```markdown [Company Information](index=3&type=section&id=Company%20Information) The company's board comprises executive, non-executive, and independent non-executive directors, with its registered office in the Cayman Islands and principal Hong Kong operations in Chater House, Central, audited by BDO Limited - The company's Board of Directors comprises executive directors Mr. Zhuang Weidong (Chairman), Mr. Qiu Chuanzhi (President), Mr. Wu Hangzheng (Vice Chairman), Mr. Mai Rongbin (Vice President), non-executive director Ms. Lin Ping, and independent non-executive directors Mr. Leung Ka Tin, Mr. Cheng Hong Ki, and Mr. Lau Wai King[4](index=4&type=chunk) - The company secretary is Mr. Yau Chi Chiu, with the registered office in the Cayman Islands and principal place of business in Hong Kong at Chater House, Central[4](index=4&type=chunk) - The Hong Kong share registrar is Tricor Investor Services Limited, and the auditor is BDO Limited[7](index=7&type=chunk) [Financial Highlights](index=5&type=section&id=Financial%20Highlights) The group reported a 42.7% revenue increase and a 60.1% reduction in loss for the six months ended June 30, 2021, while total assets remained stable and cash equivalents decreased Financial Highlights for the Six Months Ended June 30, 2021 | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | Change (+/-) | | :--- | :--- | :--- | :--- | | Revenue | 113,116 | 79,255 | 42.7% | | Gross Profit (HK$ thousand) | 30,956 | 18,635 | 66.1% | | Gross Profit Margin | 27.4% | 23.5% | 16.6% | | Loss for the period | (3,418) | (8,563) | (60.1%) | | Loss attributable to equity holders of the Company | (4,148) | (8,928) | (53.5%) | | Basic and diluted loss per share (HK cents) | (0.9) | (1.9) | (52.6%) | Balance Sheet Highlights as of June 30, 2021 | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | Change (+/-) | | :--- | :--- | :--- | :--- | | Total assets | 288,936 | 290,702 | (0.6%) | | Cash and cash equivalents | 38,673 | 60,930 | (36.5%) | | Total equity attributable to equity holders of the Company | 150,391 | 151,873 | (1.0%) | [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an in-depth review of the group's business performance, financial position, and future outlook, including detailed analysis of revenue, expenses, and liquidity [Business Review](index=6&type=section&id=Business%20Review) The group's core business is zipper manufacturing in China, with a significant reduction in loss attributable to equity holders due to market recovery and customer expansion - The group's core business is manufacturing **zippers** in China, primarily serving OEMs that produce garments for renowned Chinese and international apparel brands[11](index=11&type=chunk) - For the six months ended June 30, 2021, loss attributable to equity holders of the Company was approximately **HK$4.15 million**, a **53.5% reduction** from HK$8.93 million in the same period of 2020, primarily due to effective COVID-19 control, market improvement, garment industry rebound, and customer expansion[12](index=12&type=chunk) [Outlook](index=6&type=section&id=Outlook) The company anticipates continued economic recovery in China, with demand for zippers driven by domestic consumption and evolving fashion trends, while implementing strategic initiatives for growth - In the first half of 2021, China's economy continued to recover, but the evolution of the global COVID-19 pandemic remains uncertain, with China's economic growth in the second half relying on domestic demand[13](index=13&type=chunk) - The apparel industry rebounded post-pandemic, with domestic brands gaining consumer recognition, anticipating **low-speed demand growth** in the second half, and diversified fashion trends creating new opportunities for the zipper industry[13](index=13&type=chunk) - The company will implement multiple measures, including increasing new product development, expanding e-commerce markets, integrating and expanding production capacity, optimizing processes, strengthening capital management, accelerating digital transformation, and enhancing talent management[15](index=15&type=chunk) [Financial Review](index=7&type=section&id=Financial%20Review) The group's revenue increased by 42.7% to HK$113 million, with a substantial reduction in loss attributable to equity holders, driven by strong zipper sales and improved profitability - For the six months ended June 30, 2021, the group's revenue was approximately **HK$113.12 million**, an increase of approximately **42.7%** compared to the same period in 2020[16](index=16&type=chunk) - Loss attributable to equity holders of the Company was approximately **HK$4.15 million**, a significant reduction from approximately HK$8.93 million in the prior year period[16](index=16&type=chunk) [Revenue](index=8&type=section&id=Revenue) The group's revenue for the six months ended June 30, 2021, increased by 42.7% to HK$113 million, primarily driven by zipper and puller sales, with Mainland China contributing 90.8% Revenue Analysis by Product Category | Product Category | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Sale of goods | | | | | | Zipper chains and pullers | 111,410 | 98.5 | 78,128 | 98.6 | | Others | 1,706 | 1.5 | 1,127 | 1.4 | | Total | 113,116 | 100.0 | 79,255 | 100.0 | Revenue Analysis by Geographical Location | Geographical Location | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 102,673 | 90.8 | 69,850 | 88.1 | | Overseas | 10,443 | 9.2 | 9,405 | 11.9 | | Total | 113,116 | 100.0 | 79,255 | 100.0 | - The increase in zipper business revenue was primarily due to effective COVID-19 control, gradual improvement in the end consumer market, recovery of the apparel industry, and the group's further expansion of high-quality customers, leading to increased sales orders[19](index=19&type=chunk) [Gross Profit](index=9&type=section&id=Gross%20Profit) Gross profit increased by 66.1% to HK$30.956 million, mainly due to a significant increase in revenue without major changes in fixed expenses Gross Profit Analysis by Product Category | Product Category | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Zipper chains and pullers | 30,038 | 97.0 | 18,833 | 101.1 | | Others | 918 | 3.0 | (198) | (1.1) | | Total | 30,956 | 100.0 | 18,635 | 100.0 | - The increase in gross profit was mainly due to a significant increase in revenue, while fixed expenses (such as amortization of right-of-use assets and depreciation) remained largely unchanged[22](index=22&type=chunk) [Expenses and Costs](index=9&type=section&id=Expenses%20and%20Costs) Distribution costs increased by 41.5% due to higher sales, while administrative expenses decreased by 6.7% primarily due to reduced staff salaries and benefits - Distribution costs increased by approximately **41.5%** from approximately HK$5.42 million in the same period of 2020 to approximately **HK$7.67 million** in the same period of 2021, primarily due to increased staff costs and transportation costs resulting from higher sales[23](index=23&type=chunk) - Administrative expenses decreased by approximately **6.7%** from approximately HK$25.92 million in the same period of 2020 to approximately **HK$24.18 million** in the same period of 2021, primarily due to a reduction in salaries and welfare expenses[23](index=23&type=chunk) [Profitability](index=9&type=section&id=Profitability) The group's loss attributable to equity holders significantly decreased to HK$4.15 million, with the loss ratio improving to 3.67%, reflecting overall enhanced profitability - For the six months ended June 30, 2021, the group recorded a loss attributable to equity holders of the Company of approximately **HK$4.15 million**, compared to approximately HK$8.93 million in the same period of 2020[24](index=24&type=chunk) - For the six months ended June 30, 2021, the loss ratio attributable to equity holders of the Company was approximately **3.67%**, with the reduction in loss primarily due to the combined effects mentioned above[24](index=24&type=chunk) [Right-of-Use Assets and Lease Liabilities](index=10&type=section&id=Right-of-Use%20Assets%20and%20Lease%20Liabilities) The group adopted HKFRS 16, recognizing lease liabilities of approximately HK$55.08 million and right-of-use assets of HK$46.54 million as of June 30, 2021 - The group has applied HKFRS 16 to recognize lease liabilities and right-of-use assets since January 1, 2019[26](index=26&type=chunk) - As of June 30, 2021, lease liabilities and right-of-use assets were approximately **HK$55.08 million** and **HK$46.54 million**, respectively[26](index=26&type=chunk) [Related Party Transactions and Continuing Connected Transactions](index=10&type=section&id=Related%20Party%20Transactions%20and%20Continuing%20Connected%20Transactions) The group entered into a new lease agreement for a China property with a related party, recognized as a one-off connected transaction, and has ongoing connected lease transactions - On August 27, 2021, the group entered into the Jingmen Lease Agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. (a related party) to lease a property in China, with a monthly rent of **RMB533,000** for a term from September 1, 2021, to August 31, 2023[27](index=27&type=chunk) - The Jingmen Lease Agreement was recognized as an acquisition of a right-of-use asset, constituting a one-off connected transaction for the Company, with additional assets recognized of approximately **HK$8.58 million**[30](index=30&type=chunk) - The group has a continuing connected lease agreement with Kaiyi Jingmen, with a monthly rent of **RMB400,000**, and a maximum annual aggregate amount of **RMB6 million** for each of the three years ending August 31, 2021[31](index=31&type=chunk) [Liquidity and Capital Resources](index=12&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash outflow from operating activities significantly decreased, while cash and cash equivalents reduced, and the group maintained its adjusted net debt-to-capital ratio below 20% - For the six months ended June 30, 2021, the group's net cash outflow from operating activities was approximately **HK$1.35 million** (2020: HK$8.6 million), net cash outflow from investing activities was approximately **HK$12.7 million** (2020: HK$19.77 million inflow), and net cash outflow from financing activities was approximately **HK$11.68 million** (2020: HK$45.78 million)[33](index=33&type=chunk) - As of June 30, 2021, cash and cash equivalents were approximately **HK$38.67 million**, a decrease of approximately **HK$22.26 million** from December 31, 2020[34](index=34&type=chunk) - The group's strategy is to maintain an adjusted net debt-to-capital ratio below **20%**, with ratios of **9.5%** and **1.9%** as of June 30, 2021, and December 31, 2020, respectively[37](index=37&type=chunk) [Net Current Assets](index=13&type=section&id=Net%20Current%20Assets) Net current assets increased to approximately HK$73.01 million, primarily comprising inventory, trade and other receivables, and cash and cash equivalents - As of June 30, 2021, the group recorded current assets of approximately **HK$149.8 million** and current liabilities of approximately **HK$76.796 million**[38](index=38&type=chunk) - Net current assets increased by approximately **HK$5.57 million** from approximately HK$67.44 million as of December 31, 2020, to approximately **HK$73.01 million** as of June 30, 2021[38](index=38&type=chunk) [Pledged Assets](index=13&type=section&id=Pledged%20Assets) As of June 30, 2021, the group had no pledged assets - As of June 30, 2021, the group had no pledged assets[39](index=39&type=chunk) [Contingent Liabilities](index=13&type=section&id=Contingent%20Liabilities) As of June 30, 2021, the group had no significant contingent liabilities - As of June 30, 2021, the group had no significant contingent liabilities[40](index=40&type=chunk) [Foreign Currency Risk](index=13&type=section&id=Foreign%20Currency%20Risk) The group's foreign currency risk is limited as most transactions are denominated in the functional currency of its operations, with no hedging activities undertaken - The foreign currency risk for individual companies within the group is limited, as most transactions are denominated in the same functional currency related to their operations[41](index=41&type=chunk) - For the six months ended June 30, 2021, the group did not hedge against risks arising from exchange rate fluctuations[41](index=41&type=chunk) [Employees](index=14&type=section&id=Employees) The group's full-time employees increased to 804, with staff costs rising to approximately HK$52.04 million due to increased production - As of June 30, 2021, the group had **804 full-time employees** (June 30, 2020: 758 employees)[43](index=43&type=chunk) - Staff costs incurred for the six months ended June 30, 2021, were approximately **HK$52.04 million** (2020: approximately HK$42.65 million), primarily due to an increase in the number of workers resulting from increased production[43](index=43&type=chunk) [Changes in Remuneration of Three Executive Directors](index=14&type=section&id=Changes%20in%20Remuneration%20of%20Three%20Executive%20Directors) Three executive directors, Mr. Zhuang Weidong, Mr. Qiu Chuanzhi, and Mr. Mai Rongbin, each waived part of their remuneration, receiving HK$50,000 for the period - For the six months ended June 30, 2021, Mr. Zhuang Weidong, Mr. Qiu Chuanzhi, and Mr. Mai Rongbin each waived part of their remuneration as executive directors, receiving **HK$50,000** each[44](index=44&type=chunk) [Interim Dividend](index=14&type=section&id=Interim%20Dividend) The Board recommended no interim dividend payment for the six months ended June 30, 2021, or 2020 - The Board recommended no interim dividend payment for the six months ended June 30, 2021, and 2020[45](index=45&type=chunk) [Events After Reporting Period](index=14&type=section&id=Events%20After%20Reporting%20Period) Details of events after the reporting period are provided in Note 16 to the unaudited interim financial report on page 40 - Details of events after the reporting period are set out in Note 16 to the unaudited interim financial report on page 40 of this interim report[46](index=46&type=chunk) [Disclosure of Interests](index=15&type=section&id=Disclosure%20of%20Interests) This section details the interests and short positions of directors, chief executives, and substantial shareholders in the company's shares and underlying shares [Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, or Debentures of the Company or its Associated Corporations](index=15&type=section&id=Directors%27%20and%20Chief%20Executive%27s%20Interests%20and%20Short%20Positions%20in%20Shares%2C%20Underlying%20Shares%2C%20or%20Debentures%20of%20the%20Company%20or%20its%20Associated%20Corporations) As of June 30, 2021, several directors held long positions in the company's shares through controlled corporations, with Mr. Qiu Chuanzhi holding approximately 28.77% and Mr. Zhuang Weidong holding 28.16% Directors' Long Positions in Shares and Underlying Shares of the Company | Name of Director | Nature of Interest | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Qiu Chuanzhi | Interest in controlled corporation | 133,706,331 | 28.77% | | Zhuang Weidong | Interest in controlled corporation | 130,897,663 | 28.16% | | Lin Ping | Interest in controlled corporation | 82,342,606 | 17.72% | | Mai Rongbin | Interest in controlled corporation | 82,342,606 | 17.72% | - Mr. Qiu Chuanzhi wholly owns China Sun Corporation, Mr. Zhuang Weidong holds **90%** interest in Central Eagle Limited, and Ms. Lin Ping and Mr. Mai Rongbin hold **60%** and **25%** interests in Golden Diamond Inc., respectively[51](index=51&type=chunk) [Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares or Underlying Shares of the Company](index=17&type=section&id=Substantial%20Shareholders%27%20and%20Other%20Persons%27%20Interests%20and%20Short%20Positions%20in%20Shares%20or%20Underlying%20Shares%20of%20the%20Company) As of June 30, 2021, substantial shareholders included China Sun, Central Eagle, Golden Diamond, and China Huarong Overseas Investment Holdings Co., Ltd. and its affiliates, holding a combined 70.16% interest Substantial Shareholders' and Other Persons' Long Positions in Shares and Underlying Shares of the Company | Name of Shareholder | Capacity | Number of Shares | Percentage | | :--- | :--- | :--- | :--- | | China Sun | Beneficial owner | 133,706,331 | 28.77% | | Central Eagle | Beneficial owner | 130,897,663 | 28.16% | | Golden Diamond | Beneficial owner | 82,342,606 | 17.72% | | Noble Wisdom Ever Limited | Interest in security | 326,089,600 | 70.16% | | China Huarong Overseas Investment Holdings Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Huaqiao Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Zhiyuan Investment Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | China Huarong Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | - China Huarong Overseas wholly owns Noble Wisdom, Huarong Huaqiao wholly owns China Huarong Overseas, Huarong Zhiyuan holds **91%** interest in Huarong Huaqiao, and China Huarong Asset Management wholly owns Huarong Zhiyuan[59](index=59&type=chunk) [Directors' Interests in Competing Businesses](index=19&type=section&id=Directors%27%20Interests%20in%20Competing%20Businesses) No director held any interest in businesses directly or indirectly competing with the group's business during the reporting period or up to the date of this interim report - For the six months ended June 30, 2021, and up to the date of this interim report, no director held or had held any interest in any business (other than the group's business) that directly or indirectly competes or is likely to compete with the group's business[62](index=62&type=chunk) [Corporate Governance and Other Information](index=20&type=section&id=Corporate%20Governance%20and%20Other%20Information) The company adheres to stringent corporate governance practices, including compliance with the Corporate Governance Code and a model code for securities transactions by directors and employees [Corporate Governance Practices](index=20&type=section&id=Corporate%20Governance%20Practices) The company is committed to maintaining strict corporate governance guidelines and procedures, fully complying with all provisions of the Corporate Governance Code - The company has complied with all provisions set out in the Corporate Governance Code[65](index=65&type=chunk) [Compliance with Model Code by Directors and Relevant