香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不 負 責，對 其 準 確 性 或 完 整 性 亦 不 發 表 任 何 聲 明，並 明 確 表 示，概 不 對 因 本 公 告 全部或任何部分內容而產生或因倚賴該等內容而引致的任何損失承擔任何責 任。 附 註： 1 該 項 目 並 非 香 港 財 務 報 告 準 則（「香港財務報告準則」）下 計 量 表 現 的 指 標，惟 獲 管 理 層 從 營 運 角 度 廣 泛 應 用 於 監 控 公 司 業 務 表 現。其 未 必 可 與 其 他 公 司 呈 列 的 類 似 計 量 指 標 作 比 較。 C-MER EYE CARE HOLDINGS LIMITED 希瑪眼科醫療控股有限公司 （股份代號：3309） （於開曼群島註冊成立之有限公司） 截 至2022年12月31日止年度 的全年業績 | --- | --- | --- | --- | --- | --- | |------------------------------------------|---------|-------|-----------|--------------|----- ...

[Corporate Information](index=3&type=section&id=Corporate%20Information) [Corporate Overview](index=3&type=section&id=Corporate%20Information%20Overview) This section provides essential company details, including board members, committee composition, auditor, registered office, principal place of business in Hong Kong, share registrar, principal bankers, legal advisors, and company website - Company Name: C-MER EYE CARE HOLDINGS LIMITED[2](index=2&type=chunk) - Stock Code: **3309**[2](index=2&type=chunk)[5](index=5&type=chunk) - Auditor: PricewaterhouseCoopers[4](index=4&type=chunk) - Registered Office: Cayman Islands[5](index=5&type=chunk) - Principal Place of Business and Headquarters in Hong Kong: Room 1535, Central Building, 1–3 Pedder Street, Hong Kong[5](index=5&type=chunk) [Financial Highlights](index=5&type=section&id=Financial%20Highlights) [Financial Highlights Overview](index=5&type=section&id=Financial%20Highlights%20Overview) For the six months ended June 30, 2020, the company experienced significant declines in revenue, gross profit, and profit for the period, with a substantial drop in gross profit margin, shifting from profit to loss Key Financial Indicators Comparison (For the six months ended June 30) | Indicator | 2020 (HKD thousands) | 2019 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 261,766 | 264,594 | -1.1% | | Gross Profit | 61,466 | 99,299 | -38.1% | | (Loss)/Profit for the Period | (22,177) | 33,126 | Not Applicable | | (Loss)/Profit for the Period Attributable to Owners of the Company | (20,981) | 33,757 | Not Applicable | | Gross Profit Margin (%) | 23.5% | 37.5% | -14.0 pp | | Net Profit Margin (%) | Not Applicable | 12.5% | Not Applicable | [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=6&type=section&id=BUSINESS%20REVIEW) In the first half of 2020, the COVID-19 pandemic negatively impacted the Group's operations in Hong Kong and mainland China, leading to appointment cancellations and hospital closures, yet the Group actively expanded its service network in the Greater Bay Area and other mainland regions through acquisitions and facility upgrades - The COVID-19 pandemic negatively impacted business in Hong Kong and mainland China, with mainland surgical centers and hospitals closed for up to six weeks, and Beijing operations further affected by a second wave of the pandemic[7](index=7&type=chunk) - The Group continued to expand its service network in the Greater Bay Area and other regions of mainland China[7](index=7&type=chunk) - An agreement was signed in January 2020 to acquire 100% equity of an ophthalmology hospital in Zhuhai Xiangzhou District, with completion on August 8[7](index=7&type=chunk) - The Shenzhen Bao'an clinic will be upgraded to a full-service ophthalmology hospital by October 2020, expanding to 3,418 square meters with 4 operating rooms and 11 medical rooms[7](index=7&type=chunk) - Plans are underway to establish the seventh and eighth ophthalmology hospitals in Huizhou and Guangzhou, expected to commence operations in the second half of 2020 and first half of 2021, respectively[8](index=8&type=chunk)[10](index=10&type=chunk) - For the six months ended June 30, 2020, Hong Kong business revenue accounted for **51.8%** (2019: 51.0%), and mainland China business revenue accounted for **48.2%** (2019: 49.0%)[9](index=9&type=chunk)[10](index=10&type=chunk) - Mainland China operating revenue decreased by **2.7%** in HKD terms, primarily due to the pandemic and RMB depreciation, but increased by **2.4%** in RMB terms[9](index=9&type=chunk)[10](index=10&type=chunk) - Shenzhen Eye Hospital revenue decreased by **29.3%** (in HKD terms), while Shenzhen Bao'an Clinic revenue increased by **276.8%** (in HKD terms)[11](index=11&type=chunk) - Newly acquired ophthalmology hospitals in Kunming and Shanghai contributed **HKD 11.7 million** and **HKD 19.5 million** in revenue, respectively[12](index=12&type=chunk) [Financial Review](index=9&type=section&id=FINANCIAL%20REVIEW) This section details the Group's financial performance, including revenue composition, cost of sales, gross profit, and various expenses, highlighting a slight decrease in total revenue, a significant decline in gross profit and margin, and a shift to a loss for the period, despite strong sales of vision care products [Revenue](index=9&type=section&id=Revenue) Total revenue slightly decreased by **1.1%**, primarily due to a **7.1%** reduction in ophthalmology service revenue, despite a **75.4%** surge in vision care product sales driven by new business expansion; Hong Kong business revenue share slightly increased, while mainland China revenue decreased in HKD terms Revenue Composition (For the six months ended June 30) | Category | 2020 (HKD thousands) | % of Total Revenue | 2019 (HKD thousands) | % of Total Revenue | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Provision of ophthalmology services | 227,852 | 87.0 | 245,260 | 92.7 | (17,408) | (7.1) | | Sales of vision care products | 33,914 | 13.0 | 19,334 | 7.3 | 14,580 | 75.4 | | **Total** | **261,766** | **100.0** | **264,594** | **100.0** | **(2,828)** | **(1.1)** | Revenue by Geographical Market (For the six months ended June 30) | Region | 2020 (HKD thousands) | % of Total Revenue | 2019 (HKD thousands) | % of Total Revenue | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Hong Kong | 135,554 | 51.8 | 134,891 | 51.0 | 663 | 0.5 | | Mainland China | 126,212 | 48.2 | 129,703 | 49.0 | (3,491) | (2.7) | Breakdown of Ophthalmology Service Revenue (For the six months ended June 30) | Category | Region | 2020 (HKD thousands) | % of Ophthalmology Service Revenue | 2019 (HKD thousands) | % of Ophthalmology Service Revenue | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consultation and other medical service fees | Hong Kong | 47,698 | 20.9 | 49,761 | 20.3 | (2,063) | (4.1) | | | Mainland China | 31,357 | 13.8 | 39,469 | 16.1 | (8,112) | (20.6) | | Surgical fees | Hong Kong | 87,159 | 38.3 | 83,802 | 34.2 | 3,357 | 4.0 | | | Mainland China | 61,638 | 27.1 | 72,228 | 29.4 | (10,590) | (14.7) | Number of Surgeries and Average Fees (For the six months ended June 30) | Indicator | Region | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Surgical Fees (HKD thousands) | Hong Kong | 87,159 | 83,802 | 4.0 | | | Mainland China | 61,638 | 72,228 | (14.7) | | Number of Surgeries Performed | Hong Kong | 2,635 | 2,449 | 7.6 | | | Mainland China | 5,597 | 4,621 | 21.1 | | Average Surgical Fee (HKD) | Hong Kong | 33,077 | 34,219 | (3.3) | | | Mainland China | 11,013 | 15,630 | (29.5) | - Average surgical fees in Hong Kong decreased by **3.3%** due to changes in surgical mix, but the number of surgeries increased by **7.6%** due to an increase in ophthalmologists[25](index=25&type=chunk) - Average surgical fees in mainland China decreased by **29.5%** due to RMB depreciation and changes in surgical mix, despite a **21.1%** increase in the number of surgeries, primarily from Kunming and Shanghai Eye Hospitals[25](index=25&type=chunk) [Cost of Revenue](index=14&type=section&id=Cost%20of%20revenue) Cost of revenue increased by **21.2%** to **HKD 200.3 million**, primarily driven by higher staff salaries and allowances, inventory and consumables costs, and doctors' consultation fees, associated with the operational launch of new service centers in Kunming and Shanghai Cost of Revenue Analysis (For the six months ended June 30) | Category | 2020 (HKD thousands) | % of Revenue | 2019 (HKD thousands) | % of Revenue | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Doctors' consultation fees | 58,875 | 22.5 | 51,535 | 19.5 | 7,340 | 14.2 | | Cost of inventories and consumables | 54,700 | 20.9 | 46,737 | 17.7 | 7,963 | 17.0 | | Staff salaries and allowances | 42,625 | 16.3 | 31,431 | 11.9 | 11,194 | 35.6 | | Depreciation of right-of-use assets | 23,716 | 9.1 | 16,725 | 6.3 | 6,991 | 41.8 | | Depreciation of property, plant and equipment | 17,047 | 6.5 | 12,059 | 4.6 | 4,988 | 41.4 | | Others | 3,337 | 1.3 | 6,808 | 2.6 | (3,471) | (51.0) | | **Total** | **200,300** | **76.5** | **165,295** | **62.5** | **35,005** | **21.2** | - Cost of revenue increased by **21.2%**, primarily due