中国派对文化(01532) - 2021 - 中期财报

Corporate Information This section provides essential corporate details, including board composition, contact information, and registration specifics Board of Directors and Committees This section lists the company's board members and their roles in the audit, remuneration, and nomination committees, clarifying the composition of executive and independent non-executive directors - The Board of Directors comprises three executive directors (including Chairperson Ms. Chen Sheng and CEO Mr. Xu Chengwu) and three independent non-executive directors[4] - The Audit Committee is chaired by Mr. Zheng Jinmin, the Remuneration Committee by Mr. Chen Wenhua, and the Nomination Committee by Ms. Peng Xu[4] Company Contact and Registration Information This section provides detailed information on the company's registered office, China headquarters, principal place of business, Hong Kong business location, share registrar, legal counsel, auditor, stock code, company website, and investor relations contact - The company's registered office is in the Cayman Islands, with its China headquarters located in Yichun Economic and Technological Development Zone, Jiangxi Province[4] - The Hong Kong share registrar and transfer office is Tricor Investor Services Limited, and the auditor is Grant Thornton Hong Kong Limited[7] - The company's stock code is 1532, and its website is **www.partytime.com.cn**[7](index=7&type=chunk) Financial Highlights This section presents a concise overview of the company's key financial performance and position indicators for the reporting period Profit and Loss Summary For the six months ended June 30, 2021, the company's revenue decreased by 13.2% year-on-year, gross profit declined by 12.0%, but loss attributable to equity holders significantly narrowed by 88.1% Key Profit and Loss Indicators (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 101,928 | 117,378 | (13.2%) | | Gross Profit | 27,533 | 31,296 | (12.0%) | | Loss attributable to equity holders | (5,154) | (43,319) | (88.1%) | | Gross Profit Margin | 27.0% | 26.7% | 0.3% | | Net Loss Margin | (5.1%) | (36.9%) | 31.8% | | Basic Loss Per Share (RMB cents) | (0.57) | (4.83) | (88.2%) | Financial Position Summary As of June 30, 2021, the company's total assets and liabilities both increased, total equity grew by 6.5%, and bank balances and cash significantly rose by 52.3% Key Financial Position Indicators (As at period end) | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 493,600 | 460,112 | 7.3% | | Total Liabilities | 119,305 | 108,584 | 9.9% | | Equity attributable to equity holders | 374,295 | 351,528 | 6.5% | | Bank Balances and Cash | 74,474 | 48,908 | 52.3% | Key Financial Ratios As of June 30, 2021, the company's current ratio and gearing ratio both improved, indicating enhanced liquidity Key Financial Ratios (As at period end) | Indicator | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Current Ratio | 163.2% | 131.7% | | Gearing Ratio | 24.0% | 25.4% | Directors' Business Review and Management Discussion and Analysis This section provides an in-depth review of the company's business operations, investment activities, future prospects, and detailed financial performance analysis Business Review The Group primarily engages in the design, development, production, sales, and marketing of cosplay products (including costumes and wigs) and non-cosplay apparel (mainly lingerie), exporting to over 20 countries and regions globally, with business categorized into Contract Manufacturing Services (CMS) and Original Brand Manufacturing (OBM) - The Group primarily engages in the design, development, production, sales, and marketing of cosplay products (costumes and wigs) and non-cosplay apparel (lingerie)[11][13] - Products are mainly exported to over 20 countries and regions globally, including the United States, Germany, the United Kingdom, Japan, and Australia[11][13] - Business is categorized into Contract Manufacturing Services (CMS) and Original Brand Manufacturing (OBM)[12][14] Main Business and Products The company's core business involves global export of cosplay products and lingerie, offering both contract manufacturing and original brand manufacturing services based on customer needs - Key products include cosplay costumes, cosplay wigs, and lingerie[11][13] - Business models are divided into Contract Manufacturing Services (CMS) and Original Brand Manufacturing (OBM)[12][14] Revenue by Business Category For the six months ended June 30, 2021, CMS business revenue increased by 14.3% year-on-year to RMB 92.68 million, accounting for 90.9% of total revenue, while OBM business revenue significantly decreased by 74.5% to RMB 9.248 million Revenue by Business Category (For the six months ended June 30) | Business Category | 2021 (RMB thousands) | Percentage of Total | 2020 (RMB thousands) | Percentage of Total | Revenue Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | CMS Business | 92,680 | 90.9% | 81,104 | 69.1% | 14.3% | | OBM Business | 9,248 | 9.1% | 36,274 | 30.9% | (74.5%) | | Total | 101,928 | 100.0% | 117,378 | 100.0% | (13.2%) | Revenue by Product Category For the six months ended June 30, 2021, wig product revenue significantly decreased by 68.9% year-on-year, while apparel and other product revenue increased by 11.5% Revenue by Product Category (For the six months ended June 30) | Product Category | 2021 (RMB thousands) | Percentage of Total | 2020 (RMB thousands) | Percentage of Total | Revenue Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wigs | 11,189 | 11.0% | 35,990 | 30.7% | (68.9%) | | Apparel and Others | 90,739 | 89.0% | 81,388 | 69.3% | 11.5% | | Total | 101,928 | 100.0% | 117,378 | 100.0% | (13.2%) | Investment Review In 2018, the company subscribed to CSG convertible bonds for the Nickelodeon theme park project, but due to project delays, unassigned rights, and CSG's default, the company recorded a fair value loss in 2019 and sold the bonds for HKD 10 million in March 2021, recognizing a disposal gain of approximately RMB 2.8 million to mitigate losses and exit the investment - In March 2018, the company's subsidiary subscribed to HKD 70 million CSG convertible bonds issued by Charm Success Global Investment Limited (CSG) for the Nickelodeon theme park project[20][22] - Due to project funding delays, unassigned rights, and CSG's failure to pay interest, the company recorded a fair value loss of approximately