Employees](index=20&type=section&id=Compliance%20with%20Model%20Code%20by%20Directors%20and%20Relevant%20Employees) The company adopted the Model Code for directors' securities transactions, with all directors confirming compliance, and also implemented a code for relevant employees - The company has adopted the Model Code as the code of conduct for directors' securities transactions, with all directors confirming compliance during the period from January 1, 2021, to June 30, 2021[66](index=66&type=chunk) - The company has also adopted a code of conduct for securities transactions by relevant employees, with terms no less exacting than those set out in the Model Code[66](index=66&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=20&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) Neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the six months ended June 30, 2021 - For the six months ended June 30, 2021, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[67](index=67&type=chunk) [Audit Committee](index=20&type=section&id=Audit%20Committee) The unaudited interim financial report for the six months ended June 30, 2021, has been reviewed by the Board's Audit Committee - The group's unaudited interim financial report for the six months ended June 30, 2021, has been reviewed by the Board's Audit Committee[68](index=68&type=chunk) [Condensed Consolidated Statement of Profit or Loss](index=21&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) This statement presents the group's financial performance, showing revenue, costs, and loss for the six months ended June 30, 2021 Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 113,116 | 79,255 | | Cost of Sales (HK$ thousand) | (82,160) | (60,620) | | Gross Profit (HK$ thousand) | 30,956 | 18,635 | | Other Income and (Losses) / Gains, Net (HK$ thousand) | (622) | 6,079 | | Distribution Costs (HK$ thousand) | (7,663) | (5,416) | | Administrative Expenses (HK$ thousand) | (24,182) | (25,924) | | Interest on Lease Liabilities (HK$ thousand) | (1,944) | (1,961) | | Loss Before Tax (HK$ thousand) | (3,455) | (8,587) | | Income Tax Credit (HK$ thousand) | 37 | 24 | | Loss for the period | (3,418) | (8,563) | | Loss attributable to equity holders of the Company | (4,148) | (8,928) | | Loss attributable to non-controlling interests | 730 | 365 | | Basic and diluted loss per share (HK cents) | (0.9) | (1.9) | [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=22&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This statement details the group's total comprehensive income, including profit or loss and other comprehensive income components for the period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Loss for the period | (3,418) | (8,563) | | Other comprehensive income for the period: | | | | －Exchange differences arising on translation of financial statements of Mainland China subsidiaries (HK$ thousand) | 3,183 | (4,664) | | Total Comprehensive Income for the Period (HK$ thousand) | (235) | (13,227) | | Attributable to Equity Holders of the Company (HK$ thousand) | (1,482) | (12,807) | | Attributable to Non-controlling Interests (HK$ thousand) | 1,247 | (420) | [Condensed Consolidated Statement of Financial Position](index=23&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) This statement provides a snapshot of the group's assets, liabilities, and equity as of June 30, 2021 Condensed Consolidated Statement of Financial Position (As of June 30, 2021) | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment (HK$ thousand) | 83,056 | 86,616 | | Right-of-Use Assets (HK$ thousand) | 46,542 | 56,408 | | Intangible Assets (HK$ thousand) | 358 | 140 | | Deferred Tax Assets (HK$ thousand) | 5,970 | 5,834 | | **Current Assets** | | | | Inventories (HK$ thousand) | 32,048 | 26,881 | | Trade and Other Receivables (HK$ thousand) | 77,268 | 49,082 | | Cash and Cash Equivalents (HK$ thousand) | 38,673 | 60,930 | | **Current Liabilities** | | | | Trade and Other Payables (HK$ thousand) | 59,804 | 52,245 | | Lease Liabilities (Current Portion) (HK$ thousand) | 16,869 | 18,880 | | **Non-current Liabilities** | | | | Lease Liabilities (Non-current Portion) (HK$ thousand) | 38,210 | 45,290 | | Deferred Tax Liabilities (HK$ thousand) | 1,124 | 1,124 | | Total Equity (HK$ thousand) | 172,806 | 173,041 | | Total equity attributable to equity holders of the Company | 150,391 | 151,873 | | Non-controlling Interests (HK$ thousand) | 22,415 | 21,168 | [Condensed Consolidated Statement of Changes in Equity](index=25&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This statement outlines the changes in the group's equity attributable to owners and non-controlling interests for the reporting period Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | June 30, 2021 (HK$ thousand) | January 1, 2021 (HK$ thousand) | June 30, 2020 (HK$ thousand) | January 1, 2020 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Share capital | 4,648 | 4,648 | 4,648 | 4,648 | | Share premium | 145,830 | 145,830 | 145,830 | 180,690 | | Capital reserve | 18,324 | 18,324 | 18,324 | 18,324 | | Statutory reserve | 26,492 | 25,856 | 26,027 | 25,856 | | Exchange reserve | 18,395 | 15,729 | (5,133) | (1,254) | | Accumulated losses | (63,298) | (58,514) | (20,706) | (11,607) | | Total attributable to equity holders of the Company | 150,391 | 151,873 | 168,990 | 216,657 | | Non-controlling interests | 22,415 | 21,168 | 22,219 | 22,639 | | Total equity | 172,806 | 173,041 | 191,209 | 239,296 | - For the six months ended June 30, 2021, loss attributable to equity holders of the Company was **HK$4.148 million**, and loss attributable to non-controlling interests was **HK$0.73 million**[80](index=80&type=chunk) - For the six months ended June 30, 2020, a special dividend of **HK$34.86 million** was distributed[78](index=78&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=27&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,346) | (8,598) | | Net cash (used in) / from investing activities | (12,702) | 19,771 | | Net cash used in financing activities | (11,683) | (45,783) | | Net decrease in cash and cash equivalents | (25,731) | (34,610) | | Cash and cash equivalents at January 1 | 60,930 | 91,174 | | Effect of exchange rate changes | 3,474 | (2,300) | | Cash and cash equivalents at June 30 | 38,673 | 54,264 | [Notes to the Unaudited Interim Financial Report](index=28&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Report) This section provides detailed explanatory notes supporting the condensed consolidated interim financial statements, covering accounting policies, segment information, and significant transactions [1 General Information](index=28&type=section&id=1%20General%20Information) China Everbright Group Limited is an exempted company incorporated in the Cayman Islands, with its shares listed on The Stock Exchange of Hong Kong Limited - China Everbright Group Limited is an exempted company incorporated in the Cayman Islands under the Companies Act, with its shares listed on The Stock Exchange of Hong Kong Limited[86](index=86&type=chunk) [2 Basis of Preparation](index=28&type=section&id=2%20Basis%20of%20Preparation) The unaudited condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and Listing Rules, involving judgments, estimates, and assumptions - The unaudited condensed consolidated interim financial statements are prepared in accordance with the applicable disclosure provisions of the Listing Rules of the Stock Exchange, including compliance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants[87](index=87&type=chunk) - The preparation of the condensed consolidated interim financial statements requires the use of certain judgments, estimates, and assumptions, and actual results may differ from these estimates[87](index=87&type=chunk) [3 Principal Accounting Policies](index=29&type=section&id=3%20Principal%20Accounting%20Policies) The interim financial statements follow the same accounting policies as the 2020 annual financial statements, with new HKFRS standards having no significant impact - The condensed consolidated interim financial statements are prepared in accordance with the same accounting policies adopted in the 2020 annual financial statements, except for changes in accounting policies required to be adopted in the 2021 annual financial statements[89](index=89&type=chunk) - New or revised Hong Kong Financial Reporting Standards (including amendments to HKFRS 16 and interest rate benchmark reform) effective from January 1, 2021, had no significant impact on the group's condensed consolidated interim financial statements[90](index=90&type=chunk) [4 Segment Reporting](index=29&type=section&id=4%20Segment%20Reporting) The group operates in two reportable segments: Zipper (Mainland China) and Zipper (Overseas), with inter-segment transactions priced at market rates - The group has two reportable segments: Zipper (Mainland China) and Zipper (Overseas)[91](index=91&type=chunk) - The Zipper (Mainland China) segment manufactures zipper products primarily for customers in the Mainland China market; the Zipper (Overseas) segment purchases zipper products from the Mainland China segment and sells them to overseas market customers[92](index=92&type=chunk)[93](index=93&type=chunk) Segment Results (For the six months ended June 30, 2021) | Indicator | Zipper - Mainland China (HK$ thousand) | Zipper - Overseas (HK$ thousand) | Total (HK$ thousand) | | :--- | :--- | :--- | :--- | | Revenue from external customers | 102,673 | 10,443 | 113,116 | | Inter-segment revenue | 7,280 | – | 7,280 | | Reportable segment revenue | 109,953 | 10,443 | 120,396 | | Reportable segment profit / (loss) | 9,324 | (1,362) | 7,962 | | Depreciation and amortization for the period | 15,028 | 541 | 15,569 | [5 Revenue](index=33&type=section&id=5%20Revenue) The group's primary business is manufacturing and selling zippers and related products, with total revenue of HK$113 million for the period, and no single customer exceeding 10% of total revenue - The group's principal business is the manufacturing and sale of zippers, pullers, and other related products[106](index=106&type=chunk) Amounts of Each Major Revenue Category (For the six months ended June 30) | Revenue Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Sale of goods | | | | Zipper chains and pullers | 111,410 | 78,128 | | Others | 1,706 | 1,127 | | Total | 113,116 | 79,255 | - No single customer's transactions exceeded **10%** of the group's revenue[108](index=108&type=chunk) [6 Loss Before Tax](index=33&type=section&id=6%20Loss%20Before%20Tax) Loss before tax for the period reflects increased staff costs and depreciation, offset by a reversal of inventory impairment loss, with other income and losses turning negative Staff Costs (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Salaries, Wages and Other Benefits (HK$ thousand) | 47,536 | 40,641 | | Contributions to Defined Contribution Retirement Plans (HK$ thousand) | 4,500 | 2,005 | | Total | 52,036 | 42,646 | Other Income and (Losses) / Gains, Net (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Other income and (losses) / gains, net | (622) | 6,079 | Other Items (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Depreciation and Amortization: | | | | －Plant and equipment | 7,899 | 6,323 | | －Intangible Assets (HK$ thousand) | 101 | 601 | | －Right-of-Use Assets (HK$ thousand) | 10,422 | 9,454 | | Total | 18,422 | 16,378 | | Impairment Loss on Inventories (Reversal) / Provision (HK$ thousand) | (9) | 461 | | Cost of inventories | 82,160 | 60,620 | [7 Income Tax (Credit) / Expense](index=35&type=section&id=7%20Income%20Tax%20%28Credit%29%20%2F%20Expense) The group recorded an income tax credit of HK$37 thousand, with varying tax rates for its subsidiaries in Hong Kong and Mainland China, including preferential rates for high-tech enterprises Income Tax (Credit) / Expense (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Current Tax - PRC Enterprise Income Tax (HK$ thousand) | 32 | (30) | | Deferred Tax (HK$ thousand) | (69) | 6 | | Total | (37) | (24) | - Kaiyi (Guangdong) Garment Accessories Co., Ltd. is recognized as a high-tech enterprise, enjoying a preferential income tax rate of **15%** until 2021, while other Mainland China subsidiaries have a statutory income tax rate of **25%**[115](index=115&type=chunk) - Dividends paid by Chinese resident enterprises to non-Chinese resident enterprise investors are subject to a **10% withholding income tax**, with eligible Hong Kong tax residents subject to a reduced rate of **5%**[115](index=115&type=chunk) [8 Loss Per Share](index=36&type=section&id=8%20Loss%20Per%20Share) Basic loss per share was HK$0.9 cents, with diluted loss per share being the same due to the absence of potential dilutive shares - Basic loss per share is calculated based on the loss attributable to equity holders of the Company of **HK$4.148 million** for the six months ended June 30, 2021, and the weighted average number of ordinary shares outstanding of **464.804 million**, resulting in **HK$0.9 cents**[117](index=117&type=chunk) - As there were no potential dilutive shares outstanding for the six months ended June 30, 2020, and 2021, diluted loss per share is equal to basic loss per share[118](index=118&type=chunk) [9 Property, Plant and Equipment](index=36&type=section&id=9%20Property%2C%20Plant%20and%20Equipment) During the six months ended June 30, 2021, the group acquired property, plant, and equipment items, including payments for construction in progress, totaling HK$4.814 million - For the six months ended June 30, 2021, the group acquired property, plant, and equipment items (including payments for construction in progress) at a cost of **HK$4.814 million** (six months ended June 30, 2020: HK$5.027 million)[119](index=119&type=chunk) [10 Trade and Other Receivables](index=37&type=section&id=10%20Trade%20and%20Other%20Receivables) Total trade and other receivables amounted to HK$77.268 million, with most trade receivables and bills due within one month, and all expected to be recovered within one year Aging Analysis of Trade Receivables and Bills Receivable (As of reporting period end) | Aging | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Within one month | 62,391 | 18,049 | | Over one month but within two months | 5,424 | 13,065 | | Over two months but within three months | 2,556 | 6,144 | | Over three months | 2,418 | 6,278 | | Trade receivables and bills receivable, net of loss allowance (HK$ thousand) | 72,789 | 43,536 | | Lease deposits (HK$ thousand) | 2,783 | 2,665 | | Other prepayments (HK$ thousand) | 1,183 | 1,155 | | Other receivables (HK$ thousand) | 513 | 1,726 | | Total | 77,268 | 49,082 | - All trade and other receivables are expected to be recovered or recognized as expenses within one year[121](index=121&type=chunk) [11 Cash and Cash Equivalents](index=38&type=section&id=11%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased to HK$38.673 million as of June 30, 2021, from HK$60.93 million at December 31, 2020 Cash and Cash Equivalents (As of June 30, 2021) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Bank and cash in hand (HK$ thousand) | 38,673 | 60,930 | | Cash and cash equivalents in condensed consolidated cash flow statement (HK$ thousand) | 38,673 | 60,930 | [12 Trade and Other Payables](index=38&type=section&id=12%20Trade%20and%20Other%20Payables) Total trade and other payables were HK$59.804 million, with trade payables primarily due within one month, and significant amounts for wages and property, plant, and equipment purchases Aging Analysis of Trade and Other Payables (As of reporting period end) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Within one month | 17,204 | 8,072 | | Over one month but within three months | 984 | 1,362 | | Over three months but within six months | 5 | 1 | | Over six months | 192 | 162 | | Trade payables (HK$ thousand) | 18,385 | 9,597 | | Accrued wages and staff welfare (HK$ thousand) | 20,498 | 17,004 | | Accrued expenses (HK$ thousand) | 6,824 | 5,582 | | Payables for purchase of property, plant and equipment (HK$ thousand) | 9,408 | 18,723 | | Contract liabilities (HK$ thousand) | 1,134 | 841 | | Other receivables (HK$ thousand) | 3,555 | 498 | | Total | 59,804 | 52,245 | [13 Capital, Reserves and Dividends](index=39&type=section&id=13%20Capital%2C%20Reserves%20and%20Dividends) No interim dividends were declared for the periods ended June 30, 2021, or 2020, though a special dividend was paid in 2020, and the company's share capital remained unchanged Dividends (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Special dividend: declared per ordinary share: Nil (2020: HK$0.075) | - | 34,860 | - No interim dividends were declared for the periods ended June 30, 2021, and 2020[128](index=128&type=chunk) Share Capital (As of June 30, 2021) | Category | June 30, 2021 Number of Shares (thousand shares) | June 30, 2021 Share Capital (HK$ thousand) | December 31, 2020 Number of Shares (thousand shares) | December 31, 2020 Share Capital (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Authorised: Ordinary shares of HK$0.01 each | 2,000,000 | 20,000 | 2,000,000 | 20,000 | | Ordinary shares, issued and fully paid | 464,804 | 4,648 | 464,804 | 4,648 | [14 Commitments](index=40&type=section&id=14%20Commitments) Capital commitments contracted but not provided for in the financial statements increased to HK$0.522 million as of June 30, 2021 Unfulfilled Capital Commitments (As of June 30, 2021) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Contracted | 522 | 288 | [15 Significant Related Party Transactions](index=40&type=section&id=15%20Significant%20Related%20Party%20Transactions) The group engaged in several lease agreements with related parties, including senior management and their controlled entities, with total rent paid amounting to approximately HK$6.236 million - For the six months ended June 30, 2021, the group paid **HK$2.831 million** in rent to senior management Mr. Xu Xipeng and Mr. Xu Xinan for certain lease and building renewal lease agreements[132](index=132&type=chunk) - For the six months ended June 30, 2021, the group paid rent of **HK$0.36 million** and **HK$2.999 million** respectively to Shengdian Co., Ltd. and Foshan Nanhai Jinheming Investment Co., Ltd., owned by Mr. Xu Xipeng and Mr. Xu Xinan, for leased-back assets[133](index=133&type=chunk) - For the six months ended June 30, 2021, the group paid **HK$2.875 million** in rent under a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd[135](index=135&type=chunk) Key Management Personnel Remuneration (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Short-term employee benefits | 2,518 | 5,334 | | Retirement scheme contributions | 177 | 95 | | Total | 2,695 | 5,429 | [16 Events After Reporting Period](index=41&type=section&id=16%20Events%20After%20Reporting%20Period) The group renewed a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. through its Jingmen branch, a company owned by Mr. Xu Xipeng and Mr. Xu Xinan - The group renewed a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. through its Jingmen branch, as lessee, with the company owned **50%** by lessor Mr. Xu Xipeng and **50%** by Mr. Xu Xinan[137](index=137&type=chunk) [Glossary](index=42&type=section&id=Glossary) This section defines key terms and abbreviations used throughout the report to ensure clarity and consistent understanding - This section provides definitions for key terms used in the report, including Board, Corporate Governance Code, Company, Directors, Group, HK$, Hong Kong, Listing Rules, Main Board, Model Code, OEM, PRC or Mainland China, RMB, SFO, Shares, Shareholders, Stock Exchange, etc[139](index=139&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) ```

