谭木匠(00837) - 2020 - 中期财报

Company Information Company Information Overview This section provides basic corporate information for Tan Mujiang Holdings Limited, including board members, committee compositions, company secretary, authorized representatives, registered office, headquarters and Hong Kong office addresses, principal share registrar, legal counsel, stock code, company website, and principal bankers - The Board of Directors comprises executive, non-executive, and independent non-executive directors, with Audit, Remuneration, and Nomination Committees[6] - The company is registered in the Cayman Islands, headquartered in Jurong City, Jiangsu Province, China, with a Hong Kong office[6][10] - The stock code is 837, and the company website is www.ctans.com[10](index=10&type=chunk) Financial Highlights Overview of Financial Performance and Liquidity This section summarizes key financial indicators for the six months ended June 30, 2020, showing significant declines in revenue and profit due to the pandemic, but marked improvements in liquidity and no interest-bearing bank borrowings 2020 H1 Key Financial Data (Unaudited) | Indicator | 2020 H1 (RMB thousand) | 2019 H1 (RMB thousand) | Increase/(Decrease) | | :--- | :--- | :--- | :--- | | Revenue | 108,069 | 170,355 | (36.6)% | | Cost of Sales | (46,664) | (63,923) | (27.0)% | | Gross Profit | 61,405 | 106,432 | (42.3)% | | Gross Profit Margin | 56.8% | 62.5% | (5.7) percentage points | | Profit Before Tax | 35,760 | 87,392 | (59.1)% | | Profit for the Period | 27,878 | 73,046 | (61.8)% | | Profit Attributable to Owners of the Company | 26,808 | 73,046 | (63.3)% | | Basic Earnings Per Share (RMB cents) | 10.8 | 29.4 | (63.3)% | Liquidity and Gearing (Unaudited) | Indicator | June 30, 2020 | December 31, 2019 | Percentage Change | | :--- | :--- | :--- | :--- | | Current Ratio | 6.80 | 2.78 | 144.6% | | Quick Ratio | 4.32 | 2.14 | 101.9% | | Gearing Ratio | Not Applicable (4) | Not Applicable (4) | Not Applicable (4) | - The Group had no interest-bearing bank borrowings as of June 30, 2020, and December 31, 2019, hence the gearing ratio is not applicable[18] Chairman's Report Challenges and Response Strategies Amidst the Pandemic The Chairman's Report highlights the severe challenges posed by the COVID-19 pandemic, disrupting market and production order, but the company actively responded by supporting franchisees, launching incentive programs, and exploring new channels like IP collaborations and live streaming to expand market reach and brand influence, while remaining committed to core values and seeking breakthroughs in the second half - The COVID-19 pandemic posed severe challenges to the company, disrupting market and production order[23] - The company maintained close contact with franchisees, launched an incentive program for franchised stores, and actively explored new channels such as IP collaborations and live streaming to expand the market and enhance brand influence[23] - The company will continue to strive for breakthroughs and innovations in stable development in the second half of the year, ensuring the brand remains relevant and forward-looking, while thanking shareholders and investors for their understanding and support[24] Management Discussion and Analysis Management Review During the pandemic, the Group prioritized employee safety, provided protective supplies to staff and stores, and committed to no salary reductions and timely payments, gradually resuming full operations by early May, while also formulating plans for market expansion, product upgrades, and brand promotion to seize new opportunities - At the onset of the pandemic, the Group prioritized the safety of employees, their families, and franchised stores, providing medical masks and alcohol, and committed to no salary reductions and timely payments[28][29] - The Group actively responded to government requirements for work resumption, gradually restoring normal production and operations from partial resumption in early March to full resumption by early May[29] - Future work plans focus on expanding new market channels, upgrading product after-sales service, developing new craft products, quality control, improving production efficiency, brand communication, establishing a social responsibility system, and new factory planning[29] Business Review This section details the performance and response strategies for offline and online businesses during the pandemic, showing severe challenges for offline operations mitigated by franchisee support and service upgrades, while online business achieved growth through new models like live streaming despite logistics issues, alongside active IP collaborations and overseas market expansion - The pandemic caused a severe downturn in offline business, but the marketing team and franchisees jointly responded through aid with protective materials and private domain traffic marketing via WeChat Moments[33][37] - Online e-commerce business initially suffered from logistics disruptions but achieved counter-trend growth through the "online stay-at-home economy" and live streaming (e.g., "Xiao Zhu Pei Qi"), with Mother's Day sales increasing by 22.5% year-on-year and significantly enhancing new customer acquisition[54] - The company actively engaged in IP/cross-industry collaborations (e.g., Mulan series, Xiaomi Youpin, Lin Qingxuan) and continuously upgraded brand image and store design[44][47] Offline Business Offline business faced severe challenges due to the pandemic, with a reduction in domestic franchised stores, but the company actively responded through multi-channel promotion, upgraded after-sales services, IP collaborations, and brand image enhancements; performance recovery showed faster recovery for shopping mall and street-front stores, slower for transport hub and scenic area stores, stable growth in group purchases, but severe disruption to overseas business Store Count Comparison (December 31, 2019 vs June 30, 2020) | Region | December 31, 2019 | June 30, 2020 | | :--- | :--- | :--- | | Mainland China Franchised Stores | 1,242 | 1,187 | | Mainland China Directly Operated Stores | 3 | 3 | | Hong Kong Directly Operated Stores | 3 | 3 | | Other Countries & Regions Franchised Stores/Counters | 7 | 7 | | Total | 1,249 (Franchised Stores) + 6 (Directly Operated Stores) | 1,194 (Franchised Stores) + 6 (Directly Operated Stores) | - The company launched a WeChat Moments private domain traffic marketing strategy, with 831 specialty stores participating in social retail activities from February 10 to March 10, resulting in 