四洲集团(00374) - 2021 - 中期财报

Condensed Consolidated Statement of Profit or Loss For the six months ended September 30, 2020, the Group achieved significant revenue growth, with increased profit for the period and earnings per share, primarily due to effective cost of sales control and higher profit contributions from associates Condensed Consolidated Statement of Profit or Loss (HKD Thousands) | Indicator | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 2,185,079 | 1,505,607 | +45.14% | | Cost of Sales | (1,695,351) | (1,055,679) | +60.59% | | Gross Profit | 489,728 | 449,928 | +8.85% | | Profit Before Tax | 42,883 | 41,940 | +2.25% | | Profit for the Period | 31,180 | 27,557 | +13.15% | | Profit Attributable to Owners of the Company | 30,016 | 18,885 | +59.00% | | Earnings Per Share (Basic and Diluted) | HKD 7.8 cents | HKD 4.9 cents | +59.18% | Condensed Consolidated Statement of Comprehensive Income For the six months ended September 30, 2020, the Group's total comprehensive income significantly shifted from a loss to a profit, primarily driven by a positive change in exchange differences on translation of overseas operations Condensed Consolidated Statement of Comprehensive Income (HKD Thousands) | Indicator | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Profit for the Period | 31,180 | 27,557 | +13.15% | | Exchange Differences on Translation of Overseas Operations | 31,422 | (54,033) | Shift from Loss to Profit | | Share of Other Comprehensive Income/(Loss) of Associates | 1,728 | (2,090) | Shift from Loss to Profit | | Other Comprehensive Income/(Loss) for the Period, Net of Tax | 36,234 | (56,123) | Shift from Loss to Profit | | Total Comprehensive Income/(Loss) for the Period | 67,414 | (28,566) | Shift from Loss to Profit | | Total Comprehensive Income/(Loss) Attributable to Owners of the Company | 64,705 | (35,921) | Shift from Loss to Profit | Condensed Consolidated Statement of Financial Position As of September 30, 2020, the Group's total assets and liabilities significantly increased, with substantial growth in both non-current and current assets, alongside a rise in current liabilities, leading to a decrease in net current assets Condensed Consolidated Statement of Financial Position (HKD Thousands) | Indicator | Sep 30, 2020 (HKD Thousands) | Mar 31, 2020 (HKD Thousands) | Change | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 1,624,447 | 1,225,052 | +32.60% | | Total Current Assets | 2,197,925 | 1,668,724 | +31.71% | | Total Current Liabilities | 1,771,526 | 1,170,432 | +51.36% | | Net Current Assets | 426,399 | 498,292 | -14.43% | | Total Non-current Liabilities | 695,448 | 378,146 | +83.91% | | Net Assets | 1,355,398 | 1,345,198 | +0.76% | | Total Equity | 1,355,398 | 1,345,198 | +0.76% | Condensed Consolidated Statement of Changes in Equity For the six months ended September 30, 2020, the Group's total equity slightly increased, primarily due to the contribution from total comprehensive income for the period, despite a reduction in non-controlling interests Condensed Consolidated Statement of Changes in Equity (HKD Thousands) | Indicator | Sep 30, 2020 (HKD Thousands) | Apr 1, 2020 (HKD Thousands) | Change | | :--- | :--- | :--- | :--- | | Equity Attributable to Owners of the Company | 1,345,704 | 1,307,329 | +2.93% | | Non-controlling Interests | 9,694 | 37,869 | -74.39% | | Total Equity | 1,355,398 | 1,345,198 | +0.76% | - Total comprehensive income for the period was HKD 64,705 thousand, positively contributing to equity growth[17] - Non-controlling interests significantly decreased due to the acquisition of non-controlling interests and subsidiaries[17] Condensed Consolidated Statement of Cash Flows For the six months ended September 30, 2020, the Group's net cash inflow from operating activities significantly increased, investment activities shifted from outflow to substantial inflow, while net cash outflow from financing activities also rose considerably, ultimately leading to a net increase in cash and cash equivalents Condensed Consolidated Statement of Cash Flows (HKD Thousands) | Indicator | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Net Cash Inflow from Operating Activities | 141,702 | 87,599 | +61.75% | | Net Cash Inflow/(Outflow) from Investing Activities | 211,441 | (17,372) | Shift from Outflow to Inflow | | Net Cash Outflow from Financing Activities | (147,321) | (74,407) | Outflow Increased | | Net Increase/(Decrease) in Cash and Cash Equivalents | 205,822 | (4,180) | Shift from Decrease to Increase | | Cash and Cash Equivalents at End of Period | 717,807 | 577,567 | +24.28% | - The significant increase in net cash inflow from investing activities was primarily driven by net cash inflow of HKD 250,174 thousand from acquisition of subsidiaries[20] Notes to the Condensed Consolidated Financial Statements Accounting