to an increase of **HKD 11.2 million** in staff salaries and allowances, **HKD 8.0 million** in inventory and consumables costs, and **HKD 7.3 million** in doctors' consultation fees[29](index=29&type=chunk) - The increase in costs is mainly attributable to the commencement of operations of new service centers, including ophthalmology hospitals in Kunming and Shanghai, along with three satellite clinics in Shanghai[28](index=28&type=chunk) [Gross Profit and Gross Profit Margin](index=15&type=section&id=Gross%20profit%20and%20gross%20profit%20margin) Gross profit significantly decreased by **38.1%** to **HKD 61.5 million**, with the gross profit margin falling from **37.5%** to **23.5%**, as both Hong Kong and mainland China businesses experienced substantial declines in gross profit margins due to the pandemic's impact Gross Profit and Gross Profit Margin by Geographical Market (For the six months ended June 30) | Region | 2020 Gross Profit (HKD thousands) | 2020 Gross Profit Margin (%) | 2019 Gross Profit (HKD thousands) | 2019 Gross Profit Margin (%) | Change in Gross Profit (HKD thousands) | Change in Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Hong Kong | 32,334 | 23.9 | 44,833 | 33.2 | (12,499) | (27.9) | | Mainland China | 29,132 | 23.1 | 54,466 | 42.0 | (25,334) | (46.5) | - Total gross profit decreased by **38.1%** to **HKD 61.5 million**, with a gross profit margin of **23.5%** (2019: 37.5%)[31](index=31&type=chunk) - Mainland China's gross profit margin decreased from **42.0%** to **23.1%**, and Hong Kong's gross profit margin decreased from **33.2%** to **23.9%**, primarily due to the adverse impact of COVID-19[31](index=31&type=chunk) [Selling Expenses](index=16&type=section&id=Selling%20expenses) Selling expenses increased by **26.7%** to **HKD 23.5 million**, mainly due to higher promotion expenses for ophthalmology hospitals in mainland China, raising their percentage of total revenue from **7.0%** to **9.0%** - Selling expenses increased by **26.7%** from **HKD 18.5 million** to **HKD 23.5 million**[32](index=32&type=chunk) - This increase was primarily due to higher promotion expenses for ophthalmology hospitals in Shenzhen, Beijing, Shanghai, and Kunming in mainland China[32](index=32&type=chunk) - Selling expenses as a percentage of total revenue increased from **7.0%** to **9.0%**, with fees paid to online platforms accounting for a significant portion[32](index=32&type=chunk) [Administrative Expenses](index=16&type=section&id=Administrative%20expenses) Total administrative expenses increased by **27.1%** compared to the same period last year, primarily driven by higher staff salaries and allowances due to business expansion - Total administrative expenses increased by **27.1%** compared to the same period in 2019[32](index=32&type=chunk) - The increase was mainly due to higher staff salaries and allowances resulting from business expansion[32](index=32&type=chunk) [Other Income](index=17&type=section&id=Other%20income) Other income decreased from **HKD 6.7 million** to **HKD 2.6 million**, primarily due to a reduction in interest income and miscellaneous income - Other income decreased from **HKD 6.7 million** to **HKD 2.6 million**[33](index=33&type=chunk) - The decrease was mainly due to lower interest income and miscellaneous income[33](index=33&type=chunk) [Other (Losses)/Gains, Net](index=17&type=section&id=Other%20(losses)/gains,%20net) The period recorded a net other loss of **HKD 1.6 million**, primarily including a loss from the disposal of an associate - Net other losses for the period amounted to **HKD 1.6 million**[33](index=33&type=chunk) - This primarily included a loss from the disposal of an associate[33](index=33&type=chunk) [Finance Expenses](index=17&type=section&id=Finance%20expenses) Finance expenses increased from **HKD 3.4 million** to **HKD 4.8 million**, primarily due to lease liabilities recognized under HKFRS 16 Leases - Finance expenses increased from **HKD 3.4 million** to **HKD 4.8 million**[33](index=33&type=chunk) - This increase was primarily due to lease liabilities recognized under HKFRS 16 Leases[33](index=33&type=chunk) [Income Tax Expense](index=17&type=section&id=Income%20tax%20expense) Income tax expense decreased by **67.4%** to **HKD 3.4 million**, mainly due to reduced profit before tax from Hong Kong and Shenzhen operations - Income tax expense was **HKD 3.4 million**, a **67.4%** decrease compared to the same period in 2019[33](index=33&type=chunk) - The decrease was primarily due to reduced profit before tax from Hong Kong and Shenzhen operations[33](index=33&type=chunk) [(Loss)/Profit for the Period](index=17&type=section&id=(Loss)/profit%20for%20the%20period) The Group recorded a loss of **HKD 22.2 million** for the period, compared to a profit of **HKD 33.1 million** in the same period of 2019, primarily due to the adverse impact of COVID-19; excluding losses from Beijing, Bao'an, Kunming, and Shanghai Eye Hospitals, the Group's net profit was **HKD 10.6 million** - The loss for the period was **HKD 22.2 million** (2019: profit of HKD 33.1 million), primarily impacted by the adverse effects of COVID-19[33](index=33&type=chunk) - Excluding losses incurred by Beijing, Bao'an, Kunming, and Shanghai Eye Hospitals and clinics, the Group's "profit" or "net profit" for the period was **HKD 10.6 million**[34](index=34&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The Group's liquidity primarily stems from cash generated from operating activities and bank deposits; despite an improved current ratio, net cash from operating activities significantly decreased, while investing activities resulted in substantial net cash outflows due to land use rights and property, plant and equipment prepayments, and financing activities generated significant net cash inflows from share issuance - Liquidity primarily derived from cash generated from business operations and bank deposits[40](index=40&type=chunk) - As of June 30, 2020, cash and cash equivalents amounted to **HKD 236.4 million**, and bank deposits with original maturity over three months were **HKD 338.7 million**[40](index=40&type=chunk) - The current ratio was **5.32 times** (December 31, 2019: 4.48 times)[40](index=40&type=chunk) - Net cash generated from operating activities was **HKD 21.4 million** (2019: HKD 70.6 million), a decrease of **HKD 44.9 million**[40](index=40&type=chunk) - Net cash used in investing activities was **HKD 430.4 million**, primarily for the acquisition of land use rights (approximately **HKD 183.4 million**) and prepayments for property, plant and equipment (approximately **HKD 72.4 million**)[40](index=40&type=chunk) - Net cash generated from financing activities was **HKD 366.9 million** (2019: net cash used of HKD 19.2 million), mainly from proceeds from share issuance[40](index=40&type=chunk) - As of June 30, 2020, the gearing ratio was not applicable due to a net cash position[34](index=34&type=chunk) - Primarily settled in HKD and RMB, foreign exchange rate risk is not hedged but managed through close monitoring of exchange rate fluctuations[35](index=35&type=chunk)[36](index=36&type=chunk) - Total number of employees was **905** (December 31, 2019: 851), with the increase mainly due to business expansion[37](index=37&type=chunk) [Significant Investments, Acquisitions and Disposals](index=21&type=section&id=SIGNIFICANT%20INVESTMENTS,%20ACQUISITIONS%20AND%20DISPOSALS) For the six months ended June 30, 2020, the Group had no significant investments, acquisitions, or disposals, but disclosed progress on the Shenzhen land acquisition and post-balance sheet events including the completed acquisition of a Zhuhai ophthalmology hospital and the ongoing acquisition of a Hong Kong Central clinic - For the six months ended June 30, 2020, the Group did not undertake any significant investments, acquisitions, or disposals (other than those disclosed in this report)[42](index=42&type=chunk) - The Shenzhen Pingshan land acquisition has not yet been completed, construction has not commenced, and a deposit for the purchase price has been paid[42](index=42&type=chunk) - Post-balance sheet event: The acquisition of 100% equity in Zhuhai Changjiu Eye Hospital Co., Ltd. was completed on August 8, 2020, for a cash consideration of RMB 16,000,000 (approximately **HKD 17,456,000**)[43](index=43&type=chunk)[44](index=44&type=chunk) - Post-balance sheet event: An agreement was entered into on August 28, 2020, to acquire the practice business and assets of a clinic in Central, Hong Kong, for a maximum consideration of **HKD 26,745,000** (cash and share payment), with the acquisition not yet completed[45](index=45&type=chunk)[48](index=48&type=chunk) [Outlook