中国智能科技(00464) - 2020 - 中期财报

Company Information Company Basic Information This section details the fundamental information of China Overseas Nuoxin International Holdings Limited, covering its board, operational addresses, and stock identification - The Board of Directors comprises five executive directors and three independent non-executive directors[4] - The company's principal place of business is Unit 810, 19th Floor, 1908 Queen's Road Central, Hong Kong[4] - The company's stock code is 00464, and its website is www.co-nuoxin.com[4](index=4&type=chunk) Summary Financial Summary This section outlines the unaudited financial performance for the six months ended September 30, 2019, highlighting improved profitability despite reduced net asset value and cash Financial Summary for the Six Months Ended September 30 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Results | | | | | Turnover | 248,787 | 190,285 | +30.7% | | Gross Profit | 19,850 | 5,467 | +263.1% | | Net Loss | (11,381) | (22,916) | -50.3% | | Per Share Data | | | | | Basic Loss Per Share (HK cents) | (2.554) | (5.142) | -50.3% | | Net Asset Value Per Share (HK cents) | 28.1 | 39.1 | -28.2% | | Financial Position | | | | | Cash | 49,928 | 80,316 | -37.8% | | Net Cash | 9,761 | 30,162 | -67.6% | | Total Assets | 397,281 | 388,518 | +2.3% | | Net Assets | 125,312 | 174,397 | -28.2% | | Financial Ratios | | | | | Gross Profit Margin | 8.0% | 2.9% | +5.1pp | | Net Loss to Turnover Ratio | (4.6%) | (12.0%) | +7.4pp | | Return on Equity | (9.1%) | (13.1%) | +4.0pp | | Net Cash to Equity Ratio | 7.8% | 17.3% | -9.5pp | Management Discussion and Analysis Financial Results The Group achieved 30.7% turnover growth to HK$248.8 million and a 263.1% increase in gross profit to HK$19.85 million, significantly narrowing net loss Financial Results for the Six Months Ended September 30 | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Turnover | 248,787 | 190,285 | +30.7% | | Gross Profit | 19,850 | 5,467 | +263.1% | | Gross Profit Margin | 8.0% | 2.9% | +5.1pp | | Net Loss | (11,381) | (22,916) | -50.3% | | Basic Loss Per Share (HK cents) | (2.554) | (5.142) | -50.3% | - Turnover growth was primarily driven by increased orders for low-end products in European and Asian markets[11] - Gross profit margin improved due to a gradual decline in raw material prices, contributing to lower production costs[11] - The Board resolved not to declare an interim dividend for the six months ended September 30, 2019[13] Business Review The Group primarily designs, manufactures, and sells electronic hair care products via ODM/OEM, maintaining market position despite challenges by focusing on customer relationships and quality - The Group primarily engages in the design, manufacturing, and sale of electronic hair care products, with manufacturing based in Dongguan, China, mainly through original design manufacturing (ODM) and original equipment manufacturing (OEM) models[15] - Hair dryers constitute the largest share of the Group's revenue, followed by hair straighteners, hot air brushes, curling irons, and crimpers[15] - The Group has redesigned its manufacturing and supply chain processes to achieve cost savings[15] Market Review Amidst US-China trade tensions and China's economic slowdown, consumer preferences shifted towards low-end electronic hair care products, yet the Group maintained its market position through strong customer relationships and product quality - In the first half of 2019, ongoing US-China trade tensions and a slowdown in China's economic growth led consumers to prefer more low-end products over high-end ones[15] - The Group maintained a strong position as one of the global leading suppliers in electronic hair care products, leveraging long-term customer relationships and high-quality products[15] - The Group anticipates that European and Asian markets will remain primary revenue sources in the coming years[15] Operational Review The Group's China production centers face challenges from a slow market recovery and labor shortages, leading to increased labor costs; in response, the Group is streamlining production, focusing on high-margin products, and investing in automation to enhance efficiency and profitability - The Group faces operational challenges including a slow recovery in the Chinese market and difficulties in recruiting workshop operators, resulting in significantly increased labor costs[18] - The Group adopted a dual approach: streamlining production processes and adjusting sales strategies to focus on high-margin products, while allocating more resources to upgrade and automate manufacturing processes to improve efficiency and reduce costs[18] - The Group expects gross profit margin to continue growing in the second half of 2019[18] Liquidity and Financial Resources As of September 30, 2019, the Group's cash and bank balances decreased to HK$49.928 million, with reduced net current assets and net cash position, but improved capital gearing ratio Overview of Liquidity and Financial Resources | Metric | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 49,928 | 83,957 | -40.5% | | Net Current Assets | 38,216 | 56,973 | -32.9% | | Current Ratio | 1.1 | 1.2 | -8.3% | | Net Cash Position | 9,761 | 29,129 | -66.5% | | Net Cash to Equity Ratio | 7.8% | 29.1% | -73.2% | | Total Bank Facilities | 98,400 | 98,400 | 0% | | Utilized Bank Facilities | 40,167 | 54,828 | -26.8% | | Capital Gearing Ratio | 32.1% | 