Company Profile [Corporate Information](index=2&type=section&id=Corporate%20Information) This section provides core corporate data, including board composition, key advisors, and registered office details - The Board of Directors comprises four executive directors, one non-executive director, and three independent non-executive directors[6](index=6&type=chunk) - The company's auditor is BDO Limited[7](index=7&type=chunk) Financial Highlights [Five-Year Financial Summary](index=3&type=section&id=Five-Year%20Financial%20Summary) This section presents key financial performance and position indicators over the past five years, highlighting operational challenges in 2020 Five-Year Financial Summary (2016-2020) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 (Restated) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Results from Continuing Operations** | | | | | | | Revenue (HK$ million) | 170.09 | 205.80 | 197.53 | 184.73 | 145.57 | | Gross Profit (HK$ million) | 34.24 | 52.93 | 63.92 | 57.70 | 42.07 | | Gross Profit Margin (%) | 20.1 | 25.7 | 32.4 | 31.2 | 28.9 | | Net Loss Margin (%) | -27.6 | -21.5 | -16.8 | -24.4 | 15.1 (Profit Margin) | | **Financial Position (HK$ '000)** | | | | | | | Total Assets | 290,702 | 338,348 | 330,454 | 380,180 | 405,760 | | Total Equity Attributable to Equity Holders | 151,873 | 216,657 | 264,730 | 314,083 | 298,523 | | **Financial Ratios** | | | | | | | Current Ratio (times) | 1.9 | 3.2 | 6.0 | 5.0 | 4.0 | | Gearing Ratio (%) | 40.5 | 29.3 | 12.9 | 11.4 | 21.6 | | Inventory Turnover (days) | 82 | 70 | 66 | 62 | 58 | | Trade Receivables Turnover (days) | 91 | 72 | 74 | 77 | 78 | Consolidated Statement of Profit or Loss Summary (2020 vs 2019) (HK$ '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 170,089 | 205,796 | | Gross Profit | 34,235 | 52,932 | | Operating Loss | (50,232) | (39,255) | | Loss Before Tax | (53,894) | (43,000) | | Loss for the Year | (51,209) | (44,164) | | Loss Attributable to Equity Holders of the Company | (46,907) | (44,180) | Consolidated Statement of Financial Position Summary (2020 vs 2019) (HK$ '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Non-current Assets | 152,018 | 142,345 | | Current Assets | 138,684 | 196,003 | | **Total Assets** | **290,702** | **338,348** | | Current Liabilities | 71,247 | 60,671 | | Non-current Liabilities | 46,414 | 38,381 | | **Net Assets** | **173,041** | **239,296** | | **Total Equity Attributable to Equity Holders of the Company** | **151,873** | **216,657** | Chairman's Statement [Chairman's Statement](index=8&type=section&id=Chairman's%20Statement) The Chairman addresses the significant impact of the COVID-19 pandemic on revenue and outlines the Group's future strategy for growth - Due to the COVID-19 pandemic, global travel restrictions severely impacted customer demand, leading to a **significant decline in the Group's revenue**[25](index=25&type=chunk) - The Group has implemented **strict cost control measures** and maintained stable performance in its overall zipper business[25](index=25&type=chunk) - Looking ahead, the Group will continue to seek attractive investment and acquisition opportunities in other industries to **enhance profitability and maximize shareholder value**[25](index=25&type=chunk) Management Discussion and Analysis [Business Overview](index=10&type=section&id=Overview) The Group's continuing operation in 2020 was the zipper business, primarily serving OEMs for Chinese and international apparel brands - The Group's core business is zipper manufacturing, with customers being primarily OEM manufacturers for Chinese and international apparel brands[29](index=29&type=chunk) [Financial Summary](index=10&type=section&id=Financial%20Summary) In FY2020, the Group's revenue decreased to HK$170 million and its pre-tax loss widened to HK$53.89 million due to multiple factors Key Financial Indicator Changes for FY2020 | Indicator | 2020 (HK$ million) | 2019 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Revenue | 170.09 | 205.80 | ↓17.4% | | Loss Before Tax | 53.89 | 43.00 | ↑25.3% | - The increase in pre-tax loss was mainly due to: - Gross profit decreased from HK$52.93 million to **HK$34.24 million** - Recognition of impairment losses on property, plant and equipment of **HK$8.22 million** and on right-of-use assets of **HK$4.89 million** - A net foreign exchange loss of **HK$10.13 million** (2019: gain of HK$2.83 million) - The loss was partially offset by a fair value gain on financial assets at FVTPL of **HK$1.53 million** (2019: loss of HK$23.60 million)[30](index=30&type=chunk) [Revenue Analysis](index=10&type=section&id=Revenue) Total revenue in 2020 decreased by 17.4% to HK$170 million, driven by a decline in core product sales due to the COVID-19 pandemic Revenue by Product Category (HK$ million) | Product Category | 2020 | % of Total Revenue | 2019 | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Finished Zippers and Sliders | 167.42 | 98.4% | 202.22 | 98.3% | | Others | 2.67 | 1.6% | 3.58 | 1.7% | | **Total Revenue** | **170.09** | **100.0%** | **205.80** | **100.0%** | Revenue by Geographical Location (HK$ million) | Region | 2020 | % of Total Revenue | 2019 | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 150.18 | 88.3% | 183.00 | 88.9% | | Overseas | 19.91 | 11.7% | 22.80 | 11.1% | | **Total Revenue** | **170.09** | **100.0%** | **205.80** | **100.0%** | - The decrease in revenue from finished zippers and sliders was mainly due to the global COVID-19 pandemic, which led to a reduction in sales orders from customers (primarily apparel product OEMs)[35](index=35&type=chunk) [Cost of Sales and Gross Profit](index=11&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) In 2020, cost of sales decreased, but a larger revenue decline led to a 35.3% drop in gross profit and a lower gross margin Gross Profit and Gross Margin Changes | Indicator | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Cost of Sales (HK$ million) | 135.85 | 152.86 | ↓11.1% | | Gross Profit (HK$ million) | 34.24 | 52.93 | ↓35.3% | | Gross Margin (%) | 20.1% | 25.7% | ↓5.6pp | [Operating Expenses](index=12&type=section&id=Operating%20Expenses) Distribution costs decreased in line with revenue in 2020, while administrative expenses remained stable but increased as a percentage of revenue - Distribution costs were approximately **HK$11.76 million**, a year-on-year decrease mainly due to lower staff and transportation costs in line with reduced revenue[42](index=42&type=chunk) - Administrative expenses were approximately **HK$54.25 million**, remaining stable year-on-year, but its ratio to turnover increased to **31.9%**[43](index=43&type=chunk) [Profitability](index=12&type=section&id=Profitability) In 2020, the loss attributable to equity holders widened to HK$46.91 million, with the loss ratio and ROE indicating deteriorating profitability Profitability Indicators | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Loss Attributable to Equity Holders (HK$ million) | 46.91 | 44.18 | | Loss Attributable to Equity Holders as a % of Revenue | 27.6% | 21.5% | | Return on Equity (%) | -30.9% | -20.4% | [Financial Position Analysis](index=13&type=section&id=Financial%20Position%20Analysis) The company redeemed all financial assets at FVTPL in 2020, while inventory and receivables turnover days increased, indicating lower operational efficiency - In March 2020, the company redeemed all its remaining shares in the Fullgoal Strategic Growth Fund for net proceeds of approximately **HK$24.89 million** and no longer holds any interest in the fund[49](index=49&type=chunk)[50](index=50&type=chunk) - Inventory turnover days increased from **70 days** in 2019 to **82 days** in 2020[53](index=53&type=chunk) - Trade receivables turnover days increased from **72 days** in 2019 to **91 days** in 2020[56](index=56&type=chunk) - Trade payables turnover days increased from **21 days** in 2019 to **26 days** in 2020[59](index=59&type=chunk) [Liquidity and Capital Resources](index=14&type=section&id=Liquidity%20and%20Capital%20Resources) The Group's operating cash flow turned positive in 2020, but a significant outflow from financing activities led to a decrease in year-end cash Cash Flow Summary (HK$ million) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Net cash from/(used in) operating activities | 18.67 | (1.37) | | Net cash from investing activities | 3.02 | 34.61 | | Net cash used in financing activities | (56.59) | (22.09) | | **Net (decrease)/increase in cash and cash equivalents** | **(34.90)** | **11.15** | | **Cash and cash equivalents at year-end** | **60.93** | **91.17** | - The Group had **no borrowings** at the end of 2019 and 2020, other than lease liabilities[66](index=66&type=chunk) - The Group's strategy is to maintain an adjusted net debt-to-capital ratio below 20%; the ratio was **1.9%** at the end of 2020[66](index=66&type=chunk) - Net current assets decreased significantly from HK$135 million to **HK$67.44 million**, mainly due to the redemption of financial assets and payment of a special dividend[67](index=67&type=chunk) [Other Matters](index=15&type=section&id=Other%20Matters) This section covers foreign exchange risk, employee information, a change in the company's name, and adjustments to director remuneration - As of the end of 2020, the Group had **694 full-time employees**, a decrease from 816 in 2019, with staff costs decreasing from HK$90.61 million to HK$78.70 million[73](index=73&type=chunk) - The company's English name was changed from "KEE Holdings Company Limited" to "**China Apex Group Limited**", and its Chinese name was also changed[76](index=76&type=chunk) - Executive Directors Mr. Zhuang Weidong, Mr. Qiu Chuanzhi, and Mr. Mai Rongbin voluntarily waived part of their remuneration to support the company's development[78](index=78&type=chunk) [Connected Transactions](index=17&type=section&id=Connected%20Transactions%20and%20Continuing%20Connected%20Transactions) This section discloses multiple transactions with connected persons, primarily involving lease renewals and equipment purchases from entities controlled by former controlling shareholders - The Group renewed the lease for its Hong Kong property with connected party Shing Tin Limited for two years at a monthly rent of **HK$60,000**[79](index=79&type=chunk) - The Group renewed the lease for its Zhejiang production base with a connected party for two years at a monthly rent of **RMB 417,300**[82](index=82&type=chunk) - The Group renewed the lease for its Guangdong factory premises with connected persons Mr. Hui Sik Pang and Mr. Hui Sik Nam for two years at a monthly rent of **RMB 394,000**[83](index=83&type=chunk) - The Group purchased dyeing equipment from a connected party, KEE (Jingmen) Garment Accessories Company Limited, for a consideration of **RMB 6.718 million**[88](index=88&type=chunk) [Business Outlook](index=21&type=section&id=Outlook) The Group anticipates a gradual market recovery and will implement six key measures to address challenges and capture potential growth opportunities - Despite weak domestic and external demand, the Group believes the apparel and textile industry is gradually recovering as the pandemic comes under control[98](index=98&type=chunk) - The Group will implement six key measures to address challenges and seize market opportunities: 1. Expand into the e-commerce market and enhance product quality 2. Integrate and upgrade production capacity to improve the industrial chain 3. Optimize processes and strengthen cost management 4. Enhance capital management to control operational risks 5. Accelerate digital transformation 6. Strengthen talent management to improve organizational capabilities[100](index=100&type=chunk) Corporate Governance Report [Corporate Governance Practices](index=23&type=section&id=Corporate%20Governance%20Practices) This report details the company's corporate governance practices for 2020, confirming compliance with most code provisions while noting some deviations - For the year ended December 31, 2020, the company complied with all code provisions of the Corporate Governance Code, except for the deviation where the roles of Chairman and Chief Executive Officer were not separated[105](index=105&type=chunk)[112](index=112&type=chunk) - The Board consists of eight members, including four executive directors, one non-executive director, and three independent non-executive directors, meeting Listing Rules requirements[107](index=107&type=chunk)[113](index=113&type=chunk) - The company has established an Audit Committee, a Remuneration Committee, and a Nomination Committee, with their compositions, duties, and meeting records detailed[122](index=122&type=chunk)[125](index=125&type=chunk)[130](index=130&type=chunk)[133](index=133&type=chunk) - The Group appointed an external independent consultant for an annual review of its internal control system, which the Board deemed effective as of year-end 2020[146](index=146&type=chunk)[149](index=149&type=chunk) Environmental, Social and Governance (ESG) Report [Environmental Aspect](index=34&type=section&id=Environmental%20Aspect%20Report) The Group manages its environmental impact through an ISO 14001-based system, focusing on emissions control and resource efficiency Key Emissions Data for 2020 | Emission Type | Unit | Total Emissions | Intensity (per HK$ million of revenue) | | :--- | :--- | :--- | :--- | | Greenhouse Gases (Scope 1, 2, 3) | Tonnes of CO2e | 14,172 | 83.3 | | Wastewater | Tonnes | 46,110 | 271.1 | | Hazardous Waste | Tonnes | 4.5 | 0.03 | | Non-hazardous Waste | Tonnes | 52 | 0.31 | Key Resource Consumption Data for 2020 | Resource | Unit | Total Consumption | Intensity (per HK$ million of revenue) | | :--- | :--- | :--- | :--- | | Electricity (Factory) | kWh | 11,438,255 | 67,249 | | Water | Tonnes | 305,064 | 1,794 | | Diesel | Litres | 423,115 | 2,488 | | Natural Gas | m³ | 210,787 | 1,239 | [Social Aspect (Employment and Labor Practices)](index=38&type=section&id=Employment%20and%20Labor%20Practices) The Group prioritizes employee welfare, fair employment, and workplace safety, with detailed data on workforce composition and training provided - As of year-end 2020, the Group had **694 full-time employees**, down from 816 in 2019, with an overall employee turnover rate of approximately **47%** for the year[184](index=184&type=chunk) Occupational Health and Safety Statistics | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Lost days due to work injury | 466 | 282 | | Number of work-related fatalities | 0 | 0 | | Number of work-related injuries | 11 | 17 | - The Group provided various internal and external training for employees, with male employees receiving an average of **2.45 training hours** and female employees receiving **2.76 hours** in 2020[192](index=192&type=chunk)[193](index=193&type=chunk) - The Group strictly adheres to labor standards and had **no incidents of child or forced labor** during the reporting period[196](index=196&type=chunk) [Social Aspect (Operating Practices and Community Investment)](index=42&type=section&id=Operating%20Practices) The Group maintains robust supply chain management, product responsibility, and anti-corruption practices while actively investing in its community - The Group has **349 suppliers**, all located in Mainland China, to reduce the carbon footprint from transportation[198](index=198&type=chunk) - The Group's production bases are certified under ISO 9001 and OEKO-TEX® STANDARD 100; in 2020, it received **49 customer complaints** and had no product recalls due to health and safety issues[200](index=200&type=chunk) - The Group has an anti-fraud and whistle-blowing system and **received no reports of corruption** during the reporting period[204](index=204&type=chunk)[207](index=207&type=chunk) - The Group's "KEE Charity Foundation" assists employees in need and donated **RMB 225,900** to the Red Cross to combat the COVID-19 pandemic[208](index=208&type=chunk) Biographical Details of Directors and Senior Management [Biographical Details of Directors and Senior Management](index=44&type=section&id=Biographical%20Details%20of%20Directors%20and%20Senior%20Management) This section provides detailed professional backgrounds of the company's directors and senior management team - Provides the biographies of Executive Directors Mr. Zhuang Weidong (Chairman), Mr. Qiu Chuanzhi (President), Mr. Wu Hangzheng (Vice Chairman), and Mr. Mai Rongbin (Vice President)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Provides the biographies of Non-executive Director Ms. Lin Ping and three Independent Non-executive Directors, Mr. Cheng Hong Kei, Mr. Liu Huaijing, and Mr. Leung Kar Tin[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Provides the biographies of senior management members, including Chief Financial Officer Mr. Yau Chi Chiu[220](index=220&type=chunk)[221](index=221&type=chunk) Report of the Directors [Report of the Directors](index=47&type=section&id=Report%20of%20the%20Directors) This report presents statutory disclosures for the year ended December 31, 2020, covering business review, financial results, and shareholder information - The company's principal activity is the design, manufacture, and sale of finished zippers and other garment accessories in China[224](index=224&type=chunk) - The company paid a special dividend