RMB 60.5 million in 2019[25][29] - On March 15, 2021, the company sold the CSG convertible bonds for HKD 10 million (approximately RMB 8.34 million), recognizing a disposal gain of approximately RMB 2.8 million, aiming to reduce losses and exit the investment[31][34] CSG Convertible Bond Investment The CSG convertible bond investment resulted in significant losses due to project delays and issuer default, leading the company to sell the bonds at a lower price to cut losses and obtain immediate funds, while reserving the right to take legal action against the defaulting party - Charm Success Global Investment Limited, the issuer of the CSG convertible bonds, defaulted due to project funding delays, unassigned theme park rights, and unpaid interest[25][29] - The company recorded a fair value loss of approximately RMB 60.5 million in 2019 and a fair value gain of approximately RMB 3.9 million in 2020[25][26][29] - In March 2021, the company sold the CSG convertible bonds for HKD 10 million, recognizing a disposal gain of approximately RMB 2.8 million to reduce losses and generate immediate available funds[31][34] - The Board does not rule out the possibility of initiating legal proceedings against the CSG issuer and related parties to recover losses incurred due to the default[32][35] Business Prospects Influenced by the COVID-19 pandemic, the business outlook for 2021 remains challenging, with the company focusing on improving operational efficiency, diversifying business, and expanding revenue streams through acquiring growth-potential intellectual property and collaborating with upstream and downstream companies to deliver higher shareholder returns - The COVID-19 pandemic has adversely affected the global economy and consumer confidence, making the business outlook for 2021 challenging[33][36] - The Group will continue to enhance operational efficiency and effectiveness[39][40] - The Board will seek opportunities to diversify business and broaden revenue streams through acquiring intellectual property with growth potential and collaborating with upstream and downstream industry companies[39][40] Financial Review This section provides a detailed review of the company's financial performance during the reporting period, including changes in revenue, gross profit margin, various costs and expenses, as well as financial resources, liquidity, capital expenditure, and pledged assets Revenue and Gross Profit Margin For the six months ended June 30, 2021, total revenue decreased by 13.2%, primarily due to weak OBM business sales performance; CMS business revenue grew by 14.3%, with non-surgical mask production contributing approximately RMB 44.3 million; gross profit margin slightly increased to 27.0%, mainly benefiting from higher profit margins on non-surgical mask sales - Total revenue decreased by 13.2%, mainly due to the severe impact of the COVID-19 pandemic on OBM business sales performance[15][46][49] - CMS business revenue increased by 14.3% to approximately RMB 92.7 million, accounting for 90.9% of total revenue[44][49] - The Group diverted some production lines to non-surgical mask production, contributing approximately RMB 44.3 million in revenue, recognized under cosplay costumes within CMS business[47][50] - Gross profit margin slightly increased from 26.7% to 27.0%, primarily due to the higher profit margin contribution from non-surgical mask sales[48][51] Costs and Expenses Other income increased by approximately RMB 3.5 million to RMB 8.0 million year-on-year, mainly from rental income, utility fee income, and gain on disposal of financial assets; selling expenses as a percentage of revenue decreased; administrative and other operating expenses decreased by approximately RMB 1.6 million, primarily due to reduced R&D costs; impairment loss on property, plant, and equipment was approximately RMB 4.5 million; finance costs decreased by approximately RMB 0.8 million; and income tax expense increased by approximately RMB 0.5 million - Other income increased by approximately RMB 3.5 million to approximately RMB 8.0 million, mainly due to increased rental income and utility fee income from the Party Culture Industrial Base, and a gain of approximately RMB 2.8 million from the disposal of financial assets at fair value through profit or loss[55][60] - Selling expenses as a percentage of revenue decreased from 2.3% to 1.7%[56][61] - Administrative and other operating expenses decreased by approximately RMB 1.6 million to approximately RMB 33.4 million, primarily due to a reduction in R&D costs of approximately RMB 1.0 million[57][62] - Impairment loss on property, plant, and equipment of approximately RMB 4.5 million was recognized during the period due to continuous decline in turnover[58][62] - Finance costs decreased by approximately RMB 0.8 million to approximately RMB 2.7 million, mainly due to reduced interest payments on other short-term borrowings[64][68] - Income tax expense increased by approximately RMB 0.5 million to approximately RMB 1.2 million, primarily due to an increase in deferred tax recognized during the period[65][69] Financial Resources and Liquidity As of June 30, 2021, the Group's total cash and cash equivalents increased by approximately RMB 25.6 million to RMB 74.5 million, primarily benefiting from the net proceeds from share placement, with current ratio and gearing ratio at 163.2% and 24.0% respectively - As of June 30, 2021, total cash and cash equivalents were approximately RMB 74.5 million, an increase of approximately RMB 25.6 million compared to December 31, 2020[66][70] - The increase was mainly due to the completion of a placement of 179,544,600 shares in June 2021, with net proceeds of approximately HKD 31.0 million[66][70] - As of June 30, 2021, the current ratio was 163.2%, and the gearing ratio was 24.0%[67][71] Capital Expenditure and Pledged Assets During the reporting period, the Group invested approximately RMB 8.1 million in property, plant, and equipment, with bank loans secured by right-of-use assets, buildings, and investment properties - For the six months ended June 30, 2021, the Group invested approximately RMB 8.1 million in property, plant, and equipment[75][80] - Bank loans are secured by right-of-use assets with a carrying amount of approximately RMB 6.8 million, buildings of approximately RMB 83.0 million, and investment properties of approximately RMB 27.2 million[76][81] Events After Reporting