation and Changes in Accounting Policies](index=57&type=section&id=Basis%20of%20Presentation%20and%20Changes%20in%20Accounting%20Policies) This section explains the basis of presentation for the financial statements and the adoption of revised Hong Kong Financial Reporting Standards in 2020 - The financial statements have been prepared using the principles of merger accounting as if the Group Reorganisation had been completed on January 1, 2019, to reflect the performance and cash flows of the companies under the common control of the controlling shareholders[322](index=322&type=chunk)[325](index=325&type=chunk) - The amendments adopted for the first time in 2020 include the Conceptual Framework for Financial Reporting 2018, amendments to HKFRS 3 (Definition of a Business), HKFRS 9, HKAS 39 and HKFRS 7 (Interest Rate Benchmark Reform), HKFRS 16 (COVID-19-Related Rent Concessions), and HKAS 1 and HKAS 8 (Definition of Material)[334](index=334&type=chunk)[335](index=335&type=chunk) - The amendments to the Conceptual Framework, Definition of a Business, Interest Rate Benchmark Reform, and Definition of Material did not have a significant impact on the Group's financial position and performance[337](index=337&type=chunk)[338](index=338&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)[343](index=343&type=chunk) - The amendment to HKFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising directly from the COVID-19 pandemic, which did not have a significant impact on the Group's financial position and performance[343](index=343&type=chunk) - Issued but not yet effective HKFRSs, including amendments to HKFRS 3, 9, 10, 17, and HKAS 1, 16, 37, are not expected to have a significant impact on the Group's financial statements[346](index=346&type=chunk)[349](index=349&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[364](index=364&type=chunk) [Summary of Significant Accounting Policies](index=65&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section outlines the Group's significant accounting policies across various areas, including business combinations, fair value measurement, and revenue recognition - Business combinations are accounted for using the acquisition method, with goodwill initially measured at cost and tested for impairment annually[364](index=364&type=chunk)[367](index=367&type=chunk) - Fair value measurement is based on an orderly transaction between market participants and uses relevant observable inputs and valuation techniques[370](index=370&type=chunk)[371](index=371&type=chunk)[376](index=376&type=chunk)[380](index=380&type=chunk) - Impairment of non-financial assets is assessed when there are indications of impairment, with the recoverable amount calculated as the higher of value in use and fair value less costs of disposal[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses, with depreciation calculated using the straight-line method at annual rates of 10% to 20%[394](index=394&type=chunk)[397](index=397&type=chunk)[399](index=399&type=chunk) - Intangible assets (other than goodwill) are recognised at cost, with finite-lived assets like software amortised on a straight-line basis over 10 years[402](index=402&type=chunk)[403](index=403&type=chunk) - As a lessee, the Group applies a single recognition and measurement approach for all leases (except short-term leases), recognising lease liabilities and right-of-use assets[403](index=403&type=chunk)[407](index=407&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk)[417](index=417&type=chunk)[419](index=419&type=chunk) - Financial assets are classified at initial recognition as measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss, based on contractual cash flow characteristics and business model[414](index=414&type=chunk)[416](index=416&type=chunk)[420](index=420&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk) - Financial liabilities are classified at initial recognition as financial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, and are subsequently measured at amortised cost[448](index=448&type=chunk) - Inventories are stated at the lower of cost and net realisable value, with cost determined on a weighted average basis[451](index=451&type=chunk) - Cash and cash equivalents include cash on hand, demand deposits, and short-term, highly liquid investments[451](index=451&type=chunk) - Income tax comprises current and deferred tax, with deferred tax assets and liabilities measured at the tax rates that are enacted or substantively enacted by the end of the reporting period[454](index=454&type=chunk)[456](index=456&type=chunk)[459](index=459&type=chunk)[461](index=461&type=chunk) - Government grants are recognised at their fair value and are systematically recognised as income or amortised based on their relation to expenses or assets[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk) - Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer, with variable consideration (such as rights of return) estimated using the most likely amount method[466](index=466&type=chunk)[467](index=467&type=chunk)[469](index=469&type=chunk)[471](index=471&type=chunk)[473](index=473&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk) - The