of **HK$0.075 per share** on March 3, 2020, and the Board does not recommend a final dividend for 2020[229](index=229&type=chunk) Percentage of Major Customers and Suppliers in Total Turnover | Category | 2020 (%) | 2019 (%) | | :--- | :--- | :--- | | Largest Customer | 4.4 | 4.6 | | Five Largest Customers | 14.3 | 16.1 | | Largest Supplier | 10.0 | 12.8 | | Five Largest Suppliers | 29.1 | 33.5 | - The Board has reviewed the continuing connected transactions for the year and confirmed they were conducted in the ordinary course of business on normal commercial terms, fair and reasonable, and in the interests of shareholders as a whole[264](index=264&type=chunk) Independent Auditor's Report [Audit Opinion and Key Audit Matters](index=56&type=section&id=Independent%20Auditor's%20Report) The independent auditor issued an unqualified opinion on the financial statements, highlighting inventory valuation and asset impairment as key audit matters - The auditor concluded that the consolidated financial statements give a **true and fair view** of the Group's financial position and performance in accordance with HKFRSs, issuing an **unqualified opinion**[276](index=276&type=chunk) - **Key Audit Matter 1: Valuation of inventories**, which was significant due to the material carrying amount and the judgment involved in determining provisions[281](index=281&type=chunk) - **Key Audit Matter 2: Impairment assessment of non-financial assets**, which was critical due to impairment indicators such as declining gross profit margins and continuous losses in the zipper business[283](index=283&type=chunk)[284](index=284&type=chunk) Consolidated Financial Statements [Consolidated Statement of Profit or Loss](index=62&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) The Group's revenue for FY2020 was HK$170 million, with the loss for the year widening to HK$51.21 million Key Data from Consolidated Statement of Profit or Loss (HK$ '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 170,089 | 205,796 | | Gross Profit | 34,235 | 52,932 | | Loss before tax | (53,894) | (43,000) | | **Loss for the year** | **(51,209)** | **(44,164)** | | Loss attributable to equity holders of the Company | (46,907) | (44,180) | | Basic and diluted loss per share (HK cents) | (10.1) | (9.5) | [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=63&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The total comprehensive loss for the year narrowed to HK$31.40 million, primarily due to a positive foreign currency translation difference Key Data from Consolidated Statement of Comprehensive Income (HK$ '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Loss for the year | (51,209) | (44,164) | | Exchange difference on translation of financial statements of subsidiaries in Mainland China | 19,814 | (4,474) | | **Total comprehensive income for the year** | **(31,395)** | **(48,638)** | | Total comprehensive income attributable to equity holders of the Company | (29,924) | (48,073) | [Consolidated Statement of Financial Position](index=64&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2020, the Group's total assets decreased to HK$291 million, with net assets declining to HK$173 million Key Data from Consolidated Statement of Financial Position (HK$ '000) | Item | 31 December 2020 | 31 December 2019 | | :--- | :--- | :--- | | **Total Assets** | **290,702** | **338,348** | | Total Liabilities | 117,661 | 99,052 | | **Net Assets** | **173,041** | **239,296** | | Total equity attributable to equity holders of the Company | 151,873 | 216,657 | | Non-controlling interests | 21,168 | 22,639 | | **Total Equity** | **173,041** | **239,296** | [Consolidated Statement of Changes in Equity](index=66&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity attributable to shareholders decreased from HK$217 million to HK$152 million in FY2020, driven by the annual loss and dividend payments - Total equity attributable to the Company's equity holders decreased from **HK$217 million** at the beginning of the year to **HK$152 million** at year-end[310](index=310&type=chunk) - The main items causing the decrease in equity were the **loss for the year of HK$46.91 million** and the **payment of a special dividend of HK$34.86 million**[310](index=310&type=chunk) - An increase in the exchange reserve of **HK$16.98 million** partially offset the reduction in equity[310](index=310&type=chunk) [Consolidated Statement of Cash Flows](index=67&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Group's operating activities generated a net cash inflow, but financing outflows led to a net decrease in cash and cash equivalents for FY2020 Key Data from Consolidated Statement of Cash Flows (HK$ '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Net cash from/(used in) operating activities | 18,668 | (1,372) | | Net cash from investing activities | 3,015 | 34,607 | | Net cash used in financing activities | (56,587) | (22,086) | | **Net (decrease)/increase in cash and cash equivalents** | **(34,904)** | **11,149** | | **Cash and cash equivalents at 31 December** | **60,930** | **91,174** | Notes to the Consolidated Financial Statements [Summary of Notes to the Financial Statements](index=68&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed notes on the basis of preparation, accounting policies, key estimates, and segmental analysis for the financial statements - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and presented in Hong Kong dollars[318](index=318&type=chunk)[345](index=345&type=chunk) - Note 6 provides a detailed disclosure of the Group's two reportable segments: Zippers (Mainland China) and Zippers (Overseas), including revenue, profit/loss, and asset information for each[442](index=442&type=chunk)[443](index=443&type=chunk)[444](index=444&type=chunk) - Notes 14 and 23(b) disclose that due to declining gross profit margins and continuous losses in the zipper business, the Group recognized impairment losses of **HK$8.215 million** on property, plant and equipment and **HK$4.885 million** on right-of-use assets[492](index=492&type=chunk)[498](index=498&type=chunk)[550](index=550&type=chunk) - Note 31 details significant transactions with related parties, primarily property leases and equipment purchases from companies controlled by former controlling shareholders[595](index=595&type=chunk)[597](index=597&type=chunk) Glossary [Definitions](index=132&type=section&id=Glossary) This section provides clear definitions for specific terms and abbreviations used throughout the annual report to aid reader comprehension - This section provides definitions for the technical terms and abbreviations used in the report[633](index=633&type=chunk)

[Company Information](index=3&type=section&id=Company%20Information) This section provides essential corporate details, including board composition, committee structures, and key registration and operational information [Board of Directors and Committees](index=3&type=section&id=Board%20of%20Directors%20and%20Committees) The Company's Board of Directors comprises executive, non-executive, and independent non-executive directors, supported by Audit, Nomination, and Remuneration Committees to ensure effective corporate governance - Executive Directors include Mr. Zhuang Weidong (Chairman), Mr. Qiu Chuanzhi (President), Mr. Wu Hangzheng (Vice Chairman), and Mr. Mai Rongbin (Vice President)[3](index=3&type=chunk) - Independent Non-executive Directors include Mr. Leung Ka Tin, Mr. Cheng Hong Ki, and Mr. Lau Wai King[3](index=3&type=chunk) - Mr. Cheng Hong Ki chairs the Audit and Remuneration Committees, while Mr. Zhuang Weidong chairs the Nomination Committee[3](index=3&type=chunk) [Registration and Operational Information](index=3&type=section&id=Registration%20and%20Operational%20Information) The Company is registered in the Cayman Islands with its principal place of business in Central, Hong Kong, detailing key information such as share registrars, auditor, principal bankers, and website - The registered office is in the Cayman Islands, with the principal place of business in Hong Kong at Room 510, Chater House, 8 Connaught Road Central, Hong Kong[3](index=3&type=chunk) - Tricor Investor Services Limited serves as the Hong Kong Share Registrar, and BDO Limited is the auditor[5](index=5&type=chunk) - Principal bankers include The Bank of East Asia, The Hongkong and Shanghai Banking Corporation, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of Guangzhou[5](index=5&type=chunk) [Financial Highlights](index=5&type=section&id=Financial%20Highlights) For the six months ended June 30, 2020, the Company's revenue significantly decreased by **32.5%** year-on-year, gross profit fell by **52.2%**, resulting in a loss for the period, with total assets, cash and cash equivalents, and equity attributable to owners of the Company all showing substantial declines Financial Performance for the Six Months Ended June 30, 2020 | Indicator | 2020 June 30 (HK$'000) | 2019 June 30 (HK$'000) | Change (+/-) | | :--- | :--- | :--- | :--- | | Revenue | 79,255 | 117,469 | (32.5%) | | Gross Profit | 18,635 | 38,957 | (52.2%) | | Gross Margin | 23.5% | 33.2% | (29.2%) | | (Loss) / Profit for the Period | (8,563) | 6,346 | Not Applicable | | (Loss) / Profit for the Period Attributable to Owners of the Company | (8,928) | 4,913 | Not Applicable | | Basic and Diluted (Loss) / Earnings Per Share (HK cents) | (1.9) | 1.1 | Not Applicable | Key Balance Sheet Data | Indicator | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | Change (+/-) | | :--- | :--- | :--- | :--- | | Total Assets | 289,434 | 338,348 | (14.5%) | | Cash and Cash Equivalents | 54,264 | 91,174 | (40.5%) | | Total Equity Attributable to Owners of the Company | 168,990 | 216,657 | (22.0%) | [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) This section provides a comprehensive review of the Group's business operations, financial performance, future outlook, and key financial metrics for the reporting period [Business Review](index=6&type=section&id=Business%20Review) The Group primarily engages in zipper manufacturing in China, serving OEM clients for Chinese and international apparel brands, with the COVID-19 pandemic leading to reduced customer orders and a shift from profit to loss for the period - The Group's principal business is the manufacturing of zippers, with customers being OEMs for Chinese and international apparel brands[9](index=9&type=chunk) - The Group is actively seeking new investment and business opportunities for diversification, having entered into a memorandum of understanding on June 5, 2020, for the potential acquisition of Mosaic Capital Limited, a licensed corporation[10](index=10&type=chunk) - For the six months ended June 30, 2020, the Group recorded a loss attributable to owners of the Company of approximately **HK$8,930 thousand**, primarily due to reduced sales orders in the zipper business and a sharp decline in revenue and gross profit caused by the COVID-19 pandemic[11](index=11&type=chunk) [Outlook](index=6&type=section&id=Outlook) Facing challenges from the COVID-19 pandemic and the US-China trade war, the apparel industry's domestic and export markets remain weak, prompting the Company to adapt to market changes, enhance production, optimize processes, strengthen financial and talent management, and accelerate digital transformation to capitalize on industry consolidation opportunities - The COVID-19 pandemic and the US-China trade war have hindered terminal consumption and exports in the apparel industry, leading to a weak domestic and foreign trade market[12](index=12&type=chunk) - The Company will implement measures including exploring e-commerce markets, enhancing product quality, shortening delivery times, integrating production capacity, optimizing processes, strengthening cost and capital management, and accelerating digital transformation and talent management[14](index=14&type=chunk) - The pandemic is expected to accelerate industry consolidation in the zipper sector, creating potential market expansion opportunities for the Company, which will review its business strategies and explore other investment opportunities[14](index=14&type=chunk) [Financial Review](index=7&type=section&id=Financial%20Review) For the six months ended June 30, 2020, the Group's revenue decreased by **32.5%** year-on-year to approximately **HK$79,260 thousand**, shifting from a profit in the prior period to a loss of approximately **HK$8,930 thousand**, primarily due to reduced customer orders in the zipper business caused by the COVID-19 pandemic - For the six months ended June 30, 2020, the Group's revenue was approximately **HK$79,260 thousand**, representing a year-on-year decrease of **32.5%**[15](index=15&type=chunk)[17](index=17&type=chunk) - The Group recorded a loss attributable to owners of the Company of approximately **HK$8,930 thousand**, compared to a profit of approximately **HK$4,910 thousand** in the corresponding period of 2019[15](index=15&type=chunk) Revenue Analysis by Product Category | Product Category | 2020 (HK$'000) | % | 2019 (HK$'000) | % | | :--- | :--- | :--- | :--- | :--- | | Sales of goods | | | | | | Zippers and sliders | 78,128 | 98.6 | 115,749 | 98.5 | | Others | 1,127 | 1.4 | 1,720 | 1.5 | | **Total** | **79,255** | **100.0** | **117,469** | **100.0** | Revenue Analysis by Geographical Location | Geographical Location | 2020 (HK$'000) | % | 2019 (HK$'000) | % | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 69,850 | 88.1 | 103,344 | 88.0 | | Overseas | 9,405 | 11.9 | 14,125 | 12.0 | | **Total** | **79,255** | **100.0** | **117,469** | **100.0** | Gross Profit Analysis by Product Category | Product Category | 2020 (HK$'000) | % | 2019 (HK$'000) | % | | :--- | :--- | :--- | :--- | :--- | | Zippers and sliders | 18,833 | 101.1 | 38,120 | 97.9 | | Others | (198) | (1.1) | 837 | 2.1 | | **Total** | **18,635** | **100.0** | **38,957** | **100.0** | - Distribution costs decreased by **26.5%** year-on-year to approximately **HK$5,420 thousand**, primarily due to lower staff and transportation costs resulting from reduced sales[22](index=22&type=chunk) - Administrative expenses slightly decreased by **1.5%** year-on-year to approximately **HK$25,920 thousand**, mainly because costs associated with the establishment of the Jingmen branch in 2019 were not incurred in 2020[22](index=22&type=chunk) - The Group recorded a loss attributable to owners of the Company of approximately **HK$8,930 thousand** for the period, with a loss margin of approximately **11.3%**, primarily due to reduced revenue and gross profit from the zipper business[24](index=24&type=chunk) - The Company redeemed its remaining fund shares on March 25, 2020, receiving net proceeds of approximately **HK$24,890 thousand**, and recorded a fair value gain on financial assets at fair value through profit or loss of approximately **HK$1,530 thousand** for the six months ended June 30, 2020[25](index=25&type=chunk) - As of June 30, 2020, lease liabilities and right-of-use assets were approximately **HK$57,600 thousand** and **HK$55,930 thousand**, respectively, reflecting the impact of adopting HKFRS 16[28](index=28&type=chunk) [Related Party Transactions and Continuing Connected Transactions](index=11&type=section&id=Related%20Party%20Transactions%20and%20Continuing%20Connected%20Transactions) The Group entered into multiple land and building lease agreements with related parties, including one-off and continuing connected transactions, involving properties in Hong Kong, a production base in Zhejiang Province, and properties in China, with total rental expenses increasing during the reporting period - The Group renewed the lease for a Hong Kong property with Success Point Limited (owned by Mr. Hui Sik Pang and Mr. Hui Sik Nam) for a monthly rent of **HK$60 thousand** for two years[30](index=30&type=chunk) - The Group renewed the lease for a production base in Zhejiang Province with Foshan Nanhai Jinheming Investment Co., Ltd. (owned by Mr. Hui Sik Pang and Mr. Hui Sik Nam) for a monthly rent of **RMB417.3 thousand** for two years[31](index=31&type=chunk) - The aforementioned lease renewals were identified as one-off connected transactions, involving an additional total right-of-use asset of approximately **HK$25,040 thousand**[34](index=34&type=chunk) - Continuing connected transactions include the renewal of a Hong Kong property lease with Success Point Limited (monthly rent of **HK$51 thousand**), the renewal of a Zhejiang production base lease with Nanhai Jinheming (monthly rent of **RMB275 thousand**), and the lease of a China property with Kaiyi (Jingmen) Garment Accessories Co., Ltd. (monthly rent of **RMB400 thousand**)[35](index=35&type=chunk)[39](index=39&type=chunk) - For the six months ended June 30, 2020, the total rental expense under various lease agreements was approximately **HK$5,199 thousand**, with an additional rental expense of approximately **HK$2,868 thousand** from new lease renewals[42](index=42&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) The Group's net cash outflow from operating activities decreased, while investment activities shifted from outflow to inflow, primarily due to fund redemptions; net cash outflow from financing activities significantly increased, mainly for special dividend payments and lease liability settlements, resulting in a decrease in total cash and cash equivalents and a rise in the gearing ratio, which remains robust - For the six months ended June 30, 2020, net cash outflow from operating activities was approximately **HK$8,600 thousand**, a decrease year-on-year, mainly due to tax refunds and enhanced trade receivables collection[44](index=44&type=chunk) - Net cash inflow from investing activities was approximately **HK$19,770 thousand**, primarily attributable to the redemption of investment funds[44](index=44&type=chunk) - Net cash outflow from financing activities was approximately **HK$45,780 thousand**, mainly used for the payment of special dividends (approximately **HK$34,860 thousand**) and lease liabilities[44](index=44&type=chunk)[45](index=45&type=chunk) - As of June 30, 2020, cash and cash equivalents amounted to approximately **HK$54,260 thousand**, a decrease of approximately **HK$36,910 thousand** from December 31, 2019[45](index=45&type=chunk) - As of June 30, 2020, the gearing ratio (total liabilities divided by total assets) was **34.0%**, an increase from **29.3%** as of December 31, 2019, but still considered robust[45](index=45&type=chunk) [Net