Financial Performance - Revenue for the six months ended June 30, 2022, was RMB 1,618,373 thousand, a decrease of 11.5% compared to RMB 1,827,227 thousand in 2021[10] - Profit attributable to owners of the company was RMB 10,123 thousand, down 33.0% from RMB 15,113 thousand in 2021[10] - Gross margin decreased to 46.6%, compared to 48.7% in the previous year[10] - Operating profit increased to RMB 46,803 thousand, up 34.9% from RMB 34,702 thousand in the previous year[10] - Net profit for the period was RMB 1,852 thousand, significantly lower than RMB 14,096 thousand in the prior year[66] - Total assets as of June 30, 2022, amounted to RMB 3,636,928 thousand, down from RMB 4,045,523 thousand at the end of 2021[69] - The company reported a total comprehensive income of RMB 11,712 thousand, compared to RMB 6,047 thousand in the previous year[66] - The company reported a net loss of RMB 11,018 thousand in other income and expenses, compared to a net gain of RMB 1,093 thousand in the previous year[110] - The total income tax expense for the six months ended June 30, 2022, was RMB 29,719,000, significantly higher than RMB 3,155,000 for the same period in 2021[119] Revenue Breakdown - Retail sales accounted for 46.9% of total revenue, while sales to franchisees and e-commerce contributed 29.3% and 20.5%, respectively[23] - Retail sales amounted to RMB 758,952 thousand, down from RMB 877,952 thousand, representing a decline of 13.5% year-over-year[110] - Sales to franchisees were RMB 473,498 thousand, a decrease of 10.5% compared to RMB 528,868 thousand in the previous year[110] - E-commerce sales decreased to RMB 332,674 thousand from RMB 357,628 thousand, reflecting a decline of 7%[110] Cost and Expenses - Gross profit for the same period was RMB 754,234 thousand, down from RMB 890,178 thousand, reflecting a decline in gross margin[66] - Selling and marketing expenses decreased by about 12.8% to approximately RMB 644,351,000, mainly due to a reduction in commissions from franchisee arrangements[26] - General and administrative expenses decreased by approximately 7.4% to about RMB 117,214,000, attributed to the simplification of the corporate structure[29] - Employee benefits expenses, including director remuneration, were RMB 161,012 thousand, a decrease of 12.6% from RMB 184,284 thousand[112] Inventory and Cash Management - Inventory levels decreased by approximately RMB 205,857,000 as of June 30, 2022, compared to December 31, 2021[38] - The inventory turnover ratio improved from 3.4 times to 2.8 times over the same period[39] - Cash and cash equivalents increased to RMB 554,631 thousand from RMB 515,547 thousand, indicating a stronger liquidity position[69] - The company's cash flow management appears to be improving, as evidenced by the reduction in total liabilities and current liabilities[72] Debt and Equity - Total debt ratio was approximately 19.0% as of June 30, 2022, slightly down from 19.5% at the end of 2021[41] - The company maintained a net cash position with a net debt ratio of approximately negative 18.6% as of June 30, 2022[41] - The company's total liabilities decreased significantly to RMB 1,740,069 thousand from RMB 2,151,617 thousand, representing a reduction of approximately 19.2%[72] - Current liabilities were reported at RMB 1,405,747 thousand, down from RMB 1,951,571 thousand, indicating a decrease of about 28%[72] Strategic Initiatives - The company plans to enhance brand positioning and optimize membership management to attract its 60 million members[15] - New product development will focus on professional fabrics and designs, with plans to launch high-quality products in the second half of 2022[16] - The company aims to expand its offline store network in lower-tier cities to capture new business opportunities[19] - E-commerce initiatives include multiple live-streaming events and enhancing product visibility on online platforms[20] Sustainability and Corporate Governance - The company is committed to environmental sustainability and has obtained ISO 14001 certification for its environmental management system[57] - The company aims to leverage its competitive advantages to unlock untapped potential and drive growth, despite facing significant challenges in the market[58] Share Issuance and Capital Management - The company raised approximately HKD 600 million by issuing 240 million shares at HKD 2.50 each to Fosun International Limited, with net proceeds of about HKD 599 million intended for sales channel reform, potential mergers, acquisitions, and general working capital[45] - The company raised approximately HKD 510 million by issuing 121,443,213 shares at HKD 4.20 each to Windcreek Limited and others, with net proceeds of about HKD 509 million intended for similar purposes as the Fosun issuance[49] Employee and Talent Management - The company had approximately 3,100 full-time employees as of June 30, 2022, down from 3,300 employees at the end of 2021[56] - The company aims to retain existing management and attract new talent through the 2019 Share Award Scheme, which replaces the previous employee share option plan[175]

Financial Performance - In 2021, the company's revenue growth was impacted by increased costs, including a significant rise in raw material prices, particularly cotton, which increased by approximately 44% year-on-year[10]. - The company's overall operational results in 2021 were below expectations, particularly in the second half of the year, due to increased returns and lower-than-expected revenue[12]. - In 2021, the total revenue increased by approximately 9.7% to about RMB 3,355,403,000 compared to RMB 3,057,491,000 in 2020[24]. - Product sales revenue rose by approximately 6.5% to about RMB 3,240,377,000 from RMB 3,041,664,000 in the previous year[24]. - Gross profit margin decreased to approximately 42.1% from 48.8% in 2020, primarily due to inventory impairment provisions of about RMB 146,134,000 and rising raw material prices[26]. - Other income decreased by approximately 41.6% to about RMB 43,893,000 from RMB 75,187,000 in 2020[29]. - The group reported a total reserve of approximately RMB 1,500,348,000 as of December 31, 2021, a decrease from RMB 1,558,426,000 in 2020[196]. - The group did not declare any interim or final dividends for the year ended December 31, 2021, consistent with 2020[187]. Product Development and Innovation - The company launched several new products in 2021, including dust-free cotton homewear and size-free underwear, with the evergreen product ratio increasing from about 6.0% to approximately 12.5%[12]. - The company plans to upgrade its product line in 2022, introducing enhanced versions of popular products and new items such as soft cup bras and massage cup bras[14]. - The company has developed around 40 new materials over the past two years in collaboration with top raw material manufacturers[14]. - New product launches are expected to contribute an additional 200 million in revenue in the upcoming year[58]. - The company is investing heavily in technology development, allocating 100 million towards R&D initiatives in 2022[58]. Market Expansion and E-commerce - The company is expanding its e-commerce presence by collaborating with additional platforms such as Douyin, Kuaishou, and Pinduoduo, alongside major platforms like Alibaba and JD[15]. - The company is actively seeking to expand its business in lower-tier markets and is looking for opportunities to open new stores[14]. - The company plans to enhance its online sales platform, expecting a 40% increase in e-commerce revenue by the end of 2022[66]. - Market expansion plans include entering two new regions, which are anticipated to increase market share by 5%[58]. Operational Efficiency - The company is focusing on improving operational efficiency by reducing inventory units by approximately 42.8% year-on-year[12]. - The management team emphasized the importance of enhancing supply chain efficiency, aiming to reduce costs by 8% over the next year[58]. Corporate Governance - The board has adopted the corporate governance code as per the Hong Kong Stock Exchange, with a commitment to high standards of management[72]. - The board consists of 11 members, including 2 female directors, reflecting a balanced structure and diverse skills necessary for the company's development[76]. - The board confirmed compliance with the standards set out in the "Code of Conduct for Directors' Securities Transactions" for the year ended December 31, 2021[93]. - The company has established a risk management framework based on the COSO framework to identify and manage risks effectively[97]. Environmental, Social, and Governance (ESG) Initiatives - The company is committed to environmental sustainability and has obtained ISO 14001 certification for its environmental management system[50]. - The board of directors oversees the company's environmental, social, and governance (ESG) performance and regularly reviews significant ESG issues[119]. - The company aims to balance economic success with stakeholder expectations and environmental needs[116]. - The ESG report is prepared in accordance with the Hong Kong Stock Exchange's guidelines, ensuring compliance with principles of materiality, quantification, balance, and consistency[112]. Employee Engagement and Development - The company had around 3,300 full-time employees as of December 31, 2021, an increase from 3,200 in the previous year, with compensation linked to individual performance and overall company results[49]. - Employee compensation is generally above the industry average, with performance evaluations influencing bonuses and salary adjustments[127]. - The company organized various employee engagement activities to foster a sense of belonging and improve morale[128]. - The company focuses on employee development through tailored training programs and career advancement opportunities[134]. Community Engagement and Social Responsibility - The company actively engages in community investment opportunities to fulfill its social responsibilities and support local communities[172]. - The group donated over RMB 1.1 million for various charitable activities, including support for Xiamen University and disaster relief in Fujian and Henan provinces[173]. - A total of 13 volunteer projects were organized during the reporting period, accumulating over 250 hours of volunteer work[173]. Customer Satisfaction and Product Quality - The company implemented strict policies to protect sensitive customer data, with no complaints related to privacy or data loss reported in 2021[151]. - In 2021, the company maintained a complaint rate of less than 0.002% for sold or shipped products, which is below the industry average[152]. - The company achieved ISO 9001:2015 certification, confirming its commitment to consistent quality in products and services[151].

8 星b山西 Cosmo Lady (China) Holdings Company Limited 都市麗人(中國)控股有限公司 (於閱曼群島註冊成立的有限公司) 股份代號：2298 中 期 報 告 FIS (01:1) DIS 019, 003MO 18888 kb 目錄 . . . . | --- | --- | |------------------------------|-------| | 公司資料 | 4 | | 管理層討論與分析 | 5 | | 中期財務資料之審閱報告 | 14 | | 簡明綜合損益及其他全面收益表 | 15 | | 簡明綜合資產負債表 | 16 | | 簡明綜合權益變動表 | 18 | | 簡明綜合現金流量表 | 19 | | 簡明綜合中期財務資料附註 | 20 | | 其他資料 | 48 | temme 新品登场 双层柔心 双倍柔滑 本 ® (1) இ 美国LYCRA组密高弹纤维 360*柔弹 全天零束缚 业反重力累拉塑形 小时舒适承托 全天零压力 身馬内衣 | 2 4 小 时 零 感 自由 双层柔心杯 现已上市 all 13 3 二零二一年中期報告 都市麗人(中國)控股 ...

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8 都市丽 cosmo caay Cosmo Lady (China) Holdings Company Limited 都市麗人(中國)控股有限公司 (於開曼群島註冊成立的有限公司) 股份代號：2298 COMES Ordifen 欧迪芬 中期 報告 目錄 | --- | --- | |------------------------------|-------| | | | | 公司資料 | 4 | | 財務概要 | 5 | | 管理層討論與分析 | 6 | | 中期財務資料之審閱報告 | 17 | | 簡明綜合損益及其他全面收益表 | 18 | | 簡明綜合資產負債表 | 19 | | 簡明綜合權益變動表 | 21 | | 簡明綜合現金流量表 | 22 | | 簡明綜合中期財務資料附註 | 23 | | 其他資料 | 48 | 1 2 都市麗人(中國)控股有限公司 二零二零年中期報告 11 e 二零二零年中期報告 都市麗人(中國)控股有限公司 3 公司資料 | --- | --- | |----------------------------------------------------------- ...

Company Overview [Company Information](index=3&type=section&id=%E5%85%AC%E5%8F%B8%E8%B5%84%E6%96%99) Urban Beauty (China) Holdings Limited's board, listing, offices, and key professional service providers are outlined - The company's board comprises executive, non-executive, and independent non-executive directors, with **Mr. Zheng Yaonan** as Chairman[4](index=4&type=chunk) - The company's shares are listed on The Stock Exchange of Hong Kong Limited under stock code **2298**[4](index=4&type=chunk) - The registered office is in the Cayman Islands, headquarters in Dongguan, Guangdong Province, and Hong Kong business address on Connaught Road Central[4](index=4&type=chunk) - **PricewaterhouseCoopers** is the company's auditor, with principal bankers including Bank of China (Hong Kong) Limited and Industrial and Commercial Bank of China Limited[4](index=4&type=chunk) [Financial Highlights](index=4&type=section&id=%E8%B2%A1%E5%8B%99%E6%A6%82%E8%A6%81) Urban Beauty's key financial indicators for the year ended December 31, 2019, show significant declines in revenue and profit, a substantial drop in gross profit margin, and a recorded loss 2019 vs 2018 Financial Highlights Comparison | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 4,081,885 | 5,096,453 | -19.9% | | Operating (Loss)/Profit | (1,389,193) | 483,978 | From profit to loss | | (Loss)/Profit Attributable to Owners of the Company | (1,297,812) | 378,229 | From profit to loss | | Gross Profit Margin | 22.6% | 41.7% | -19.1% | | Operating (Loss)/Profit Margin | -34.0% | 9.5% | -43.5% | | (Loss)/Profit Margin Attributable to Owners of the Company | -31.8% | 7.4% | -39.2% | | (Loss)/Earnings Per Share – Basic | (57.76) RMB cents | 17.15 RMB cents | From profit to loss | | Final Dividend Per Share | – | 3.75 HK cents (3.20 RMB cents) | No dividend declared | | Special Final Dividend Per Share | – | 6.20 HK cents (5.30 RMB cents) | No dividend declared | Management Report and Analysis [Chairman's Statement](index=5&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A) The company faced a challenging 2019 due to global economic slowdowns and domestic retail market shifts, leading to operational issues and a comprehensive transformation plan - Global economic growth slowed in 2019, trade barriers increased, and the Chinese retail market faced evolving consumption patterns, diversified consumer preferences, and technological innovation challenges[8](index=8&type=chunk) - The company experienced uneven retail and replenishment capabilities among franchisees, diversified sales channels, and inventory accumulation in both self-operated and franchised stores due to product quality and structural adjustments[9](index=9&type=chunk) - The previous strategy focusing on fast-fashion, sexy intimate wear failed to meet the demand for practical, functional, and cost-effective products from most female consumers, impairing store productivity and profitability[9](index=9&type=chunk) - The company appointed **Mr. Vincent H.C. Siu** as the new CEO and engaged Boston Consulting Group to formulate a transformation plan, including product strategy adjustments, channel expansion, inventory clearance, and cost control[12](index=12&type=chunk) - The company recognized substantial one-off accounting provisions, including approximately **RMB 738 million** for inventory impairment, **RMB 395 million** for trade receivables impairment and write-offs, and **RMB 52 million** for loss-making store closure costs and renovation provisions[16](index=16&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) This section analyzes the company's 2019 financial performance, highlighting a 19.9% revenue decrease and a significant drop in gross profit margin due to inventory impairment, alongside strategic adjustments and a net cash position - Total revenue decreased by **19.9%** to approximately **RMB 4.082 billion** in 2019, primarily due to adverse factors mentioned in the Chairman's Statement[18](index=18&type=chunk) 2019 Revenue by Sales Channel Comparison | Sales Channel | 2019 (RMB thousands) | 2019 (%) | 2018 (RMB thousands) | 2018 (%) | | :--- | :--- | :--- | :--- | :--- | | Sales to franchisees | 1,950,422 | 47.8 | 2,800,790 | 55.0 | | Retail | 1,378,873 | 33.8 | 1,494,518 | 29.3 | | E-commerce | 627,481 | 15.4 | 712,450 | 14.0 | | Raw material trading | 125,109 | 3.0 | 88,695 | 1.7 | | **Total Revenue** | **4,081,885** | **100.0** | **5,096,453** | **100.0** | 2019 Revenue by Product Category Comparison | Product Category | 2019 (RMB thousands) | 2019 (%) | 2018 (RMB thousands) | 2018 (%) | | :--- | :--- | :--- | :--- | :--- | | Bras | 1,872,085 | 45.9 | 2,504,239 | 49.1 | | Underwear | 745,952 | 18.3 | 819,577 | 16.1 | | Sleepwear and loungewear | 577,739 | 14.1 | 651,553 | 12.8 | | Thermal wear | 358,046 | 8.8 | 529,315 | 10.4 | | Raw material trading | 125,109 | 3.0 | 88,695 | 1.7 | | Others | 402,954 | 9.9 | 503,074 | 9.9 | | **Total Revenue** | **4,081,885** | **100.0** | **5,096,453** | **100.0** | - Gross profit margin significantly decreased to **22.6%** (2018: 41.7%), primarily due to a one-off write-down of approximately **RMB 738 million** for old inventory; excluding this, the gross profit margin would be approximately **40.7%**[26](index=26&type=chunk) - Selling and marketing expenses increased by **9.6%** to approximately **RMB 1.613 billion**, mainly