杉杉品牌(01749) - 2019 - 中期财报

Company Information This chapter provides basic company information for Shanshan Brand Management Co., Ltd., including its name, listing details, board and committee composition, registered office, principal place of business, key management personnel, independent auditor, legal advisors, and principal bankers - The company name is Shanshan Brand Management Co., Ltd., listed on the Main Board of The Stock Exchange of Hong Kong Limited, stock code 1749[5] - The Board of Directors comprises executive directors, non-executive directors (Chairman Mr. Zhuang Wei), and independent non-executive directors, with audit, remuneration, and nomination committees[5][6] - The company's registered office and China headquarters are in Ningbo, Zhejiang Province, with its principal place of business in Hong Kong located in Electric Road, North Point[6] - The independent auditor is BDO Limited, and legal advisors include Sidley Austin (Hong Kong law) and Guangdong Cinda Law Firm (PRC law)[6][8] Management Discussion and Analysis This chapter reviews Shanshan Brand Management Co., Ltd.'s business operations and financial performance for the first half of 2019, including revenue, costs, profits, working capital, liquidity, IPO proceeds usage, and future plans, addressing macroeconomic challenges and strategies Business Review Despite a complex external environment and domestic economic slowdown, the Group focused on its core brands FIRS and SHANSHAN, achieving steady retail network growth through channel optimization, brand enhancement, and improved logistics efficiency - Strategic focus: Concentrating on FIRS and SHANSHAN as two core proprietary brands, driving performance growth through differentiated competition[10] - Channel optimization: Optimizing sales channels and diversifying layouts to enhance brand influence[10] - Logistics efficiency: Establishing a warehousing and logistics center in Suqian, Jiangsu Province, China, to continuously improve logistics efficiency and market responsiveness[10] Retail Network Store Count Changes | Indicator | June 30, 2019 (stores) | December 31, 2018 (stores) | Growth Rate | | :--- | :--- | :--- | :--- | | FIRS | 699 | - | - | | SHANSHAN | 527 | - | - | | LUBIAM | 15 | - | - | | Total | 1,241 | 1,226 | 1.2% | Financial Review The Group's total revenue increased by 6.8% year-on-year in the first half of 2019, mainly due to the growth of the SHANSHAN brand; gross profit and other income increased, but selling and distribution expenses and finance costs rose, leading to a 5.5% year-on-year decrease in profit attributable to owners of the company Revenue The Group's total revenue increased by approximately 6.8% from RMB499.7 million in the first half of 2018 to RMB533.8 million in the first half of 2019, primarily due to increased revenue from the SHANSHAN brand Total Revenue Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Total Revenue | 533.8 | 499.7 | 6.8% | - Revenue growth primarily driven by the contribution of the SHANSHAN brand[11] Revenue by Sales Channel The Group's revenue primarily comes from sales to distributors, direct sales (e-commerce platforms and self-operated retail stores), and franchisee sales (cooperative arrangements, professional wear, etc.), with cooperative arrangements accounting for the largest share and professional wear sales growing significantly Revenue Breakdown by Sales Channel | Sales Channel | H1 2019 (RMB thousand) | Share (%) | H1 2018 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Sales to distributors | 56,284 | 10.5 | 89,365 | 17.9 | | E-commerce platforms | 52,482 | 9.8 | 64,844 | 13.0 | | Self-operated retail stores | 86,201 | 16.2 | 84,018 | 16.8 | | Cooperative arrangements | 275,515 | 51.6 | 227,099 | 45.4 | | MARCO AZZALI and LUBIAM franchisees | 3,356 | 0.6 | 7,453 | 1.5 | | Professional wear | 53,156 | 10.0 | 18,055 | 3.6 | | Trademark licensing income | 6,764 | 1.3 | 8,868 | 1.8 | | Total | 533,758 | 100 | 499,702 | 100 | - Professional wear sales revenue significantly increased from RMB18,055 thousand in H1 2018 to RMB53,156 thousand in H1 2019, with its share rising from 3.6% to 10.0%[13] Revenue by Brand SHANSHAN brand contributed the most revenue and grew significantly, FIRS brand also saw revenue growth, while MARCO AZZALI no longer contributed revenue due to business divestiture Revenue Breakdown by Brand | Brand | H1 2019 (RMB thousand) | Share (%) | H1 2018 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | FIRS | 221,341 | 41.5 | 215,790 | 43.2 | | SHANSHAN | 294,175 | 55.1 | 250,975 | 50.2 | | MARCO AZZALI | — | — | 7,241 | 1.4 | | LUBIAM | 11,478 | 2.1 | 16,828 | 3.4 | | Other | 6,764 | 1.3 | 8,868 | 1.8 | | Total | 533,758 | 100 | 499,702 | 100 | - SHANSHAN brand revenue increased from RMB250,975 thousand in H1 2018 to RMB294,175 thousand in H1 2019, with its share rising from 50.2% to 55.1%[15] - MARCO AZZALI brand business was sold in March 2018, contributing no revenue in the current period[15] Gross Profit The Group's gross profit increased by 1.9% year-on-year to RMB299.7 million, primarily due to the increase in total revenue Gross Profit Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Gross Profit | 299.7 | 294.0 | 1.9% | Other Income Other income decreased by 33.3% year-on-year to RMB0.8 million, mainly due to a reduction in miscellaneous