21,138 products sold and a cumulative transaction amount of approximately RMB 3.99 million[37] - The Group firmly implemented "lifetime free repair service," upgraded its repair system, and established 32 authorized repair stations nationwide (15 online), handling 1,954 orders since its launch on May 18[38] - As of June 30, 2020, POS sales completed 51.92% of the first-half target, reaching 53.27% of the same period last year, with shopping mall and street-front stores recovering faster, while transport hub and scenic area stores recovered slower[45] - Group purchase business showed stable growth, with group purchase amount increasing by 17.29% compared to the same period last year[48] - The global pandemic led to the shelving of new overseas store projects, temporary closure of most overseas stores, and some shifting to online sales[49] Online Business Online business initially saw sales decline due to logistics disruptions during the pandemic, but successfully stimulated consumption by actively developing the "online stay-at-home economy" and new retail models, such as participating in "Xiao Zhu Pei Qi" live streaming, achieving a 22.5% year-on-year sales increase during Mother's Day and significantly boosting new customer acquisition, with overseas online business also expanding well, particularly on Amazon Japan - Online e-commerce business lost 1.5 months of sales time due to the pandemic, with February sales decreasing by 31% year-on-year[54] - Through efforts, domestic online platforms completed 48.98% of the annual total target, with sales only decreasing by 2.84% compared to the same period in 2019[54] - Participating in the "Xiao Zhu Pei Qi" live streaming during Mother's Day resulted in a 22.5% year-on-year sales increase, with 340,000 visitors and 19,000 orders placed on the night of the live stream, totaling nearly RMB 1.4 million in payments, significantly enhancing new customer acquisition[54] - Tan Mujiang's online e-commerce has launched on numerous overseas platforms including Amazon US, eBay Australia, and Amazon Japan, with Amazon Japan showing an upward trend in both order volume and average order value (from JPY 2,000 to JPY 4,000), indicating market development potential[62] Creative R&D The Creative Design Center, guided by the "Crafting Oriental Beauty" brand positioning, delves into traditional Chinese culture to create a fashionable and youthful brand image; despite pandemic impacts, the department focused on product use and comb function R&D, successfully developing 8 new products, prototyping 36, launching 9, with Disney IP products accounting for 6.1% of total retail sales, and securing 3 design patents - Creative R&D focuses on the "Crafting Oriental Beauty" brand positioning, deeply exploring traditional Chinese culture to create a fashionable and youthful brand image[65] - In the first half, 8 new product development tasks were undertaken, 36 prototypes made, and 9 products launched after review, including flat combs, inlaid tooth combs, hairpins, and gift sets[65] - Retail sales of launched Disney IP products accounted for 6.1% of total retail sales[65] - The Creative Design Center obtained 3 design patent certificates[65] Production Technology The Wanzhou factory fully resumed operations from March to late April, but product output in the first half decreased by 37.8% year-on-year; technologically, the inlaid tooth comb milling machine was developed, and innovations in manual profiling, automatic profiling, and fuzzy polishing techniques were achieved to optimize production, enhance efficiency, and save costs, while securing 2 utility model patents and 3 design patents, with multiple new patent applications - The Wanzhou factory resumed work on March 3 and fully resumed by the end of April, producing approximately 1,468,000 units in the first half, a 37.8% year-on-year decrease[72] - Technologically, the inlaid tooth comb milling machine equipment development was completed, and innovations in manual profiling, automatic profiling processes, and fuzzy polishing techniques were developed to optimize production processes, shorten cycles, improve efficiency, and save costs[69][74] - During the reporting period, the company obtained 2 utility model patents and 3 design patent authorizations, and applied for 1 invention patent, 11 utility model patents, and 3 design patents[74] Logistics and Distribution Amidst the severe pandemic, the logistics center began processing orders on February 13 and was approved to resume work on February 26, ensuring no employee infections; the Group promptly organized product processing and timely distribution, especially for live streaming events, saving logistics costs through full-truck transportation and monthly express billing, while adjusting quality control to include on-site final inspection and pre-assembly inspection, though the issue of metal comb pin oxidation remains unresolved - The logistics center began processing orders on February 13 during the pandemic and was approved to resume work on February 26, ensuring no employee infections[77] - The Group promptly organized product processing and timely distribution, especially for the "Xiao Zhu Pei Qi" live streaming event and collaboration with Yizhen[77] - Logistics costs and workload were saved by arranging full-truck transportation and changing express delivery from cash-on-delivery to monthly billing[77] - Quality control processes were adjusted to include final inspection of products at the Wanzhou factory and pre-assembly inspection at the logistics center, but the issue of metal comb pin oxidation in hair care combs remains to be resolved[77] Brand Promotion During the reporting period, many offline brand promotion plans were postponed, prompting the company to adjust its strategy by strengthening online promotion, delving into brand essence, and emphasizing internal-to-external communication; specific measures included organizing a brand culture knowledge base, multi-dimensional showcasing of "the beauty of combs," and creating "Ode to Labor" posters, with plans for a franchisee story documentary in the second half to boost morale - Brand promotion strategy shifted to strengthening online promotion, delving into brand essence, and emphasizing internal-to-external communication[78] - Organized Tan Mujiang's brand culture knowledge base, presented in "text + audio" format, and multi-dimensionally showcased "the beauty of combs" covering its history, craftsmanship, stories, and culture[78] - During the May Day holiday, a series of posters titled "Ode to Labor" were