Date Subsequent to the reporting period, the company acquired a patent in July 2021 and received a writ of summons for legal proceedings concerning a proposed sale of the company's controlling stake, which the Board considers groundless - On July 9, 2021, the company acquired a 75% equity interest in Hmda Culture International Co., Limited for a cash consideration of HKD 11 million to obtain a patent, with the transaction completed on July 30[78][83] - On July 30, 2021, the company and certain former directors and shareholders received a writ of summons for legal proceedings concerning a proposed sale of the company's controlling stake[85][88] - The Board considers the allegations against the company in the writ of summons to be groundless and baseless[85][88] Other Management Discussion This section discusses the company's foreign currency risk management, employee and remuneration policies, and the use of proceeds from share placement, highlighting the company's operational and financial management strategies Foreign Currency Exposure The company faces currency risk from its predominantly USD-denominated overseas sales, currently lacking a Group foreign currency hedging policy, but management will monitor and consider hedging significant foreign currency exposures - The company's currency risk primarily arises from USD-denominated overseas sales[86][89] - There is currently no Group foreign currency hedging policy, but management will monitor foreign exchange risk and consider hedging when necessary[86][89] Employees and Remuneration Policy As of June 30, 2021, the company had approximately 924 employees, with total staff costs of approximately RMB 32.6 million during the period; remuneration policy is regularly reviewed based on market practice, employee performance, and company financial performance, with no significant changes - As of June 30, 2021, the company had approximately 924 employees[87][90] - Total staff costs for the period were approximately RMB 32.6 million[87][90] - Remuneration policy is regularly reviewed based on market practice, employee performance, and company financial performance, with no significant changes[87][90] Use of Proceeds The net proceeds from the June 2021 share placement were approximately HKD 31.0 million, with approximately HKD 15.7 million allocated to repay existing debt principal and interest, and approximately HKD 15.3 million for general working capital and intellectual property acquisition; as of June 30, 2021, approximately HKD 4.3 million had been used for general working capital - Net proceeds from the June 2021 share placement were approximately HKD 31.0 million[93][95] - The net proceeds are intended for repaying approximately HKD 15.7 million of existing debt principal and interest, and approximately HKD 15.3 million for general working capital and intellectual property acquisition[93][95] - As of June 30, 2021, approximately HKD 4.3 million had been used for general working capital[94][96] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This section presents the condensed consolidated statement of profit or loss and other comprehensive income, detailing the company's financial performance for the reporting period Profit or Loss Statement For the six months ended June 30, 2021, the company recorded a loss for the period of RMB 5,154 thousand, a significant reduction from RMB 43,319 thousand in the prior period, with revenue at RMB 101,928 thousand and gross profit at RMB 27,533 thousand Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 101,928 | 117,378 | | Cost of sales | (74,395) | (86,082) | | Gross profit | 27,533 | 31,296 | | Other income | 7,972 | 4,506 | | Selling expenses | (1,768) | (2,642) | | Net impairment loss on property, plant and equipment | (4,512) | (37,294) | | Reversal of impairment loss on investment properties | 3,313 | – | | Fair value loss on financial assets at fair value through profit or loss | (349) | – | | Administrative and other operating expenses | (33,440) | (35,035) | | Operating loss | (1,251) | (39,169) | | Finance costs | (2,656) | (3,461) | | Loss before income tax | (3,907) | (42,630) | | Income tax expense | (1,247) | (689) | | Loss for the period | (5,154) | (43,319) | | Other comprehensive income/(expense) for the period | 2,110 | (569) | | Total comprehensive expense for the period | (3,044) | (43,888) | | Basic and diluted loss per share (RMB cents) | (0.57) | (4.83) | Condensed Consolidated Statement of Financial Position This section presents the condensed consolidated statement of financial position, outlining the company's assets, liabilities, and equity at the end of the reporting period Statement of Financial Position As of June 30, 2021, the Group's total assets were RMB 493,600 thousand, total liabilities were RMB 119,305 thousand, and total equity was RMB 374,295 thousand, with net current assets significantly increasing to RMB 71,868 thousand Condensed Consolidated Statement of Financial Position (As at period end) | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Non-current assets | | | | Right-of-use assets | 9,082 | 9,258 | | Investment properties | 62,069 | 58,915 | | Property, plant and equipment | 203,612 | 217,707 | | Deferred tax assets | 25,719 | 26,172 | | Current assets | | | | Inventories | 19,546 | 14,119 | | Trade and other receivables | 88,449 | 67,639 | | Bank balances and cash | 74,474 | 48,908 | | Current liabilities | | | | Trade and other payables | 25,071 | 19,289 | | Contract liabilities | 3,962 | 170 | | Short-term borrowings | 81,488 | 81,429 | | Total assets | 493,600 | 460,112 | | Total liabilities | 119,305 | 108,584 | | Total equity | 374,295 | 351,528 | | Net current assets | 71,868 | 32,646 | Condensed Consolidated Statement of Changes in Equity This section presents the condensed consolidated statement of changes in equity, detailing movements in the company's equity components during the reporting period Statement of Changes in Equity For the six months ended June 30, 2021, the company's total equity increased from RMB 351,528 thousand at the beginning of the period to RMB 374,295 thousand, primarily due to net proceeds from share issuance of RMB 25,811 thousand, despite a loss for the period of RMB 5,154 thousand Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | Share Capital (RMB thousands) | Share Premium (RMB thousands) | Capital Reserve (RMB thousands) | Statutory Reserve (RMB thousands) | Exchange