income collected from franchisees Other Income Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Other Income | 0.8 | 1.2 | -33.3% | Other Gains and Losses Other gains and losses turned from a loss of RMB2.9 million in the prior period to a gain of RMB0.1 million in the current period, primarily benefiting from government grants Other Gains and Losses Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Other Gains and Losses | 0.1 (Gain) | (2.9) (Loss) | Turnaround to gain | - Main reason: Receipt of government grants[18] Selling and Distribution Expenses Selling and distribution expenses increased by 9.2% year-on-year to RMB266.6 million, mainly due to increased revenue sharing fees to franchisees and depreciation expenses for renovations, driven by increased sales of SHANSHAN brand products Selling and Distribution Expenses Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 266.6 | 244.2 | 9.2% | - Reasons for increase: (1) Increased revenue sharing fees paid to franchisees due to increased sales of SHANSHAN brand products; (2) Increased renovation expenses and equipment depreciation[20] Administrative Expenses Administrative expenses increased by 3.5% year-on-year to RMB20.6 million, remaining relatively stable Administrative Expenses Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Administrative Expenses | 20.6 | 19.9 | 3.5% | Finance Costs Finance costs increased by 13.5% year-on-year to RMB8.4 million, primarily due to the adoption of Hong Kong Financial Reporting Standard 16 "Leases" Finance Costs Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Finance Costs | 8.4 | 7.4 | 13.5% | - Reason for increase: Primarily due to the impact of adopting Hong Kong Financial Reporting Standard 16 "Leases" effective January 1, 2019[22] Income Tax Expense Income tax expense significantly decreased by 82.4% year-on-year to RMB0.6 million, mainly because IPO expenses in the prior year could not be offset against taxable income Income Tax Expense Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 0.6 | 3.4 | -82.4% | - Main reason: IPO expenses in the prior year could not be offset against taxable income[23] Profit Attributable to Owners of the Company Profit attributable to owners of the company decreased by 5.5% year-on-year to RMB8.6 million Profit Attributable to Owners of the Company Comparison | Indicator | H1 2019 (RMB million) | H1 2018 (RMB million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Profit Attributable to Owners of the Company | 8.6 | 9.1 | -5.5% | Working Capital Management The Group's average inventory turnover days increased, while accounts receivable and accounts payable turnover days remained relatively stable Working Capital Turnover Days | Indicator | June 30, 2019 (days) | December 31, 2018 (days) | Change | | :--- | :--- | :--- | :--- | | Average inventory turnover days | 366 | 339 | Increase of 27 days | | Average accounts receivable turnover days | 68 | 62 | Increase of 6 days | | Average accounts payable turnover days | 167 | 171 | Decrease of 4 days | - Increase in inventory turnover days primarily due to purchasing SHANSHAN brand products to support its retail store expansion and meet demand[26] Liquidity and Financial Resources The Group's financial position remained sound, but cash and cash equivalents decreased, total bank borrowings increased, and the gearing ratio slightly rose - Cash and cash equivalents decreased from RMB145.4 million as of December 31, 2018, to RMB102.1 million as of June 30, 2019[29] - Total bank borrowings increased from RMB260.0 million as of December 31, 2018, to RMB285.0 million as of June 30, 2019[29] - Gearing ratio increased from 24.6% as of December 31, 2018, to 25.5% as of June 30, 2019[29] Treasury Policy The Group adopts a prudent financial management approach, closely monitoring its liquidity position to ensure it can meet funding needs and appropriately investing surplus cash - The Group adopts a prudent financial management approach to maintain a sound liquidity position[31] - The Board closely monitors the liquidity position to ensure the liquidity structure of assets, liabilities, and other commitments can meet funding needs[31] Foreign Exchange Risk and Hedging The Group faces minimal currency risk as most transactions are conducted in RMB, and therefore, no foreign currency hedging policy has been implemented - The Group faces minimal currency risk, with most transactions conducted in RMB[32] - The Group has not implemented any foreign currency hedging policy[32] Use of Proceeds from Initial Public Offering The net proceeds from the Company's IPO amounted to RMB55.2 million, of which RMB39.0 million had been utilized as of June 30, 2019, primarily for retail network, brand promotion, and warehousing logistics center - Total net proceeds from the initial public offering were approximately RMB55.2 million[33] Use of Share Offer Proceeds | Planned Use of Proceeds | Planned Amount (RMB million) | Actual Amount Used as of June 30, 2019 (RMB million) | Actual Amount Used During the Period (RMB million) | Actual Unused Amount as of June 30, 2019 (RMB million) | | :--- | :--- | :--- | :--- | :--- | | Retail network | 20.9 | 18.5 | 14.6 | 2.4 | | Brand promotion and marketing | 13.6 | 9.3 | 3.4 | 4.3 | | Information technology systems | 10.7 | 1.2 | 0.9 | 9.5 | | Warehousing and logistics center | 