Current Assets](index=16&type=section&id=Net%20Current%20Assets) The Group's net current assets decreased from approximately **HK$135,000 thousand** at the end of 2019 to approximately **HK$88,980 thousand** as of June 30, 2020, primarily due to the payment of a special dividend during the period - As of June 30, 2020, current assets were approximately **HK$146,000 thousand**, primarily comprising inventories, trade and other receivables, and cash and cash equivalents[47](index=47&type=chunk) - Current liabilities mainly include trade and other payables and lease liabilities[47](index=47&type=chunk) - Net current assets decreased by approximately **HK$46,350 thousand** to **HK$88,980 thousand**, mainly due to the payment of a special dividend[47](index=47&type=chunk) [Pledged Assets and Contingent Liabilities](index=16&type=section&id=Pledged%20Assets%20and%20Contingent%20Liabilities) As of June 30, 2020, the Group had no pledged assets or significant contingent liabilities - As of June 30, 2020, the Group had no pledged assets[48](index=48&type=chunk) - As of June 30, 2020, the Group had no significant contingent liabilities[49](index=49&type=chunk) [Foreign Currency Risk](index=16&type=section&id=Foreign%20Currency%20Risk) The Group's foreign currency risk is limited as most transactions are denominated in their functional currencies, and no hedging against exchange rate fluctuations was undertaken during the reporting period - The foreign currency risk of individual companies within the Group is limited, as most transactions are denominated in their functional currencies[50](index=50&type=chunk) - For the six months ended June 30, 2020, the Group did not hedge against risks arising from exchange rate fluctuations[50](index=50&type=chunk) [Employees and Remuneration](index=16&type=section&id=Employees%20and%20Remuneration) As of June 30, 2020, the Group's employee count decreased by **8.3%** year-on-year to **758**, with a corresponding reduction in staff costs, and two executive directors resumed receiving salaries after waiving remuneration for a specific period - As of June 30, 2020, the Group had **758** employees, a decrease of approximately **8.3%** compared to the same period in 2019[51](index=51&type=chunk) - For the six months ended June 30, 2020, staff costs were approximately **HK$42,650 thousand**, a year-on-year decrease, mainly due to reduced headcount resulting from lower production volume[51](index=51&type=chunk) - Mr. Zhuang Weidong and Mr. Qiu Chuanzhi waived their executive director's remuneration from April 1 to May 31, 2020, and resumed receiving a monthly salary of **HK$10 thousand** from June 1, 2020[53](index=53&type=chunk) [Dividends](index=17&type=section&id=Dividends) The Company paid a special dividend of **HK$0.075** per share, totaling **HK$34,860 thousand**, on March 3, 2020, and the Board recommended no interim dividend for the six months ended June 30, 2020 - On February 11, 2020, shareholders approved the payment of a special dividend of **HK$0.075** per share from the share premium account, totaling **HK$34,860.3 thousand**, which was fully paid on March 3, 2020[54](index=54&type=chunk) - The Board recommended not to pay any interim dividend for the six months ended June 30, 2020[54](index=54&type=chunk) [Events After Reporting Period](index=17&type=section&id=Events%20After%20Reporting%20Period) Subsequent to the reporting period, the Group completed the acquisition of all equity and shareholder loans of a Chinese consulting service company on August 11, 2020, for a consideration of **RMB2.177 million** - On August 11, 2020, subsequent to the reporting period, the Group completed the acquisition of all equity and shareholder loans of a company incorporated in China (the "PRC Company") for a consideration of **RMB2,177 thousand** (equivalent to approximately **HK$2,400 thousand**)[161](index=161&type=chunk) [Disclosure of Interests](index=18&type=section&id=Disclosure%20of%20Interests) This section details the interests of directors, chief executives, substantial shareholders, and other relevant parties in the Company's shares, as well as information on directors' competing businesses and the share option scheme [Directors' and Chief Executive's Interests in Shares](index=18&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20in%20Shares) As of June 30, 2020, several directors and chief executives held long positions in the Company's shares through controlled corporations, with Mr. Qiu Chuanzhi and Mr. Zhuang Weidong holding approximately **28.77%** and **28.16%** interests, respectively Directors' and Chief Executive's Long Positions in the Company's Shares | Director Name | Type of Interest | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Qiu Chuanzhi | Interest in controlled corporation | 133,706,331 | 28.77% | | Zhuang Weidong | Interest in controlled corporation | 130,897,663 | 28.16% | | Lin Ping | Interest in controlled corporation | 82,342,606 | 17.72% | | Mai Rongbin | Interest in controlled corporation | 82,342,606 | 17.72% | - Mr. Qiu Chuanzhi wholly owns China Sun Corporation, Mr. Zhuang Weidong holds a **90%** interest in Central Eagle Limited, and Ms. Lin Ping and Mr. Mai Rongbin hold **60%** and **25%** interests in Golden Diamond Inc., respectively[59](index=59&type=chunk) [Substantial Shareholders' and Other Persons' Interests in Shares](index=20&type=section&id=Substantial%20Shareholders'%20and%20Other%20Persons'%20Interests%20in%20Shares) As of June 30, 2020, apart from the directors, China Huarong Overseas Investment Holding Co., Ltd. and its associated companies, through Noble Wisdom Ever Limited, held approximately **70.16%** of the Company's shares, making them the largest substantial shareholders Substantial Shareholders' and Other Persons' Long Positions in the Company's Shares | Shareholder Name | Capacity | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | China Sun | Beneficial owner | 133,706,331 | 28.77% | | Central Eagle | Beneficial owner | 130,897,663 | 28.16% | | Golden Diamond | Beneficial owner | 82,342,606 | 17.72% | | Noble Wisdom Ever Limited | Security interest | 326,089,600 | 70.16% | | China Huarong Overseas Investment Holding Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Overseas Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Zhiyuan Investment Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | China Huarong Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | - Noble Wisdom Ever Limited is wholly owned by China Huarong Overseas, which is wholly owned by Huarong Overseas, which holds a **91%** interest in Huarong Zhiyuan, which is wholly owned by China Huarong Asset Management[68](index=68&type=chunk) [Directors' Interests in Competing Businesses](index=22&type=section&id=Directors'%20Interests%20in%20Competing%20Businesses) For the six months ended June 30, 2020, and up to the date of this report, no director held any interest in any business that competes with the Group's business - For the six months ended June 30, 2020, and up to the date of this interim report, no director held any direct or indirect interest in any business that competes with the Group's business[71](index=71&type=chunk) [Share Option Scheme](index=22&type=section&id=Share%20Option%20Scheme) The Company has a share option scheme to reward employees for their contributions to the Group, with a maximum of **40 million shares** issuable under the scheme as of June 30, 2020, but no options were granted, exercised, lapsed, or cancelled during the reporting period - The share option scheme aims to grant share options to selected employees as a reward for their contributions to the Group[72](index=72&type=chunk) - As of June 30, 2020, the maximum number of shares that may be issued upon exercise of share options under the scheme was **40 million shares**, representing approximately **8.6%** of the issued shares[72](index=72&type=chunk) - For the six months ended June 30, 2020, no outstanding share options existed under the Company's share option scheme, nor were any options granted, exercised, lapsed, or cancelled[74](index=74&type=chunk) [Corporate Governance and Other Information](index=24&type=section&id=Corporate%20Governance%20and%20Other%20Information) This section outlines the Company's commitment to maintaining stringent corporate governance practices, compliance with the Model Code, and details regarding transactions involving its listed securities and the Audit Committee's review [Corporate Governance Practices](index=24&type=section&id=Corporate%20Governance%20Practices) The Company is committed to maintaining stringent corporate governance guidelines and procedures and has complied with all provisions of the Corporate Governance Code - The Company has complied with all provisions contained in the Corporate Governance Code and is committed to maintaining stringent corporate governance guidelines and procedures[76](index=76&type=chunk) [Compliance with Model Code by Directors and Relevant Employees](index=24&type=section&id=Compliance%20with%20Model%20Code%20by%20Directors%20and%20Relevant%20Employees) The Company has adopted the Model Code as the code of conduct for directors' securities transactions, with all directors confirming compliance during the reporting period, and has also established a code of conduct for relevant employees no less exacting than the Model Code - The Company has adopted the Model Code as the code of conduct for directors' securities transactions, and all directors confirmed compliance throughout the reporting period[77](index=77&type=chunk) - The Company has also adopted a code of conduct for relevant employees who may possess inside information, requiring them to comply when dealing in the Company's securities[77](index=77&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=24&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company's%20Listed%20Securities) For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[78](index=78&type=chunk) [Audit Committee](index=24&type=section&id=Audit%20Committee) The Group's unaudited interim report for the six months ended June 30, 2020, has been reviewed by the Board's Audit Committee - The Group's unaudited interim report for the six months ended June 30, 2020, has been reviewed by the Board's Audit Committee[79](index=79&type=chunk) [Condensed Consolidated Statement of Profit or Loss](index=25&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For the six months ended June 30, 2020, the Group shifted from a profit in the prior period to a loss, primarily due to a significant decline in revenue and a sharp reduction in gross profit, recording a loss before tax of **HK$8,587 thousand** compared to a profit of **HK$8,812 thousand** in the prior year Condensed Consolidated Statement of Profit or Loss (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Revenue | 79,255 | 117,469 | | Cost of sales | (60,620) | (78,512) | | Gross Profit | 18,635 | 38,957 | | Other income and gains / (losses) – net | 6,079 | 5,543 | | Distribution costs | (5,416) | (7,368) | | Administrative expenses | (25,924) | (26,311) | | Interest on lease liabilities | (1,961) | (2,009) | | (Loss) / Profit before tax | (8,587) | 8,812 | | Income tax credit / (expense) | 24 | (2,466) | | (Loss) / Profit for the period | (8,563) | 6,346 | | (Loss) / Profit for the period attributable to owners of the Company | (8,928) | 4,913 | | (Loss) / Profit for the period attributable to non-controlling interests | 365 | 1,433 | | Basic and diluted (loss) / earnings per share (HK cents) | (1.9) | 1.1 | [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=26&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2020, the Group shifted from a profit to a loss for the period, and other comprehensive income was negative due to exchange differences, resulting in a total comprehensive income of negative **HK$13,227 thousand** compared to positive **HK$8,452 thousand** in the prior year Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | (Loss) / Profit for the period | (8,563) | 6,346 | | Other comprehensive income for the period | | | | – Exchange differences on translation of financial statements of Mainland China subsidiaries | (4,664) | 2,106 | | **Total comprehensive income for the period** | **(13,227)** | **8,452** | | Attributable to owners of the Company | (12,807) | 6,655 | | Attributable to non-controlling interests | (420) | 1,797 | | **Total comprehensive income for the period** | **(13,227)** | **8,452** | [Condensed Consolidated Statement of Financial Position](index=27&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2020, the Group's total assets decreased compared to the end of 2019, and net current assets also significantly reduced, while non-current assets remained relatively stable and current liabilities slightly declined Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | **Non-current assets** | | | | Property, plant and equipment | 76,447 | 79,243 | | Right-of-use assets | 55,933 | 52,042 | | Intangible assets | 275 | 885 | | Prepayments for property, plant and equipment | 2,145 | 3,004 | | Lease deposits | 5,334 | 3,986 | | Deferred tax assets | 3,125 | 3,185 | | **Total non-current assets** | **143,259** | **142,345** | | **Current assets** | | | | Inventories | 32,515 | 34,425 | | Financial assets at fair value through profit or loss | – | 23,583 | | Trade and other receivables | 58,975 | 44,698 | | Current tax recoverable | 421 | 2,123 | | Cash and cash equivalents | 54,264 | 91,174 | | **Total current assets** | **146,175** | **196,003** | | **Current liabilities** | | | | Trade and other payables | 39,498 | 44,344 | | Lease liabilities | 17,699 | 16,327 | | **Total current liabilities** | **57,197** | **60,671** | | **Net current assets** | **88,978** | **135,332** | | **Total assets less current liabilities** | **232,237** | **277,677** | | **Non-current liabilities** | | | | Lease liabilities | 39,904 | 37,257 | | Deferred tax liabilities | 1,124 | 1,124 | | **Total non-current liabilities** | **41,028** | **38,381** | | **Net assets** | **191,209** | **239,296** | | **Total equity** | **191,209** | **239,296** | [Condensed Consolidated Statement of Changes in Equity](index=29&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) For the six months ended June 30, 2020, total equity attributable to owners of the Company significantly decreased from **HK$216,600 thousand** as of January 1, 2020, to **HK$169,000 thousand** at period-end, primarily due to the loss for the period, a reduction in exchange reserves, and the payment of a special dividend Condensed Consolidated Statement of Changes in Equity (For the Six Months Ended June 30) | Indicator | Share Capital (HK$'000) | Share Premium (HK$'000) | Capital Reserve (HK$'000) | Statutory Reserve (HK$'000) | Exchange Reserve (HK$'000) | Retained Earnings (HK$'000) | Total Attributable to Owners of the Company (HK$'000) | Non-controlling Interests (HK$'000) | Total Equity (HK$'000) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Balance at January 1, 2020** | **4,648** | **180,690** | **18,324** | **25,856** | **(1,254)** | **(11,607)** | **216,657** | **22,639** | **239,296** | | Loss for the period | – | – | – | – | – | (8,928) | (8,928) | 365 | (8,563) | | Other comprehensive income | – | – | – | – | (3,879) | – | (3,879) | (785) | (4,664) | | **Total comprehensive income** | **–** | **–** | **–** | **–** | **(3,879)** | **(8,928)** | **(12,807)** | **(420)** | **(13,227)** | | Special dividend | – | (34,860) | – | – | – | – | (34,860) | – | (34,860) | | Transfer to statutory reserve | – | – | – | 171 | – | (171) | – | – | – | | **Balance at June 30, 2020** | **4,648** | **145,830** | **18,324** | **26,027** | **(5,133)** | **(20,706)** | **168,990** | **22,219** | **191,209** | [Condensed Consolidated Statement of Cash Flows](index=31&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2020, the Group's net cash outflow from operating activities decreased, net cash inflow from investing activities significantly increased, while net cash outflow from financing activities substantially rose, primarily due to the payment of a special dividend, resulting in a decrease in cash and cash equivalents to **HK$54,264 thousand** at period-end Condensed Consolidated Statement of Cash Flows (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Net cash used in operating activities | (8,598) | (13,282) | | Net cash from / (used in) investing activities | 19,771 | (12,136) | | Net cash used in financing activities | (45,783) | (9,161) | | Net decrease in cash and cash equivalents | (34,610) | (34,579) | | Cash and cash equivalents at January 1 | 91,174 | 78,587 | | Effect of foreign exchange rate changes | (2,300) | 279 | | **Cash and cash equivalents at June 30** | **54,264** | **44,287** | [Notes to the Unaudited Interim Financial Report](index=32&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Report) This section provides detailed notes to the unaudited interim financial report, covering general information, basis of preparation, significant events, accounting policies, use of judgments and estimates, segment reporting, revenue, profit/loss before tax, income tax, earnings per share, property, plant and equipment, financial assets, receivables, cash, payables, capital, reserves, dividends, commitments, related party transactions, and events after the reporting period [1 General Information](index=32&type=section&id=1%20General%20Information) China Everbright Group Limited is an exempted company incorporated in the Cayman Islands, with its shares listed on The Stock Exchange of Hong Kong Limited - The Company is an exempted company incorporated in the Cayman Islands under the Companies Law of the Cayman Islands, and its shares are listed on The Stock Exchange of Hong Kong Limited[95](index=95&type=chunk) [2 Basis of Preparation](index=32&type=section&id=2%20Basis%20of%20Preparation) The interim financial report is prepared in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34, utilizing management judgments, estimates, and assumptions, where actual results may differ - The interim financial report is prepared in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants[96](index=96&type=chunk) - The condensed consolidated interim financial statements require the use of management judgments, estimates, and assumptions, and actual results may differ from these estimates[96](index=96&type=chunk) [3 Significant Events](index=33&type=section&id=3%20Significant%20Events) The