Financial Performance - The company's revenue decreased by approximately 28.1% from about $122.0 million in 2019 to about $87.7 million in 2020, primarily due to the impact of COVID-19 on supply chains and customer orders[23]. - Revenue from online-native customers dropped from approximately $62.0 million in 2019 to about $34.8 million in 2020, a decline of about 43.9%[23]. - Revenue from traditional high-end customers slightly decreased from approximately $52.0 million in 2019 to about $50.0 million in 2020, a decline of about 3.9%, while their revenue share increased from about 42.6% to 57.0%[24]. - The gross profit decreased from approximately $35.7 million in 2019 to about $25.9 million in 2020, a decline of about 27.3%[29]. - The adjusted net profit for 2020 was approximately $0.7 million, with an adjusted net profit margin of about 0.8%[32]. - The company's cash and cash equivalents as of December 31, 2020, were approximately $17.8 million, compared to $17.0 million in 2019[34]. - The current ratio for 2020 was approximately 2.0, down from 2.1 in 2019, indicating a relatively stable financial condition[34]. - The debt-to-equity ratio as of December 31, 2020, was approximately 44.5%, up from 34.1% in 2019[38]. - The gross margin improved from approximately 29.3% in 2019 to about 29.6% in 2020, attributed to business expansion into new product categories and improved operational efficiency[29]. Business Expansion and Strategy - The company maintained profitability during the COVID-19 crisis, outperforming most industry peers due to a light-asset business model and approximately 40% of sales coming from online-native brands and platforms[11]. - The company completed four acquisitions during the review period, including a sweater manufacturer, a functional outerwear manufacturer, a denim manufacturer, and a professional sportswear brand, significantly broadening its product line[12]. - The company is experiencing a resurgence in market share as demand increases with the rollout of vaccines, benefiting from the collapse of weaker competitors[14]. - The company aims to continue its business expansion strategy through active acquisition opportunities, expanding its geographical production range and customer base[15]. - The product line has been significantly expanded to cover the entire wardrobe, allowing the company to provide one-stop services to several clients[16]. - The company is positioning itself as a major player in the fast-growing digital retail space, focusing on small-batch and customized production capabilities[16]. - The company has implemented initiatives such as crowdsourced design and factory-brand matching algorithms as part of its strategy to become a super company in the apparel sourcing industry[16]. Corporate Governance - The company has established a board diversity policy to ensure a balanced mix of skills, experience, and perspectives among board members, enhancing corporate governance and operational effectiveness[65]. - The audit committee held three meetings during the year ended December 31, 2020, with full attendance from all members, focusing on financial reporting, risk management, and internal control systems[69]. - The remuneration committee conducted five meetings to review the company's remuneration policies and structures for directors and senior management, ensuring transparency in the remuneration process[72]. - The nomination committee held three meetings to assess board composition and recommend policies for the nomination and appointment of directors, considering various diversity factors[73]. - The company has appointed three independent non-executive directors, constituting over one-third of the board, ensuring compliance with independence requirements[62]. - The chairman and CEO roles are separated to maintain a clear distinction between board leadership and operational management responsibilities[61]. - The audit committee is responsible for reviewing the company's financial performance and risk management systems, ensuring compliance with corporate governance standards[71]. - The company received annual written confirmations from independent non-executive directors regarding their independence, affirming compliance with listing rules[62]. - The board diversity policy will be regularly reviewed to ensure its effective implementation and alignment with the company's business needs[66]. - The company has established three committees: audit, remuneration, and nomination, each with defined responsibilities and sufficient resources to oversee specific areas[67]. - The company held a total of 4 board meetings, 3 audit committee meetings, and 4 shareholder meetings during the year[79]. - The external auditor, Deloitte, received a total fee of $334,000, which includes $308,000 for audit services and $26,000 for non-audit services[90]. - All directors participated in continuous professional development training, ensuring they are well-informed about their responsibilities under the listing rules[85]. - The company has adopted a nomination policy for directors, ensuring a formal and transparent process for appointment and re-election[81]. - The company has established appropriate insurance coverage for its directors and senior officers against potential legal actions[87]. - The board of directors is responsible for preparing financial statements that fairly reflect the group's business status and performance[92]. - The company has not identified any significant uncertainties that may cast doubt on its ability to continue as a going concern[94]. - The company will continue to monitor and evaluate the skills and experiences of potential new board members[82]. - All directors confirmed compliance with the standard code of conduct regarding securities trading during the reporting period[88]. - The company will hold at least four board meetings annually to discuss financial performance and strategic development[77]. - The company has established a risk management framework involving the board of directors, audit committee, and senior management to oversee risk management and internal control systems[95]. - The board conducts an annual review of the effectiveness of the risk management and internal control systems, ensuring they are adequate and effective as of December 31, 2020[98]. - Independent internal control consultants provide annual internal audit and enterprise risk assessment reports to the audit committee and board for approval[96]. - The company aims to manage risks rather than eliminate them, providing reasonable assurance against significant