37.4% | -14.2% | - The Group consistently maintains a sound liquidity position and continuously monitors its financial resources to ensure sufficient funds for working capital and capital expenditure needs[22] Significant Investments Held For the six months ended September 30, 2019, the Group did not hold any significant investments - The Group held no significant investments for the six months ended September 30, 2019[23] Significant Acquisitions and Disposals of Subsidiaries, Associates, and Joint Ventures For the six months ended September 30, 2019, the Group did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures - The Group had no significant acquisitions or disposals of subsidiaries, associates, and joint ventures for the six months ended September 30, 2019[24] Sufficient Public Float As of the latest practicable date before the report's printing, the Company maintained a sufficient public float in accordance with the Listing Rules - The Company has maintained a sufficient public float of its issued shares as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[26] Foreign Exchange Risk The Group primarily transacts in HKD, USD, and RMB; USD exchange risk is not significant due to the HKD peg, and RMB fluctuation risk is managed by offsetting RMB receipts and payments from China operations without using financial instruments for hedging this period - The Group's financial statements are presented in HKD, with business transactions primarily conducted in HKD, USD, and RMB[27] - There is no significant exchange rate risk concerning USD due to the HKD peg to the USD[27] - To manage exchange rate risk related to RMB fluctuations, the Group successfully offsets RMB receipts and payments through its China operations and did not use any financial instruments for hedging during this period[27] Contractual and Capital Commitments As of September 30, 2019, the Group's capital commitments decreased to HK$0.915 million from HK$1.53 million as of March 31, 2019 Capital Commitments | Metric | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Capital Commitments | 915 | 1,530 | Contingent Liabilities As of September 30, 2019, the Group had no significant contingent liabilities - As of September 30, 2019, the Group had no significant contingent liabilities[28] Pledged Assets As of September 30, 2019, the Group had no pledged assets - As of September 30, 2019, the Group had no pledged assets[29] Employment and Remuneration Policies As of September 30, 2019, the Group employed 26 staff in Hong Kong and approximately 1,627 staff and workers in China, with total staff costs slightly increasing to HK$72.525 million Staff Headcount and Costs | Metric | Sep 30, 2019 | Sep 30, 2018 | | :--- | :--- | :--- | | Hong Kong Staff Headcount | 26 | 29 | | Total China Staff and Workers | 1,627 | 1,589 | | Total Staff Costs (HK$ Thousand) | 72,525 | 70,529 | - The Group's remuneration policy is based on fairness, performance-driven rewards, and market-competitive compensation packages for employees[31] - In addition to salaries, other employee benefits provided by the Group include a share option scheme, performance-linked bonuses, MPF contributions, and medical insurance[31] Outlook and Prospects The Group anticipates challenges in its hair care business, including weak consumer sentiment, pricing pressure, labor shortages, and market volatility, and plans to diversify operations and explore production expansion in Cambodia to create new revenue streams - The Group expects its main hair care products business to face challenges such as weak consumer sentiment, pressure from customers to lower selling prices, a shortage of skilled labor in mainland China, shorter product life cycles for consumer electronics, and capital market volatility and exchange rate fluctuations[32] - The Group intends to establish a representative office in Cambodia to explore production potential and cooperation outside mainland China, aiming to expand its production capacity and product and customer portfolio[32] - The Group continuously explores opportunities to expand and diversify its businesses and activities to create new revenue streams and maximize returns for the Company and its shareholders in the long term[32] Supplementary Information Share Capital For the six months ended September 30, 2019, the Company's total issued shares amounted to 445,646,000 with a par value of HK$0.001 per share - As of the six months ended September 30, 2019, the total number of issued shares in the Company's share capital was 445,646,000 with a par value of HK$0.001 per share[34] Purchase, Sale or Redemption of the Company's Listed Shares Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed shares during the period - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed shares during the period[35] Future Plans for Material Investments or Capital Assets As of September 30, 2019, the Group had no future plans for material investments or capital assets - As of September 30, 2019, the Group had no plans for material investments or capital assets[36] Interim Dividend The Board of Directors resolved not to declare an interim dividend for the six months ended September 30, 2019 - The Board resolved not to declare an interim dividend for the six months ended September 30, 2019[37] Events After the Reporting Period Subsequent to the reporting period, the Company completed the acquisition of Shanghai Tingxin Internet Financial Information Service Co., Ltd. on