Financial Performance - Revenue for the six months ended June 30, 2020, was RMB 1,715,710, a decrease of 17.1% compared to RMB 2,069,317 in the same period of 2019[13]. - Gross profit decreased by 16.9% to RMB 1,088,700, with a gross profit margin of 63.5%, slightly up from 63.3% in 2019[13]. - Operating profit fell significantly by 77.0% to RMB 185,778, with an EBIT margin of 10.8%, down from 39.0% in the previous year[13]. - Profit for the period was RMB 66,192, representing an 89.1% decline compared to RMB 609,173 in 2019[13]. - The adjusted profit for the period was RMB 561,690, a decrease of 7.8% from RMB 609,173 in the prior year[13]. - The company reported a basic and diluted loss per share of RMB (1.46), a decline of 109.5% from earnings of RMB 15.45 per share in 2019[13]. - The interim dividend per share was not declared, compared to 8.8 cents in the previous year[13]. Impact of COVID-19 - The pandemic significantly impacted market demand and consumption sentiment, affecting all business segments of the group[16]. - The pandemic led to a significant negative impact on the catering industry, with total revenue dropping by 32.8% year-on-year to RMB 1,460.9 billion[26]. - The pandemic has prompted catering enterprises to consider shifting to online sales channels, impacting their business models[48]. - The uncertainty in the catering industry's recovery is linked to the overall economic recovery in China and the pandemic control measures[49]. - The pandemic led to temporary suspensions of various business activities, significantly affecting the demand for condiment products from catering enterprises[44]. Acquisition and Goodwill Impairment - An impairment of goodwill of RMB 495,498,000 was recognized for the Cash-Generating Unit of Jiahao Foodstuff Limited during the Reporting Period[32]. - The impairment test conducted in June 2020 revealed that the recoverable amount of Jiahao's cash-generating unit was RMB 495,498,000 lower than its carrying amount, leading to the recognition of goodwill impairment of the same amount[43]. - The goodwill arising from the acquisition of Jiahao was approximately RMB 3,635,550,000, reflecting expected synergies and economies of scale post-integration[36]. - The acquisition of Jiahao was completed on September 4, 2018, for a cash consideration of approximately USD 695,985,000 (equivalent to approximately RMB 4,745,437,000) and is expected to enhance the Group's revenue sources and optimize its business structure[36]. Segment Performance - The sales revenue of the condiment business recorded a significant year-on-year decrease of approximately 52.9%, accounting for approximately 10.3% of the Group's total revenue[91]. - The sales revenue of the flavours and fragrances business amounted to approximately RMB 931 million, representing a year-on-year decrease of approximately 3.8% and accounting for approximately 54.3% of the Group's total revenue[72]. - The sales revenue of the tobacco raw materials business was approximately RMB 303 million, representing a year-on-year decrease of approximately 17.1% and accounting for approximately 17.7% of the Group's total revenue[81]. - The operating loss for the condiment segment was approximately RMB 525 million, primarily due to the recognition of impairment of goodwill of RMB 495.5 million[91]. Research and Development - The Group's R&D investment during the reporting period was approximately RMB 109 million, accounting for about 6.3% of sales revenue, representing a year-on-year decrease of 0.2 percentage points[101]. - The Group focused on R&D of meat flavours and extraction technologies for herbs and plants to align with market trends towards natural and healthy consumption[76]. - The Group plans to enhance its R&D in natural and functional food flavors and strengthen studies on food flavors in plant protein-based meat products[106]. - The Group's R&D team focused on popular flavors like "umami," "fragrance," and "spiciness," launching "Sour and Chilli Sauce" and "Rattan Pepper Sauce" to meet market demand[94]. Market Strategy and Operations - The Group's strategy focuses on "Concentric Diversification based on Consumers' Demand in the Taste-based Fast-moving Products Industry," which aligns with the acquisition of Jiahao[34]. - The Group's marketing strategy shifted to online communication during the first half of 2020, receiving positive feedback from catering customers[97]. - The Group aims to promote Jiahao's "Chinese tastes expert" brand image and establish reliable partnerships with distributors and users[106]. - The Group will continue to seek synergistic acquisition opportunities along the upstream and downstream industry chain to strengthen its competitiveness[106]. Financial Position and Assets - As of June 30, 2020, the net current asset value was RMB 6,664,835,000, down from RMB 6,957,179,000 as of December 31, 2019; cash and bank balances were RMB 5,854,355,000[129]. - Bank borrowings totaled RMB 2,856,898,000, down from RMB 2,998,776,000, with secured loans of RMB 1,860,474,000 and unsecured loans of RMB 996,424,000; the gearing ratio was 24.9%, a decrease of 0.5 percentage points from 25.4%[130][131]. - As of June 30, 2020, the Group's inventory balance was RMB 868,794,000, a decrease of RMB 62,591,000 from RMB 931,385,000 as of December 31, 2019[136]. - The total assets as of June 30, 2020, reflect a stable financial position despite fluctuations in specific asset categories[200]. Governance and Compliance - The Company has complied with the Corporate Governance Code during the Reporting Period, except for provisions A.2.1 and A.4.1[174]. - The roles of chairman and CEO are held by the same individual, Ms. CHU Lam Yiu, since April 9, 2013, which the Board believes does not impair the balance of power[175]. - The Company has adopted the Model Code for Securities Transactions by Directors, ensuring compliance by all Directors[180]. - The Audit Committee has reviewed and approved the Group's unaudited condensed consolidated interim financial information for the six months ended 30 June 2020[191].
华宝国际(00336) - 2020 - 中期财报