® 56 福 HUNG FOOK TONG Hung Fook Tong Group Holdings Limited 鴻福堂集團控股有限公司 (Incorporated in the Cayman Islands with Iimited liability) ( 於開曼群島註冊成立的有限公司 ) Stock Code 股份代號：1446 2020 Annual Report 年報 H F T WELLNESS ORGANIC NATURAL HFT QQ 31 अन्नराज 0 H F. 目錄 2 4 6 8 11 19 21 22 26 37 49 58 60 62 63 64 126 | --- | --- | |------------------|-------| | | | | 公司資料 | | | 二零二零年大事記 | | | 業務分部回顧 | | | 主席的話 | | | 管理層討論及分析 | | | 企業社會責任 | | | 獎項及嘉許 | | | | | | 董事及高級管理層 | | | 董事會報告 | | | 企業管治報告 | | | 獨立核數師報告 | | | 綜合全面收益表 | ...

Financial Performance - The company's revenue decreased by 11.7% to HKD 345.2 million for the first half of 2020, compared to HKD 390.9 million in the same period of 2019[9]. - Gross profit fell by 8.3% to HKD 222.4 million, with a gross margin increase to 64.4% from 62.1% year-on-year[10]. - The net profit attributable to shareholders surged by 355.8% to HKD 23 million, up from HKD 5.1 million in the previous year[10]. - The group's revenue for the first half of 2020 was HKD 345.2 million, a decrease of 11.7% compared to HKD 390.9 million in the first half of 2019[29]. - The group's gross profit for the first half of 2020 was HKD 222.4 million, down 8.3% from HKD 242.7 million in the first half of 2019, but the gross margin increased to 64.4% from 62.1%[31]. - The group’s net profit for the first half of 2020 was HKD 23.0 million, a significant increase of 355.8% from HKD 5.1 million in the first half of 2019, resulting in a net profit margin of 6.8%[37]. - Operating profit increased significantly to HKD 32,421,000 from HKD 8,947,000, indicating a strong recovery in operational efficiency[52]. - The net profit for the period was HKD 23,326,000, a significant increase from HKD 5,124,000 in the previous year, reflecting a growth of approximately 354.5%[89]. Revenue Segments - The Hong Kong retail segment generated revenue of HKD 276.9 million, a decline of 6.6% year-on-year, accounting for approximately 80.2% of total revenue[12]. - Wholesale revenue from Hong Kong increased by 8.4% to HKD 60.7 million compared to HKD 56 million in the same period last year[18]. - Revenue from the mainland China market dropped by 80.4% to HKD 7.5 million, down from HKD 38.4 million in the same period last year[20]. - Retail and wholesale revenue in Hong Kong fell to HKD 276.9 million and HKD 68.2 million, representing declines of 6.6% and 27.7% respectively compared to the same period in 2019[29]. - The segment revenue from Hong Kong retail was HKD 276,945,000, while wholesale revenue was HKD 68,227,000, leading to a total segment performance of HKD 57,152,000[89]. Cost Management - The company implemented cost control measures, including rent and labor cost reductions, to mitigate the impact of the challenging retail environment[10]. - Employee costs decreased by 18.0% to HKD 101.7 million, with the employee cost ratio improving to 29.4% from 31.7% in the previous year[33]. - Rental expenses for retail stores in Hong Kong were HKD 48.6 million, a reduction of 7.6% from HKD 52.6 million in the first half of 2019, with the rental expense ratio at 17.6%[34]. - The cost of goods sold for the six months ended June 30, 2020, was HKD 94,237,000, down from HKD 113,826,000 in 2019, representing a decrease of approximately 17.3%[100]. - The company’s employee benefits expenses totaled HKD 101,651,000 for the six months ended June 30, 2020, down from HKD 123,946,000 in 2019, a decrease of approximately 18%[100]. Cash Flow and Financial Position - As of June 30, 2020, the company held cash and cash equivalents of approximately HKD 107.4 million, an increase from HKD 95.4 million at the end of 2019[11]. - Operating cash flow for the six months ended June 30, 2020, was HKD 84,981,000, significantly up from HKD 26,552,000 in the same period of 2019, representing an increase of approximately 219.36%[65]. - Total assets as of June 30, 2020, amounted to HKD 788,861,000, slightly down from HKD 789,122,000 as of December 31, 2019, representing a decrease of 0.03%[57]. - Total liabilities decreased from HKD 517,355,000 to HKD 497,345,000, a reduction of approximately 3.88%[59]. - Cash and cash equivalents increased from HKD 95,353,000 to HKD 107,417,000, an increase of about 12.16%[65]. - The company reported a net financial expense of HKD 3,922,000 for the period, compared to HKD 2,428,000 in the previous year, indicating an increase of approximately 61.7%[89]. Dividends and Shareholder Returns - The company declared a special dividend of HKD 0.009 per