中国旺旺(00151) - 2021 - 中期财报

Corporate Information This section provides fundamental company details, including legal name, listing information, and professional advisors Company Overview This section provides basic company information, including legal name, listing location and code, and company website - The company's legal name is Want Want China Holdings Limited[5] - The company is listed on The Stock Exchange of Hong Kong Limited, stock code 0151[5] - The company's website is **www.want-want.com**[7](index=7&type=chunk) Board of Directors and Committees This section lists board members and their roles, detailing the composition of key committees - Executive Directors include Mr. Tsai Eng-Meng (Chairman and CEO), Mr. Tsai Shao-Chung, Mr. Tsai Wang-Chia (COO), Mr. Huang Yung-Sung (CMO), Mr. Chu Chi-Wen (CFO), Ms. Lai Hong-Yi, and Mr. Tsai Ming-Hui[5] - The Environmental, Social and Governance Committee was established on August 18, 2020, with Mr. Tsai Wang-Chia as Chairman[6] Professional Advisors and Registrars This section provides detailed information on the company's auditor, legal counsel, principal bankers, share registrar, and registered office - The company's auditor is PricewaterhouseCoopers[6] - Principal bankers include Bank of China (Hong Kong) Limited, China Merchants Bank Co., Ltd., Citigroup, and CTBC Bank Co., Ltd. Hong Kong Branch[6] - The Hong Kong share registrar is Computershare Hong Kong Investor Services Limited[7] Financial Highlights This section summarizes key financial performance indicators, ratios, and operating metrics for the reporting period Key Income Statement Items For the six months ended September 30, 2020, the company achieved significant year-on-year growth in revenue, gross profit, operating profit, and profit attributable to equity holders Key Income Statement Items (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 10,299,247 | 9,304,071 | +10.7 | | Gross Profit | 4,963,652 | 4,550,046 | +9.1 | | Operating Profit | 2,534,882 | 2,053,767 | +23.4 | | Profit attributable to equity holders of the Company | 1,952,396 | 1,614,913 | +20.9 | Key Financial Ratios For the six months ended September 30, 2020, the company's operating profit margin and profit attributable to equity holders margin both improved, despite a slight decrease in gross profit margin Key Financial Ratios (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (%) | As of Sep 30, 2019 (%) | Change (percentage points) | | :--- | :--- | :--- | :--- | | Gross Profit Margin | 48.2 | 48.9 | -0.7 | | Operating Profit Margin | 24.6 | 22.1 | +2.5 | | Profit attributable to equity holders of the Company Margin | 19.0 | 17.4 | +1.6 | Key Operating Ratios For the six months ended September 30, 2020, the company's inventory, trade receivables, and trade payables turnover days remained stable compared to the year ended March 31, 2020 Key Operating Ratios | Indicator | As of Sep 30, 2020 (days) | As of Mar 31, 2020 (days) | | :--- | :--- | :--- | | Inventory Turnover Days | 91 | 90 | | Trade Receivables Turnover Days | 16 | 17 | | Trade Payables Turnover Days | 38 | 37 | Management Discussion and Analysis This section provides management's perspective on the company's financial performance, operational strategies, and future outlook Overall Performance Overview For the six months ended September 30, 2020, the Group achieved significant year-on-year growth in total revenue and operating profit, driven by channel diversification and multi-brand strategies - For the six months ended September 30, 2020, the Group's total revenue reached RMB 10,299 million, a year-on-year increase of 10.7%[11] - Operating profit reached RMB 2,535 million, a year-on-year increase of 23.4%, with an operating profit margin of 24.6%[11] - New products contributed a mid-to-high single-digit percentage to total revenue[12] Channel Diversification The Group achieved robust growth by refining traditional channels, expanding emerging channels, and continuously developing overseas markets - Traditional channel revenue growth accelerated year-on-year since 2016, with a double-digit increase in the first half of fiscal year 2020, driven by market order control and optimized distributor policies[18][20] - Emerging channels continued high-speed growth, contributing a mid-to-high single-digit percentage to the Group's total revenue in the first half of fiscal year 2020, with over 5,500 vending machines and approximately 110 themed stores deployed[21][23] - Despite global pandemic impacts, overseas market sales grew by a mid-single-digit percentage year-on-year in the first half of fiscal year 2020, with products sold to over 60 countries and regions[26][28] Product Differentiation Strategy The Group employs a multi-brand strategy to meet diverse consumer needs, continuously innovating with nutritious and functional new products, combined with digital marketing and distinctive packaging - The Group launched multiple brands, such as "Bebemama" (infant complementary food), "Bond" (youthful beverages), and "Fix x Body" (health and nutrition), to meet the personalized needs of consumers across different age groups[32] - Continuous development of low-calorie nutritional meal replacements, nutrient-rich, and functional new products, along with digital marketing activities like "QQ Brother" videos and "Want Want Frozen Chi" influencers, stimulates new demand[33][34] - Product packaging is designed to integrate brand IP images and cater to channel display characteristics, attracting consumer attention[35] Creative Digital Marketing The Group utilizes creative and diversified digital marketing activities, leveraging current trends to strengthen brand image, enhance consumer