Reserve (RMB thousands) | Retained Profits (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | January 1, 2021 | 7,352 | 196,839 | 85,160 | 36,409 | 5,482 | 20,286 | 351,528 | | Loss for the period | – | – | – | – | – | (5,154) | (5,154) | | Other comprehensive income | – | – | – | – | 2,110 | – | 2,110 | | Transactions with owners: | | | | | | | | | - Transfer to statutory reserve | – | – | – | 92 | – | (92) | – | | - Issue of share capital | 1,495 | 24,316 | – | – | – | – | 25,811 | | June 30, 2021 | 8,847 | 221,155 | 85,160 | 36,501 | 7,592 | 15,040 | 374,295 | - Net proceeds from share capital issued during the period amounted to RMB 25,811 thousand, primarily from share placement[106] Condensed Consolidated Statement of Cash Flows This section presents the condensed consolidated statement of cash flows, detailing the company's cash movements from operating, investing, and financing activities Cash Flow Statement For the six months ended June 30, 2021, net cash inflow from operating activities was RMB 130 thousand, net cash outflow from investing activities was RMB 632 thousand, and net cash inflow from financing activities was RMB 26,011 thousand, resulting in a net increase in cash and cash equivalents of RMB 25,509 thousand Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Net cash generated from/(used in) operating activities | 130 | (26,206) | | Net cash (used in)/generated from investing activities | (632) | 2,635 | | Net cash generated from financing activities | 26,011 | 18,632 | | Net increase/(decrease) in cash and cash equivalents | 25,509 | (4,939) | | Cash and cash equivalents at beginning of period | 48,908 | 78,761 | | Effect of foreign exchange rate changes | 57 | (244) | | Cash and cash equivalents at end of period | 74,474 | 73,578 | - Operating cash flow shifted from a net outflow in the prior period to a net inflow, indicating improved operating performance[109] - Cash inflow from financing activities primarily stemmed from proceeds from share issuance of RMB 26,160 thousand[109] Notes to the Interim Financial Report This section provides detailed notes to the interim financial report, offering additional context and breakdowns for the financial statements GENERAL INFORMATION The company was incorporated in the Cayman Islands, with shares listed on the Main Board of the Hong Kong Stock Exchange, primarily engaged in the production and sale of cosplay products, lingerie, and factory leasing; the ultimate controlling shareholder is Mr. Chen Shengbi - The company was incorporated in the Cayman Islands on February 12, 2015, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited[111][114] - Its principal activities include the design, development, production, sales, and marketing of cosplay products (including costumes and wigs) and lingerie, as well as factory leasing[112][115] - The ultimate controlling shareholder is Mr. Chen Shengbi, through his wholly-owned company Master Professional Holdings Limited[113][115] BASIS OF PREPARATION The condensed consolidated interim financial information is prepared in accordance with the Listing Rules of the Stock Exchange and Hong Kong Accounting Standard 34, is unaudited, presented in RMB thousands, and should be read in conjunction with the annual consolidated financial statements - The condensed consolidated interim financial information is prepared in accordance with the Listing Rules of The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting"[117][120] - This information is unaudited and presented in RMB thousands[118][119] - It should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2020[117][120] SIGNIFICANT ACCOUNTING POLICIES This period's financial information follows the accounting policies adopted in the 2020 annual consolidated financial statements, incorporating new and revised Hong Kong Financial Reporting Standards effective from January 1, 2021, with no significant impact on the results and financial position for the current and prior periods - The condensed consolidated interim financial information follows the accounting policies adopted in the 2020 annual consolidated financial statements[121][124] - New and revised Hong Kong Financial Reporting Standards effective from January 1, 2021, including amendments to Interest Rate Benchmark Reform – Phase 2, have been adopted[122][125] - The adoption of new standards has no significant impact on the preparation and presentation of results and financial position for the current and prior periods[122][125] ESTIMATES AND JUDGEMENTS The preparation of condensed consolidated interim financial information involves management making accounting judgments, estimates, and assumptions, with these judgments and estimates sharing the same primary sources of significant estimation uncertainty as those applied in the 2020 annual consolidated financial statements - The preparation of financial information requires management to make accounting judgments, estimates, and assumptions, affecting the reported amounts of assets, liabilities, income, and expenses[127] - The primary sources of significant judgments and estimation uncertainty made in the current period are the same as those applied in the 2020 annual consolidated financial statements[127] SEGMENT INFORMATION The Group's operating segments include wigs, apparel and others, and factory leasing, with strategic decisions based on the adjusted operating results of these segments; segment results exclude unallocated finance costs, bank interest income, gain on disposal of financial assets, unallocated income, corporate expenses, and income tax expense - The Group's principal product and service lines are identified as operating segments, including wigs, apparel and others, and factory leasing[127][130] - Segment results represent operating results before unallocated finance costs, bank interest income, gain on disposal of financial assets at fair value through profit or loss, unallocated income, corporate expenses, and income tax expense[127] Revenue and Results by Operating and Reportable Segments (For the six months ended June 30) | Segment | 2021 Revenue (RMB thousands) | 2021 Segment Results (RMB thousands) | 2020 Revenue (RMB thousands) | 2020 Segment Results (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Wigs | 11,189 | (9,074) | 35,990 | (15,764) | | Apparel and Others | 90,739 | 25,281 | 81,388 | 7,125 | | Factory Leasing | – | (3,411) | – | (304) | | Total | 