谭木匠(00837) - 2019 - 中期财报

Company Information This section provides basic company information for Tanmujiang Holding Co., Ltd., including board members, committee composition, registered office, headquarters, principal place of business in Hong Kong, auditor, legal counsel, share registrar, stock code, and principal bankers, offering essential background for understanding the company's governance structure and operational foundation - Board members include executive, non-executive, and independent non-executive directors, with a Nomination Committee, Audit Committee, and Remuneration Committee[4][7][10][14][19][24] - The company's registered office is in the Cayman Islands, headquarters in Jurong City, Jiangsu Province, China, and principal place of business in Mong Kok, Kowloon, Hong Kong[15][19][20][25][26] - The company's stock code is 837, auditor is Crowe (HK) CPA Limited, and legal counsel is Hastings & Co[25][26] Financial Highlights This section outlines Tanmujiang Holding Co., Ltd.'s key financial performance and liquidity for the six months ended June 30, 2019, showing growth in revenue and profit attributable to owners, a slight decrease in gross profit margin, robust liquidity, and no interest-bearing bank borrowings Financial Highlights for the Six Months Ended June 30 | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Percentage Change (Increase/Decrease) | | :--- | :------------------ | :------------------ | :---------------------- | | Revenue | 170,355 | 157,578 | 8.1% | | Cost of Sales | (63,923) | (51,114) | 25.1% | | Gross Profit | 106,432 | 106,464 | (0.0)% | | Gross Profit Margin | 62.5% | 67.6% | (5.1) percentage points | | Profit Before Tax | 87,392 | 78,753 | 11.0% | | Profit Attributable to Owners of the Company | 73,046 | 64,481 | 13.3% | | Basic Earnings Per Share (RMB cents) | 29.4 | 25.9 | 13.5% | Liquidity and Gearing Ratio Highlights | Indicator | June 30, 2019 | December 31, 2018 | Percentage Change (Increase/Decrease) | | :--- | :------------ | :------------- | :---------------------- | | Current Ratio (1) | 7.84 | 7.96 | (1.5)% | | Quick Ratio (2) | 5.56 | 5.97 | (6.9)% | | Gearing Ratio (3) | Not Applicable (4) | Not Applicable (4) | Not Applicable (4) | - The Group had no interest-bearing bank borrowings as of June 30, 2019, and December 31, 2018, thus the gearing ratio is not applicable[32] Chairman's Report The Chairman's Report highlights Tanmujiang Holding Co., Ltd.'s stable development and orderly operations during the reporting period, successful 'Comb Garden' brand promotion, and a commitment to brand rejuvenation and seeking breakthroughs in the second half of the year - The Group maintained stable development and orderly operations during the reporting period, with overall steady progress[37] - Successfully held the 'Comb Garden' brand promotion event, effectively engaging younger consumers through interactive and immersive experiences, receiving enthusiastic responses[37] - In the second half of 2019, the Group aims to seek breakthroughs and innovations on a stable foundation to revitalize the brand for the present and future[38] Management Discussion and Analysis This section details Tanmujiang Holding Co., Ltd.'s operational performance, business strategies, financial position, and future outlook for the first half of 2019, covering brand rejuvenation, channel expansion, product R&D, production, corporate culture, and human resources Management Review Management review indicates overall operations met expectations despite personnel changes, with the company steadily progressing, launching the 'Comb Garden' exhibition, new member system, official website, and sales mini-program, alongside advancements in product R&D, marketing, and overseas expansion - Overall operations for the reporting period were in line with expectations, with the company continuing to make steady progress after personnel changes[42] - Tanmujiang began exploring new brand directions, hosting the 'Comb Garden' touring exhibition, successfully launching a member system and new official website, with the sales mini-program entering testing[42] - Brand strategy shifted from conceptual expansion to concrete actions, with refined product R&D, innovative online and offline marketing, and substantial progress in overseas expansion[42] Business Review Business review covers Tanmujiang's online and offline, domestic and international market operations, creative R&D, production technology, logistics, and corporate culture, emphasizing brand rejuvenation, global expansion, product quality, and employee welfare Offline Business Offline domestic market remained stable with 1,223 franchised stores, focusing on premium shopping centers and transport hubs with upgraded store images, while overseas business saw slight progress, stable Hong Kong direct sales, and active expansion into new markets like Canada and Malaysia Domestic Business Domestic offline marketing team remained stable after personnel changes, with 1,223 franchised stores in China as of June 30, 2019, focusing on premium shopping centers (80% new stores) and third-generation store images (75%), achieving 1.8% sales growth and enhanced customer loyalty through a new member system and experiential marketing - As of June 30, 2019, Tanmujiang had 1,223 franchised stores in mainland China, maintaining a stable store count[43][46] - New store expansion focused on premium shopping centers and transport hubs, with 80% of new stores in shopping centers and 75% featuring the third-generation store image[50] - First-half sales increased by 1.8% year-on-year, with a slight increase in average single-store sales performance[72] - Launched the Tanmujiang member system, opened the first Morandi elegant style concept store, and continued experiential marketing activities like comb painting, enhancing brand awareness and customer loyalty[63][64] Overseas Business Overseas business made substantial progress with 4 franchised stores and 3 direct stores in Hong Kong, including the first mall store at Telford Plaza, with new stores in Canada, Malaysia, Singapore, Taichung, and Germany, four of which are operational and showing steady growth, with plans for improved operations and increased brand exposure through exhibitions - Tanmujiang currently has 4 franchised stores in other countries and regions, 3 direct stores in Hong Kong, and opened its first mall store at Telford Plaza in Hong Kong[73] - Overseas stores have signed agreements in Canada, Malaysia, Singapore, Taichung, and Germany, with four already operational and showing steady growth[76] - Participated in the Taipei International Chain and Franchise Exhibition twice