and Strategies](index=22&type=section&id=OUTLOOK%20AND%20STRATEGIES) The Group anticipates that favorable policies in the mainland healthcare industry, the development of the Greater Bay Area, and rising middle-class living standards will stimulate demand for high-quality ophthalmology services, and plans to capitalize on these opportunities by establishing or acquiring ophthalmology hospitals, enhancing operational and service capabilities, and seeking strategic partners - Favorable policies in the mainland healthcare industry, the development of the Greater Bay Area, increasing urbanization, and rising living standards of the middle class are expected to increase demand for high-quality ophthalmology services[46](index=46&type=chunk)[49](index=49&type=chunk) - Strategies include: establishing or acquiring ophthalmology hospitals, eye centers, and clinics in selected cities in Hong Kong and mainland China[47](index=47&type=chunk)[49](index=49&type=chunk) - Strategies include: enhancing operational strength and service capabilities[47](index=47&type=chunk)[49](index=49&type=chunk) - Strategies include: identifying suitable strategic partners[47](index=47&type=chunk)[49](index=49&type=chunk) [Condensed Consolidated Interim Statement of Comprehensive Income](index=23&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Comprehensive%20Income) [Condensed Consolidated Interim Statement of Comprehensive Income Overview](index=23&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Comprehensive%20Income%20Overview) For the six months ended June 30, 2020, the Group shifted from a profit to a loss of **HKD 22.2 million**, compared to a profit of **HKD 33.1 million** in the prior year, with total comprehensive loss reaching **HKD 33.5 million** primarily due to decreased gross profit, increased selling and administrative expenses, and foreign currency translation differences Condensed Consolidated Interim Statement of Comprehensive Income Summary (For the six months ended June 30) | Indicator | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Revenue | 261,766 | 264,594 | | Cost of revenue | (200,300) | (165,295) | | Gross profit | 61,466 | 99,299 | | Other income | 2,564 | 6,669 | | Selling expenses | (23,489) | (18,533) | | Administrative expenses | (52,844) | (41,567) | | Other (losses)/gains, net | (1,632) | 1,073 | | Operating (loss)/profit | (13,935) | 46,941 | | Finance expenses | (4,770) | (3,433) | | Share of loss of an associate | (84) | – | | (Loss)/Profit before income tax | (18,789) | 43,508 | | Income tax expense | (3,388) | (10,382) | | (Loss)/Profit for the period | (22,177) | 33,126 | | Other comprehensive loss for the period, net of tax | (11,280) | (234) | | Total comprehensive (loss)/income for the period | (33,457) | 32,892 | | Basic (loss)/earnings per share (HK cents) | (1.97) | 3.24 | | Diluted (loss)/earnings per share (HK cents) | (1.97) | 3.19 | [Condensed Consolidated Interim Balance Sheet](index=25&type=section&id=Condensed%20Consolidated%20Interim%20Balance%20Sheet) [Condensed Consolidated Interim Balance Sheet Overview](index=25&type=section&id=Condensed%20Consolidated%20Interim%20Balance%20Sheet%20Overview) As of June 30, 2020, the Group's total assets significantly increased to **HKD 1,479.4 million**, driven by higher right-of-use assets and property, plant and equipment, while total equity substantially rose due to share issuance, and total liabilities remained relatively stable Condensed Consolidated Interim Balance Sheet Summary (As of June 30) | Indicator | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | **Assets** | | | | Property, plant and equipment | 168,637 | 164,373 | | Right-of-use assets | 397,033 | 165,392 | | Intangible assets | 103,679 | 104,566 | | Interests in an associate | 793 | 2,204 | | Financial assets at fair value through other comprehensive income | 54,933 | – | | Deferred income tax assets | 4,695 | 5,014 | | Deposits and prepayments (non-current) | 119,172 | 96,401 | | **Total non-current assets** | **848,942** | **537,950** | | Inventories | 22,308 | 14,169 | | Trade receivables | 12,407 | 11,228 | | Deposits, prepayments and other receivables (current) | 20,674 | 20,449 | | Bank deposits with original maturity over three months | 338,734 | 253,675 | | Cash and cash equivalents | 236,359 | 282,178 | | **Total current assets** | **630,482** | **581,699** | | **Total assets** | **1,479,424** | **1,119,649** | | **Equity** | | | | Share capital | 114,373 | 105,130 | | Reserves | 1,110,013 | 751,608 | | Non-controlling interests | 3,249 | 4,583 | | **Total equity** | **1,227,635** | **861,321** | | **Liabilities** | | | | Lease liabilities (non-current) | 133,224 | 128,437 | | **Total non-current liabilities** | **133,224** | **128,437** | | Trade payables | 14,968 | 13,849 | | Accruals and other payables | 45,607 | 60,385 | | Amount due to a related party | 129 | 131 | | Current income tax liabilities | 7,424 | 12,283 | | Lease liabilities (current) | 50,437 | 43,243 | | **Total current liabilities** | **118,565** | **129,891** | | **Total liabilities** | **251,789** | **258,328** | | **Total equity and liabilities** | **1,479,424** | **1,119,649** | [Condensed Consolidated Interim Statement of Changes in Equity](index=27&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Changes%20in%20Equity) [Condensed Consolidated Interim Statement of Changes in Equity Overview](index=27&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Changes%20in%20Equity%20Overview) As of June 30, 2020, total equity significantly increased from **HKD 861.3 million** at the beginning of the year to **HKD 1,227.6 million**, primarily driven by proceeds from share issuance and the exercise of pre-IPO share options, despite a loss for the period and foreign currency translation differences - As of January 1, 2020, total equity was **HKD 861,321 thousand**[55](index=55&type=chunk) - As of June 30, 2020, total equity increased to **HKD 1,227,635 thousand**[55](index=55&type=chunk) - Proceeds from share issuance amounted to **HKD 407,652 thousand**[55](index=55&type=chunk) - Proceeds from the exercise of pre-IPO share options were **HKD 10,905 thousand**[55](index=55&type=chunk) - Loss for the period attributable to owners of the Company was **(HKD 20,981) thousand**[55](index=55&type=chunk) - Foreign currency translation differences amounted to **(HKD 11,142) thousand**[55](index=55&type=chunk) [Condensed Consolidated Interim Statement of Cash Flows](index=29&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Cash%20Flows) [Condensed Consolidated Interim Statement of Cash Flows Overview](index=29&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Cash%20Flows%20Overview) For the six months ended June 30, 2020, net cash generated from operating activities significantly decreased, while investing activities resulted in net cash outflows due to substantial acquisitions of land use rights and prepayments for property, plant and equipment; financing activities generated significant net cash inflows from share issuance, but overall cash and cash equivalents decreased at period-end Condensed Consolidated Interim Statement of Cash Flows Summary (For the six months ended June 30) | Indicator | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Net cash generated from operating activities | 21,440 | 70,612 | | Net cash used in investing activities | (430,443) | (379,146) | | Net cash generated from/(used in) financing activities | 366,911 | (19,247) | | Net decrease in cash and cash equivalents | (42,092) | (327,781) | | Cash and cash equivalents at end of period | 236,359 | 145,802 | - Net cash generated from operating activities decreased by **HKD 44.9 million**[40](index=40&type=chunk) - Net cash used in investing activities primarily included **HKD 183.4 million** for the acquisition of land use rights and **HKD 72.4 million** for prepayments for property, plant and equipment[40](index=40&type=chunk)[56](index=56&type=chunk) - Net cash generated from financing activities primarily came from proceeds of **HKD 407.7 million** from share issuance[40](index=40&type=chunk)[57](index=57&type=chunk) [Notes to the Condensed Consolidated Interim Financial Information](index=31&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Information) [1 General Information](index=31&type=section&id=1%20General%20information) C-MER Eye Care Holdings Limited, incorporated in the Cayman Islands, has been listed on the Main Board of the Hong Kong Stock Exchange since January 15, 2018, primarily providing ophthalmology services and selling vision care products in Hong Kong and mainland China, with this condensed consolidated interim financial information being