4.5 | 4.5 | 1.1 | 0 | | General working capital | 5.5 | 5.5 | 0 | 0 | | Total | 55.2 | 39.0 | 20.0 | 16.2 | Interim Dividend The Board has resolved not to declare any interim dividend for the current period - The Board has resolved not to declare any interim dividend for the current period (six months ended June 30, 2018: nil)[35] Employees and Remuneration Policy As of June 30, 2019, the Group's employee count slightly decreased, employee costs remained stable, and remuneration policy is linked to performance - As of June 30, 2019, the Group had 658 employees (December 31, 2018: 701 employees)[37] - Employee costs (including directors' emoluments) for the period were approximately RMB47.7 million (six months ended June 30, 2018: RMB47.3 million)[37] - Remuneration policy for directors and senior management is determined based on experience, level of responsibility, market conditions, Group profit performance, and individual performance[37] Significant Investments, Material Acquisitions and Disposals The Group had no significant investments, material acquisitions, or disposals of assets, subsidiaries, associates, or joint ventures during the period - The Group had no significant investments, material acquisitions, or disposals of assets, subsidiaries, associates, or joint ventures during the period[38] Future Plans for Material Investments or Capital Assets As of June 30, 2019, the Company had no plans for material investments or capital assets, with future funding expected to come from existing internal resources and bank borrowings - As of June 30, 2019, there were no plans for any material investments or capital assets[39] - Expected funding sources for the coming year will temporarily be from the Group's existing internal resources and bank borrowings[39] Capital Structure The Company's capital structure as of June 30, 2019, remained unchanged compared to December 31, 2018 - The Company's capital structure as of June 30, 2019, remained unchanged compared to December 31, 2018[40] Pledge of Assets As of June 30, 2019, the Group pledged RMB26.4 million in deposits as security for outstanding bank acceptance bills, with no other assets pledged - As of June 30, 2019, the Group pledged deposits of RMB26,400,000 (December 31, 2018: RMB31,540,000) as security for outstanding bank acceptance bills[41] - Other than the pledged deposits, the Group has not pledged any other assets as security for outstanding bank acceptance bills[41] Contingent Liabilities As of June 30, 2019, the Group had no significant contingent liabilities - As of June 30, 2019, the Group had no significant contingent liabilities (December 31, 2018: nil)[42] Events After the Reporting Period After the reporting period, the Company entered into new lease agreements with its controlling shareholder, Shanshan Co., Ltd., to renew property leases for one year, constituting connected transactions under the Listing Rules - The Company entered into New Lease Agreement I and New Lease Agreement III with its controlling shareholder, Shanshan Co., Ltd., and its non-wholly owned subsidiary Lubiam Apparel entered into New Lease Agreement II with Shanshan Co., Ltd., to renew property leases for one year[46] - The transactions contemplated under the new lease agreements constitute connected transactions under Chapter 14A of the Listing Rules of the Stock Exchange for the Company[46] Outlook and Plans Facing a complex and volatile macroeconomic environment, the Group will continue to focus on its proprietary brands, enhancing core competitiveness and operational efficiency through refined retail operations, strengthened brand promotion, supply chain innovation, and optimized operating procedures - Strategic direction: Focusing on proprietary brands, utilizing diversified sales channel layouts, and driving refined retail operations with data[48] - Core capability enhancement: Increasing brand promotion and marketing efforts, advancing supply chain innovation and application, and accelerating supply chain responsiveness[48] - Operational optimization: Continuously optimizing company operating procedures, improving risk management processes, deepening cost reduction and efficiency enhancement, strengthening core competitiveness, and improving operational efficiency[48] Corporate Governance and Other Information This chapter discloses equity interests of directors, supervisors, and major shareholders, explains the company's compliance with corporate governance codes and model code, and other important information such as changes in directors' information Directors', Supervisors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures This chapter discloses the long positions of the Company's directors, supervisors, and chief executive in the Company's domestic shares and shares of associated corporations as of June 30, 2019 - Executive Director Mr. Luo Yefei holds 10,000,000 domestic shares of the Company through his controlled corporation Shaanxi Maoye Industry and Trade Co., Ltd., representing 10% of the domestic share class and approximately 7.496% of the total shares[51] - Non-executive Director and Chairman of the Board Mr. Zhuang Wei holds 22,000,000 domestic shares of Shanshan Holdings through Longhe Investment, representing approximately 2.200% of Shanshan Holdings' total shares[53] - Executive Director Mr. Cao Yang holds 