created and disseminated, featuring frontline factory employees to express respect[83] - Plans for the second half of 2020 include filming a brand promotional video about franchisee stories to showcase their spirit and boost morale[83] Social Responsibility During the pandemic, the Group strictly adhered to national prevention measures, ensured employee well-being, paid salaries on time and in full, and delivered protective supplies to staff, while also providing support policies to franchised stores and donating medical protective materials to Wuhan Central Hospital, demonstrating social responsibility; despite the challenges of resuming work, the company successfully managed self-rescue in production, committing that "no employee would be left behind" - During the pandemic, the Group ensured employee well-being, paid salaries on time and in full, and delivered protective supplies to employees[87] - The company provided support policies to franchised stores to overcome the pandemic and organized donations of medical protective materials to Wuhan Central Hospital, fulfilling its social responsibility[87] - Despite the significant challenges in resuming work at the Wanzhou factory, the Group established a high-standard and strict prevention and control system, successfully managed self-rescue in production, and ensured "no employee was left behind"[87] Financial Review This section provides a detailed financial review for the six months ended June 30, 2020, showing significant declines in revenue, gross profit, and operating profit due to the pandemic, with increased selling and distribution expenses but reduced administrative expenses, leading to substantial drops in profit for the period and profit attributable to owners, yet the Group maintains ample liquidity, no bank borrowings, and confirmed going concern ability - For the six months ended June 30, 2020, revenue was approximately RMB 108.069 million, a 36.6% decrease year-on-year, primarily due to the pandemic[91] - Gross profit was approximately RMB 61.405 million, a 42.3% decrease; gross profit margin declined from 62.5% in 2019 to 56.8% in 2020, mainly due to changes in sales mix[94] - Operating profit was approximately RMB 36.001 million, a 59.0% decrease, primarily attributable to reduced gross profit, lower other income, and increased selling and distribution expenses, partially offset by reduced administrative expenses[99] - Profit for the period was approximately RMB 27.878 million, a 61.8% decrease; profit attributable to owners of the company was approximately RMB 26.808 million, a 63.3% decrease[107][108] - The Group has ample liquidity, no bank borrowings, cash and bank balances of RMB 24.429 million, and confirmed sufficient working capital for at least the next twelve months[109] Revenue For the six months ended June 30, 2020, the Group's revenue was approximately RMB 108.069 million, a 36.6% decrease year-on-year, primarily due to the negative impact of the pandemic on foot traffic, logistics, market demand, and the suspension of production after the Lunar New Year - Revenue decreased by 36.6% year-on-year to RMB 108.069 million[91] - Main reasons were the negative impact of the pandemic on foot traffic, logistics, market demand, and production suspension[91] Revenue Composition (2020 H1) | Sales | 2020 (RMB thousand) | Percentage (%) | | :--- | :--- | :--- | | －Combs | 21,867 | 20.2 | | －Mirrors | 115 | 0.1 | | －Gift Sets | 83,594 | 77.4 | | －Other Accessories | 2,399 | 2.2 | | Franchise Fee Income | 94 | 0.1 | | Total | 108,069 | 100.0 | Cost of Sales For the six months ended June 30, 2020, cost of sales was approximately RMB 46.664 million, a 27.0% decrease year-on-year, primarily due to the reduction in revenue - Cost of sales decreased by 27.0% year-on-year to RMB 46.664 million[93] - The decrease in cost of sales was primarily attributable to the decline in revenue[93] Gross Profit and Gross Profit Margin For the six months ended June 30, 2020, gross profit was approximately RMB 61.405 million, a 42.3% decrease; gross profit margin declined from 62.5% in 2019 to 56.8% in 2020, mainly due to a shift in sales mix with a reduced proportion of higher-margin products - Gross profit decreased by 42.3% year-on-year to RMB 61.405 million[94] - Gross profit margin decreased from 62.5% to 56.8% (a 5.7 percentage point decrease)[94] - The decline in gross profit margin was primarily due to a change in sales mix, with a reduced proportion of higher-margin products[94] Other Income For the six months ended June 30, 2020, net other income was approximately RMB 25.672 million, an 11.9% decrease year-on-year, primarily due to a reduction of approximately RMB 6.974 million in China VAT preferential refunds, partially offset by an increase of approximately RMB 3.987 million in government subsidies - Net other income decreased by 11.9% year-on-year to RMB 25.672 million[96] - Primarily due to a RMB 6.974 million decrease in China VAT preferential refunds, partially offset by a RMB 3.987 million increase in government subsidies[96] Selling and Distribution Expenses For the six months ended June 30, 2020, selling and distribution expenses were approximately RMB 29.764 million, a 15.6% increase year-on-year, primarily due to an increase of approximately RMB 2.599 million in advertising and promotion expenses - Selling and distribution expenses increased by 15.6% year-on-year to RMB 29.764 million[97] - Primarily due to a RMB 2.599 million increase in advertising and promotion expenses[97] Administrative Expenses For the six months ended June 30, 2020, administrative expenses were approximately RMB 12.601 million, a 22.4% decrease year-on-year, primarily due to a reduction of approximately RMB 2.563 million in depreciation of right-of-use assets - Administrative expenses decreased by 22.4% year-on-year to RMB 12.601 million[98] - Primarily due to a RMB 2.563 million decrease in depreciation of right-of-use assets[98] Operating Profit For the six months ended June 30, 2020, operating profit was approximately RMB 36.001 million, a 59.0% decrease year-on-year, primarily attributable to reduced gross profit, lower other income, and increased selling and distribution expenses, partially offset by reduced administrative expenses - Operating profit decreased by 59.0% year-on-year to RMB 36.001 million[99] - Primarily impacted by a RMB 45.027 million decrease in gross profit, a RMB 3.475 million decrease in other income, and a RMB 4.027 million increase in selling and distribution expenses, partially offset by a RMB 3.647 million decrease in