in the first half of 2019, gathering more potential franchisee information[76] - In the second half, the company will continue to improve overseas store opening and operation management, provide more suitable support for overseas markets, and enhance brand exposure through exhibitions and promotional platforms[76] Online Business Online business achieved significant growth both domestically and internationally, with domestic e-commerce sales up 18.3% driven by Tmall and JD.com through holiday marketing and live streaming, while international online presence expanded across multiple platforms, promoting brand culture through offline events and social media Domestic Business Tanmujiang's e-commerce team successfully met sales targets in the first half of 2019, achieving an 18.3% year-on-year increase, primarily driven by Tmall (RMB 47.5 million, up 16.1%) and JD.com (RMB 19.5 million, up 18.9%), with notable holiday sales growth (Valentine's Day up 110%, 618 up 84%) and increased fan loyalty through live streaming - In the first half of 2019, the e-commerce team successfully met sales targets, achieving an 18.3% year-on-year sales growth[77] 2019 H1 Domestic Online Sales | Platform | 2019 H1 Sales (RMB millions) | Year-on-year Growth Rate | | :--- | :-------------------------------- | :--------- | | Tmall | 47.5 | 16.1% | | JD.com | 19.5 | 18.9% | - Key holiday sales performed exceptionally, with Valentine's Day sales increasing by 110% compared to 2018, and 618 period sales increasing by 84.0%[84] - Monthly live streaming events were planned to coincide with promotional activities, showcasing products in a personalized manner and increasing fan loyalty[84] Overseas Business Tanmujiang's online e-commerce has successfully launched on numerous international platforms including Amazon US, eBay Australia/UK, Amazon Japan, Naver Korea, Lazada Singapore, and Shopee Malaysia, collaborating with North American cross-border e-commerce and promotion teams for content creation on Facebook and Instagram, and expanding local brand influence through offline events like 'Combing for Mom' and Met Gala appearances to promote Chinese culture - Online e-commerce has successfully launched on numerous international platforms including Amazon US, eBay Australia, eBay UK, independent US website, Amazon Japan, and Naver Korea[86] - Collaborated with North American cross-border e-commerce and US promotion teams to regularly produce content and promote the brand on Facebook and Instagram[86] - Expanded local brand influence and promoted Chinese culture through activities like 'Combing for Mom,' comb painting DIY, and appearing at the Met Gala with Hollywood actress Gemma Chan[87] - In the second half, the company will enhance innovation awareness, increase investment in online media promotion, and actively produce supporting content to overcome 'language barriers'[87] Creative R&D The Creative Design Center conducted 12 product designs in the first half of 2019, launching 38 items with 6 becoming regular products, successfully developing Disney IP products (Mickey family, Princess series, Mulan blockbuster), optimizing functional products like boar bristle brushes, and filing 4 new patents, with plans for diversified, personalized, and refined products, new categories, and improved craftsmanship in the second half - In the first half, the Creative Design Center conducted 12 product designs and developments, submitted 65 design proposals, launched 38 products, and incorporated 6 into regular sales[89] - Developed Mickey family and Princess series under the 'Disney' IP category, and for the first time, a blockbuster Mulan product combining Chinese traditional craftsmanship[89] - Functionally upgraded and redefined boar bristle brushes, innovatively optimized multi-material comb-pin hairbrushes; the first batch of 5,000 Jade Rabbit Gua Sha boards sold out upon launch[89] - In the first half of 2019, 4 new patents were applied for, including 3 utility model patents and 1 invention patent[89] - In the second half, R&D thinking will be broader, not limited to existing product styles or structures, daring to innovate and break through, with products considering diversification, personalization, and refinement, and continuously improving the product system by adding new categories and enhancing new craftsmanship[90] Production Technology Tanmujiang factory employs 731 staff, nearly half with disabilities, who craft exquisite combs, demonstrating their value, while the company continuously innovates equipment and processing methods, implementing lean production to control costs and increase output, with 23 technical innovation projects proposed and 9 initiated, prioritizing safety and a caring 6S work environment, and enhancing disabled employees' skills and living standards Production Volume for the Six Months Ended June 30 For the six months ended June 30, 2019, comb production reached 1,986,888 units, a 6.9% increase year-on-year, while mirror and accessory production slightly decreased, totaling 2,361,744 units, a 5.4% overall increase Production Volume for the Six Months Ended June 30 | | 2019 (Units) | 2018 (Units) | | :--- | :------------ | :------------ | | Combs | 1,986,888 | 1,858,675 | | Mirrors, Accessories | 374,856 | 383,067 | | Total | 2,361,744 | 2,241,742 | - Comb production increased by 6.9% year-on-year, while mirror and accessory production decreased by 2.1% year-on-year[95] - Total production increased by 5.4% year-on-year[95] - Tanmujiang factory employs 731 staff, nearly half of whom are disabled, proving their value through work[94] - The factory continuously researches and challenges equipment and processing method innovations, proposing 23 technical development and innovation projects in the first half, with 9 already underway[95] - Implemented lean production, increasing the utilization rate of recycled materials, effectively controlling costs, and improving production volume[95] - Highly values production safety, establishing a fume extraction system, adhering to 'visualized' inspection and rectification, and regularly conducting drills and safety knowledge dissemination[97] - Adheres to the 6S management model, creating a clean, tidy, and beautiful environment for employees, and providing one-on-one assistance to disabled employees to enhance their work and life skills[97] Logistics and Distribution The logistics center efficiently organized production and expedited distribution to meet marketing demands in the first half of 2019, achieving a 99.8% customer order fulfillment rate, with employees embodying the 'Honesty, Labor, Happiness' brand philosophy through multi-skilled, collective