7,300,000 domestic shares of Shanshan Holdings through Pingren Investment, representing approximately 0.730% of Shanshan Holdings' total shares[53] Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares This chapter details the interests of substantial shareholders and other persons holding 5% or more of the Company's equity as of June 30, 2019, showing Shanshan Co., Ltd. and its affiliates as the largest shareholders Substantial Shareholders' Shareholding | Name of Substantial Shareholder / Entity | Share Class | Capacity / Nature of Interest | Number of Shares Held (shares) | Percentage of Shareholding in Relevant Class | Approximate Percentage of Total Shareholding | | :--- | :--- | :--- | :--- | :--- | :--- | | Shanshan Co., Ltd. | Domestic Shares | Beneficial owner / Personal interest | 90,000,000 | 90% | 67.466% | | Shanshan Group Co., Ltd. | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Ningbo Yonggang Garment Investment Co., Ltd. | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Shanshan Holdings | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Ningbo Qinggang Investment Co., Ltd. | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Mr. Zheng Yonggang | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Ms. Zhou Jiqing | Domestic Shares | Interest of controlled corporation / Corporate interest | 90,000,000 | 90% | 67.466% | | Shaanxi Maoye | Domestic Shares | Beneficial owner / Personal interest | 10,000,000 | 10% | 7.496% | | Ms. Zhou Yumei | Domestic Shares | Spouse's interest / Family interest | 10,000,000 | 10% | 7.496% | - Shanshan Co., Ltd. is owned by Shanshan Group, Shanshan Holdings, Mr. Zheng, and other public shareholders; Shanshan Group and Shanshan Holdings control the majority of Shanshan Co., Ltd.'s board[59] Compliance with Corporate Governance Code The Company complied with all code provisions of the Corporate Governance Code during the period, with two deviations explained and rectified - The Company complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules during the period[63] - Deviation from code provision A.4.2 (rotation of directors) was rectified after the 2019 Annual General Meeting[63] - Deviation from code provision E.1.2 (Chairman's attendance at AGM) was due to Chairman Mr. Zhuang Wei's official duties, with Executive Director Mr. Cao presiding instead, and shareholder feedback has been followed up[64] Audit Committee The Board's Audit Committee, comprising all three independent non-executive directors, has reviewed the Company's unaudited condensed consolidated interim results and this announcement for the period - The Audit Committee comprises all three independent non-executive directors, namely Mr. Ouyang Baofeng (Chairman of the Committee), Mr. Wang Yashan, and Mr. Wu Xuekai[65] - The Audit Committee has reviewed the Company's unaudited condensed consolidated interim results and this announcement for the period with the Company's management team[65] Purchase, Sale or Redemption of the Company's Listed Securities The Company did not redeem any of its H shares listed on the Stock Exchange during the period, nor did the Company or any of its subsidiaries purchase or sell any such H shares - During the period, the Company did not redeem any of its H shares listed on the Stock Exchange, nor did the Company or any of its subsidiaries purchase or sell any such H shares[66] Compliance with Model Code The Company has adopted the Model Code as its code of conduct for directors and supervisors dealing in the Company's securities, and all directors and supervisors confirmed compliance during the period - The Company has adopted the Model Code as its code of conduct for its directors and supervisors dealing in the Company's securities[67] - All directors and supervisors confirmed their compliance with the Model Code during the period[67] Competing Interests As of June 30, 2019, no director, supervisor, controlling shareholder, or their respective close associates had any interests in businesses that compete or may compete with the Group's business - As of June 30, 2019, no director, supervisor of the Company, controlling shareholder, or their respective close associates had any interests in businesses that directly or indirectly compete or may compete with the Group's business[69] Changes in Directors' Information During the period, Executive Director Mr. Luo Yefei's remuneration increased, and Independent Non-executive Director Mr. Ouyang Baofeng was appointed as an independent non-executive director of another listed company - Executive Director Mr. Luo Yefei's remuneration increased from RMB450,000 per annum to RMB600,000 per annum, effective April 1, 2019[70] - Independent Non-executive Director Mr. Ouyang Baofeng was appointed as an independent non-executive director of CIFI Holdings (Group) Co., Ltd. (stock code: 2772, a company listed on the Main Board of the Stock Exchange) on June 19, 2019[70] Condensed Consolidated Statement of Comprehensive Income This chapter provides the condensed consolidated statement of comprehensive income for the six months ended June 30, 2019, reflecting the Group's revenue, costs, expenses, and profit performance Key Indicators of Condensed Consolidated Statement of Comprehensive Income | Indicator | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Revenue | 533,757,730 | 499,702,257 | | Gross Profit | 299,701,713 | 293,952,316 | | Profit Before Income Tax | 8,052,204 | 12,179,644 | | Profit and Total Comprehensive Income for the Period | 7,486,661 | 8,760,883 | | Profit Attributable to Owners of the Company | 8,643,075 | 9,116,503 | | Basic Earnings Per Share | 0.06 | 0.09 | Condensed Consolidated Statement of Financial Position This chapter provides the condensed consolidated statement of financial position as of June 30, 2019, showcasing the Group's asset, liability, and equity structure, and reflecting changes after adopting Hong Kong Financial Reporting Standard 16 Key Indicators of Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2019 (RMB) | December 31, 2018 (RMB) | | :--- | :--- | :--- | | Non-current assets | 179,214,573 | 134,035,363 | | Current assets | 940,122,663 | 921,490,782 | | Current liabilities | 786,777,736 | 745,253,740 | | Net current assets | 153,344,927 | 176,237,042 | | Net assets | 309,755,066 | 310,272,405 | | Total equity | 309,755,066 | 310,272,405 | - Right-of-use assets of RMB42,468,789 were first recognized in non-current assets, reflecting the impact of adopting Hong Kong Financial Reporting Standard 16[75] Condensed Consolidated Statement of Changes in Equity This chapter provides the condensed consolidated statement of changes in equity for the six months ended June 30, 2019, reflecting changes in share capital, reserves, and non-controlling interests, including profit for the period and dividends paid - As of June 30, 2019, total equity was RMB309,755,066, a slight decrease from RMB310,272,405 as of December 31, 2018[81] - Profit attributable to owners of the Company for the period was RMB8,643,075[81] - Final dividend of RMB8,004,000 for 2018 was declared and paid[81] Condensed Consolidated Statement of Cash Flows This chapter provides the condensed consolidated statement of cash flows for the six months ended June 30, 2019, showing the Group's cash flows from operating, investing, and financing activities - Net cash used in operating activities was RMB(20,273,929), worsening from RMB(4,461,690) in the prior period[84] - Net cash used in investing activities was RMB(19,950,882), an improvement from RMB(29,424,078) in the prior period[84] - Net cash used in financing activities was RMB(3,064,821), compared to net cash generated of RMB67,296,454 in the prior period[84] - Cash and cash equivalents at the end of the period were RMB102,108,862, a decrease from RMB145,398,494 at the beginning of the period[84] Notes to the Condensed Consolidated Interim Financial Statements This chapter provides detailed notes to the condensed consolidated interim financial statements, covering company information, accounting policies, standard changes, segment information, financial item breakdowns, and related party transactions, offering crucial supplementary information for understanding the financial statements 1. Company Information This note reiterates the company's basic information, including its establishment history, principal activities, and immediate and ultimate holding companies - The company, formerly Ningbo Shanshan Garment Brand Management Co., Ltd., was established on August 23, 2011, and restructured into Shanshan Brand Management Co., Ltd. on May 18, 2016[87] - The Group is principally engaged in the design, marketing, and sale of men's business formal wear and casual wear in China[88] - The Company's immediate holding company is Shanshan Co., Ltd., and its ultimate holding company is Shanshan Holdings, both incorporated in China[88] 2. Basis of Preparation and Presentation This chapter clarifies the basis for preparing the condensed consolidated interim financial statements, primarily following HKAS 34 and the Listing Rules, and notes the first-time adoption of HKFRS 16 in this period - These condensed consolidated interim financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 issued by the HKICPA and the applicable disclosure provisions of the Listing Rules[89] - This period marks the first-time adoption of Hong Kong Financial Reporting Standard 16 "Leases"; apart from this, the adoption of new and revised HKFRSs had no other significant impact on the financial statements[89][93] 3. Changes in Hong Kong Financial Reporting Standards This chapter details the impact of the first-time adoption of Hong Kong Financial Reporting Standard 16 "Leases" on the financial statements, including new definitions, lessee accounting treatment, and transition arrangements Impact of Adopting HKFRS 16 Adoption of HKFRS 16 led lessees to recognize most leases as right-of-use assets and lease liabilities; the Group applied the cumulative effect method and did not restate 2018 comparative data - Hong Kong Financial Reporting Standard 16 significantly changed lease accounting, primarily for lessees, with most leases recognized as right-of-use assets and lease liabilities on the statement of financial position[94] - The Group applied HKFRS 16 using the cumulative effect method, and comparative information presented for 2018 has not been restated[96] Impact of Adopting HKFRS 16 on Statement of Financial Position as of January 1, 2019 | Indicator | RMB (Increase / (Decrease)) | | :--- | :--- | | Right-of-use assets | 43,818,629 | | Less: Lease prepayments | (5,901,670) | | Total assets | 37,916,959 | | Lease liabilities (non-current) | 