Policies These interim financial statements are prepared in accordance with HKAS 34, with the initial application of certain revised HKFRSs, which had no significant financial impact on the statements - The Group initially applied certain revised Hong Kong Financial Reporting Standards (HKFRSs) and Interpretations issued by the HKICPA, including HKFRS 3 (Definition of a Business), HKFRS 9, HKAS 39 and HKFRS 7 (Interest Rate Benchmark Reform), and HKAS 1 and HKAS 8 (Definition of Material)[27][28][29] - The adoption of these amendments had no significant financial impact on the condensed consolidated financial statements[28][32] Operating Segment Information The Group is organized into three reportable operating segments based on geographical areas: Hong Kong, Mainland China, and Japan, with each segment's performance independently monitored for resource allocation and performance assessment - The Group operates in three reportable segments: Hong Kong (manufacturing and sales of snacks, confectionery, beverages, frozen food, ham, and noodles, retail and catering services), Mainland China (manufacturing and sales of snacks, confectionery, beverages, frozen food, ham, and noodles, restaurant operations), and Japan (wholesale and distribution of snacks and confectionery)[34][37] Segment Revenue (Sales to External Customers) - For the six months ended September 30, 2020 (HKD Thousands) | Segment | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | 2020 Total Sales Share | | :--- | :--- | :--- | :--- | :--- | | Hong Kong | 919,113 | 976,182 | -5.85% | 42% | | Mainland China | 436,184 | 529,425 | -17.61% | 20% | | Japan | 829,782 | – | Newly Added | 38% | | Total | 2,185,079 | 1,505,607 | +45.14% | 100% | Segment Results - For the six months ended September 30, 2020 (HKD Thousands) | Segment | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Hong Kong | 59,239 | 42,127 | +40.62% | | Mainland China | 23,041 | 17,033 | +35.27% | | Japan | (10,600) | – | Newly Added Loss | | Total | 71,680 | 59,160 | +21.16% | - The Japan segment generated new revenue of HKD 829,782 thousand in 2020, accounting for 38% of the Group's total sales, but incurred a loss of HKD 10,600 thousand[46][133] Revenue, Other Income and Gains/(Losses), Net For the six months ended September 30, 2020, the Group's revenue primarily derived from contracts with customers, with some revenue recognized from contract liabilities at the beginning of the period, and net other income and gains increased, mainly due to government grants Revenue from Contracts with Customers - For the six months ended September 30, 2020 (HKD Thousands) | Region | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Hong Kong | 919,113 | 976,182 | -5.85% | | Mainland China | 436,184 | 529,425 | -17.61% | | Japan | 829,782 | – | Newly Added | | Total | 2,185,079 | 1,505,607 | +45.14% | Other Income and Gains/(Losses), Net - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Bank Interest Income | 1,347 | 3,376 | -60.09% | | Government Grants | 6,469 | – | Newly Added | | Dividend Income | 2,001 | 4,678 | -57.23% | | Rental Income from Investment Properties under Operating Leases | 1,351 | 736 | +83.56% | | Others | 4,639 | 2,700 | +71.81% | | Fair Value Loss on Investment Properties, Net | (145) | – | Newly Added Loss | | Fair Value Loss on Financial Assets at Fair Value Through Profit or Loss, Net | (5,793) | (4,500) | +28.73% | | Total | 9,869 | 6,990 | +41.19% | - Newly added government grants of HKD 6,469 thousand in 2020 positively contributed to other income[68] - Performance obligations for goods sold are satisfied upon delivery, with payment terms typically one to three months, extendable to four to five months for major customers[64] Finance Costs For the six months ended September 30, 2020, the Group's finance costs slightly increased, primarily comprising interest on bank loans, trust receipt loans, and lease liabilities Finance Costs - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Interest on Bank Loans and Trust Receipt Loans | 9,141 | 8,546 | +6.96% | | Interest on Lease Liabilities | 5,378 | 5,664 | -5.05% | | Total | 14,519 | 14,210 | +2.17% | Profit Before Tax For the six months ended September 30, 2020, the Group's profit before tax slightly increased, primarily benefiting from the inclusion of government grants, which partially offset the rise in depreciation and amortization expenses Components of Profit Before Tax - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Cost of Inventories Sold | 1,693,854 | 1,055,679 | +60.44% | | Government Grants | (32,398) | – | Newly Added | | Depreciation of Property, Plant and Equipment Items | 34,668 | 31,134 | +11.35% | | Depreciation of Right-of-use Assets | 76,440 | 65,149 | +17.33% | | Amortization of Other Intangible Assets | 2,029 | 109 | +1761.47% | - Government