October 29, 2019, expanding into e-commerce and online platform businesses, which is not a discloseable transaction under Listing Rule Chapter 14 - The Company completed the acquisition of the entire equity interest in Shanghai Tingxin Internet Financial Information Service Co., Ltd. on October 29, 2019[39] - The acquisition aligns with the Group's business development strategy, offering a good opportunity to expand into e-commerce, including pre-sale and group-buying online platform businesses[39] - As the applicable percentage ratios for the acquisition did not exceed 5%, it is not subject to the reporting, announcement, and shareholder approval requirements under Chapter 14 of the Listing Rules[39] Directors' and Chief Executive's Interests and Short Positions in Shares of the Company As of September 30, 2019, no directors or chief executive of the Company held any interests or short positions in the shares, underlying shares, or debentures of the Company or its associated corporations that required disclosure under the Securities and Futures Ordinance or the Listing Rules Model Code - As of September 30, 2019, no directors or chief executive of the Company held any interests or short positions in the shares, underlying shares, or debentures of the Company or its associated corporations as recorded in the register maintained by the Company under Section 352 of the Securities and Futures Ordinance, or as required to be notified to the Company and The Stock Exchange of Hong Kong Limited under the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 of the Listing Rules[43] Substantial Shareholders' Interests and Short Positions in Shares of the Company As of September 30, 2019, Zhongyun Capital Limited and its associates held 56.80% of the Company's shares, with Tianjin Xiantong Investment Management Co., Ltd. and Tianjin Huitongyuan Asset Management Co., Ltd. holding 11.35% and 9.99% respectively, and Everbright International Financial Holdings Limited and Everbright Securities Co., Ltd. holding a 51.01% pledged interest Substantial Shareholders' Long Positions in Shares of the Company | Name of Substantial Shareholder | Capacity and Nature of Interest | Number of Shares Held | Approximate Percentage of Issued Shares | | :--- | :--- | :--- | :--- | | Zhongyun Capital Limited | Beneficial owner | 253,132,500 | 56.80% | | China Investment International Limited | Interest in controlled corporation | 253,132,500 | 56.80% | | Asia Glory Management Group Limited | Interest in controlled corporation | 253,132,500 | 56.80% | | Luckever Holdings Limited | Interest in controlled corporation | 253,132,500 | 56.80% | | Li Yuelan | Interest in controlled corporation | 253,132,500 | 56.80% | | Liu Xuezhong | Interest in controlled corporation | 253,132,500 | 56.80% | | Tianjin Xiantong Investment Management Co., Ltd. | Beneficial owner | 50,575,000 | 11.35% | | Tianjin Huitongyuan Asset Management Co., Ltd. | Beneficial owner | 44,500,000 | 9.99% | | Everbright International Financial Holdings Limited | Interest in pledged shares | 227,332,500 | 51.01% | | Everbright Securities Co., Ltd. | Interest in pledged shares | 227,332,500 | 51.01% | Share Option Scheme The Company adopted a new share option scheme on August 6, 2015, valid for ten years, with no options granted or outstanding during the six months ended September 30, 2019 - The Company adopted a new share option scheme on August 6, 2015, which will remain effective for a period of ten (10) years[49] - No share options were granted under the new share option scheme during the six months ended September 30, 2019[49] - As of September 30, 2019, no share options were outstanding[49] Arrangements to Purchase Shares or Debentures During the period, the Company did not grant any rights to directors or their associates to subscribe for its securities, nor did it enter into any arrangements enabling directors to acquire similar rights in other corporations - At no time during the period did the Company grant any rights to any director or their respective spouses or children under 18 years of age to subscribe for the Company's securities for their benefit, nor did they exercise any such rights[50] - Neither the Company, its holding company, its subsidiaries, nor fellow subsidiaries entered into any arrangements that would enable directors to acquire relevant rights in any other body corporate[50] Competing Interests As of September 30, 2019, no directors or controlling shareholders of the Company, or their respective associates, held any interests in other companies that might directly or indirectly compete with the Group's business, other than their interests in the Group - As of September 30, 2019, other than their interests in the Group, no directors or controlling shareholders of the Company or their respective associates held any interests in any other company that might directly or indirectly compete with the Group's business[51] Corporate Governance The Company is committed to developing a robust corporate governance framework to enhance accountability, transparency, independence, responsibility, and fairness for shareholders and stakeholders Corporate Governance Practices The Company is dedicated to enhancing corporate governance, ensuring accountability, transparency, independence, responsibility, and fairness, with regular reviews and improvements; the Board confirms compliance with the Corporate Governance Code, except for the absence