efforts to handle high workloads, especially during weekends and holidays - The logistics center efficiently organized production and expedited distribution, achieving a customer order fulfillment rate of 99.8%[98] - Facing high demand for stock preparation during weekends and holidays, the logistics center implemented multi-skilled roles and collective action to collaboratively process orders[98] - Employees, under high work pressure, rarely complained, embodying the brand philosophy of 'Honesty, Labor, Happiness' through their actions[98] Corporate Culture Tanmujiang actively promoted its corporate culture during the reporting period, centered on the 'Comb Garden' interactive exhibition in Shanghai and Hefei, attracting young consumers and generating 71 million exposures, while also launching a revamped official website with sales functionality, an official sales mini-program for new retail, and a member system to foster loyal customers, all while emphasizing the 'Honesty, Labor, Happiness' brand culture, particularly through the contributions of disabled employees Comb Garden Themed Interactive Exhibition The 'Comb Garden' themed interactive exhibition, a major brand promotion event, offered immersive experiences through five sections including 'Warm Tree Hole' and 'Comb Forest,' successfully held in Shanghai and Hefei with themes of 'Girlfriends,' 'Friendship,' and 'Combing for Mom,' attracting media and influencers, generating 71 million exposures, and expanding brand influence, with future events planned for Shenzhen and Chongqing - The 'Comb Garden' themed interactive exhibition is a major brand promotion event, featuring five sections interspersed with comb-making processes, offering an immersive experience[99] - Successfully held in Shanghai and Hefei, using different holiday and emotional themes as entry points, generating 71 million exposures and expanding event influence[102] - Through the event, customers gained a deeper understanding of Tanmujiang combs' blend of fashion and tradition, exquisite craftsmanship, brand culture stories, and the 'Honesty, Labor, Happiness' corporate culture[102] - Future events are planned for Shenzhen Futian CBD's Huangting Plaza during Qixi Festival and Chongqing during National Day, with anticipated positive responses[103] Official Website Revamp Tanmujiang's official website was revamped in March 2019, significantly enhancing its appearance and introducing sales functionality for the first time, establishing an online proprietary sales platform, which, along with the official sales mini-program launched in early August, will integrate with the offline marketing network as a key tool for the company's new retail initiatives - In March 2019, Tanmujiang's official website completed its revamp, significantly enhancing its appearance and establishing an online proprietary sales platform for the first time[104] - The official sales mini-program officially launched in early August, integrating with the offline marketing network as a key tool for Tanmujiang's new retail initiatives[104] Member System The Tanmujiang member system, launched in March 2019, aims to serve as a brand-to-member connection rather than just a marketing tool, with future efforts focused on fostering strong interactions and cultivating loyal customers to increase customer loyalty - In March 2019, the Tanmujiang member system officially launched, aiming to serve as a brand-to-member connection[105] - Future efforts will focus on building good interactions with members through the system, cultivating loyal customers, and increasing customer loyalty[105] Practicing 'Honesty, Labor, Happiness' in Action Nearly half of Tanmujiang's team comprises disabled individuals who embody the 'Honesty, Labor, Happiness' brand culture through their work, proving their self-worth, while the company remains committed to being a quality domestic brand, diligently cultivating its niche, and continuously spreading this spirit as a core long-term development strategy - Nearly half of Tanmujiang's team consists of disabled individuals who embody the 'Honesty, Labor, Happiness' brand culture through their actions, proving their self-worth to society[106] - The company is committed to being a quality domestic brand, diligently cultivating its niche, and continuing to spread the spirit of 'Honesty, Labor, Happiness' as a long-term development strategy[106] Human Resources and Integrated Governance Tanmujiang factory employs 731 staff, including 363 disabled employees, for whom the company provides work, skills training, and comprehensive benefits (e.g., staff meals, transport, sports facilities, dormitories), fostering a learning and benevolent environment, with plans for innovative evaluation and reward mechanisms, and in the first half of 2019, general employee wages increased by RMB 100, disabled employee wages by RMB 150, and prosthetics were installed for 11 disabled colleagues, demonstrating deep employee care - Tanmujiang factory employs 731 staff, including 363 disabled employees, for whom the company provides work, skills, and family support[107] - The company fosters an environment of mutual learning and progress, prioritizing benevolence, and plans to establish or improve innovative evaluation and reward mechanisms[107] - In the first half of 2019, general employee wages increased by RMB 100, disabled employee wages increased by RMB 150, and prosthetics were installed for 11 disabled colleagues[107] Financial Review The financial review analyzes key metrics for the six months ended June 30, 2019, showing an 8.1% revenue increase, a slight gross margin decline due to sales mix, significant growth in other income, reduced administrative expenses driving an 11.4% operating profit increase, and a 13.3% profit for the period, with ample liquidity, no bank borrowings, and healthy cash flow, despite increased financing cash outflows Revenue For the six months ended June 30, 2019, the Group's revenue was approximately RMB 170,355,000, an 8.1% year-on-year increase, primarily driven by enhanced offline business organization, store image, and distribution channels, as well as proactive online marketing strategies, with gift sets contributing the most and other accessories and franchise fees showing significant growth Revenue Composition and Change | Sales Category | 2019 (RMB thousands) | Share (%) | 2018 (RMB thousands) | Share (%) | Year-on-year Change (%) | | :--- | :------------------ | :------- | :------------------ | :------- | :----------- | | Combs | 37,956 | 22.3 | 36,672 | 23.3 | 3.5 | | Mirrors | 309 | 0.2 | 324 | 0.2 | (4.7) | | Gift Sets | 129,958 | 76.2 | 119,339 | 