ordinary share for the year ending December 31, 2020, compared to no special dividend in the previous year[11]. - The company plans to pay a special dividend of HKD 0.90 per ordinary share for the year ending December 31, 2020[137]. - The company did not declare any interim dividend for the six months ended June 30, 2020, consistent with the same period in 2019[109]. Corporate Governance and Compliance - The company has adhered to the Corporate Governance Code as outlined in Appendix 14 of the listing rules during the six-month period ending June 30, 2020[160]. - The Audit Committee, composed of three independent non-executive directors, is responsible for reviewing and supervising the company's financial procedures, risk management, and internal control systems[162]. - The company maintained sufficient public float as of June 30, 2020, in compliance with listing rules[158]. Market and Product Development - The company successfully expanded its sales channels to more online platforms and food delivery services in response to changing consumer behavior[9]. - The group launched new health-focused products, including a "Lung Detox Soup" and a collagen-rich "Fish Essence," to cater to increased health awareness among consumers[15]. - The group is enhancing online sales and delivery services to capitalize on the growing demand for convenient and hygienic food options during the pandemic[24]. - The group plans to launch new products, including a collaboration with Danisa for "Hong Fu Tang X Danisa Hong Kong Milk Tea" and new flavors of rice water in Q3 2020[27]. - The group will continue to enhance its product offerings in health supplements to capture the growing market demand for wellness products[27]. Environmental and Social Responsibility - The company collected 237,000 plastic bottles and aluminum cans through recycling machines, contributing to environmental sustainability efforts[50]. - The company donated surgical masks and herbal drinks to support approximately 1,500 families during the COVID-19 pandemic, demonstrating corporate social responsibility[49]. Shareholder Information - The company has a total of 398,552,600 shares held by major shareholders, representing approximately 60.76% of the total issued shares[146]. - Think Expert directly owns 29.22% of the company, equivalent to 191,638,200 shares[143]. - The company has a stock option plan that allows for the issuance of up to 63,200,000 shares, which is about 9.63% of the total issued share capital as of June 30, 2020[153]. - The stock option plan was adopted on June 11, 2014, and is valid for ten years, expiring on June 10, 2024[153]. - The company’s major shareholders include Bao Shi, Think Expert, and Yi Tao, each holding 60.76% of the shares[146].

Business Performance - Hong Fook Tong's retail business revenue grew by 4.2% year-on-year despite market challenges, showcasing strong brand loyalty among local consumers [27]. - The company maintained a market share of 27.8% by sales revenue and 37.8% by volume in the health beverage category in Hong Kong, according to Nielsen [24]. - The company's retail business in Hong Kong achieved a revenue growth of 4.2%, reaching HKD 581.1 million, which accounts for approximately 74.9% of total revenue [40]. - Revenue from continuing operations slightly decreased by 1.0% to HKD 775.8 million, compared to HKD 783.4 million in the previous year [38]. - Gross profit from continuing operations increased by 2.6% to HKD 488.7 million, resulting in a gross profit margin of 63.0%, up from 60.8% in the previous year [38]. - The company reported a net profit attributable to owners of the company increased by 6.8% to HKD 10 million, compared to HKD 9.4 million in the previous year [38]. - Wholesale revenue decreased by 13.7% year-on-year to HKD 194.7 million, with a segment loss of HKD 4.9 million due to declining sales and rising administrative expenses [45]. - Revenue from the mainland China wholesale business fell by 32.8% to HKD 59.7 million, primarily due to disruptions in business relationships with major clients [49]. - The group reported its audited financial statements for the year ended December 31, 2019, to shareholders [121]. Customer Engagement and Membership - The number of CLUB members surpassed 900,000, indicating a strong customer base and engagement [14]. - Membership in the in-house CLUB program increased to over 924,000, with approximately 97,000 new members added during the year, despite a generally weak retail