101,928 | 12,796 | 117,378 | (8,943) | Reportable Segment Assets and Liabilities (As at period end) | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Reportable segment assets | 493,600 | 460,112 | | Reportable segment liabilities | 119,305 | 108,584 | REVENUE The Group's revenue primarily derives from the sale of wigs, apparel, and other products, with Contract Manufacturing Services (CMS) contributing the vast majority of revenue, while Original Brand Manufacturing (OBM) revenue significantly declined - The Group's revenue refers to the net invoiced value of goods sold, primarily from the sale of wigs, apparel, and other products[139][140] Revenue by Product Category (For the six months ended June 30) | Product Category | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Wigs | 11,189 | 35,990 | | Apparel and Others | 90,739 | 81,388 | | Total | 101,928 | 117,378 | Revenue by Business Model (For the six months ended June 30) | Business Model | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Contract Manufacturing Services Business | 92,680 | 81,104 | | Original Brand Manufacturing Business | 9,248 | 36,274 | | Total | 101,928 | 117,378 | OTHER INCOME For the six months ended June 30, 2021, other income increased from RMB 4,506 thousand to RMB 7,972 thousand, primarily benefiting from increased gain on disposal of financial assets at fair value through profit or loss, rental income, and utility fee income Other Income Details (For the six months ended June 30) | Income Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Exchange gain | – | 331 | | Bank interest income | 84 | 113 | | Government grants | 439 | 912 | | Gain on disposal of financial assets at fair value through profit or loss | 2,835 | – | | Rental income from operating leases of plant and machinery | 827 | 818 | | Rental income from operating leases of investment properties | 1,208 | 1,563 | | Income related to net investment in leases | 245 | 658 | | Utility service fee income | 1,283 | – | | Subcontracting income | 513 | – | | Others | 538 | 111 | | Total | 7,972 | 4,506 | - Gain on disposal of financial assets at fair value through profit or loss was RMB 2,835 thousand, representing a new major source of income for the period[148] - Utility service fee income increased from zero to RMB 1,283 thousand[148] LOSS BEFORE INCOME TAX For the six months ended June 30, 2021, loss before income tax significantly narrowed to RMB 3,907 thousand, primarily benefiting from a substantial reduction in impairment loss on property, plant, and equipment and the reversal of impairment loss on investment properties Loss Before Income Tax Details (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories recognized | 44,499 | 67,034 | | Depreciation – property, plant and equipment | 16,417 | 18,615 | | Depreciation – investment properties | 1,442 | 626 | | Depreciation – right-of-use assets | 115 | 350 | | Impairment loss on property, plant and equipment | 4,512 | 37,294 | | Reversal of impairment loss on investment properties | (3,313) | – | | Net exchange loss/(gain) | 693 | (331) | | Fair value loss on financial assets at fair value through profit or loss | 349 | – | | Research and development costs | 8,556 | 9,646 | | Government grants | (439) | (912) | | Staff costs | 32,646 | 25,610 | - Impairment loss on property, plant, and equipment significantly decreased from RMB 37,294 thousand in 2020 to RMB 4,512 thousand in 2021[151] - Reversal of impairment loss on investment properties of RMB 3,313 thousand had a positive impact on narrowing the loss[151] INCOME TAX EXPENSES For the six months ended June 30, 2021, income tax expense increased to RMB 1,247 thousand, primarily due to an increase in deferred tax; Chinese subsidiaries are subject to a 25% corporate income tax rate, with some high-tech enterprises enjoying a preferential rate of 15% Income Tax Expense Details (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Current tax – PRC corporate income tax | 794 | 620 | | Current tax – Hong Kong profits tax | – | 69 | | Deferred tax | 453 | – | | Income tax expense | 1,247 | 689 | - Chinese subsidiaries are subject to a 25% corporate income tax rate, with some high-tech enterprises eligible for a 15% preferential tax rate for three years[154][157] - Hong Kong profits tax for the period was zero due to no assessable profits[153][156] DIVIDENDS The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021, consistent with the prior period - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021 (2020: nil)[158][160] LOSS PER SHARE For the six months ended June 30, 2021, basic loss per share was RMB (0.57) cents, a significant reduction from RMB (4.83) cents in the prior period, with no diluted shares outstanding, thus no diluted earnings per share presented - Basic loss per share was RMB (0.57) cents (2020: RMB (4.83) cents), indicating a significant narrowing of loss[160] - Calculation is based on loss attributable to equity holders of the company of RMB 5,154 thousand and a weighted average of 907,643,000 ordinary shares outstanding[158][160] - Diluted earnings per share is not presented as there were no dilutive shares outstanding during the period[159][160] RIGHT-OF-USE ASSETS As of June 30, 2021, the carrying amount of right-of-use assets was approximately RMB 9,082 thousand, primarily prepaid land lease payments in China, of which RMB 6,781 thousand was pledged to secure bank loans Movement in Right-of-Use Assets (As at period end) | Item | Prepaid land lease payments (RMB thousands) | Other properties leased for own use (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | | Carrying amount at January 1, 2020 | 10,211 | 786 | 10,997 | | Depreciation for the year | (239) | (412) | (651) | | Transferred to investment properties | (714) | (374) | (1,088) | | Carrying amount at December 31, 2020 | 9,258 | – | 9,258 | | Carrying amount at January 1, 2021 | 9,258 | – | 9,258 | | Depreciation for the period | (115) | – | (115) | | Transferred to investment properties | (61) | – | (61) | | Carrying amount at June 30, 2021 | 9,082 | – | 9,082 | - Right-of-use assets primarily refer to prepaid land lease payments for leased land located in China[163][166] - As of June 30, 2021, right-of-use assets of approximately RMB 6,781 thousand were pledged to secure bank loans[163][166] INVESTMENT PROPERTIES As of June 30, 2021, the carrying amount of investment properties increased to RMB 62,069 thousand, with