进腾集团(02011) - 2023 - 中期财报

Company Information This chapter lists the basic information of China Hengtai Group Limited and its subsidiaries, including key contact and governance details such as company secretary, board members (executive, non-executive, independent non-executive directors), committee compositions, registered office, principal place of business in Hong Kong, share registrar, auditor, principal bankers, and company website - Board members include Yip Siu Lun (Chairman), Ng Cheuk Hin, Mak Yung Bun, Cheung Ka Yin (Executive Directors), Lam Ping (Non-executive Director), and Leung Ka Tin, Cheng Hong Kei, Lau Wai King, Or Kwok Shu (Independent Non-executive Directors)[16][3][5] - The compositions of the Audit Committee, Remuneration Committee, and Nomination Committee are listed, with Mr. Cheng Hong Kei serving as Chairman of the Audit and Remuneration Committees, and Mr. Yip Siu Lun as Chairman of the Nomination Committee[10][16] - The Company's registered office is in the Cayman Islands, and its principal place of business in Hong Kong is at Units 10A & 10B, 15th Floor, 9 Queen's Road Central, Central[4][10] Financial Summary This chapter outlines China Hengtai Group's key financial performance for the six months ended June 30, 2023, showing a slight decrease in revenue, an increase in gross profit, but a significant reduction in profit for the period and earnings per share, with total assets and cash and cash equivalents both decreasing Financial Summary for the Six Months Ended June 30, 2023 | Metric | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | Change (+/-) | | :--- | :--- | :--- | :--- | | Revenue | 123,386 | 125,612 | (1.7%) | | Gross Profit | 42,594 | 40,808 | 4.4% | | Gross Profit Margin | 34.5% | 32.5% | 6.2% | | Profit for the Period | 5,910 | 10,978 | (46.2%) | | Profit for the Period Attributable to Equity Holders of the Company | 3,394 | 8,587 | (60.5%) | | Basic and Diluted Earnings Per Share (HK cents) | 0.6 | 1.8 | (66.7%) | | Metric | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | Change (+/-) | | :--- | :--- | :--- | :--- | | Total Assets | 284,991 | 305,712 | (6.8%) | | Cash and Cash Equivalents | 67,457 | 105,266 | (35.9%) | | Total Equity Attributable to Equity Holders of the Company | 179,488 | 184,913 | (2.9%) | Management Discussion and Analysis This section details the Group's business operations, financial performance, future outlook, and key management matters during the reporting period, highlighting efforts to enhance competitiveness despite macroeconomic challenges, a slight revenue decrease, improved gross margin, and a significant net profit decline due to reduced foreign exchange gains and increased professional fees, also covering related party transactions, liquidity, employees, and the share option scheme Business Review The Group primarily engages in the manufacturing of zipper chains in China, serving OEM clients for renowned apparel brands, with profit attributable to equity holders of the Company significantly decreasing for the six months ended June 30, 2023, mainly due to reduced net foreign exchange gains and additional professional fees for business development - The Group's core business is the manufacturing of zipper chains in China, primarily serving OEM clients for apparel brands[22] - For the six months ended June 30, 2023, profit attributable to equity holders of the Company was approximately HKD 3.39 million, a decrease of approximately 60.5% compared to HKD 8.59 million in the same period of 2022[23] - The decrease in profit was mainly due to a reduction in net foreign exchange gains from approximately HKD 6.9 million in the same period of 2022 to approximately HKD 4.9 million, and additional professional fees incurred for business development[23] Outlook Facing challenges in H1 2023 such as insufficient domestic demand, weak consumer spending, and a complex external environment, the Group recognizes the resilience and potential of the Chinese economy and plans to enhance future development through increased market development, R&D investment, expanded production capacity, digital transformation, and strengthened capital and talent management - In H1 2023, the economy faced difficulties and challenges including insufficient domestic demand, weak consumer spending, and a severe and complex external environment (e.g., Russia-Ukraine conflict, US dollar interest rate hikes, inflation)[26] - The Group will intensify market development efforts, expanding its zipper business beyond the apparel industry and developing overseas markets[40] - The Group plans to increase R&D investment to enhance its capabilities and accelerate the transformation from digitalization and informatization to 'intelligent digitalization' to improve operational efficiency and management levels[40][18] - Other countermeasures include integrating and expanding production capacity, improving production processes, controlling costs, and strengthening capital and talent management[18][42][17] Financial Review This section details the Group's financial performance during the reporting period, covering revenue, gross