administrative expenses[99] Finance Costs For the six months ended June 30, 2020, finance costs were approximately RMB 241,000, primarily arising from the adoption of HKFRS 16, with no interest expenses on bank borrowings during this period - Finance costs were approximately RMB 241,000, primarily arising from the adoption of HKFRS 16[100] - The Group had no interest expenses on bank borrowings during this period[100] Profit Before Tax For the six months ended June 30, 2020, profit before tax was approximately RMB 35.760 million, a 59.1% decrease year-on-year, primarily attributable to the reduction in operating profit - Profit before tax decreased by 59.1% year-on-year to RMB 35.760 million[105] - Primarily attributable to a RMB 51.719 million decrease in operating profit[105] Income Tax Expense For the six months ended June 30, 2020, income tax expense was approximately RMB 7.882 million, a 45.1% decrease year-on-year, primarily due to reduced profit before tax; the effective tax rate increased from 16.4% in 2019 to 22.0% in 2020 - Income tax expense decreased by 45.1% year-on-year to RMB 7.882 million[106] - The effective tax rate increased from 16.4% in 2019 to 22.0% in 2020 (a 5.6 percentage point increase)[106] Profit for the Period For the six months ended June 30, 2020, profit for the period was approximately RMB 27.878 million, a 61.8% decrease year-on-year, primarily impacted by the aforementioned financial factors - Profit for the period decreased by 61.8% year-on-year to RMB 27.878 million[107] Profit Attributable to Owners of the Company For the six months ended June 30, 2020, profit attributable to owners of the company was approximately RMB 26.808 million, a 63.3% decrease year-on-year, primarily due to the reduction in profit for the period - Profit attributable to owners of the company decreased by 63.3% year-on-year to RMB 26.808 million[108] - The primary reason was a RMB 45.168 million decrease in profit for the period[108] Liquidity and Sources of Funds The Group primarily relies on cash generated from operations and long-term and short-term bank borrowings to meet its funding needs; there were 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 of RMB 24.429 million as of June 30, 2020 - The Group primarily relies on cash generated from operations and long-term and short-term bank borrowings to meet its funding needs, with no bank loans during the reporting period[109] - The Board believes the Group has sufficient working capital to meet its funding needs for at least the next twelve months[109] - As of June 30, 2020, cash and bank balances were RMB 24.429 million[109] Cash Flow During the reporting period, the Group's cash and cash equivalents decreased by approximately RMB 14.951 million, with net cash outflow from operating activities, net cash inflow from investing activities, net cash outflow from financing activities, and a negative impact from exchange rate changes - During the reporting period, cash and cash equivalents decreased by approximately RMB 14.951 million[113] - Net cash outflow from operating activities was approximately RMB 11.822 million[113] - Net cash inflow from investing activities was approximately RMB 215.300 million[113] - Net cash outflow from financing activities was approximately RMB 213.411 million[113] - Net negative impact from exchange rate changes was approximately RMB 5.018 million[113] Capital Structure, Gearing Ratio and Charges on Assets As of June 30, 2020, the Group had no bank loans, thus the gearing ratio was not applicable, and no assets were pledged - The Group had no bank loans as of June 30, 2020, and December 31, 2019[114] - Due to the absence of bank borrowings, the gearing ratio is not applicable[114] - As of June 30, 2020, the Group had no assets pledged to banks[115] Capital Expenditure During the reporting period, the Group's capital expenditure was RMB 2.034 million, primarily for the purchase of property, plant and equipment, renovation of leased properties, and vehicles - Capital expenditure during the reporting period was RMB 2.034 million[116] - Primarily used for the purchase of property, plant and equipment, renovation of leased properties, and vehicles[116] Exchange Rate Risk The Group's principal operations use RMB and HKD as functional and operating currencies, thus it has no significant risk from other exchange rate fluctuations - The Group's principal operations use RMB and HKD as functional and operating currencies[117] - There is no significant risk from other exchange rate fluctuations[117] Contingent Liabilities, Legal and Potential Proceedings As of June 30, 2020, the Group had no significant contingent liabilities, legal proceedings, or potential proceedings - As of June 30, 2020, the Group had no significant contingent liabilities, legal proceedings, or potential proceedings[118] Material Acquisitions and Disposals For the six months ended June 30, 2020, the Group had no material acquisitions or disposals - For the six months ended June 30, 2020, the Group had no material acquisitions or disposals[119] Going Concern Based on its current financial position and available financing, the Group has sufficient financial resources to continue operations for the foreseeable future, and thus the financial statements are prepared on a going concern basis - The Group has sufficient financial resources to continue operations for the foreseeable future[120] - The financial statements have been prepared on a going concern basis[120] Future Outlook The Group views the pandemic as both a challenge and an opportunity, having demonstrated its resilience; future plans include adjusting marketing and communication strategies, achieving modular interaction in marketing and services, enhancing store marketing capabilities, and promoting digital transformation of specialty stores, while integrating communication and sales channels, planning promotions with a user-centric approach, deeply exploring the beauty of traditional Chinese culture, elucidating the "Oriental Wooden Comb" concept, and implementing online-offline联动 to gain broader consumer recognition - The Group views the pandemic as both a change and an opportunity, having demonstrated its strong risk resistance capability[124] - Marketing and communication strategies will be adjusted to achieve modular interaction in marketing and services, enhance store marketing capabilities, and promote digital transformation and upgrading of specialty stores[124] - Communication and sales channels will be integrated, promotions planned with a user-centric approach, the beauty