a reversal of impairment loss of RMB 3,313 thousand recorded for the period; fair value is assessed using the income approach, with key inputs being estimated rent and discount rate Movement in Carrying Amount of Investment Properties (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Carrying amount at January 1 | 58,915 | 20,754 | | Additions | – | 10,893 | | Transferred from right-of-use assets | 61 | 1,088 | | Transferred from property, plant and equipment | 1,222 | 59,112 | | Depreciation | (1,442) | (1,665) | | Reversal of/(provision for) impairment loss | 3,313 | (20,000) | | Carrying amount | 62,069 | 58,915 | - As of June 30, 2021, the fair value of investment properties was RMB 84,208 thousand, with a reversal of impairment loss of RMB 3,313 thousand recorded[174][175] - Fair value is assessed using the income approach, with key unobservable inputs being estimated rent (RMB 12-15 per square meter) and discount rate (6%-6.5%)[177][179] - As of June 30, 2021, investment properties with a carrying amount of RMB 27,233 thousand were pledged as collateral for bank loans[179] PROPERTY, PLANT AND EQUIPMENT As of June 30, 2021, the net carrying amount of property, plant, and equipment was approximately RMB 203,612 thousand, with new additions of approximately RMB 8,056 thousand and an impairment loss of RMB 4,512 thousand recognized during the period; certain buildings were pledged to secure bank loans Movement in Net Carrying Amount of Property, Plant and Equipment (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Buildings | 143,733 | 145,378 | | Plant and machinery | 15,589 | 16,050 | | Motor vehicles | 493 | 630 | | Furniture and fixtures | 536 | 756 | | Leasehold improvements | 43,261 | 54,893 | | Total | 203,612 | 217,707 | - Additions during the period amounted to approximately RMB 8,056 thousand, primarily for buildings[185][188] - An impairment loss of RMB 4,512 thousand was recognized during the period, mainly due to continuous decline in turnover[192][204][207] - As of June 30, 2021, buildings with a total value of approximately RMB 83,023 thousand were pledged to banks[199] TRADEMARK As of June 30, 2021, the cost and accumulated amortization of trademarks were both RMB 500 thousand, resulting in a net carrying amount of zero Net Carrying Amount of Trademark (As at period end) | Item | Trademark (RMB thousands) | | :--- | :--- | | Cost | 500 | | Accumulated amortization | 500 | | Net carrying amount | – | INVENTORIES As of June 30, 2021, total inventories increased to RMB 19,546 thousand, primarily composed of raw materials, representing a 38.4% year-on-year increase Inventories Details (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Raw materials | 18,144 | 12,748 | | Work-in-progress | 899 | 961 | | Finished goods | 503 | 410 | | Total | 19,546 | 14,119 | - Raw materials inventory increased from RMB 12,748 thousand to RMB 18,144 thousand, an increase of approximately 42.3%[210] TRADE AND OTHER RECEIVABLES As of June 30, 2021, total trade and other receivables increased to RMB 88,449 thousand; net trade receivables were RMB 62,208 thousand, with the 0-30 day aging category being the largest; prepayments, other tax receivables, and deposits significantly increased Trade and Other Receivables Details (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Trade receivables – from third parties | 62,989 | 62,807 | | Less: Provision for expected credit losses | (781) | (696) | | Net trade receivables | 62,208 | 62,111 | | Deposits, prepayments and other receivables | 26,241 | 5,528 | | Total | 88,449 | 67,639 | Aging Analysis of Trade Receivables (As at period end) | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | 0–30 days | 31,884 | 9,272 | | 31–60 days | 10,869 | 7,752 | | 61–90 days | – | 7,781 | | 91–365 days | 15,847 | 37,306 | | Over 1 year | 3,608 | – | | Total | 62,208 | 62,111 | - Prepayments, other tax receivables, and deposits significantly increased from a total of RMB 5,486 thousand as of December 31, 2020, to a total of RMB 25,893 thousand as of June 30, 2021[212] - Provision for expected credit losses increased from RMB 696 thousand to RMB 781 thousand[215][218] FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS As of June 30, 2021, financial assets at fair value through profit or loss amounted to RMB 651 thousand, entirely comprising unlisted equity investments; the CSG convertible bonds were sold during the period, resulting in a fair value loss of RMB 349 thousand Financial Assets at Fair Value Through Profit or Loss Details (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Unlisted convertible bonds | – | 5,557 | | Unlisted equity investments | 651 | – | | Total | 651 | 5,557 | - The CSG convertible bonds were sold to an independent third party on March 15, 2021, for a cash consideration of HKD 10 million (approximately RMB 8,340 thousand)[237] - Unlisted equity investments recorded a fair value loss of RMB 349 thousand during the period, with a fair value of RMB 651 thousand at period end[240] NET INVESTMENT IN LEASES As of June 30, 2021, net investment in leases amounted to RMB 9,998 thousand, primarily from subleasing factory premises to third parties, with RMB 3,065 thousand due within one year and RMB 6,933 thousand due after one year Net Investment in Leases Details (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Gross investment in leases | 10,639 | 10,661 | | Less: Unearned finance income | (641) | (886) | | Net investment in leases | 9,998 | 9,775 | | Portion due within one year | 3,065 | 2,996 | | Portion due after one year | 6,933 | 6,779 | - The Group entered into three lease contracts for certain factory premises, with initial lease terms of two to four years, and all leased factory premises are subleased to third parties to earn rental income[248] - Net investment in leases refers to two sublease arrangements entered into by the Group with sublessees for factory premises, typically with an initial lease term of four years[248] DEFERRED TAX ASSETS As of June 30, 2021, deferred tax assets amounted to RMB 25,719 thousand, a slight decrease from the beginning of the period, primarily related to asset impairment losses; the company has not recognized deferred income tax for withholding tax on unremitted earnings of Chinese subsidiaries Movement in Deferred Tax Assets (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | January 1 | 26,172 | 13,393 | | Recognized in profit or