75.7 | 8.9 | | Other Accessories | 1,811 | 1.1 | 1,057 | 0.7 | 71.3 | | Franchise Fee Income | 321 | 0.2 | 186 | 0.1 | 72.6 | | Total Revenue | 170,355 | 100.0 | 157,578 | 100.0 | 8.1 | - Revenue increase was primarily due to improved offline business team organization, store image, and channel distribution, as well as proactive online business marketing strategies[113] Cost of Sales For the six months ended June 30, 2019, the Group's cost of sales was approximately RMB 63,923,000, a 25.1% year-on-year increase, primarily due to revenue growth and a decrease in gross profit margin Cost of Sales Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Cost of Sales | 63,923 | 51,114 | 25.1 | - The increase in cost of sales was primarily attributable to increased revenue and a decrease in gross profit margin[115] Gross Profit and Gross Profit Margin For the six months ended June 30, 2019, the Group's gross profit was approximately RMB 106,432,000, a marginal 0.0% year-on-year decrease, with the gross profit margin falling from 67.6% in 2018 to 62.5% in 2019, mainly due to a shift in sales mix towards products with lower gross profit margins Gross Profit and Gross Profit Margin Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Gross Profit | 106,432 | 106,464 | (0.0) | | Gross Profit Margin | 62.5% | 67.6% | (5.1) percentage points | - The decrease in gross profit margin was mainly due to a change in sales mix, resulting in a lower proportion of revenue from higher gross profit margin products[116] Other Income For the six months ended June 30, 2019, net other income was approximately RMB 29,147,000, a 25.1% year-on-year increase, primarily driven by an increase of approximately RMB 3,689,000 in China VAT preferential refunds and approximately RMB 11,454,000 in fair value changes of financial assets at fair value through profit or loss Net Other Income Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Net Other Income | 29,147 | 23,290 | 25.1 | - The main increase came from an increase of approximately RMB 3,689,000 in China VAT preferential refunds and an increase of approximately RMB 11,454,000 in fair value changes of financial assets at fair value through profit or loss[119] Selling and Distribution Expenses For the six months ended June 30, 2019, the Group's selling and distribution expenses were approximately RMB 25,737,000, a 13.4% year-on-year increase, primarily due to an increase of approximately RMB 2,079,000 in staff costs and commission fees Selling and Distribution Expenses Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Selling and Distribution Expenses | 25,737 | 22,686 | 13.4 | - The increase was primarily due to an increase of approximately RMB 2,079,000 in staff costs and commission fees[120] Administrative Expenses For the six months ended June 30, 2019, the Group's administrative expenses were approximately RMB 16,248,000, a 15.5% year-on-year decrease, mainly due to a reduction of approximately RMB 2,735,000 in staff relocation allowances and compensation expenses Administrative Expenses Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Administrative Expenses | 16,248 | 19,226 | (15.5) | - The main decrease came from a reduction of approximately RMB 2,735,000 in staff relocation allowances and compensation expenses[121] Operating Profit For the six months ended June 30, 2019, the Group's operating profit was approximately RMB 87,720,000, an 11.4% year-on-year increase, primarily driven by increased other income, reduced administrative expenses, and decreased other operating expenses, partially offset by increased selling and distribution expenses Operating Profit Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Operating Profit | 87,720 | 78,753 | 11.4 | - The increase in operating profit was primarily attributable to an increase in other income of approximately RMB 5,857,000, a decrease in administrative expenses of approximately RMB 2,978,000, and a decrease in other operating expenses of approximately RMB 3,215,000, partially offset by an increase in selling and distribution expenses of approximately RMB 3,051,000[123] Finance Costs For the six months ended June 30, 2019, the Group's finance costs were approximately RMB 328,000, compared to zero in the prior period, entirely due to the adoption of new HKFRS 16 from January 1, 2019, with no bank borrowings during the period Finance Costs Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------ | :------------------ | | Finance Costs | 328 | – | - Finance costs arose due to the Group's adoption of new HKFRS 16 from January 1, 2019[124] - The Group had no interest-bearing bank borrowings in both reporting periods[124] Profit Before Tax For the six months ended June 30, 2019, the Group's profit before tax was approximately RMB 87,392,000, an 11.0% year-on-year increase, primarily due to the growth in operating profit during the reporting period Profit Before Tax Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Profit Before Tax | 87,392 | 78,753 | 11.0 | - The increase in profit before tax was primarily attributable to an increase in operating profit of approximately RMB 8,967,000 during the reporting period[126] Income Tax Expense For the six months ended June 30, 2019, the Group's income tax expense was approximately RMB 14,346,000, a marginal 0.5% year-on-year increase, primarily due to increased profit before tax, with the effective tax rate slightly decreasing from 18.1% in 2018 to 16.4% in 2019 Income Tax Expense and Effective Tax Rate Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Income Tax Expense | 14,346 | 14,272 | 0.5 | | Effective Tax Rate | 16.4% | 18.1% | (1.7) percentage points | - The increase in income tax expense was primarily attributable to an increase in profit before tax during the reporting period[127] Profit for the Period For the six months ended June 30, 2019, the Group's profit for the period was approximately RMB 73,046,000, a 13.3% year-on-year increase Profit for the Period Change | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | Year-on-year Change (%) | | :--- | :------------------ | :------------------ | :----------- | | Profit for the Period | 73,046 | 64,481 | 13.3 | Liquidity and Sources of Funding The Group primarily uses cash generated from operations and long- and short-term bank borrowings to meet working capital needs, with no bank loans during the reporting period, and the Board believes the Group has sufficient working capital for at least the next twelve months, with cash and bank balances totaling RMB 39,459,000 as of June 30, 2019 - The Group primarily uses cash generated from operations and various long- and short-term bank borrowings to