of traditional Chinese culture deeply explored, and the "Oriental Wooden Comb" concept elucidated[124] - Future plans include implementing online-offline integration to introduce Tan Mujiang to more consumers, emphasizing patriotism and industrial revitalization[124] Human Resources and Training As of June 30, 2020, the Group employed 958 staff and is committed to providing employment opportunities for people with disabilities; the company values employee self-improvement, offering various themed exhibitions, workshops, lectures, and on-the-job training to enhance skills in work, marketing, teamwork, professional etiquette, production management, and accounting practices, thereby consolidating and practicing corporate culture - As of June 30, 2020, the Group employed 958 staff and is committed to providing employment opportunities for people with disabilities[125] - The Group values employee self-improvement, offering themed exhibitions, workshops, lectures, and on-the-job training to enhance skills in work, marketing strategies, teamwork, professional etiquette, production management, and accounting practices[125] - Training formats include in-person instruction and examinations, aiming to consolidate and practice Tan Mujiang's corporate culture[125] Other Information Principal Business The company is an investment holding company, with its group primarily engaged in designing, manufacturing, and distributing creative small wooden ornaments made from natural wood with traditional Chinese cultural characteristics; its business model includes operating franchised stores and distribution networks in China, and directly selling products through retail stores in Hong Kong and China, with products mainly categorized as wooden/horn combs, pocket wooden mirrors, other wooden ornaments and decorations, and themed gift sets, mostly sold under the "Tan Mujiang" brand - The company is an investment holding company; the Group primarily designs, manufactures, and distributes creative small wooden ornaments made from natural wood with traditional Chinese cultural characteristics[127] - The business model includes operating franchised stores and distribution networks in China, and directly selling products through retail stores in Hong Kong and China[127] - Products are mainly categorized as wooden/horn combs, pocket wooden mirrors, other wooden ornaments and decorations, and themed gift sets for gifting purposes, mostly sold under the "Tan Mujiang" brand[127] Directors' Interests in Competing Businesses For the six months ended June 30, 2020, none of the company's directors had any interests in businesses that directly or indirectly compete or may compete with the Group's business - For the six months ended June 30, 2020, none of the company's directors had any interests in any business that competes or may compete with the Group's business[128] Directors' Securities Interests As of June 30, 2020, the company's directors and chief executive held interests in the shares of the company and its associated corporations, with Mr. Tan Chuanhua holding 67.43% through a controlled company and Mr. Tan Lizi holding 0.12% as a beneficial owner Directors' Interests in Company Shares (June 30, 2020) | Director Name | Capacity/Nature of Interest | Number of Securities | Approximate Percentage of Holding | | :--- | :--- | :--- | :--- | | Mr. Tan Chuanhua | Interest in controlled corporation | 167,700,000 | 67.43% | | Mr. Tan Lizi | Beneficial owner | 300,000 | 0.12% | Directors' Interests in Associated Corporation Shares (June 30, 2020) | Director Name | Associated Corporation | Capacity/Nature of Interest | Approximate Percentage of Interest in Associated Corporation | | :--- | :--- | :--- | :--- | | Mr. Tan Chuanhua | Lingchang | Beneficial owner | 51% | Major Shareholders' Securities Interests As of June 30, 2020, major shareholders holding 5% or more of the company's issued share capital included Mr. Tan Chuanhua, Ms. Fan Chengqin, and Lingchang, all holding 167,700,000 shares through controlled companies, representing 67.43% of the issued share capital Major Shareholders' Interests in Company Shares (June 30, 2020) | Name | Capacity/Nature of Interest | Number of Shares | Type | Approximate Percentage | | :--- | :--- | :--- | :--- | :--- | | Mr. Tan Chuanhua | Interest in controlled corporation | 167,700,000 | Long Position | 67.43% | | Ms. Fan Chengqin | Interest in controlled corporation | 167,700,000 | Long Position | 67.43% | | Lingchang | Beneficial owner | 167,700,000 | Long Position | 67.43% | - Mr. Tan Chuanhua holds a 51% interest in Lingchang, Ms. Fan Chengqin holds a 49% interest in Lingchang, and Lingchang is a controlling shareholder as defined by the Listing Rules[134][137][138] Share Option Scheme The company adopted a share option scheme on November 17, 2009, to recognize and incentivize eligible individuals' contributions, stipulating that the total shares issued upon exercise of options shall not exceed 10% of issued shares, and for any single eligible person, not more than 1% in any twelve-month period, with an exercise period of up to ten years; as of June 30, 2020, 700,000 share options remained unexercised - The share option scheme was adopted on November 17, 2009, to recognize and incentivize eligible individuals' contributions to the Group[139][140] - The total number of shares that may be issued upon exercise of options under this scheme and other share option schemes shall not exceed 10% of the total issued shares (i.e., 25,000,000 shares)[143] - The maximum number of shares issued upon exercise of options by any one eligible person in any twelve-month period shall not exceed 1% of the issued shares[144] - The exercise period for share options is determined by the Board, not exceeding ten years from the grant date[145] Share Option Overview (June 30, 2020) | Grantee | Position | Grant Date | Option Period | Exercise Price Per Share (HKD) | Unexercised as of Jan 1, 2020 | Unexercised as of June 30, 2020 | Percentage of Company's Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Tan Lizi | Executive Director | August 31, 2018 | August 31, 2018 to August 30, 2023 | 4.896 | 300,000 | 300,000 | 0.12% | | Ms. Jian Kejia | Marketing Director | August 31, 2018 | August 31, 2018 to August 30, 2023 | 4.896 | 200,000 | 200,000 | 0.08% | | Mr. An Hongping | Administrative Director | August 31, 2018 | August 31, 2018 to August 30, 2023 | 4.896 | 200,000 | 200,000 | 0.08% | | Total | | | | | 900,000 | 700,000 | 0.28% | Capital Commitments As of June 30, 2020, the Group had capital commitments contracted