misstatements or losses[98]. ESG and Sustainability - The ESG report details the company's efforts and achievements in sustainable development and social responsibility during the fiscal year[116]. - The ESG report covers environmental and social performance from January 1, 2020, to December 31, 2020[117]. - The board believes that effective ESG governance principles are crucial for long-term business development and investment value[122]. - The audit committee has engaged third-party ESG professionals to manage the company's ESG performance[122]. - The company actively communicates with stakeholders through various channels to understand their expectations regarding ESG[124]. - The report outlines the main stakeholders, their expectations, and the company's responses and communication channels[126]. - The company emphasizes compliance with emission regulations and engages with local environmental departments[129]. - The total greenhouse gas emissions for the year were 320.3 tons of CO2 equivalent, a decrease of 23.5% from 419.2 tons in the previous year[136]. - Direct emissions (Scope 1) were 13.8 tons of CO2 equivalent, down from 34.5 tons, representing a reduction of 60%[136]. - Indirect emissions from purchased electricity (Scope 2) increased to 271.6 tons of CO2 equivalent, up from 188.2 tons, marking a rise of 44.4%[136]. - Other indirect emissions (Scope 3) decreased significantly to 34.9 tons of CO2 equivalent from 196.5 tons, a reduction of 82.2%[136]. - Non-hazardous waste generated was 112.6 tons, down 39.0% from 184.8 tons in the previous year[140]. - Hazardous waste generated was 27.5 kg, an increase from 21.9 kg, reflecting a rise of 25.6%[140]. - The density of non-hazardous waste per employee was 0.38 tons, down from 0.50 tons[140]. - The company has implemented strict measures to control the use of toxic chemicals in production, aligning with the Greenpeace Detox Campaign[141]. - The company encourages employees to adopt low-carbon lifestyles and reduce waste through various initiatives[141]. - The company adheres to environmental regulations and has not reported any significant violations related to environmental protection laws[133]. - Total energy consumption in Shenzhen office increased to 570.9 MWh in 2020 from 496.0 MWh in 2019, representing a 15% increase[145]. - Direct energy consumption from vehicle fuel decreased significantly to 55.7 MWh in 2020 from 138.9 MWh in 2019, a reduction of approximately 60%[145]. - Indirect energy consumption from purchased electricity rose to 515.2 MWh in 2020, up from 357.1 MWh in 2019, marking a 44% increase[145]. - Total water consumption in Shenzhen office decreased to 1,993.1 cubic meters in 2020 from 2,943.9 cubic meters in 2019, a reduction of about 32%[149]. - Employee water consumption density improved to 6.67 cubic meters per employee in 2020 from 7.94 cubic meters in 2019, indicating better resource efficiency[149]. - The company has implemented energy-saving measures, including the installation of energy-efficient lighting and regular maintenance of air conditioning systems[146]. - The company is actively monitoring climate change trends and has established a task force to address extreme weather events and their potential impacts on operations[152]. - The company promotes water-saving awareness among employees and has adopted water-saving devices, contributing to reduced water usage[149]. Employee Engagement and Welfare - The company recognizes the importance of employee engagement and has established competitive compensation structures to attract and retain talent[155]. - As of December 31, 2020, the company employed a total of 304 employees[161]. - The employee distribution by gender showed that 56% were female and 83% were male in 2020, compared to 33% and 21% in 2019 respectively[162]. - The employee turnover rate was categorized by age, with 74% under 30 years old, 59% between 30 to 50 years old, and 135% over 50 years old in 2020[162]. - The average training hours per employee in 2020 were 3.1 hours for senior staff (91% trained), 7.1 hours for middle staff (61% trained), and 4.3 hours for junior staff (41% trained)[168]. - The company has implemented various training programs, including hardware skills training and case studies on customer service and information security[168]. - The company has maintained a zero fatality rate from workplace injuries over the past three years[170]. - Employee benefits include public holidays, annual leave, and discretionary bonuses, promoting a good work-life balance[174]. Supply Chain and Ethical Practices - The company has established strict supplier selection procedures, prioritizing suppliers with good reputations and compliance with labor laws[176]. - The company is committed to maintaining a safe working environment, adhering to relevant health and safety regulations[170]. - The company actively participates in health programs for female workers to enhance their health awareness and knowledge[164]. - The group has implemented a supplier scorecard system to identify potential risks in the supply chain, including environmental and social risks[178]. - The number of suppliers by region includes 468 (42%) from Hong Kong, 270 (25%) from Europe, 35 (3%) from Asia, 179 (16%) from America, and 149 (14%) from China[179]. - The group has established a quality management system to ensure products meet health and safety requirements, with all raw materials undergoing quality inspection before being accepted[182]. - The group has not recorded any product recalls due to safety and health reasons during the year[182]. - The group donates one piece of clothing for every 1,000 clothing products sold to NGOs and charities, contributing over 2,000 pieces to local communities in Shenzhen[188]. - The group donated a total of RMB 220,000 to the Hong Kong Salvation Army as part of a charitable donation event organized by the Shenzhen Caring Action Committee[188]. - The group prioritizes responsible and environmentally friendly sourcing of raw materials, ensuring compliance with standards such as GOTS, GRS, RDS, and RWS[181]. - The group has not been involved in any legal cases related to bribery, corruption, extortion, or money laundering that significantly impacted the company during the year[186]. - The group emphasizes the importance of protecting intellectual property and requires employees to maintain confidentiality regarding sensitive information[185]. - The group is committed to ethical business practices and has a whistleblowing policy for reporting misconduct[186].
利华控股集团(01346) - 2020 - 年度财报