grants, totaling HKD 32,398 thousand, primarily from the Hong Kong Government's Employment Support Scheme, were recognized in cost of sales, selling and distribution expenses, and administrative expenses[72][74] Income Tax For the six months ended September 30, 2020, the Group's income tax expense decreased, with the Hong Kong profits tax rate remaining at 16.5%, while the share of tax from associates increased Income Tax Expense - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Current – Hong Kong | 8,664 | 9,611 | -9.75% | | Current – Other Regions | 2,850 | 4,794 | -40.55% | | Underprovision in Prior Years | 95 | 58 | +63.79% | | Deferred | 94 | (80) | Shift from Negative to Positive | | Total Tax Expense for the Period | 11,703 | 14,383 | -18.63% | - The Hong Kong profits tax rate remained at 16.5%[77] - Share of tax from associates was HKD 1,754 thousand, an increase from HKD 999 thousand in the prior period[79][80] Dividend For the six months ended September 30, 2020, the Board resolved to declare an interim dividend of HKD 3.0 cents per ordinary share, consistent with the prior year, and the final dividend paid during the period also remained unchanged Dividend Information - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Interim Dividend Declared (HKD 3.0 cents per ordinary share) | 11,528 | 11,528 | 0% | | Final Dividend Approved and Paid (HKD 6.5 cents per ordinary share) | 24,977 | 24,977 | 0% | - The interim dividend was calculated based on 384,257,640 ordinary shares in issue at the end of the reporting period[85] Earnings Per Share For the six months ended September 30, 2020, the Group's basic and diluted earnings per share were HKD 7.8 cents, a significant increase from the prior period, with no dilutive potential ordinary shares outstanding Earnings Per Share Information - For the six months ended September 30, 2020 | Indicator | 2020 | 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Profit Attributable to Ordinary Equity Holders of the Company (HKD Thousands) | 30,016 | 18,885 | +59.00% | | Weighted Average Number of Ordinary Shares in Issue | 384,257,640 | 384,257,640 | 0% | | Basic and Diluted Earnings Per Share | HKD 7.8 cents | HKD 4.9 cents | +59.18% | - For the six months ended September 30, 2020 and 2019, the Group had no dilutive potential ordinary shares in issue, thus basic and diluted earnings per share were identical[91] Property, Plant and Equipment For the six months ended September 30, 2020, the Group's additions to property, plant and equipment significantly increased, while some assets were disposed of, resulting in a net loss Movements in Property, Plant and Equipment - For the six months ended September 30, 2020 (HKD Thousands) | Item | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Additions at Cost | 37,696 | 24,476 | +54.01% | | Net Book Value of Disposals | 316 | 1,570 | -79.87% | | Net Loss on Disposals | 295 | 517 | -42.94% | Trade Receivables As of September 30, 2020, the Group's total trade receivables significantly increased, with the most notable growth in amounts due within one month, reflecting higher sales Ageing Analysis of Trade Receivables (Net of Impairment Provisions) - As of September 30, 2020 (HKD Thousands) | Ageing | Sep 30, 2020 (HKD Thousands) | Mar 31, 2020 (HKD Thousands) | Change | | :--- | :--- | :--- | :--- | | Within 1 month | 358,065 | 180,692 | +98.17% | | 1 to 2 months | 233,099 | 98,978 | +135.52% | | 2 to 3 months | 89,228 | 84,474 | +5.63% | | Over 3 months | 156,519 | 164,238 | -4.70% | | Total | 836,911 | 528,382 | +58.39% | - The Group's trade terms with customers are primarily credit-based, typically one to three months, extendable to four to five months for major customers, while new customers usually require upfront payment[95][96] Trade Payables, Other Payables and Accruals As of September 30, 2020, the Group's total trade payables significantly increased, with notable growth in amounts due within one month, reflecting increased purchasing activities Ageing Analysis of Trade Payables - As of September 30, 2020 (HKD Thousands) | Ageing | Sep 30, 2020 (HKD Thousands) | Mar 31, 2020 (HKD Thousands) | Change | | :--- | :--- | :--- | :--- | | Within 1 month | 252,735 | 146,416 | +72.61% | | 1 to 2 months | 81,013 | 16,873 | +380.14% | | 2 to 3 months | 24,999 | 7,919 | +215.68% | | Over 3 months | 35,787 | 7,011 | +410.44% | | Total | 394,534 | 178,219 | +121.38% | - Trade payables are interest-free and generally settled within 30 to 60 days[101] - Trade payables include amounts due to associates of HKD 41,751 thousand and amounts due to a subsidiary of a substantial shareholder of HKD 36 thousand[100] Commitments As of September 30, 2020, the Group's capital commitments for property, plant and equipment significantly increased, reflecting future investment plans Capital Commitments (Property, Plant and Equipment) - As of September 30, 2020 (HKD Thousands) | Item | Amount (HKD Thousands) | | :--- | :--- | | Contracted but Not Provided For | 9,127 | Related Party Transactions For the six months ended September 30, 2020, significant related party transactions included purchases of goods from associates, sales of goods, reimbursement of promotion expenses from associates, and rental income, with purchases from associates being the largest and increasing in value Significant Related Party Transactions - For the six months ended September 30, 2020 (HKD Thousands) | Transaction Type | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Associates: Purchases of Goods | 200,403 | 196,063 | +2.21% | | Associates: Sales of Goods | 1,056 | 950 | +11.16% | | Associates: Reimbursement of Promotion Expenses | 16,841 | 15,541 | +8.37% | | Associates: Rental Income | 720 | 736 | -2.20% | | Subsidiary of a Substantial Shareholder: Sales of Goods | 783 | 1,414 | -44.62% | - Purchase costs from associates are determined at pre-agreed prices, while sales prices are determined by reference to similar prices and conditions offered to other major customers[109][111] Business Combination On April 16, 2020, the Group acquired an additional 55% equity interest in Miyata Holding Co., Ltd., making it a subsidiary, aiming to expand its confectionery distribution and product development business in Japan and create synergies, resulting in provisional goodwill of HKD 85,744 thousand - On April 16, 2020, the Group acquired an additional 55% equity interest in Miyata Holding Co., Ltd., increasing its stake from 15% to 70%, making Miyata a subsidiary of the Group[120][121] - The acquisition aims to expand the Group's confectionery distribution and product development business in Japan and create synergies with other Group businesses[120][121] - The acquisition resulted in provisional goodwill of HKD 85,744 thousand, primarily attributable to the integration of MYC's products with the Group, MYC's network, and the resulting synergies[126][129] - Since the acquisition, Miyata contributed approximately HKD 829,782 thousand in revenue to the Group but resulted in a consolidated profit loss of HKD 7,405 thousand[127][130] Management Discussion and Analysis Interim Dividend The Board resolved to declare an interim dividend of HKD 3.0 cents per ordinary share for the six months ended September 30, 2020, consistent with the prior year, to be paid on January 18, 2021 - The Board resolved to declare an interim dividend of HKD 3.0 cents per ordinary share for the six months ended September 30, 2020 (2019: HKD 3.0 cents)[132][134] - The dividend will be paid on Monday, January 18, 2021[132][134] Closure of Register of Members To qualify for the interim dividend, the company will suspend share transfer registration from December 16 to December 18, 2020, requiring shareholders to submit transfer documents by 4:30 p.m. on December 15, 2020 - The register of members will be closed from Wednesday, December 16, 2020, to Friday, December 18, 2020[133] - Shareholders must submit all transfer documents with the relevant share certificates by 4:30 p.m. on Tuesday, December 15, 2020, to qualify for the interim dividend[133] Results For the six months ended September 30, 2020, the Group's consolidated turnover significantly increased, and profit attributable to owners of the company substantially improved, primarily due to new revenue contributions from Japan, despite sales declines in Hong Kong and Mainland China Group Performance Overview - For the six months ended September 30, 2020 (HKD Thousands) | Indicator | 2020 (HKD Thousands) | 2019 (HKD Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Consolidated Turnover | 2,185,079 | 1,505,607 | +45.14% | | Profit Attributable to Owners of the Company | 30,016 | 18,885 | +59.00% | Sales by Region (HKD Thousands) | Region | 2020 (HKD Thousands) | 2019 (HKD Thousands) | 2020 Total Sales Share | | :--- | :--- | :--- | :--- | | Hong Kong | 919,113 | 976,182 | 42% | | Mainland China | 436,184 | 529,425 | 20% | | Japan | 829,782 | – | 38% | Business Review Despite COVID-19 challenges, the Group maintained steady business growth through diversified strategies and sales promotions, with robust food agency and manufacturing, new growth from Japan ice cream and CHOYA plum wine, and high standards and innovation in retail and catering - The Group successfully withstood COVID-19 challenges, maintaining steady business development, with robust food agency and manufacturing businesses[137] - The Group actively promoted its Japan ice cream business, introducing several renowned brands, expanding sales channels to convenience stores and supermarkets, achieving ideal sales[138][139] - The Group secured the Hong Kong distribution rights for the renowned Japanese brand CHOYA Umeshu, expected