of independent non-executive directors at the AGM - The Company is committed to developing a corporate governance framework suitable for the Group to enhance accountability, transparency, independence, responsibility, and fairness for shareholders and business-related parties[52] - The Board believes that the Company has complied with the applicable code provisions of the Corporate Governance Code and Corporate Governance Report contained in Appendix 14 of the Listing Rules for the six months ended September 30, 2019, except that independent non-executive directors Mr. Chan Ka Yin and Mr. Wong Chi Wai were unable to attend the Company's Annual General Meeting held on August 23, 2019, due to other commitments[52] Compliance with the Model Code for Securities Transactions by Directors The Company has adopted procedures for directors' securities transactions that are no less stringent than the Model Code, and all directors confirmed full compliance during the reporting period - The Company has adopted procedures governing directors' securities transactions, with terms no less stringent than the required standards set out in the Model Code[53] - Following specific inquiries with all directors, all directors confirmed their full compliance with the required standards, and the Company is not aware of any non-compliance with the required standards set out in the Model Code for the six months ended September 30, 2019[53] Board of Directors The Board of Directors consists of eight members, including five executive directors (Mr. Gao Jianbo, Ms. Cai Dongyan, Mr. Zhang Huijun, Ms. Lin Jiahui, Mr. Lin Liangyong) and three independent non-executive directors (Mr. Chan Ka Yin, Mr. Wong Chi Wai, Mr. Lam Yick Man) - The Board of Directors comprises eight directors, including five executive directors: Mr. Gao Jianbo (Chairman), Ms. Cai Dongyan (Chief Executive Officer), Mr. Zhang Huijun, Ms. Lin Jiahui, and Mr. Lin Liangyong[55] - The three independent non-executive directors are Mr. Chan Ka Yin, Mr. Wong Chi Wai, and Mr. Lam Yick Man[55] Remuneration Committee The Remuneration Committee is responsible for reviewing and recommending the Group's remuneration policies, executive directors' and senior management's basic salaries and performance bonuses, and is composed of three independent non-executive directors and one executive director, with Mr. Chan Ka Yin as Chairman - The Remuneration Committee is responsible for reviewing and recommending the Group's overall remuneration policy and remuneration packages; reviewing and recommending the basic salaries of the Group's executive directors and senior management; and recommending performance bonuses for the Company's executive directors[56] - The Remuneration Committee comprises three independent non-executive directors (Mr. Chan Ka Yin, Mr. Wong Chi Wai, and Mr. Lam Yick Man) and one executive director (Mr. Zhang Huijun), with Mr. Chan Ka Yin appointed as Chairman of the Remuneration Committee[56] Nomination Committee The Nomination Committee is responsible for formulating and implementing the Board's nomination policy, consisting of three independent non-executive directors with Mr. Chan Ka Yin as Chairman, and its terms of reference comply with the Corporate Governance Code in Appendix 14 of the Listing Rules - The Nomination Committee is responsible for formulating nomination policies for the Board's consideration and implementing the nomination policies established by the Board[57] - The Nomination Committee comprises three independent non-executive directors (Mr. Chan Ka Yin, Mr. Wong Chi Wai, and Mr. Lam Yick Man), with Mr. Chan Ka Yin appointed as Chairman of the Nomination Committee[57] Audit Committee Established on April 29, 2005, the Audit Committee reviews and oversees the Group's financial reporting, risk management, and internal control systems, and has discussed accounting principles and reviewed the interim financial statements with management - The primary responsibilities of the Audit Committee are to review and oversee the Group's financial reporting process, risk management, and internal control systems, with a particular focus on any changes in accounting policies and practices, compliance with accounting standards, and legal requirements when reviewing financial statements[59] - The Audit Committee comprises three independent non-executive directors (Mr. Chan Ka Yin, Mr. Wong Chi Wai, and Mr. Lam Yick Man), with Mr. Chan Ka Yin appointed as Chairman of the Audit Committee[60] - The Audit Committee has discussed the accounting principles and policies adopted by the Group with management and reviewed this report and the Group's unaudited condensed consolidated interim financial statements for the six months ended September 30, 2019[60] Risk Management The Board considers risk management crucial for the Company's success, with the Group employing a pragmatic approach to identify, assess, and mitigate risks through action plans, and continuously strengthening risk management and internal control systems - The Board considers risk management one of the key success factors for the Company[62] - Management regularly identifies potential risks, assesses their impact and likelihood, and develops appropriate action plans to mitigate the level of risk[62] - The Group will continue to strengthen its risk management measures and internal control systems, and adopt a stringent governance framework by referencing market best practices[62] Internal