profit, expenses, profitability, related party transactions, liquidity, and capital resources, noting a slight revenue decrease but improved gross margin due to cost control, a significant net profit decline from reduced foreign exchange gains and increased professional fees, stable net current assets, no bank borrowings or pledged assets, and disclosures on employees and the decision not to declare an interim dividend Revenue For the six months ended June 30, 2023, the Group's revenue was approximately HKD 123.4 million, a 1.7% decrease year-on-year, primarily due to insufficient domestic demand and weak consumer spending caused by RMB depreciation, with zipper chains and sliders remaining the main revenue source and mainland China contributing the majority of revenue - For the six months ended June 30, 2023, revenue was approximately HKD 123.4 million, a year-on-year decrease of 1.7%[36] Revenue Analysis by Product Category | Product Category | 2023 (thousand HKD) | 2023 (%) | 2022 (thousand HKD) | 2022 (%) | | :--- | :--- | :--- | :--- | :--- | | Zipper Chains and Sliders | 122,120 | 99.0 | 123,042 | 98.0 | | Others | 1,266 | 1.0 | 2,570 | 2.0 | | Total | 123,386 | 100.0 | 125,612 | 100.0 | Revenue Analysis by Geographical Location | Geographical Location | 2023 (thousand HKD) | 2023 (%) | 2022 (thousand HKD) | 2022 (%) | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 109,042 | 88.4 | 108,821 | 86.6 | | Overseas | 14,344 | 11.6 | 16,791 | 13.4 | | Total | 123,386 | 100.0 | 125,612 | 100.0 | - The decrease in revenue was mainly due to insufficient domestic demand and weak consumer spending caused by RMB depreciation[37] Gross Profit For the six months ended June 30, 2023, the Group's gross profit increased by 4.4% to HKD 42.594 million, with the gross profit margin rising to 34.5%, primarily due to cost control measures implemented in daily operations Gross Profit Analysis by Product Category | Product Category | 2023 (thousand HKD) | 2023 (%) | 2022 (thousand HKD) | 2022 (%) | | :--- | :--- | :--- | :--- | :--- | | Zipper Chains and Sliders | 41,734 | 98.0 | 39,620 | 97.1 | | Others | 860 | 2.0 | 1,188 | 2.9 | | Total | 42,594 | 100.0 | 40,808 | 100.0 | - The increase in gross profit was mainly due to the impact of cost control measures implemented in daily operations[41] Expenses and Costs Distribution costs increased by 44.7% year-on-year to HKD 9.07 million, mainly due to increased sales activities and advertising, while administrative expenses rose by 8.8% year-on-year to HKD 32.57 million, primarily due to higher professional fees related to business development - Distribution costs increased by approximately 44.7% to approximately HKD 9.07 million, mainly due to increased sales activities and advertising[43] - Administrative expenses increased by approximately 8.8% to approximately HKD 32.57 million, mainly due to increased professional fees related to business development[43] Profitability For the six months ended June 30, 2023, profit attributable to equity holders of the Company was approximately HKD 3.39 million, a significant decrease from the prior year, resulting in a profit margin of approximately 2.75% - Profit attributable to equity holders of the Company was approximately HKD 3.39 million, compared to approximately HKD 8.59 million in the same period last year[44] - The profit margin attributable to equity holders of the Company was approximately 2.75%[44] Related Party Transactions The Group entered into several lease agreements with related parties owned by directors or senior management for properties in Hong Kong, Zhejiang, Guangdong, and Jingmen, with independent property valuers confirming all monthly rents referenced market prices, and these leases resulted in the recognition of additional right-of-use assets under HKFRS 16, constituting related party transactions under the Listing Rules - The Group renewed a lease agreement for a Hong Kong property with Success Point Limited (owned by Mr. Hui Sek Pang and Mr. Hui Sek Nam) at a monthly rent of HKD 54,000[49] - The Group renewed a lease agreement for its Zhejiang production base with Foshan Nanhai Jinheming Investment Co., Ltd. (owned by Mr. Hui Sek Pang and Mr. Hui Sek Nam) at a monthly rent of RMB 625,958[50] - The Group renewed a lease agreement for its Guangdong factory with Mr. Hui Sek Pang and Mr. Hui Sek Nam at a monthly rent of RMB 428,980[53] - In accordance with HKFRS 16, these lease agreements resulted in the recognition of right-of-use assets totaling approximately HKD 2 million, HKD 0.2 million, HKD 8.58 million, and HKD 8.34 million respectively[58] Business Update on Relocation of Zhejiang Production Base The Group's production base in Jiashan County, Zhejiang Province, is subject to relocation as part of an organic renewal project within the economic development zone, with no specific relocation timetable received yet, and the Group is discussing the relocation plan with the Jiashan Economic and Technological Development Zone Management Committee - The Group's production base in Jiashan County, Zhejiang Province, China, is subject to relocation due to an organic renewal project within the economic