due to higher depreciation and amortization and increased advertising and promotional activities[27](index=27&type=chunk) - General and administrative expenses increased by **16.7%** to approximately **RMB 304 million**, primarily due to higher consulting service fees and provisions for renovation costs of loss-making stores[28](index=28&type=chunk) 2019 Working Capital Management Indicators Comparison | Indicator | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Average inventory turnover days | 107 days | 140 days | Decreased by 33 days | | Average trade receivables turnover days | 49 days | 49 days | Unchanged | | Average trade payables turnover days | 68 days | 80 days | Decreased by 12 days | - The total number of stores in the distribution network decreased from **7,305** in 2018 to **5,970** in 2019, comprising **1,269** self-operated stores and **4,701** franchised stores[49](index=49&type=chunk) - In 2020, the company will venture into personal hygiene products, launching high-quality masks and antibacterial intimate wear, and plans to introduce air disinfectant purifiers and sprays to expand its product portfolio[52](index=52&type=chunk) [Directors' Report](index=49&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83%E5%A0%B1%E5%91%8A) The Directors' Report confirms the company's core business in intimate wear design, R&D, and sales, reviews 2019 performance, and details dividend policy, share repurchases, key stakeholders, and director interests - The company's principal business is the design, research, development, and sale of self-branded intimate wear products, ranking as China's largest intimate wear brand enterprise by retail sales value in 2019[194](index=194&type=chunk) - No interim dividend was paid in 2019, and the Board did not recommend a final dividend or special final dividend (both were paid in 2018)[197](index=197&type=chunk) - The company has adopted a dividend policy, with recommendations considering financial results, distributable reserves, shareholder interests, working capital needs, future expansion plans, taxation, gearing ratio, financial covenants, and overall business and economic conditions[200](index=200&type=chunk) - In 2019, the company repurchased and cancelled **6,567,000** shares on the Stock Exchange for a total consideration of approximately **HK$15,653,000**[207](index=207&type=chunk) - In 2019, the company's largest customer and top five customers accounted for **0.6%** and **2.7%** of turnover, respectively, while the largest supplier and top five suppliers accounted for **2.9%** and **11.0%** of purchases, respectively[211](index=211&type=chunk) - Directors including Mr. Zheng Yaonan, Ms. Wu Xiaoli, Mr. Zhang Shengfeng, Mr. Lin Zonghong, Mr. Cheng Zuming, Mr. Wen Baoma, and Dr. Lyu Hongde hold interests in the company's shares, with Mr. Zheng Yaonan and his spouse Ms. Wu Xiaoli collectively holding approximately **34.19%** of the shares[222](index=222&type=chunk)[224](index=224&type=chunk) - Post-reporting period, the COVID-19 pandemic led to the closure of most stores in February and early March, significantly reducing retail sales, but most stores have since reopened, and no material adverse impact on accounting items has been identified as of the report date[270](index=270&type=chunk) Corporate Governance and Social Responsibility [Biographies of Directors and Senior Management](index=16&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E9%AB%98%E7%B4%9A%E7%AE%A1%E7%90%86%E5%B1%A4%E5%B1%A5%E6%AD%B7) This section details the backgrounds, experiences, and key responsibilities of the company's executive, non-executive, and independent non-executive directors, as well as senior management, highlighting their industry expertise and leadership - **Mr. Zheng Yaonan** serves as Chairman of the Board, Executive Director, and Chairman of the Nomination Committee, possessing over two decades of experience in intimate wear manufacturing and sales, responsible for the Group's strategic planning, business development, and corporate management[54](index=54&type=chunk) - **Mr. Vincent H.C. Siu** joined the Group as Chief Executive Officer in August 2019, previously serving as Senior Vice President of Commercial for Adidas Greater China, and is responsible for managing the Group's intimate wear business and strategic development[69](index=69&type=chunk) - The senior management team includes **Mr. Zhang Shengfeng** (responsible for design, R&D, and procurement), **Ms. Wu Xiaoli** (human resources and administration), **Mr. Lo Hong Shing** (Chief Financial Officer), and **Mr. Yuasa Tsutomu** (Chief Technology Officer), covering all critical operational functions[55](index=55&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk) [Corporate Governance Report](index=22&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%A0%B1%E5%91%8A) The report details the company's compliance with the Corporate Governance Code in 2019, covering board composition, diversity policy, committee functions, director development, and securities trading, confirming separation of Chairman and CEO roles - The company complied with the Corporate Governance Code's requirement for separation of Chairman and Chief Executive Officer functions following **Mr. Vincent H.C. Siu's** appointment as CEO on August 19, 2019[78](index=78&type=chunk)[79](index=79&type=chunk) - The Board comprises **11** directors, including **3** executive, **4** non-executive, and **4** independent non-executive directors, and has adopted a board diversity policy considering gender, age, culture, educational background, and professional experience[79](index=79&type=chunk)[81](index=81&type=chunk) - The company established Audit, Nomination, Remuneration, and Risk Management Committees, each with clear terms of reference and regular reporting to the Board[85](index=85&type=chunk) - The Board confirmed maintaining appropriate and effective risk management and internal control systems, with no material issues affecting financial position or operating results identified[106](index=106&type=chunk)[109](index=109&type=chunk) - The company is committed to effective communication with shareholders and investors, having adopted a shareholder communication policy and providing information via its website and investor meetings[111](index=111&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) [Environmental, Social and Governance Report](index=33&type=section&id=%E7%92%B0%E5%A2%83%E3%80%81%E7%A4%BE%E6%9C%83%E5%8F%8A%E7%AE%A1%E6%B2%BB%E5%A0%B1%E5%91%8A) This report details the company's ESG commitments and practices, including employee welfare, supply chain management, product responsibility, anti-corruption, environmental protection, and community investment, demonstrating a balance between economic success and stakeholder expectations - The company's vision is to be a global mass-market intimate wear brand, its mission is to care for customers and create healthy lifestyles, its core values are accountability, innovation, efficiency, and win-win, and its strategic core is to promote the "Refined + Core" strategy[123](index=123&type=chunk) - The company highly values its employees, promoting open and trusting work relationships, fair talent selection, and providing career development paths and training; in 2019, the total workforce was **3,500** employees, with an average monthly turnover rate of **2.39%**[129](index=129&type=chunk)[130](index=130&type=chunk) - The company has obtained **ISO 45001:2018** Occupational Health and Safety Management System certification and reported no work-related injuries or fatalities during the reporting year[136](index=136&type=chunk) - In 2019, the company's supplier base decreased from **175** to **106**, with strict supplier screening, evaluation, and communication processes established to ensure product quality and ethical standards[142](index=142&type=chunk)[147](index=147&type=chunk) - The company has obtained **ISO 9001:2015** Quality Management System certification and established internal physical and chemical laboratories accredited by the China National Accreditation Service for Conformity Assessment (CNAS) to ensure product quality and safety[153](index=153&type=chunk) - The company maintains a zero-tolerance policy towards any unethical behavior, implementing anti-corruption policies, a whistleblowing hotline, and cooperating with law enforcement to ensure ethical business operations[154](index=154&type=chunk)[155](index=155&type=chunk) - The company has achieved **ISO 14001:2015** Environmental Management System certification and implemented various measures to reduce emissions, conserve resources (e.g., LED lighting, efficient water taps, electronic records replacing paper receipts), and protect the environment[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk) 2019 vs 2018 Environmental Key Performance Indicators Comparison | Environmental Key Performance Indicator | Unit | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | :--- | | Nitrogen oxides emissions | tonnes | 0.406 | 0.860 | -52.8% | | Sulfur oxides emissions | tonnes | 0.000730 | 0.00124 | -41.1% | | Particulate matter emissions | tonnes | 0.0399 | 0.0846 | -52.9% | | Total greenhouse gas emissions | tonnes (CO2) | 5,554 | 6,274 | -11.4% | | Total energy consumption | Gigajoules | 25,090 | 29,009 | -13.5% | | Water consumption | cubic meters | 176,937 | 193,471 | -8.5% | | Packaging materials | tonnes | 271 | 293 | -7.5% | - In 2019, the company donated approximately **RMB 828 thousand** and contributed **550** volunteer hours to community investment, undertaking **8** volunteer projects covering community care, health, and sports promotion[171](index=171&type=chunk) Financial Statements [Independent Auditor's Report](index=63&type=section&id=%E7%8D%A8%E7%AB%8B%E6%A0%B8%E6%95%B8%E5%B8%AB%E5%A0%B1%E5%91%8A) PricewaterhouseCoopers issued an unmodified opinion on Urban Beauty's 2019 consolidated financial statements, affirming their fair presentation of the company's financial position, performance, and cash flows in compliance with IFRS and Hong Kong Companies Ordinance, with inventory and trade receivables impairment highlighted as key audit matters - PricewaterhouseCoopers issued an unmodified opinion on the Group's 2019 consolidated financial statements[273](index=273&type=chunk) - Key audit matters included assessing the carrying value of inventories (total inventories of **RMB 1.467 billion**, impairment provision of **RMB 787 million**) and assessing the impairment provision for trade receivables (total of **RMB 349 million**, impairment provision of **RMB 73 million**)[278](index=278&type=chunk)[282](index=282&type=chunk) - The auditor evaluated the assumptions and methods applied by management in calculating inventory and trade receivables impairment provisions, deeming them supported by available audit evidence[278](index=278&type=chunk)[283](index=283&type=chunk) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=68&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) In 2019, the company's revenue decreased year-on-year, operating activities shifted from profit to a substantial loss, and net profit also turned into a significant loss, driven by a sharp decline in gross profit and a large increase in financial asset impairment losses, resulting in a considerable total comprehensive loss 2019 vs 2018 Consolidated Statement of Profit or Loss and Other Comprehensive Income Key Data | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 4,081,885 | 5,096,453 | -19.9% | | Cost of sales | (3,159,299) | (2,972,889) | +6.3% | | Gross profit | 922,586 | 2,123,564 | -56.5% | | Selling and marketing expenses | (1,612,604) | (1,471,006) | +9.6% | | General and administrative expenses | (304,106) | (260,589) | +16.7% | | Net impairment losses on financial assets | (419,550) | (4,492) | +9232.8% | | Operating (loss)/profit | (1,389,193) | 483,978 | From profit to loss | | (Loss)/profit before income tax | (1,406,538) | 502,282 | From profit to loss | | (Loss)/profit for the year | (1,299,792) | 379,609 | From profit to loss | | Total comprehensive (loss)/income for the year | (1,291,850) | 414,042 | From profit to loss | | Basic (loss)/earnings per share | (57.76) RMB cents | 17.15 RMB cents | From profit to loss | [Consolidated Statement of Financial Position](index=69&type=section&id=%E7%B6%9C%E5%90%88%E8%B3%87%E7%94%A2%E8%B2%A0%E5%82%B5%E8%A1%A8) As of December 31, 2019, the company's total assets and equity significantly decreased, with notable reductions in current assets like inventories and trade receivables, while non-current assets increased due to right-of-use assets from new lease accounting standards, and total liabilities rose, particularly current lease liabilities and non-current borrowings 2019 vs 2018 Consolidated Statement of Financial Position Key Data | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Non-current assets | 1,826,313 | 1,121,244 | +62.9% | | Current assets | 2,513,726 | 4,294,956 | -41.5% | | **Total Assets** | **4,340,039** | **5,416,200** | **-19.8%** | | **Equity** | | | | | Share capital and reserves attributable to owners of the Company | 2,536,623 | 4,047,549 | -37.3% | | Non-controlling interests | 15,989 | 15,056 | +6.2% | | **Total Equity** | **2,552,612** | **4,062,605** | **-37.1%** | | **Liabilities** | | | | | Current liabilities | 1,314,192 | 1,339,861 | -1.9% | | Non-current liabilities | 473,235 | 13,734 | +3345.8% | | **Total Liabilities** | **1,787,427** | **1,353,595** | **+32.0%** | - Inventories decreased from **RMB 1.165 billion** to **RMB 680 million**, and trade receivables decreased from **RMB 826 million** to **RMB 276 million**, primarily due to significant impairment provisions[305](index=305&type=chunk) - Right-of-use assets increased by **RMB 517 million** due to the adoption of IFRS 16[305](index=305&type=chunk) - Total borrowings increased from **RMB 184 million** to **RMB 455 million**, with non-current borrowings increasing from zero to **RMB 305 million**[309](index=309&type=chunk) [Consolidated Statement of Changes in Equity](index=71&type=section&id=%E7%B6%9C%E5%90%88%E6%AC%8A%E7%9B%8A%E8%AE%8A%E5%8B%95%E8%A1%A8) In 2019, the company's total equity significantly decreased, mainly due to the loss for the year and dividends paid, while share premium reduced from dividend payments and share repurchases, and other reserves changed due to share award schemes and exchange differences 2019 vs 2018 Consolidated Statement of Changes in Equity Key Data | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Total equity at beginning of year | 4,062,605 | 3,356,113 | +21.0% | | Total comprehensive (loss)/income for the year | (1,291,850) | 414,042 | From profit to loss | | Dividends paid | (196,706) | (115,725) | +69.9% | | Shares repurchased and cancelled in the market | (13,454) | (29,080) | -53.7% | | Equity-settled compensation | 7,944 | 5,607 | +41.7% | | Shares purchased for share award scheme | (18,840) | (1,121) | +1580.6% | | Total equity at end of year | 2,552,612 | 4,062,605 | -37.1% | - The loss attributable to owners of the company in 2019 was **RMB 1,297,812 thousand**, leading to a substantial reduction in retained earnings[311](index=311&type=chunk) - Share premium decreased due to dividends paid of **RMB 196,706 thousand** and shares repurchased and cancelled in the market of **RMB 13,011 thousand**[311](index=311&type=chunk) [Consolidated Statement of Cash Flows](index=73&type=section&id=%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In 2019, the company's operating cash flow shifted from net inflow to net outflow, investment cash outflow decreased, and financing cash flow moved from net inflow to net outflow, resulting in a net decrease in cash and cash equivalents 2019 vs 2018 Consolidated Statement of Cash Flows Key Data | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Net cash (used in)/generated from operating activities | (247,929) | 50,797 | From inflow to outflow | | Net cash used in investing activities | (215,902) | (236,968) | -8.9% | | Net cash (used in)/generated from financing activities | (193,296) | 235,317 | From inflow to outflow | | Net (decrease)/increase in cash and cash equivalents | (657,127) | 49,146 | From increase to decrease | | Cash and cash equivalents at end of year | 854,164 | 1,496,163 | -42.8% | - Net cash outflow from operating activities was primarily influenced by the loss before income tax of **RMB 1.407 billion** and changes in working capital, such as decreases in trade receivables and inventories[580](index=580&type=chunk) - Net cash outflow from financing activities was mainly due to dividend payments of **RMB 197 million**, loan repayments of **RMB 199 million**, and lease payments of **RMB 218 million**, despite receiving **RMB 470 million** in loan proceeds[318](index=318&type=chunk) [Notes to the Consolidated Financial Statements](index=74&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E6%B3%A8) The notes provide detailed explanations and supplementary information on the company's financial position, performance, and cash flows, covering accounting policies, risk management, estimates, segment information, revenue and expense breakdowns, balance sheet items, equity changes, cash flow notes, related party