interaction, increase product exposure, and build a "Wang Zai Club" fan ecosystem - The launch of topical products and marketing campaigns like "Wang Zai Milk Professional Cans," "Wang Zai Masks," and "Want Want Health Boost Packs" conveys a positive brand image[39][41] - A collaboration with NetEase Cloud Music, "Listen to music to earn Yunbei, redeem snacks at offline vending machines," drives online-to-offline traffic and boosts growth for emerging channels[40][42] - Focusing on consumer experience, the Group is dedicated to building a "Wang Zai Club" fan base, fostering a fan ecosystem to enhance user stickiness[38] Digitalized Operation and Management The Group continues to advance digitalization to enhance consumer understanding, improve channel management, and optimize supply chain efficiency, driving sustainable growth and achieving cost reduction and efficiency gains - Digitalization aims to enhance consumer understanding, improve channel management capabilities, and supply chain efficiency, driving the Group's sustainable growth[44] - Information systems and multi-dimensional data analysis enable management to more agilely identify market opportunities, review management weaknesses, enhance channel management efficiency, and optimize production layout and supply chain management, continuously reducing costs and increasing efficiency[44] - Future plans include further strengthening regional collaborative management, improving responsiveness to emergencies, and applying digitalization to product R&D and sales management to enhance operational precision[44] Revenue Performance by Product Segment For the six months ended September 30, 2020, all three major product categories (rice crackers, dairy and beverages, snack foods) achieved strong year-on-year growth, with snack foods growing the fastest, demonstrating the Group's focus on balanced product development Revenue by Product Category (First Half of Fiscal Year 2020) | Product Category | As of Sep 30, 2020 (RMB'000) | Year-on-Year Growth (%) | % of Total Revenue | | :--- | :--- | :--- | :--- | | Rice Crackers | 1,992,300 | +9.4 | 19.3 | | Dairy and Beverages | 5,315,000 | +7.4 | 51.6 | | Snack Foods | 2,952,000 | +17.7 | 28.7 | - Rice cracker revenue increased by 9.4% year-on-year, with main brand rice cracker revenue growing by 6.5% to a record high, driven by channel penetration, market promotion, and new product development (e.g., "Bebemama" organic rice crackers)[45][46] - Dairy and beverage revenue increased by 7.4% year-on-year, with "Wang Zai Milk" growing by 7.0% and other beverages growing by 13.3%, while "O-Pao" lactic acid bacteria beverage sales exceeded RMB 100 million in three months[49][50][51] - Snack food revenue increased by 17.7% year-on-year, with ice products, candies, beans/jellies, and others growing by 22.5%, 22.8%, and 11.9% respectively, primarily due to strengthened channel inventory management and new product launches[52][53][55] Cost and Profitability Analysis Despite a slight decrease in gross profit margin due to rising raw material costs, the Group achieved significant operating profit growth through effective control of distribution and administrative expenses, reaching an operating profit margin of 24.6% - Cost of sales increased by 12.2% year-on-year to RMB 5,335.6 million, primarily due to higher prices for key raw materials such as milk powder and sugar[56] - Gross profit margin decreased by 0.7 percentage points to 48.2% compared to the same period last year, but gross profit amount increased by 9.1% to RMB 4,963.7 million due to revenue growth[58] - Distribution costs decreased by 8.8% to RMB 1,249.9 million, with its ratio to revenue decreasing by 2.6 percentage points to 12.1%, mainly due to lower advertising and promotion expenses and staff costs[59][63] - Operating profit increased by 23.4% year-on-year to RMB 2,534.9 million, with an operating profit margin of 24.6%[61][65] - Profit attributable to equity holders of the Company increased by 20.9% year-on-year to RMB 1,952.4 million, with a profit attributable to equity holders margin of 19.0%[67] Liquidity and Capital Resources As of September 30, 2020, the Group maintained sufficient bank balances, but total borrowings increased, leading to a decrease in net cash, with a net debt-to-equity ratio of -0.51 times indicating a sound financial position - As of September 30, 2020, bank balances amounted to RMB 17,339.2 million, an increase of RMB 82.2 million from March 31, 2020[67] - Total borrowings were RMB 10,218.3 million, an increase of RMB 1,337.7 million from March 31, 2020, with short-term borrowings significantly increasing by RMB 6,244.9 million[67] - Net cash was RMB 7,120.8 million, a decrease of 15.0% from March 31, 2020[67] - The net debt-to-equity ratio was -0.51 times, indicating the Group has ample cash and bank credit facilities[67] Cash Flow and Capital Expenditure For the six months ended September 30, 2020, net cash inflow from operating activities significantly increased, while net cash outflow from financing activities was primarily affected by dividend payments and share repurchases, with capital expenditure mainly for additions and upgrades to production plants and equipment - Net cash inflow from operating activities was RMB 2,364.1 million, a year-on-year increase of 22.2%[68][71] - Net cash outflow from financing activities was RMB 2,031.6 million, primarily comprising dividend payments of RMB 2,990.2 million and share repurchases of RMB 669.5 million[68][71] - Total capital expenditure was RMB 160.1 million, mainly for additions and upgrades to production plants and equipment across the three major product categories[69][72] Working