Control The Board is fully responsible for maintaining sound and effective internal control and risk management systems, designed to safeguard assets, ensure accurate accounting records, enhance financial reporting reliability, and comply with laws and regulations, providing reasonable assurance for achieving objectives and mitigating operational risks - The Board is fully responsible for maintaining sound and effective internal control and risk management systems for the Group and reviewing their effectiveness[63] - The internal control and risk management systems are designed to provide reasonable, but not absolute, assurance against material misstatement or loss, and to manage and minimize the risk of failure in the Group's operating systems[63] Disclosure of Directors' Information Pursuant to Rule 13.51B(1) of the Listing Rules During the reporting period, independent non-executive director Mr. Chan Ka Yin's directorships changed, including his resignation from Dickson Construction International Group Limited and appointment to China Kangda Food Company Limited - Mr. Chan Ka Yin resigned as an independent non-executive director, chairman of the audit committee and internal control committee, and a member of the remuneration committee and nomination committee of Dickson Construction International Group Limited, effective July 29, 2019[65] - Mr. Chan was appointed as an independent non-executive director, chairman of the audit committee, and a member of the nomination committee and remuneration committee of China Kangda Food Company Limited, effective November 7, 2019[65] Change of Company Name and Amendments to and Restatement of Constitutional Documents The Company's English name was changed to "China Overseas Nuoxin International Holdings Limited" and its Chinese name to "中国海外诺信国际控股有限公司" via a special resolution on May 27, 2019, with constitutional documents amended to reflect this change, effective May 31, 2019 - The Company passed a special resolution at an extraordinary general meeting held on May 27, 2019, to change its English name from "Kenford Group Holdings Limited" to "China Overseas Nuoxin International Holdings Limited" and its dual foreign name from "建福集团控股有限公司" to "中国海外诺信国际控股有限公司"[66] - The change of name became effective on May 31, 2019[66] Publication of Interim Results The Company has published its interim results and related financial information on the HKEX website and plans to dispatch the interim report to shareholders in early December 2019, also making it available for public inspection at its principal place of business in Hong Kong and on the company website - The Company has published all details of its financial and related information (including all information required by paragraphs 46(1) to 46(9) of Appendix 16 of the Listing Rules) on the HKEX website[68] - This interim report will also be dispatched to shareholders in early December 2019 and made available for public inspection at the Company's principal place of business in Hong Kong and on its website[68][69] Other Disclosures Except for the information already disclosed, there were no other material changes to the information disclosed in the Company's most recent annual report, or such changes were deemed immaterial to the Group's operations, thus no further disclosures are made in this report - Except for what has been disclosed, there were no other material changes to the information disclosed in the Company's most recent annual report, or such changes were deemed immaterial to the Group's operations, thus no other disclosures are made in this report[69] Acknowledgement The Board extends its sincere gratitude to all employees for their loyal service and contributions, and to customers, suppliers, banks, and shareholders for their continuous support - The Board takes this opportunity to express its sincere gratitude to all employees for their loyal service and contributions, and to customers, suppliers, banks, and shareholders for their continuous support[70] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Overview of Profit or Loss and Comprehensive Income This section presents the condensed consolidated statement of profit or loss and other comprehensive income for the six months ended September 30, 2019, showing turnover of HK$248.8 million, gross profit of HK$19.85 million, loss for the period of HK$11.381 million, and total comprehensive expense for the period of HK$21.204 million Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the Six Months Ended September 30) | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Turnover | 248,787 | 190,285 | | Cost of Sales | (228,937) | (184,818) | | Gross Profit | 19,850 | 5,467 | | Other Income, Gains and Losses | 3,314 | 8,056 | | Distribution Costs | (3,964) | (3,348) | | Administrative Expenses | (29,663) | (31,652) | | Finance Costs | (983) | (914) | | Loss Before Tax | (11,446) | (22,391) | | Income Tax | 65 | (525) | | Loss for the Period Attributable to Owners of the Company | (11,381) | (22,916) | | Exchange Differences on Translation of Overseas Operations | (9,823) | (12,882) | | Total Comprehensive Expense for the Period Attributable to Owners of the Company | (21,204) | (35,798) | | Basic Loss Per Share (HK cents) | (2.554) | (5.142) | Condensed Consolidated Statement of Financial Position Overview of Financial Position This section provides the condensed consolidated statement of financial position as of September 30, 