28,313,996 | | Lease liabilities (current) | 9,602,963 | | Total liabilities | 37,916,959 | Reconciliation of Operating Lease Commitments to Lease Liabilities (January 1, 2019) | Indicator | RMB | | :--- | :--- | | Operating lease commitments as of December 31, 2018 | 64,118,520 | | Less: Short-term leases | (13,745,019) | | Less: Future interest expense | (3,561,462) | | Less: Low-value asset leases | (2,993,410) | | Less: Lease prepayments | (5,901,670) | | Total lease liabilities as of January 1, 2019 | 37,916,959 | New Definition of a Lease Under HKFRS 16, a lease is defined as a contract or part of a contract that conveys the right to use an asset for a period in exchange for consideration, with clear conditions for controlling the use of an identified asset; the Group chose not to separate non-lease components - A lease is defined as a contract or part of a contract that conveys the right to use an asset for a period in exchange for consideration, where the customer has the right to obtain substantially all economic benefits and direct the use of the identified asset[100] - The Group has chosen not to separate non-lease components, accounting for each lease component and any associated non-lease components as a single lease component[100] Accounting as a Lessee As a lessee, the Group capitalizes all leases (except short-term and low-value leases) as right-of-use assets and lease liabilities under HKFRS 16, measuring right-of-use assets at cost and lease liabilities at present value - Under Hong Kong Financial Reporting Standard 16, all leases (except short-term and low-value leases) are capitalized on the statement of financial position as right-of-use assets and lease liabilities[103] - Right-of-use assets are recognized at cost, including the initial amount of lease liabilities, lease payments, initial direct costs, and estimated dismantling costs, and are measured using the cost model[104] - Lease liabilities are recognized at the present value of lease payments not paid at the commencement date, discounted using the interest rate implicit in the lease or the incremental borrowing rate[106] Transition Arrangements The Group applied HKFRS 16 using the cumulative effect method, recognizing lease liabilities and right-of-use assets on January 1, 2019, and applied several practical expedients - The Group applied Hong Kong Financial Reporting Standard 16 using the cumulative effect method, recognizing right-of-use assets at an amount equal to the lease liabilities, and comparative information for 2018 has not been restated[107] - On January 1, 2019, the Group recognized lease liabilities for leases previously classified as operating leases, measured at the present value of the remaining lease payments[111] - The Group applied several practical expedients, including applying a single discount rate to portfolios of leases with reasonably similar characteristics, excluding initial direct costs, and determining the lease term with hindsight[111][112] 4. Application of Judgements and Estimates The significant judgments and key sources of estimation uncertainty made by management in preparing these condensed consolidated interim financial statements are the same as those applied in the 2018 annual financial statements, except for new significant judgments and estimation uncertainties related to the application of HKFRS 16 - The significant judgments and key sources of estimation uncertainty made by management in preparing these condensed consolidated interim financial statements are the same as those applied in the 2018 annual financial statements[113] - The exception is new significant judgments and estimation uncertainties related to the application of Hong Kong Financial Reporting Standard 16[113] 5. Segment Information and Revenue The Group has only one reportable segment, engaged in apparel trading in China, with revenue primarily from standard apparel products and trademark licensing, and all operations and non-current assets located in China Reportable Segments The Group is identified as having a single reportable segment engaged in apparel trading in China, with revenue classified by geography, product/service, and timing of recognition - The Group has only one single reportable segment engaged in apparel trading in China[116] Revenue Breakdown from Customer Contracts | Revenue Source | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Apparel trading | 526,993,579 | 490,834,332 | | Trademark licensing income | 6,764,151 | 8,867,925 | | Total | 533,757,730 | 499,702,257 | Revenue Breakdown by Brand | Brand | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | FIRS | 221,340,708 | 215,789,443 | | Shanshan | 294,175,424 | 250,975,260 | | Marco Azzali | — | 7,241,040 | | Lubiam | 11,477,447 | 16,828,590 | | Other | 6,764,151 | 8,867,924 | | Total | 533,757,730 | 499,702,257 | Geographical Information The Group's operations and non-current assets are all located in China, and all revenue is derived from China - During the period, the Group's operations and non-current assets were located in China, and all its revenue was derived from China[120] Information About Major Customers During the period, no single customer accounted for more than 10% of the Group's revenue - During the period, no single customer accounted for more than 10% of the Group's revenue[121] 