unaudited and presented in HKD - The Company was incorporated as an exempted company in the Cayman Islands on February 1, 2016[58](index=58&type=chunk) - Primarily engaged in providing ophthalmology services and selling vision care products in Hong Kong and mainland China[58](index=58&type=chunk) - Listed on the Main Board of The Stock Exchange of Hong Kong Limited since January 15, 2018[58](index=58&type=chunk) - This condensed consolidated interim financial information is unaudited and presented in Hong Kong dollars[58](index=58&type=chunk) [2 Basis of Preparation](index=32&type=section&id=2%20Basis%20of%20preparation) This condensed consolidated interim financial information is prepared in accordance with HKAS 34 "Interim Financial Reporting" and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2019, with income tax for the interim period accrued based on the tax rate applicable to the expected total annual earnings - Prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[59](index=59&type=chunk) - Should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2019[59](index=59&type=chunk) - Income tax for the interim period is accrued based on the tax rate that would be applicable to the expected total annual earnings[59](index=59&type=chunk) [3 Accounting Policies](index=32&type=section&id=3%20Accounting%20policies) The accounting policies applied are consistent with the 2019 annual consolidated financial statements, except for the early adoption of the HKFRS 16 amendment "COVID-19-Related Rent Concessions" effective January 1, 2020, which resulted in **HKD 3.4 million** in rent concessions recognized as negative variable lease payments, and management is currently assessing the financial impact of other new and revised standards - Accounting policies are consistent with those applied in the annual consolidated financial statements for the year ended December 31, 2019[60](index=60&type=chunk) - Early adoption of the amendment to HKFRS 16 "COVID-19-Related Rent Concessions" effective January 1, 2020[61](index=61&type=chunk)[62](index=62&type=chunk) - A total of **HKD 3,400,000** in rent concessions has been accounted for as negative variable lease payments[62](index=62&type=chunk) - Management is currently assessing the financial impact of other new and revised standards[67](index=67&type=chunk) [4 Financial Risk Management and Financial Instruments](index=36&type=section&id=4%20Financial%20risk%20management%20and%20financial%20instruments) The Group is exposed to market risks (including foreign exchange, cash flow and fair value interest rate, and price risks), credit risk, and liquidity risk, with no significant changes in financial risk management policies since the year-end; the carrying amounts of current financial assets and liabilities approximate their fair values, and financial assets at fair value through other comprehensive income (unlisted equity investments) are classified as Level 3 fair value hierarchy - The Group's business activities are exposed to market risks (including foreign exchange risk, cash flow and fair value interest rate risk, and price risk), credit risk, and liquidity risk[68](index=68&type=chunk) - There have been no significant changes in financial risk management policies since the year-end[68](index=68&type=chunk) - Current financial assets and liabilities have short maturities, so their carrying amounts approximate their fair values[71](index=71&type=chunk)[77](index=77&type=chunk) - Financial assets at fair value through other comprehensive income (unlisted equity investments) amounted to **HKD 54,933 thousand** as of June 30, 2020, and are classified as Level 3 in the fair value hierarchy[74](index=74&type=chunk)[121](index=121&type=chunk) [5 Estimates](index=40&type=section&id=5%20Estimates) The preparation of interim financial information involves management's judgments, estimates, and assumptions, which are consistent with the significant judgments and key sources of estimation uncertainty applied in the 2019 annual consolidated financial statements - Management's judgments, estimates, and assumptions made in preparing the interim financial information affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses[77](index=77&type=chunk) - The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31, 2019[77](index=77&type=chunk) [6 Revenue and Segment Information](index=41&type=section&id=6%20Revenue%20and%20segment%20information) The Group's revenue primarily derives from providing ophthalmology services (**87.0%**) and selling vision care products (**13.0%**), with Hong Kong and mainland China contributing **51.8%** and **48.2%** of total revenue, respectively; segment results indicate a significant loss in mainland China operations, while Hong Kong operations remained profitable Revenue Composition (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Provision of ophthalmology services | 227,852 | 245,260 | | Sales of vision care products | 33,914 | 19,334 | | **Total Revenue** | **261,766** | **264,594** | - Revenue recognition timing: "Over time" for ophthalmology services, "at a point in time" for sales of vision care products[80](index=80&type=chunk) - Management determines operating segments based on geographical location (Hong Kong and mainland China)[82](index=82&type=chunk)[83](index=83&type=chunk) Segment Results (For the six months ended June 30, 2020) | Indicator | Hong Kong (HKD thousands) | Mainland China (HKD thousands) | Total (HKD thousands) | | :--- | :--- | :--- | :--- | | Segment revenue | 135,554 | 126,212 | 261,766 | | Gross profit | 32,334 | 29,132 | 61,466 | | Selling expenses | (4,134) | (19,355) | (23,489) | | Administrative expenses | (13,336) | (39,508) | (52,844) | | Segment results | 14,864 | (29,731) | (14,867) | - Additions to non-current assets: **HKD 13,264 thousand** in Hong Kong, **HKD 279,757 thousand** in mainland China[87](index=87&type=chunk) [7 Other Income](index=45&type=section&id=7%20Other%20income) Other income decreased from **HKD 6.7 million** in the first half of 2019 to **HKD 2.6 million** in the first half of 2020, primarily due to a reduction in bank deposit interest income Other Income Details (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Management fee income | 57 | 57 | | Interest on bank deposits | 2,436 | 6,587 | | Others | 71 | 25 | | **Total** | **2,564** | **6,669** | [8 Other (Losses)/Gains, Net](index=45&type=section&id=8%20Other%20(losses)/gains,%20net) The Group recorded a net other loss of **HKD 1.6 million** in the first half of 2020, compared to a net gain of **HKD 1.1 million** in the same period of 2019, mainly due to a loss on disposal of an associate and exchange losses Other (Losses)/Gains, Net Details (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Net loss on disposal of property, plant and equipment | (4) | (108) | | Loss on disposal of an associate | (1,328) | – | | Exchange (losses)/gains, net | (300) | 1,181 | | **Total** | **(1,632)** | **1,073** | [9 Expenses by Nature](index=46&type=section&id=9%20Expenses%20by%20nature) This section details expenses by nature, showing significant increases in depreciation of property, plant and equipment, right-of-use assets, doctors' consultation fees, cost of inventories and consumables, and employee benefit expenses, while COVID-19-related rent concessions resulted in a **HKD 3.4 million** reduction in expenses Expenses by Nature Details (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Amortisation of intangible assets | 415 | 289 | | Auditor's remuneration | 917 | 907 | | Depreciation of property, plant and equipment | 20,704 | 14,304 | | Depreciation of right-of-use assets | 33,079 | 20,469 | | Doctors' consultation fees | 58,875 | 51,535 | | Cost of inventories and consumables | 54,700 | 46,737 | | Employee benefit expenses | 67,383 | 50,087 | | Short-term lease expenses | 549 | 307 | | COVID-19-related rent concessions | (3,400) | – | | Legal and professional fees | 2,259 | 4,048 | | Share-based payment expenses for share options granted to doctors and consultants | 1,809 | 1,532 | [10 Finance Expenses](index=46&type=section&id=10%20Finance%20expenses) Finance expenses increased from **HKD 3.4 million** in the first half of 2019 to **HKD 4.8 million** in the first half of 2020, entirely attributable to interest expenses on lease liabilities Finance Expenses Details (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Interest expense on lease liabilities | 4,770 | 3,433 | [11 Income Tax Expense](index=47&type=section&id=11%20Income%20tax%20expense) Income tax expense significantly decreased by **67.4%** to **HKD 3.4 million**, primarily due to reduced profit before tax from Hong Kong and Shenzhen