Capital Management The Group's inventory turnover days and trade payables turnover days remained stable, while trade receivables turnover days slightly decreased, indicating efficient working capital management - As of September 30, 2020, inventory amounted to RMB 2,636.4 million, with inventory turnover days of 91 days[73][74] - Trade receivables turnover days were 16 days, a slight decrease from 17 days for the year ended March 31, 2020[78] - Trade payables turnover days were 38 days, a slight increase from 37 days for the year ended March 31, 2020[81] Human Resources and Remuneration For the six months ended September 30, 2020, the Group's average headcount decreased due to improved sales management efficiency, leading to a reduction in total remuneration expenses, while continuous investment in employee training enhances professional knowledge and skills - The average headcount was approximately 40,757, a decrease of 1,815 from the year ended March 31, 2020, primarily due to enhanced sales management efficiency[82] - Total remuneration expenses were RMB 1,837.8 million, a year-on-year decrease of 2.0%[82] - The Group consistently focuses on and invests resources in ongoing employee education and training programs[83] Foreign Exchange Risks The Group's foreign exchange risk primarily arises from overseas procurement, dividend payments, and asset/liability recognition, but the overall exposure is not significant due to most operations being in RMB in mainland China and USD borrowings being offset by USD functional currency subsidiaries, with no foreign currency hedging undertaken during the year - The Group's presentation currency is RMB, but the Company's functional currency remains USD, while mainland China subsidiaries' functional currency is RMB[84] - Foreign exchange risk primarily arises from overseas raw material and equipment procurement, overseas dividend payments, and certain recognized assets or liabilities[84] - Assets and liabilities involving foreign exchange risk are minimal, and the net exposure after offsetting is not significant, with no hedging of foreign currency exchange rate risk undertaken during the year[85] Dividend Policy The Board declared an interim dividend of 0.65 US cents per share for fiscal year 2020, reflecting the Group's policy of returning most free cash flow to shareholders through share repurchases and dividends, with total returns to shareholders significantly increasing by 77% compared to the same period last year - The Board declared an interim dividend of 0.65 US cents per share for fiscal year 2020, approximately US$79 million (equivalent to approximately RMB 555 million)[88] - Including share repurchases, the total amount returned to shareholders was approximately US$177 million (equivalent to approximately RMB 1,225 million), a 77% increase compared to the first half of fiscal year 2019[88] - The Group adheres to a policy of returning most free cash flow (after deducting necessary operating costs and capital expenditures) to shareholders through share repurchases and dividends[88] Report on Review of Condensed Consolidated Interim Financial Information This section presents the independent auditor's review report on the condensed consolidated interim financial information Introduction and Responsibilities PricewaterhouseCoopers has reviewed Want Want China Holdings Limited's condensed consolidated interim financial information for the six months ended September 30, 2020, prepared by the directors in accordance with HKAS 34 - PricewaterhouseCoopers has reviewed the condensed consolidated interim financial information for the six months ended September 30, 2020[91] - The company's directors are responsible for the preparation and presentation of this financial information in accordance with HKAS 34 "Interim Financial Reporting"[91] Scope of Review The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, which is significantly narrower than an audit, thus no audit opinion is expressed - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants[93][95] - The scope of a review is significantly narrower than an audit, and therefore no audit opinion is expressed[93][95] Conclusion Based on the review, the auditor found no matters that lead them to believe the condensed consolidated interim financial information is not prepared, in all material respects, in accordance with HKAS 34 - The auditor found no matters that lead them to believe the condensed consolidated interim financial information is not prepared, in all material respects, in accordance with HKAS 34 "Interim Financial Reporting"[94][96] Interim Condensed Consolidated Balance Sheet This section presents the Group's financial position, detailing assets, equity, and liabilities as of the reporting date Assets As of September 30, 2020, the Group's total assets slightly decreased, with reductions in non-current assets and inventories, while cash and cash equivalents remained stable Assets Overview | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, plant and equipment | 6,553,357 | 6,770,980 | | Right-of-use assets | 1,065,754 | 1,062,289 | | Current Assets | | | | Inventories | 2,636,409 | 2,746,167 | | Trade receivables | 933,562 | 846,744 | | Cash and cash equivalents | 17,339,163 | 17,256,927 | | Total Assets | 29,783,017 | 29,824,990 | Equity As of September 30, 2020, the Group's total equity decreased, primarily due to reductions in share capital and reserves, related to share repurchases and dividend payments during the period Equity Overview | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Share capital | 1,847,089 | 1,866,355 | | Reserves | 12,008,039 | 13,406,327 | | Non-controlling interests | 76,551 | 81,532 | | Total Equity | 13,931,679 | 15,354,214 | Liabilities As of September 30, 2020, the Group's total liabilities significantly increased, mainly driven by a substantial rise in current borrowings, while non-current borrowings decreased considerably Liabilities Overview | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Non-current Liabilities | | | | Borrowings | 3,386,378 | 8,293,566 | | Current Liabilities | | | | Trade payables | 1,146,928 | 1,093,092 | | Borrowings | 6,831,970 | 587,085 | | Total Liabilities | 15,851,338 | 14,470,776 | Interim Condensed Consolidated Statement of Income This section presents the Group's financial performance, including revenue, expenses, and net profit for the reporting period Revenue and Gross Profit For the six months ended September 30, 2020, the Group's revenue increased by 10.7% year-on-year, and gross profit increased by 9.1% year-on-year, demonstrating robust growth in top-line and core profitability Revenue and Gross Profit (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Revenue | 10,299,247 | 9,304,071 | | Cost of sales | (5,335,595) | (4,754,025) | | Gross Profit | 4,963,652 | 4,550,046 | Operating Expenses and Profit Despite a slight increase in administrative expenses, effective control over distribution costs and revenue growth collectively drove a significant 23.4% increase in operating profit Operating Expenses and Profit (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Distribution costs | (1,249,863) | (1,369,929) | | Administrative expenses | (1,304,081) | (1,285,660) | | Operating Profit | 2,534,882 | 2,053,767 | Net Profit and Earnings Per Share Profit for the period and profit attributable to equity holders of the Company both increased by over 20%, with basic and diluted earnings per share rising accordingly Net Profit and Earnings Per Share (For the six months ended September 30) | Indicator | As of Sep 30, 2020 | As of Sep 30, 2019 | | :--- | :--- | :--- | | Profit for the period (RMB'000) | 1,946,691 | 1,604,849 | | Profit attributable to equity holders of the Company (RMB'000) | 1,952,396 | 1,614,913 | | Basic earnings per share (RMB cents) | 15.75 | 12.99 | | Diluted earnings per share (RMB cents) | 15.75 | 12.99 | Interim Condensed Consolidated Statement of Comprehensive Income This section presents the Group's total comprehensive income, including profit for the period and other comprehensive income items Profit and Other Comprehensive Income For the six months ended September 30, 2020, the Group's total comprehensive income for the period significantly increased, primarily due to higher profit for the period and a positive shift in currency translation differences Profit and Other Comprehensive Income (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Profit for the period | 1,946,691 | 1,604,849 | | Currency translation differences | 283,868 | (366,957) | | Changes in fair value of financial assets at fair value through other comprehensive income | 6,699 | (959) | | Total comprehensive income for the period | 2,237,258 | 1,236,926 | - Total comprehensive income for the period attributable to equity holders of the Company increased from RMB 1,248,039 thousand in 2019 to RMB 2,242,140 thousand in 2020[108] Interim Condensed Consolidated Statement of Changes in Equity This section details the changes in the Group's equity components, including share capital, reserves, and non-controlling interests Equity Movements (2020) For the six months ended September 30, 2020, the Group's total equity decreased due to dividend payments and share repurchases, partially offset by total comprehensive income for the period Equity Movements (First Half of 2020) | Indicator | As of Apr 1, 2020 (RMB'000) | As of Sep 30, 2020 (RMB'000) | | :--- | :--- | :--- | | Total equity at beginning of period | 15,354,214 | | | Total comprehensive income for the period | 2,237,258 | | | 2019 final dividend paid | (2,990,283) | | | Share repurchases | (669,510) | | | Total equity at end of period | | 13,931,679 | - Share repurchases amounted to RMB 669,510 thousand, resulting in a decrease of RMB 19,266 thousand in share capital and RMB 650,244 thousand in retained earnings[112][177] Equity Movements (2019) For the six months ended September 30, 2019, the Group's total equity decreased due to dividend payments, share repurchases, and business combinations under common control Equity Movements (First Half of 2019) | Indicator | As of Apr 1, 2019 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Total equity at beginning of period | 15,459,827 | | | Total comprehensive income for the period | 1,236,926 | | | 2018 final dividend paid | (2,543,364) | | | Share repurchases | (142,357) | | | Business combination under common control | (51,986) | | | Total equity at end of period | | 13,957,509 | Interim Condensed Consolidated Statement of Cash Flows This section presents the Group's cash flows from operating, investing, and financing activities for the reporting period Operating Activities For the six months ended September 30, 2020, net cash inflow from operating activities increased by 22.2% year-on-year, demonstrating strong operational cash generation capabilities Cash Flows from Operating Activities (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Cash generated from operations | 2,857,486 | 2,585,259 | | Income tax paid | (608,495) | (716,787) | | Interest paid | (91,338) | (148,638) | | Interest received | 206,468 | 214,672 | | Net cash flows from operating activities | 2,364,121 | 1,934,506 | Investing Activities For the six months ended September 30, 2020, net cash outflow from investing activities increased, primarily due to higher expenditures