transactions, subsidiary information, and post-reporting period events - The company's functional currency is HK dollars, while its main Chinese subsidiaries' functional currency is RMB, and the financial statements are presented in RMB[346](index=346&type=chunk) - The initial adoption of IFRS 16 Leases on January 1, 2019, led to the recognition of lease liabilities and right-of-use assets, with adjustments made to the opening statement of financial position[326](index=326&type=chunk)[335](index=335&type=chunk) - Post-reporting period, the COVID-19 pandemic significantly impacted the company's retail sales in February and early March, but most stores have resumed operations, and the company is assessing its impact on financial position and operating results[614](index=614&type=chunk) [1 General Information](index=74&type=section&id=1%20%E4%B8%80%E8%88%AC%E8%B3%87%E6%96%99) This section introduces the company's registration details, listing venue, principal activities, ultimate holding company, and the presentation currency and approval date of the financial statements - The company was incorporated in the Cayman Islands on January 28, 2014, and its ordinary shares were listed on the Main Board of the Stock Exchange of Hong Kong on June 26, 2014[320](index=320&type=chunk) - The principal business involves the design, marketing, and sale of intimate wear products in China[320](index=320&type=chunk) - The ultimate holding company is Yao Li Investment Holdings Limited, controlled by **Mr. Zheng Yaonan**[320](index=320&type=chunk) - The consolidated financial statements are presented in RMB and were approved for issue by the Board of Directors on March 25, 2020[321](index=321&type=chunk) [2 Summary of Significant Accounting Policies](index=74&type=section&id=2%20%E9%87%8D%E8%A6%81%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E6%A6%82%E8%A6%81) This section outlines the Group's key accounting policies for financial statement preparation, including newly adopted and revised standards (especially IFRS 16 Leases), consolidation principles, asset measurement, revenue recognition, employee benefits, and share-based payments - The Group first adopted **IFRS 16 Leases** on January 1, 2019, applying simplified transition provisions without restating 2018 comparative figures[326](index=326&type=chunk) - Following IFRS 16 adoption, leases previously classified as operating leases resulted in the recognition of lease liabilities and right-of-use assets, with **RMB 152,132 thousand** in lease liabilities recognized on January 1, 2019[326](index=326&type=chunk)[330](index=330&type=chunk) - The principle of consolidation requires full consolidation of entities over which the Group has control[337](index=337&type=chunk) - Inventories are stated at the lower of cost and net realizable value, with cost determined using the weighted average method[369](index=369&type=chunk) - Revenue recognition is primarily based on the point at which control of products is transferred, including sales to franchisees, retail sales, and e-commerce transactions[407](index=407&type=chunk)[411](index=411&type=chunk) [3 Financial Risk Management](index=93&type=section&id=3%20%E8%B2%A1%E5%8B%99%E9%A2%A8%E9%9A%AA%E7%AE%A1%E7%90%86) This section describes the market risks (foreign exchange, interest rate, price), credit risk, and liquidity risk faced by the Group, along with the company's policies and methods for managing these risks - The Group's primary transactions are denominated in RMB, resulting in no significant foreign exchange risk; borrowings are at fixed interest rates, thus not exposed to cash flow interest rate risk[433](index=433&type=chunk)[434](index=434&type=chunk) - Credit risk is managed by extending credit only to franchisees with good credit records, collecting deposits, and placing bank balances with reputable financial institutions[436](index=436&type=chunk)[438](index=438&type=chunk) - As of December 31, 2019, the Group was in a net cash position, with total bank balances, cash, and current investments exceeding bank borrowings by approximately **RMB 43,339 thousand**[443](index=443&type=chunk) - Fair value estimates for financial instruments use Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs) valuation hierarchies[446](index=446&type=chunk) [4 Critical Accounting Estimates and Judgements](index=98&type=section&id=4%20%E9%87%8D%E8%A6%81%E6%9C%83%E8%A8%88%E4%BC%B0%E8%A8%88%E5%8F%8A%E5%88%A4%E6%96%B7) This section discloses areas requiring significant management estimates and judgments in preparing financial statements, including inventory net realizable value, impairment of financial and non-financial assets, current and deferred income tax, and fair value of certain financial assets - Estimates for inventory net realizable value are based on current market conditions and past sales experience, subject to change due to customer preferences and competition[453](index=453&type=chunk) - Impairment of financial assets, particularly trade receivables, relies on assumptions about default risk and expected loss rates, considering macroeconomic factors[454](index=454&type=chunk) - Assessing impairment for non-financial assets requires judgment and estimation to determine their recoverable amounts[455](index=455&type=chunk) - Recognition of income tax provisions and deferred tax assets involves significant judgment, which may be adjusted if final tax outcomes differ from initial records[456](index=456&type=chunk) [5 Segment Information](index=99&type=section&id=5%20%E5%88%86%E9%83%A8%E8%B3%87%E6%96%99) The Group operates as a single operating segment, primarily engaged in the design, marketing, and sale of intimate wear products, with all major revenue derived from China - The Group operates as a single operating segment, with the Executive Directors serving as the chief operating decision makers[459](index=459&type=chunk) - All major revenue is derived from China, and no single external customer accounted for more than **10%** of revenue in 2019[460](index=460&type=chunk)[461](index=461&type=chunk) [6 Revenue](index=99&type=section&id=6%20%E6%94%B6%E5%85%A5) This section details the Group's revenue breakdown by sales channel and discloses contract liabilities related to sales to franchisees and raw material trading 2019 vs 2018 Revenue by Sales Channel | Sales Channel | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Sales to franchisees | 1,950,422 | 2,800,790 | | Retail | 1,378,873 | 1,494,518 | | E-commerce | 627,481 | 712,450 | | Raw material trading | 125,109 | 88,695 | | **Total Revenue** | **4,081,885** | **5,096,453** | 2019 vs 2018 Contract Liabilities | Contract Liability Type | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Contract liabilities related to sales to franchisees | 108,227 | 77,621 | | Contract liabilities related to raw material trading | 25,448 | 8,142 | | **Total Contract Liabilities** | **133,675** | **85,763** | - Revenue recognized from opening contract liabilities in 2019 was approximately **RMB 85,763 thousand**[462](index=462&type=chunk) [7 Other Income](index=100&type=section&id=7%20%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) This section lists the Group's other income sources for 2019, primarily including government grants, logistics, warehousing, and delivery income, and software usage fees, with a significant decrease in government grants 2019 vs 2018 Other Income | Income Source | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Government grants | 13,559 | 41,268 | | Logistics, warehousing and delivery income | 10,252 | 10,564 | | Software usage fee income | 1,290 | 2,462 | | Franchise fee income | 768 | 1,489 | | Investment income from financial assets at fair value through profit or loss | 157 | 8,885 | | Dividends received from financial assets at fair value through other comprehensive income | – | 14,000 | | Others | 9,893 | 12,269 | | **Total** | **35,919** | **90,937** | - Government grants primarily originated from various local governments in China, with no unfulfilled conditions or contingencies[464](index=464&type=chunk) [8 Other (Losses)/Gains – Net](index=100&type=section&id=8%20%E5%85%B6%E4%BB%96%EF%BC%88%E4%BA%8E%E6%90%8D%EF%BC%89%E2%88%95%E6%94%B6%E7%9B%8A%EF%BC%8D%E5%87%88%E9%A1%8D) This section discloses the Group's net other (losses)/gains for 2019, primarily comprising foreign exchange losses, fair value losses on financial assets at fair value through profit or loss, and losses from the disposal of property, plant and equipment and a subsidiary 2019 vs 2018 Other (Losses)/Gains – Net | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Net foreign exchange (losses)/gains | (2,445) | 7,293 | | Fair value losses on financial assets at fair value through profit or loss | (2,334) | (523) | | Net loss on disposal of property, plant and equipment | (2,522) | (1,206) | | Net loss on disposal of a subsidiary | (4,137) | – | | **Total** | **(11,438)** | **5,564** | [9 Expenses by Nature](index=101&type=section&id=9%20%E6%8C%89%E6%80%A7%E8%B3%AA%E5%8A%83%E5%88%86%E7%9A%84%E8%B2%BB%E7%94%A8) This section details the Group's expenses by nature for 2019, including cost of inventories, employee benefits, store operating expenses, marketing and promotion, depreciation and amortization, and inventory impairment provisions, showing a significant increase in inventory impairment provisions 2019 vs 2018 Expenses by Nature | Expense Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories recognized as cost of sales | 2,381,264 | 2,895,327 | | Employee benefit expenses | 399,820 | 376,097 | | Operating expenses of stores under joint operation arrangements | 605,313 | 677,488 | | Marketing and promotion expenses | 190,141 | 160,963 | | Depreciation and amortization | 241,251 | 87,602 | | Inventory impairment provision | 737,912 | 27,902 | | Impairment of property, plant and equipment | 23,071 | – | | Consulting service fees | 33,541 | 15,133 | | **Total** | **5,076,009** | **4,704,484** | - Inventory impairment provision significantly increased from **RMB 27,902 thousand** in 2018 to **RMB 737,912 thousand** in 2019[468](index=468&type=chunk) - Depreciation of right-of-use assets amounted to **RMB 136,571 thousand** in 2019[468](index=468&type=chunk) [10 Employee Benefit Expenses](index=102&type=section&id=10%20%E5%83%B1%E5%93%A1%E7%A6%8F%E5%88%A9%E8%B2%BB%E7%94%A8) This section discloses the composition of the Group's employee benefit expenses for 2019, including wages, salaries and bonuses, retirement benefit costs, welfare and allowances, and equity-settled share-based payments 2019 vs 2018 Employee Benefit Expenses | Expense Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Wages, salaries and bonuses | 339,685 | 316,982 | | Retirement benefit costs – defined contribution plans | 37,750 | 38,331 | | Welfare and allowances | 14,441 | 15,177 | | Equity-settled share-based payments | 7,944 | 5,607 | | **Total** | **399,820** | **376,097** | [11 Directors' and Chief Executive's Emoluments and Five Highest Paid Individuals](index=102&type=section&id=11%20%E8%91%A3%E4%BA%8B%E5%8F%8A%E8%A1%8C%E6%94%BF%E7%B8%BD%E8%A3%81%E9%85%AC%E9%87%91%E4%BB%A5%E5%8F%8A%E4%BA%94%E5%90%8D%E6%9C%80%E9%AB%98%E8%96%AA%E4%BA%BA%E5%A3%AB) This section details the emoluments of directors and the Chief Executive, as well as the remuneration structure of the five highest-paid individuals in 2019, including changes in the Chief Executive position 2019 Directors' and Chief Executive's Emoluments | Director Name | Fees (RMB thousands) | Salaries, allowances and benefits in kind (RMB thousands) | Employer's contribution to retirement schemes (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Mr. Zheng Yaonan | – | 757 | 64 | 821 | | Mr. Zhang Shengfeng | – | 640 | 64 | 704 | | Ms. Wu Xiaoli | – | 776 | 92 | 868 | | Mr. Lin Zonghong | – | – | 64 | 64 | | Mr. Cheng Zuming | – | 640 | 62 | 702 | | Mr. Wen Baoma | – | 50 | – | 50 | | Dr. Dai Yiyi | 150 | – | – | 150 | | Mr. Chen Zhigang | 120 | – | – | 120 | | Mr. Qiu Zhiming | 179 | – | – | 179 | | Dr. Lyu Hongde | 150 | – | – | 150 | | **Total** | **599** | **2,863** | **346** | **3,808** | - **Mr. Vincent H.C. Siu** was appointed Chief Executive Officer effective August 19, 2019, with his 2019 remuneration totaling **RMB 6,368 thousand**[473](index=473&type=chunk) 2019 vs 2018 Remuneration of Five Highest Paid Individuals (excluding Directors) | Remuneration Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Salaries, allowances and bonuses | 11,070 | 5,857 | | Retirement benefit costs – defined contribution plans | 462 | 192 | | Equity-settled share-based payments | 1,140 | – | | **Total** | **12,672** | **6,049** | [12 Net Impairment Losses on Financial Assets](index=105&type=section&id=12%20%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2%E6%B8%9B%E5%80%BC%E6%90%8D%E5%A4%B1%E5%87%88%E9%A1%8D) This section discloses a significant increase in the Group's net impairment losses on financial assets in 2019, primarily due to a one-off write-off of trade receivables and impairment provisions for trade receivables 2019 vs 2018 Net Impairment Losses on Financial Assets | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | One-off write-off of trade receivables | 326,602 | – | | Impairment provision for trade receivables | 68,665 | 2,372 | | Impairment provision for other receivables | 24,283 | 2,120 | | **Total** | **419,550** | **4,492** | [13 Finance Income and Expenses](index=105&type=section&id=13%20%E8%B2%A1%E5%8B%99%E6%94%B6%E5%85%A5%E5%8F%8A%E8%B2%BB%E7%94%A8) This section discloses the Group's finance income and expenses for 2019, indicating a decrease in finance income and an increase in finance expenses, resulting in net finance expenses 2019 vs 2018 Finance Income and Expenses | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | **Finance Income** | | | | Interest income from short-term bank deposits | 9,522 | 16,491 | | Interest income from prepayments to suppliers | 425 | 3,486 | | **Total Finance Income** | **9,947** | **19,977** | | **Finance Expenses** | | | | Interest expense on bank borrowings | (20,324) | (10,056) | | Interest expense on lease liabilities | (9,963) | – | | **Total Finance Expenses** | **(30,287)** | **(10,056)** | | **Net Finance (Expenses)/Income** | **(20,340)** | **9,921** | [14 Income Tax (Credit)/Expense](index=106&type=section&id=14%20%E6%89%80%E5%BE%97%E7%A8%85%EF%BC%88%E6%B8%9B%E5%85%8D%EF%BC%89%E2%88%95%E8%B2%BB%E7%94%A8) This section discloses the Group's income tax credit for 2019, primarily due to the reversal of prior year's over-provision for China corporate income tax and the recognition of deferred tax assets 2019 vs 2018 Income Tax (Credit)/Expense | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Current income tax | (8,108) | 147,603 | | Deferred income tax | (98,638) | (24,930) | | **Income Tax (Credit)/Expense** | **(106,746)** | **122,673** | - Guangdong Urban Beauty Industrial Co., Ltd. was approved as a high-tech enterprise in April 2019, qualifying for a preferential tax rate of **15%**, leading to a reversal of over-provided income tax from 2018 in 2019[490](index=490&type=chunk)[492](index=492&type=chunk) [15 (Losses)/Earnings Per Share](index=107&type=section&id=15%20%E6%AF%8F%E8%82%A1%EF%BC%88%E4%BA%8E%E6%90%8D%EF%BC%89%E2%88%95%E7%9B%88%E5%88%A9) This section discloses the Group's basic and diluted losses per share for 2019, contrasting with earnings per share in 2018 2019 vs 2018 (Losses)/Earnings Per Share | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | (Loss)/profit for the year attributable to owners of the Company (RMB thousands) | (1,297,812) | 378,229 | | Weighted average number of ordinary shares for basic (loss)/earnings per share (thousands) | 2,247,066 | 2,205,670 | | **Basic (Loss)/Earnings Per Share (RMB cents per share)** | **(57.76)** | **17.15** | | Weighted average number of ordinary shares for diluted (loss)/earnings per share (thousands) | 2,247,066 | 2,211,483 | | **Diluted (Loss)/Earnings Per Share (RMB cents per share)** | **(57.76)** | **17.10** | [16 Dividends](index=108&type=section&id=16%20%E8%82%A1%E6%81%AF) The Board did not recommend a final dividend or interim dividend for 2019, contrasting with dividend declarations in 2018 - The Board did not recommend a final dividend for 2019 (2018: **3.75 HK cents** per ordinary share and a special final dividend of **6.20 HK cents** per ordinary share)[500](index=500&type=chunk) - The Board did not recommend an interim dividend for the first half of 2019 (2018: **2.73 HK cents** per share)[501](index=501&type=chunk) - In 2019, the total final dividend and special final dividend for 2018 paid amounted to approximately **RMB 196,706 thousand**[501](index=501&type=chunk) [17 Property, Plant and Equipment](index=109&type=section&id=17%20%E7%89%A9%E6%A5%AD%E3%80%81%E5%BB%A0%E6%88%BF%E5%8F%8A%E8%A8%AD%E5%82%99) This section discloses the Group's property, plant and equipment movements in 2019, including additions, disposals, depreciation, and impairment losses, indicating a decrease in net book value at year-end 2019 vs 2018 Net Book Value of Property, Plant and Equipment | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Net book value at beginning of year | 564,357 | 565,009 | | Additions | 75,430 | 79,877 | | Disposals | (4,241) | (1,798) | | Depreciation | (97,073) | (78,731) | | Impairment losses | (23,071) | – | | **Net Book Value at End of Year** | **515,402** | **564,357** | - An impairment provision of **RMB 23,071 thousand** was recognized in 2019 for leasehold improvements of certain loss-making retail stores[504](index=504&type=chunk) - As of December 31, 2019, buildings with a carrying amount of approximately **RMB 26,239 thousand** were pledged as collateral for the Group's borrowings[505](index=505&type=chunk) [18 Leases](index=110&type=section&id=18%20%E7%A7%9F%E8%B3%83) This section provides the Group's lease information as a lessee, including right-of-use assets and lease liabilities recognized on the statement of financial position, and depreciation and interest expenses recognized in the statement of profit or loss 2019 Right-of-Use Assets and Lease Liabilities | Item | 2019 December 31 (RMB thousands) | 2019 January 1 (RMB thousands) | | :--- | :--- | :--- | | **Right-of-Use Assets** | | | | Properties | 441,101 | 154,606 | | Land use rights | 75,421 | 85,231 | | **Total Right-of-Use Assets** | **516,522** | **239,837** | | **Lease Liabilities** | | | | Current | 199,147 | 69,656 | | Non-current | 165,880 | 82,476 | | **Total Lease Liabilities** | **365,027** | **152,132** | - Additions to right-of-use assets in 2019 amounted to approximately **RMB 409,917 thousand**[509](index=509&type=chunk) - Depreciation expense for right-of-use assets was **RMB 136,571 thousand**, and interest expense on lease liabilities was **RMB 9,963 thousand** in 2019[511](index=511&type=chunk) - Some property leases include variable payment terms linked to store sales, ranging from **35%** to **40%** of sales[513](index=513&type=chunk) [19 Intangible Assets](index=112&type=section&id=19%20%E7%84%A1%E5%BD%A2%E8%B3%87%E7%94%A2) This section discloses the Group's intangible asset movements in 2019, including goodwill, purchased trademarks, and computer software, and details impairment reviews conducted 2019 vs 2018 Net Book Value of Intangible Assets | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Goodwill | 2,887 | 2,887 | | Purchased trademarks | 4,738 | 5,557 | | Computer software | 32,246 | 36,528 | | **Total** | **39,871** | **44,972** | - Management conducted an impairment review of goodwill, with the recoverable amount calculated based on value-in-use, using a five-year cash flow forecast and a discount rate of **19%**[516](index=516&type=chunk) [20 Investments in Joint Ventures and an Associate](index=113&type=section&id=20%20%E6%96%BC%E5%90%88%E7%87%9F%E5%85%AC%E5%8F%B8%E5%8F%8A%E4%B8%80%E5%AE%B6%E8%81%AF%E7%87%9F%E5%85%AC%E5%8F%B8%E7%9A%84%E6%8A%95%E8%B3%87) This section discloses the Group's investment movements in joint ventures and an associate, including opening balances, additions, and share of profit for the year 2019 vs 2018 Movements in Investments in Joint Ventures and an Associate | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Beginning of year | 165,790 | 22,407 | | Additions | 116,389 | 135,000 | | Share of profit for the year | 2,995 | 8,383 | | **End of Year** | **285,174** | **165,790** | - The Group's investments in joint ventures include Guangdong Dongdu Industrial Co., Ltd., Jinghedu (Dongguan) Equity Investment Management Co., Ltd. and its fund partnership, and Shantou Lianda Technology Co., Ltd.[519](index=519&type=chunk) [21 Financial Assets at Fair Value Through Other Comprehensive Income](index=114&type=section&id=21%20%E6%8C%89%E5%85%AC%E5%B9%B3%E5%80%BC%E8%A8%88%E5%85%A5%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E7%9A%84%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2) This section discloses that the Group's financial assets at fair value through other comprehensive income primarily consist of unlisted equity investments 2019 vs 2018 Financial Assets at Fair Value Through Other Comprehensive Income | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Unlisted equity investments | 74,414 | 60,494 | [22 Deposits, Prepayments and Other Receivables](index=114&type=section&id=22%20%E6%8C%89%E9%87%91%E3%80%81%E9%A0%90%E4%BB%98%E6%AC%BE%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85) This section details the composition of the Group's deposits, prepayments, and other receivables in 2019, and discloses impairment provisions 2019 vs 2018 Deposits, Prepayments and Other Receivables | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Prepayments for acquisition of property, plant and equipment and intangible assets | 105,816 | 5,043 | | VAT recoverable and prepaid taxes | 220,138 | 157,705 | | Prepayments and deposits | 8,509 | 11,715 | | Prepaid lease expenses under joint operation arrangements | 181,954 | 304,696 | | Prepayments for purchases of goods | 79,703 | 142,056 | | Prepayments for purchases of raw materials | 123,640 | 67,766 | | Less: Impairment provision for other receivables | (26,403) | (2,120) | | **Current Portion** | **694,154** | **790,493** | | **Non-current Portion** | **113,757** | **14,417** | - The impairment provision for other receivables in 2019 was **RMB 26,403 thousand**, a significant increase from 2018[526](index=526&type=chunk) [23 Deferred Taxation](index=115&type=section&id=23%20%E9%81%9E%E5%BB%B6%E6%89%80%E5%BE%97%E7%A8%85) This section discloses the Group's deferred tax asset and liability movements in 2019, primarily influenced by inventory impairment provisions, trade receivables impairment, and tax losses 2019 vs 2018 Deferred Tax Assets | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Inventory impairment provision | 138,837 | 15,957 | | Trade receivables impairment | 14,806 | 1,114 | | Tax losses | – | 36,553 | | Impairment of property, plant and equipment | 5,031 | – | | **Total Deferred Tax Assets** | **178,444** | **79,983** | 2019 vs 2018 Deferred Tax Liabilities | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Intangible assets | 1,070 | 1,247 | - The Group did not recognize deferred tax liabilities for temporary differences related to undistributed profits of certain Chinese subsidiaries totaling **RMB 359,964 thousand**, as the Board believes these profits are unlikely to be distributed in the foreseeable future[531](index=531&type=chunk) [24 Inventories](index=116&type=section&id=24%20%E5%AD%98%E8%B2%A8) This section discloses the composition and impairment provisions of the Group's inventories in 2019, showing significant increases in both total inventories and impairment provisions 2019 vs 2018 Inventory Composition | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Raw materials | 12,633 | 23,121 | | Work in progress | – | 6,683 | | Finished goods | 1,454,118 | 1,198,958 | | Less: Impairment provision | (786,906) | (63,829) | | **Net Inventories** | **679,845** | **1,164,933** | - The inventory impairment provision significantly increased to **RMB 737,912 thousand** in 2019, primarily due to the deteriorating retail market and difficulties in selling old inventory, with management making provisions based on revised strategies[533](index=533&type=chunk) [25 Trade Receivables](index=116&type=section&id=25%20%E6%87%89%E6%94%B6%E8%B3%B4%E6%AC%BE) This section details the composition, aging analysis, and impairment provisions of the Group's trade receivables in 2019, showing significant increases in both total trade receivables and impairment provisions 2019 vs 2018 Trade Receivables Composition | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Amounts due from third parties | 349,347 | 830,401 | | Less: Impairment provision | (73,236) | (4,774) | | **Net Trade Receivables** | **276,111** | **825,627** | 2019 vs 2018 Aging Analysis of Trade Receivables (by invoice date) | Aging | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Within 30 days | 88,808 | 401,470 | | Over 30 days but within 60 days | 65,006 | 113,493 | | Over 60 days but within 90 days | 51,064 | 155,705 | | Over 90 days but within 180 days | 49,485 | 107,243 | | Over 180 days but within 360 days | 50,676 | 33,291 | | Over 360 days | 44,308 | 19,199 | | **Total** | **349,347** | **830,401** | - The impairment provision for trade receivables significantly increased to **RMB 73,236 thousand** in 2019, primarily due to a one-off write-off of overdue amounts from a major customer totaling **RMB 326,602 thousand**[537](index=537&type=chunk)[541](index=541&type=chunk) [26 Financial Assets at Fair Value Through Profit or Loss](index=119&type=section&id=26%20%E6%8C%89%E5%85%AC%E5%B9%B3%E5%80%BC%E8%A8%88%E5%85%A5%E6%90%8D%E7%9B%8A%E7%9A%84%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2) This section discloses the composition of the Group's financial assets at fair value through profit or loss in 2019, including listed equity securities and trust investments 2019 vs 2018 Financial Assets at Fair Value Through Profit or Loss | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Current assets: Listed equity securities in Japan | 8,822 | 7,885 | | Non-current assets: Trust investments | 102,729 | 106,000 | | **Total** | **111,551** | **113,885** | - Fair value losses on financial assets at fair value through profit or loss amounted to **RMB 2,334 thousand** in 2019[544](index=544&type=chunk) - The Group received a prepayment of **RMB 100,000 thousand** from Jinghedu for the disposal of entrusted investments, with the transaction completed in early 2020[544](index=544&type=chunk) [27 Bank Balances and Cash](index=120&type=section&id=27%20%E9%8A%80%E8%A1%8C%E7%B5%90%E9%A4%98%E5%8F%8A%E7%8F%BE%E9%87%91) This section discloses the composition and currency distribution of the Group's bank balances and cash in 2019, showing a significant decrease in cash and cash equivalents 2019 vs 2018 Bank Balances and Cash | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 854,164 | 1,496,163 | | Time deposits with initial maturity over three months | 630 | 630 | | Restricted bank deposits | – | 9,225 | | **Total** | **854,794** | **1,506,018** | 2019 vs 2018 Currency Distribution of Bank Balances and Cash | Currency | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | RMB | 637,432 | 856,911 | | HKD | 87,646 | 496,136 | | Other currencies | 129,716 | 152,971 | | **Total** | **854,794** | **1,506,018** | - As of December 31, 2019, restricted bank deposits were released as final payments for certain property, plant and equipment were settled[548](index=548&type=chunk) [28 Share Capital and Share Premium](index=121&type=section&id=28%20%E8%82%A1%E6%9C%AC%E5%8F%8A%E8%82%A1%E4%BB%BD%E6%BA%A2%E5%83%B9) This section discloses the Group's share capital and share premium movements in 2019, primarily affected by share repurchases and cancellations, and dividend payments 2019 vs 2018 Movements in Share Capital and Share Premium | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Share capital at beginning of year | 140,755 | 133,792 | | Share premium at beginning of year | 1,866,386 | 1,603,035 | | Shares repurchased and cancelled in the market | (443) | (778) | | Dividends | – | (115,725) | | **Share Capital at End of Year** | **140,312** | **140,755** | | **Share Premium at End of Year** | **1,656,669** | **1,866,386** | - In 2019, **6,567,000** shares repurchased from the market were cancelled during the year[552](index=552&type=chunk) [29 Other Reserves](index=122&type=section&id=29%20%E5%85%B6%E4%BB%96%E5%84%B2%E5%82%99) This section discloses the Group's other reserve movements in 2019, including merger reserve, statutory reserve, capital reserve, capital contribution reserve, equity-settled share-based payments, financial assets at fair value through other comprehensive income, and exchange reserve 2019 vs 2018 Movements in Other Reserves | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Other reserves at beginning of year | 416,471 | 275,445 | | Equity-settled share-based payments | 7,944 | 5,607 | | Shares purchased for share award scheme | (18,840) | (1,121) | | Exchange differences | 17,388 | 34,433 | | Transfer to statutory reserve | 5,290 | 98,133 | | **Other Reserves at End of Year** | **418,807** | **416,471** | - In 2019, the trustee of the share award scheme acquired and held **17,085,000** ordinary shares of the company from the open market, with a total consideration of approximately **RMB 18,840 thousand**[559](index=559&type=chunk) [30 Equity-settled Share-based Payments](index=123&type=section&id=30%20%E4%BB%A5%E6%AC%8A%E7%9B%8A%E7%B5%90%E7%AE%97%E7%9A%84%E8%82%A1%E4%BB%BD%E5%A0%B1%E9%85%AC) This section discloses the Group's equity-settled share-based payment schemes in 2019, including the 2016 Share Award Scheme, Employee Share Option Scheme, and 2019 Share Award Scheme, along with related expenses - No awards were granted under the 2016 Share Award Scheme from its adoption up to December 31, 2019[562](index=562&type=chunk) - Share options granted under the Employee Share Option Scheme were replaced by the 2019 Share Award Scheme, with the remaining balance of **RMB 35,437 thousand** as of December 31, 2018, continuing to be amortized[564](index=564&type=chunk) - The 2019 Share Award Scheme aims to incentivize management members and replaces the Employee Share Option Scheme, with **34,332,000** shares to be issued to participating employees as of December 31, 2019[566](index=566&type=chunk) 2019 vs 2018 Equity-settled Share-based Payment Expenses | Expense Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | 2019 Share Award Scheme (general and administrative expenses) | 5,018 | – | | Share-based payments related to senior management's interests in subsidiaries | – | 5,607 | | 2019 Share Award Scheme (selling and marketing expenses) | 2,926 | – | | **Total** | **7,944** | **5,607** | [31 Trade Payables](index=124&type=section&id=31%20%E6%87%89%E4%BB%98%E8%B3%B4%E6%AC%BE) This section discloses the composition and aging analysis of the Group's trade payables in 2019, including amounts due to third parties and related parties 2019 vs 2018 Trade Payables Composition | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Amounts due to third parties | 440,928 | 703,688 | | Amounts due to related parties | 19,714 | 7,417 | | **Total** | **460,642** | **711,105** | 2019 vs 2018 Aging Analysis of Trade Payables (by invoice date) | Aging | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Within 30 days | 76,738 | 128,260 | | Over 30 days but within 60 days | 50,898 | 185,045 | | Over 60 days but within 90 days | 150,834 | 229,615 | | Over 90 days but within 180 days | 130,202 | 82,371 | | Over 180 days but within 360 days | 47,521 | 39,235 | | Over 360 days | 4,449 | 46,579 | | **Total** | **460,642** | **711,105** | [32 Accruals and Other Payables](index=125&type=section&id=32%20%E6%87%89%E8%A8%88%E8%B2%BB%E7%94%A8%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E4%BB%98%E6%AC%BE%E9%A0%85) This section discloses the composition of the Group's accruals and other payables in 2019, including payables for property, plant and equipment, salaries and benefits, and franchisee deposits 2019 vs 2018 Accruals and Other Payables | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Payables for acquisition of property, plant and equipment and intangible assets | 17,734 | 37,943 | | Accrued salaries and welfare | 47,566 | 47,827 | | Franchisee deposits | 53,658 | 54,731 | | Logistics payables | 40,480 | 26,963 | | Deposits received for proposed disposal of financial assets at fair value through profit or loss | 100,000 | – | | Other accruals and payables | 93,115 | 63,135 | | **Total** | **370,292** | **283,790** | [33 Borrowings](index=126&type=section&id=33%20%E8%B2%B8%E6%AC%BE) This section discloses the composition and movement analysis of the Group's borrowings in 2019, including secured and unsecured bank loans 2019 vs 2018 Borrowings Composition | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Non-current: Secured bank loans | 189,990 | – | | Non-current: Unsecured bank loans | 115,200 | – | | Current: Unsecured bank loans | 150,000 | 183,960 | | **Total** | **455,190** | **183,960** | 2019 Borrowings Movement Analysis | Item | 2019 (RMB thousands) | | :--- | :--- | | Opening balance | 183,960 | | Repayment of bank loans | (198,770) | | Proceeds from new loans | 470,000 | | **Closing Balance** | **455,190** | - Approximately **RMB 189,990 thousand** of bank loans are secured by certain of the Group's buildings and land use rights, bear an annual interest rate of **5.23%**, and are repayable by June 17, 2022[576](index=576&type=chunk) [34 Deferred Income](index=127&type=section&id=34%20%E9%81%9E%E5%BB%B6%E6%94%B6%E5%85%A5) This section discloses the composition of the Group's deferred income in 2019, primarily consisting of government grants related to property, plant and equipment 2019 vs 2018 Deferred Income | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Non-current | 1,095 | 12,487 | | Current | 436 | 2,958 | | **Total** | **1,531** | **15,445** | - Deferred income represents government grants related to property, plant and equipment[580](index=580&type=chunk) [35 Notes to the Consolidated Statement of Cash Flows](index=127&type=section&id=35%20%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8%E9%99%84%E6%B3%A8) This section provides supplementary information for the consolidated statement of cash flows, including reconciliation of (loss)/profit before income