meet working capital needs, with no bank loans during the reporting period[129] - The Board believes the Group has sufficient working capital to meet its funding requirements for at least the next twelve months[129] - As of June 30, 2019, the Group's cash and bank balances amounted to RMB 39,459,000[129] Cash Flows The Group's cash flows are primarily used for working capital, debt interest and principal repayment, facilities, and business growth, with net cash from operating activities increasing by RMB 10,639,000 to RMB 39,745,000, net cash from investing activities significantly increasing by RMB 218,021,000 to RMB 65,268,000 due to higher maturity proceeds from financial assets and reduced purchase expenditures, and net cash used in financing activities decreasing by RMB 129,672,000 to RMB 116,412,000 due to a reduction in unpledged bank deposits Cash Flow Changes | Cash Flow Category | 2019 (RMB thousands) | 2018 (RMB thousands) | Change (RMB thousands) | | :--- | :------------------ | :------------------ | :---------------- | | Net Cash From Operating Activities | 39,745 | 29,106 | +10,639 | | Net Cash From/(Used In) Investing Activities | 65,268 | (152,753) | +218,021 | | Net Cash (Used In)/From Financing Activities | (116,412) | 13,260 | (129,672) | - The increase in net cash from investing activities was primarily due to an increase of approximately RMB 93,704,000 in maturity proceeds from financial assets at fair value through profit or loss and a decrease of approximately RMB 125,425,000 in purchase expenditures[133] - The decrease in net cash from financing activities was primarily due to a reduction of approximately RMB 141,000,000 in unpledged bank deposits[134] Capital Structure As of June 30, 2019, and during the reporting period, the Group had no bank loans or asset charges, with capital expenditures primarily for property, plant, and equipment, leasehold improvements, and vehicles, totaling RMB 1,869,000 for the period - As of June 30, 2019, and during the reporting period, the Group had no bank loans or asset charges[135][137] - Capital expenditures primarily included purchases of property, plant, and equipment, leasehold improvements, and vehicles, totaling RMB 1,869,000 for the reporting period[138] Exchange Rate Risk The Group's primary business operates in RMB and HKD as functional and operating currencies, thus it is exposed to foreign exchange risks arising from these two currencies, with no significant risk from other exchange rate fluctuations - The Group is primarily exposed to foreign exchange risks arising from RMB and HKD[141] - The Group has no significant risk from other exchange rate fluctuations[141] Contingent Liabilities, Legal and Potential Proceedings As of June 30, 2019, the Group had no significant contingent liabilities, legal proceedings, or potential proceedings - As of June 30, 2019, the Group had no significant contingent liabilities, legal proceedings, or potential proceedings[142] Material Acquisitions and Disposals For the six months ended June 30, 2019, the Group had no material acquisitions or disposals - For the six months ended June 30, 2019, the Group had no material acquisitions or disposals[143] Going Concern Based on its current financial position and available financing, the Board believes the Group has sufficient financial resources to continue as a going concern for the foreseeable future (at least twelve months), thus the financial statements are prepared on a going concern basis - The Group has sufficient financial resources to continue as a going concern for the foreseeable future, and the financial statements are prepared on a going concern basis[144] Future Outlook For the second half of 2019, Tanmujiang will focus on internal management, continuous improvement of brand image, products, and packaging, and open-minded product R&D, planning to adjust underperforming stores, actively expand omni-channel marketing domestically and internationally, and enhance the product system through new categories and craftsmanship for diversification, personalization, and refinement, while pragmatically communicating the brand to resonate with younger consumers, adapting to market changes, and upholding the 'Honesty, Labor, Happiness' culture to become a global leading comb brand - In the second half, the company will focus on internal management, continuously enhancing corporate image, products, packaging, and brand awareness, and developing products with an open mindset[146] - Actively expand omni-channel marketing both domestically and internationally, considering diversification, personalization, and refinement, and continuously improve the product system by adding new categories and enhancing new craftsmanship[146] - Pragmatically communicate the brand, better connect with younger consumers, and keep pace with market changes[146] - The company will uphold the cultural philosophy of 'Honesty, Labor, Happiness,' staying true to its original intention of making combs, pursuing a long-term development path, and aiming to be a global comb brand[146] Human Resources and Training As of June 30, 2019, the Group employed 969 staff across mainland China, Hong Kong, and overseas, committed to providing employment opportunities for disabled individuals and emphasizing employee self-improvement through various training formats (exhibitions, workshops, seminars, on-the-job training) to enhance skills, marketing strategies, teamwork, and professional etiquette, thereby solidifying and practicing Tanmujiang's corporate culture - As of June 30, 2019, the Group employed a total of 969 staff across mainland China, Hong Kong, and overseas[147] - The Group is committed to providing employment opportunities for disabled individuals and highly values employee self-improvement[147] - Through various themed exhibitions, workshops, seminars, and employee training, the company enhances staff work skills, marketing strategies, techniques, and methods, and deepens their sense of belonging to the Group[147] Other Information This section discloses non-financial material information for Tanmujiang Holding Co., Ltd., including directors' and major shareholders' securities interests, share option scheme details, capital commitments, public float, dividend policy, IPO proceeds usage, corporate governance practices, standard code for securities transactions, audit committee responsibilities, and post-reporting period events, providing investors with a comprehensive view of governance, ownership, and future direction Directors' Interests in Competing Businesses For the six months ended June 30, 2019, no directors of the Company held any interests in businesses