cost of share-based payments is measured by reference to the fair value at the date of grant and is recognised as an employee benefit expense over the period when performance and/or service conditions are fulfilled[481](index=481&type=chunk)[482](index=482&type=chunk)[483](index=483&type=chunk)[486](index=486&type=chunk) - Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised[494](index=494&type=chunk)[497](index=497&type=chunk) - The financial statements are presented in Hong Kong dollars, and the functional currencies of foreign subsidiaries are translated at the exchange rates prevailing at the end of the reporting period[501](index=501&type=chunk)[508](index=508&type=chunk)[510](index=510&type=chunk) [Significant Accounting Judgements and Estimates](index=91&type=section&id=Significant%20Accounting%20Judgements%20and%20Estimates) This section describes the significant judgements and estimates made by management in preparing the financial statements - Management uses the most likely amount method to estimate variable consideration (such as rights of return for sales of printed products), considering historical experience, business forecasts, and current economic conditions[512](index=512&type=chunk)[513](index=513&type=chunk) - The useful lives and impairment assessment of property, plant and equipment are based on historical experience and may change due to technological innovations and competitor actions[515](index=515&type=chunk)[518](index=518&type=chunk) - The provision for expected credit losses on trade receivables is calculated using a provision matrix based on days past due and forward-looking macroeconomic data, and its amount is sensitive to changes in economic conditions[516](index=516&type=chunk)[519](index=519&type=chunk)[522](index=522&type=chunk) - Inventory write-downs are based on management's review of obsolete and slow-moving inventories, with net realisable value estimated based on the latest invoice prices and market conditions[523](index=523&type=chunk)[524](index=524&type=chunk)[527](index=527&type=chunk) - Goodwill impairment testing is performed at least annually and involves estimating the value in use of cash-generating units, including future cash flow forecasts and the selection of a discount rate[525](index=525&type=chunk)[529](index=529&type=chunk) - The purchase price allocation for business combinations requires determining the fair values of identifiable assets acquired and liabilities assumed, which depends on a series of estimates such as future cash flows, discount rates, and interest rates[525](index=525&type=chunk) [Operating Segment Information](index=94&type=section&id=Operating%20Segment%20Information) This section discloses the Group's operating segment information, which consists of a single reportable segment: the production and sale of printed products - The Group has only one reportable operating segment, which is the production and sale of printed products[530](index=530&type=chunk) Revenue by Customer Location (HK$'000) | Region | 2020 | 2019 | | :--- | :--- | :--- | | Hong Kong | 60,364 | 97,895 | | Mainland China | 76,026 | 88,362 | | Bangladesh | 28,660 | 34,264 | | Vietnam | 13,109 | 20,688 | | USA | 16,249 | 17,429 | | Others | 64,906 | 94,299 | | **Total** | **259,314** | **352,937** | Non-current Assets by Asset Location (HK$'000) | Region | 2020 | 2019 | | :--- | :--- | :--- | | Hong Kong | 4,709 | 8,437 | | Mainland China | 99,246 | 93,355 | | Bangladesh | 13,452 | 15,823 | | Other countries | 23,376 | 17,868 | | **Total** | **140,783** | **135,483** | Major Customer Revenue (HK$'000) | Customer | 2020 | 2019 | | :--- | :--- | :--- | | Customer A | 31,150 | 38,908 | - Revenue from major customers was generated from the sale of printed products[543](index=543&type=chunk) [Revenue and Other Income and Gains](index=95&type=section&id=Revenue%20and%20Other%20Income%20and%20Gains) This section provides a detailed analysis of the Group's revenue composition and other income and gains - Revenue represents the net invoiced value of goods sold, after allowances for returns and trade discounts and rebates[544](index=544&type=chunk) Analysis of Revenue and Other Income and Gains (HK$'000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Sale of printed products | 259,314 | 352,937 | | Freight and transportation income | 462 | 536 | | Interest income | 1,419 | 7 | | Sale of scrap materials | 1,410 | 2,011 | | Government grants | 4,332 | 532 | | Net exchange differences | – | 1,446 | | Net gain on disposal of property, plant and equipment | 687 | – | | Net gain on derecognition of right-of-use assets | 63 | – | | Others | 1,321 | 1,169 | | **Total** | **9,694** | **5,701** | - Performance obligations are satisfied upon delivery of the printed products, and payment is generally due within 30 to 90 days from delivery[548](index=548&type=chunk)[553](index=553&type=chunk) - The increase in contract liabilities in 2020 was mainly due to an increase in short-term advances received from customers for the sale of printed products at the end of the year[681](index=681&type=chunk) [Profit Before Tax](index=97&type=section&id=Profit%20Before%20Tax) This