tax to net cash from operating activities, proceeds from disposal of property, plant and equipment, and reconciliation of net cash 2019 vs 2018 Reconciliation of (Loss)/Profit Before Income Tax to Net Cash from Operating Activities | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | (Loss)/profit before income tax | (1,406,538) | 502,282 | | Total adjustments | 51,816 | 581,132 | | Total changes in working capital | (183,752) | 174,764 | | **Net Cash (Used in)/Generated from Operating Activities** | **(247,929)** | **50,797** | 2019 vs 2018 Reconciliation of Net Cash | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Total bank balances and cash | 854,794 | 1,506,018 | | Current investments | 8,822 | 7,885 | | Borrowings | (455,190) | (183,960) | | Lease liabilities | (365,027) | – | | **Net Cash** | **43,399** | **1,329,943** | [36 Company-level Statement of Financial Position and Reserves](index=130&type=section&id=36%20%E6%9C%AC%E5%85%AC%E5%8F%B8%E8%B3%87%E7%94%A2%E8%B2%A0%E5%82%B5%E8%A1%A8%E5%8F%8A%E5%84%B2%E5%82%99) This section discloses the company-level (non-consolidated) statement of financial position and reserves for 2019, including interests in subsidiaries, other receivables, bank balances and cash, share capital, share premium, other reserves, and accumulated losses 2019 vs 2018 Company-level Statement of Financial Position Key Data | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Total Assets | 1,829,639 | 2,016,217 | | Total Equity | 1,821,116 | 2,009,061 | | Total Liabilities | 8,523 | 7,156 | 2019 vs 2018 Company-level Accumulated Losses | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Accumulated losses at beginning of year | (167,996) | (164,802) | | Loss for the year | (7,055) | (3,194) | | **Accumulated Losses at End of Year** | **(175,051)** | **(167,996)** | 2019 vs 2018 Company-level Other Reserves | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Other reserves at beginning of year | 169,916 | 67,050 | | Value of employee services | 7,944 | – | | Shares purchased for share award scheme | (18,840) | (1,121) | | Exchange differences | 40,166 | 103,987 | | **Other Reserves at End of Year** | **199,186** | **169,916** | [37 Commitments](index=132&type=section&id=37%20%E6%89%BF%E6%93%94) This section discloses the Group's capital commitments and operating lease commitments for 2019 2019 vs 2018 Capital Commitments | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Contracted but not provided for: Property, plant and equipment | 96,584 | 28,880 | | Contracted but not provided for: Intangible assets | 2,182 | 697 | | **Total** | **98,766** | **29,577** | 2019 vs 2018 Total Future Minimum Lease Payments Under Non-cancellable Operating Leases for Buildings | Period | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Not later than 1 year | 6 | 82,466 | | Later than 1 year but not later than 5 years | – | 85,689 | | Later than 5 years | – | – | | **Total** | **6** | **168,155** | - As of January 1, 2019, the Group recognized right-of-use assets for these leases, excluding short-term and low-value leases[598](index=598&type=chunk) [38 Related Party Transactions](index=133&type=section&id=38%20%E9%97%9C%E9%80%A3%E6%96%B9%E4%BA%A4%E6%98%93) This section discloses the Group's significant related party transactions and year-end balances in 2019, including purchases of goods from and amounts payable to related parties - Related parties include directors (**Mr. Zhang Shengfeng**, **Mr. Lin Zonghong**), companies controlled by directors' spouses' brothers (Shantou Shengqiang Knitting Industrial Co., Ltd.), companies controlled by directors' brothers (Shantou Maosheng Knitting Underwear Co., Ltd.), companies controlled by **Mr. Zheng Yaonan**, and joint ventures[602](index=602&type=chunk) 2019 vs 2018 Purchases of Goods from Related Parties | Related Party | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Shantou Shengqiang | 30,208 | 28,348 | | Shantou Maosheng | 1,818 | 8,847 | | **Total** | **32,026** | **37,195** | 2019 vs 2018 Amounts Payable to Related Parties | Related Party | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Shantou Shengqiang | 19,714 | 7,417 | 2019 vs 2018 Key Management Personnel Emoluments | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :--- | :--- | | Salaries, allowances and bonuses | 16,429 | 10,846 | | Retirement benefit costs – defined contribution plans | 876 | 663 | | Equity-settled share-based payments | 3,266 | – | | **Total** | **20,571** | **11,509** | [39 Information on Subsidiaries, Associates and Joint Ventures of the Group](index=135&type=section&id=39%20%E6%9C%AC%E9%9B%86%E5%9C%98%E9%99%84%E5%B1%AC%E5%85%AC%E5%8F%B8%E3%80%81%E8%81%AF%E7%87%9F%E5%85%AC%E5%8F%B8%E5%8F%8A%E5%90%88%E7%87%9F%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) This section details the names, places of incorporation, issued/registered share capital, Group's equity interest, and principal business/operation locations for all subsidiaries, associates, and joint ventures as of December 31, 2019 - The Group holds interests in numerous direct and indirect subsidiaries primarily engaged in investment holding, intimate wear sales, raw material sales, logistics, warehousing and delivery services, corporate consulting, and property management services, with main operations in China and Hong Kong[607](index=607&type=chunk)[609](index=609&type=chunk)[610](index=610&type=chunk) - The Group holds interests in several joint ventures and one associate, primarily involved in investment management, r

| --- | --- | --- | --- | --- | --- | |-------|--------------------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | 8 都市预 cosmo raay Cosmo Lady (China) Holdings Company Limited 都市麗人(中國)控股有限公司 | | | | | | | (於開曼群島註冊成立的有限公司) 股份代號：2298 | | | | | | | 中期報告 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 目錄 | --- | --- | |------------------------------|-------| | | | | 公司資料 | 2 | | 財務概要 | 3 | | 管理層討論與分析 ...

Company Information [Company Overview](index=3&type=section&id=%E5%85%AC%E5%8F%B8%E6%A6%82%E8%A7%88) Cosmo Lady (China) Holdings Company Limited's basic corporate information, including board members, listing details, and key professional advisors, is presented - The company is listed on the Main Board of The Stock Exchange of Hong Kong Limited, stock code 2298[3](index=3&type=chunk) - The Board of Directors comprises executive, non-executive, and independent non-executive directors, with Mr. Zheng Yaonan serving as Chairman and CEO[3](index=3&type=chunk) - PricewaterhouseCoopers is the company's auditor, and major banks include Bank of China (Hong Kong) Limited and Hang Seng Bank Limited[3](index=3&type=chunk) Financial Summary [Key Financial Data for FY2018](index=4&type=section&id=2018%E8%B2%A1%E5%B9%B4%E9%97%9C%E9%8D%B5%E8%B2%A1%E5%8B%99%E6%95%B8%E6%93%9A) The company achieved significant revenue and profit growth in FY2018, with improved profitability ratios and a proposed special dividend 2018 Key Financial Data | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 5,096,453 | 4,542,483 | 12.2% | | Operating Profit | 483,978 | 419,565 | 15.4% | | Profit Attributable to Owners of the Company | 378,229 | 317,002 | 19.3% | | Gross Margin (%) | 41.7% | 43.2% | -1.5 pp | | Operating Profit Margin (%) | 9.5% | 9.2% | 0.3 pp | | Profit Attributable to Owners of the Company Margin (%) | 7.4% | 7.0% | 0.4 pp | | Basic Earnings Per Share (RMB cents) | 17.15 | 15.45 | 11.0% | | Diluted Earnings Per Share (RMB cents) | 17.10 | 15.45 | 10.7% | | Final Dividend Per Share (HK cents) | 3.75 | 3.34 | 12.3% | | Special Final Dividend Per Share (HK cents) | 6.20 | – | N/A | Chairman and CEO's Report [2018 Economic and Industry Review](index=5&type=section&id=2018%E5%B9%B4%E7%B6%93%E6%BF%9F%E5%8F%8A%E8%A1%8C%E6%A5%AD%E5%9B%9E%E9%A1%A7) The 2018 global and Chinese economic slowdown, coupled with US-China trade tensions, impacted business confidence and led to structural adjustments in China's intimate wear industry - Global economic growth slowed in 2018, with US-China trade tensions impacting global business confidence[9](index=9&type=chunk) - China's domestic social consumption, fixed asset investment, and real estate market growth continued to slow, with full-year GDP growth of approximately **6.6%**, a 28-year low[9](index=9&type=chunk) - China's intimate wear industry, highly fragmented with diversified sales channels, faced significant challenges due to ongoing structural adjustments in product quality and mix[9](index=9&type=chunk) [Group Transformation and Reform Measures](index=5&type=section&id=%E9%9B%86%E5%9C%98%E8%BD%89%E5%9E%8B%E8%88%87%E8%AE%8A%E9%9D%A9%E6%8E%AA%E6%96%BD) The Group implemented comprehensive transformation strategies, including brand and distribution optimization, product and supply chain reforms, and cost control, to navigate market challenges and capitalize on opportunities - Optimized brand image and distribution management: launched "Cosmo Lady" shopping center 2.0, introduced young brand "O+" into mid-to-high-end shopping malls, renovated pedestrian street stores, partnered with Tencent for smart retail stores, and continued investing in e-commerce channels[9](index=9&type=chunk)[10](index=10&type=chunk) - Improved product design and quality, and reformed supply chain management: appointed Mr. Yuasa Masaru as Chief Technology Officer to enhance technology and quality, hired French designers to improve design, collaborated with US trend expert Vincent Daudin, engaged Roland Berger to optimize supply chain management, and signed strategic investment agreements with eleven suppliers to integrate development capabilities, shorten cycles, and improve quick response capabilities[10](index=10&type=chunk) - Strictly controlled expenses to save costs[11](index=11&type=chunk) Management Discussion and Analysis [Financial Review](index=6&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) The 2018 financial review highlights revenue growth driven by franchisees and e-commerce, a decline in gross margin, increased other income, and changes in working capital efficiency - The Group's revenue increased by approximately **12.2%** in 2018, primarily due to strong sales performance from franchisee sales and e-commerce channels[16](index=16&type=chunk) Revenue by Sales Channel | Sales Channel | 2018 (RMB thousands) | 2018 (%) | 2017 (RMB thousands) | 2017 (%) | | :--- | :--- | :--- | :--- | :--- | | Sales to Franchisees | 2,800,790 | 55.0 | 2,433,468 | 53.6 | | Retail | 1,494,518 | 29.3 | 1,566,039 | 34.5 | | E-commerce | 712,450 | 14.0 | 542,976 | 11.9 | | Raw Material Trading | 88,695 | 1.7 | – | – | - Sales to franchisees increased by approximately **15.1%**, e-commerce sales increased by approximately **31.2%**, while self-operated store sales decreased by approximately **4.6%**[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - Sales of sleepwear and homewear grew by approximately **22.3%**, mainly due to promotional activities and optimized product design[23](index=23&type=chunk) - Gross margin decreased to approximately **41.7%** (2017: 43.2%), primarily due to intense e-commerce competition and increased promotions of old inventory[24](index=24&type=chunk) - Other income increased by approximately **64.3%** to **RMB 90.937 million**, mainly from financial asset dividends and growth in logistics and warehousing business[27](index=27&type=chunk) Key Working Capital Management Indicators | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Average Inventory Turnover Days | 139.8 days | 160.2 days | | Average Accounts Receivable Turnover Days | 49.4 days | 40.4 days | | Average Accounts Payable Turnover Days | 79.5 days | 80.5 days | - Average accounts receivable turnover days increased to approximately **49.4 days**, mainly due to granting longer one-off credit terms to certain large franchisee customers[33](index=33&type=chunk) [Capital Management and Resource Utilization](index=8&type=section&id=%E8%B3%87%E9%87%91%E7%AE%A1%E7%90%86%E8%88%87%E8%B3%87%E6%BA%90%E9%81%8B%E7%94%A8) The Group maintained a strong financial position with substantial cash reserves, strategic investments in joint ventures, and unutilized proceeds from share placements - Established a cooperation fund with a wholly-owned subsidiary of JD.com, Inc. and Mr. Li Guocheng, targeting investments in intimate wear and related industries, with the Group contributing **RMB 135 million**[34](index=34&type=chunk) - As of December 31, 2018, the Group's cash and cash equivalents were approximately **RMB 1.506 billion**, bank loans approximately **RMB 184 million**, current ratio approximately **3.2 times**, and net debt ratio approximately **-32.5%** (net cash position)[35](index=35&type=chunk)[37](index=37&type=chunk) - Net proceeds from the initial public offering were approximately **RMB 1.162 billion**, with approximately **RMB 624 million** utilized for expanding the retail network, constructing logistics centers, and upgrading IT infrastructure[40](index=40&type=chunk) - Net proceeds from share placement to Fosun were approximately **HKD 600 million**, partly used for dividend distribution, share repurchases, and developing Hong Kong and overseas businesses, with the remaining unutilized funds held in banks[41](index=41&type=chunk)[42](index=42&type=chunk) - Net proceeds from share placement to Windcreek were approximately **HKD 509 million**, remaining unutilized as of December 31, 2018, and held in Hong Kong banks[44](index=44&type=chunk) - Capital expenditures during the year were approximately **RMB 259 million** (2017: RMB 128 million), with the increase primarily due to investments in joint ventures[46](index=46&type=chunk) [Operational Review and Future Outlook](index=10&type=section&id=%E7%87%9F%E9%81%8B%E6%A6%82%E6%B3%81%E8%88%87%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B) The Group expanded its distribution network and achieved environmental certifications, with future strategies focusing on brand, product, supply chain, and digital system enhancements for sustainable growth - As of December 31, 2018, the distribution network included **7,305 stores** (2017: 7,181 stores), comprising **1,406 self-operated stores** and **5,899 franchisee stores**[48](index=48&type=chunk) - The number of full-time employees decreased to approximately **4,540** (2017: 7,252), mainly due to new associate arrangements[49](index=49&type=chunk) - Obtained ISO14001 "Environmental Management System" certification and was selected as one of the "Top 500 Chinese Brands" in 2018[50](index=50&type=chunk)[52](index=52&type=chunk) - 2019 Outlook and Strategy: continue implementing the shopping center 2.0 plan, launch young brand "O+" and 7th generation image stores, develop smart retail stores, leverage Tencent mini-programs to aggregate online and offline traffic, and increase investment in e-commerce channels[53](index=53&type=chunk) - 2019 Outlook and Strategy: continue optimizing product functionality, quality, and design, increase R&D investment, implement Roland Berger's supply chain reform recommendations, and launch new products in four styles (Flirt, Free, Function, Fun)[53](index=53&type=chunk) - 2019 Outlook and Strategy: optimize internal organization to improve management efficiency, increase investment in digital information systems, and balance expense investment with new development plans[54](index=54&type=chunk) Biographies of Directors and Senior Management [Biographies of Board Members](index=12&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83%E6%88%90%E5%93%A1%E5%B1%A5%E6%AD%B7) The biographies detail the diverse professional backgrounds and extensive industry experience of the executive, non-executive, and independent non-executive directors - Mr. Zheng Yaonan (Chairman and CEO) has over **19 years** of experience in intimate wear manufacturing and sales, responsible for the Group's strategic planning, business development, and overall performance[56](index=56&type=chunk) - Mr. Zhang Shengfeng (Vice Chairman) is responsible for the Group's design, R&D, and procurement; Mr. Lin Zonghong (Vice Chairman) is responsible for production and logistics; Ms. Wu Xiaoli is responsible for human resources and administrative management[57](index=57&type=chunk)[59](index=59&type=chunk) - Non-executive directors include Mr. Cheng Zuming, Mr. Wen Baoma, Mr. Yang Weiqiang, and Mr. Hu Shengli, providing strategic advice in investment, manufacturing, and e-commerce[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) - Independent non-executive directors Mr. Qiu Zhiming, Dr. Dai Yiyi, Mr. Chen Zhigang, and Dr. Lu Hongde possess extensive experience in finance, accounting, economics, and corporate management[67](index=67&type=chunk)[68](index=68&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Biographies of Senior Management](index=16&type=section&id=%E9%AB%98%E7%B4%9A%E7%AE%A1%E7%90%86%E5%B1%A4%E5%B1%A5%E6%AD%B7) The senior management team comprises experienced professionals with diverse expertise in e-commerce, finance, human resources, product strategy, and technology, including former executives from leading intimate wear brands - Mr. Sha Shuang is Senior Vice President, responsible for the development of e-commerce and Oudianfen brand businesses[74](index=74&type=chunk) - Mr. Lu Kangcheng serves