development zone[59] - Kaiyi Zhejiang has not yet received a relocation timetable and will discuss the relocation plan with the Jiashan Economic and Technological Development Zone Management Committee[59] Liquidity and Capital Resources For the six months ended June 30, 2023, the Group recorded net cash outflows from operating, investing, and financing activities, leading to a significant decrease in cash and cash equivalents, and while the Group actively reviews its capital structure and monitors capital status using an adjusted net debt to capital ratio (target below 20%), this ratio was not calculated as total debt was lower than cash - Net cash outflow from operating activities was approximately HKD 16.55 million (2022: HKD 12.07 million), primarily due to an increase in trade receivables[61] - Net cash outflow from investing activities was approximately HKD 2.91 million, mainly attributable to payments for the purchase of property, plant and equipment[61] - Net cash outflow from financing activities was approximately HKD 12.56 million (2022: net inflow of HKD 0.45 million), mainly due to rental payments[61] - As at June 30, 2023, cash and cash equivalents were approximately HKD 67.46 million, a decrease of approximately HKD 37.81 million from December 31, 2022[62] - The Group's strategy is to maintain an adjusted net debt to capital ratio below 20%, but this ratio was not calculated as total debt was lower than cash and cash equivalents[64] Net Current Assets As at June 30, 2023, the Group's net current assets were HKD 107.96 million, an increase of approximately HKD 2.93 million from December 31, 2022, with current assets primarily comprising inventories, trade and other receivables, and cash and cash equivalents, while current liabilities mainly consisted of trade and other payables and the current portion of lease liabilities - As at June 30, 2023, net current assets were HKD 107.96 million, an increase of approximately HKD 2.93 million from December 31, 2022[65] - Key components of current assets included inventories of approximately HKD 26.45 million, trade and other receivables of approximately HKD 82.94 million, and cash and cash equivalents of approximately HKD 67.46 million[65] - Key components of current liabilities included trade and other payables of approximately HKD 50.66 million and the current portion of lease liabilities of approximately HKD 18.13 million[65] Bank Borrowings As at June 30, 2023, and June 30, 2022, the Group had no bank borrowings, rendering the gearing ratio inapplicable - As at June 30, 2023, and June 30, 2022, the Group had no bank borrowings[66] Pledged Assets As at June 30, 2023, the Group had no pledged assets - As at June 30, 2023, the Group had no pledged assets[67] Contingent Liabilities As at June 30, 2023, the Group had no significant contingent liabilities - As at June 30, 2023, the Group had no significant contingent liabilities[69] Foreign Currency Risk Individual companies within the Group have limited foreign currency risk as most transactions are denominated in their respective functional currencies, and for the six months ended June 30, 2023, the Group did not hedge against risks arising from exchange rate fluctuations - Individual companies within the Group have limited foreign currency risk, with most transactions denominated in their functional currencies[70] - For the six months ended June 30, 2023, the Group did not hedge against risks arising from exchange rate fluctuations[70] Employees As at June 30, 2023, the Group had 663 full-time employees, a decrease from the prior year, but staff costs increased to approximately HKD 51.05 million due to human resource integration - As at June 30, 2023, the Group had 663 full-time employees (June 30, 2022: 804 employees)[71] - For the six months ended June 30, 2023, staff costs were approximately HKD 51.05 million (2022: approximately HKD 49.98 million), with the increase mainly due to an increase in the number of workers resulting from human resource integration[71] Significant Acquisitions and Disposals of Subsidiaries and Associates For the six months ended June 30, 2023, the Group had no significant acquisitions or disposals of subsidiaries and associates - For the six months ended June 30, 2023, the Group had no significant acquisitions or disposals of subsidiaries and associates[72] Interim Dividend The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2023[28] Events After Reporting Period The Directors confirm that no significant events affecting the Group have occurred after June 30, 2023, and up to the date of this report - The Directors confirm that no significant events affecting the Group have occurred after June 30, 2023, and up to the date of this report[75] Share Option Scheme The Company adopted a share option scheme on May 30, 2023, to incentivize or reward selected participants for their contributions to the Group, with an authorized limit of 10% of issued shares and a 10-year validity, and no share options had been granted as of June 30, 2023 - The Company adopted a share option scheme by ordinary resolution on May 30, 2023, to incentivize or reward participants