section presents the components of the Group's profit before tax Components of Profit Before Tax (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Cost of sales | 129,117 | 178,168 | | Depreciation of property, plant and equipment | 14,902 | 17,326 | | Depreciation of right-of-use assets | 10,510 | 11,224 | | Short-term lease expenses | 821 | 43 | | Employee benefit expenses (excluding directors' remuneration) | 98,861 | 116,538 | | Government grants | (4,332) | (532) | | Auditor's remuneration | 2,152 | 1,611 | | Listing expenses | 10,607 | 11,030 | | Net exchange differences | 4,683 | (1,446) | | Impairment of trade receivables | 1,397 | 833 | | Net gain on disposal of property, plant and equipment | (687) | (87) | | Net gain on derecognition of right-of-use assets | (63) | – | | Fair value loss on financial asset at FVTPL | 1,333 | – | - Cost of inventories sold includes employee benefit expenses of **HK$52,485,000** (2019: HK$64,003,000) and depreciation of property, plant and equipment and right-of-use assets[557](index=557&type=chunk) - Government grants were mainly from local governments, including unemployment insurance compensation and new machinery acquisition, as well as grants from the Hong Kong government's COVID-19-related "Employment Support Scheme"[556](index=556&type=chunk) [Finance Costs](index=98&type=section&id=Finance%20Costs) This section analyses the Group's finance costs, which primarily consist of interest on bank loans and lease liabilities Analysis of Finance Costs (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Interest on bank loans | 854 | 601 | | Interest on lease liabilities | 1,527 | 2,134 | | **Total** | **2,381** | **2,735** | [Directors' and Chief Executive's Remuneration](index=98&type=section&id=Directors'%20and%20Chief%20Executive's%20Remuneration) This section discloses the remuneration details of the directors and chief executive Directors' and Chief Executive's Remuneration (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Fees | – | – | | Salaries, allowances and benefits in kind | 2,635 | 2,402 | | Performance-related bonuses | 1,800 | 1,496 | | Pension scheme contributions | 49 | 46 | | **Total** | **4,484** | **3,944** | Independent Non-executive Directors' Fees (HK$'000) | Director's Name | 2020 | 2019 | | :--- | :--- | :--- | | Dr Wong Chi Wing | 206 | – | | Mr Li Tak Cheong | 155 | – | | Mr Lam Chor Ki | 155 | – | | **Total** | **516** | **–** | Executive Directors' Remuneration (HK$'000) | Director's Name | Salaries, allowances and benefits in kind | Performance-related bonuses | Pension scheme contributions | Total | | :--- | :--- | :--- | :--- | :--- | | Mr Chan Sze Ming | 1,042 | 900 | 18 | 1,960 | | Ms Lo Miu Lan | 838 | 900 | 18 | 1,756 | | Mr Chan Tsz Fung | 239 | – | 13 | 252 | | **Total** | **2,119** | **1,800** | **49** | **3,968** | - During the year, no director entered into any arrangement to waive or agree to waive any remuneration, and the Group did not pay any remuneration to directors as an inducement to join or as compensation for loss of office[587](index=587&type=chunk) [Five Highest Paid Employees](index=100&type=section&id=Five%20Highest%20Paid%20Employees) This section discloses the remuneration details of the Group's five highest-paid employees - During the year, the five highest-paid employees included two directors and three non-director employees[590](index=590&type=chunk) Remuneration of Non-Director Highest-Paid Employees (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Salaries, allowances and benefits in kind | 5,344 | 6,993 | | Pension scheme contributions | 289 | 301 | | **Total** | **5,633** | **7,294** | Remuneration Bands of Non-Director Highest-Paid Employees (Number of individuals) | Remuneration Band | 2020 | 2019 | | :--- | :--- | :--- | | HK$1,000,001 to HK$1,500,000 | 1 | – | | HK$1,500,001 to HK$2,000,000 | 1 | 1 | | HK$2,000,001 to HK$2,500,000 | – | 1 | | HK$2,500,001 to HK$3,000,000 | 1 | – | | HK$3,000,001 to HK$3,500,000 | – | 1 | | **Total** | **3** | **3** | - During the year, the Group did not pay any remuneration to any non-director highest-paid employee as an inducement to join or as compensation for loss of office[593](index=593&type=chunk) [Income Tax](index=101&type=section&id=Income%20Tax) This section discloses the Group's income tax expense for 2020, which amounted to HK$3.145 million, a significant decrease of 72.5% from 2019 Income Tax Expense (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Current - Hong Kong (Charge for the year) | 1,233 | 7,842 | | Current - Hong Kong (Over-provision in prior years) | (770) | – | | Current - Elsewhere (Charge for the year) | 2,294 | 3,584 | | Deferred | 388 | 8 | | **Total tax charge for the year** | **3,145** | **11,434** | - Hong Kong profits tax is provided at a rate of 16.5% (with some entities at 8.25% on the first HK$2 million), China tax at 25%, and US federal income tax at 21%[595](index=595&type=chunk)[596](index=596&type=chunk) Reconciliation of Tax Expense to Profit Before Tax (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Profit before tax | 4,792 | 37,916 | | Tax at the statutory tax rate of 16.5% | 791 | 6,256 | | Effect of lower tax rate of 8.25% enacted by local authorities | (165) | (165) | | Effect of different tax rates in different jurisdictions | 778 | 989 | | Adjustments in respect of current tax of previous periods | (770) | – | | Income not subject to tax | (1,726) | (106) | | Expenses not deductible for tax | 3,246 | 3,224 | | Tax losses utilised from previous periods | – | (100) | | Tax losses not recognised | 954 | 963 | | Others | 37 | 373 | | **Tax charge at the Group's effective rate** | **3,145** | **11,434** | [Dividends](index=102&type=section&id=Dividends) This section discloses the company's proposed final dividend for 2020 and the special dividend declared and paid in February 2020 Dividends (HK$'000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Proposed final dividend | 1,500 | – | | Special dividend | – | 10,000 | | **Total** | **1,500** | **10,000** | - In February 2020, the company declared and paid a special dividend of **HK$10 million** to its then shareholders[608](index=608&type=chunk) - The proposed final dividend for the year is subject to

Financial Performance - The profit for the year attributable to owners of the Company amounted to HK$25,331,000, a decrease from HK$31,940,000 in 2018, representing a decline of approximately 20.5%[12] - Revenue for 2019 was HK$352,937,000, down from HK$371,883,000 in 2018, indicating a decrease of about 5.4%[8] - Basic earnings per share for 2019 were HK$1.69 cents, compared to HK$2.13 cents in 2018, reflecting a decline of approximately 20.7%[12] - The Group's profit attributable to owners for 2019 was HK$25,331,000, a decrease from HK$31,940,000 in 2018, primarily due to increased labor costs, listing expenses, and administrative costs related to depreciation[16] - Revenue for the Group decreased by approximately 5.1% compared to 2018 due to a global economic downturn affecting demand for apparel-related products[27] - The Group's revenue decreased by approximately HK$18.9 million to approximately HK$352.9 million for the year ended 31 December 2019, primarily due to a decrease in sales to Customer A and a reduction in average sales price from HK$0.28 to HK$0.25 per piece[33] - Gross profit increased by approximately HK$12.4 million to approximately HK$174.8 million for the year ended 31 December 2019, resulting in a gross profit margin increase from approximately 43.7% to approximately 49.5%[33] - Total comprehensive income for the year was HK$27,254,000, a decrease of 17.4% from HK$32,803,000 in 2018[199] Expenses and Liabilities - Total liabilities attributable to owners of the Company were HK$143,970,000 in 2019, compared to HK$116,716,000 in 2018, representing an increase of approximately 23.3%[8] - Administrative expenses increased by approximately HK$7.0 million to HK$83.8 million for the year ended 31 December 2019, mainly due to higher staff costs and increased depreciation related to the new office[33] - Selling and distribution expenses rose by approximately HK$3.7 million to HK$44.1 million for the year ended 31 December 2019, primarily due to an increase in staff costs[33] - Listing expenses increased by approximately HK$7.0 million to HK$11.0 million for the year ended December 31, 2019[35] - Income tax expense increased by approximately HK$3.4 million to approximately HK$11.4 million for the year ended 31 December 2019, mainly due to higher estimated assessable profits[35] Assets and Cash Flow - Total assets increased to HK$286,400,000 in 2019 from HK$270,846,000 in 2018, marking an increase of about 5.5%[8] - The net assets of the Group amounted to approximately HK$144.0 million as at 31 December 2019, an increase from HK$116.7 million in 2018, primarily due to profit generated from operations[35] - As of December 31, 2019, the Group's cash and bank balances increased to approximately HK$43.8 million, up from HK$23.0 million in 2018, primarily due to operating cash inflow and reduced capital expenditures[37] - The Group's net current assets rose to approximately HK$41.5 million as of December 31, 2019, compared to HK$4.0 million in 2018, resulting in a current ratio of approximately 1.4[37] - Interest-bearing bank borrowings amounted to approximately HK$20.7 million as of December 31, 2019, an increase from HK$12.7 million in 2018[37] - The gearing ratio improved to approximately 43.5% for the year ended December 31, 2019, down from 57.7% in 2018[37] Strategic Initiatives - The Group plans to develop RFID technology in its printing products to enhance customer engagement and gain a first mover advantage[14] - The Company will continue to explore suitable business opportunities to diversify its business foundation and maximize shareholder interests[13] - The Group aims to implement stringent cost controls in response to challenging global market conditions[11] - The Group plans to enhance its product offerings by incorporating more value-added IT-related services and developing RFID technology for printing products[17] - The Group will expand production capacity in Bangladesh through the construction of a new facility and machinery purchases, funded by net proceeds of approximately HK$74.9 million from the Global Offering[28] - The