on the purchase of property, plant and equipment and financial assets at fair value through other comprehensive income Cash Flows from Investing Activities (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Purchase of property, plant and equipment | (159,708) | (134,983) | | Purchase of financial assets at fair value through other comprehensive income | (53,589) | – | | Net cash flows used in investing activities | (207,392) | (132,200) | Financing Activities For the six months ended September 30, 2020, net cash outflow from financing activities decreased, as significant dividend payments and share repurchases were partially offset by a substantial increase in proceeds from borrowings Cash Flows from Financing Activities (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Dividends paid to equity holders | (2,990,184) | (2,543,364) | | Share repurchases | (669,510) | (142,357) | | Proceeds from borrowings | 3,931,679 | 3,801,633 | | Repayment of borrowings | (2,269,488) | (3,450,773) | | Net cash flows used in financing activities | (2,031,576) | (2,410,939) | Net Change in Cash and Equivalents For the six months ended September 30, 2020, the Group achieved a net increase in cash and cash equivalents, reversing the net decrease trend of the prior year, despite exchange losses Net Change in Cash and Cash Equivalents (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Net increase/(decrease) in cash and cash equivalents | 125,153 | (608,633) | | Cash and cash equivalents at end of period | 17,339,163 | 16,636,232 | Notes to the Condensed Consolidated Interim Financial Information This section provides detailed explanations and disclosures supporting the condensed consolidated interim financial statements General Information This section outlines Want Want China Holdings Limited's principal activities, registration and listing information, and the presentation currency of its financial reports - The Group is primarily engaged in the manufacturing and distribution of food and beverages, with major operating activities in mainland China and products sold to North America, East Asia, Southeast Asia, and Europe[122] - The Company was incorporated in the Cayman Islands on October 3, 2007, and has been listed on the Main Board of The Stock Exchange of Hong Kong Limited since March 26, 2008[122] - The condensed consolidated interim financial information is presented in RMB[122] Basis of Preparation 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 March 31, 2020 - This condensed consolidated interim financial information has been prepared in accordance with HKAS 34 "Interim Financial Reporting"[122] - It should be read in conjunction with the annual consolidated financial statements for the year ended March 31, 2020[122] Accounting Policies The accounting policies adopted in this period are consistent with the previous year's consolidated financial statements, except for income tax estimates and the adoption of several HKFRS amendments, which had no significant impact on the Group's financial statements - Accounting policies are consistent with the annual consolidated financial statements for the year ended March 31, 2020, except for income tax estimates and the adoption of HKFRS amendments effective for the financial year ending March 31, 2021[124] - New amendments adopted include HKAS 1 and 8 (Definition of Material), HKFRS 3 (Definition of a Business), Amendments to Conceptual Framework for Financial Reporting, HKFRS 7, 9 and HKAS 39 (Interest Rate Benchmark Reform), and HKFRS 16 (COVID-19-Related Rent Concessions)[124][125][127][131] - These new amendments and interpretations had no significant impact on the Group's financial statements[124] Estimates The significant judgments made by management in applying accounting policies and the key sources of estimation uncertainty are the same as those applied to the consolidated financial statements for the year ended March 31, 2020, except for changes in determining income tax provisions - The significant judgments made by management in applying accounting policies and the key sources of estimation uncertainty are the same as those applied to the consolidated financial statements for the year ended March 31, 2020, except for changes in determining income tax provisions[135] Financial Risk Management The Group is exposed to market risks (including currency, interest rate, and price risks), credit risk, and liquidity risk, with no significant changes in risk management policies or contractual undiscounted cash outflows of financial liabilities since year-end - The Group's activities expose it to various financial risks: market risk (including foreign currency risk, fair value interest rate risk, cash flow interest rate risk, and price risk), credit risk, and liquidity risk[137] - There have been no changes in the risk management department or risk management policies since year-end, nor have there been any significant changes in the contractual undiscounted cash outflows of financial liabilities[137][138] - As of September 30, 2020, financial assets at fair value through other comprehensive income (Level 1) amounted to RMB 90,842 thousand[140] Segment Information The Group primarily operates four business segments: rice crackers, dairy and beverages, snack foods, and other products, with over 90% of revenue and business activities conducted in China, and all segments were profitable and incurred capital expenditures in the first half of fiscal year 2020 - The Group's operations are primarily managed through four business segments: rice crackers, dairy and beverages, snack foods, and other products[145] - Over 90% of the Group's revenue and business activities are conducted