for their contributions to the Group[76][29] - The total number of shares under the share option scheme shall not exceed 10% of the issued shares (i.e., 55,776,480 shares), and the scheme is valid for 10 years[84][80] - As at June 30, 2023, no share options had been granted or agreed to be granted under the share option scheme[81] Disclosure of Interests This chapter discloses the interests and short positions of Directors and chief executives, as well as substantial shareholders and other persons, in the Company's shares, noting that Ms. Lam Ping and Mr. Mak Yung Bun hold shares through controlled corporations, and China Huarong Asset Management Co., Ltd. and its subsidiaries are deemed controlling shareholders, with several beneficial owners and receivers holding significant stakes Directors' and Chief Executives' Interests and/or Short Positions in the Shares, Underlying Shares or Debentures of the Company or any Associated Corporation As at June 30, 2023, Ms. Lam Ping and Mr. Mak Yung Bun were each deemed to have an interest in 26,556,126 shares of the Company, representing 4.76% of the issued shares, held through their jointly owned Golden Diamond Inc., with no other Directors or chief executives holding disclosable interests or short positions Directors' Long Positions in the Shares and Underlying Shares of the Company | Name of Director | Nature of Interest | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Lam Ping | Interest in controlled corporation | 26,556,126 | 4.76% | | Mak Yung Bun | Interest in controlled corporation | 26,556,126 | 4.76% | - Ms. Lam Ping and Mr. Mak Yung Bun were each deemed to have an interest in 26,556,126 shares of the Company, held through Golden Diamond Inc.[89] Substantial Shareholders' and Other Persons' Interests and Short Positions in the Shares or Underlying Shares of the Company As at June 30, 2023, several substantial shareholders and other persons held interests of 5% or more in the Company's issued share capital, with China Sun, Central Eagle, and Golden Diamond as beneficial owners, and China Huarong Asset Management Co., Ltd. and its multi-tiered subsidiaries (including Noble Wisdom Ever Limited) holding 70.16% of shares through security interests, while Chan Ho Yin and Li Kin Long Kenny held 28.73% of shares as joint and several receivers Substantial Shareholders' and Other Persons' Long Positions in the Shares and Underlying Shares of the Company | Name of Shareholder | Capacity | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | China Sun | Beneficial owner | 133,706,331 | 23.97% | | Central Eagle | Beneficial owner | 130,897,663 | 23.47% | | Golden Diamond | Beneficial owner | 26,566,126 | 4.76% | | Noble Wisdom Ever Limited | Security interest | 326,089,600 | 70.16% | | China Huarong Overseas Investment Holdings Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Overseas Investment & Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Zhiyuan Investment Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | China Huarong Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Chan Ho Yin | Joint and several receivers | 160,272,457 | 28.73% | | Li Kin Long Kenny | Joint and several receivers | 160,272,457 | 28.73% | - China Huarong Asset Management Co., Ltd., through its wholly-owned Huarong Zhiyuan Investment Management Co., Ltd., Huarong Overseas Investment & Asset Management Co., Ltd., and China Huarong Overseas Investment Holdings Co., Ltd., indirectly controls Noble Wisdom Ever Limited, thereby holding 70.16% of the Company's shares[102][103][104][105] - Chan Ho Yin and Li Kin Long Kenny have been appointed as joint and several receivers of the pledged assets, involving share charges over the Company's shares executed by China Sun Corporation, Central Eagle Limited, and Golden Diamond Inc.[105] Corporate Governance and Other Information This chapter outlines the Group's corporate governance practices, confirming compliance with most Corporate Governance Code provisions, with an exception for independent non-executive directors' attendance at the AGM, and notes the adoption of a standard code for securities transactions by directors and relevant employees, no purchases, sales, or redemptions of listed securities by the Company or its subsidiaries during the reporting period, and the Audit Committee's review of the interim financial report Corporate Governance Practices The Company is committed to maintaining stringent corporate governance and has complied with all provisions of the Corporate Governance Code, except for certain independent non-executive directors' absence from the AGM on June 27, 2023, due to personal reasons, and has adopted a standard code for directors' securities transactions and a similar code of conduct for relevant employees - The Company has complied with all provisions of the Corporate Governance Code, except that certain independent non-executive directors were unable to attend the Annual General Meeting held on June 27, 2023, due to personal reasons[108][110] - The Company has adopted the Model Code as its code of conduct for directors' securities transactions and has made specific