atmosphere [43]. - The company plans to enhance its mobile app functionality to better engage members and expand its customer base in the coming year [33]. - The introduction of a new website interface and updated mobile app aimed to improve user experience and engagement [14]. - The company has encouraged customers to use its CLUB mobile app instead of physical membership cards, promoting electronic payments and reducing paper usage [90]. Product Development and Diversification - New product launches included organic chicken essence and frozen seafood products, diversifying the product range [11]. - The acquisition of a local handmade bakery aimed to attract customers interested in baked goods, indicating a strategic move towards product diversification [10]. - A new product, "Lung Cleansing Detox Drink," was launched in the first half of 2020, with plans to expand the "In-house Celebration Series" product line [56]. - New product development includes the launch of a herbal tea line, projected to contribute an additional HKD 200 million in revenue within the first year [105]. - The group launched four new beverage flavors in Vietnam and introduced Hong Kong-style milk tea in Taiwan, resulting in improved sales performance in those markets [50]. Store Expansion and Market Presence - The company opened new stores in various locations, including the Peak Galleria and MTR stations, expanding its retail footprint [13]. - The group opened nine new stores during the fiscal year, with five located in shopping malls and four in MTR stations, maintaining its position as the largest herbal product retailer in Hong Kong with a total of 115 self-operated retail stores as of December 31, 2019 [43]. - The company aims to regain market presence in mainland China by re-establishing product listings in major convenience stores [36]. - The company is expanding its market presence by opening 10 new retail locations across Hong Kong, aiming to increase market share by 5% [105]. - The company continues to expand its wholesale business in Taiwan and overseas markets to mitigate the impact of economic fluctuations in mainland China and Hong Kong [126]. Financial Management and Investments - The board proposed a final dividend of HKD 0.46 and a special dividend of HKD 0.38 per share, totaling HKD 0.84 per share, up from HKD 0.79 per share in the previous year [32]. - Capital expenditures for the year were HKD 53 million, primarily for opening new stores and renovating existing ones [72]. - The company's distributable reserves as of December 31, 2019, amounted to approximately HKD 211,800,000, which includes a share premium of about HKD 215,000,000 and other reserves of approximately HKD 108,000,000 [140]. - The company has invested HKD 50 million in technology upgrades to improve production efficiency, aiming for a 10% reduction in operational costs [105]. Corporate Social Responsibility and Environmental Initiatives - The company is committed to corporate social responsibility, conducting various activities to support employees, communities, and the environment [131]. - The company recycled about 380 tons of food waste, significantly increasing from 107 tons in 2018, which reduced greenhouse gas emissions by over 90 tons CO2 equivalent [86]. - The company aims to reduce food waste disposal by approximately 50% in the coming years, with a long-term goal of achieving zero food waste disposal [86]. - The company has implemented a plastic bottle recycling trial in two designated stores, collecting nearly 500 bottles in the first two months [86]. - Environmental initiatives have been implemented, with a goal to reduce carbon emissions by 30% over the next three years [105]. Governance and Management - The management team has extensive experience in operations, finance, and marketing, with key personnel having over 26 years of industry experience [112][113][114]. - The company emphasizes employee training and development as part of its operational strategy [112]. - The company has established a risk assessment system for selecting new suppliers, ensuring strict monitoring and compliance with food safety standards [92]. - The board of directors is responsible for establishing strategic goals and ensuring the necessary financial and human resources to achieve business objectives [197]. - The company adopted the corporate governance code as per Appendix 14 of the listing rules, emphasizing effective internal controls and risk management systems [194].