operations, with Hong Kong profits tax at **16.5%** and mainland China corporate income tax at **25%** - Income tax expense was **HKD 3.4 million**, a **67.4%** decrease compared to the same period in 2019[33](index=33&type=chunk)[98](index=98&type=chunk) - The decrease was mainly due to reduced profit before tax from Hong Kong and Shenzhen operations[33](index=33&type=chunk) - Hong Kong profits tax rate is **16.5%**, and the applicable tax rate for mainland China subsidiaries is **25%**[98](index=98&type=chunk) Income Tax Expense Details (For the six months ended June 30) | Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | | Current income tax – Hong Kong profits tax | 2,680 | 6,909 | | Current income tax – PRC corporate income tax | 423 | 4,424 | | Underprovision in prior years | 38 | 27 | | Deferred income tax | 247 | (978) | | **Income tax expense** | **3,388** | **10,382** | [12 Earnings Per Share](index=48&type=section&id=12%20Earnings%20per%20share) Due to the loss incurred during the period, both basic and diluted earnings per share turned negative, and diluted loss per share for 2020 did not include share options as they had an anti-dilutive effect Basic (Loss)/Earnings Per Share (For the six months ended June 30) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | (Loss)/Profit for the period attributable to owners of the Company (HKD thousands) | (20,981) | 33,757 | | Weighted average number of ordinary shares in issue | 1,062,916,228 | 1,041,361,323 | | Basic (loss)/earnings per share (HK cents) | (1.97) | 3.24 | Diluted (Loss)/Earnings Per Share (For the six months ended June 30) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | (Loss)/Profit for the period attributable to owners of the Company (HKD thousands) | (20,981) | 33,757 | | Weighted average number of ordinary shares for diluted (loss)/earnings per share | 1,062,916,228 | 1,056,822,459 | | Diluted (loss)/earnings per share (HK cents) | (1.97) | 3.19 | - As of June 30, 2020, outstanding pre-IPO share options and post-IPO share options were not included in the calculation of diluted loss per share as they had an anti-dilutive effect[103](index=103&type=chunk) [13 Dividends](index=51&type=section&id=13%20Dividends) The Board of Directors recommended and approved a final dividend of **HKD 2.0 cents** per ordinary share for the year ended December 31, 2019, totaling **HKD 21.5 million**, and no interim dividend is recommended for the six months ended June 30, 2020 - At the Annual General Meeting on May 19, 2020, a final dividend of **HKD 2.0 cents** per ordinary share for the year ended December 31, 2019, totaling **HKD 21,515,000**, was approved[106](index=106&type=chunk) - The Directors do not recommend the payment of any interim dividend for the six months ended June 30, 2020[107](index=107&type=chunk) [14 Property, Plant and Equipment](index=51&type=section&id=14%20Property,%20plant%20and%20equipment) As of June 30, 2020, the net book value of property, plant and equipment increased to **HKD 168.6 million**, with additions of **HKD 27.5 million** and depreciation of **HKD 20.7 million** during the period - As of June 30, 2020, the net book value at the end of the period was **HKD 168,637 thousand**[108](index=108&type=chunk) - Additions during the period amounted to **HKD 27,543 thousand**[108](index=108&type=chunk) - Depreciation during the period was **HKD 20,704 thousand**[108](index=108&type=chunk) [15 Intangible Assets](index=52&type=section&id=15%20Intangible%20assets) As of June 30, 2020, the net book value of intangible assets slightly decreased to **HKD 103.7 million**, with goodwill remaining the largest component - As of June 30, 2020, the net book value at the end of the period was **HKD 103,679 thousand**[110](index=110&type=chunk) - Goodwill amounted to **HKD 97,711 thousand**[110](index=110&type=chunk) - Additions to other intangible assets during the period were **HKD 1,406 thousand**, and amortization was **HKD 415 thousand**[110](index=110&type=chunk) [16 Leases](index=53&type=section&id=16%20Leases) The Group's right-of-use assets significantly increased to **HKD 397.0 million**, primarily due to the recognition of land use rights, while lease liabilities also rose, with corresponding depreciation and interest expenses recognized; lease terms range from one to ten years, and most are renewable at market rates Lease-Related Balances (As of June 30) | Category | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | **Right-of-use assets** | | | | Properties | 170,334 | 163,465 | | Land use rights | 225,169 | – | | Medical equipment | 1,530 | 1,927 | | **Total** | **397,033** | **165,392** | | **Lease liabilities** | | | | Current | 50,437 | 43,243 | | Non-current | 133,224 | 128,437 | | **Total** | **183,661** | **171,680** | - Depreciation expense for right-of-use assets was **HKD 33,079 thousand**, and interest expense on lease liabilities was **HKD 4,770 thousand** during the period[114](index=114&type=chunk) - COVID-19-related rent concessions amounted to **(HKD 3,400) thousand**[114](index=114&type=chunk) - Lease terms range from one to ten years, and most lease agreements are renewable at market rates at the end of the lease term[114](index=114&type=chunk) [17 Interests in Associates](index=55&type=section&id=17%20Interests%20in%20associates) As of June 30, 2020, the Group's interests in associates decreased to **HKD 793 thousand**, primarily due to the disposal of C-MER D&J Technology Limited and the share of loss from RainsOptics Limited Interests in Associates (As of June 30) | Company Name | Place of Incorporation | Effective Interest Held by the Group (%) | Principal Business | Carrying Amount (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | C-MER D&J Technology Limited | Hong Kong | 24% (December 31, 2019) | Design and development of vision care products | – (June 30, 2020) | | RainsOptics Limited | Hong Kong | 14.4% (June 30, 2020) | Research and development of medical diagnostic technology | 793 (June 30, 2020) | - The carrying amount at the beginning of the period was **HKD 2,204 thousand**, and at the end of the period was **HKD 793 thousand**[119](index=119&type=chunk) - During the period, the disposal of an associate resulted in a decrease of **HKD 2,153 thousand**, and the share of loss for the period was **HKD 83 thousand**[119](index=119&type=chunk) [18 Financial Assets at Fair Value Through Other Comprehensive Income](index=56&type=section&id=18%20Financial%20assets%20at%20fair%20value%20through%20other%20comprehensive%20income) As of June 30, 2020, the Group's financial assets at fair value through other comprehensive income amounted to **HKD 54.9 million**, representing unlisted equity investments in Hong Kong whose fair value is determined by reference to recent transaction prices in arm's length transactions - As of June 30, 2020, the balance was **HKD 54,933 thousand**[121](index=121&type=chunk) - Refers to unlisted equity instruments in Hong Kong not held for trading[120](index=120&type=chunk) - Fair value is determined by reference to recent transaction prices in arm's length transactions[122](index=122&type=chunk) [19 Deposits, Prepayments and Other Receivables](index=57&type=section&id=19%20Deposits,%20prepayments%20and%20other%20receivables) As of June 30, 2020, total deposits, prepayments, and other receivables increased to **HKD 139.8 million**, primarily due to a significant increase in non-current prepayments for property, plant and equipment Deposits, Prepayments and Other Receivables Details (As of June 30) | Category | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | **Non-current** | | | | Prepayments for property, plant and equipment | 112,653 | 40,369 | | Prepaid land use rights | – | 46,440 | | Rental deposits | 6,519 | 9,592 | | **Total non-current** | **119,172** | **96,401** | | **Current** | | | | Prepaid inventories | 2,846 | 3,696 | | Prepaid lease expenses | 216 | 273 | | Prepaid operating expenses | 6,455 | 6,314 | | Rental and other deposits | 8,519 | 5,560 | | Interest receivables | 1,371 | 2,199 | | Others | 1,267 | 2,407 | | **Total current** | **20,674** | **20,449** | | **Total** | **139,846** | **116,850** | [20 Inventories](index=58&type=section&id=20%20Inventories) As of June 30, 2020, total inventories increased to **HKD 22.3 million**, primarily due to an increase in pharmaceuticals and medical consumables Inventories Details (As of June 30) | Category | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | Pharmaceuticals and medical consumables | 19,835 | 12,293 | | Vision care products | 2,473 | 1,876 | | **Total** | **22,308** | **14,169** | [21 Trade Receivables](index=59&type=section&id=21%20Trade%20receivables) As