to bring new contributions[142][143] Distribution Business As a core business, the food distribution segment performed well during the pandemic due to increased home consumption, leveraging an extensive network and continuous introduction of global quality foods, further strengthened by the acquisition of Miyata Co., Ltd. in Japan - The food distribution business performed ideally during the pandemic, boasting an extensive distribution network covering department stores, supermarkets, convenience stores, fast-food restaurants, and hotels[141][143] - The Group distributes various renowned quality food products from over 20 countries and regions, including ice cream, snacks, milk powder, health foods, soy sauce, ham, and sausages[142][143] - The acquisition of an additional 55% equity interest in Miyata Co., Ltd., a renowned Japanese snack and confectionery distributor, strengthens the Group's sales and distribution network and broad customer base[145][148] Manufacturing Business The Group's food manufacturing business ensures products meet international standards and certifications through stringent quality control and scientific management, operating 18 factories in Hong Kong and Mainland China, with the expanded Calbee Four Seas factory enhancing efficiency and benefiting from increased home cooking demand during the pandemic - The Group's food manufacturing business strictly monitors quality, adhering to international standards and obtaining certifications such as HACCP, ISO 9001, ISO 22000, GMP, and the Hong Kong Q-Mark license[146][149] - The Group operates 18 factories in Hong Kong and Mainland China, with the expanded Calbee Four Seas factory in Tseung Kwan O Industrial Estate significantly improving production efficiency and output[147][149] - The food manufacturing business benefited from the increased demand for home cooking during the pandemic[147][149] Retail and Catering Businesses Despite negative impacts from the pandemic, the Group's retail and catering businesses maintained high standards and pursued innovation, with its Chinese and Japanese restaurants gaining acclaim and Michelin honors in Guangdong and Hong Kong, while 'Okashi Land' and 'YOKU MOKU' bakeries remained popular and expanded Japan ice cream counters - Retail and catering businesses were affected by the pandemic but maintained high standards and innovation[151][153] - The Group's 'Kung Tak Lam' Shanghai Vegetarian Cuisine in Causeway Bay received a Michelin Plate honor, and 'Sushiyoshi' Hong Kong branch was rated a two-Michelin-star restaurant from Osaka[151][153] - 'Okashi Land' Japanese snack specialty stores and 'YOKU MOKU' cookie stores remained popular among consumers, with new Japan ice cream counters added in 'Okashi Land' and convenience stores[152][153] Brand Development Four Seas Group, approaching its 50th anniversary, has become a household name in Hong Kong with diversified businesses, upholding its commitment to food safety and quality, and the recent acquisition of Miyata aims to combine strengths for cross-brand and sales synergies, establishing a food sales platform spanning Mainland China, Hong Kong, and Japan - The Group is approaching its 50th anniversary, having become a household name in Hong Kong with diversified businesses covering food distribution, manufacturing, retail, and catering[154][156] - Upholding the principle of 'Eat with Confidence, Eat with Joy,' the Group maintains strict requirements for food hygiene, safety, and quality, with a comprehensive monitoring system in place[154][156] - The acquisition of an additional 55% equity interest in Miyata Holding Co., Ltd., a renowned Japanese snack and confectionery distributor, aims to combine the strengths and advantages of both parties, creating cross-brand and sales synergies[155][157] - The goal is to establish a unique food sales platform spanning Mainland China, Hong Kong, and Japan[155][157] Corporate Social Responsibility The Group actively fulfills its corporate social responsibility by participating in Hong Kong community welfare activities, earning multiple accolades including the 'Manpower Developer' title and various brand awards, demonstrating its achievements in human resource development and brand building - The Group actively promotes and participates in Hong Kong community welfare activities, earning the prestigious titles of 'Manpower Developer 2013-2021' and 'Manpower Developer 2011-2021'[159][161] - 'Okashi Land' was awarded the 'Hong Kong Top Brand Mark', and 'Calbee' received multiple accolades including the '2019 Most Loved Convenience Brand Award' and 'ParknShop Super Brand Award 2019'[160] - The Group was recognized by Mediazone as 'Asia's Leading Snack Foods Innovator' and for 'Excellence in Manufacturing Quality Hygiene Measure and Customer Services'[160] Prospects and Growth Despite