2019, showing total assets less current liabilities of HK$141.3 million and net assets of HK$125.3 million, with non-current assets including property, plant and equipment and right-of-use assets, and current assets primarily comprising inventories, trade receivables, and bank balances Condensed Consolidated Statement of Financial Position (As of September 30, 2019) | Metric | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 94,864 | 99,822 | | Right-of-use Assets | 6,599 | – | | Current Assets | | | | Inventories | 95,362 | 90,462 | | Trade and Bills Receivables | 127,654 | 101,116 | | Bank Balances and Cash | 49,928 | 83,957 | | Current Liabilities | | | | Trade Payables | 103,415 | 80,797 | | Loans from Related Parties | 71,345 | 70,045 | | Bank Borrowings | 40,167 | 54,828 | | Net Current Assets | 38,216 | 56,973 | | Net Assets | 125,312 | 146,468 | | Share Capital | 446 | 446 | | Share Premium and Reserves | 124,866 | 146,022 | | Total Equity | 125,312 | 146,468 | Condensed Consolidated Statement of Changes in Equity Overview of Changes in Equity This section presents the condensed consolidated statement of changes in equity for the six months ended September 30, 2019, showing a decrease in total equity attributable to owners of the Company from HK$146.5 million at the beginning of the period to HK$125.3 million at the end, primarily due to loss for the period and a reduction in translation reserve Condensed Consolidated Statement of Changes in Equity (Attributable to Owners of the Company) | Metric | Share Capital (HK$ Thousand) | Share Premium (HK$ Thousand) | Merger Reserve (HK$ Thousand) | Property Revaluation Reserve (HK$ Thousand) | Translation Reserve (HK$ Thousand) | Retained Profits (HK$ Thousand) | Total (HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Apr 1, 2019 (Audited) | 446 | 63,099 | 942 | 47,779 | 6,942 | 27,260 | 146,468 | | Loss for the Period | – | – | – | – | – | (11,381) | (11,381) | | Other Comprehensive Expense for the Period | – | – | – | – | (9,823) | 48 | (9,775) | | Total Comprehensive Expense for the Period | – | – | – | – | (9,823) | (11,333) | (21,156) | | Sep 30, 2019 (Unaudited) | 446 | 63,099 | 942 | 47,779 | (2,881) | 15,927 | 125,312 | Condensed Consolidated Statement of Cash Flows Overview of Cash Flows This section presents the condensed consolidated statement of cash flows for the six months ended September 30, 2019, showing net cash used in operating activities of HK$15.128 million, net cash used in investing activities of HK$2.365 million, and net cash used in financing activities of HK$14.344 million, resulting in a net decrease in cash and cash equivalents of HK$31.837 million Condensed Consolidated Statement of Cash Flows (For the Six Months Ended September 30) | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Net Cash (Used in) Generated from Operating Activities | (15,128) | 16,083 | | Net Cash (Used in) Investing Activities | (2,365) | (10,784) | | Net Cash (Used in) Generated from Financing Activities | (14,344) | 17,578 | | Net (Decrease) Increase in Cash and Cash Equivalents | (31,837) | 22,877 | | Cash and Cash Equivalents at Beginning of Period | 83,957 | 58,072 | | Effect of Exchange Rate Changes | (2,192) | (633) | | Cash and Cash Equivalents at End of Period | 49,928 | 80,316 | Notes to the Condensed Consolidated Financial Statements General Information The Company, incorporated in the Cayman Islands on November 10, 2004, and listed on HKEX since June 16, 2005, is an investment holding company whose subsidiaries primarily design, manufacture, and sell electronic hair care products; its name changed to "China Overseas Nuoxin International Holdings Limited" on May 31, 2019, and this interim report is presented in HKD - The Company was incorporated in the Cayman Islands as an exempted company with limited liability on November 10, 2004, and its shares have been listed on The Stock Exchange of Hong Kong Limited since June 16, 2005[87] - The Company is an investment holding company, and its subsidiaries' principal business is the design, manufacture, and sale of electronic hair care products[87] - The Company's name changed from Kenford Group Holdings Limited to China Overseas Nuoxin International Holdings Limited, effective May 31, 2019[88] Basis of Preparation and Principal Accounting Policies The condensed consolidated financial statements are prepared in accordance with Appendix 16 of the Listing Rules and HKAS 34 "Interim Financial Reporting," primarily on a historical cost basis, with the first-time application of HKFRS 16 "Leases" impacting financial position and performance by recognizing right-of-use assets and lease liabilities - The condensed consolidated financial statements are prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[89] - The condensed consolidated financial statements are prepared on a historical cost basis, except for leasehold land which is measured at revalued amounts[91] - During this interim period, the Group first applied Hong Kong Financial Reporting Standard 16 "Leases" and other new and revised Hong Kong Financial Reporting Standards[91] Impact of Application of HKFRS 16 "Leases" and Changes in Accounting Policies The Group first applied HKFRS 16, replacing HKAS 17, which requires lessees to recognize right-of-use assets and lease liabilities, and specifies detailed rules for lease definition, consideration allocation, exemptions for short-term and low-value leases, measurement