as Vice President, Chief Financial Officer, and Company Secretary, with extensive experience in finance and accounting[74](index=74&type=chunk) - Ms. Sharen Jester Turney is a part-time Chief Strategy Officer, previously President and CEO of Victoria's Secret, the world's largest intimate apparel retailer[78](index=78&type=chunk) - Mr. Yuasa Masaru is Chief Technology Officer, having worked for over **42 years** at Wacoal Corp., Japan's largest intimate apparel retailer, responsible for technology research, development, and innovation[78](index=78&type=chunk)[79](index=79&type=chunk) Corporate Governance Report [Corporate Governance Practices](index=18&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%B8%B8%E8%A6%8F) The company adheres to high corporate governance standards, including a diverse 12-member Board and a board diversity policy, while addressing the combined Chairman and CEO roles with adequate safeguards - The company has adopted the principles of the HKEX Corporate Governance Code and complies with relevant code provisions, except for code provision A.2.1 (separation of Chairman and CEO functions)[82](index=82&type=chunk) - The Board currently comprises **12 directors**, including **4 executive directors**, **4 non-executive directors**, and **4 independent non-executive directors**[83](index=83&type=chunk)[84](index=84&type=chunk) - The company has adopted a Board Diversity Policy, considering gender, age, cultural and educational background, professional experience, qualifications, ethnicity, skills, knowledge, and length of service when determining Board composition[86](index=86&type=chunk) - All independent non-executive directors have confirmed their independence and comply with the Listing Rules requirements[87](index=87&type=chunk) [Board Committees](index=20&type=section&id=%E8%91%A3%E4%BA%8B%E5%A7%94%E5%93%A1%E6%9C%83) The Board has established specialized committees—Audit, Nomination, Remuneration, and Risk Management—each with defined responsibilities and regular reporting to ensure effective governance - The Audit Committee, composed entirely of independent non-executive directors, is responsible for reviewing financial information, overseeing financial reporting systems, internal control procedures, risk management systems, and auditor relationships[91](index=91&type=chunk) - The Nomination Committee is responsible for advising on director appointments and re-elections, succession planning, and reviewing the Board's structure, size, and composition[93](index=93&type=chunk) - The Remuneration Committee is responsible for advising on the remuneration policy and structure for all directors and senior management, and determining executive directors' remuneration policy[95](index=95&type=chunk) - The Risk Management Committee is responsible for overseeing the design, implementation, and monitoring of the company's risk management system, and reviewing the Group's strategy[96](index=96&type=chunk) 2018 Board Meeting Attendance Record | Director Name | AGM | Board Meetings | Audit Committee | Nomination Committee | Remuneration Committee | Risk Management Committee | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Zheng Yaonan | 1/1 | 4/4 | N/A | 2/2 | N/A | N/A | | Mr. Zhang Shengfeng | 0/1 | 4/4 | N/A | N/A | 2/2 | N/A | | Mr. Lin Zonghong | 1/1 | 4/4 | N/A | N/A | N/A | N/A | | Ms. Wu Xiaoli | 1/1 | 4/4 | N/A | N/A | N/A | N/A | | Mr. Cheng Zuming | 1/1 | 4/4 | N/A | N/A | N/A | N/A | | Mr. Wen Baoma | 1/1 | 4/4 | N/A | N/A | N/A | N/A | | Mr. Yang Weiqiang | 1/1 | 3/4 | N/A | N/A | N/A | N/A | | Mr. Hu Shengli | N/A | 2/3 | N/A | N/A | N/A | N/A | | Mr. Qiu Zhiming | 1/1 | 4/4 | 3/3 | 2/2 | N/A | 2/2 | | Dr. Dai Yiyi | 1/1 | 4/4 | 3/3 | N/A | 2/2 | 2/2 | | Mr. Chen Zhigang | 0/1 | 4/4 | 3/3 | 2/2 | 2/2 | 2/2 | | Dr. Lu Hongde | 1/1 | 3/4 | 2/3 | 2/2 | 2/2 | 2/2 | [Appointment and Development of Directors](index=22&type=section&id=%E8%91%A3%E4%BA%8B%E5%A7%94%E4%BB%BB%E8%88%87%E7%99%BC%E5%B1%95) The company maintains robust procedures for director appointment, re-election, and continuous professional development, guided by a nomination policy emphasizing integrity, diversity, and independence - Board members are required to retire by rotation at annual general meetings and are eligible for re-election in accordance with the company's Articles of Association[101](index=101&type=chunk) - The nomination policy aims to identify individuals with integrity, outstanding achievements, relevant qualifications, and skills for Board membership, while also considering diversity factors[102](index=102&type=chunk)[103](index=103&type=chunk) - Newly appointed directors receive comprehensive induction materials and guidance, and all directors are encouraged to participate in continuous professional development to update their knowledge and skills[106](index=106&type=chunk) [Accountability and Audit](index=24&type=section&id=%E5%95%8F%E8%B2%AC%E5%8F%8A%E5%AF%A9%E6%A0%B8) The Board oversees the Group's risk management and internal control systems, utilizing the COSO framework and internal audit, with external audit services provided by PricewaterhouseCoopers - The Board is responsible for ensuring the Group maintains appropriate risk management and internal control systems and monitoring their effectiveness[114](index=114&type=chunk) - The Group refers to the COSO enterprise risk management framework for risk management and has an internal audit department that regularly reviews business units and internal controls[114](index=114&type=chunk) - The Board considers the risk management and internal control systems to be adequate and effective, and has complied with relevant provisions of the Corporate Governance Code[115](index=115&type=chunk) Auditor's Remuneration | Services Provided | RMB thousands | | :--- | :--- | | Audit Services (Annual Audit and Interim Review) | 3,549 | | Non-Audit Services (Tax Services, ESG Services) | 780 | | **Total** | **4,329** | [Communication with Shareholders and Investors](index=25&type=section&id=%E8%88%87%E8%82%A1%E6%9D%B1%E5%8F%8A%E6%8A%95%E8%B3%87%E8%80%85%E7%9A%84%E6%BA%9D%E9%80%9A) The company fosters continuous and effective communication with shareholders and investors through a dedicated policy, multiple channels, and regular engagement activities, upholding shareholder rights - The company has adopted a Shareholder Communication Policy aimed at promoting continuous relationships and effective communication with shareholders and investors[118](index=118&type=chunk) - Communication channels include shareholder inquiries, plain language bilingual corporate communications, a regularly updated "Investor Relations" section on the company website, and general meetings attended by Board members[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk) - Shareholders can request an extraordinary general meeting (holding not less than **10%** of paid-up share capital) and nominate directors[124](index=124&type=chunk)[125](index=125&type=chunk) - As of December 31, 2018, there were no significant changes to the company's constitutional documents during the year[127](index=127&type=chunk) Environmental, Social and Governance Report [ESG Approach](index=27&type=section&id=%E7%92%B0%E5%A2%83%E3%80%81%E7%A4%BE%E6%9C%83%E5%8F%8A%E7%AE%A1%E6%B2%BB%E6%96%B9%E6%B3%95) This report details Cosmo Lady's 2018 ESG performance, integrating sustainable development into operations across headquarters and retail, and identifying key issues through stakeholder engagement - The company's vision is to be a world-class intimate wear brand, its mission is to care for customers and create a healthy lifestyle, its core values are accountability, innovation, striving, win-win, and efficiency, and its strategic core is to promote the "Refined + Core" strategy[130](index=130&type=chunk) - The report's scope covers the overall environmental, social, and governance performance and measures of the Group's headquarters and retail stores in China[133](index=133&type=chunk) - Through stakeholder engagement and materiality assessment, significant ESG issues such as employment, health and safety, development and training, labor standards, product responsibility, anti-corruption, environmental protection, and community investment have been identified[134](index=134&type=chunk)[136](index=136&type=chunk) [Employment and Labor Practices](index=28&type=section&id=%E5%83%B1%E5%82%AD%E5%8F%8A%E5%8B%9E%E5%B7%A5%E5%B8%B8%E8%A6%8F) The Group upholds strict labor compliance, offers competitive compensation, and maintains a robust occupational health and safety system, resulting in industry recognition and no work-related injuries - The Group strictly complies with China's "Labor Contract Law," "Employment Promotion Law," and Hong Kong's "Employment Ordinance," opposing any form of forced labor and child labor[138](index=138&type=chunk) - As of December 31, 2018, the Group had a total of **4,539 employees** (2017: 7,252), with an average monthly turnover rate of **7.2%**[138](index=138&type=chunk)[142](index=142&type=chunk) - The Group provides an above-average compensation package and cares for employee well-being through employment handbooks, performance appraisals, recreational activities, and sports facilities[143](index=143&type=chunk)[144](index=144&type=chunk) - Awarded "Best Employer" by the "China Employer Brand Forum" in 2018[145](index=145&type=chunk) - Established an "Occupational Health and Safety Management System" referencing OHSAS 18001:2007, with no work-related injuries or fatalities during the reporting period[146](index=146&type=chunk) Average Training Hours Per Employee by Category | Employee Category | 2018 Ratio of Trained Employees | 2018 Average Training Hours | 2017 Average Training Hours | | :--- | :--- | :--- | :--- | | Senior and Middle Management | 100% | 74 | 80 | | Non-Management Employees | 100% | 49 | 45 | | Store Sales Staff | 100% | 27 | 14 | [Operating Practices](index=30&type=section&id=%E7%B6%93%E7%87%9F%E6%96%B9%E5%BC%8F) The Group operates with high ethical standards, ensuring product quality through strict supply chain management and ISO certification, while maintaining robust anti-corruption policies and a low customer complaint rate - The Group has an extensive supply chain network in China, with a total of **175 suppliers**, mainly located in Guangdong, Jiangsu, Zhejiang, Shanghai, and other regions[151](index=151&type=chunk)[152](index=152&type=chunk) - Implements strict procurement policies and "Qualified Supplier Scoring Standards" for supplier screening, evaluation, and quarterly performance reviews[154](index=154&type=chunk)[157](index=157&type=chunk) - Complies with China's "Product Quality Law," "Advertising Law," and "Consumer Rights Protection Law," implements strict quality inspection processes, and has obtained ISO9001:2015 Quality Management System certification[158](index=158&type=chunk)[160](index=160&type=chunk) - Established internal physical and chemical laboratories, accredited by the China National Accreditation Service for Conformity Assessment (CNAS), complying with ISO 17025 standards[160](index=160&type=chunk) - In 2018, product sales or shipping recalls due to quality or other reasons remained at a level not exceeding **0.01%**[160](index=160&type=chunk) - Formulated anti-corruption policies and regulations, including employee handbooks and anti-fraud management systems, encouraging employees to report illegal activities through hotlines and email[161](index=161&type=chunk)[162](index=162&type=chunk) - The number of corruption lawsuits against the issuer or its employees that were concluded during the reporting period was zero[181](index=181&type=chunk) [Environmental Protection](index=33&type=section&id=%E7%92%B0%E5%A2%83%E4%BF%9D%E8%AD%B7) The Group demonstrates commitment to environmental protection through ISO14001 certification, implementing measures to reduce emissions, conserve resources, and optimize packaging, with detailed KPI reporting - The Group complies with all applicable environmental protection laws and regulations and has obtained ISO14001:2015 "Environmental Management System" certification[163](index=163&type=chunk) - Implemented measures to reduce exhaust gas and greenhouse gas emissions, such as providing shuttle buses for commuting and using green label transportation[164](index=164&type=chunk) - Promoted energy-saving measures (e.g., maintaining indoor temperature at 26°C, installing LED lights, utilizing natural light) and freshwater resource conservation measures (e.g., installing water-saving faucets, water-saving training)[165](index=165&type=chunk) - Advocated for efficient use of product packaging materials, including replacing paper receipts with electronic records, improving packaging design, implementing product carton recycling, and repairing and reusing cargo pallets[168](index=168&type=chunk)[169](index=169&type=chunk) 2018 Environmental Key Performance Indicators | Environmental Key Performance Indicator | Unit | 2018 | 2017 | | :--- | :--- | :--- | :--- | | NOx Emissions | tonnes | 0.860 | 1.080 | | SOx Emissions | tonnes | 0.00124 | 0.00109 | | Particulate Matter Emissions | tonnes | 0.0846 | 0.105 | | Total Greenhouse Gas Emissions | tonnes (CO2) | 16,281 | 15,800 | | Total Energy Consumption | gigajoules | 71,918 | 67,234 | | Water Consumption | cubic meters | 193,471 | 170,426 | | Packaging Materials | tonnes | 293 | 317 | [Community Investment](index=35&type=section&id=%E7%A4%BE%E5%8D%80%E6%8A%95%E8%B3%87) The Group actively engages in community investment, focusing on youth, vulnerable groups, poverty alleviation, and women's protection, with significant donations and volunteer hours, earning recognition for social responsibility - The Group's corporate charitable activities focus on aiding young people, caring for those in need, poverty alleviation, promoting women's protection, and fostering culture[176](index=176&type=chunk) - For the year ended December 31, 2018, the Group donated approximately **RMB 4.534 million** (2017: RMB 2.035 million)[176](index=176&type=chunk)[194](index=194&type=chunk) - In 2018, **1,500 volunteer hours** were contributed across **8 volunteer projects**, primarily focused on assisting vulnerable groups, promoting sports, and other areas[176](index=176&type=chunk)[177](index=177&type=chunk) - Chairman Zheng Yaonan was recognized as the "Most Socially Responsible Entrepreneur" for his commitment to social investment[176](index=176&type=chunk) [Content Index](index=35&type=section&id=%E5%85%A7%E5%AE%B9%E7%B4%A2%E5%BC%95) The content index cross-references the ESG report with HKEX ESG Reporting Guide KPIs and general disclosures, enhancing navigability and compliance transparency - The content index maps the report's content to the key performance indicators and general disclosures of the Environmental, Social and Governance Reporting Guide, as set out in Appendix 27 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[177](index=177&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) Directors' Report [Principal Activities and Business Review](index=38&type=section&id=%E4%B8%BB%E8%A6%81%E6%A5%AD%E5%8B%99%E8%88%87%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) The company's principal activity is investment holding, with the Group focusing on intimate wear design, R&D, and sales in China, recognized as the largest brand by 2018 retail sales - The principal business of the Company is investment holding, while the Group is primarily engaged in the design, research, development, and sale of self-owned brand intimate wear products in the People's Republic of China[184](index=184&type=chunk) - According to the Frost & Sullivan report, the Group was the largest intimate wear brand enterprise in China by total retail sales in 2018[184](index=184&type=chunk) - Discussions on business review, operational performance, future development, and potential risks are included in the "Chairman and CEO's Report" and "Management Discussion and Analysis" sections[186](index=186&type=chunk) [Results and Appropriations](index=38&type=section&id=%E6%A5%AD%E7%B8%BE%E5%8F%8A%E5%88%86%E9%85%8D) The Board proposed a final and special dividend for 2018, reflecting the company's listing anniversary and a dividend policy considering financial performance, reserves, and strategic needs - The Board recommended a final dividend of **HK 3.75 cents** per share (2017: 3.34 HK cents) and a special final dividend of **HK 6.20 cents** per share (2017: nil) for the year ended December 31, 2018, to celebrate the company's fifth anniversary of listing[187](index=187&type=chunk) - The dividend policy considers the Group's actual and expected financial performance, retained earnings and distributable reserves, shareholder interests, anticipated working capital requirements and future expansion plans, tax considerations, gearing ratio and financial covenants, lender restrictions, overall business conditions and strategies, economic conditions, and other factors[191](index=191&type=chunk) [Share Capital and Reserves](index=39&type=section&id=%E8%82%A1%E6%9C%AC%E5%8F%8A%E5%84%B2%E5%82%99) The Group significantly increased charitable donations in 2018, repurchased and cancelled shares, and maintained substantial distributable reserves - For the year