of June 30, 2020, trade receivables slightly increased to **HKD 12.4 million**, with the majority due within 90 days Ageing Analysis of Trade Receivables (As of June 30) | Ageing | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | 0 – 90 days | 10,766 | 9,617 | | 91 – 180 days | 1,082 | 594 | | Over 180 days | 559 | 1,017 | | **Total** | **12,407** | **11,228** | [22 Share Capital](index=60&type=section&id=22%20Share%20capital) As of June 30, 2020, issued and fully paid share capital increased to **HKD 114.4 million**, primarily due to the exercise of pre-IPO share options and other share issuances Changes in Share Capital (As of June 30) | Category | Number of Ordinary Shares (thousands) | Par Value of Ordinary Shares (HKD thousands) | | :--- | :--- | :--- | | **Authorised:** | | | | As at January 1, 2020 and June 30, 2020 | 8,000,000 | 800,000 | | **Issued and fully paid:** | | | | As at January 1, 2020 | 1,051,300 | 105,130 | | Shares issued upon exercise of pre-IPO share options | 20,564 | 2,056 | | Shares issued | 71,864 | 7,187 | | **As at June 30, 2020** | **1,143,728** | **114,373** | [23 Share-based Payments](index=61&type=section&id=23%20Share-based%20payments) The Group operates pre-IPO and post-IPO share option schemes to incentivize employees and directors; in the first half of 2020, approximately **20.6 million** shares were issued upon exercise of share options, and **HKD 2.7 million** in share-based payment expenses were recognized; as of June 30, 2020, **3,174,337** share options remained unexercised under the pre-IPO scheme, and **5,500,000** under the post-IPO scheme - The Company has a pre-IPO share option scheme and a post-IPO share option scheme, designed to incentivize directors, senior management, ophthalmologists, doctors, employees, and consultants[131](index=131&type=chunk) - For the six months ended June 30, 2020, approximately **20,564,000** shares were issued upon the exercise of share options[141](index=141&type=chunk) - For the six months ended June 30, 2020, share-based payment expenses of approximately **HKD 2,729,000** relating to share options were recognized in the consolidated statement of comprehensive income[142](index=142&type=chunk)[144](index=144&type=chunk) - As of June 30, 2020, **3,174,337** share options remained unexercised under the pre-IPO share option scheme[186](index=186&type=chunk) - As of June 30, 2020, **5,500,000** share options remained unexercised under the post-IPO share option scheme[264](index=264&type=chunk) [24 Trade Payables](index=67&type=section&id=24%20Trade%20payables) As of June 30, 2020, trade payables slightly increased to **HKD 15.0 million**, with the majority due within 30 days Ageing Analysis of Trade Payables (As of June 30) | Ageing | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | 0 – 30 days | 11,893 | 10,216 | | 31 – 60 days | 182 | 1,256 | | 61 – 90 days | 1,404 | 870 | | Over 90 days | 1,489 | 1,507 | | **Total** | **14,968** | **13,849** | [25 Accruals and Other Payables](index=68&type=section&id=25%20Accruals%20and%20other%20payables) As of June 30, 2020, accruals and other payables decreased to **HKD 45.6 million**, primarily due to a reduction in employee benefit accruals and payables for property, plant and equipment Accruals and Other Payables Details (As of June 30) | Category | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | Accrued employee benefits | 9,091 | 15,307 | | Accrued operating expenses | 5,369 | 5,479 | | Accrued listing expenses | 3,591 | 3,591 | | Payables for doctors' consultation fees | 15,760 | 12,987 | | Contract liabilities | 6,788 | 7,897 | | Payables for property, plant and equipment | 3,679 | 6,357 | | Consideration payable for acquisition of a subsidiary | – | 7,521 | | Others | 1,329 | 1,246 | | **Total** | **45,607** | **60,385** | [26 Commitments](index=69&type=section&id=26%20Commitments) As of June 30, 2020, capital commitments for property, plant and equipment significantly decreased to **HKD 0.99 million**, with no commitments for land use rights Capital Commitments (As of June 30) | Category | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | | Property, plant and equipment | 990 | 2,982 | | Land use rights | – | 185,759 | | **Total** | **990** | **188,741** | [27 Related Party Transactions](index=70&type=section&id=27%20Related%20party%20transactions) The Group engages in various transactions with related parties, including ophthalmology services, management fee income, and lease payments, with key management personnel compensation also disclosed; amounts due to related parties are unsecured, interest-free, and repayable on demand - The Group is controlled by its ultimate holding company, C-MER Group Limited, which owns **63.2%** of the Company's shares; the ultimate controlling parties are Dr. Lam Shun Chiu and Ms. Li Xiao Ting[149](index=149&type=chunk) Related Party Transactions (For the six months ended June 30) | Transaction Type | Related Party Name | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :--- | :--- | :--- | | Provision of ophthalmology services to a related company | Brightness Charity Foundation Limited | 44 | 182 | | Management fee income from a related company | Brightness Charity Foundation Limited | 57 | 63 | | Lease payments to a related company | Meda Medical Software Development (Shenzhen) Co., Ltd. | 2,189 | 4,532 | - Key management personnel compensation amounted to **HKD 3,705 thousand** (2019: HKD 4,796 thousand)[154](index=154&type=chunk) Balances with Related Parties (As of June 30) | Category | Related Party Name | June 30, 2020 (HKD thousands) | December 31, 2019 (HKD thousands) | | :--- | :--- | :--- | :--- | | Amount due to a related party: non-trade | Brightness Charity Foundation Limited | 129 | 131 | | Lease liabilities due to a related party | Meda Medical Software Development (Shenzhen) Co., Ltd. | 25,231 | 3,584 | - Balances with related parties are unsecured, interest-free, and repayable on demand, denominated in RMB[157](index=157&type=chunk) [28 Events After the Balance Sheet Date](index=73&type=section&id=28%20Events%20after%20the%20balance%20sheet%20date) Subsequent to the balance sheet date, the Group completed the acquisition of 100% equity in Zhuhai Changjiu Eye Hospital Co., Ltd. on August 8, 2020, and entered into an agreement on August 28, 2020, to acquire the practice business and assets of a clinic in Central, Hong Kong, which is yet to be completed - On August 8, 2020, the acquisition of 100% equity in Zhuhai Changjiu Eye Hospital Co., Ltd. was completed for a cash consideration of RMB 16,000,000 (approximately **HKD 17,456,000**)[158](index=158&type=chunk) - On August 28, 2020, an agreement was entered into to acquire the practice business and assets of a clinic in Central, Hong Kong, for a maximum consideration of **HKD 26,745,000** (cash and share payment), with the acquisition not yet completed[158](index=158&type=chunk) [Report on Review of Interim Financial Information](index=75&type=section&id=Report%20on%20Review%20of%20Interim%20Financial%20Information) [Report on Review of Interim Financial Information Overview](index=75&type=section&id=Report%20on%20Review%20of%20Interim%20Financial%20Information%20Overview) PricewaterhouseCoopers conducted a review of the interim financial information in accordance with Hong Kong Standard on Review Engagements 2410, concluding that nothing came to their attention to suggest the interim financial information was not prepared in all material respects in accordance with HKAS 34; the scope of a review is less than an audit, thus no audit opinion is expressed - The review was conducted by PricewaterhouseCoopers[161](index=161&type=chunk)[164](index=164&type=chunk) - The review was performed in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity"[162](index=162&type=chunk) - The conclusion is that nothing has come to their attention that causes them to believe the Group's interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[164](index=164&type=chunk) - The scope of a review is substantially less than an audit, and therefore no audit opinion is expressed[162](index=162&type=chunk) [Other Information](index=77&type=section&id=Other%20Information) [Directors' and Chief Executives' Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or Any Associated Corporation](index=77&type=section&id=DIRECTORS'%20AND%20CHIEF%20EXECUTIVES'%20INTERESTS%20AND%20SHORT%20POSITIONS%20IN%20SHARES,%20UNDERLYING%20SHARES%20AND%20DEBENTURES%20OF%20OUR%20COMPANY%20OR%20ANY%20ASSOCIATED%20CORPORATION) As of June 30, 2020, the interests and short positions of the Company's directors and chief executives in the shares, underlying shares, and shares of