loss | (453) | 12,779 | | June 30/December 31 | 25,719 | 26,172 | Composition of Deferred Tax Assets (As at period end) | Item | Asset impairment losses (RMB thousands) | Others (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | | January 1, 2021 | 26,338 | (166) | 26,172 | | Recognized in profit or loss | (453) | – | (453) | | June 30, 2021 | 25,885 | (166) | 25,719 | - The company has not recognized deferred income tax for withholding tax payable on unremitted earnings of Chinese subsidiaries, with total related temporary differences of approximately RMB 137,943 thousand[255][256] BANK BALANCES AND CASH As of June 30, 2021, total bank balances and cash amounted to RMB 74,474 thousand, of which approximately RMB 60,443 thousand were RMB-denominated balances deposited in banks in China, with RMB being a non-freely convertible currency Bank Balances and Cash (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Bank balances and cash | 74,474 | 48,908 | - Approximately RMB 60,443 thousand were RMB-denominated balances deposited in banks in China[258][259] - RMB is a non-freely convertible currency, but the Group can convert foreign currencies through authorized banks[258][259] TRADE AND OTHER PAYABLES As of June 30, 2021, total trade and other payables increased to RMB 25,071 thousand; trade payables were primarily within 0-30 days aging, and salaries payable and other payables also increased Trade and Other Payables Details (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Trade payables – due to third parties | 14,436 | 9,144 | | Accrued expenses and other payables | 10,635 | 10,145 | | Total | 25,071 | 19,289 | Aging Analysis of Trade Payables (As at period end) | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | 0–30 days | 14,436 | 9,144 | - Salaries payable increased from RMB 3,395 thousand to RMB 6,598 thousand[265] CONTRACT LIABILITIES As of June 30, 2021, contract liabilities significantly increased to RMB 3,962 thousand, primarily from deposits received for production orders; all outstanding contract liabilities at the beginning of the period were recognized as revenue during the period Contract Liabilities (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Contract liabilities arising from deposits received for production orders | 3,962 | 170 | - Contract liabilities significantly increased, reflecting an increase in deposits received for production orders during the period[269] - All outstanding contract liabilities at the beginning of the period were recognized as revenue during the period[271] LEASE LIABILITIES As of June 30, 2021, total lease liabilities amounted to RMB 8,262 thousand, with RMB 2,623 thousand due within one year; lease liabilities primarily arise from office and factory leases and are secured by related assets Maturity Analysis of Lease Liabilities (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Total minimum lease payments | 8,766 | 8,395 | | Less: Future finance charges | (504) | (699) | | Present value of lease liabilities | 8,262 | 7,696 | | Portion due within one year | 2,623 | 2,190 | | Portion due after one year | 5,639 | 5,506 | - Lease liabilities primarily arise from office and factory leases, with factory leases including renewal options[283][284] - Lease liabilities are effectively secured by the related assets, meaning that if the Group fails to make payments, the rights to the leased assets will revert to the lessor[276][277] SHORT TERM BORROWINGS As of June 30, 2021, total short-term borrowings amounted to RMB 81,488 thousand; secured bank loans bear interest at annual rates of 4.15% to 4.86%, while unsecured borrowings bear a fixed annual interest rate of 14% Short-Term Borrowings (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Short-term borrowings | 81,488 | 81,429 | - Secured bank loans bear interest at annual rates ranging from 4.15% to 4.86% and are secured by certain Group assets (right-of-use assets, investment properties, buildings)[288][290] - Unsecured borrowings totaled RMB 12,488 thousand and bear a fixed annual interest rate of 14%[289][290] SHARE CAPITAL As of June 30, 2021, issued and fully paid share capital increased to RMB 8,847 thousand, with a total of 1,077,267,600 shares outstanding, primarily due to the placement of 179,544,600 ordinary shares in June 2021 Movement in Share Capital (As at period end) | Item | Number of Shares | Share Capital (RMB thousands) | | :--- | :--- | :--- | | January 1, 2020 and December 31, 2020 | 897,723,000 | 7,352 | | Shares issued by way of placement | 179,544,600 | 1,495 | | June 30, 2021 | 1,077,267,600 | 8,847 | - On June 21, 2021, the company placed 179,544,600 ordinary shares at HKD 0.175 per share, with net proceeds of approximately HKD 31.0 million[293] - Of the proceeds, RMB 1,495 thousand was credited to the share capital account, and approximately RMB 24,316 thousand was credited to the share premium account[293] LEASE COMMITMENTS As of June 30, 2021, short-term lease commitments as a lessee amounted to RMB 12 thousand; as a lessor, total future minimum lease receivables for plant and machinery were RMB 2,413 thousand, and for investment properties were RMB 2,915 thousand Short-Term Lease Commitments as Lessee (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Land and buildings: within one year | 12 | 47 | Total Future Minimum Lease Receivables as Lessor (As at period end) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Plant and machinery: less than one year | 1,645 | 1,870 | | Plant and machinery: one to two years | 768 | 1,478 | | Total Plant and Machinery | 2,413 | 3,348 | | Investment properties: less than one year | 990 | 651 | | Investment properties: one to two years | 964 | 528 | | Investment properties: two to three years | 517 | 396 | | Investment properties: three to four years | 335 | – | | Investment properties: four to five years | 109 | – | | Total Investment Properties | 2,915 | 1,575 | - The Group leases out plant and machinery for an initial term of five years, with an option to renew at expiry[299][301] - The Group leases out investment properties for initial terms typically ranging from 2-5 years, with no early termination, extension, or renewal options in the contracts[301] RELATED PARTY TRANSACTIONS For the six months ended June 30, 2021, total key management personnel remuneration amounted to RMB 1,343 thousand, comprising short-term employee benefits and contributions to retirement benefit