COVID-19 pandemic severely impacted the Group's operations, leading to demand setbacks, supply chain disruptions, and increased future uncertainty; despite reduced sales and cash flows, impairment assessments showed no impairment of non-financial assets, and the Group received government subsidies for employee wages and social security contribution reductions - The COVID-19 pandemic severely impacted the Group's operations, including demand setbacks, disruptions in inventory supply from key suppliers, and increased future uncertainty[98](index=98&type=chunk) - Despite reduced sales and cash flows, impairment assessments by independent valuers indicated no impairment of non-financial assets in cash-generating units[99](index=99&type=chunk)[100](index=100&type=chunk) - The Group received government subsidies of approximately **HK$598 thousand** for Hong Kong employee wages and reduced social security contributions by approximately **HK$2,304 thousand** due to China's social security relief policies[102](index=102&type=chunk) [4 Principal Accounting Policies](index=35&type=section&id=4%20Principal%20Accounting%20Policies) The condensed consolidated interim financial statements are prepared using the same accounting policies adopted in the 2019 annual financial statements, incorporating several new or revised Hong Kong Financial Reporting Standards effective in 2020, which had no significant impact on the Group's financial statements - The condensed consolidated interim financial statements are prepared in accordance with the same accounting policies adopted in the 2019 annual financial statements[104](index=104&type=chunk) - The Group adopted several new or revised Hong Kong Financial Reporting Standards, which had no significant impact on the condensed consolidated interim financial statements[105](index=105&type=chunk) [5 Use of Judgements and Estimates](index=36&type=section&id=5%20Use%20of%20Judgements%20and%20Estimates) Management made significant judgments and estimates in preparing the financial statements, particularly impacted by COVID-19, concerning government subsidy compliance, non-financial asset impairment, inventory net realizable value, customer return probabilities, expected credit losses, and going concern assessment; despite performance decline, directors believe no material uncertainty exists regarding the Group's going concern for the next 18 months - The impact of COVID-19 necessitated significant judgments and estimates regarding government subsidy compliance, recoverable amounts of non-financial assets, net realizable value of inventories, probability of customer returns, and expected credit losses[107](index=107&type=chunk)[108](index=108&type=chunk) - Despite the Group's performance decline during the period, the directors believe there are no material uncertainties that would cast significant doubt upon the Group's ability to continue as a going concern for the next 18 months[109](index=109&type=chunk) [6 Segment Reporting](index=37&type=section&id=6%20Segment%20Reporting) The Group is organized into two reportable segments by business line and geography: Zippers (Mainland China) and Zippers (Overseas); the Mainland China segment primarily manufactures and sells zipper products to domestic customers, while the Overseas segment procures from the Mainland China segment and sells to international customers, with the Mainland China segment shifting from profit to loss and the Overseas segment experiencing reduced profit for the six months ended June 30, 2020 - The Group is divided into two reportable segments: Zippers (Mainland China) and Zippers (Overseas)[110](index=110&type=chunk) - The Zippers (Mainland China) segment primarily manufactures and sells zipper products to customers in the Mainland China market, while the Zippers (Overseas) segment procures from the Mainland China segment and sells to customers in overseas markets[111](index=111&type=chunk) Segment Results (For the Six Months Ended June 30, 2020) | Indicator | Mainland China (HK$'000) | Overseas (HK$'000) | Total (HK$'000) | | :--- | :--- | :--- | :--- | | Revenue from external customers | 69,850 | 9,405 | 79,255 | | Reportable segment profit / (loss) | (563) | 655 | 92 | | Depreciation and amortisation for the period | 13,010 | 510 | 13,520 | | Reportable segment assets | 244,507 | 7,882 | 252,389 | | Reportable segment liabilities | 88,395 | 2,042 | 90,437 | Segment Results (For the Six Months Ended June 30, 2019) | Indicator | Mainland China (HK$'000) | Overseas (HK$'000) | Total (HK$'000) | | :--- | :--- | :--- | :--- | | Revenue from external customers | 103,344 | 14,125 | 117,469 | | Reportable segment profit | 10,182 | 1,002 | 11,184 | | Depreciation and amortisation for the period | 10,980 | 476 | 11,456 | | Reportable segment assets | 263,912 | 16,667 | 280,579 | | Reportable segment liabilities | 95,970 | 2,678 | 98,648 | Reconciliation of Reportable Segment Profit or Loss | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Reportable segment profit | 92 | 11,184 | | Elimination of unrealised gains and losses on inter-segment purchases of inventories, other assets and property, plant and equipment | 43 | 820 | | Reportable segment profit from external customers | 135 | 12,004 | | Other income and gains / (losses) – net | 6,079 | 5,543 | | Interest on lease liabilities | (1,961) | (2,009) | | Unallocated head office and corporate expenses | (12,840) | (6,726) | | (Loss) / Profit before tax | (8,587) | 8,812 | [7 Revenue](index=41&type=section&id=7%20Revenue) The Group's primary business involves the manufacturing and sale of zippers, sliders, and related products; for the six months ended June 30, 2020, revenue from sales of goods amounted to **HK$79,255 thousand**, with zippers and sliders constituting the vast majority - The Group's principal business is the manufacturing and sale of zippers, sliders, and other related products[125](index=125&type=chunk) Revenue by Major Category (For the Six Months Ended June 30) | Revenue Category | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Sales of goods | | | | Zippers and sliders | 78,128 | 115,749 | | Others | 1,127 | 1,720 | | **Total** | **79,255** | **117,469** | - No individual customer's transactions exceeded **10%** of the Group's revenue[127](index=127&type=chunk) [8 (Loss) / Profit Before Tax](index=41&type=section&id=8%20(Loss)%20%2F%20Profit%20Before%20Tax) This section details the various expenses and income affecting the loss/profit before tax, including a year-on-year decrease in staff costs, an increase in other income and net gains, and changes in depreciation, amortization, and inventory costs Staff Costs (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Salaries, wages and other benefits | 40,641 | 43,624 | | Contributions to defined contribution retirement plans | 2,005 | 3,238 | | **Total** | **42,646** | **46,862** | Other Income and Gains / (Losses) – Net (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Fair value gain on financial assets at fair value through profit or loss | 1,526 | 5,519 | | Interest income | 137 | 542 | | Loss on disposal of property, plant and equipment | (25) | (19) | | Government grants | 2,300 | 563 | | Others | 2,141 | (1,062) | | **Total** | **6,079** | **5,543** | Other Items (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Depreciation and amortisation | | | | – Plant and equipment | 6,323 | 4,607 | | – Intangible assets | 601 | 391 | | – Right-of-use assets | 9,454 | 8,933 | | **Total depreciation and amortisation** | **16,378** | **13,931** | | Inventories written down (net of reversal) | 461 | (90) | | Cost of inventories | 60,620 | 78,512 | [9 Income Tax in Condensed Consolidated Statement of Profit or Loss](index=43&type=section&id=9%20Income%20Tax%20in%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For the six months ended June 30, 2020, the Group recorded an income tax credit of **HK$24 thousand**, compared to an income tax expense of **HK$2,466 thousand** in the prior period; Mainland China subsidiaries are subject to varying income tax rates, and dividends paid to non-PRC resident enterprise investors are subject to withholding income tax Income Tax in Condensed Consolidated Statement of Profit or Loss (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Current tax – PRC Enterprise Income Tax | (30) | 2,328 | | Deferred tax | 6 | 138 | | **Total** | **(24)** | **2,466** | - No income tax is payable in the Cayman Islands and British Virgin Islands, while Kaiyi Zipper Company Limited is subject to a **16.5%** Hong Kong Profits Tax[133](index=133&type=chunk) - Kaiyi (Guangdong) Garment Accessories Co., Ltd., as a high-tech enterprise, enjoys a preferential income tax rate of **15%** until 2021, while other Mainland China subsidiaries are subject to a statutory income tax rate of **25%**[134](index=134&type=chunk) - Dividends paid by PRC resident enterprises to non-PRC resident enterprise investors are subject to a **10%** withholding income tax, with eligible Hong Kong tax residents potentially qualifying for a reduced tax rate of **5%**[134](index=134&type=chunk) [10 (Loss) / Earnings Per Share](index=44&type=section&id=10%20(Loss)%20%2F%20Earnings%20Per%20Share) For the six months ended June 30, 2020, the Company's basic loss per share was **1.9 HK cents**, compared to earnings per share of **1.1 HK cents** in the prior period; diluted loss/earnings per share were the same as basic loss/earnings per share due to the absence of potential dilutive shares - Basic loss per share was calculated based on the loss attributable to owners of the Company of **HK$8,928 thousand** and the weighted average number of **464.8 million** ordinary shares outstanding for the six months ended June 30, 2020, resulting in **1.9 HK cents**[136](index=136&type=chunk) - As there were no potential dilutive shares outstanding for the six months ended June 30, 2019 and 2020, diluted (loss) / earnings per share were equal to basic (loss) / earnings per share[137](index=137&type=chunk) [11 Property, Plant and Equipment](index=44&type=section&id=11%20Property%2C%20Plant%20and%20Equipment) For the six months ended June 30, 2020, the Group's cost of additions to property, plant, and equipment (including payments for construction in progress) was **HK$5,027 thousand**, a decrease compared to the prior period - For the six months ended June 30, 2020, the Group acquired property, plant, and equipment (including payments for construction in progress) at a cost of **HK$5,027 thousand**, a decrease from **HK$10,002 thousand** in the corresponding period of 2019[138](index=138&type=chunk) [12 Financial Assets at Fair Value Through Profit or Loss](index=44&type=section&id=12%20Financial%20Assets%20at%20Fair%20Value%20Through%20Profit%20or%20Loss) The Group redeemed its remaining shares in an unlisted investment fund during the six months ended June 30, 2020, receiving proceeds of approximately **HK$25,109 thousand**, thus no longer holding such financial assets at period-end; the fair value of the fund was measured using net asset value and categorized into three levels according to accounting standards - For the six months ended June 30, 2020, the Group redeemed its remaining shares in an unlisted investment fund, receiving proceeds of approximately **HK$25,109 thousand**[139](index=139&type=chunk) Financial Assets at Fair Value Through Profit or Loss | Indicator | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | Unlisted investment funds at fair value | – | 23,583 | - The fair value of the fund is calculated based on the net asset value reported by the fund manager and categorized into Level 1, Level 2, and Level 3 according to accounting standards[142](index=142&type=chunk) [13 Trade and Other Receivables](index=47&type=section&id=13%20Trade%20and%20Other%20Receivables) As of June 30, 2020, the Group's total trade and other receivables amounted to **HK$58,975 thousand**, an increase from the end of 2019, with receivables within one month constituting the largest portion; all receivables are expected to be recovered within one year Ageing Analysis of Trade and Other Receivables | Ageing | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | Within 1 month | 38,173 | 11,379 | | Over 1 month but within 2 months | 6,900 | 14,645 | | Over 2 months but within 3 months | 4,285 | 6,969 | | Over 3 months | 3,697 | 8,697 | | **Trade receivables and bills receivable, net of loss allowance** | **53,055** | **41,690** | | Other prepayments | 3,963 | 1,490 | | Deposits and other receivables | 1,957 | 1,518 | | **Total** | **58,975** | **44,698** | - All trade and other receivables are expected to be recovered or recognized as expenses within one year[147](index=147&type=chunk) [14 Cash and Cash Equivalents](index=48&type=section&id=14%20Cash%20and%20Cash%20Equivalents) As of June 30, 2020, the Group's cash and cash equivalents amounted to **HK$54,264 thousand**, a decrease from **HK$91,174 thousand** at the end of 2019 Cash and Cash Equivalents | Indicator | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | Bank and cash in hand | 54,264 | 91,174 | | **Cash and cash equivalents in the condensed consolidated statement of cash flows** | **54,264** | **91,174** | [15 Trade and Other Payables](index=48&type=section&id=15%20Trade%20and%20Other%20Payables) As of June 30, 2020, the Group's total trade and other payables amounted to **HK$39,498 thousand**, a decrease from **HK$44,344 thousand** at the end of 2019, with salaries and staff welfare payable and payables for property, plant, and equipment being the main components Ageing Analysis of Trade and Other Payables | Ageing | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | Within 1 month | 9,221 | 8,991 | | Over 1 month but within 3 months | 427 | 555 | | Over 3 months but within 6 months | – | 17 | | Over 6 months | 626 | 414 | | **Trade payables** | **10,274** | **9,977** | | Salaries and staff welfare payable | 13,588 | 19,449 | | Accrued expenses | 2,552 | 4,302 | | Payables for purchase of property, plant and equipment | 8,368 | 10,019 | | Other tax payables | 1,848 | – | | Contract liabilities | 2,412 | 592 | | Other payables | 456 | 5 | | **Total** | **39,498** | **44,344** | [16 Capital, Reserves and Dividends](index=49&type=section&id=16%20Capital%2C%20Reserves%20and%20Dividends) The Company paid a special dividend of **HK$34,860 thousand** in March 2020, but no interim dividend was declared for the six months ended June 30, 2020, while authorized and issued share capital remained unchanged Dividends (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Special dividend: declared: HK$0.075 per ordinary share | 34,860 | – | | **Total** | **34,860** | **–** | - No interim dividend was declared for the six months ended June 30, 2020[152](index=152&type=chunk) Authorized and Issued Share Capital | Indicator | 2020 June 30 Number of Shares (thousands) | 2020 June 30 Share Capital (HK$'000) | 2019 December 31 Number of Shares (thousands) | 2019 December 31 Share Capital (HK$'000) | | :--- | :--- | :--- | :--- | :--- | | Authorized: Ordinary shares of HK$0.01 par value each | 2,000,000 | 20,000 | 2,000,000 | 20,000 | | Ordinary shares, issued and fully paid: At January 1, June 30 and December 31 | 464,804 | 4,648 | 464,804 | 4,648 | [17 Commitments](index=50&type=section&id=17%20Commitments) As of June 30, 2020, the Group's unfulfilled capital commitments not provided for in the consolidated financial statements amounted to **HK$2,470 thousand**, a decrease from the end of 2019 Unfulfilled Capital Commitments | Indicator | 2020 June 30 (HK$'000) | 2019 December 31 (HK$'000) | | :--- | :--- | :--- | | Contracted for | 2,470 | 4,464 | [18 Significant Related Party Transactions](index=50&type=section&id=18%20Significant%20Related%20Party%20Transactions) The Group engaged in multiple lease transactions with related parties (Mr. Hui Sik Pang and Mr. Hui Sik Nam and their controlled companies) involving plant, land, and buildings, with total rental expenses for these transactions increasing during the reporting period; this section also discloses key management personnel compensation - The Group renewed lease agreements with Mr. Hui Sik Pang and Mr. Hui Sik Nam for certain leases and buildings, with rent paid amounting to **HK$2,381 thousand** for the six months ended June 30, 2020[156](index=156&type=chunk) - The Group leased back assets from Success Point Limited and Foshan Nanhai Jinheming Investment Co., Ltd., with rents paid amounting to **HK$356 thousand** and **HK$2,684 thousand**, respectively, for the six months ended June 30, 2020[157](index=157&type=chunk) - The Company entered into lease agreements with Kaiyi (Jingmen) Garment Accessories Co., Ltd. for certain leased land and buildings, with rent paid amounting to **HK$2,646 thousand** for the six months ended June 30, 2020[159](index=159&type=chunk) Key Management Personnel Compensation (For the Six Months Ended June 30) | Indicator | 2020 (HK$'000) | 2019 (HK$'000) | | :--- | :--- | :--- | | Short-term employee benefits | 5,334 | 3,464 | | Contributions to retirement schemes | 95 | 138 | | **Total** | **5,429** | **3,602** | [19 Events After Reporting Period](index=51&type=section&id=19%20Events%20After%20Reporting%20Period) Subsequent to the reporting period, the Group completed the acquisition of all equity and shareholder loans of a Chinese consulting service company on August 11, 2020, for a consideration of **RMB2.177 million** - Subsequent to the end of the reporting period, on August 11, 2020, the Group completed the acquisition of all equity and shareholder loans of a company incorporated in China (the "PRC Company") for a consideration of **RMB2,177 thousand** (equivalent to approximately **HK$2,400 thousand**)[161](index=161&type=chunk) [Glossary](index=52&type=section&id=Glossary) This section provides definitions for key terms used throughout the interim report, including Board, Corporate Governance Code, Company, Directors, Group, HK$, Hong Kong, Listing Rules, Main Board, Model Code, OEM, PRC, RMB, SFO, Shares, Shareholders, and Stock Exchange - This section defines key terms used in the interim report, such as "Board," "Corporate Governance Code," "Company," "Group," "HK$," "Listing Rules," "OEM," and "PRC"[163](index=163&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)