ended December 31, 2018, the Group's total charitable and other donations amounted to approximately **RMB 4.534 million** (2017: RMB 2.035 million)[194](index=194&type=chunk) - In 2018, the company repurchased and cancelled a total of **11,876,000 issued shares** on the Stock Exchange for a total consideration of approximately **HKD 34.027 million**[200](index=200&type=chunk) - As of December 31, 2018, the company's distributable reserves were approximately **RMB 1.846 billion** (2017: RMB 1.497 billion)[201](index=201&type=chunk) [Major Customers and Suppliers](index=40&type=section&id=%E4%B8%BB%E8%A6%81%E5%AE%A2%E6%88%B6%E5%8F%8A%E4%BE%9B%E6%87%89%E5%95%86) The Group's customer and supplier base is diversified, with no single entity or related party holding significant influence over the top five customers or suppliers - For the year ended December 31, 2018, the Group's largest customer and top five customers accounted for approximately **1.6%** and **5.8%** of the Group's turnover, respectively (2017: 1.0% and 3.1%)[204](index=204&type=chunk) - For the year ended December 31, 2018, the Group's largest supplier and top five suppliers accounted for approximately **4.1%** and **14.9%** of the Group's purchases, respectively (2017: 4.2% and 16.3%)[204](index=204&type=chunk) - No director or any of their associates or any shareholder (to the best knowledge of the directors, holding more than **5%** of the company's issued share capital) had an interest in any of the Group's top five customers or suppliers[204](index=204&type=chunk) [Directors and Management](index=41&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E7%AE%A1%E7%90%86%E5%B1%A4) This section outlines the Board composition, directors' emoluments, and significant shareholdings of directors and major shareholders, including long and short positions - The current directors of the company include Mr. Zheng Yaonan, Mr. Zhang Shengfeng, Mr. Lin Zonghong, Ms. Wu Xiaoli (Executive Directors), Mr. Cheng Zuming, Mr. Wen Baoma, Mr. Yang Weiqiang, Mr. Hu Shengli (Non-executive Directors), and Mr. Qiu Zhiming, Dr. Dai Yiyi, Mr. Chen Zhigang, Dr. Lu Hongde (Independent Non-executive Directors)[208](index=208&type=chunk) - Details of directors' emoluments are set out in Note 11 to the consolidated financial statements, and no director waived emoluments or received compensation for joining/leaving[209](index=209&type=chunk)[509](index=509&type=chunk) - The company has arranged for appropriate directors' and officers' liability insurance for its directors and senior officers[214](index=214&type=chunk) Directors' Interests and Short Positions in Shares (December 31, 2018) | Director Name | Nature of Interest | Number of Shares Held (L) | Approximate Percentage of Equity (L) | | :--- | :--- | :--- | :--- | | Mr. Zheng Yaonan and Parties Acting in Concert | Jointly held interests; interests in controlled corporations; founder of discretionary trust | 1,193,529,678 | 52.90% | | Mr. Wen Baoma | Personal interest | 5,000,000 | 0.22% | | Dr. Lu Hongde | Personal interest | 210,000 | 0.01% | Major Shareholders' Interests and Short Positions in Shares (December 31, 2018) | Name | Nature of Interest | Number of Shares Held (L) | Approximate Percentage of Equity (L) | | :--- | :--- | :--- | :--- | | Mr. Zheng Yaonan and Parties Acting in Concert | Jointly held interests; interests in controlled corporations | 1,193,529,678 | 52.90% | | Fosun International Holdings Limited | Interests in controlled corporations | 240,000,000 | 10.64% | | Morgan Stanley | Jointly held interests; interests in controlled corporations | 148,029,923 (L) / 50,758,157 (S) | 6.56% (L) / 2.25% (S) | | Today Capital XVIII (Hong Kong) Limited | Beneficial owner | 133,156,000 | 5.90% | [Share Option and Share Award Schemes](index=47&type=section&id=%E8%B3%BC%E8%82%A1%E6%AC%8A%E5%8F%8A%E8%82%A1%E4%BB%BD%E7%8D%8E%E5%8B%B5%E8%A8%88%E5%8A%83) The company maintains share option and award schemes for employee incentives, with a significant number of unexercised options and shares purchased for the award scheme in 2018 - The share option scheme aims to incentivize and reward directors or employees who have contributed to the Group, with **55,300,000 unexercised share options** remaining, representing approximately **2.45%** of the total issued shares[236](index=236&type=chunk)[237](index=237&type=chunk) - The exercise price of the share options is **HKD 3.288 per share**, valid for ten years from the grant date, and vests in five stages[244](index=244&type=chunk)[248](index=248&type=chunk) - The share award scheme aims to recognize and motivate contributions from Group employees and help retain management members; as of December 31, 2018, **8,018,000 shares** were purchased, but no awards were granted during the year[249](index=249&type=chunk) [Non-Competition Undertaking and Connected Transactions](index=49&type=section&id=%E4%B8%8D%E7%AB%B6%E7%88%AD%E5%A5%91%E6%93%9A%E5%8F%8A%E9%97%9C%E9%80%A3%E4%BA%A4%E6%98%93) Controlling shareholders adhered to non-competition agreements, and continuing connected transactions with related parties were conducted on normal commercial terms and duly reviewed - The controlling shareholders have provided annual confirmations to the company, confirming their compliance with the provisions of the non-competition undertaking[251](index=251&type=chunk) - As of December 31, 2018, no director had any interest in any business that directly or indirectly competes or is likely to compete with the Group's business[253](index=253&type=chunk) Continuing Connected Transactions: Purchases from Related Parties | Related Party | 2018 Annual Cap (RMB thousands) | 2018 Amount for the Year (RMB thousands) | | :--- | :--- | :--- | | Shantou Shengqiang | 32,000 | 28,348 | | Shantou Maosheng | 25,000 | 8,847 | - Independent non-executive directors and the auditor have reviewed the continuing connected transactions and confirmed that they were entered into in the ordinary course of business on normal or better commercial terms[258](index=258&type=chunk) [Compliance with Laws and Regulations](index=51&type=section&id=%E6%B3%95%E5%BE%8B%E5%8F%8A%E8%A6%8F%E4%BE%8B%E9%81%B5%E5%AE%88) The Group maintains strict compliance with all applicable laws and regulations, including Listing Rules and local statutes, reporting no material non-compliance incidents - The Group is committed to complying with relevant laws and regulations, including the Listing Rules, the Hong Kong Companies Ordinance, and other local laws and regulations applicable in the different jurisdictions where it operates[260](index=260&type=chunk) - For the year ended December 31, 2018, and up to the date of this report, the Group has not identified any incidents of non-compliance with applicable laws and regulations that would have a material impact on its business and operations[260](index=260&type=chunk) [Retirement Schemes and Public Float](index=51&type=section&id=%E9%80%80%E4%BC%91%E8%A8%88%E5%8A%83%E5%8F%8A%E5%85%AC%E7%9C%BE%E6%8C%81%E8%82%A1%E9%87%8F) The Group provides retirement benefit schemes for employees in China and Hong Kong, while maintaining a public float exceeding 25% of issued shares in compliance with Listing Rules - The Group participates in various retirement benefit schemes in accordance with relevant rules and regulations in China and Hong Kong, including defined contribution retirement benefit schemes in China and the Mandatory Provident Fund Scheme in Hong Kong[261](index=261&type=chunk)[433](index=433&type=chunk) - For the year ended December 31, 2018, and up to the date of this report, over **25%** of the company's issued shares were held by the public, complying with the Listing Rules requirements[262](index=262&type=chunk) [Auditor](index=51&type=section&id=%E6%A0%B8%E6%95%B8%E5%B8%AB) PricewaterhouseCoopers audited the 2018 consolidated financial statements and is eligible for re-election at the upcoming Annual General Meeting - The consolidated financial statements for the year ended December 31, 2018, have been audited by PricewaterhouseCoopers[263](index=263&type=chunk) - PricewaterhouseCoopers will retire at the 2019 Annual General Meeting but is eligible and willing to stand for re-election[263](index=263&type=chunk) Independent Auditor's Report [Auditor's Opinion](index=52&type=section&id=%E6%A0%B8%E6%95%B8%E5%B8%AB%E6%84%8F%E8%A6%8B) PricewaterhouseCoopers issued an unmodified opinion, affirming the consolidated financial statements present a true and fair view in accordance with IFRS and Hong Kong Companies Ordinance - PricewaterhouseCoopers issued an unmodified opinion on the Group's consolidated financial statements[266](index=266&type=chunk) - The consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2018, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards[266](index=266&type=chunk) - The auditor confirmed independence from the Group and fulfilled other ethical responsibilities in accordance with the Code of Ethics for Professional Accountants[268](index=268&type=chunk) [Key Audit Matters](index=53&type=section&id=%E9%97%9C%E9%8D%B5%E5%AF%A9%E8%A8%88%E4%BA%8B%E9%A0%85) Key audit matters included assessing inventory carrying value and accounts receivable loss allowance, where the auditor evaluated management's assumptions and verified control procedures - Key audit matters include assessing the carrying amount of inventories and assessing the loss allowance for accounts receivable[278](index=278&type=chunk) - Assessing the carrying amount of inventories: The auditor evaluated the appropriateness of management's assumptions, examined the accuracy of inventory and slow-moving inventory analysis, and compared the net realizable value from post-year-end sales with inventory cost[273](index=273&type=chunk)[275](index=275&type=chunk)[277](index=277&type=chunk) - Assessing the loss allowance for accounts receivable: The auditor understood and verified management's credit control procedures, examined the accuracy of the accounts receivable aging analysis, and validated management's assessment of expected credit loss provisions[284](index=284&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk) - The auditor believes that management's estimates and judgments for provisions for obsolete or slow-moving inventories and expected credit loss provisions are supported by available audit evidence[279](index=279&type=chunk)[288](index=288&type=chunk) [Responsibilities of Directors and Audit Committee](index=55&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E5%AF%A9%E6%A0%B8%E5%A7%94%E5%93%A1%E6%9C%83%E8%B2%AC%E4%BB%BB) The Board is responsible for preparing true and fair consolidated financial statements and effective internal controls, while the Audit Committee oversees the financial reporting process - Directors are responsible for preparing consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, and for internal controls[294](index=294&type=chunk) - The Audit Committee is responsible for overseeing the Group's financial reporting process[295](index=295&type=chunk) [Auditor's Responsibilities](index=55&type=section&id=%E6%A0%B8%E6%95%B8%E5%B8%AB%E8%B2%AC%E4%BB%BB) The auditor's responsibility is to provide reasonable assurance on the financial statements' freedom from material misstatement, exercising professional skepticism and communicating key findings to the Audit Committee - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes an opinion[296](index=296&type=chunk) - The auditor exercises professional judgment, maintains professional skepticism, identifies and assesses risks of material misstatement, and understands internal controls relevant to the audit[297](index=297&type=chunk)[298](index=298&type=chunk) - The auditor communicates with the Audit Committee regarding the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control[302](index=302&type=chunk) Consolidated Statement of Profit or Loss and Other Comprehensive Income [2018 Consolidated Profit or Loss and Other Comprehensive Income](index=57&type=section&id=2018%E5%B9%B4%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A) The 2018 consolidated statement shows robust revenue and profit growth, with a significant increase in total comprehensive income driven by positive exchange differences 2018 Consolidated Profit or Loss and Other Comprehensive Income | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 5,096,453 | 4,542,483 | 12.2% | | Cost of Sales | (2,972,889) | (2,577,960) | 15.3% | | **Gross Profit** | **2,123,564** | **1,964,523** | **8.1%** | | Selling and Marketing Expenses | (1,471,006) | (1,337,868) | 9.9% | | General and Administrative Expenses | (265,081) | (261,525) | 1.4% | | Other Income | 90,937 | 55,354 | 64.3% | | Other Gains/(Losses) - Net | 5,564 | (919) | N/A | | **Operating Profit** | **483,978** | **419,565** | **15.4%** | | Finance Income - Net | 9,921 | 7,199 | 37.8% | | Share of Profits/(Losses) of Equity-Accounted Investments | 8,383 | (1,493) | N/A | | Profit Before Income Tax | 502,282 | 425,271 | 18.1% | | Income Tax Expense | (122,673) | (108,269) | 13.3% | | **Profit for the Year** | **379,609** | **317,002** | **19.7%** | | Other Comprehensive Income for the Year (Exchange Differences) | 34,433 | (18,035) | N/A | | **Total Comprehensive Income for the Year** | **414,042** | **298,967** | **38.5%** | | Profit Attributable to Owners of the Company | 378,229 | 317,002 | 19.3% | | Basic Earnings Per Share (RMB cents) | 17.15 | 15.45 | 11.0% | | Diluted Earnings Per Share (RMB cents) | 17.10 | 15.45 | 10.7% | Consolidated Statement of Financial Position [2018 Consolidated Statement of Financial Position](index=58&type=section&id=2018%E5%B9%B4%E7%B6%9C%E5%90%88%E8%B3%87%E7%94%A2%E8%B2%A0%E5%82%B5) The 2018 consolidated statement reflects a strong balance sheet with significant growth in total assets and equity, driven by joint venture investments, despite increased current liabilities 2018 Consolidated Statement of Financial Position | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Non-current Assets | 1,121,244 | 807,084 | 38.9% | | Current Assets | 4,294,956 | 3,729,410 | 15.2% | | **Total Assets** | **5,416,200** | **4,536,494** | **19.4%** | | **Equity** | | | | | Share Capital and Reserves Attributable to Owners of the Company | 4,047,549 | 3,356,113 | 20.6% | | Non-controlling Interests | 15,056 | – | N/A | | **Total Equity** | **4,062,605** | **3,356,113** | **21.0%** | | **Liabilities** | | | | | Current Liabilities | 1,339,861 | 952,252 | 40.7% | | Non-current Liabilities | 13,734 | 228,129 | -94.0% | | **Total Liabilities** | **1,353,595** | **1,180,381** | **14.7%** | Consolidated Statement of Changes in Equity [2018 Consolidated Statement of Changes in Equity](index=60&type=section&id=2018%E5%B9%B4%E7%B6%9C%E5%90%88%E6%AC%8A%E7%9B%8A%E8%AE%8A%E5%8B%95) The 2018 consolidated statement shows a substantial increase in total equity, influenced by profit, share issuance, dividends, share repurchases, and transfers to statutory reserves 2018 Consolidated Statement of Changes in Equity | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Total Equity at Beginning of Year | 3,356,113 | 2,693,829 | | Total Comprehensive Income for the Year | 414,042 | 298,967 | | Proceeds from Issued Shares | 415,119 | 528,450 | | Dividends Paid | (115,725) | (163,517) | | Shares Repurchased from Market | (29,080) | – | | Transactions with Non-controlling Interests | 3,974 | – | | Equity-Settled Compensation | 5,607 | 3,049 | | Shares Purchased for Share Award Scheme | (1,121) | (4,665) | | Capital Contribution from Non-controlling Interests | 13,676 | – | | Transfer to Statutory Reserves | 98,133 | 34,167 | | Total Equity at End of Year | 4,062,605 | 3,356,113 | Consolidated Statement of Cash Flows [2018 Consolidated Statement of Cash Flows](index=61&type=section&id=2018%E5%B9%B4%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F) The 2018 consolidated statement shows a decrease in operating cash flow, increased investing cash outflow due to joint venture investments, and positive financing cash flow from share issuance 2018 Consolidated Cash Flows | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 50,797 | 346,827 | | Net Cash Used in Investing Activities | (236,968) | (90,492) | | Net Cash Generated from Financing Activities | 235,317 | 371,784 | | Net Increase in Cash and Cash Equivalents | 49,146 | 628,119 | | Cash and Cash Equivalents at Beginning of Year | 1,405,285 | 799,533 | | Effect of Exchange Rate Changes | 41,732 | (22,367) | | Cash and Cash Equivalents at End of Year | 1,496,163 | 1,405,285 | Notes to the Consolidated Financial Statements [General Information](index=62&type=section&id=%E4%B8%80%E8%88%AC%E8%B3%87%E6%96%99) This note provides foundational information on Cosmo Lady's registration, HKEX listing, principal business in China's intimate wear market, and financial statement presentation - The company was incorporated in the Cayman Islands as an exempted company with limited liability on January 28, 2014, and listed on the Main Board of The Stock Exchange of Hong Kong Limited on June 26, 2014[326](index=326&type=chunk) - The Group's principal business is the design, marketing, and sale of intimate wear products in the People's Republic of China[326](index=326&type=chunk) - The consolidated financial statements