Financial Performance - Total revenue from continuing operations for the first half of 2019 increased by 0.9% year-on-year to HKD 390.9 million, compared to HKD 387.3 million in the same period of 2018[8]. - Gross profit from continuing operations rose by 3.4% to HKD 242.7 million, with a gross profit margin of 62.1%, up from 60.6% in the previous year[8]. - Profit attributable to owners increased by 19.0% to HKD 5.1 million, compared to HKD 4.2 million in the first half of 2018[9]. - Revenue from the Hong Kong retail business grew by 5.0% to HKD 296.5 million, accounting for approximately 75.8% of total revenue[10]. - Revenue from wholesale operations decreased by 10.1% to HKD 94.4 million, with a segment loss of HKD 4.5 million compared to a loss of HKD 2.1 million in the previous year[14]. - The group's revenue from continuing operations for the first half of 2019 was HKD 390.9 million, an increase of 0.9% compared to HKD 387.3 million in the same period of 2018[29]. - Revenue from the wholesale business decreased by 10.1% to HKD 94.4 million due to intense competition in the Hong Kong and mainland China markets[29]. - The group reported a net profit attributable to owners for the first half of 2019 was HKD 5.1 million, a 19.0% increase from HKD 4.2 million in the first half of 2018, with a net profit margin of 1.3% compared to 1.2% in the previous year[37]. Retail Operations - The number of self-operated retail stores in Hong Kong reached 112, following the opening of four new stores during the review period[12]. - Revenue from the Hong Kong retail business increased by 5.0% to HKD 296.5 million, driven by strong sales of the self-branded festive series and growth in product bundles sold through online platforms[29]. - The group plans to open approximately six new stores in Hong Kong in the second half of 2019, primarily located in MTR stations[22]. - For the six months ended June 30, 2019, total revenue from the Hong Kong retail segment was HKD 299,734,000, while the wholesale segment generated HKD 94,686,000, resulting in a total revenue of HKD 394,420,000[121]. - The profit from the Hong Kong retail segment was HKD 43,324,000, while the wholesale segment reported a loss of HKD 4,474,000, leading to an overall profit of HKD 38,850,000[121]. Production and Product Development - The new production facility in Kaiping, Guangdong, commenced full production in the second quarter of 2019, expected to lower production costs in the coming years[9]. - The group launched several new products featuring "Hong Kong flavors," including Hong Kong-style milk tea and sour plum drink, to stimulate consumer demand[16]. - The company launched new product flavors targeting younger customers, including passion fruit honey and purple amaranth drinks[14]. - The group aims to enhance its wholesale business by introducing new products such as lemon barley and aloe vera drinks, as well as frozen seafood products in supermarkets and convenience stores[25]. Financial Position and Liabilities - As of June 30, 2019, the group's bank deposits and cash balance was HKD 82.6 million, down from HKD 128.4 million at the end of 2018[39]. - The capital-to-debt ratio as of June 30, 2019, was 0.31, improved from 0.35 at the end of 2018[39]. - Non-current liabilities increased to HKD 94,800 thousand from HKD 62,531 thousand, representing a 51.4% increase year-over-year[60]. - Current liabilities totaled HKD 358,276 thousand, up from HKD 303,092 thousand, indicating an 18.2% increase compared to the previous year[60]. - Total liabilities rose to HKD 453,076 thousand, a 24% increase from HKD 365,623 thousand in the prior year[60]. - The company’s total assets less current liabilities stood at HKD 370,194 thousand, up from HKD 334,225 thousand, indicating a 10.8% increase[60]. Cash Flow and Investments - Cash flow from operating activities was HKD 26,606 thousand, slightly up from HKD 25,930 thousand, reflecting a 2.6% increase[66]. - The company reported a net cash outflow from investing activities of HKD 28,091 thousand, compared to HKD 41,491 thousand in the previous year, showing a 32.3% improvement[66]. - Financing activities resulted in a net cash outflow of HKD 44,194 thousand, contrasting with a net inflow of HKD 31,928 thousand in the prior year[66]. - The company reported a cash decrease of HKD (102,000) from discontinued operations for the six months ended June 30, 2018[140]. Employee and Operational Costs - Employee costs for the first half of 2019 were HKD 123.9 million, a 2.7% increase from HKD 120.7 million in the first half of 2018, representing 31.7% of revenue compared to 31.2% in the previous year[32]. - Rental expenses for retail stores in Hong Kong decreased by 1.1% to HKD 52.6 million in the first half of 2019, accounting for 17.8% of revenue, down from 18.9% in the first half of 2018[33]. - Advertising and promotional expenses rose by 10.2% to HKD 15.6 million in the first half of 2019, representing 4.0% of revenue compared to 3.7% in the previous year[34]. Corporate Governance and Compliance - The company has complied with the Corporate Governance Code as outlined in Appendix 14 of the listing rules for the six months ending June 30, 2019[196]. - The Audit Committee, composed of three independent non-executive directors, has been established to review and supervise the group's financial procedures and internal control systems[198]. - Major shareholders include Bao Shi with 60.76% equity (398,552,600 shares) and Think Expert with 60.76% equity (398,552,600 shares) as of June 30, 2019[180]. Environmental and Social Responsibility - The company donated over 25,000 food items to food banks during the reporting period, contributing to community welfare[51]. - The company achieved a reduction of approximately 18 metric tons of CO2 equivalent emissions through the recycling of 69 metric tons of food waste[50]. - The group received multiple awards for corporate social responsibility and service quality during the review period, including the Platinum Award for Credible Brand 2019[49].