but not provided for, amounting to approximately RMB 1.087 million for the acquisition of property, plant, and equipment - As of June 30, 2020, the Group had capital commitments contracted but not provided for, amounting to approximately RMB 1.087 million for the acquisition of property, plant, and equipment[155] Public Float From the reporting period to the date of this report, at least 25% of the company's issued share capital was held by public shareholders, complying with Listing Rules requirements - From the reporting period to the date of this report, at least 25% of the company's issued share capital was held by public shareholders[156] Dividends The company paid a final dividend of HKD 28.04 cents per share for the year ended December 31, 2019, totaling approximately RMB 62.502 million, on June 29, 2020; the Board resolved not to declare any interim dividend for the six months ended June 30, 2020 - The company declared and paid a final dividend of HKD 28.04 cents per share for the year ended December 31, 2019, totaling approximately RMB 62.502 million to all shareholders[160] - The Board resolved not to declare any interim dividend for the six months ended June 30, 2020[161] 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[162] Use of Net Proceeds from the Company's Initial Public Offering The net proceeds from the company's initial public offering were approximately RMB 116.8 million; as of June 30, 2020, approximately RMB 64.09 million had been utilized, primarily for enhancing design and product development capabilities, improving operational efficiency, sales network and support services, constructing logistics centers and production facilities, and working capital, while business development plans for high-end home furnishing stores and fashion craft stores have been discontinued - The net proceeds from the company's initial public offering were approximately RMB 116.8 million[163] - As of June 30, 2020, approximately RMB 64.09 million had been utilized for design and product development, operational efficiency enhancement, sales network, logistics center and production facility construction, and working capital[163] - Business development plans for high-end home furnishing stores and fashion craft stores have been discontinued[163] Corporate Governance Practices The Board is committed to adhering to the Corporate Governance Code outlined in the Listing Rules, adopting measures to strengthen internal control systems, continuous professional training for directors, and other standard practices; the company complied with all applicable code provisions of the Corporate Governance Code throughout the reporting period - The Board is committed to adhering to the Corporate Governance Code outlined in Appendix 14 of the Listing Rules, adopting measures to strengthen internal control systems and continuous professional training for directors[164] - The company complied with all applicable code provisions of the Corporate Governance Code throughout the reporting period[164] Standard Code for Securities Transactions The company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules, and also adopted written guidelines for relevant employees no less stringent than the Standard Code; all directors confirmed compliance with the Standard Code during the reporting period, with no instances of employee violations of the written guidelines - The company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[168] - Each director confirmed compliance with the Standard Code throughout the reporting period[168] - The company also adopted written guidelines for relevant employees no less stringent than the Standard Code, with no violations reported during the period[168] Audit Committee The Audit Committee, established on November 17, 2009, comprises three independent non-executive directors, chaired by Mr. Zhou Jinrong, and is primarily responsible for independently reviewing and overseeing financial reporting, internal control effectiveness, and the independence of external auditors; the committee reviewed the financial information in this interim report and confirmed that the adopted accounting treatments comply with current accounting standards and Listing Rules - The Audit Committee comprises three independent non-executive directors, chaired by Mr. Zhou Jinrong, who possesses recognized accounting professional qualifications[169] - The committee's primary responsibilities include independently reviewing and overseeing financial reporting, the effectiveness of internal controls, and the independence of external auditors[169] - The Audit Committee reviewed the company's unaudited condensed consolidated interim financial information for the six months ended June 30, 2020, and agreed with the adopted accounting treatments[169] Events After Reporting Period The COVID-19 pandemic, which erupted in January 2020, continues to impact the global business environment and has affected the Group; further changes in the Group's economic conditions due to the pandemic's development and spread may impact financial performance, but the extent of such impact remains unquantifiable as of the report date, and the Group will continue to monitor and actively respond - The COVID-19 pandemic, which erupted in January 2020, has impacted the global business environment and the Group[173] - Further changes in the Group's economic conditions due to the pandemic's development and spread may impact financial performance, but the extent of such impact remains unquantifiable as of the report date[173] - The Group will continue to monitor the pandemic's development and actively respond to its impact on financial position and operating results[173] Information Disclosure The company will dispatch the interim report for the six months ended June 30, 2020, to its shareholders in due course and will publish it on the HKEXnews website and the company's website - This interim report will be dispatched to the company's shareholders and published on the HKEXnews website (http://www.hkexnews.hk) and the company's website (http://www.ctans.com)[175](index=175&type=chunk) Condensed Consolidated Statement of Profit or Loss Overview of Condensed Consolidated Statement of Profit or Loss This condensed consolidated statement of profit or loss presents the unaudited financial performance for the six months ended June 30, 2020, showing significant year-on-year declines in revenue, gross profit, operating profit, and profit for the period, reflecting the substantial impact of the pandemic on the company's