中国集成控股(01027) - 2020 - 年度财报

Chairman's Statement Chairman Mr. Huang Wenji reported a 38.5% revenue decrease to RMB 344 million in 2020, with annual loss expanding to RMB 34 million, and a strategic shift towards downstream distribution and brand building 2020 Fiscal Year Performance Overview | Indicator | 2020 (RMB) | 2019 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | 344 million | 559 million | -38.5% | | Annual Loss | 34 million | 16 million | +112.5% | | POE Umbrella Revenue | 66 million | 120 million | -45.0% | | Nylon Umbrella Revenue | 149 million | 179 million | -16.8% | | Umbrella Components Revenue | 129 million | 260 million | -50.4% | - The Board does not recommend a final dividend for the year ended December 31, 2020[11] - Future strategy shifts from upstream manufacturing to downstream distribution and brand building to promote higher-margin branded umbrellas and create greater shareholder value[14][16] - The Group aims to maintain its leading position in the Japanese market, develop its own brands in the Chinese market, and expand market share in existing markets like Hong Kong, Cambodia, and South Korea[13][16] Management Discussion and Analysis Business Review The Group's core business involves manufacturing and selling POE umbrellas, nylon umbrellas, and related components, primarily for export (84% of total revenue) to Japan, Hong Kong, and South Korea, with a strategic shift towards downstream distribution and brand building - The Group primarily engages in manufacturing and sales of POE umbrellas, nylon umbrellas, and components like plastic fabric and central shafts[18] - In 2020, export sales accounted for approximately 84% of total revenue, mainly to Japan, Hong Kong, and South Korea; domestic market sales accounted for approximately 16%[19][20] - The new business strategy shifts focus from upstream manufacturing to downstream distribution and brand building to promote higher-margin branded umbrellas[21][24] Financial Review In FY2020, revenue decreased by 38.5% to RMB 344 million, with annual loss expanding to RMB 34 million due to revenue decline and asset impairment, while liquidity improved significantly FY2020 Key Financial Indicators Changes | Indicator | 2020 (RMB) | 2019 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 344 million | 559 million | -38.5% | | Gross Profit | 53 million | 66 million | -19.7% | | Gross Margin | 15.3% | 11.8% | +3.5pp | | Annual Loss | 34 million | 16 million | +112.5% | | Finance Costs | 4 million | 11 million | -63.6% | - The primary reasons for the expanded annual loss were (i) reduced revenue due to the pandemic; and (ii) recognition of approximately RMB 23 million in impairment losses on property, plant and equipment and right-of-use assets[35] Liquidity and Financial Resources (as of year-end) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Bank Balances and Cash | 115 million RMB | 82 million RMB | | Short-term Bank Borrowings | 77 million RMB | 203 million RMB | | Current Ratio | 3.4 times | 2.3 times | | Debt-to-Asset Ratio | 34% | 56% | Key Operating Metrics In 2020, the Group's operating efficiency metrics showed significant changes, with inventory turnover days increasing to 323 days due to slower sales, while trade receivables turnover days decreased to 120 days, and trade payables turnover days increased to 54 days Changes in Operating Turnover Days | Indicator | 2020 (days) | 2019 (days) | | :--- | :--- | :--- | | Inventory Turnover Days | 323 | 154 | | Trade Receivables Turnover Days | 120 | 135 | | Trade Payables and Bills Payable Turnover Days | 54 | 25 | Principal Risks and Uncertainties The Group faces key operational risks including reliance on major customers, exposure to political and economic fluctuations and foreign exchange rate changes in key markets, and potential negative impacts from raw material price volatility, supply instability, or rising labor costs - Loss of major customers could significantly and adversely impact the Group's business, financial condition, and operating results[40] - The Group faces risks related to sales in Japan, China, and other overseas markets, such as political and economic instability and foreign currency exchange rate fluctuations[43] - Raw material price volatility, supply instability, and labor shortages or rising costs are other major risks faced by the Group[43] Use of Proceeds The company reallocated unutilized global offering proceeds to align with its new strategy, with RMB 37 million unutilized as of end-2020, primarily for new brand acquisition and brand promotion Use of Net Proceeds (as of December 31, 2020) | Purpose | Revised Allocation (million RMB) | Unutilized Amount as of End 2020 (million RMB) | | :--- | :--- | :--- | | Enhancing Brand Awareness and Promotion | 27.2 | 7.3 | | Acquisition of New Brand Names and Investment in Trading Companies | 36.9 | 29.7 | | Total | 106.0 | 37.0 | - The remaining approximately RMB 7.3 million for brand promotion is expected to be fully utilized by December 31, 2021[55][57] - The remaining approximately RMB 29.7 million for acquiring new brands and investing in trading companies is expected to be fully utilized by December 31, 2022[61][62] Future Prospects The Group aims to maintain its leading position in the Japanese umbrella market, promote its own brands in China, and expand market share in existing markets like Hong Kong, Cambodia, and South Korea, by continuing its strategic shift towards