directly or indirectly competing or potentially competing with the Group's business - For the six months ended June 30, 2019, no directors of the Company held any interests in any business directly or indirectly competing or potentially competing with the Group's business[149] Directors' Securities Interests As of June 30, 2019, Mr. Tan Chuanhua held interests in 167,700,000 shares, representing 67.43% of the issued share capital, through his controlled company, Leading Champ Investment Limited, while Mr. Tan Lizi beneficially owned 300,000 shares, representing 0.12%, derived from share options granted under the share option scheme Directors' Interests in the Company's Shares | Director Name | Capacity/Nature of Interest | Number of Securities | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Tan Chuanhua | Interest in controlled corporation | 167,700,000 | 67.43% | | Tan Lizi | Beneficial owner | 300,000 | 0.12% | - Tan Chuanhua holds a 51% interest in Leading Champ Investment Limited and is deemed to have an interest in the 167,700,000 shares held by Leading Champ[150] - Mr. Tan Lizi's beneficial interest is derived from share options granted under the share option scheme[151] Major Shareholders' Securities Interests As of June 30, 2019, Tan Chuanhua, Fan Chengqin, and Leading Champ Investment Limited each held a long position in 167,700,000 shares of the Company, representing 67.43% of the issued share capital, with Tan Chuanhua and Fan Chengqin holding 51% and 49% interests in Leading Champ respectively, both considered controlling shareholders Major Shareholders' Interests in the Company's Shares | Name | Capacity/Nature of Interest | Number of Shares | Type | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | :--- | | Tan Chuanhua | Interest in controlled corporation | 167,700,000 | Long Position | 67.43% | | Fan Chengqin | Interest in controlled corporation | 167,700,000 | Long Position | 67.43% | | Leading Champ | Beneficial owner | 167,700,000 | Long Position | 67.43% | - Tan Chuanhua holds a 51% interest in Leading Champ, and Fan Chengqin holds a 49% interest in Leading Champ; both are considered controlling shareholders as defined by the Listing Rules[154][155] Share Option Scheme The Company adopted a share option scheme on November 17, 2009, to incentivize eligible persons, valid for ten years, with total shares issuable not exceeding 10% (25,000,000 shares) of the initial issued share capital, and a 1% individual limit within any twelve-month period; as of June 30, 2019, 700,000 options were granted and accepted, representing 0.28% of issued share capital, with an exercise price of HKD 4.896 per share - The share option scheme was adopted on November 17, 2009, to recognize and incentivize eligible persons, with a ten-year validity period[157][158][165] - The total number of shares that may be issued upon exercise of options shall not exceed 10% (25,000,000 shares) of the total issued shares at the time of initial listing, with a 1% exercise limit for any single eligible person within any twelve-month period[160][161] Summary of Share Options as of June 30, 2019 | Grantee | Position in the Group | Number of Outstanding Share Options as of June 30, 2019 | Approximate Percentage of Total Issued Share Capital of the Company | | :--- | :--- | :--- | :--- | | Mr. Tan Lizi | Executive Director | 300,000 | 0.12% | | Ms. Liu Kejia | Marketing Director (Online Business) | 200,000 | 0.08% | | Mr. Luo Hongping | Administrative Director | 200,000 | 0.08% | | Total | | 700,000 | 0.28% | - The share option exercise price is HKD 4.896 per share, with the grant date being August 31, 2018[165][166] Capital Commitments As of June 30, 2019, the Group's contracted but unprovided capital commitments for the acquisition of property, plant, and equipment were approximately RMB 954,000, a decrease from RMB 1,535,000 as of December 31, 2018 Capital Commitments Change | Indicator | June 30, 2019 (RMB thousands) | December 31, 2018 (RMB thousands) | | :--- | :----------------------- | :------------------------ | | Capital Commitments | 954 | 1,535 | - Capital commitments were primarily for the acquisition of property, plant, and equipment[167] Public Float Based on publicly available information and to the best knowledge of the directors, at least 25% of the Company's issued share capital is held by public shareholders, complying with Listing Rules requirements - At least 25% of the Company's issued share capital is held by public shareholders[168] Dividends The Company declared and paid a final dividend of HKD 25.86 cents per share (approximately RMB 56,359,000) and a special dividend of HKD 25.86 cents per share (approximately RMB 56,359,000) for the year ended December 31, 2018, but the Board did not propose an interim dividend for the six months ended June 30, 2019 - The Company declared and paid a final dividend of HKD 25.86 cents per share, totaling approximately RMB 56,359,000, for the year ended December 31, 2018[170] - A special dividend of HKD 25.86 cents per share, totaling approximately RMB 56,359,000, was also distributed to company shareholders[170] - The Board did not propose an interim dividend for the six months ended June 30, 2019[171] Purchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[172] Use of Net Proceeds from the Company's Initial Public Offering The Company's IPO in December 2009 yielded net proceeds of approximately HKD 132,900,000 (approximately RMB 116,800,000), with approximately RMB 54,200,000 utilized as of June 30, 2019, primarily for enhancing design and product development, improving operational efficiency, sales network and production facility construction, and working capital, while plans for high-end home decor and fashion craft stores were discontinued due to market changes - The Company's IPO in December 2009 yielded net proceeds of approximately HKD 132,900,000 (approximately RMB 116,800,000)[173] - As of June 30, 2019, approximately RMB 54,200,000 of the net proceeds had been utilized, with RMB 25,500,000 for enhancing design and product development and improving operational efficiency, RMB 16,500,000 for enhancing the sales network and support services and constructing production facilities, and RMB 12,200,000 for working capital[173] - Due to changes in market conditions and the Group's business strategy, business development plans for high-end home decor and fashion craft stores have been discontinued[173] Corporate Governance Practices The Board is committed to adhering to the Corporate Governance Code, continuously strengthening internal control systems and director training, and despite the deviation from Code Provision