profitability Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30, 2020) | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 108,069 | 170,355 | | Cost of Sales | (46,664) | (63,923) | | Gross Profit | 61,405 | 106,432 | | Other Income | 25,672 | 29,147 | | Selling and Distribution Expenses | (29,764) | (25,737) | | Administrative Expenses | (12,601) | (16,248) | | Other Operating Expenses | (8,711) | (5,874) | | Operating Profit | 36,001 | 87,720 | | Finance Costs | (241) | (328) | | Profit Before Tax | 35,760 | 87,392 | | Income Tax | (7,882) | (14,346) | | Profit for the Period | 27,878 | 73,046 | | Profit Attributable to Owners of the Company | 26,808 | 73,046 | | Non-controlling Interests | 1,070 | – | | Basic and Diluted Earnings Per Share | RMB 10.8 cents | RMB 29.4 cents | Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Overview of Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This condensed consolidated statement of profit or loss and other comprehensive income shows that for the six months ended June 30, 2020, profit for the period was RMB 27.878 million, while other comprehensive income was primarily affected by exchange differences arising from the translation of functional currency to presentation currency, resulting in a total comprehensive income of RMB 27.844 million for the period, a significant year-on-year decrease Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30, 2020) | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Profit for the Period | 27,878 | 73,046 | | Other comprehensive income for the period: | | | | Exchange differences arising from translation of functional currency to presentation currency | (34) | 3,284 | | Total comprehensive income for the period | 27,844 | 76,330 | | Attributable to owners of the company | 26,774 | 76,330 | | Non-controlling Interests | 1,070 | – | Condensed Consolidated Statement of Financial Position Overview of Condensed Consolidated Statement of Financial Position This condensed consolidated statement of financial position shows that as of June 30, 2020, the Group's total assets less current liabilities were RMB 591.213 million, and net assets were RMB 561.946 million; compared to December 31, 2019, financial assets at fair value through profit or loss and cash and bank balances within current assets significantly decreased, leading to a decline in net current assets Condensed Consolidated Statement of Financial Position (As of June 30, 2020) | Indicator | June 30, 2020 (RMB thousand) | December 31, 2019 (RMB thousand) | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 60,364 | 60,539 | | Investment properties | 101,240 | 101,240 | | Right-of-use assets | 38,340 | 42,019 | | Current assets | | | | Inventories | 167,470 | 153,072 | | Trade receivables | 5,417 | 4,799 | | Financial assets at fair value through profit or loss | 242,145 | 447,584 | | Other receivables, deposits and prepayments | 19,225 | 18,892 | | Cash and bank balances | 24,429 | 39,380 | | Current liabilities | | | | Trade payables | 3,009 | 3,098 | | Other payables and accrued expenses | 36,137 | 196,288 | | Lease liabilities | 4,179 | 4,977 | | Income tax payable | 24,092 | 34,428 | | Net assets | 561,946 | 596,604 | | Equity attributable to owners of the company | 553,076 | 588,804 | | Non-controlling Interests | 8,870 | 7,800 | - Net current assets decreased from RMB 424.936 million as of December 31, 2019, to RMB 391.269 million as of June 30, 2020[189] - Financial assets at fair value through profit or loss significantly decreased from RMB 447.584 million to RMB 242.145 million[189] Condensed Consolidated Statement of Changes in Equity Overview of Condensed Consolidated Statement of Changes in Equity This condensed consolidated statement of changes in equity shows that for the six months ended June 30, 2020, equity attributable to owners of the company decreased from RMB 588.804 million at the beginning of the period to RMB 553.076 million at the end of the period, primarily reflecting the impact of profit for the period, exchange differences, and dividends paid Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30, 2020) | Indicator | Share Capital (RMB thousand) | Share Premium (RMB thousand) | Capital Reserve (RMB thousand) | Other Reserves (RMB thousand) | Revaluation Reserve (RMB thousand) | Share-based Payment Reserve (RMB thousand) | Exchange Fluctuation Reserve (RMB thousand) | Retained Profits (RMB thousand) | Non-controlling Interests (RMB thousand) | Total (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | As of January 1, 2020 (audited) | 2,189 | 110,503 | 10,005 | 57,947 | 17,542 | 12,245 | 192 | (16,788) | 394,969 | 7,800 | 596,604 | | Profit for the Period | - | - | - | - | - | - | - | 26,808 | 1,070 | 27,878 | | Exchange differences arising from translation of functional currency to presentation currency | - | - | - | - | - | - | (34) | - | - | (34) | | Total comprehensive income for the period | - | - | - | - | - | - | (34) | 26,808 | 1,070 | 27,844 | | Dividends | - | - | - | - | - | - | - | (62,502) | - | (62,502) | | As of June 30, 2020 (unaudited) | 2,189 | 110,503 | 10,005 | 57,947 | 17,542 | 12,245 | 192 | (16,822) | 359,275 | 8,870 | 561,946 | - Equity attributable to owners of the company decreased from RMB 588.804 million as of January 1, 2020, to RMB 553.076 million as of June 30, 2020[191] Condensed Consolidated Statement of Cash Flows Overview of Condensed Consolidated Statement of Cash Flows This condensed consolidated statement of cash flows shows that for the six months ended June 30, 2020, the Group's cash and cash equivalents net decreased by RMB 9.933 million, with net cash outflow from operating activities, net cash inflow from investing activities, net cash outflow from financing activities, and a negative impact from foreign exchange rate changes Condensed Consolidated Statement of Cash Flows (For the six months ended June 30, 2020) | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Net cash (used in)/generated from operating activities | (11,822) | 39,745 | | Net cash generated from investing activities | 215,300 | 65,268 | | Net cash used in financing activities | (213,411) | (116,412) | | Net decrease in cash and cash equivalents | (9,933) | (11,399) | | Cash and cash equivalents at January 1 | 39,380 | 46,203 | | Net effect of foreign exchange rate changes | (5,018) | 4,655 | | Cash and cash equivalents at June 30 | 24,429 | 39,459 | - Net cash used in operating activities was RMB (11.822) million, a significant shift from a net inflow in the same period last year[196] - Net cash generated from investing activities