downstream distribution and brand building and exploring new business opportunities - The Group's primary goal is to maintain and strengthen its leading position in the Japanese market and promote its own branded umbrellas in the Chinese market[66][69] - The Group will shift its business focus from upstream manufacturing to downstream distribution networks and brand building to promote higher-margin branded umbrellas, aiming for better returns for shareholders[67][69] - To achieve business diversification, the Group is actively exploring and developing new business opportunities and projects[67] Corporate Governance Report Corporate Governance Practices The company maintains high corporate governance standards, with two deviations from the code: combined Chairman and CEO roles, and independent non-executive directors' absence from the 2020 AGM; the Board oversees risk management and internal controls - The company deviates from the Corporate Governance Code as the roles of Chairman and Chief Executive Officer are held by the same person (Mr. Huang Wenji), which the Board believes facilitates business strategy execution and decision-making[72][73] - Another deviation is that three independent non-executive directors were unable to attend the Annual General Meeting on June 30, 2020, due to other commitments[74] - The Board is responsible for evaluating and determining risks, ensuring the establishment and maintenance of appropriate and effective risk management and internal control systems; in 2020, the company engaged an external consulting firm for internal audit functions and found no material deficiencies[139][150] Board and Committee Attendance In FY2020, the Board held 6 meetings with full attendance from all directors, and all members fully attended their respective audit, remuneration, and nomination committee meetings; however, most executive directors and some independent non-executive directors were absent from the three general meetings 2020 Board Meeting Attendance (Attended/Held) | Director Name | General Meetings | Board Meetings | Audit Committee | Remuneration Committee | Nomination Committee | | :--- | :--- | :--- | :--- | :--- | :--- | | Executive Directors | | | | | | | Huang Wenji | 0/3 | 6/6 | N/A | N/A | N/A | | Yang Guang | 0/3 | 6/6 | N/A | N/A | N/A | | Lin Zhenshuang | 0/3 | 6/6 | N/A | N/A | N/A | | Zhong Jianxiong | 1/3 | 6/6 | N/A | N/A | N/A | | Independent Non-Executive Directors | | | | | | | Cao Siwei | 2/3 | 6/6 | 2/2 | 1/1 | 1/1 | | Yang Xuetai | 0/3 | 6/6 | 2/2 | 1/1 | 1/1 | | Li Jieying | 0/3 | 6/6 | 2/2 | 1/1 | 1/1 | Environmental, Social and Governance Report ESG Report This report outlines the company's 2020 ESG performance, detailing environmental efforts under ISO 14001, social compliance with labor laws and employee training, and governance practices including supply chain management and community donations 2020 Environmental Performance Indicators | Indicator | 2020 Data | | :--- | :--- | | Total Energy Consumption | Approx. 6,627 MWh equivalent | | Total Water Consumption | 123,287 cubic meters | | Total GHG Emissions (Scope 1+2+3) | Approx. 4,030 tonnes of CO2 equivalent | | Non-Hazardous Waste Generated | 240 tonnes | - As of end-2020, the Group had 1,062 employees in China, with a male-to-female ratio of approximately 1.3:1; 457 employees received training during the year, representing a training ratio of 43%[223][231] - The Group strictly adheres to labor standards, with no instances of child or forced labor reported during the period[235][238] - During the year, the Group donated a total of RMB 410,000 to various charitable organizations, supporting community culture, education, and health development[255][256] Biographical Details of Directors and Senior Management Directors and Senior Management Biographies This section details the backgrounds of the company's Board members and senior management, including executive directors led by founder and Chairman Mr. Huang Wenji, and independent non-executive directors with expertise in accounting, industrial design, and financial administration, along with key senior management - Executive Directors include: Mr. Huang Wenji (Chairman, Founder), Mr. Yang Guang (Deputy General Manager, responsible for production), Mr. Lin Zhenshuang (International Business Department Manager, responsible for sales), and Mr. Zhong Jianxiong (responsible for strategic planning and finance)[258][259][260][261] - Independent Non-Executive Directors include: Mr. Cao Siwei (accounting background), Mr. Yang Xuetai (art and design background), and Ms. Li Jieying (finance and administration background)[266] - Senior management includes Mr. Liu Liangping, Research and Development Department Manager[266] Report of the Directors Directors' Report This report outlines the Group's principal business and financial position for FY2020, noting high customer concentration (top five clients accounted for 73% of total revenue), no recommended annual dividend, and details on directors' and major shareholders' equity interests Major Customer and Supplier Concentration | Concentration Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Largest Customer as % of Total Revenue | 20% | 18.1% | | Top Five Customers as % of Total Revenue | 73% | 59.4% | | Largest Supplier as % of Total Purchases | 9% | 35.0% | | Top Five Suppliers as % of Total Purchases | 25% | 53.4% | - The Board does not recommend a final dividend for the year ended December 