enquiries to all Directors, who confirmed their compliance[110] - The Company has also adopted a code of conduct for relevant employees' securities transactions, the terms of which are no less exacting than the Model Code[110] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2023, 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, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[111] Audit Committee The Group's unaudited interim financial report for the six months ended June 30, 2023, has been reviewed by the Board's Audit Committee - The Group's unaudited interim financial report for the six months ended June 30, 2023, has been reviewed by the Board's Audit Committee[112] Condensed Consolidated Statement of Profit or Loss The condensed consolidated statement of profit or loss shows that for the six months ended June 30, 2023, the Group's revenue was HKD 123.386 million, gross profit was HKD 42.594 million, and profit for the period was HKD 5.910 million, a significant 46.2% decrease from the prior year, with profit attributable to equity holders of the Company at HKD 3.394 million and basic and diluted earnings per share at 0.6 HK cents Summary of Condensed Consolidated Statement of Profit or Loss | Metric | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 123,386 | 125,612 | | Cost of sales | (80,792) | (84,804) | | Gross profit | 42,594 | 40,808 | | Other income and gains/(losses) – net | 6,383 | 8,266 | | Distribution costs | (9,070) | (6,269) | | Administrative expenses | (32,574) | (29,947) | | Interest on lease liabilities | (1,472) | (2,088) | | Profit before tax | 5,861 | 10,770 | | Income tax credit | 49 | 208 | | Profit for the period | 5,910 | 10,978 | | Profit for the period attributable to equity holders of the Company | 3,394 | 8,587 | | Profit for the period attributable to non-controlling interests | 2,516 | 2,391 | | Basic and diluted earnings per share (HK cents) | 0.6 | 1.8 | Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The condensed consolidated statement of profit or loss and other comprehensive income shows that for the six months ended June 30, 2023, profit for the period was HKD 5.910 million, but due to exchange differences arising from the translation of financial statements of mainland China subsidiaries, other comprehensive income was negative HKD 10.371 million, resulting in a total comprehensive income for the period of negative HKD 4.461 million Summary of Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Profit for the period | 5,910 | 10,978 | | Items that may be reclassified subsequently to profit or loss: Exchange differences arising from translation of financial statements of mainland China subsidiaries | (10,371) | (14,619) | | Total comprehensive income for the period | (4,461) | (3,641) | | Attributable to equity holders of the Company | (5,425) | (3,849) | | Attributable to non-controlling interests | 964 | 208 | Condensed Consolidated Statement of Financial Position The condensed consolidated statement of financial position shows that as at June 30, 2023, the Group's total assets less current liabilities were HKD 216.095 million, and net assets were HKD 201.954 million, with non-current assets primarily comprising property, plant and equipment and right-of-use assets, current assets showing a significant increase in trade and other receivables but a decrease in cash and cash equivalents, and current liabilities mainly consisting of trade and other payables and lease liabilities Summary of Condensed Consolidated Statement of Financial Position | Metric | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 69,369 | 73,753 | | Right-of-use assets | 26,353 | 37,068 | | Intangible assets | 1,081 | 1,272 | | Deferred tax assets | 5,580 | 5,691 | | Current assets | | | | Inventories | 26,455 | 33,527 | | Trade and other receivables | 82,940 | 43,753 | | Cash and cash equivalents | 67,457 | 105,266 | | Current liabilities | | | | Trade and other payables | 50,659 | 47,577 | | Amounts due to related parties | – | 7,393 | | Lease liabilities (current portion) | 18,126 | 22,427 | | Non-current liabilities | | | | Lease liabilities (non-current portion) | 13,017 | 20,661 | | Deferred tax liabilities | 1,124 | 1,124 | | Total equity | | | | Total equity attributable to equity holders of the Company | 179,488 | 184,913 | | Non-controlling interests | 22,466 | 21,502 | | Net assets | 201,954 | 206,415 | Condensed Consolidated Statement of Changes in Equity The condensed consolidated statement of changes in equity traces equity movements for the six months ended June 30, 2023, showing that while profit for the period increased equity attributable to equity holders of the Company, exchange reserves significantly decreased due to exchange differences from translating financial statements of mainland China subsidiaries, resulting in negative total comprehensive income and a net decrease in total equity attributable to equity holders of the Company Summary of Condensed Consolidated Statement of Changes in Equity | Metric | Balance at January 1, 2023 (thousand HKD) | Profit for the period (thousand HKD) | Other comprehensive income (thousand HKD) | Transfer to statutory reserve (thousand HKD) | Balance at June 30, 2023 (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Share capital | 5,578 | – | – | – | 5,578 | | Share premium | 213,575 | – | – | – | 213,575 | | Capital reserve | 18,324 | – | – | – | 18,324 | | Statutory reserve | 25,856 | – | – | 1,805 | 27,661 | | Exchange reserve | (515) | – | (8,819) | – | (9,334) | | Accumulated losses | (77,905) | 3,394 | – | (1,805) | (76,316) | | Total attributable to equity holders of the Company | 184,913 | 3,394 | (8,819) | – | 179,488 | | Non-controlling interests | 21,502 | 2,516 | (1,552) | – | 22,466 | | Total equity | 206,415 | 5,910 | (10,371) | – | 201,954 | Condensed Consolidated Statement of Cash Flows The condensed consolidated statement of cash flows shows that for the six months ended June 30, 2023, the Group recorded net cash outflows from operating, investing, and financing activities, resulting in a net decrease in cash and cash equivalents of HKD 32.022 million, with cash and cash equivalents at period-end totaling HKD 67.457 million Summary of Condensed Consolidated Statement of Cash Flows | Category of Activities | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Net cash used in operating activities | (16,550) | (12,065) | | Net cash used in investing activities | (2,909) | (4,318) | | Net cash (used in)/generated from financing activities | (12,563) | 447 | | Net decrease in cash and cash equivalents | (32,022) | (15,936) | | Cash and cash equivalents at January 1 | 105,266 | 59,870 | | Effect of exchange rate changes | (5,787) | (3,011) | | Cash and cash equivalents at June 30 | 67,457 | 40,923 | Notes to the Unaudited Interim Financial Report This chapter provides detailed notes to the condensed consolidated interim financial statements, covering general company information, basis of preparation, significant accounting policy changes, segment reporting, revenue recognition, profit before tax composition, income tax credit, earnings per share calculation, property, plant and equipment, trade and other receivables, cash and cash equivalents, trade and other payables, amounts due to related parties, capital reserves and dividends, commitments, and significant related party transactions General Information The Company is an exempted company incorporated in the Cayman Islands, with its shares listed on the Stock Exchange, primarily engaged in the zipper business, and China Huarong Asset Management Co., Ltd. is considered by the Directors to be the Company's controlling shareholder, with receivers appointed for certain shares - The Company is an exempted company incorporated in the Cayman Islands, with its shares listed on The Stock Exchange of Hong Kong Limited, primarily engaged in the zipper business[127][133] - Huarong (a subsidiary of China Huarong Asset Management Co., Ltd.) is the controlling shareholder of the Company[129] - Mr. Chan Ho Yan and Mr. Li Kin Long Kenny have been appointed as joint and several receivers for 341,446,600 shares of the Company[128] Basis of Preparation The condensed consolidated interim financial statements are prepared in accordance with the applicable disclosure provisions of the Listing Rules of the Stock Exchange and Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the HKICPA, involving the use of certain judgments, estimates, and assumptions - The condensed consolidated interim financial statements are prepared in accordance with the Listing Rules of the Stock Exchange and Hong Kong Accounting Standard 34 Interim Financial Reporting[136] - The preparation involves the use of certain judgments, estimates, and assumptions, and actual results may differ from these estimates[130] Principal Accounting Policies The condensed consolidated interim financial statements are prepared using the same accounting policies adopted in the 2022 annual financial statements, and new or revised Hong Kong Financial Reporting Standards effective from January 1, 2023, had no significant impact on the Group's condensed consolidated interim financial statements - The condensed consolidated interim financial statements are prepared in accordance with the same accounting policies adopted in the 2022 annual financial statements[138] - New or revised Hong Kong Financial Reporting Standards (including HKFRS 17 and amendments to HKAS 8, HKAS 1, and HKAS 12) effective from January 1, 2023, had no significant impact on the Group's condensed consolidated interim financial statements[140] Segment Reporting The Group manages its business by business line and geographical region, with information reported to the chief operating decision-maker focusing on revenue analysis by customer geographical location, providing no other separate financial information beyond overall results and financial position - The Group manages its business by segments, which are organized by business line and geographical region[141] - Information reported to the chief operating decision-maker focuses on revenue analysis by customer geographical location[141] Revenue The Group's principal business is the manufacturing and sale of zipper chains, sliders, and other