schemes Key Management Personnel Remuneration (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Short-term employee benefits | 1,317 | 1,236 | | Contributions to retirement benefit schemes | 26 | 24 | | Total | 1,343 | 1,260 | FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Financial assets and liabilities are measured at fair value across three levels (Level 1, Level 2, Level 3); as of June 30, 2021, financial assets at fair value through profit or loss (unlisted equity investments) amounted to RMB 651 thousand, categorized as Level 3 fair value measurement, with fair value assessment referencing net asset value and utilizing unobservable inputs such as market-based discount rates and control premiums - Financial assets and liabilities are measured at fair value across three levels (Level 1, Level 2, Level 3), with the level based on the observability of input data[304][305][306] Fair Value Measurement of Financial Assets at Fair Value Through Profit or Loss (As at period end) | Item | Fair Value (RMB thousands) | Level 1 (RMB thousands) | Level 2 (RMB thousands) | Level 3 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | June 30, 2021: Unlisted equity investments | 651 | – | – | 651 | | December 31, 2020: CSG convertible bonds | 5,557 | – | – | 5,557 | - The fair value of unlisted equity investments references net asset value, using unobservable inputs such as market-based discount rates and control premiums[312][316] - The fair value measurement of CSG convertible bonds uses a default model, with the primary unobservable input being the recovery rate; a 1% increase in recovery rate would increase fair value and reduce loss by RMB 622 thousand[314][315][316][317][318] SUBSEQUENT EVENTS Subsequent to the reporting period, the company acquired a patent in July 2021 and received a writ of summons for legal proceedings concerning a proposed sale of the company's controlling stake, which the Board considers groundless - On July 9, 2021, the company acquired a 75% equity interest in Hmda Culture International Co., Limited for a cash consideration of HKD 11 million to obtain a patent, with the transaction completed on July 30[319] - On July 30, 2021, the company and certain former directors and shareholders received a writ of summons for legal proceedings concerning a proposed sale of the company's controlling stake[319] - The Board considers the allegations against the company in the writ of summons to be groundless and baseless[319] Other Information This section provides additional information regarding interim dividends, directors' interests, securities transactions, share option schemes, shareholder disclosures, and corporate governance Interim Dividend The Board has resolved not to declare any interim dividend for the six months ended June 30, 2021, consistent with the corresponding period in 2020 - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2021 (June 30, 2020: nil)[322][325] Directors' and Chief Executive's Interests As of June 30, 2021, none of the company's directors, chief executive, and/or their associates held any interests or short positions in the shares, underlying shares, and debentures of the company or its associated corporations - As of June 30, 2021, none of the company's directors, chief executive, and/or any of their respective associates held any interests or short positions in the shares, underlying shares, and debentures of the company or its associated corporations[323][326] Purchase, Redemption or Sale of Listed Securities For the six months ended June 30, 2021, neither the company nor its subsidiaries purchased, redeemed, or sold any of the company's listed securities - For the six months ended June 30, 2021, neither the company nor its subsidiaries purchased, redeemed, or sold any of the company's listed securities[324] Share Option Scheme The company's share option scheme, adopted on August 7, 2015, allows for granting options to directors, employees, and other eligible participants, involving a maximum of 75,000,000 new shares; no options were granted or exercised during the reporting period, and no outstanding options existed at period end - The company may grant share options to directors, Group employees, and other eligible participants under the share option scheme, involving a maximum of 75,000,000 new shares[324] - During the reporting period, no share options were granted or exercised, and there were no outstanding share options at period end[329][332] Interests of Shareholders Disclosable Under the SFO As of June 30, 2021, major shareholders, including Master Professional Holdings Limited and its associates Mr. Chen Shengbi and Ms. Li Zhiping, as well as Mr. Lin Shixin, all held long positions in the company's shares Long Positions in Shares and Underlying Shares of the Company (As of June 30, 2021) | Name of Shareholder | Nature of Interest | Number of Ordinary Shares | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Master Professional Holdings Limited | Beneficial owner | 371,859,000 | 34.52% | | Mr. Chen Shengbi | Interest in controlled corporation | 371,859,000 | 34.52% | | Ms. Li Zhiping | Interest of spouse | 371,859,000 | 34.52% | | Mr. Lin Shixin | Beneficial owner | 78,563,000 | 7.29% | - Mr. Chen Shengbi holds 34.52% of the company's shares through his wholly-owned Master Professional Holdings Limited[336][340] - Ms. Li Zhiping, as Mr. Chen Shengbi's spouse, is deemed to have an interest in the same number of shares[336][340] Corporate Governance The company has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules and fully complied with its relevant code provisions for the six months ended June 30, 2021 - The company has adopted the Corporate Governance Code as set out in Appendix 14 of the Listing Rules[338][340] - For the six months ended June 30, 2021, the company has fully complied with the relevant code provisions of the Corporate Governance Code[338][340] Model Code for Securities Transactions by the Directors The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions; all directors confirmed compliance with this Model Code during the review period - 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 as its code of conduct for directors' securities transactions[339][341] - All directors have confirmed that they complied with the Model Code throughout the review period[339][342] [Review of Interim Results and Interim Report](index=69&type=section&id=Review%20of%2