in China[145] Segment Profit (First Half of 2020) | Segment | Revenue (RMB'000) | Segment Profit (RMB'000) | | :--- | :--- | :--- | | Rice Crackers | 1,992,268 | 395,991 | | Dairy and Beverages | 5,315,003 | 1,690,620 | | Snack Foods | 2,951,974 | 695,317 | | Other Products | 40,002 | 24,873 | - Total capital expenditure for the first half of fiscal year 2020 was RMB 160,091 thousand, primarily for production plants and equipment across all segments[148] Investment in Associates As of September 30, 2020, the Group's investment in associates decreased to RMB 14,376 thousand, primarily due to its share of losses from associates Investment in Associates Movements | Indicator | As of Sep 30, 2020 (RMB'000) | | :--- | :--- | | Balance at beginning of period | 15,425 | | Share of loss of associates | (1,049) | | Balance at end of period | 14,376 | Property, Plant and Equipment, Investment Properties and Intangible Assets As of September 30, 2020, the Group's net book value of property, plant and equipment decreased, but additions were made to support business development, with slight changes also observed in investment properties and intangible assets Net Book Value of Non-current Assets | Indicator | As of Sep 30, 2020 (RMB'000) | As of Apr 1, 2020 (RMB'000) | | :--- | :--- | :--- | | Property, plant and equipment | 6,553,357 | 6,770,980 | | Investment properties | 37,351 | 37,944 | | Intangible assets | 11,958 | 13,027 | - For the six months ended September 30, 2020, additions to property, plant and equipment amounted to RMB 204,306 thousand[161] Leases As of September 30, 2020, the Group's total right-of-use assets and lease liabilities both increased, with corresponding depreciation and interest expenses incurred during the period Lease-Related Data | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Right-of-use assets | 1,065,754 | 1,062,289 | | Total lease liabilities | 139,992 | 118,912 | - For the six months ended September 30, 2020, depreciation of right-of-use assets was RMB 44,931 thousand, and total cash payments for leases were RMB 99,091 thousand[165] Inventories As of September 30, 2020, the Group's total inventories slightly decreased, with a significant reduction in goods in transit Inventory Composition | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Raw materials and packing materials | 1,684,516 | 1,621,545 | | Work in progress | 250,675 | 216,331 | | Finished goods | 671,822 | 646,599 | | Goods in transit | 29,396 | 261,692 | | Total | 2,636,409 | 2,746,167 | Trade Receivables As of September 30, 2020, the Group's net trade receivables increased, with most receivables due within 60 days, indicating efficient collection Net Trade Receivables and Ageing Analysis | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Trade receivables – net | 933,562 | 846,744 | | Within 60 days | 702,990 | 382,742 | | 61-90 days | 126,849 | 187,662 | - The majority of the Group's sales are on a cash-on-delivery basis, with credit terms for modern distribution channels and some emerging channels typically ranging from 60 to 90 days[170] Share Capital For the six months ended September 30, 2020, the Company's issued share capital decreased due to share repurchases, leading to a corresponding reduction in total share capital Issued Share Capital Movements | Indicator | As of Apr 1, 2020 | As of Sep 30, 2020 | | :--- | :--- | :--- | | Number of ordinary shares issued (shares) | 12,415,184,135 | 12,274,312,135 | | Shares repurchased (shares) | | (140,872,000) | | Share capital (RMB'000) | 1,866,355 | 1,847,089 | - For the six months ended September 30, 2020, the Company repurchased and cancelled 140,872,000 shares, with a total payment of RMB 669,510 thousand[177] Reserves As of September 30, 2020, the Group's total reserves decreased, primarily impacted by share repurchases and dividend payments, partially offset by total comprehensive income for the period, with statutory reserves for specific purposes and share premium available for distribution Reserves Movements (For the six months ended September 30) | Indicator | As of Apr 1, 2020 (RMB'000) | As of Sep 30, 2020 (RMB'000) | | :--- | :--- | :--- | | Reserves at beginning of period | 13,406,327 | | | Total comprehensive income for the period | 2,242,140 | | | Share repurchases | (650,244) | | | 2019 final dividend paid | (2,990,184) | | | Reserves at end of period | | 12,008,039 | - Share premium is available for distribution to shareholders, subject to solvency tests and the provisions of the Company's articles of association[187] - Statutory reserve funds are used to cover losses, expand production operations, or increase the company's capital[187] Trade Payables As of September 30, 2020, the Group's total trade payables slightly increased, with the majority due within 60 days Trade Payables Ageing Analysis | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Total trade payables | 1,146,928 | 1,093,092 | | Within 60 days | 1,087,043 | 985,783 | - Trade payables primarily arise from credit purchases of raw materials, with credit terms granted by suppliers generally ranging from 30 to 60 days[190] Borrowings As of September 30, 2020, the Group's total borrowings significantly increased, primarily due to a substantial rise in current borrowings and a decrease in non-current borrowings, while the Group still maintains substantial unutilized floating rate borrowing facilities Borrowings Composition | Indicator | As of Sep 30, 2020 (RMB'000) | As of Mar 31, 2020 (RMB'000) | | :--- | :--- | :--- | | Non-current borrowings | 3,386,378 | 8,293,566 | | Current borrowings | 6,831,970 | 587,085 | | Total borrowings | 10,218,348 | 8,880,651 | - For the six months ended