global economic uncertainties, the Group remains confident in the Hong Kong food market, pursuing a 'Rooted in Hong Kong, Facing Mainland China, Going Global' strategy by introducing new quality foods and establishing a food platform across Mainland China, Hong Kong, and Japan - The Group remains confident in the Hong Kong food market and will establish a food platform spanning Mainland China, Hong Kong, and Japan[163][167] - The business development strategy is 'Rooted in Hong Kong, Facing Mainland China, Going Global'[163][167] Hong Kong Business Leveraging its leading position and extensive experience in the Hong Kong food market, the Group will utilize its capital, management resources, retail distribution expertise, and Mainland China manufacturing and distribution network through the Miyata Co., Ltd. acquisition to introduce more global fine foods, create cross-brand and sales synergies, and enter the Japanese consumer market - The Group holds a leading position, extensive sales network, and 49 years of experience in the Hong Kong food market[164][168] - Through the equity acquisition of Miyata Co., Ltd. in Japan, the Group will leverage its capital, management resources, experience in Hong Kong's food retail and distribution industry, and domestic manufacturing capabilities and distribution network to introduce more exquisite global food products[164][168] - The objective is to create a unique food sales platform encompassing Mainland China, Hong Kong, and Japan[164][168] Mainland China Business The Group's Mainland China business is steadily growing, with popular products sold on major e-commerce platforms, benefiting from the pandemic's recovery and economic rebound, successfully stimulating sales through online and offline channels, and will remain a development focus with plans to expand Mainland Chinese foods overseas - The Group's business in the Mainland China market is steadily rising, with popular products sold on major e-commerce platforms such as Taobao, Tmall, Tmall Global, and JD.com[165][169] - Benefiting from the rapid recovery from the pandemic and the domestic economic rebound, the Group successfully stimulated sales and increased market share through online and offline channel expansion[166][169] - The Mainland China market will continue to be one of the Group's future development focuses, with plans to bring Mainland Chinese food products overseas through aggressive market strategies[166][169] Japan Business Japan's vast consumer market offers new development opportunities for the Group, which will strengthen its expansion in the Japanese market through the Miyata acquisition, consolidate Miyata's existing business, and leverage China's production capabilities to introduce Four Seas branded products, enhancing its confectionery market presence in Japan - The vast Japanese consumer market presents development opportunities for the Group[171][173] - Following the acquisition of Miyata, the Group will strengthen its expansion in the Japanese market through Miyata's sales network and consolidate Miyata's existing business[171][173] - The Group will leverage its production capabilities in China to provide Four Seas branded quality products to Japanese customers, thereby strengthening its presence in the Japanese confectionery market[171][173] Liquidity and Financial Resources As of September 30, 2020, the Group maintained ample liquidity with cash and cash equivalents of HKD 717,807 thousand, sufficient bank credit facilities with moderate utilization, a debt-to-equity ratio of 104%, and bank borrowings primarily denominated in HKD, JPY, and RMB Liquidity and Financial Resources Overview - As of September 30, 2020 (HKD Thousands) | Indicator | Amount (HKD Thousands) | | :--- | :--- | | Cash and Cash Equivalents | 717,807 | | Total Bank Credit Facilities | 2,952,575 | | Bank Credit Facility Utilization Rate | 47% | | Debt-to-Equity Ratio | 104% | - Bank borrowings are denominated in HKD, JPY, and RMB, primarily comprising trust receipt loans and bank loans, bearing interest at prevailing market rates[172][174] - Bank borrowings classified as current liabilities are repayable on demand or within one year, while non-current bank borrowings are repayable within the second to third year[172][174] Key Financial Ratios For the six months ended September 30, 2020, the Group's gross profit margin decreased, but net profit margin slightly increased, while inventory turnover days and trade receivables turnover days shortened, and trade payables turnover days remained stable Key Financial Ratios - For the six months ended September 30, 2020 | Indicator | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Gross Profit Margin | 22.4% | 29.9% | -7.5 percentage points | | Net Profit Margin | 1.4% | 1.3% | +0.1 percentage point | | Inventory Turnover Days | 42 | 62 | -20 days | | Trade Receivables Turnover Days | 57 | 69 | -12 days | | Trade Payables Turnover Days | 31 | 32 | -1 day | - Net profit margin is calculated as profit attributable to owners of the company divided by revenue[178][179] - Inventory and trade payables turnover days are calculated by dividing the average of opening and closing balances by cost of sales and multiplying by the number of days in the period[178][179] - Trade receivables turnover days are calculated by dividing the average of opening and closing balances by revenue and multiplying by the number of days in the period[178][180] Charges on Assets As of September 30, 2020, the Group had pledged approximately HKD 116,614 thousand in land and buildings and HKD 23,005 thousand in investment properties to secure bank facilities Pledged Assets - As of September 30, 2020 (HKD Thousands) | Asset Type | Amount (HKD Thousands) | | :--- | :--- | | Land and Buildings | 116,614 | | Investment Properties | 23,005 | Capital Commitments As of September 30, 2020, the Group's capital commitments for property, plant and equipment, contracted but not provided for in the financial statements, amounted to HKD 9,127 thousand Capital Commitments (Property, Plant and Equipment) - As of September 30, 2020 (HKD Thousands) | Item | Amount (HKD Thousands) | | :--- | :--- | | Contracted but Not Provided For | 9,127 | Foreign Currency Exposure The Group primarily faces currency risks from JPY and RMB transactions and continuously monitors foreign exchange conditions to minimize adverse fluctuations, but currently does not maintain a foreign currency hedging policy - The Group's transactional currency risk primarily arises from buying and selling transactions denominated in Japanese Yen (JPY) and Renminbi (RMB)[184][189] - The Group continuously monitors foreign exchange conditions to minimize the impact of adverse foreign currency fluctuations but currently does not maintain a foreign currency hedging policy[185][190] Staff Employment and Remuneration Policies As of September 30, 2020, the Group employed approximately 3,100 staff, with remuneration packages determined by market terms and individual qualifications, and salaries and wages typically reviewed annually based on performance assessments and other relevant factors - As of September 30, 2020, the Group employed approximately 3,100 staff[186][191] - Remuneration packages are determined by reference to market terms and individual qualifications, with salaries and wages typically reviewed annually based on performance assessments and other relevant factors[186][191] Directors' and Chief Executive's Interests and/or Short Positions in the Shares and Underlying Shares of the Company or Any Associated Corporation As of September 30, 2020, Mr. Tai Tak Fung and his spouse, Ms. Wu Mei Yung, held the vast majority of long positions in the Company's ordinary shares through controlled corporate interests, representing 67.52% of the total issued shares Directors' Long Positions in the Company's Ordinary Shares - As of September 30, 2020 | Director's Name | Capacity | Number of Ordinary Shares Held/Owned | Approximate Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Tai Tak Fung, Stephen | Interest in Controlled Corporation | 259,478,000 | 67.52% | | Wu Mei Yung, Quinly | Spouse's Interest and Interest in Controlled Corporation | 259,478,000 | 67.52% | - Mr. Tai Tak Fung's interests include 70,000,000 shares held by Careful Guide Limited (CGL), which he wholly owns, and 74,250,000 shares held by Special Access Limited (SAL), which he and his spouse wholly own[195][197] - Mr. Tai Tak Fung and his spouse, Ms. Wu Mei Yung, are also deemed to be interested in 115,228,000 shares held by Capital Season Investments Limited (CSI) through their interests in Hong Kong Food Investment Holdings Limited (HKFH)[197] Directors' Rights to Acquire Shares or Debentures For the six months ended September 30, 2020, the Company neither granted any rights to its directors, their spouses, or minor children to acquire shares or debentures, nor were any such rights exercised - During the period, the Company did not grant any rights to its directors or their respective spouses or minor children to acquire shares or debentures of the Company, nor were any such rights exercised[202][205] Substantial Shareholders' Interests and/or Short Positions in the Shares and Underlying Shares of the Company As of September 30, 2020, besides the directors, Special Access Limited (SAL), Careful Guide Limited (CGL), and Capital Season Investments Limited (CSI) were substantial shareholders, holding 19.32%, 18.22%, and 29.98% of the issued shares, respectively Substantial Shareholders' Long Positions in the Company's Ordinary Shares - As of September 30, 2020 | Name of Substantial Shareholder | Capacity | Number of Ordinary Shares