Group anticipates a positive growth outlook for the apparel labels and trim products manufacturing market in 2020 despite challenges posed by the COVID-19 pandemic[24] - The Group aims to increase efficiency and profitability through effective management across technology, operations, and marketing activities[19] - The Group will continue to seek sustainable growth opportunities and increase shareholder value by expanding its production capacity and customer base[27] - The Group's strategic focus includes collaboration with customers and suppliers to navigate global market volatility[19] - The Group's commitment to innovation and high-quality printing products is expected to drive long-term business development[20] Corporate Governance - The Board consists of 6 Directors, with 3 executive Directors and 3 independent non-executive Directors, ensuring a balanced composition for effective management[58] - All independent non-executive Directors have confirmed their independence annually, meeting the guidelines set out in Rule 3.13 of the Listing Rules[60] - The attendance record of Directors at board meetings since the Listing Date shows a 100% attendance rate for all Directors[58] - The Nomination Committee, primarily composed of independent non-executive Directors, is responsible for recommending candidates for directorship[52] - Directors receive comprehensive training and support, including tailored induction and ongoing professional development to ensure they are well-informed about the Company's operations[66] - The Company Secretary ensures compliance with all applicable rules and regulations during board meetings, with minutes available for inspection[60] - Regular board meetings are scheduled, with at least fourteen days' notice given for meetings and board papers sent three days in advance[60] - The Company maintains a balanced composition of executive Directors to ensure independence and effective management[54] - All Directors participated in training related to general business and regulatory updates, ensuring their contributions remain relevant[68] Audit and Compliance - The Company received approximately HK$1,611,000 for audit services in 2019, an increase of 118.8% from HK$736,000 in 2018[73] - Non-audit services provided to the Group amounted to approximately HK$608,000 in 2019, up from HK$103,000 in 2018, representing a 487.4% increase[73] - The Audit Committee assists the Board in maintaining an effective system of internal control[73] - The Company places great importance on internal control and risk management to safeguard assets and shareholder interests[73] - The Internal Control Consultant formulates audit plans covering key internal control areas on a rotational basis[73] - The Audit Committee reviewed the financial statements for the year ended December 31, 2019, focusing on business highlights and compliance with accounting standards[84] - The Audit Committee recommended the re-appointment of external auditors for the financial year ending December 31, 2020, based on their satisfactory performance[84] - The auditor's report includes key audit matters that were significant in the current period's audit[192] Shareholder Communication - The Company emphasizes the importance of communication with shareholders and has implemented a Shareholders Communication Policy to provide timely information and facilitate engagement[91] - The Annual General Meeting (AGM) serves as a platform for communication between the Board and shareholders, with key figures present to address shareholder questions[88] - The Company maintains a proactive investor relations policy, ensuring regular dialogue with investors and stakeholders, with relevant information available on its website[98] - The Company has a dedicated Investor Relations section on its website to facilitate communication and provide access to financial and non-financial information[102] - Shareholders can requisition an Extraordinary General Meeting (EGM) if they hold at least one-tenth of the paid-up capital, ensuring their rights to convene meetings[93] - Specific inquiries and suggestions from shareholders can be submitted in writing to the Board or Company Secretary, promoting active shareholder engagement[101] Directors and Management - The Company has arranged appropriate directors' and officers' liability insurance coverage for its Directors and officers[145] - No Director had a material interest in any significant transactions or contracts related to the Group during the year[146] - As of the report date, Mr. Barry Chan and Ms. Candy Law own 51% and 49% of Charming International, which holds 1,404,000,000 Shares, indicating their significant interest in the Company[150] - The Company has appointed Ernst & Young as the auditor for the year ended December 31, 2019[166] - The compliance adviser, Elstone Capital Limited, has no interests in the share capital of the Company as of the report date[165] - The Company is required to maintain a register of interests as per Section 336 of the SFO[157] - The report indicates that there are no other persons with interests of 5% or more in the shares of the Company apart from the Directors[160]