associated corporations were disclosed in accordance with the Securities and Futures Ordinance and the Model Code Directors' and Chief Executives' Long and Short Positions in the Company's Shares (As of June 30, 2020) | Director Name | Nature of Interest | Number of Shares | Approximate % of Shareholding in the Company (%) | | :--- | :--- | :--- | :--- | | Dr. Lam Shun Chiu | Interest in controlled corporation | 722,696,756 (Long Position) | 63.2% | | | | 2,000,000 (Short Position) | 0.2% | | Ms. Li Xiao Ting | Interest of spouse | 722,696,756 (Long Position) | 63.2% | | | | 2,000,000 (Short Position) | 0.2% | | Dr. Lee Yu Wing | Beneficial owner | 12,953,000 (Long Position) | 1.1% | | Mr. Chan Chi Leung | Interest of spouse | 2,200,000 (Long Position) | 0.2% | | Mr. Li Chun Shan | Beneficial owner | 777,000 (Long Position) | 0.07% | | | Interest of spouse | 259,000 (Long Position) | 0.02% | - Dr. Lam Shun Chiu and Ms. Li Xiao Ting jointly manage and operate the business through C-MER Group Limited (Dr. Lam Shun Chiu owns **70%**, Ms. Li Xiao Ting owns **30%**)[169](index=169&type=chunk)[170](index=170&type=chunk) - Dr. Lee Yu Wing's long position in underlying shares of the Company was **500,000 shares** (**0.04%**), representing physically settled unlisted equity derivatives[174](index=174&type=chunk) [Interests and Short Positions of Substantial Shareholders in Shares and Underlying Shares of the Company](index=81&type=section&id=INTERESTS%20AND%20SHORT%20POSITIONS%20OF%20SUBSTANTIAL%20SHAREHOLDERS%20IN%20SHARES%20AND%20UNDERLYING%20SHARES%20OF%20OUR%20COMPANY) As of June 30, 2020, other than the directors and chief executives, C-MER Group was the only substantial shareholder with disclosable interests, holding long and short positions in the Company's shares Substantial Shareholders' Long and Short Positions in the Company's Shares (As of June 30, 2020) | Shareholder Name | Nature of Interest | Number of Shares | Approximate % of Shareholding in the Company (%) | | :--- | :--- | :--- | :--- | | C-MER Group | Beneficial owner | 722,696,756 (Long Position) | 63.2% | | | | 2,000,000 (Short Position) | 0.2% | - C-MER Group is owned by Dr. Lam Shun Chiu and Ms. Li Xiao Ting, with **70%** and **30%** interests, respectively[182](index=182&type=chunk) [Pre-IPO Share Option Scheme and Post-IPO Share Option Scheme](index=83&type=section&id=PRE-IPO%20SHARE%20OPTION%20SCHEME%20AND%20POST-IPO%20SHARE%20OPTION%20SCHEME) The Company operates pre-IPO and post-IPO share option schemes to incentivize Group employees; as of June 30, 2020, **3,174,337** share options remained unexercised under the pre-IPO scheme, with approximately **20.6 million** shares exercised during the period, and **5,500,000** share options remained unexercised under the post-IPO scheme, with detailed terms, vesting conditions, and exercise prices for each scheme provided - The Pre-IPO Share Option Scheme aims to reward and acknowledge the contributions of directors, Group employees, ophthalmologists/doctors, consultants, and business partners[184](index=184&type=chunk) - As of June 30, 2020, **42,313,663** share options granted under the Pre-IPO Share Option Scheme had been exercised[184](index=184&type=chunk) - As of June 30, 2020, **3,174,337** share options remained unexercised under the Pre-IPO Share Option Scheme (representing approximately **0.28%** of the issued share capital)[186](index=186&type=chunk) - The vesting period for Pre-IPO share options ranges from one to five years, with exercise prices between **HKD 0.1** and **HKD 1.0**, some subject to revenue performance targets[140](index=140&type=chunk)[221](index=221&type=chunk)[224](index=224&type=chunk) - As of June 30, 2020, **5,500,000** share options remained unexercised under the Post-IPO Share Option Scheme (representing approximately **0.48%** of the issued share capital)[264](index=264&type=chunk) - The maximum number of shares under the Post-IPO Share Option Scheme is **100,000,000** shares (**10%** of issued shares on the listing date), with a maximum limit of **1%** for each eligible participant[265](index=265&type=chunk)[267](index=267&type=chunk) - The exercise price for Post-IPO share options shall not be less than the highest of the nominal value of the shares, the closing price on the grant date, or the average closing price for the five business days immediately preceding the grant date[270](index=270&type=chunk) - The value of share options granted in 2019 was **HKD 10,284,000** (calculated using the Black-Scholes valuation model), with a share price of **HKD 5.06** on the grant date[275](index=275&type=chunk) [Interim Dividend](index=102&type=section&id=INTERIM%20DIVIDEND) The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2020 - The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2020[279](index=279&type=chunk) [Corporate Governance](index=102&type=section&id=CORPORATE%20GOVERNANCE) The Board is committed to maintaining high corporate governance standards, believing that combining the roles of Chairman and Chief Executive Officer enhances efficiency; the Board comprises four executive directors and four independent non-executive directors, and its structure and composition are reviewed periodically - The Board is committed to maintaining high standards of corporate governance[279](index=279&type=chunk) - The Board believes that combining the roles of Chairman and Chief Executive Officer allows the Company to be more agile, efficient, and effective in formulating and executing business strategies[280](index=280&type=chunk) - The Board currently comprises four executive directors (including Dr. Lam Shun Chiu) and four independent non-executive directors, demonstrating a high degree of independence[280](index=280&type=chunk) - The Board will review its structure and composition from time to time based on current circumstances[280](index=280&type=chunk) [Model Code for Securities Transactions](index=103&type=section&id=MODEL%20CODE%20FOR%20SECURITIES%20TRANSACTIONS) The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance for the six months ended June 30, 2020, with no non-compliance incidents reported among employees - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules[281](index=281&type=chunk) - Each Director confirmed compliance with the Model Code for the six months ended June 30, 2020[281](index=281&type=chunk) - For the six months ended June 30, 2020, the Company was not aware of any non-compliance with the Model Code by employees[281](index=281&type=chunk) [Purchase, Sale or Redemption of Listed Securities](index=103&type=section&id=PURCHASE,%20SALE%20OR%20REDEMPTION%20OF%20LISTED%20SECURITIES) For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[282](index=282&type=chunk) [Changes in Information of and Other Information on Directors](index=104&type=section&id=CHANGES%20IN%20INFORMATION%20OF%20AND%20OTHER%20INFORMATION%20ON%20DIRECTORS) Independent Non-executive Director Mr. Ma Chiu Cheung, John, retired as an independent non-executive director of Charoen Pokphand Foods Public Company Limited; Dr. Lee Yu Wing received a reprimand from the Medical Council of Hong Kong for an advertising title, but the Board believes this event does not affect his directorship or the Group's business - Independent Non-executive Director Mr. Ma Chiu Cheung, John, retired as an independent non-executive director of Charoen Pokphand Foods Public Company Limited with effect from June 5, 2020[284](index=284&type=chunk) - Dr. Lee Yu Wing received a reprimand from the Medical Council of Hong Kong for using the title "Retina Macular Surgery Specialist" in an advertisement, which was unapproved and potentially misleading to the public[284](index=284&type=chunk) - The Board assessed that this matter did not involve fraud or integrity issues on Dr. Lee's part, did not affect his qualification as a director, and had no impact on business operations or financial position[284](index=284&type=chunk) [Use of Proceeds from Global Offering](index=105&type=section&id=USE%20OF%20PROCEEDS%20FROM%20GLOBAL%20OFFERING) The net proceeds from the global offering amounted to **HKD 609.8 million**; for the six months ended June 30, 2020, approximately **HKD 184.9 million** was utilized, primarily for the final payment for the Shanghai Eye Hospital acquisition and payments for Shenzhen land use rights and Guangzhou properties; the remaining **HKD 151.1 million** is expected to be utilized by December 31, 2021, with no changes to the intended use - Net proceeds from the global offering amounted to **HKD 609.8 million**[285](index=285&type=chunk) - For the six months ended June 30, 2020, approximately **HKD 184.9 million** was utilized[285](index=285&type=chunk) - Utilized