and depreciation of right-of-use assets, recognition and remeasurement of lease liabilities, lease modifications, and tax treatment - The Group first applied Hong Kong Financial Reporting Standard 16 during this interim period, which replaces Hong Kong Accounting Standard 17 Leases and related interpretations[93] - The new standard stipulates that a contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration[95] - As a lessee, the Group recognizes right-of-use assets and lease liabilities at the lease commencement date and applies recognition exemptions for short-term leases and leases of low-value assets[98][100][104] Summary of Impact Arising from Transition and Initial Application of HKFRS 16 The Group retrospectively applied HKFRS 16, recognizing cumulative effects on January 1, 2019, without restating comparative information; during transition, practical expedients were used for operating leases, leading to an increase in right-of-use assets by HK$3.082 million and a corresponding decrease in prepaid lease payments - The Group retrospectively applied Hong Kong Financial Reporting Standard 16, with the cumulative effect recognized at the date of initial application (January 1, 2019), and comparative information is not restated[114] - The Group applied practical expedients to leases previously classified as operating leases under Hong Kong Accounting Standard 17, including not recognizing right-of-use assets and lease liabilities for leases ending within 12 months from the date of initial application, and not including initial direct costs when measuring right-of-use assets at the date of initial application[116] Impact of Adopting HKFRS 16 | Metric | Amount (HK$ Thousand) | | :--- | :--- | | Increase in Right-of-use Assets | 3,082 | | Decrease in Prepaid Lease Payments | (3,082) | | Net Impact | – | Revenue Revenue represents amounts received and receivable from the sale of electronic hair care products - Revenue represents amounts received and receivable from the sale of electronic hair care products[125] Seasonality of Operations The Group's business is seasonal, with higher sales typically in the second and third fiscal quarters driven by increased retail demand during Christmas and Lunar New Year holidays, necessitating increased production in the second quarter to build inventory - The Group's sales are typically higher in the second and third fiscal quarters compared to other quarters, primarily due to increased retail demand for products during the Christmas and Lunar New Year holidays[126] - To meet this demand, the Group increases production in the second fiscal quarter to build up inventory[126] Segment Information The Group's single reportable operating segment is the design, manufacturing, and sale of electronic hair care products, with revenue primarily segmented by customer geographical location, where Europe and Asia are the main revenue sources, followed by North and South America - The Company's executive directors consider the design, manufacturing, and sale of electronic hair care products as a single reportable operating segment[127] Revenue from External Customers by Customer Geographical Location | Region | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Europe | 122,366 | 95,520 | | Asia | 86,729 | 62,155 | | North and South America | 37,981 | 28,378 | | Africa | 754 | 2,445 | | Australia | 957 | 1,787 | | Total | 248,787 | 190,285 | Loss Before Tax Loss before tax is stated after deducting or crediting various expenses, including cost of inventories, depreciation, and staff costs; for the current period, cost of inventories was HK$229.684 million and total staff costs were HK$72.525 million Items Deducted/(Credited) in Loss Before Tax (For the Six Months Ended September 30) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Cost of Inventories Recognized as Expense | 229,684 | 185,016 | | Depreciation of Property, Plant and Equipment | 1,491 | 2,549 | | Depreciation of Right-of-use Assets | 452 | – | | Amortization of Prepaid Lease Payments | – | 46 | | Total Staff Costs (Including Directors' Emoluments) | 72,525 | 70,529 | | Reversal of Inventory Provision | (747) | (198) | | Net Exchange (Gain)/Loss | (1,139) | 417 | Income Tax Income tax for the current period was HK$65 thousand, primarily comprising current tax for China enterprise income tax and an adjustment for over-provision in prior years Income Tax (For the Six Months Ended September 30) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | China Enterprise Income Tax: Current Tax | 273 | 15 | | China Enterprise Income Tax: Over-provision in Prior Years | (338) | – | | Hong Kong Profits Tax: Current Tax | – | 510 | | Total Income Tax | (65) | 525 | Loss Per Share For the six months ended September 30, 2019, basic loss per share was 2.554 HK cents, an improvement from 5.142 HK cents in the prior year, with no diluted loss per share as no potential ordinary shares were outstanding in either period Loss Per Share Calculation (For the Six Months Ended September 30) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Loss for the Purpose of Calculating Basic Loss Per Share (HK$ Thousand) | (11,381) | (22,916) | | Weighted Average Number of Ordinary Shares for Basic Loss Per Share (Thousand shares) | 445,646 | 445,646 | | Basic Loss Per Share (HK cents) | (2.554) | (5.142) | - There was no diluted loss per share for the six months ended September 30, 2019 and 2018, as there were no outstanding