[Company Information](index=2&type=section&id=Company%20Information) [Company Basic Information](index=2&type=section&id=Company%20Information) This section provides basic company information, including board and committee member changes and key corporate details - On **November 19, 2019**, significant changes occurred in the company's Board of Directors and its committees (Audit, Nomination, Remuneration), with **Mr. Zhuang Weidong** appointed as **Chairman** and **Mr. Qiu Chuanzhi** as **President**[3](index=3&type=chunk)[4](index=4&type=chunk) [Financial Highlights](index=3&type=section&id=Financial%20Highlights) [Five-Year Financial Summary](index=3&type=section&id=Five-Year%20Financial%20Summary) This report presents key five-year financial data, highlighting a decline in gross profit margin and shareholder equity, alongside an increase in the gearing ratio in 2019 Five-Year Financial Summary | Metric | 2019 | 2018 | 2017 | 2016 (Restated) | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit Margin (%) | 25.7 | 32.4 | 31.2 | 28.9 | 30.2 | | Operating Loss/Profit Margin (%) | -19.1 | -14.6 | -4.5 | 27.2 | 4.5 | | Net Loss/Profit Margin (%) | -21.5 | -16.8 | -24.4 | 15.1 | 2.6 | | Return on Equity (%) | -20.4 | -12.5 | -14.4 | 7.3 | 1.4 | | Total Assets (HKD Thousands) | 338,348 | 330,454 | 380,180 | 405,760 | 368,931 | | Total Equity Attributable to Shareholders (HKD Thousands) | 216,657 | 264,730 | 314,083 | 298,523 | 290,857 | | Gearing Ratio (%) | 29.3 | 12.9 | 11.4 | 21.6 | 15.2 | [Consolidated Statement of Profit or Loss Summary](index=6&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20Summary) In 2019, revenue from continuing operations increased, but gross profit declined, leading to an expanded operating loss and a larger loss attributable to equity holders Consolidated Statement of Profit or Loss Summary | Item (HKD Thousands) | 2019 | 2018 | | :--- | :--- | :--- | | **Continuing Operations** | | | | Revenue | 205,796 | 197,532 | | Gross Profit | 52,932 | 63,919 | | Operating Loss | (39,255) | (28,872) | | Loss Before Tax | (43,000) | (28,872) | | **Loss for the Year** | (44,164) | (29,946) | | Loss Attributable to Equity Holders of the Company | (44,180) | (33,177) | [Consolidated Statement of Financial Position Summary](index=7&type=section&id=Consolidated%20Statement%20of%20Financial%20Position%20Summary) As of 2019 year-end, total assets slightly increased, non-current assets rose due to right-of-use assets, while current assets and net assets declined Consolidated Statement of Financial Position Summary | Item (HKD Thousands) | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 142,345 | 83,397 | | Current Assets | 196,003 | 247,057 | | **Total Assets** | **338,348** | **330,454** | | **Liabilities and Equity** | | | | Current Liabilities | 60,671 | 41,396 | | Non-current Liabilities | 38,381 | 1,124 | | **Net Assets** | **239,296** | **287,934** | | Total Equity Attributable to Equity Holders of the Company | 216,657 | 264,730 | [Chairman's Statement](index=8&type=section&id=Chairman%27s%20Statement) [Chairman's Statement](index=8&type=section&id=Chairman%27s%20Statement) The Chairman's Statement reviews 2019, highlighting a change in control, continued focus on the zipper business with steady revenue growth despite challenges, and future plans for cost control and strategic investments - In **July 2019**, the company's control changed, with new major shareholders intending to continue and develop the existing zipper business while exploring other business opportunities[21](index=21&type=chunk) - Facing macro challenges such as the US-China trade dispute and the **COVID-19** pandemic, the Group focused on strengthening marketing and product innovation, with zipper business revenue reaching approximately **HKD 205.8 million** in **2019**[22](index=22&type=chunk) - Looking ahead, the Group will continue to seek attractive investment and acquisition opportunities to enhance profitability and shareholder value, remaining open to exploring new business ventures[22](index=22&type=chunk) [Management Discussion and Analysis](index=9&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Performance Overview](index=10&type=section&id=Financial%20Highlights) In 2019, the Group's revenue increased, but loss before tax expanded significantly due to lower gross profit, fair value losses, and reduced foreign exchange gains, partially offset by a prior-year impairment reversal Financial Performance Overview | Financial Metric | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | HKD 205.8 million | HKD 197.5 million | | Loss Before Tax | HKD 43 million | HKD 28.87 million | - Loss before tax increased by **HKD 14.13 million** year-on-year, primarily attributable to: - Decrease in gross profit of approximately **HKD 11 million** - Increase in fair value loss on financial assets of approximately **HKD 22.3 million** - Decrease in foreign exchange gains of approximately **HKD 6.16 million** - New interest expense on lease liabilities of approximately **HKD 3.75 million** - Dividend income of **HKD 9.3 million** in the prior year period, which was zero in the current year - These negative impacts were partially offset by an impairment loss of **HKD 45 million** on other receivables in the prior year period[27](index=27&type=chunk) [Operational Review](index=11&type=section&id=Operational%20Review) This section reviews 2019 operations, noting a revenue increase driven by overseas sales, but a decline in gross profit margin due to increased manufacturing costs, leading to an expanded loss attributable to shareholders Revenue by Product Category (HKD Millions) | Product Category | 2019 | % of Total | 2018 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Zippers and Sliders | 202.22 | 98.3 | 192.97 | 97.7 | | Others | 3.58 | 1.7 | 4.56 | 2.3 | | **Total** | **205.80** | **100.0** | **197.53** | **100.0** | Revenue by Geographical Location (HKD Millions) | Region | 2019 | % of Total | 2018 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 183.00 | 88.9 | 181.70 | 92.0 | | Overseas | 22.80 | 11.1 | 15.83 | 8.0 | | **Total Revenue** | **205.80** | **100.0** | **197.53** | **100.0** | - Gross profit decreased by **17.2%** from **HKD 63.92 million** to **HKD 52.93 million**, with gross profit margin declining from **32.4%** to **25.7%** - This was primarily due to increased fixed manufacturing overheads and labor costs following the commencement of production at Kaiyi (Guangdong) Jingmen branch in **April 2019**[35](index=35&type=chunk) - Loss attributable to equity holders of the company was approximately **HKD 44.18 million**, an increase of **33.2%** from the **HKD 33.18 million** loss in **2018**[43](index=43&type=chunk) [Financial Position Analysis](index=13&type=section&id=Financial%20Position%20Analysis) This section analyzes the Group's financial position, noting partial fund redemption, a significant increase in inventory, improved trade receivables turnover, initial recognition of right-of-use assets and lease liabilities, and a zero gearing ratio at year-end - The Group redeemed part of its fund investments in **2019**, reducing the carrying value of these financial assets to **HKD 23.58 million** at year-end (end of **2018**: **HKD 102 million**), and recording a fair value change loss of **HKD 23.6 million** for the year - Subsequent to the reporting period, the remaining fund interests were also redeemed[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - Inventory significantly increased by **40.2%** from **HKD 24.55 million** to **HKD 34.43 million**, primarily due to increased raw material reserves to meet **2020** sales orders - Average inventory turnover days increased from **66 days** to **70 days**[50](index=50&type=chunk)[51](index=51&type=chunk) - Due to **HKD 45 million** in sales consideration from the **2017** disposal of a subsidiary remaining uncollected, the Group fully provided for impairment loss in **2018** and obtained a favorable judgment in **2019**, but is still evaluating subsequent recovery actions[55](index=55&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk) - Due to the application of HKFRS 16, right-of-use assets of approximately **HKD 52.04 million** and lease liabilities of approximately **HKD 53.58 million** were recognized at the end of **2019**[61](index=61&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) In 2019, operating cash flow turned negative, while investing cash flow was positive due to fund redemptions, leading to increased cash and cash equivalents at year-end with zero bank borrowings Cash Flow Summary (HKD Millions) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash (Used in)/From Operating Activities | (1.37) | 6.25 | | Net Cash From/(Used in) Investing Activities | 34.61 | (17.08) | | Net Cash Used in Financing Activities | (22.09) | – | | **Cash and Cash Equivalents at End of Period** | **91.17** | **78.59** | - As of **December 31, 2019**, the Group had no bank borrowings or bank facilities, and its gearing ratio (total interest-bearing borrowings/total equity) was **zero**[65](index=65&type=chunk) [Outlook](index=21&type=section&id=Outlook) The Group anticipates severe challenges in the global business environment, particularly from the US-China trade war and COVID-19, impacting 2020 performance, but plans to enhance brand, integrate capacity, and strengthen management to navigate these challenges - The **COVID-19** pandemic led to insufficient operation in downstream industries, decreased new orders, and disrupted supply chains and logistics, placing significant pressure on the company's zipper business operating performance in the first half of **2020**[93](index=93&type=chunk) - The company will adopt four key measures to address challenges: - Enhance brand image and increase market development investment - Integrate production capacity, improve automation, and control costs - Strengthen talent management and improve operational efficiency - Strengthen cash flow management[94](index=94&type=chunk) [Corporate Governance Report](index=21&type=section&id=Corporate%20Governance%20Report) [Corporate Governance Practices and Board of Directors](index=22&type=section&id=Corporate%20Governance%20Practices) The company strives for high corporate governance, largely complying with the code but noting deviations regarding the Chairman/CEO role and a non-executive director's term, with an eight-member board overseeing company leadership - The company complied with all code provisions of the Corporate Governance Code, with some deviations[99](index=99&type=chunk) - Deviations include: 1. From **January 1, 2019**, to **November 19, 2019**, the Chairman and Chief Executive Officer were the same person (**Mr. Wu Hangzheng**), deviating from Code Provision A.2.1 2. The appointment of Non-executive Director **Ms. Lin Ping** had no specific term, deviating from Code Provision A.4.1[106](index=106&type=chunk)[111](index=111&type=chunk) - The Board of Directors currently comprises **eight members**, including **four executive directors**, **one non-executive director**, and **three independent non-executive directors**, meeting the Listing Rules' requirements for the number and professional qualifications of independent non-executive directors[101](index=101&type=chunk)[109](index=109&type=chunk) [Board Committees](index=26&type=section&id=Board%20Committees) The Board operates with Audit, Remuneration, and Nomination Committees, primarily composed of independent non-executive directors, which held meetings to fulfill their duties, and the company has adopted diversity and dividend policies - The Audit Committee comprises **three independent non-executive directors**, held **three meetings** during the year, and reviewed significant matters including annual and interim financial results and internal control systems[134](index=134&type=chunk) - The Remuneration Committee comprises **three independent non-executive directors**, held **two meetings** during the year, and reviewed remuneration policies and determined executive directors' remuneration[140](index=140&type=chunk) - The Nomination Committee comprises **two executive directors** and **three independent non-executive directors**, held **two meetings** during the year, and reviewed the Board's structure, size, and composition[144](index=144&type=chunk) [Internal Control and Shareholders' Rights](index=30&type=section&id=Internal%20Control%20and%20Shareholders%27%20Rights) The Board ensures internal control and risk management through external reviews, and the company has established clear shareholder rights mechanisms, including EGM procedures and inquiry channels, fostering effective communication - The Group has not established an internal audit department but appoints an external independent consultant to conduct annual reviews of its internal control system - The Board believes that as of the end of **2019**, the Group's risk management and internal control systems were implemented and effective[157](index=157&type=chunk)[160](index=160&type=chunk) - Shareholders holding not less than **one-tenth** of the company's paid-up capital have the right to request the Board to convene an extraordinary general meeting[164](index=164&type=chunk) [Environmental, Social and Governance Report](index=32&type=section&id=Environmental%2C%20Social%20and%20Governance%20Report) [Environmental Protection](index=33&type=section&id=Environmental%20Protection) The Group manages environmental matters according to ISO14001 and national regulations, focusing on waste reduction, energy saving, compliant emissions, wastewater reuse, and promoting green practices and reduced packaging - The Group strictly handles hazardous waste (e.g., waste mineral oil, dyes) and non-hazardous waste (e.g., waste packaging, domestic waste), and holds a "Pollutant Discharge Permit" to ensure compliant exhaust gas emissions[178](index=178&type=chunk)[179](index=179&type=chunk) - By installing wastewater treatment and reclaimed water reuse systems, over **10,000 tonnes** of wastewater were purified during the reporting period, with treated wastewater reusable for dyeing, washing, and other processes[181](index=181&type=chunk) Key Resource Consumption and Emission Data for 2019 | Category | Unit | Total Amount | Intensity (per HKD Million Revenue) | | :--- | :--- | :--- | :--- | | **Greenhouse Gas Emissions** | Tonnes of CO2e | 10,749 | 53.1 | | **Wastewater** | Tonnes | 66,552 | 323 | | **Hazardous Waste** | Tonnes | 7.5 | 0.03 | | **Non-hazardous Waste** | Tonnes | 126 | 6.1 | | **Electricity Consumption** | kWh | 12,437,223 | 50,562 | | **Water Consumption** | Tonnes | 339,611 | 1,650 | [Employment and Labor Practices](index=37&type=section&id=Employment%20and%20Labor%20Practices) The Group adheres to labor laws, ensuring fair employment, prohibiting child/forced labor, prioritizing employee health and safety through training and drills, and providing professional development for its 816 full-time employees - As of the end of **2019**, the Group had **816 full-time employees**, an increase from **622** in **2018** - Employees are primarily located in **Mainland China (99%)**, with the **31-40 age group** being the largest (**48%**)[195](index=195&type=chunk) - The Group highly values occupational health and safety, implementing a **three-tier safety training mechanism** and regularly conducting fire drills - In **2019**, there were **17 work-related injuries**, resulting in **282 lost workdays**, with **no work-related fatalities**[197](index=197&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk) - The Group strictly adheres to labor standards, prohibiting child and forced labor, and safeguarding employee rights through its "Grievance Management Procedure"[204](index=204&type=chunk) [Operating Practices](index=42&type=section&id=Operating%20Practices) The Group manages operating practices through supplier evaluation, prioritizing local sourcing, ensuring product quality with ISO 9001 certification and a complaint mechanism, protecting privacy, and implementing an anti-fraud system - The Group has established a comprehensive supply chain management system, evaluating suppliers on quality, price, delivery time, and environmental measures - All suppliers are located in **Mainland China**[208](index=208&type=chunk)[209](index=209&type=chunk) - The Group's production bases are certified with **ISO 9001**, **OEKO-TEX® STANDARD 100**, and **TQP** quality systems - In **2019**, **41 customer complaints** were received, a reduction from **70** in **2018**, with no product recalls due to health and safety issues[210](index=210&type=chunk) - The Group promotes integrity in operations, establishing a whistleblowing system and reward mechanism, and signing integrity agreements with employees and partners to prevent corruption and bribery - No related cases were found in **2019**[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Community Investment](index=44&type=section&id=Community%20Investment) The Group actively fulfills social responsibilities through the "Kaiyi Charity Foundation," providing employee assistance, consistently donating to vulnerable groups, supporting youth, and encouraging community involvement - The Group established the "**Kaiyi Charity Foundation**" to provide assistance to employees facing financial difficulties (e.g., children's education, critical illness, natural disasters)[219](index=219&type=chunk) [Biographies of Directors and Senior Management](index=44&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) [Biographies of Directors and Senior Management](index=44&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) This section details the personal biographies of the company's executive, non-executive, and independent non-executive directors, along with senior management, covering their professional backgrounds and other listed company roles - Detailed biographies are provided for **four executive directors**, including Chairman **Mr. Zhuang Weidong** and President **Mr. Qiu Chuanzhi**, one non-executive director, and three independent non-executive directors[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - The backgrounds and responsibilities of senior management, including Chief Financial Officer **Mr. Qiu Zhichao** and zipper business founders **Mr. Xu Xipeng** and **Mr. Xu Xinan**, are introduced[231](index=231&type=chunk)[232](index=232&type=chunk) [Directors' Report](index=47&type=section&id=Directors%27%20Report) [Business and Financial Review](index=48&type=section&id=Business%20and%20Financial%20Review) The Directors' Report outlines the Group's 2019 zipper business, noting