A.2.1 where Mr. Tan Chuanhua serves as both Chairman and CEO, the Board believes this structure provides strong and consistent leadership, balanced by independent non-executive directors, benefiting the Company's overall business operations - The Board is committed to adhering to the Corporate Governance Code and has adopted various measures to strengthen internal control systems and ongoing professional training for directors[173] - There is a deviation from Corporate Governance Code Provision A.2.1, as Mr. Tan Chuanhua concurrently serves as both Chairman and Chief Executive Officer[175] - The Board believes this structure provides strong and consistent leadership for the Group, and with strong and independent non-executive directors, it does not compromise the balance of power[175] Standard Code for Securities Transactions The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules, confirming compliance by all directors during the reporting period, and also implemented written guidelines no less stringent than the Model Code for senior management and employees who may possess unpublished inside information, which have also been complied with - 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 have confirmed compliance[176] - The Company has also adopted written guidelines no less stringent than the Model Code for employees who may possess unpublished inside information, and no breaches have occurred[176] Audit Committee The Audit Committee, established on November 17, 2009, comprises three independent non-executive directors with Mr. Zhou Jinrong as Chairman, primarily responsible for independent review and oversight of financial reporting, internal control effectiveness, and ensuring external auditor independence and audit efficiency, having reviewed and agreed to the Company's unaudited condensed consolidated interim financial information, results announcement, and accounting policies adopted in this interim report for the six months ended June 30, 2019 - The Audit Committee was established on November 17, 2009, comprising three independent non-executive directors, with Mr. Zhou Jinrong as Chairman[178] - Its primary responsibilities include independent review and oversight of financial reporting, internal control effectiveness, and ensuring the independence and audit efficiency of external auditors[178] - The Committee has reviewed and agreed to the Company's unaudited condensed consolidated interim financial information, results announcement, and accounting policies adopted in this interim report for the six months ended June 30, 2019[178] Events After Reporting Period As of the date of this report, there are no significant events after the reporting period - As of the date of this report, there are no significant events after the reporting period[180] Disclosure of Information The Company will dispatch its interim report for the six months ended June 30, 2019, to its shareholders in due course and will publish it on the HKEX website and the Company's website - The Company will dispatch its interim report for the six months ended June 30, 2019, to its shareholders in due course and will publish it on the HKEX website and the Company's website[181] Consolidated Statement of Profit or Loss This Consolidated Statement of Profit or Loss presents Tanmujiang Holding Co., Ltd.'s financial performance for the six months ended June 30, 2019, with revenue of RMB 170,355,000, gross profit of RMB 106,432,000, operating profit of RMB 87,720,000, profit for the period of RMB 73,046,000, and basic earnings per share of RMB 29.4 cents Consolidated Statement of Profit or Loss for the Six Months Ended June 30 | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------ | :------------------ | | Revenue | 170,355 | 157,578 | | Cost of Sales | (63,923) | (51,114) | | Gross Profit | 106,432 | 106,464 | | Other Income | 29,147 | 23,290 | | Selling and Distribution Expenses | (25,737) | (22,686) | | Administrative Expenses | (16,248) | (19,226) | | Other Operating Expenses | (5,874) | (9,089) | | Operating Profit | 87,720 | 78,753 | | Finance Costs | (328) | – | | Profit Before Tax | 87,392 | 78,753 | | Income Tax | (14,346) | (14,272) | | Profit for the Period | 73,046 | 64,481 | | Basic Earnings Per Share (RMB cents) | 29.4 | 25.9 | - The Group first adopted HKFRS 16 with a modified retrospective approach on January 1, 2019, and comparative figures have not been restated[184] Consolidated Statement of Profit or Loss and Other Comprehensive Income This Consolidated Statement of Profit or Loss and Other Comprehensive Income shows Tanmujiang Holding Co., Ltd.'s profit for the period and other comprehensive income for the six months ended June 30, 2019, with profit for the period at RMB 73,046,000, and total comprehensive income for the period reaching RMB 76,330,000 after including exchange differences on translation of functional currency to presentation currency of RMB 3,284,000 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Six Months Ended June 30 | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------ | :------------------ | | Profit for the Period | 73,046 | 64,481 | | Exchange Differences on Translation from Functional Currency to Presentation Currency | 3,284 | (4,337) | | Total Comprehensive Income for the Period | 76,330 | 60,144 | Consolidated Statement of Financial Position This Consolidated Statement of Financial Position presents Tanmujiang Holding Co., Ltd.'s assets, liabilities, and equity as of June 30, 2019, with total non-current assets of RMB 247,477,000, total current assets of RMB 537,541,000, current liabilities of RMB 68,664,000, and net assets of RMB 680,870,000, notably including new right-of-use assets and lease liabilities due to HKFRS 16 adoption Consolidated Statement of Financial Position as of June 30, 2019 | Indicator | June 30, 2019 (RMB thousands) | December 31, 2018 (RMB thousands) | | :--- | :----------------------- | :------------------------ | | Property, Plant and Equipment | 60,752 | 60,883 | | Investment Properties | 100,120 | 100,120 | | Right-of-use Assets | 31,605 | – | | Financial Assets at Fair Value Through Profit or Loss (Non-current) | 55,000 | 65,000 | | Inventories | 156,846 | 145,626 | | Trade Receivables | 7,673 | 2,351 | | Financial Assets at Fair Value Through Profit or Loss (Current) | 324,070 | 370,480 | | Cash and Bank Balances | 39,459 | 46,203 | | Trade Payables | 3,711 | 3,617 | | Other Payables and Accruals | 31,624 | 42,166 | | Lease Liabilities (Current) | 4,935 | – | | Income Tax Payable | 28,394 | 27,164 | | Lease Liabilities (Non-current) | 9,845 | – | | Deferred Tax Liabilities | 24,968 | 31,267 | | Net Assets | 680,870 | 717,258 | - The Group first adopted HKFRS 16 with a modified retrospective approach on January 1, 2019, leading to the recognition of right-of-use assets and lease liabilities[190] Consolidated Statement of Changes in Equity This Consolidated Statement of Changes in Equity outlines Tanmujiang Holding Co., Ltd.'s equity movements for the six months ended June 30, 2019, with total equity decreasing to RMB 680,870,000 from RMB 717,258,000 at the end of 2018, primarily due to dividends paid of RMB 112,718,000, partially offset by profit for the period of RMB 73,046,000 and positive changes in foreign currency translation reserve Consolidated Statement of Changes in Equity for the Six Months Ended June 30 | Indicator | June 30, 2019 (RMB thousands) | December 31, 2018 (RMB thousands) | | :--- | :----------------------- | :------------------------ | | Share Capital | 2,189 | 2,189 | | Share Premium | 110,503 | 110,503 | | Capital Reserve | 2,767 | 2,767 | | Statutory Reserve | 17,542 | 17,542 | | Other Reserves | 12,245 | 12,245 | | Equity-settled Share-based Payment Reserve | 47 | 47 | | Foreign Currency Translation Reserve | (15,878) | (19,162) | | Retained Profits | 405,415 | 445,087 | | Total | 680,870 | 717,258 | - Profit for the period was RMB 73,046,000, with exchange differences on translation from functional currency to presentation currency of RMB 3,284,000[194] - Dividends paid during the period amounted to RMB 112,718,000[194] Condensed Consolidated Statement of Cash Flows This Condensed Consolidated Statement of Cash Flows presents Tanmujiang Holding Co., Ltd.'s cash flow movements for the six months ended June 30, 2019, with net cash from operating activities of RMB 39,745,000, net cash from investing activities of RMB 65,268,000, and net cash used in financing activities of RMB 116,412,000, resulting in a net decrease in cash and cash equivalents of RMB 11,399,000 and an ending balance of RMB 39,459,000 Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30 | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------ | :------------------ | | Net Cash From Operating Activities | 39,745 | 29,106 | | Net Cash From/(Used In) Investing Activities | 65,268 | (152,753) | | Net Cash (Used In)/From Financing Activities | (116,412) | 13,260 | | Net Decrease in Cash and Cash Equivalents | (11,399) | (110,387) | | Cash and Cash Equivalents at June 30 | 39,459 | 100,026 | - The Group first adopted HKFRS 16 with a modified retrospective approach on January 1, 2019, and comparative figures have not been restated[196] Notes to the Unaudited Interim Financial Report These notes provide detailed explanations and supplementary information for Tanmujiang Holding Co., Ltd.'s unaudited interim financial report, covering general information, basis of preparation, significant accounting policies (especially HKFRS 16 adoption impact), segment reporting, operating seasonality, revenue and other income, profit before tax, income tax, earnings per share, fixed assets, trade receivables, financial assets, cash and bank balances, trade payables, dividends, share capital, financial instruments, and contingent liabilities, offering crucial context and data for understanding the financial statements 1. General Information Tanmujiang Holding Co., Ltd. is an exempted company incorporated in the Cayman Islands, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited, having its registered office in the Cayman Islands and principal place of business in Jurong City, Jiangsu Province, China - Tanmujiang Holding Co., Ltd. is incorporated in the Cayman Islands, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited[200] - The company's registered office is in the Cayman Islands, and its principal place of business is in Jurong City, Jiangsu Province, China[200] 2. Basis of Preparation The unaudited interim financial report is prepared in accordance with applicable disclosure requirements of the Listing Rules of The Stock Exchange of Hong Kong Limited and HKAS 34 Interim Financial Reporting issued by the HKICPA, comprising condensed consolidated financial statements and selected explanatory notes, highlighting significant changes in financial position and performance since the 2018 financial statements, and has been reviewed by the Company's Audit Committee - The unaudited interim financial report is prepared in accordance with the Listing Rules of The Stock Exchange of Hong Kong Limited and HKAS 34[201] - The report includes condensed consolidated financial statements and selected explanatory notes, clarifying significant changes in financial position and performance since the 2018 financial statements[201] - The interim financial report is unaudited but has been reviewed by the Company's Audit Committee[202] 3. Significant Accounting Policies This section outlines the Group's significant accounting policies for preparing the condensed consolidated financial statements, particularly the impact of adopting HKFRS 16 'Leases' from January 1, 2019, which introduced a single accounting model requiring lessees to recognize right-of-use assets and lease liabilities, significantly affecting financial performance and cash flow presentation, and also explains key accounting judgments and sources of estimation uncertainty New and Revised Standards Adopted by the Group The Group first applied HKFRS 16 'Leases' from January 1, 2019, using a modified retrospective approach, recognizing the cumulative effect of initial application as an adjustment to the opening equity balance for 2019, with comparative figures not restated, as the standard introduced a single accounting model requiring lessees to recognize right-of-use assets and lease liabilities (except for short-term and low-value leases), positively impacting operating profit in the consolidated statement of profit or loss and other comprehensive income, and reclassifying rent payments from operating to financing activities in the consolidated statement of cash flows - The Group initially applied HKFRS 16 'Leases' from January 1, 2019, using a modified retrospective approach, with comparative figures not restated[207] - HKFRS 16 introduced a single accounting model, requiring lessees to recognize right-of-use assets and lease liabilities for all leases (except for short-term leases and leases of low-value assets)[206] - The adoption of HKFRS 16 had a positive impact on operating profit presented in the consolidated statement of profit or loss and other comprehensive income, and resulted in significant changes in cash flow presentation in the consolidated statement of cash flows (reclassification of rent payments from operating to financing activit