Held/Owned | Approximate Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | SAL (Special Access Limited) | Beneficial Owner | 74,250,000 | 19.32% | | CGL (Careful Guide Limited) | Beneficial Owner | 70,000,000 | 18.22% | | CSI (Capital Season Investments Limited) | Beneficial Owner | 115,228,000 | 29.98% | | AFI (Advance Finance Investments Limited) | Interest in Controlled Corporation | 115,228,000 | 29.98% | | HKFH (Hong Kong Food Investment Holdings Limited) | Interest in Controlled Corporation | 115,228,000 | 29.98% | - AFI holds the entire issued share capital of CSI, and AFI is wholly owned by HKFH; thus, AFI and HKFH are both deemed to have an equal interest in the 115,228,000 shares of the Company held by CSI[208] Share Option Scheme For the six months ended September 30, 2020, the Company had no outstanding share options at the beginning or end of the period, granted no share options, and experienced no changes to the terms of its share option scheme - The Company had no unexercised share options at the beginning or end of the review period[214][218] - During the review period, the Company did not grant any share options under the share option scheme adopted on August 28, 2012, and there were no changes to the terms of the scheme[214][218] Purchase, Sale or Redemption of Listed Securities of the Company For the six months ended September 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended September 30, 2020[215][219] Corporate Governance For the six months ended September 30, 2020, the Board believed it complied with the Corporate Governance Code, with two deviations: non-executive directors lacked specific appointment terms, and directors filling casual vacancies were not elected at the first general meeting, which the Board deemed immaterial - The Company's directors believe they have complied with the Corporate Governance Code set out in Appendix 14 of the Listing Rules, with two deviations[216][220] - Deviations include: non-executive directors do not have specific terms of appointment (but are subject to retirement by rotation and re-election), and directors appointed to fill casual vacancies were not elected at the first general meeting (though the Board considers this immaterial)[217][220][222] - The Company has adopted the Model Code for Securities Transactions by Directors as its code of conduct for directors and established a code for employees' securities transactions, with no non-compliance during the period[224][225][228] Update of Directors' Information Under Rule 13.51B(1) of the Listing Rules The annual director's fee for Independent Non-executive Director Mr. Kijima Tsunawo will be adjusted starting April 1, 2021 - The annual director's fee for Independent Non-executive Director Mr. Kijima Tsunawo will be adjusted from HKD 341,000 to HKD 428,000, effective April 1, 2021[226][229] Audit Committee The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited condensed consolidated interim financial report for the six months ended September 30, 2020, and discussed accounting principles, risk management, internal controls, and financial reporting matters with management - The Audit Committee comprises three independent non-executive directors: Ms. Leung Mei Yin (Chairperson), Mr. Chan Yuk Sang, and Mr. Kijima Tsunawo[231][235] - The Audit Committee reviewed the unaudited condensed consolidated interim financial report for the six months ended September 30, 2020, and discussed accounting principles, risk management, internal controls, and financial reporting matters with management[231][235] Publication of Interim Results Announcement and Interim Report The Company's 2020 interim results announcement has been published on the HKEX and company websites, and the interim report will be dispatched to shareholders and posted on the websites in due course - The Company's 2020 interim results announcement has been published on the websites of Hong Kong Exchanges and Clearing Limited and the Company[232][236] - The interim report for the six months ended September 30, 2020, will be dispatched to shareholders and posted on the aforementioned websites[232][236] Appreciation The Board extends its sincere gratitude to shareholders, business partners, and employees for their continued support of the Group - The Board expresses its sincere gratitude to the Group's shareholders, business partners, and employees for their continued support[233][237] The Board As of the reporting date, the Company's Board of Directors comprised six executive directors, including Mr. Tai Tak Fung and Ms. Wu Mei Yung, and three independent non-executive directors, including Ms. Leung Mei Yin - As of the reporting date, the Company's Board of Directors comprised six executive directors and three independent non-executive directors[234][238] - The Chairman is Mr. Tai Tak Fung[234][239]