was RMB 215.300 million, primarily from the maturity proceeds of financial assets at fair value through profit or loss[196] Notes to the Unaudited Interim Financial Report General Information This section provides basic information about Tan Mujiang Holdings Limited, including its incorporation as an exempted company in the Cayman Islands, its listing on the Main Board of The Stock Exchange of Hong Kong Limited, and its principal place of business in Jurong City, Jiangsu Province, China - Tan Mujiang Holdings Limited was incorporated as an exempted company in the Cayman Islands on June 20, 2006[197] - Its shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited[197] - The principal place of business is located in Jurong City, Jiangsu Province, People's Republic of China[197] Basis of Preparation This unaudited interim financial report is prepared in accordance with the applicable disclosure requirements 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; it involves management's judgments, estimates, and assumptions, and has been reviewed by the company's Audit Committee - This unaudited interim financial report is prepared in accordance with the Listing Rules of The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34[198] - In preparing the report, management is required to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of financial statements[198] - The interim financial report is unaudited but has been reviewed by the company's Audit Committee[199] Principal Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, except for investment properties and financial assets at fair value through profit or loss, which are stated at fair value; amendments to Hong Kong Financial Reporting Standards were first adopted and applied during this interim period, but they did not have a significant impact on the amounts presented or disclosures in the financial statements - The condensed consolidated financial statements are prepared on a historical cost basis, except for investment properties and financial assets at fair value through profit or loss[203] - Amendments to HKFRS 3, 9, 39, 7, 1, and 8 were first adopted and applied during this interim period[204] - The application of these amendments did not have a significant impact on the amounts presented or disclosures in the condensed consolidated financial statements[204] Segment Reporting The Group's operating segments are identified based on internal reporting, with management assessing business performance from a product perspective; as over 90% of revenue, results, and assets are derived from a single segment of manufacturing and distribution of wooden crafts and ornaments, and principal business activities are conducted in China, no segment and geographical information is presented, and no single external customer's transactions accounted for 10% or more of total revenue - Over 90% of the Group's revenue, results, and assets are derived from a single segment of manufacturing and distribution of wooden crafts and ornaments, thus no segment information is presented[209] - The Group's revenue and results are primarily derived from business activities conducted in the People's Republic of China, thus no geographical information is provided[209] - No transactions with a single external customer accounted for 10% or more of the Group's total revenue[210] Operating Seasonal Factors The Group's sales generally fluctuate due to seasonal factors, with higher sales in March to April and September to December, and lower sales in July, primarily because franchised stores increase procurement in preparation for retail peaks during holidays such as Labor Day, National Day, Christmas, New Year, and Lunar New Year - The Group's sales are generally affected by seasonality, with higher sales in March to April and September to December, and lower sales in July[211] - Seasonal impact is attributed to franchised stores increasing procurement in preparation for retail peaks during holidays (e.g., Labor Day, National Day, Christmas, New Year, and Lunar New Year)[211] Revenue and Other Income This section provides a detailed analysis of the composition of revenue and other income for the six months ended June 30, 2020; revenue primarily came from goods sales, with a smaller proportion from franchise fees, while other income sources included government subsidies, interest income from financial assets, fair value changes, China VAT preferential refunds, and investment property rental income Revenue and Other Income Analysis (For the six months ended June 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Revenue | | | | Sales of goods | 107,975 | 170,034 | | Franchise fee income | 94 | 321 | | Other Income | | | | Government subsidies | 4,582 | 595 | | Interest income from financial assets | 39 | 117 | | Fair value changes of financial assets at fair value through profit or loss | 11,838 | 11,454 | | China VAT preferential refunds | 5,085 | 12,059 | | Rental income from investment properties | 2,716 | 3,849 | | Others | 1,409 | 996 | | Total | 133,741 | 199,502 | - Government subsidies significantly increased from RMB 595 thousand in 2019 to RMB 4,582 thousand in 2020[214] - China VAT preferential refunds decreased from RMB 12,059 thousand in 2019 to RMB 5,085 thousand in 2020[214] Profit Before Tax This section lists the components of profit before tax for the six months ended June 30, 2020, including cost of inventories, depreciation, staff costs, reversal of provision for sales returns, and net rental income; cost of inventories and staff costs decreased year-on-year, while depreciation expenses increased Components of Profit Before Tax (For the six months ended June 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Cost of inventories | 46,664 | 63,923 | | Impairment loss on inventories | 1,255 | 1,349 | | Reversal of impairment loss on inventories | (3) | – | | Depreciation－property, plant and equipment | 2,152 | 1,517 | | Depreciation－right-of-use assets | 3,768 | 2,606 | | Loss allowance for trade and other receivables | 323 | 26 | | Staff costs (including directors' emoluments) | 29,334 | 32,487 | | Reversal of provision for sales returns | (1,104) | (829) | | Net rental income | (2,424) | (3,381) | - Cost of inventories (including staff costs and depreciation) of approximately RMB 16.512 million has been included in individual totals[217][222] Income Tax This section details the income tax expense for the six months ended June 30, 2020, including China corporate income tax, dividend withholding tax, and deferred tax; the company's subsidiary, Tan