proceeds included: **HKD 7.5 million** for the final payment for the acquisition of Shanghai Eye Hospital and three clinics; **HKD 177.3 million** for payments for Shenzhen land use rights and Guangzhou properties[285](index=285&type=chunk) Use of Net Proceeds from Global Offering (As of June 30, 2020) | Intended Use of Net Proceeds | % of Net Proceeds | Net Proceeds (HKD thousands) | Amount Utilized (HKD thousands) | Remaining Amount (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | For potential acquisition of three operating ophthalmology hospitals in selected cities in mainland China | 42.5% | 259,200 | (123,679) | 135,521 | | For establishment of three ophthalmology hospitals in selected cities in mainland China | 40.4% | 246,400 | (246,400) | – | | For establishment of two satellite clinics in Shenzhen | 4.2% | 25,600 | (10,000) | 15,600 | | For upgrading medical equipment and enhancing IT systems in Hong Kong and mainland China | 8.5% | 51,800 | (51,800) | – | | For working capital and general corporate purposes | 4.4% | 26,800 | (26,800) | – | | **Total** | **100.0%** | **609,800** | **(458,679)** | **151,121** | - The Directors expect the remaining amount to be utilized by December 31, 2021, with no changes to the intended use[289](index=289&type=chunk) [Use of Proceeds from Placing](index=107&type=section&id=USE%20OF%20PROCEEDS%20FROM%20PLACING) A placing of **68,000,000** shares at **HKD 5.80** per share was completed in June 2020, yielding net proceeds of approximately **HKD 387.6 million**; these funds will be used to strengthen the Group's financial position, for potential acquisitions and/or establishment of ophthalmo

Financial Performance - Revenue for the year ended December 31, 2018, was HK$429,374,000, representing a 38.0% increase from HK$311,228,000 in 2017[13] - Gross profit for the same period was HK$149,337,000, up 10.3% from HK$135,431,000 in 2017[13] - Profit for the year increased by 6.1% to HK$42,571,000 from HK$40,127,000 in 2017[13] - Adjusted net profit for the year decreased by 30.6% to HK$44,592,000 from HK$64,287,000 in 2017[13] - Gross profit margin fell to 34.8% from 43.5%, a decrease of 8.7 percentage points[13] - Net profit margin decreased to 9.9% from 12.9%, a decline of 3.0 percentage points[13] - The total revenue for the year ended December 31, 2018, increased by 38.0% to HK$429.4 million, compared to HK$311.2 million for the year ended December 31, 2017[55] - Revenue from the provision of ophthalmic services rose by 37.4% to HK$399.9 million, driven by an increase in the number of surgeries performed and the number of ophthalmologists[55] - Sales of vision aid products increased by 46.2% to HK$29.5 million, up from HK$20.2 million in the previous year[55] - The gross profit margin decreased to 34.8% from 43.5% in 2017, while gross profit increased to HK$149.3 million from HK$135.4 million[45] - Net profit for the year ended December 31, 2018, increased by only 6.1% to HK$42.6 million, impacted by net losses from the Beijing eye hospital and the new satellite clinic in Baoan[46] Expansion Plans - The Group plans to expand its service network in Kunming and Shanghai through acquisitions and establish a new eye hospital in Huizhou in 2019[17] - An agreement was signed to acquire 100% equity interest in Shanghai Lucida Medical Scientific Ltd, which operates an eye hospital and three clinics in Shanghai[18] - The acquisition of Kunming Eye Hospital aims to enhance the Group's presence in Western China, leveraging local expertise[19] - Establishing an eye hospital in Huizhou will strengthen the Group's service offerings in Guangdong province, where demand for high-quality ophthalmic services is strong[19] - The Group plans to open its first eye hospital in Huizhou, Guangdong province, in the second half of 2019, which will have ten consultation rooms and three operation theatres[39] - The Group aims to expand its service network in the Guangdong-Hong Kong-Macau Greater Bay Area and other regions in the PRC[39] - The Group's strategic focus includes establishing or acquiring eye hospitals and clinics in selected cities in the PRC and improving operational capacity[36] - The company plans to open its first eye hospital in Huizhou, Guangdong Province, in the second half of 2019, which will enhance its service network in the region[41] - The company entered into an agreement to acquire 80% of Kunming Eye Hospital for RMB30 million (approximately HK$35.2 million) and a subsequent capital injection of RMB20 million (approximately HK$23.5 million), expected to complete by April 2019[43] - An agreement was made to acquire 100% equity interest of Shanghai Lucida Medical Scientific Ltd for a maximum cash consideration of RMB82.9 million (approximately HK$97.3 million), expected to complete by June 2019[44] Operational Highlights - The Group's operations in the PRC recorded a significant revenue increase of 73.7% during the year ended December 31, 2018, driven by strong demand for quality medical services[25] - The eye hospital in Shenzhen generated revenue of HK$179.7 million, reflecting a growth rate of 47.7% compared to HK$121.7 million in 2017[27] - The Group's Hong Kong operations contributed 50.8% of total revenue, with a revenue increase of 15.0% to HK$218.0 million during the year ended December 31, 2018[26] - The eye hospital in Beijing, which commenced operations in January 2018, generated total revenue of HK$31.7 million but incurred a net loss of HK$23.2 million during the year[28] - Revenue generated from operations in Hong Kong accounted for 50.8% of total revenue, down from 60.9% in 2017, while revenue from the PRC increased by 73.7%[56] - Total revenue for ophthalmic services increased by 37.4% to HK$399.9 million in 2018 from HK$291.1 million in 2017[60] - Revenue from consultation and other medical service fees rose by 41.1% to HK$160.2 million, with significant growth in both Hong Kong (29.9%) and PRC (55.8%)[60] - Total surgery fees increased by 35.0% to HK$239.7 million, with PRC surgery fees doubling (100.8%) to HK$107.8 million[60] - The number of surgeries performed in PRC surged by 86.3% to 7,202, attributed to the opening of new eye hospitals[65] - Four new service locations commenced operations to meet increased demand, including two in PRC and two in Hong Kong[72] Cost and Expenses - Cost of revenue rose by 59.3% to HK$280.0 million, driven by increases in inventories, staff salaries, and rent[72] - Selling expenses rose by 134.5% from HK$11.3 million in 2017 to HK$26.5 million in 2018, representing 6.2% of total revenue, up from 3.6% in 2017[77] - Total administrative expenses for 2018 were HK$66.9 million, with other administrative expenses increasing by 48.8% to HK$64.9 million, driven by higher staff salaries due to business expansion[81][82] Cash Flow and Financial Position - Net cash generated from operating activities decreased to HK$40.9 million in 2018 from HK$65.5 million in 2017, reflecting a decline in cash generated from operations[138][142] - Net cash used in investing activities increased significantly to HK$274.6 million in 2018 from HK$89.9 million in 2017, with approximately HK$249.1 million allocated for bank deposits and HK$29.8 million for property, plant, and equipment[139][142] - Net cash generated from financing activities surged to HK$630.4 million in 2018 compared to HK$41.2 million in 2017, primarily due to proceeds from the issuance of shares amounting to HK$657.0 million[140][143] - As of December 31, 2018, the Group's cash and bank balances totaled HK$471.8 million, with short-term bank deposits of HK$249.1 million[142] - The current ratio as of December 31, 2018, was 14.84 times, a significant increase from 1.46 times in 2017[142] Management and Governance - The company has directors with extensive experience in ophthalmology and management, enhancing its operational capabilities[156] - The company has been recognized for its contributions to ophthalmology, with multiple awards received by its directors[160] - The company is focused on expanding its operations in Hong Kong and Shenzhen, leveraging the expertise of its management team[158] - The company has a strong commitment to innovation in ophthalmic practices, as evidenced by the patents held by its executives[165] - The leadership team includes individuals with significant military and governmental experience, contributing to strategic decision-making[172] - The Company has a diverse board with expertise in finance, healthcare, and management, which supports strategic decision-making[199] - The Company is committed to maintaining high standards of governance and financial oversight through its experienced board members[192]