高地股份(01676) - 2020 - 年度财报

Corporate Information Board of Directors and Committees This section outlines the Board of Directors' composition and the structure of its Audit, Nomination, and Remuneration Committees - Mr. Liu Rongru serves as Co-Chairman and Chief Executive Officer, responsible for the Group's development, positioning, and strategic planning[7] - Mr. Li Dongfan was appointed Non-Executive Director and Co-Chairman on January 14, 2020, providing advice on business development, management, and strategic planning[7] - Mr. Peng Weizheng chairs the Audit Committee, Mr. Liu Rongru chairs the Nomination Committee, and Mr. Liu Dajin chairs the Remuneration Committee[7] Company Details This section provides key company details, including registration, principal bankers, share registrar, and contact information - The company's auditor is BDO Limited, Hong Kong[7] - The company's principal bankers include Xiamen Bank Huachang Sub-branch and China Construction Bank Xiamen Hubin Sub-branch[9] - The company's stock code is 1676, and its website is www.chinashenghaigroup.com[9](index=9&type=chunk) Chairman's Statement Business Review (Chairman's Statement) In 2020, the company's dried seafood product revenue significantly declined by 65.6% to RMB 162.7 million, resulting in a net loss of RMB 32.3 million, while a new fast-moving consumer goods business generated RMB 7.2 million in net revenue - The global economy in 2020 was severely impacted by the COVID-19 pandemic, leading to reduced consumption in China and negative effects on the company's business[12][14] 2020 Key Financial Data (Chairman's Statement) | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Dried Seafood Product Revenue | 162.7 | 472.9 | -65.6% | | Gross Profit | 30.7 | 103.8 | -70.4% | | Net Loss | 32.3 | (30.8) | N/A (Loss incurred) | | FMCG Business Total Transaction Value | 132.9 | N/A | N/A | | FMCG Business Net Revenue | 7.2 | N/A | N/A | | FMCG Business Net Profit | 3.2 | N/A | N/A | - To mitigate single-business risk, the company launched a fast-moving consumer goods business in early 2020, primarily selling cosmetics, daily necessities, fashion, and accessories[12][15] Outlook (Chairman's Statement) The company plans to transform its traditional sales model by investing in e-commerce, diversifying beyond food products, and seeking M&A opportunities for growth - The pandemic accelerated the shift to e-commerce, prompting the company to increase investment in its e-commerce business[17][19] - The company will expand beyond food products to diversify revenue streams and actively seek cooperation and M&A opportunities for growth[17][19] Appreciation The Board expresses sincere gratitude to all employees, shareholders, investors, customers, and suppliers, committing to pragmatic operations and performance-driven returns - The Board thanks all employees, shareholders, investors, customers, and suppliers for their support[18][19] - The company pledges to uphold its original mission, operate pragmatically, actively pursue development, and reward trust with tangible performance[18][19] Biographical Details of Directors Executive Directors This section details the backgrounds, education, careers, and responsibilities of Executive Directors Mr. Liu Rongru and Ms. Li Jiayin - Mr. Liu Rongru (53) is the Group's founder, CEO, Executive Director, and Co-Chairman, responsible for Group development, positioning, and strategic planning, with over 20 years of experience in the seafood business[22][25] - Ms. Li Jiayin (37) is an Executive Director, responsible for business development, overall management, and strategic planning, holding a Bachelor's degree in Finance and having held senior management positions in various companies[28][30] Non-Executive Director This section introduces Mr. Li Dongfan, a Non-Executive Director and Co-Chairman appointed on January 14, 2020, who advises on business development, management, and strategic planning, holding a Ph.D. in Finance - Mr. Li Dongfan (36) was appointed Non-Executive Director and Co-Chairman on January 14, 2020, primarily advising on the Group's business development, management, and strategic planning[29][31] - Mr. Li Dongfan holds a Ph.D. in Philosophy (Finance) from Brampton International University, Canada, and has served as a director for several listed companies[29][31] Independent Non-Executive Directors This section outlines the professional backgrounds and responsibilities of Independent Non-Executive Directors Mr. Liu Dajin, Mr. Liu Juntin, and Mr. Peng Weizheng, highlighting their roles in ensuring board independence and expertise - Mr. Liu Dajin (55) has been a practicing member of the Chinese Institute of Certified Public Accountants since 1996, holds a Bachelor's degree in Economics, has taught at several universities, and is currently a professor in the Management Department at Jimei University Chengyi College[33][37] - Mr. Liu Juntin (31) was appointed on January 14, 2020, graduated from Beijing Institute of Technology, currently serves as Assistant Manager at Zhuhai Oasis Industrial Co., Ltd., and is an Independent Non-Executive Director of Mandi