Membership and Customer Engagement - The company achieved a significant milestone with over 800,000 members in its self-operated CLUB program[8] - The total membership of the company's "self-owned CLUB" program exceeded 825,000, including a significant number of high-spending platinum card members[116] - User data showed a 20% increase in active users, reaching a total of 1.2 million users[92] Retail Operations and Expansion - The company plans to open 6 to 8 new retail stores in Hong Kong in the coming year, despite anticipated weak consumer sentiment due to ongoing trade conflicts[19] - The company closed all retail stores in mainland China, focusing on strengthening its presence in Hong Kong[12] - The company ended all retail operations in mainland China by the end of 2018 due to rapid changes in the health beverage sales environment and underperforming stores[20] - The company plans to open 6 to 8 new retail stores in Hong Kong in 2019, with confirmed locations in MTR stations and shopping malls[49] Financial Performance - Revenue from continuing operations increased by 7.3% year-on-year to HKD 783.4 million, with gross profit rising by 4.8% to HKD 476.3 million[34] - The company’s net profit attributable to shareholders increased by 15.6% to HKD 9.4 million, despite one-time expenses related to the closure of retail stores in mainland China[34] - The Hong Kong retail business generated revenue of HKD 557.9 million, an increase of 8.1% year-on-year, contributing 71.2% of total revenue[36] - The company reported a significant increase in revenue, with a year-over-year growth of 15% in the last quarter[92] Product Development and Innovation - The company launched over 40 new products and had more than 825,000 members in its online platform by the end of 2018[25][39] - The company introduced the "Hung Fook Tong Online" shopping platform and launched the "Hung Family" smart vending machine, enhancing customer experience and operational efficiency[16] - The introduction of the smart vending machine "Hong Jia" aims to enhance operational efficiency and analyze customer purchasing data for better marketing strategies[49] - The company is set to launch approximately 8 additional "Hung Family" smart vending machines in 2019 to further enhance customer convenience[19] Market Strategy and Expansion - The company plans to expand its market presence in Taiwan and other countries like Vietnam and Singapore, leveraging the "Belt and Road" initiative[20] - The company aims to expand its wholesale business in Taiwan and overseas markets to mitigate the impact of economic fluctuations and trade disputes[117] - Market expansion plans include entering two new regions, which are projected to increase market share by 5%[92] Cost Management and Efficiency - The company aims to control costs, particularly procurement expenses, to maintain competitiveness in the market[19] - The company has achieved a 25% reduction in production costs due to improved operational efficiencies[92] - The cost of sales for the year ended December 31, 2018, was HKD 307.0 million, up 11.6% from HKD 275.1 million in 2017, representing 39.2% of revenue compared to 37.7% in 2017[55] Corporate Governance and Compliance - The company has maintained compliance with all relevant laws and regulations in its operating jurisdictions, including Hong Kong and mainland China[123] - The company has adopted the corporate governance code as per the listing rules, emphasizing transparency and accountability[185] - The board of directors includes both executive and independent non-executive members, with specific terms of service outlined[145] Sustainability and Corporate Social Responsibility - The group recycled approximately 107 metric tons of food waste in 2018, reducing greenhouse gas emissions[76] - The group conducted 172 employee training courses in the review year, with a total of 3,117 participations[81] - The group made charitable donations amounting to HKD 235,000 during the fiscal year ending December 31, 2018[141] Future Outlook - The company provided a positive outlook for the next quarter, projecting a revenue growth of 10%[92] - New product launches are expected to contribute an additional $5 million in revenue over the next fiscal year[92] - The management team emphasized the importance of sustainability initiatives, with plans to invest $H million in eco-friendly practices and technologies[102]