related products, with revenue from sales of goods totaling HKD 123.386 million for the six months ended June 30, 2023, predominantly from zipper chains and sliders, and revenue is recognized when control of the goods is transferred to the customer, with no individual customer's transactions exceeding 10% of the Group's revenue - The Group's principal business is the manufacturing and sale of zipper chains, sliders, and other related products[143] Amounts of Each Major Category of Revenue | Revenue Category | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Zipper Chains and Sliders | 122,120 | 123,042 | | Others | 1,266 | 2,570 | | Total | 123,386 | 125,612 | - Revenue is recognized at the point in time when control of the goods is transferred to the customer, and no individual customer's transactions exceeded 10% of the Group's revenue[144][145] Profit Before Tax Profit before tax is influenced by various factors, including staff costs, other income and gains net (such as interest income, gain on disposal of property, government grants, net foreign exchange gains), and other expense items (such as depreciation and amortization, provision for impairment loss on inventories, cost of inventories), with net foreign exchange gains decreasing compared to the prior year Staff Costs | Item | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Salaries, wages and other benefits | 46,101 | 44,317 | | Contributions to defined contribution retirement plans | 4,950 | 5,659 | | Total | 51,051 | 49,976 | Other Income and Gains/(Losses) – Net | Item | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Interest income | 256 | 203 | | Gain on disposal of property, plant and equipment | 23 | 6 | | Government grants | 543 | 215 | | Net foreign exchange gains | 4,897 | 6,950 | | Others | 664 | 892 | | Total | 6,383 | 8,266 | Other Items | Item | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Depreciation and amortization | 15,996 | 17,084 | | Provision for/(reversal of) impairment loss on inventories | 1,363 | (36) | | Cost of inventories | 80,792 | 84,804 | Income Tax Credit The Group is not subject to income tax in the Cayman Islands and British Virgin Islands, while Hong Kong profits tax rate is 16.5%, and for mainland China subsidiaries, Kaiyi Guangdong enjoys a preferential tax rate of 15% as a high-tech enterprise until 2025, with others at 25%, and dividends paid to non-resident enterprise investors are subject to a 10% withholding income tax, which can be reduced to 5% for eligible Hong Kong tax residents - The Group is not subject to any income tax in the Cayman Islands or the British Virgin Islands[151] - Kaiyi Zipper Company Limited is subject to Hong Kong profits tax at a rate of 16.5%[152] - Kaiyi (Guangdong) Garment Accessories Co., Ltd. enjoys a preferential income tax rate of 15% as a high-tech enterprise until 2025, while other mainland China subsidiaries are subject to a statutory tax rate of 25%[152] - Dividends paid by PRC resident enterprises to non-PRC resident enterprise investors are subject to a 10% withholding income tax, which can be reduced to 5% for eligible Hong Kong tax residents[152] Earnings Per Share For the six months ended June 30, 2023, basic earnings per share were 0.6 HK cents, calculated based on profit attributable to equity holders of the Company of HKD 3.394 million and a weighted average of 557,764,800 ordinary shares outstanding, with diluted earnings per share being equal to basic earnings per share due to the absence of potential dilutive ordinary shares - Basic earnings per share are calculated based on profit attributable to equity holders of the Company of HKD 3.394 million and a weighted average of 557,764,800 ordinary shares outstanding[158] - As there were no potential dilutive ordinary shares for the six months ended June 30, 2023, and 2022, diluted earnings per share were equal to basic earnings per share[154] Property, Plant and Equipment For the six months ended June 30, 2023, the Group acquired items of property, plant and machinery (including payments for construction in progress) at a cost of HKD 4.016 million - For the six months ended June 30, 2023, the Group acquired items of property, plant and machinery (including payments for construction in progress) at a cost of HKD 4.016 million[155] Trade and Other Receivables As at June 30, 2023, total trade and other receivables significantly increased to HKD 82.94 million from HKD 43.753 million at December 31, 2022, with trade receivables within one month accounting for the largest portion, and all trade and other receivables are expected to be recovered or recognized as expenses within one year Ageing Analysis of Trade and Other Receivables | Ageing | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Within 1 month | 34,330 | 13,723 | | Over 1 month but within 2 months | 27,739 | 14,520 | | Over 2 months but within 3 months | 6,890 | 5,838 | | Over 3 months | 9,751 | 2,905 | | Trade receivables and bills receivable, net of loss allowance | 78,710 | 36,986 | | Rental deposits | 770 | – | | Other prepayments | 1,838 | 1,233 | | Other tax receivables | – | 5,080 | | Other receivables | 1,622 | 454 | | Total | 82,940 | 43,753 | - All trade and other receivables are expected to be recovered or recognized as expenses within one year[161] Cash and Cash Equivalents As at June 30, 2023, the Group's cash and bank balances were HKD 67.457 million, a decrease from HKD 105.266 million at December 31, 2022 Cash and Cash Equivalents | Item | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Cash and bank balances | 67,457 | 105,266 | | Cash and cash equivalents in the condensed consolidated statement of cash flows | 67,457 | 105,266 | Trade and Other Payables As at June 30, 2023, total trade and other payables increased to HKD 50.659 million from HKD 47.577 million at December 31, 2022, with key components including wages and staff welfare payable, trade payables, and accrued expenses Ageing Analysis and Composition of Trade and Other Payables | Item | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Trade payables | 12,563 | 7,630 | | Wages and staff welfare payable | 23,581 | 22,721 | | Accrued expenses | 7,769 | 6,932 | | Amounts payable for purchase of property, plant and equipment | 641 | 2,274 | | Other tax payables | 3,580 | 5,588 | | Contract liabilities | 1,419 | 1,832 | | Other payables | 1,106 | 600 | | Total | 50,659 | 47,577 | Amounts Due to Related Parties As at June 30, 2023, amounts due to related parties were zero, compared to HKD 7.393 million at December 31, 2022, with the balance representing advances made by an individual (who is a vice president and son-in-law of a Director of the Company), which were unsecured, interest-free, and repayable on demand - As at June 30, 2023, amounts due to related parties were zero (December 31, 2022: HKD 7.393 million)[117] - The amount represented advances made by an individual who is a vice president and son-in-law of a Director of the Company, which were unsecured, interest-free, and repayable on demand[166] Capital, Reserves and Dividends For the period ended June 30, 2023, no interim dividend was declared by the Company, and both authorized share capital and issued and fully paid share capital remained unchanged at 2,000,000 thousand shares (HKD 20 million) and 557,765 thousand shares (HKD 5.578 million) respectively - No interim dividend was declared for the periods ended June 30, 2023, and 2022[167] Authorized and Issued Share Capital | Item | June 30, 2023 Number of Shares (thousand shares) | June 30, 2023 Share Capital (thousand HKD) | December 31, 2022 Number of Shares (thousand shares) | December 31, 2022 Share Capital (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Authorized: Ordinary shares of HKD 0.01 each | 2,000,000 | 20,000 | 2,000,000 | 20,000 | | Ordinary shares, issued and fully paid | 557,765 | 5,578 | 557,765 | 5,578 | Commitments As at June 30, 2023, the Group had capital commitments contracted but not provided for in the condensed consolidated interim financial statements amounting to HKD 1.119 million Capital Commitments Outstanding | Item | June 30, 2023 (thousand HKD) | December 31, 2022 (thousand HKD) | | :--- | :--- | :--- | | Contracted | 1,119 | 1,460 | Significant Related Party Transactions The Group engaged in several significant related party transactions, primarily involving rental payments for leased land and buildings under agreements with Mr. Hui Sek Pang, Mr. Hui Sek Nam, Success Point Limited, Foshan Nanhai Jinheming Investment Co., Ltd., and Kaiyi (Jingmen) Garment Accessories Co., Ltd., and key management personnel compensation also increased - The Group renewed lease agreements with senior management Mr. Hui Sek Pang and Mr. Hui Sek Nam, with HKD 2.912 million in rent paid for the six months ended June 30, 2023[171] - The Company paid rent of HKD 324,000 and HKD 4.249 million to Success Point Limited and Foshan Nanhai Jinheming Investment Co., Ltd., respectively[172] - Kaiyi Guangdong renewed a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd., with HKD 3.618 million in rent paid for the six months ended June 30, 2023[174] Key Management Personnel Compensation | Item | June 30, 2023 (thousand HKD) | June 30, 2022 (thousand HKD) | | :--- | :--- | :--- | | Short-term employee benefits | 3,779 | 2,565 | | Post-employment benefits | 46 | 60 | | Total | 3,825 | 2,625 | Events After Reporting Period Except as disclosed in this report, the Directors confirm that no significant events affecting the Group have occurred after June 30, 2023, and up to the date of approval of these condensed consolidated interim financial statements - The Directors confirm that no significant events affecting the Group have occurred after June 30, 2023, and up to the date of approval of these condensed consolidated interim financial statements[177] Glossary This chapter provides definitions for key terms and abbreviations used in the interim report to ensure consistent understanding of the report's content - This glossary defines key terms used in the report, such as 'Board', 'CG Code', 'Company', 'Group', 'HKD', 'Hong Kong', 'Listing Rules', 'Main Board', 'Model Code', 'OEM', 'PRC' or 'mainland China', 'SFO', 'Shareholder', 'RMB', and 'Stock Exchange'[179][181][182][185][186][187]