Technology Co., Ltd[34][38] - Mr. Peng Weizheng (32) has been a member of the Hong Kong Institute of Certified Public Accountants since 2015, holds a Bachelor of Business Administration in Accountancy, possesses over 10 years of experience in accounting, auditing, and company secretarial matters, and is currently the Company Secretary of Xingfa Aluminium Holdings Limited[35][36][38] Management Discussion and Analysis Business Review (MD&A) In 2020, the company's total revenue significantly decreased by 65.6% to RMB 162.7 million, resulting in a net loss of RMB 32.3 million, while a new fast-moving consumer goods business generated RMB 7.2 million in net revenue - In 2020, the company's revenue and gross profit significantly declined, and it recorded a loss for the first time, severely impacted by the COVID-19 pandemic in China[40] 2020 Key Financial Data (Management Discussion and Analysis) | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 162.7 | 472.9 | -65.6% | | Gross Profit | 30.7 | 103.8 | -70.4% | | Gross Profit Margin | 18.9% | 21.9% | -3.0pp | | Net Loss | 32.3 | (30.8) | N/A (Loss incurred) | | Food Business Revenue | 155.6 | 472.9 | -67.1% | | FMCG Business Net Revenue | 7.2 | N/A | N/A | | FMCG Business Profit | 3.2 | N/A | N/A | - The revenue recognition method for the fast-moving consumer goods business was adjusted from a gross basis in the interim report to a net basis, resulting in a RMB 66.3 million reduction in both revenue and cost of sales[44][46] Outlook (MD&A) The company plans to actively transform its traditional sales model by investing in e-commerce, diversifying beyond food products, and seeking M&A opportunities for growth - The pandemic accelerated e-commerce as a primary consumption method, leading the company to increase investment in its e-commerce business[48][52] - The company will further expand beyond food products to diversify revenue sources and actively seek cooperation and M&A opportunities[48][52] Operating Results and Financial Review In 2020, the company's revenue decreased by 65.6% to RMB 162.7 million, primarily due to lower sales volume and average selling prices, with gross profit margin falling to 18.9% and increased sales and administrative expenses as a percentage of revenue Revenue by Product Type | Product Type | 2020 (RMB thousand) | Share (%) | 2019 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Dried Seafood Products | 88,018 | 54.1% | 246,108 | 52.1% | | Algae and Fungi Products | 62,755 | 38.6% | 190,283 | 40.2% | | Marine Leisure Products | 4,780 | 2.9% | 36,497 | 7.7% | | FMCG and Other Businesses | 7,165 | 4.4% | – | N/A | | Total | 162,718 | 100% | 472,888 | 100% | Gross Profit and Gross Profit Margin | Business Type | 2020 Gross Profit (RMB thousand) | 2020 Gross Profit Margin (%) | 2019 Gross Profit (RMB thousand) | 2019 Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Food Business | 23,551 | 15.1% | 103,769 | 21.9% | | FMCG and Other Businesses | 7,165 | 100% | – | N/A | | Total | 30,716 | 18.9% | 103,769 | 21.9% | - Sales and distribution expenses as a percentage of revenue increased from 9.2% in 2019 to 22.0% in 2020, and administrative expenses as a percentage of revenue increased from 3.0% in 2019 to 11.8% in 2020, primarily due to the decrease in revenue[58][59][60] Liquidity, Financial Resources, and Capital Structure In 2020, the company's net current assets decreased to RMB 391.7 million, with cash and cash equivalents at RMB 213.5 million and no bank borrowings, while the gearing ratio increased significantly and operating efficiency declined as evidenced by extended inventory and trade receivable turnover days Overview of Liquidity and Financial Resources | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Current Assets | 391.7 | 404.3 | -3.1% | | Cash and Cash Equivalents | 213.5 | 242.6 | -12.0% | | Bank Borrowings | 0 | 0 | 0 | | Gearing Ratio | 0.040 | 0.009 | +344.4% | | Inventories | 75.5 | 79.1 | -4.6% | | Inventory Turnover Days | 214 days | 74 days | +189.2% | | Trade Receivables | 133.5 | 102.3 | +30.5% | | Trade Receivables Turnover Days | 264 days | 82 days | +221.9% | | Trade Payables | 16.4 | 8.7 | +88.5% | - The company's capital expenditure increased from RMB 5 million in 2019 to RMB 7.2 million in 2020[66] - As of December 31, 2020, the company had no assets pledged and no significant investments, acquisitions, or disposals of subsidiaries[67][68] Other Information (MD&A) The company primarily operates in China with most transactions settled in RMB, resulting in minimal foreign exchange exposure and no formal hedging policy, while the number of full-time employees decreased in 2020, and no final dividend is recommended - The company primarily operates in China, with transactions settled in RMB, and the Board anticipates that future currency fluctuations will not severely impact operations, thus no formal hedging policy is adopted[69][74] - As of December 31, 2020, the company had 486 full-time employees, a decrease from 554 in 2019[70][75] - The Board does not recommend the payment of a final dividend to shareholders for the year ended December 31, 