key customer and supplier concentrations, no final dividend recommendation but a special dividend paid in 2020, and distributable reserves of HKD 84.6 million - The Group's principal business is the design, manufacture, and sale of zippers and other garment accessories[235](index=235&type=chunk) Key Customer and Supplier Concentration | Category | % of Total Turnover/Purchases (2019) | | :--- | :--- | | Largest Customer | 4.8% | | Top Five Customers | 16.1% | | Largest Supplier | 13.1% | | Top Five Suppliers | 33.5% | - The Board does not recommend a final dividend for **2019** - A special dividend of **HKD 0.075 per share** was paid on **March 3, 2020**[240](index=240&type=chunk) [Directors and Share Capital Matters](index=50&type=section&id=Directors%20and%20Share%20Capital%20Matters) This section details director changes, share interests, and capital structure, noting significant board changes in November 2019, directors' controlled shareholdings, no listed securities transactions, and the restoration of public float to over 25% by year-end - Multiple changes occurred in the Board of Directors during the year and subsequent to the reporting period, including the appointment and resignation of several directors[255](index=255&type=chunk) Directors' Interests in Company Shares (Long Position) (December 31, 2019) | Director Name | Type of Interest | Number of Shares | Approximate % of Interest | | :--- | :--- | :--- | :--- | | Qiu Chuanzhi | Interest in controlled corporation | 133,706,331 | 28.77% | | Zhuang Weidong | Interest in controlled corporation | 130,897,663 | 28.16% | | Lin Ping | Interest in controlled corporation | 83,942,606 | 18.06% | | Mai Rongbin | Interest in controlled corporation | 83,942,606 | 18.06% | - After the offer closed on **September 20, 2019**, the company's public float decreased to approximately **13.03%**, below the **25%** required by the Listing Rules - It was subsequently restored to **25%** through a placing completed on **December 19, 2019**[308](index=308&type=chunk)[309](index=309&type=chunk) [Independent Auditor's Report](index=57&type=section&id=Independent%20Auditor%27s%20Report) [Independent Auditor's Report](index=57&type=section&id=Independent%20Auditor%27s%20Report) The auditor issued an unmodified opinion on the 2019 consolidated financial statements, highlighting key audit matters including inventory valuation, fair value measurement of financial assets, and impairment assessment of non-financial assets - The auditor issued an **unmodified opinion** on the consolidated financial statements[315](index=315&type=chunk) - Key audit matters include: - **Inventory Valuation**: Due to the significant net carrying amount of inventory (**HKD 34.43 million**) and the significant judgment involved in determining the required provision level - **Valuation of Financial Assets at Fair Value Through Profit or Loss**: Refers to unlisted investment funds, where fair value determination involves significant judgment - **Impairment Assessment of Non-financial Assets**: Due to the decline in gross profit margin of the zipper business, there may be indications of impairment, and the assessment involves significant judgment regarding future cash flows[317](index=317&type=chunk)[319](index=319&type=chunk)[322](index=322&type=chunk)[336](index=336&type=chunk) [Consolidated Financial Statements](index=64&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss](index=65&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) In 2019, the Group reported HKD 206 million in revenue and HKD 52.93 million in gross profit, but due to other losses and expenses, the loss before tax was HKD 43 million, resulting in a HKD 44.18 million loss attributable to equity holders Key Data from Consolidated Statement of Profit or Loss for the Year Ended 2019 (HKD Thousands) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 205,796 | 197,532 | | Gross Profit | 52,932 | 63,919 | | Loss Before Tax | (43,000) | (28,872) | | Loss for the Year | (44,164) | (29,946) | | Loss Attributable to Equity Holders of the Company | (44,180) | (33,177) | | Basic Loss Per Share (HK cents) | (9.5) | (7.1) | [Consolidated Statement of Financial Position](index=67&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2019, the Group's total assets were HKD 338 million, with net assets at HKD 239 million, and significant changes in non-current assets and liabilities due to new lease accounting standards Key Data from Consolidated Statement of Financial Position as of December 31, 2019 (HKD Thousands) | Item | 2019 | 2018 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 142,345 | 83,397 | | Current Assets | 196,003 | 247,057 | | **Total Assets** | **338,348** | **330,454** | | **Liabilities and Equity** | | | | Current Liabilities | 60,671 | 41,396 | | Non-current Liabilities | 38,381 | 1,124 | | **Net Assets** | **239,296** | **287,934** | | **Total Equity** | **239,296** | **287,934** | [Consolidated Cash Flow Statement](index=70&type=section&id=Consolidated%20Cash%20Flow%20Statement) In 2019, operating activities resulted in a net cash outflow, while investing activities generated a net inflow from fund redemptions, leading to a net increase in cash and cash equivalents to HKD 91.17 million at year-end Consolidated Cash Flow Statement for the Year Ended 2019 (HKD Thousands) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash (Used in)/From Operating Activities | (1,372) | 6,247 | | Net Cash From/(Used in) Investing Activities | 34,607 | (17,082) | | Net Cash Used in Financing Activities | (22,086) | – | | Net Increase/(Decrease) in Cash and Cash Equivalents | 11,149 | (10,835) | | Cash and Cash Equivalents at December 31 | 91,174 | 78,587 | [Notes to the Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Changes in Accounting Policies](index=72&type=section&id=2.%20Adoption%20of%20Hong%20Kong%20Financial%20Reporting%20Standards) This year, the Group adopted new HKFRS, most notably HKFRS 16 "Leases," recognizing HKD 69.2 million in right-of-use assets and lease liabilities on January 1, 2019, significantly impacting financial statement presentation - The Group adopted **HKFRS 16 "Leases"** effective **January 1, 2019**, bringing significant changes to lease accounting[373](index=373&type=chunk) Impact of Adopting HKFRS 16 on the Statement of Financial Position as of January 1, 2019 (HKD Thousands) | Item | Impact Amount | | :--- | :--- | | Recognition of Right-of-Use Assets | +69,204 | | Recognition of Lease Liabilities (Non-current) | +53,581 | | Recognition of Lease Liabilities (Current) | +15,623 | [Segment Reporting](index=95&type=section&id=6.%20Segment%20Reporting) The Group manages its business through Mainland China and Overseas zipper segments, with Mainland China contributing most revenue and profit in 2019, while overseas revenue grew significantly Segment Results for 2019 (HKD Thousands) | Item | Zippers - Mainland China | Zippers - Overseas | Total | | :--- | :--- | :--- | :--- | | Revenue from External Customers | 182,992 | 22,804 | 205,796 | | Reportable Segment Profit | 2,318 | 594 | 2,912 | | Reportable Segment Assets | 235,873 | 13,975 | 249,848 | [Significant Related Party Transactions](index=126&type=section&id=29.%20Significant%20Related%20Party%20Transactions) The Group engages in ongoing related party transactions, primarily property and plant leases, totaling HKD 14.75 million in rental payments for 2019, and also discloses key management personnel remuneration - The Group has multiple property lease agreements with senior management **Mr. Xu Xipeng** and **Mr. Xu Xinan** (or their associated companies), constituting continuing connected transactions[631](index=631&type=chunk)[632](index=632&type=chunk)[633](index=633&type=chunk) - For the year ended **2019**, the total remuneration of key management personnel (including short-term benefits and retirement scheme contributions) was **HKD 10.903 million**[635](index=635&type=chunk) [Events After Reporting Period](index=134&type=section&id=32.%20Events%20After%20Reporting%20Period) Post-reporting period events include lease renewals, a special dividend payment of HKD 34.86 million, and the redemption of remaining fund investments, with the COVID-19 pandemic's financial impact still being assessed - On **March 3, 2020**, the company paid a special dividend of **HKD 0.075 per share**, totaling approximately **HKD 34.86 million**[666](index=666&type=chunk) - On **March 25, 2020**, the Group redeemed the remaining fund investments, receiving net proceeds of approximately **HKD 24.89 million**[667](index=667&type=chunk) - The **COVID-19** pandemic, which erupted in early **2020**, impacted business activities in China; the Group has resumed production, but its specific financial impact remains uncertain and is expected to be reflected in the **2020** interim and annual financial reports[667](index=667&type=chunk)

Financial Performance - For the six months ended June 30, 2019, the company's revenue was approximately HKD 117,469,000, representing a 5.3% increase compared to HKD 111,556,000 for the same period in 2018[8]. - The gross profit for the same period was HKD 38,957,000, a decrease of 5.5% from HKD 41,207,000 in 2018, resulting in a gross margin of 33.2%, down from 36.9%[8]. - The net profit attributable to equity shareholders for the six months was HKD 4,913,000, a significant decline of 62.6% from HKD 13,137,000 in the previous year[8]. - Total revenue for the first half of 2019 was approximately HKD 117,469,000, an increase from HKD 111,556,000 in 2018, representing a growth of 5.4%[19]. - Gross profit for the first half of 2019 was HKD 38,957,000, down from HKD 41,207,000 in 2018, indicating a decrease of 5.4%[21]. - The company's profit before tax decreased significantly to HKD 8,812,000, a decline of 55.7% compared to HKD 19,908,000 in the previous year[75]. - Net profit for the period was HKD 6,346,000, representing a decrease of 59.9% from HKD 15,819,000 in the prior year[75]. - Basic and diluted earnings per share for the company were HKD 1.1, down from HKD 2.8 in the same period last year[75]. - Total comprehensive income for the period was HKD 8,452,000, compared to HKD 12,610,000 in the previous year, reflecting a decrease of 32.5%[77]. Assets and Liabilities - The company's total assets increased by 24.5% to HKD 411,279,000 as of June 30, 2019, compared to HKD 330,454,000 at the end of 2018[8]. - Cash and cash equivalents decreased by 43.6% to HKD 44,287,000 from HKD 78,587,000 in the previous year[8]. - The company's total liabilities to total assets ratio was 27.9% as of June 30, 2019, compared to 12.9% on December 31, 2018, indicating a significant increase in leverage[42]. - The company recorded current assets of approximately HKD 262,280,000 as of June 30, 2019, with a current asset net value of about HKD 194,750,000[43]. - The company reported a net cash outflow from operating activities of approximately HKD 13,280,000 for the six months ending June 30, 2019, an increase from HKD 11,030,000 for the same period in 2018[39]. - The company’s inventory rose to HKD 30,710 thousand from HKD 24,549 thousand, representing a 24.5% increase[79]. - Trade receivables and notes receivable, net of impairment provisions, increased to HKD 75,521,000 as of June 30, 2019, compared to HKD 39,575,000 as of December 31, 2018, representing an increase of 90.5%[11]. Expenses and Costs - Distribution costs rose by 3.4% to approximately HKD 7,370,000 in the first half of 2019, up from HKD 7,130,000 in 2018, consistent with sales growth[22]. - Administrative expenses increased by 23.6% to approximately HKD 26,310,000 in the first half of 2019, compared to HKD 21,290,000 in 2018, primarily due to increased salaries and benefits related to the establishment of a new subsidiary[22]. - The company incurred employee costs of HKD 46,862,000 for the six months ended June 30, 2019, compared to HKD 42,260,000 in the same period of 2018, reflecting an increase of 10.5%[135]. - The company reported a depreciation and amortization expense of HKD 13,931,000 for the six months ended June 30, 2019, compared to HKD 4,681,000 in the same period of 2018, indicating a significant increase[138]. Strategic Initiatives - The company aims to enhance brand image and value, increase market development, and invest in product innovation to improve customer satisfaction[13]. - The company is actively seeking new investment and business opportunities to diversify its existing operations[12]. - The company plans to optimize resource allocation and improve operational efficiency to meet customer demands and increase market share[14]. - The company plans to expand its operations following the acquisition of 70.16% of its shares for a total consideration of HKD 546,852,259.20[50]. Ownership Structure - As of June 30, 2019, the major shareholder, Crocodile Trade Limited, holds 326,089,600 shares, representing approximately 70.16% of the company's equity[53]. - Beijing Zhonghong Hongyi Investment Limited also holds 326,089,600 shares, equivalent to 70.16% of the equity, indicating significant control by related companies[55]. - The ownership structure includes various controlled companies, highlighting a complex network of interests among shareholders[60]. - The significant percentage of shares held by a few entities may impact corporate governance and decision-making processes[60]. Compliance and Governance - The company has maintained compliance with all provisions of the corporate governance code, except for the dual role of the chairman and CEO[69]. - The report indicates no additional disclosures of interests or short positions by directors or key executives as of June 30, 2019[62].

Financial Performance - KEE Holdings reported a revenue of HKD 197.53 million for 2018, an increase from HKD 184.73 million in 2017, representing a growth of approximately 9.7%[10] - The gross profit margin improved to 32.4% in 2018, up from 31.2% in 2017, indicating better cost management and pricing strategies[10] - The net profit margin for 2018 was -16.8%, an improvement from -24.4% in 2017, reflecting a reduction in losses[10] - Total revenue for the year ended December 31, 2018, was HKD 197,532,000, an increase of 6.9% from HKD 184,732,000 in 2017[22] - Gross profit for 2018 was HKD 63,919,000, up 10.3% from HKD 57,704,000 in 2017[22] - The net loss from continuing operations for 2018 was HKD 29,946,000, compared to a loss of HKD 13,762,000 in 2017[22] - The loss for the year ended December 31, 2018, was approximately HKD 29.95 million, influenced by a profit of HKD 12.3 million from the zipper business and a loss of HKD 45 million from other receivables[36] - The loss attributable to equity shareholders for 2018 was approximately HKD 33,180,000, a 26.5% reduction compared to HKD 45,130,000 in 2017[54] Assets and Liabilities - Total assets decreased to HKD 330.45 million in 2018 from HKD 405.76 million in 2016, showing a decline of approximately 18.5% over two years[10] - The company's total equity attributable to shareholders was HKD 264.73 million in 2018, down from HKD 314.08 million in 2017, a decrease of about 15.7%[10] - Non-current assets decreased to HKD 83,397,000 in 2018 from HKD 168,051,000 in 2017, reflecting a significant reduction[27] - Current assets increased to HKD 247,057,000 in 2018, up from HKD 212,129,000 in 2017, indicating improved liquidity[27] - Total liabilities decreased to HKD 42,153,000 in 2018 from HKD 86,347,000 in 2017, indicating a reduction in financial obligations[28] Operational Efficiency - The current ratio improved to 6.0 in 2018, compared to 5.0 in 2017, indicating better short-term financial health[10] - The company reported a significant increase in inventory turnover days, which rose to 66 days in 2018 from 62 days in 2017, suggesting a slower inventory movement[10] - KEE Holdings' operating profit margin was -14.6% in 2018, worsening from -4.5% in 2017, indicating challenges in operational efficiency[10] - The average trade receivables turnover days improved from 77 days in 2017 to 74 days in 2018[62] - Trade payables decreased by approximately 31.8% from HKD 11,210,000 in 2017 to HKD 7,640,000 in 2018[69] Market Strategy and Future Plans - The company plans to focus on market expansion and new product development to drive future growth, although specific figures were not disclosed during the call[10] - The company began collaborating with 10 new brands in 2018, including 4 domestic and 6 overseas brands, to expand its market presence[42] - The company is optimistic about future opportunities and is actively seeking attractive investment and acquisition opportunities to enhance profitability[36] - The company plans to cautiously select high-growth potential projects for acquisition without jeopardizing financial stability[36] - The company anticipates stable economic growth in China for 2019, with the textile and apparel industry expected to maintain low-speed growth due to increasing consumer brand awareness[97] Corporate Governance - The company is committed to maintaining high standards of corporate governance to protect shareholder interests and enhance corporate value[101] - The company has established three committees: audit committee, remuneration committee, and nomination committee, to oversee specific aspects of its affairs[132] - The audit committee's main role includes reviewing financial information, internal control systems, and risk management processes[134] - The company emphasizes the importance of continuous professional development for its directors to ensure they remain informed about their responsibilities[116] - The board is responsible for strategic decision-making and monitoring the company's performance, ensuring that all decisions are made in the best interest of the company[114] Environmental Management - The company has established an environmental management policy in accordance with ISO14001 standards to minimize environmental impact[179] - There were no violations of environmental laws regarding emissions, wastewater treatment, or waste disposal during the year[180] - The company has implemented a wastewater recycling system, saving over 100 tons of water daily through improved processes and automation[186] - The company actively monitors wastewater discharge, ensuring compliance with the textile dyeing industry's pollution discharge standards[186] - The company has reduced landfill burden by dehydrating dyeing sludge, thereby decreasing its volume and water content[184]