6. Profit Before Income Tax This chapter details the expenses deducted when calculating profit before income tax, including advertising, amortization, depreciation, cost of sales, and staff costs Items Deducted from Profit Before Income Tax | Expense Item | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Advertising and promotion expenses | 14,067,693 | 12,433,238 | | Amortization of intangible assets | 187,741 | 145,732 | | Depreciation of property, plant and equipment | 23,191,245 | 12,731,598 | | Amortization of right-of-use assets | 12,979,845 | — | | Cost of inventories sold | 234,056,017 | 205,749,941 | | Lease payments under operating leases: minimum lease payments | 9,131,822 | 18,770,680 | | Lease payments under operating leases: contingent rents | 1,287,363 | 6,086,541 | | Trademark payments | 326,242 | 563,905 | | Staff costs | 47,736,285 | 47,298,654 | - Amortization of right-of-use assets of RMB12,979,845 is a new item after adopting Hong Kong Financial Reporting Standard 16[123] 7. Finance Costs This chapter details the composition of the Group's finance costs, primarily including interest expense on bank borrowings and lease liabilities Composition of Finance Costs | Finance Cost Item | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Interest expense on bank borrowings repayable within one year | 7,296,249 | 7,334,222 | | Interest expense on lease liabilities | 1,071,229 | — | | Total | 8,367,478 | 7,406,607 | - Interest expense on lease liabilities of RMB1,071,229 is a new item after adopting Hong Kong Financial Reporting Standard 16[124] 8. Dividends This chapter discloses the final dividends paid by the Company for prior years and confirms that the Board does not recommend any interim dividend for the current period Dividend Payments | Indicator | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Final dividend of RMB0.06 per share for prior year | 8,004,000 | — | - The Board does not recommend any interim dividend for the current period[126] 9. Income Tax Expense This chapter details the Group's income tax expense, accrued at a 25% corporate income tax rate, and lists the current period's income tax provision and deferred tax - Corporate income tax is accrued at a rate of 25% based on the estimated taxable profits derived from China during the period[127] Income Tax Expense Breakdown | Income Tax Item | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Income tax provision for the period | 2,119,178 | 5,710,028 | | Deferred tax | (1,553,635) | (2,291,267) | | Income Tax Expense | 565,543 | 3,418,761 | 10. Earnings Per Share This chapter presents the profit attributable to owners of the Company and basic earnings per share, confirming no potential dilutive shares for the period Basic Earnings Per Share | Indicator | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Profit attributable to owners of the Company for the period (RMB) | 8,643,075 | 9,116,503 | | Weighted average number of shares outstanding for the period | 133,400,000 | 100,553,591 | | Basic earnings per share (RMB) | 0.06 | 0.09 | - As there were no potential dilutive shares outstanding during the current and prior periods, diluted earnings per share are the same as basic earnings per share[130] 11. Property, Plant and Equipment During the period, the Group acquired property, plant, and equipment amounting to approximately RMB25.3 million - During the period, the Group acquired property, plant, and equipment amounting to approximately RMB25,317,387 (six months ended June 30, 2018: RMB24,753,201)[133] 12. Trade and Bills Receivables This chapter provides an aging analysis of trade and bills receivables, showing that most receivables are within three months, and explains the Group's credit period policy - As of June 30, 2019, total trade and bills receivables were RMB214,557,507, an increase from RMB183,246,509 as of December 31, 2018[136] Aging Analysis of Trade and Bills Receivables (June 30, 2019) | Aging | Amount (RMB) | | :--- | :--- | | Within three months | 113,330,728 | | Over three months but within six months | 36,289,366 | | Over six months but within one year | 53,513,983 | | Over one year | 11,423,430 | | Total | 214,557,507 | - The Group provides a general credit period of 30 to 240 days for goods sold to customers[136] 13. Prepayments and Other Receivables This chapter lists the composition of the Group's prepayments and other receivables Breakdown of Prepayments and Other Receivables | Item | June 30, 2019 (RMB) | December 31, 2018 (RMB) | | :--- | :--- | :--- | | Prepayments | 75,078,492 | 64,833,190 | | Other receivables | 37,973,062 | 29,972,821 | | Less: Impairment allowance | (663,286) | (663,286) | | Total | 112,388,268 | 94,142,725 | 14. Trade and Bills Payables This chapter provides an aging analysis of trade and bills payables, showing that most payables are within three months - As of June 30, 2019, total trade and bills payables were RMB209,772,417, a decrease from RMB218,120,737 as of December 31, 2018[138] Aging Analysis of Trade and Bills Payables (June 30, 2019) | Aging | Amount (RMB) | | :--- | :--- | | Within three months | 104,174,847 | | Over three months but within six months | 29,982,113 | | Over six months but within one year | 7,395,478 | | Over one year | 2,219,979 | | Total | 143,772,417 | 15. Other Payables and Accrued Expenses This chapter