September 30, 2020, borrowings increased by RMB 3,937,537 thousand, and repayments of borrowings amounted to RMB 2,269,488 thousand[194] - The Group issued US$500 million guaranteed bonds in 2017, which will be fully repaid on April 27, 2022, with an annual interest rate of 2.875%[194] - The Group has unutilized floating rate borrowing facilities of RMB 6,962,337 thousand maturing within one year[198] Other (Losses)/Gains – Net For the six months ended September 30, 2020, the Group recorded other net losses, primarily due to net exchange losses and net losses on disposal of property, plant and equipment Other (Losses)/Gains – Net (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Net exchange (losses)/gains | (14,073) | 8,270 | | Donation expenses | (18,111) | (5,538) | | Net loss on disposal of property, plant and equipment | (7,853) | (4,285) | | Total | (36,094) | 1,787 | Expenses by Nature For the six months ended September 30, 2020, the Group's cost of raw materials used and changes in inventories increased, employee benefit expenses slightly decreased, and advertising and promotion expenses significantly reduced Expenses by Nature (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Raw materials used and changes in inventories | 4,078,957 | 3,479,354 | | Employee benefit expenses | 1,837,767 | 1,876,004 | | Advertising and promotion expenses | 240,837 | 309,387 | | Total cost of sales, distribution costs and administrative expenses | 7,889,539 | 7,409,614 | Income Tax Expense For the six months ended September 30, 2020, the Group's total income tax expense increased, primarily due to higher current income tax in mainland China Income Tax Expense (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Current income tax – mainland China | 689,786 | 509,156 | | Deferred income tax | 53,271 | 68,444 | | Total | 757,127 | 584,518 | - Income tax expense is recognized based on management's estimate of the weighted average annual income tax rate expected for the full financial year[203] Earnings Per Share For the six months ended September 30, 2020, the Group's basic and diluted earnings per share both increased, reflecting higher profit attributable to equity holders of the Company, with basic and diluted earnings per share being identical due to no dilutive shares Earnings Per Share (For the six months ended September 30) | Indicator | As of Sep 30, 2020 | As of Sep 30, 2019 | | :--- | :--- | :--- | | Basic earnings per share (RMB cents) | 15.75 | 12.99 | | Diluted earnings per share (RMB cents) | 15.75 | 12.99 | - As the Company has no dilutive shares, diluted earnings per share are the same as basic earnings per share[206] Dividends The final and special dividends for the year ended March 31, 2020, were paid in September 2020, and the Board declared an interim dividend of 0.65 US cents per share for the six months ended September 30, 2020, payable on December 23, 2020 - The final and special dividends of RMB 2,990,184 thousand for the year ended March 31, 2020, were paid in September 2020[207] - The Board declared an interim dividend of 0.65 US cents per share for the six months ended September 30, 2020, on November 19, 2020, to be paid on December 23, 2020[207] - This interim dividend (RMB 555,346 thousand) has not been recognized as a liability in this condensed consolidated interim financial information but will be recognized in equity for the financial year ending March 31, 2021[207] Related Party Transactions This section discloses the Group's transactions and balances with related parties, primarily involving sales, purchases, and leasing activities with companies controlled by the Chairman and his family, as well as minority shareholders of subsidiaries, with all receivables and payables being unsecured, interest-free, and without fixed repayment terms - The ultimate controlling party of the Group is Mr. Tsai Eng-Meng, the Chairman and CEO of the Group, and his family[210] - For the six months ended September 30, 2020, sales of goods to minority shareholders of subsidiaries amounted to RMB 12,951 thousand, and purchases of goods and services from companies controlled by the Chairman amounted to RMB 19,961 thousand[211] - As of September 30, 2020, trade receivables (due from minority shareholders of subsidiaries) amounted to RMB 18,622 thousand[214] - Receivables and payables are unsecured, interest-free, and without fixed repayment terms[214] Key Management Compensation For the six months ended September 30, 2020, total compensation for key management personnel, including directors and senior management, amounted to RMB 7,807 thousand Key Management Compensation (For the six months ended September 30) | Indicator | As of Sep 30, 2020 (RMB'000) | As of Sep 30, 2019 (RMB'000) | | :--- | :--- | :--- | | Fees | 2,930 | 2,596 | | Salaries | 2,854 | 2,901 | | Other benefits | 1,858 | 1,727 | | Employer's contribution to pension schemes | 165 | 216 | | Total | 7,807 | 7,440 | Events After Balance Sheet Date In October 2020, the Company repurchased and cancelled its own ordinary shares on The Stock Exchange of Hong Kong Limited - In October 2020, the Company repurchased and cancelled 46,723,000 ordinary shares, with a total payment of HK$246,103,010[219][220][234] Other Information This section provides additional disclosures not covered in the financial statements, including dividend details, directors' interests, and corporate governance practices Interim Dividend and Closure of Register of Members The Board declared an interim dividend of 0.65 US cents per share for the six months ended September 30, 2020, payable on December 23, 2020, and the company will close its register of members from December 7 to 