potential ordinary shares during the respective periods[135] Dividends The directors have resolved not to declare an interim dividend for the six months ended September 30, 2019 - The directors have resolved not to declare an interim dividend for the six months ended September 30, 2019[136] Property, Plant and Equipment and Right-of-use Assets During this interim period, the Group incurred approximately HK$2.574 million in additions to property, plant and equipment, and recognized approximately HK$4.157 million in right-of-use assets and an equal amount of lease liabilities due to new lease agreements; the directors believe there is no material difference between the carrying amount and fair value of leasehold land and buildings - During this interim period, the Group incurred additions to property, plant and equipment amounting to approximately HK$2,574,000[137] - At the commencement of the lease, the Group recognized right-of-use assets of approximately HK$4,157,000 and lease liabilities of the same amount[137] - The directors believe that there is no material difference between the carrying amount of the Group's leasehold land and buildings measured at revalued amounts and their estimated fair value at the end of the period[140] Trade and Bills Receivables As of September 30, 2019, total trade and bills receivables increased to HK$127.654 million from HK$101.116 million as of March 31, 2019, with credit terms generally ranging from 14 to 90 days, extending up to 120 days for major customers Total Trade and Bills Receivables | Metric | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Trade Receivables | 125,942 | 101,365 | | Less: Provision for Losses | (571) | (571) | | Bills Receivables | 2,283 | 322 | | Total | 127,654 | 101,116 | - The credit period granted by the Group generally ranges from 14 to 90 days, and for major customers, the Group allows a credit period of up to 120 days from the invoice date[141] Ageing Analysis of Trade and Bills Receivables | Ageing | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Within 60 Days | 80,890 | 49,532 | | 61 to 120 Days | 39,633 | 39,903 | | 121 to 365 Days | 6,717 | 11,643 | | Over 365 Days | 414 | 38 | | Total | 127,654 | 101,116 | Trade Payables As of September 30, 2019, total trade payables increased to HK$103.415 million from HK$80.797 million as of March 31, 2019, with credit terms for product purchases generally ranging from 30 to 120 days Ageing Analysis of Trade Payables | Ageing | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Within 60 Days | 62,458 | 65,187 | | 61 to 120 Days | 33,591 | 11,483 | | 121 to 365 Days | 5,952 | 2,806 | | Over 365 Days | 1,414 | 1,321 | | Total | 103,415 | 80,797 | - Credit terms for product purchases generally range from 30 to 120 days[144] Loans from Related Parties As of September 30, 2019, loans from related parties totaled HK$71.345 million, including HK$13.745 million from controlling shareholder Zhongyun Capital Limited and HK$57.6 million from key management personnel Mr. Tam Chi Sang and Mr. Lam Wai Ming; these loans are unsecured, interest-free, and repayable within one year Loans from Related Parties | Related Party | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Zhongyun Capital Limited | 13,745 | 10,045 | | Mr. Tam Chi Sang and Mr. Lam Wai Ming | 57,600 | 60,000 | | Total | 71,345 | 70,045 | - The amounts are unsecured, interest-free, and repayable within one year from the date of drawdown[147] - Zhongyun Capital is the Company's controlling shareholder, and Mr. Tam Chi Sang and Mr. Lam Wai Ming are both key management personnel of the Group[148][149] Share Capital As of September 30, 2019, the Company's authorized share capital was HK$1,000 thousand, with issued and fully paid share capital of HK$446 thousand, representing 445,646 thousand ordinary shares of HK$0.001 par value each Share Capital Structure | Share Type | Number of Shares (Thousand shares) | Par Value (HK$ Thousand) | | :--- | :--- | :--- | | Authorized: Ordinary Shares of HK$0.001 Par Value Each | 1,000,000 | 1,000 | | Issued and Fully Paid: Ordinary Shares of HK$0.001 Par Value Each | 445,646 | 446 | Capital Commitments As of September 30, 2019, the Group's capital expenditure for the acquisition of property, plant and equipment contracted but not provided for in the condensed consolidated financial statements amounted to HK$0.915 million Capital Commitments | Item | Sep 30, 2019 (HK$ Thousand) | Mar 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Capital expenditure for the acquisition of property, plant and equipment contracted but not provided for in the condensed consolidated financial statements | 915 | 1,530 | Related Party Transactions During the period, total emoluments for directors and other key management personnel amounted to HK$2.587 million, including salaries, allowances, and contributions to defined contribution plans; the key management personnel comprised 12 individuals Directors' and Other Key Management Personnel's Emoluments (For the Six Months Ended September 30) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Salaries and Other Allowances and Benefits | 2,528 | 6,091 | | Contributions to Defined Contribution Plans | 59 | 72 | | Total | 2,587 | 6,163 | - Key management personnel are individuals with the authority and responsibility for planning, directing, and controlling the Group's business, including directors and other senior management, totaling 12 individuals[153]