2020[71][75] Report of the Directors General Business and Financial Information The company's principal business is investment holding, with subsidiaries primarily engaged in seafood packaging and sales, and no dividends were declared or recommended during the reporting period - The company's principal business is investment holding, with its subsidiaries primarily engaged in packaging and selling seafood products[77] - The Board did not declare or recommend any dividends for the year ended December 31, 2020[77] - The Group's business review, key financial performance indicators, and outlook are provided in the Chairman's Statement and Management Discussion and Analysis[77] Environmental and Social Governance The company is committed to sustainable development and environmental protection through energy conservation and emergency plans, has adopted a dividend policy to share profits while retaining sufficient reserves, and values stakeholder relationships by offering competitive employee remuneration, fostering long-term supplier partnerships, and providing quality products to customers - The company is committed to promoting sustainable development and environmental protection by conserving electricity and implementing emergency plans to reduce environmental impact[77] - The company has adopted a dividend policy, with dividend recommendations at the Board's discretion, considering factors such as the Group's financial performance, financial position, liquidity, and capital requirements[77][79][80] - The company values stakeholder relationships, offering competitive remuneration to employees, establishing long-term partnerships with suppliers, and striving to provide quality products to customers[86][87][88][93][94] Risk Management and Compliance The company has implemented a comprehensive risk management system covering financial security, production, logistics, technology, and compliance, overseen by the Audit Committee, and no significant breaches of applicable laws or regulations were identified during the year - The company has implemented a risk management system covering financial security, production, logistics, technology, and compliance, with the Audit Committee responsible for oversight[85][92] - No significant breaches or non-compliance with applicable laws and regulations were identified during the year[81][83] - The company faces operational risks related to its business and identifies, assesses, and controls potential risks through a systematic risk management system[85][92] Share Capital and Reserves Details of the company's share capital changes are in Note 23 to the consolidated financial statements, and reserve changes are in the consolidated statement of changes in equity, with distributable reserves decreasing to approximately RMB 85.1 million in 2020 - Details of the company's share capital changes are provided in Note 23 to the consolidated financial statements[91][94] - Details of the company's reserve changes are provided in the consolidated statement of changes in equity[96][101] Distributable Reserves | Year | Amount (RMB million) | | :--- | :--- | | 2020 | 85.1 | | 2019 | 92.7 | Major Customers and Suppliers In 2020, sales to the company's largest and top five customers accounted for 8.9% and 36.8% of total turnover, respectively, while purchases from the largest and top five suppliers accounted for 14.7% and 44.6% of total purchases, with no beneficial interests held by directors or major shareholders in these key parties 2020 Major Customer and Supplier Proportions | Type | Proportion (%) | | :--- | :--- | | Sales to Largest Customer | 8.9% | | Sales to Top Five Customers | 36.8% | | Purchases from Largest Supplier | 14.7% | | Purchases from Top Five Suppliers | 44.6% | - No directors, their associates, or shareholders holding 5% or more of the company's shares had any beneficial interest in the Group's top five customers or suppliers[99][103] Directors' Information and Corporate Actions This section lists the Board members for 2020 and up to the report date, confirms the independence of all independent non-executive directors, notes the adoption of a share option scheme with no options granted, discloses directors' and major shareholders' interests, and confirms directors' liability insurance and no significant related party transactions or conflicts of interest during the year - The Board of Directors includes Executive Directors Mr. Liu Rongru and Ms. Li Jiayin, Non-Executive Director Mr. Li Dongfan, and Independent Non-Executive Directors Mr. Liu Dajin, Mr. Peng Weizheng, and Mr. Liu Juntin[105] - The company has received confirmations of independence from all independent non-executive directors in accordance with Rule 3.13 of the Listing Rules[105] - The company has adopted a share option scheme, but no share options have been granted under the scheme as of the date of this annual report[108][112][115] - Mr. Liu Rongru and his spouse, Ms. Lin Yueying, are deemed to have an interest in 52.5% of the company's shares[119][123] - The company has purchased and maintains directors' and officers' liability insurance, and there were no significant