31, 2020[291] - On May 14, 2020, the company granted share options to several directors and employees under the share option scheme, with an adjusted exercise price of HKD 0.464 per share after share consolidation[317][361] - During the year, neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities[301] Independent Auditor's Report Auditor's Report Auditor Kaiyuan Xinde Certified Public Accountants Limited issued an unmodified opinion on the company's 2020 consolidated financial statements, highlighting key audit matters regarding contingent consideration and asset impairment assessment - The auditor issued an unmodified opinion, stating that the consolidated financial statements fairly present the Group's financial position and performance[374][377] - Key Audit Matter One: Fair value measurement of contingent consideration payable, which involves significant management judgment and reliance on independent external valuation[379][382] - Key Audit Matter Two: Impairment of property, plant and equipment and right-of-use assets, which involves significant management judgment on key assumptions such as future revenue, operating profit margins, and discount rates[379][385] Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2020, the Group reported revenue of RMB 344 million, a 38.5% decrease, with gross profit at RMB 52.8 million, down 19.7%, and annual loss expanding to RMB 34.31 million Consolidated Statement of Profit or Loss Summary (RMB thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 344,390 | 558,599 | | Gross Profit | 52,795 | 65,861 | | Loss Before Tax | (31,823) | (11,441) | | Loss for the Year Attributable to Owners of the Company | (34,312) | (16,247) | | Basic Loss Per Share (RMB cents) | (17.78) | (8.58) | Consolidated Statement of Financial Position As of December 31, 2020, the Group's total assets were RMB 582 million, total liabilities decreased to RMB 155 million, and total equity stood at RMB 426 million, indicating a stable financial position Consolidated Statement of Financial Position Summary (RMB thousands) | Item | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Non-current Assets | 105,238 | 134,665 | | Current Assets | 476,371 | 582,873 | | Total Assets | 581,609 | 717,538 | | Current Liabilities | 154,971 | 250,407 | | Non-current Liabilities | 413 | 15,031 | | Total Liabilities | 155,384 | 265,438 | | Total Equity | 426,225 | 452,100 | Consolidated Statement of Changes in Equity As of end-2020, the Group's total equity was RMB 426 million, a decrease of approximately RMB 25.88 million from the beginning of the year, primarily due to the RMB 34.31 million loss for the year, partially offset by new share issuance and share option grants - Total equity decreased from RMB 452.1 million at the beginning of the year to RMB 426.2 million at year-end[423] - Key factors in equity changes include: an annual loss of RMB 34.31 million, an increase of RMB 6.38 million from new share issuance, an increase of RMB 1.8 million from share option grants, and RMB 0.28 million from capital contribution by shareholders[423] Consolidated Statement of Cash Flows In 2020, the Group generated RMB 155 million in net cash from operating activities, a significant improvement, with net cash outflow from investing activities of RMB 0.87 million, and from financing activities of RMB 122 million, resulting in a net increase of RMB 32.38 million in cash and cash equivalents Consolidated Statement of Cash Flows Summary (RMB thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash From Operating Activities | 155,452 | 9,351 | | Net Cash (Used In)/From Investing Activities | (866) | 492 | | Net Cash Used In Financing Activities | (122,209) | (1,656) | | Net Increase in Cash and Cash Equivalents | 32,377 | 8,187 | | Cash and Cash Equivalents at End of Period | 58,319 | 26,151 | Notes to the Consolidated Financial Statements This section provides detailed explanations and supplementary information for the consolidated financial statements, covering company information, accounting policies, key judgments and estimates, financial data breakdowns, related party transactions, and subsidiary acquisition details - Note 7 discloses revenue breakdown by product category, with nylon umbrellas being the largest revenue source, accounting for approximately 43% of total revenue[729] - Note 8 discloses revenue by geographical region, with Cambodia, Japan, and China being the top three markets, contributing approximately 38%, 33%, and 16% of revenue respectively[734] - Note 31 details the acquisition of Jinjiang Jingting Trading Co., Ltd. in 2019, including consideration, net assets acquired, and goodwill generated[908][911][916] Financial Summary Five-Year Financial Summary This section provides a summary of the Group's key financial data for the past five fiscal years (2016-2020), showing a continuous decline in revenue since 2016, consecutive losses in 2019 and 2020, and a decrease in total assets and net assets over the last two years Five-Year Performance Trend (RMB thousands) | Year | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 344,390 | 558,599 | 521,186 | 538,264 | 603,985 | | (Loss)/Profit Before Tax | (31,823) | (11,441) | 25,260 | 6,705 | 13,514 | Five-Year Assets and Liabilities Trend (RMB thousands) | Year | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 581,609 | 717,538 | 701,426 | 681,201 | 713,292 | | Net Assets | 426,225 | 452,100 | 461,204 | 440,586 | 430,983 |