9, 2020, to determine dividend entitlements - The Board declared an interim dividend of 0.65 US cents per ordinary share for the six months ended September 30, 2020, on November 19, 2020[222] - The interim dividend will be paid on or about December 23, 2020, to shareholders whose names appear on the company's register of members on December 9, 2020[222] - The company will suspend registration of share transfers from December 7, 2020, to December 9, 2020 (both days inclusive)[223] Directors' and Chief Executive's Interests As of September 30, 2020, the company's directors and chief executive held long positions in the company's shares, with Mr. Tsai Eng-Meng holding the largest stake through beneficial and controlled corporate interests - As of September 30, 2020, Mr. Tsai Eng-Meng (Chairman and CEO) held 6,320,843,100 ordinary shares in the Company (representing approximately 51.4965% of the issued share capital), including beneficial interests and controlled corporate interests[228] - Other directors also held shares in the Company, for example, Mr. Cheng Wen-Hsien held 463,162,640 shares (representing approximately 3.7734%)[228] - As of September 30, 2020, no director or chief executive held any short positions in the shares, underlying shares, or debentures of the Company or its associated corporations[226] Other Person's Interests As of September 30, 2020, other persons, apart from directors and the chief executive, held long positions in the company's shares, primarily entities beneficially owned by Mr. Tsai Eng-Meng - Want Power Holdings Limited (WPHL) held 5,080,063,100 shares, representing approximately 41.3878% of the Company's issued share capital[230] - Norwares Overseas Inc. (NOI) held 1,063,780,000 shares, representing approximately 8.6667% of the Company's issued share capital[230] - Shares held by WPHL and NOI are both beneficially owned by Mr. Tsai Eng-Meng[230] Purchase, Sale or Redemption of Listed Securities The Company continued to repurchase and cancel its listed shares on the Hong Kong Stock Exchange during the six months ended September 30, 2020, and after the balance sheet date, as the Board believes this is in the best interest of the company and shareholders and enhances earnings per share - For the six months ended September 30, 2020, the Company repurchased a total of 140,872,000 shares on the Hong Kong Stock Exchange for a total of HK$757,033,141, which have been cancelled[231][233] - After the balance sheet date of September 30, 2020, the Company repurchased and cancelled an additional 46,723,000 shares in October 2020, for a total of HK$246,103,010[233][234] - The Directors believe that the share repurchases are in the best interests of the Company and its shareholders and will enhance the Company's earnings per share[235] Model Code for Directors' Securities Transactions The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules, and all directors confirmed compliance during the six months ended September 30, 2020 - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[235] - All Directors confirmed compliance with the standards set out in the Model Code during the six months ended September 30, 2020[235] Corporate Governance Practices For the six months ended September 30, 2020, the Company complied with the Corporate Governance Code, with deviations regarding the combined roles of Chairman and CEO and non-executive director tenure, but the Board believes sufficient measures are in place to safeguard shareholder interests - The Company has complied with the Corporate Governance Code, except for deviations from Code Provision A.2.1 (combined roles of Chairman and CEO) and A.4.1 (non-executive directors without specific terms of appointment)[236] - The Board believes that Mr. Tsai Eng-Meng serving concurrently as Chairman and CEO provides strong and consistent leadership to the Company[236] - Non-executive directors are required to retire by rotation at least once every three years, and the Board believes sufficient measures have been taken to safeguard shareholders' interests[236] Changes of Director's Information This section discloses changes in director information, including the appointment of independent non-executive directors Mr. Lee Kwok Ming and Mr. Chu Chia-Fu to other listed companies, the establishment of the Environmental, Social and Governance Committee, and the renewal of Mr. Tsai Eng-Meng's service contract - Independent Non-executive Director Mr. Lee Kwok Ming was appointed as an independent non-executive director of Bossini International Holdings Limited effective July 24, 2020[238] - The Environmental, Social and Governance Committee was established on August 18, 2020, to promote and assist the Board in managing the Group's environmental, social, and governance matters[238] - The Board resolved to renew Mr. Tsai Eng-Meng's service contract for a term of 3 years commencing August 26, 2020, with no changes to the main terms and conditions[238] - Independent Non-executive Director Mr. Chu Chia-Fu was appointed as an independent non-executive director of Ocean Sky International Limited effective October 1, 2020[238] Audit and Risk Management Committee The Audit and Risk Management Committee, comprising five independent non-executive directors, has reviewed the unaudited interim results for the six months ended September 30, 2020, with the external auditor PricewaterhouseCoopers - The Audit and Risk Management Committee comprises 5 independent non-executive directors, with Mr. Chu Chia-Fu as Chairman[241] - The Committee, together with the external auditor PricewaterhouseCoopers, has reviewed the unaudited interim results for the six months ended September 30, 2020[241]