related party transactions or conflicts of interest during the year[126][134][135][136][137] Corporate Governance Report Compliance with Corporate Governance Code The company has generally complied with the Corporate Governance Code in Appendix 14 of the Listing Rules during the reporting period, despite deviations regarding the number of board meetings, the combined roles of Chairman and CEO, and committee chairs' attendance at the AGM - The company has adopted the Corporate Governance Code set out in Appendix 14 of the Listing Rules[145][147] - The Board held three meetings in 2020, fewer than the minimum of four required annually by Code Provision A.1.1[145][147] - The roles of Co-Chairman and Chief Executive Officer are combined in Mr. Liu Rongru, deviating from Code Provision A.2.1, which requires separation of these roles[146][148] - The chairmen and members of the Audit, Remuneration, and Nomination Committees were unable to attend the 2020 Annual General Meeting due to business commitments, deviating from Code Provision E.1.2[150][154] Board of Directors (Corporate Governance) The Board is responsible for leading and overseeing the company, including business, strategic decisions, internal control, and risk management, comprising two executive, one non-executive, and three independent non-executive directors to ensure diversity, and operates with regular meetings, adequate resources, and independent professional advice, guided by diversity and nomination policies - The Board is responsible for leading and overseeing the company, supervising the Group's business, strategic decisions, internal control, and risk management systems[153] - The Board comprises two executive directors, one non-executive director, and three independent non-executive directors, with independent non-executive directors constituting one-half of the Board's total members[157][158] - The company has adopted a Board Diversity Policy, considering factors such as race, gender, age, educational background, and industry experience, and aims to increase the proportion of female members[159][160] - The company has adopted a Nomination Policy, with selection criteria including integrity, business experience, time commitment, diversity, and professional qualifications[168][170][172] - All directors have confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers[165][169] Board Committees This section details the responsibilities, composition, and meeting activities of the Nomination, Audit, and Remuneration Committees, which regularly convene to review board structure, identify suitable director candidates, oversee financial statements, internal controls, risk management, and formulate remuneration policies for directors and senior management - The Nomination Committee's primary responsibilities include regularly reviewing the Board's structure, identifying suitable director candidates, and assessing the independence of independent non-executive directors[167][169] - The Audit Committee's primary responsibilities include advising on the appointment of external auditors, reviewing financial statements, and overseeing internal control and risk management procedures[176] - The Remuneration Committee's primary responsibility is to make recommendations to the Board on the overall remuneration policy and structure for all directors and senior management[176] Board and Committee Meeting Attendance | Director Name | Board Meetings | Audit Committee | Remuneration Committee | Nomination Committee | | :--- | :--- | :--- | :--- | :--- | | Mr. Liu Rongru | 6/7 | N/A | 3/3 | 3/3 | | Ms. Li Jiayin | 7/7 | N/A | N/A | N/A | | Mr. Li Dongfan | 6/7 | N/A | N/A | N/A | | Mr. Liu Dajin | 6/7 | 2/2 | 3/3 | 3/3 | | Mr. Liu Juntin | 5/7 | 2/2 | 2/3 | 2/3 | | Mr. Peng Weizheng | 7/7 | 2/2 | N/A | N/A | Accountability and Audit The Board and Audit Committee have reviewed the Group's consolidated financial statements, with directors confirming their responsibility for account preparation, the use of appropriate and consistently applied accounting policies, and no material doubts about the company's going concern ability; the auditor is BDO Limited, Hong Kong, with 2020 audit service fees of HKD 1.08 million - The Board and Audit Committee have reviewed the Group's consolidated financial statements, and the directors confirm their responsibility for preparing the accounts[183][185] - The Board believes that appropriate accounting policies have been selected and consistently applied, and there are no material doubts about the Group's ability to continue as a going concern[183][184][185] Auditor's Remuneration | Service Type | 2020 Amount (HKD thousand) | | :--- | :--- | | Review Services | 1,080 | Risk Management and Internal Controls (Corporate Governance) The Board is fully responsible for the company's internal control and risk management systems, aiming to enhance operational efficiency, safeguard shareholder investments and assets, and ensure compliance, with established procedures for handling inside information and external consultants assisting in risk identification and internal control review, which the Board deems