are presented in RMB and were approved for issue by the Board of Directors on March 27, 2019[327](index=327&type=chunk) [Summary of Significant Accounting Policies](index=62&type=section&id=%E9%87%8D%E8%A6%81%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E6%A6%82%E8%A6%81) This section details the Group's significant accounting policies, including the 2018 adoption of IFRS 9 and 15, and the anticipated material impact of IFRS 16 in 2019 - The Group first adopted IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers) for the annual reporting period beginning January 1, 2018[330](index=330&type=chunk) - IFRS 9 resulted in changes to financial asset classification and measurement, reclassifying some available-for-sale financial assets to fair value through other comprehensive income, and adopting an expected credit loss model for impairment provisions[348](index=348&type=chunk)[349](index=349&type=chunk)[354](index=354&type=chunk) - IFRS 15 updated revenue recognition policies but had no material impact on the Group's revenue sources, primarily affecting the presentation of contract liabilities[363](index=363&type=chunk)[364](index=364&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - The adoption of IFRS 16 (Leases) in 2019 is expected to result in the recognition of approximately **RMB 122 million** in right-of-use assets and approximately **RMB 116 million** in lease liabilities, with an estimated decrease in 2019 net profit after tax of approximately **RMB 3.164 million**[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk) [Financial Risk Management](index=86&type=section&id=%E8%B2%A1%E5%8B%99%E9%A2%A8%E9%9A%AA%E7%AE%A1%E7%90%86) The Group actively manages financial risks, including foreign exchange, interest rate, price, credit, and liquidity, maintaining a robust capital structure and a net cash position - The majority of the Group's transactions are denominated and settled in RMB, so foreign exchange risk does not have a material impact[461](index=461&type=chunk) - The Group's borrowings bear interest at fixed rates and are not exposed to cash flow interest rate risk[462](index=462&type=chunk) - Credit risk is managed by granting credit periods to franchisee customers with good credit records, regularly assessing customer creditworthiness, and placing bank balances with reputable financial institutions[464](index=464&type=chunk)[466](index=466&type=chunk) - As of December 31, 2018, the Group was in a net cash position, with total bank balances, cash and cash equivalents, and liquid investments exceeding bank loan balances by approximately **RMB 1.330 billion**[471](index=471&type=chunk) - Financial instruments measured at fair value are disclosed by fair value hierarchy levels, including Level 1 (quoted prices in active markets) and Level 3 (unobservable inputs) items[472](index=472&type=chunk)[473](index=473&type=chunk)[476](index=476&type=chunk) [Critical Accounting Estimates and Judgments](index=90&type=section&id=%E9%87%8D%E8%A6%81%E6%9C%83%E8%A8%88%E4%BC%B0%E8%A8%88%E5%8F%8A%E5%88%A4%E6%96%B7) Key accounting estimates and judgments involve inventory net realizable value, financial asset impairment, income tax determination, and fair value estimation, all based on market conditions and forecasts - Estimation of net realizable value of inventories: based on current market conditions and past sales experience, which may change due to customer preferences and competitor actions[483](index=483&type=chunk) - Impairment of financial assets: loss allowance for trade and other receivables is based on assumptions of default risk and expected loss rates, considering historical data, current market conditions, and forward-looking estimates[484](index=484&type=chunk) - Current and deferred income tax: determining income tax provisions requires significant judgment, and final tax outcomes may differ from initial recordings[485](index=485&type=chunk) - Fair value of certain financial assets: fair value of financial assets not traded in active markets is determined using valuation techniques, requiring management judgment and assumptions[486](index=486&type=chunk) [Segment Information](index=91&type=section&id=%E5%88%86%E9%83%A8%E8%B3%87%E6%96%99) The Group operates as a single segment, deriving all major revenue from intimate wear product sales in China, with no single customer accounting for over 10% of revenue - The Group operates as a single operating segment, with reporting consistent with internal reports provided to the chief operating decision maker[491](index=491&type=chunk) - The Group is primarily engaged in the design, marketing, and sale of intimate wear products, with all major revenue derived from China[492](index=492&type=chunk) - For the year ended December 31, 2018, no single external customer generated more than **10%** of the Group's revenue[493](index=493&type=chunk) [Revenue](index=91&type=section&id=%E6%94%B6%E5%85%A5) The Group's 2018 revenue of RMB 5.096 billion was primarily driven by franchisee and retail sales, with strong e-commerce growth and new revenue from raw material trading Revenue by Sales Channel | Sales Channel | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Sales to Franchisees | 2,800,790 | 2,433,468 | | Retail | 1,494,518 | 1,566,039 | | E-commerce | 712,450 | 542,976 | | Raw Material Trading | 88,695 | – | | **Total Revenue** | **5,096,453** | **4,542,483** | Contract Liabilities | Contract Liability Type | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Contract Liabilities Related to Sales to Franchisees | 77,621 | – | | Contract Liabilities Related to Raw Material Trading | 8,142 | – | | **Total** | **85,763** | **–** | - The Group adopted IFRS 15 from January 1, 2018, and recognized revenue of approximately **RMB 50.703 million** from contract liabilities brought forward as of January 1, 2018, in the current reporting year[495](index=495&type=chunk) [Other Income](index=92&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) Other income significantly increased in 2018, primarily due to higher government grants, dividends from financial assets, and growth in logistics and investment income Other Income Details | Income Source | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Government Grants | 41,268 | 40,349 | | Dividends from Financial Assets at FVTOCI | 14,000 | – | | Logistics Warehousing and Delivery Income | 10,564 | 3,100 | | Investment Income from Financial Assets at FVTPL | 8,885 | – | | Software Usage Fees | 2,462 | 1,833 | | Franchisee Fees | 1,489 | 922 | | Other | 12,269 | 9,150 | | **Total** | **90,937** | **55,354** | - Government grants are primarily received from various local governments in China, with no unfulfilled conditions or contingencies[497](index=497&type=chunk) [Other Gains/(Losses) – Net](index=92&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E7%9B%8A%2F(%E虧%E6%90%8D)%EF%BC%8D%E6%B7%A8) The Group reported a net foreign exchange gain in 2018, a notable improvement from the previous year's net loss Other Gains/(Losses) – Net | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Net Foreign Exchange Gains/(Losses) | 7,293 | (4,332) | [Expenses by Nature](index=93&type=section&id=%E6%8C%89%E6%80%A7%E8%B3%AA%E5%8A%83%E5%88%86%E7%9A%84%E8%B2%BB%E7%94%A8) Total expenses by nature reached RMB 4.709 billion in 2018, with significant components including inventory costs, employee benefits, and operating expenses for associate stores Expenses by Nature | Expense Item | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Cost of Inventories Recognized | 2,895,327 | 2,511,457 | | Employee Benefit Expenses | 376,097 | 506,845 | | Operating Expenses of Stores Under Associate Arrangements | 677,488 | 479,934 | | Marketing and Promotion Expenses | 160,963 | 133,255 | | Depreciation and Amortization | 87,602 | 81,654 | | E-commerce Platform Service Fees | 80,748 | 74,003 | | Inventory Write-downs | 27,902 | 19,574 | | **Total** | **4,708,976** | **4,177,353** | - Employee benefit expenses decreased, mainly because employee costs for some stores under new associate arrangements are borne by business partners[501](index=501&type=chunk) [Employee Benefit Expenses](index=94&type=section&id=%E5%83%B1%E5%82%AD%E7%A6%8F%E5%88%A9%E8%B2%BB%E7%94%A8) Employee benefit expenses decreased in 2018, primarily comprising wages, salaries, bonuses, retirement costs, and equity-settled share-based payments Employee Benefit Expenses Details | Expense Item | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Wages, Salaries and Bonuses | 316,982 | 448,680 | | Retirement Benefit Costs - Defined Contribution Plans | 38,331 | 42,523 | | Benefits and Allowances | 15,177 | 12,593 | | Equity-Settled Share-Based Payments | 5,607 | 3,049 | | **Total** | **376,097** | **506,845** | [Directors' and Chief Executive's Emoluments and Five Highest Paid Individuals](index=94&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E8%A1%8C%E6%94%BF%E7%B8%BD%E8%A3%81%E9%85%AC%E9%87%91%E4%BB%A5%E5%8F%8A%E4%BA%94%E5%90%8D%E6%9C%80%E9%AB%98%E8%96%AA%E4%BA%BA%E5%A3%AB) Directors' and chief executive's emoluments decreased in 2018, while the total remuneration for the five highest-paid individuals increased, with detailed salary ranges provided Directors' and Chief Executive's Emoluments (2018) | Director Category | Fees (RMB thousands) | Wages, Salaries and Bonuses (RMB thousands) | Employer Contributions to Retirement Schemes (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Executive Directors | – | 2,298 | 280 | 2,578 | | Non-executive Directors | – | 737 | 68 | 805 | | Independent Non-executive Directors | 595 | – | – | 595 | | **Total** | **595** | **3,035** | **348** | **3,578** | - The total remuneration for the five highest-paid individuals (including one director) in 2018 was **RMB 5.857 million** (2017: RMB 4.439 million)[514](index=514&type=chunk) 2018 Remuneration Ranges for Five Highest Paid Individuals (Excluding Directors) | Remuneration Range (HKD) | 2018 Number of Individuals | 2017 Number of Individuals | | :--- | :--- | :--- | | 500,000 to 1,000,000 | 1 | – | | 1,000,001 to 1,500,000 | 1 | 2 | | 1,500,001 to 2,000,000 | – | 1 | | 2,000,001 to 2,500,000 | 2 | 1 | 2018 Senior Management Remuneration Ranges | Remuneration Range (HKD) | 2018 Number of Individuals | 2017 Number of Individuals | | :--- | :--- | :--- | | 0 to 500,000 | 2 | – | | 500,001 to 1,000,000 | 3 | 3 | | 1,000,001 to 1,500,000 | 1 | 1 | | 1,500,001 to 2,000,000 | – | 1 | | 2,000,001 to 2,500,000 | 2 | 1 | [Finance Income and Costs](index=97&type=section&id=%E8%B2%A1%E5%8B%99%E6%94%B6%E5%85%A5%E5%8F%8A%E8%B2%BB%E7%94%A8) Net finance income increased in 2018, driven by higher interest from short-term bank deposits and reduced finance costs due to lower bank loan amounts Finance Income and Costs Details | Indicator | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Finance Income | 19,977 | 18,763 | | Interest Income from Short-Term Bank Deposits | 16,491 | 4,822 | | Finance Costs (Bank Loan Interest Expense) | (10,056) | (11,564) | | **Net Finance Income** | **9,921** | **7,199** | - The increase in finance income was mainly due to higher interest income from short-term bank deposits during the year[29](index=29&type=chunk) - The decrease in finance costs was mainly due to a reduction in the amount of bank loans[30](index=30&type=chunk) [Income Tax Expense](index=98&type=section&id=%E6%89%80%E5%BE%97%E7%A8%85%E8%B2%BB%E7%94%A8) Income tax expense increased in 2018, primarily due to higher China corporate income tax, with the effective tax rate remaining stable Income Tax Expense Details | Expense Item | 2018 (RMB thousands) | 2017 (RMB thousands) | | :--- | :--- | :--- | | Current Income Tax - China Corporate Income Tax | 147,603 | 124,467 | | Deferred Income Tax | (24,930) | (16,198) | | **Income Tax Expense** | **122,673** | **108,269** | - For the year ended December 31, 2018, the Group's effective tax rate remained relatively stable at approximately **24.4%** (2017: 25.5%)[31](index=31&type=chunk)[524](index=524&type=chunk) - The Group has fulfilled all its tax obligations, and there are no unresolved tax disputes[31](index=31&type=chunk) [Earnings Per Share](index=99&type=section&id=%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Both basic and diluted earnings per share increased in 2018, reflecting adjustments for new share issues, share award purchases, and share repurchases Basic Earnings Per Share | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Profit for the Year Attributable to Owners of the Company (RMB thousands) | 378,229 | 317,002 | | Weighted Average Number of Ordinary Shares (thousands) | 2,205,670 | 2,051,303 | | **Basic Earnings Per Share (RMB cents per share)** | **17.15** | **15.45** | Diluted Earnings Per Share | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Profit for the Year Attributable to Owners of the Company (RMB thousands) | 378,229 | 317,002 | | Weighted Average Number of Ordinary Shares (thousands) | 2,211,483 | 2,051,303 | | **Diluted Earnings Per Share (RMB cents per share)** | **17.10** | **15.45** | - The weighted average number of ordinary shares for basic earnings per share has been adjusted for the issuance of new shares on May 25, 2018, and the purchase and repurchase and cancellation of the company's ordinary shares for the share award scheme during the year ended December 31, 2018[527](index=527&type=chunk) [Dividends](index=100&type=section&id=%E8%82%A1%E6%81%AF) The Board proposed a final and special dividend for 2018 totaling approximately RMB 192 million, following interim and prior year final dividend payments - The Board recommended a final dividend of **HK 3.75 cents** per ordinary share and a special final dividend of **HK 6.20 cents** per share for the year ended December 31, 2018, totaling approximately **RMB 191.683 million**[534](index=534&type=chunk) - Interim dividends of **HK 2.73 cents** per share (approximately **RMB 54.171 million**) and 2017 final dividends of **HK 3.34 cents** per share (approximately **RMB 61.554 million**) were paid in 2018[534](index=534&type=chunk)[535](index=535&type=chunk) [Disposal of a Subsidiary](index=100&type=section&id=%E5%87%BA%E5%94%AE%E9%99%84%E5%B1%AC%E5%85%AC%E5%8F%B8) In 2017, the Group disposed of a 95% equity interest in a subsidiary to a related party for RMB 10.8091 million, realizing a gain of RMB 1.378 million - On June 23, 2017, the Group disposed of **95%** equity interest in Guangdong Cosmo Lady Smart Industrial Investment Co., Ltd. to Guangdong Zhengji Innovation Industrial Park Development Co., Ltd. for a consideration of **RMB 10.8091 million**[536](index=536&type=chunk) - The disposal of the subsidiary resulted in a gain of **RMB 1.378 million**[537](index=537&type=chunk) [Property, Plant and Equipment](index=101&type=section&id=%E7%89%A9%E6%A5%AD%E3%80%81%E5%BB%A0%E6%88%BF%E5%8F%8A%E8%A8%AD%E5%82%99) The net book value of property, plant, and equipment remained stable in 2018, with additions and depreciation primarily impacting general and administrative expenses - As of December 31, 2018, the net book value of property, plant and equipment was **RMB 564.357 million** (2017: RMB 565.009 million)[539](index=539&type=chunk) - Additions during the year amounted to **RMB 79.877 million**, and depreciation expense was **RMB 78.731 million** (2017: RMB 73.712 million)[539](index=539&type=chunk)[541](index=541&type=chunk) - Depreciation expense is primarily recognized in general and administrative expenses (**RMB 67.231 million**)[541](index=541&type=chunk) [Land Use Rights](index=102&type=section&id=%E5%9C%9F%E5%9C%B0%E4%BD%BF%E7%94%A8%E6%AC%8A) The net book value of land use rights slightly decreased in 2018, with amortization expense primarily recognized in general and administrative expenses - As of December 31, 2018, the net book value of land use rights was **RMB 85.231 million** (2017: RMB 87.311 million)[542](index=542&type=chunk) - Amortization expense for the year was **RMB 2.08 million** (2017: RMB 2.08 million), primarily recognized in general and administrative expenses[542](index=542&type=chunk) [Intangible Assets](index=103&type=section&id=%E7%84%A1%E5%BD%A2%E8%B3%87%E7%94%A2) Intangible assets, including goodwill and trademarks, had a net book value of RMB 44.972 million in 2018, with annual impairment tests performed on goodwill - As of December 31, 2018, the net book value of intangible assets was **RMB 44.972 million** (2017: RMB 45.390 million)[547](index=547&type=chunk) - Amortization expense for the year was **RMB 6.791 million** (2017: RMB 5.862 million), primarily recognized in selling and marketing expenses and general and administrative expenses[547](index=547&type=chunk)[549](index=549&type=chunk) - Goodwill is tested for impairment annually, with the recoverable amount calculated based on value-in-use, using a five-year cash flow forecast and a pre-tax discount rate of **19%**[549](index=549&type=chunk) [Investments in Joint Ventures and an Associate](index=104&type=section&id=%E6%96%BC%E5%90%88%E7%87%9F%E5%85%AC%E5%8F%B8%E5%8F%8A%E4%B8%80%E5%AE%B6%E8%81%AF%E7%87%9F%E5%85%AC%E5%8F%B8%E7%9A%84%E6%8A%95%E8%B3%87) Investments in joint ventures and an associate significantly increased in 2018, primarily due to a substantial capital injection into investment man