lists the composition of the Group's other payables and accrued expenses Breakdown of Other Payables and Accrued Expenses | Item | June 30, 2019 (RMB) | December 31, 2018 (RMB) | | :--- | :--- | :--- | | Other payables and accrued expenses | 229,608,001 | 226,059,499 | | Other tax payables | 6,252,161 | 932,432 | | Sales rebates | 10,789,698 | 9,834,834 | | Total | 246,649,860 | 236,826,765 | 16. Interest-bearing Bank Borrowings This chapter discloses the Group's interest-bearing bank borrowings, which are unsecured, fixed-rate, and repayable within one year - As of June 30, 2019, total bank borrowings were RMB285,000,000, an increase from RMB260,000,000 as of December 31, 2018[141] - Bank borrowings are unsecured, bear fixed annual interest rates ranging from 5.00% to 5.44%, and are repayable within one year[141] 17. Share Capital This chapter lists the composition of the Company's share capital, including registered domestic shares and H shares, and mentions the H share issuance in 2018 Share Capital Composition | Item | Number of Shares | RMB | | :--- | :--- | :--- | | As of January 1, 2018 | 100,000,000 | 100,000,000 | | Issuance of H shares | 33,400,000 | 33,400,000 | | As of December 31, 2018, January 1, 2019, and June 30, 2019 | 133,400,000 | 133,400,000 | - On the listing date, the Group issued a total of 33,400,000 H shares with a par value of RMB1 each at HKD3.78 per share, raising approximately RMB104,911,782[143] 18. Related Party Disclosures This chapter details the Group's receivables/payables and various transactions with related parties, including cooperation with controlling shareholder Shanshan Co., Ltd. on professional wear business, and compensation for key management personnel Amounts Due from Immediate Holding Company / Fellow Subsidiaries This chapter discloses amounts due from the Group's immediate holding company and fellow subsidiaries, which are unsecured, interest-free, and repayable on demand - Amounts due from immediate holding company / fellow subsidiaries are unsecured, interest-free, and repayable on demand[145] Amounts Due from Immediate Holding Company / Fellow Subsidiaries (June 30, 2019) | Item | Amount (RMB) | | :--- | :--- | | Amounts due from immediate holding company (trade nature) | 1,934,233 | | Amounts due from immediate holding company (non-trade nature) | 899,189 | | Amounts due from fellow subsidiaries (trade nature) | 1,146,863 | | Amounts due from fellow subsidiaries (non-trade nature) | 231,854 | Transactions with Related Parties This chapter lists details of the Group's transactions with related parties for product inspection, goods sales, purchases, subcontracting, rent, utilities, and commissions, and elaborates on the professional wear business cooperation with Shanshan Co., Ltd. Major Related Party Transactions (H1 2019) | Transaction Type | Related Party | Amount (RMB) | | :--- | :--- | :--- | | Re-collection of product inspection fees | Associate | 6,126 | | Sales of goods to | Fellow subsidiaries | 2,478,912 | | Purchases from | Non-controlling shareholder of a subsidiary | (539,382) | | Rental expenses received from | Immediate holding company | (2,017,574) | | Utilities expenses received from | Immediate holding company | (765,703) | | Sales commissions received from | Fellow subsidiaries | (991,402) | - The Group previously cooperated with Shanshan Co., Ltd. on professional wear business, with invoices issued to Shanshan Co., Ltd. amounting to RMB5,717 during the period[150] Compensation of Key Management Personnel This chapter discloses the total remuneration for the Group's directors and senior management, primarily comprising short-term benefits and contributions to defined contribution retirement plans Total Compensation of Key Management Personnel | Remuneration Item | H1 2019 (RMB) | H1 2018 (RMB) | | :--- | :--- | :--- | | Short-term benefits | 1,592,861 | 1,345,795 | | Contributions to defined contribution retirement plans | 102,198 | 85,364 | | Total | 1,695,059 | 1,431,159 | 19. Commitments This chapter discloses the Group's operating lease commitments and confirms no significant capital commitments Operating Lease Commitments This chapter lists the Group's future aggregate minimum lease payments under non-cancellable operating leases, primarily for offices, retail stores, and warehouses Future Aggregate Minimum Lease Payments Due (June 30, 2019) | Due Date | Amount (RMB) | | :--- | :--- | | Not later than one year | 4,838,427 | | Later than one year but not later than five years | — | | Total | 4,838,427 | - The Group leases various offices, retail stores, and warehouses under non-cancellable lease agreements with lease terms ranging from one to four years[154] - Operating leases for certain retail stores also require additional rent, but related contingent rents have not been recognized due to the inability to precisely estimate future revenue[155] Capital Commitments As of June 30, 2019, and December 31, 2018, the Group had no significant capital commitments - As of June 30, 2019, and December 31, 2018, the Group had no significant capital commitments[156] 20. Contingent Liabilities This chapter confirms that the Group had no significant contingent liabilities at the end of the reporting period - As of June 30, 2019, the Group had no significant contingent liabilities (December 31, 2018: nil)[157]