effective and adequate - The Board is fully responsible for the company's internal control and risk management systems, aiming to enhance operational efficiency, safeguard shareholder investments and assets, and ensure compliance[189][192] - The company has established and maintains procedures and internal controls for handling and disseminating inside information[190][193] - The company engages external independent consultants to assist in identifying and assessing risks, and to independently review internal controls and evaluate system effectiveness, which the Board considers effective and adequate[191][194] Shareholders' Rights and Investor Relations The company encourages shareholders to express opinions and ask questions via email, phone, or general meetings, allows shareholders holding at least one-tenth of the paid-up capital to requisition an extraordinary general meeting, ensures all resolutions at general meetings are voted by poll with results published on the company and HKEX websites, and maintains continuous communication with shareholders through its website - Shareholders can submit questions to the Board or senior management via email, phone, or at general meetings[196] - Shareholders holding not less than one-tenth of the paid-up capital can requisition the Board to convene an extraordinary general meeting[196] - All resolutions at general meetings are voted by poll, and the results are published on the company's and HKEX websites[196] - The company maintains continuous communication with shareholders through its website, www.chinashenghaigroup.com, and encourages participation in general meetings[198][199][201] Independent Auditor's Report Opinion and Basis of Opinion Independent auditor BDO Limited issued an unmodified opinion on China Shenghai Group Limited's consolidated financial statements for the year ended December 31, 2020, affirming they present a true and fair view of the company's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, with the audit conducted under Hong Kong Standards on Auditing and the Code of Ethics for Professional Accountants - The auditor issued an unmodified opinion on the consolidated financial statements, deeming them to present a true and fair view of the company's financial position, performance, and cash flows[205][209] - The audit was conducted in accordance with Hong Kong Standards on Auditing and the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants[206][210] Key Audit Matters The auditor identified revenue recognition and impairment assessment of trade receivables as key audit matters due to inherent management manipulation risk and significant judgment involved, addressing them by reviewing contracts, comparing transaction records, examining accounting entries, assessing internal controls, analyzing aging, and evaluating management estimates - Revenue recognition was identified as a key audit matter due to its significance as a key performance indicator for the Group and the inherent risk of management manipulating revenue recognition[211][213] - The auditor's procedures for revenue recognition included understanding internal controls, sampling sales agreements, comparing sales records with supporting documents, comparing transactions before and after year-end, and examining accounting entries affecting revenue[213] - Impairment assessment of trade receivables was identified as a key audit matter due to its substantial amount (RMB 133.5 million, representing 27% of total assets) and the significant judgment and estimation involved[215] - The auditor's procedures for impairment assessment of trade receivables included evaluating internal controls, examining aging reports, assessing the reasonableness of management's loss allowance estimates, and checking post-year-end cash receipts[215] Responsibilities This section outlines the respective responsibilities of directors and auditors in the preparation and audit of consolidated financial statements, with directors responsible for preparing true and fair financial statements, ensuring effective internal controls, and assessing going concern, while auditors are responsible for obtaining reasonable assurance about material misstatements and communicating audit scope and findings to the Audit Committee - Directors are responsible for preparing true and fair consolidated financial statements in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, and for internal controls[219][223] - Directors are responsible for assessing the Group's ability to continue as a going concern and disclosing related matters where appropriate[220][223] - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[225] - The auditor communicates with the Audit Committee regarding the audit scope, timing, and significant audit findings, including any significant deficiencies in internal control[227] Consolidated Statements of Comprehensive Income Financial Performance Overview For the year ended December 31, 2020, the company's total revenue significantly decreased to RMB 162.7 million, resulting in a pre-tax loss of RMB 30.3 million and a net loss of RMB 32.3 million, a reversal from the 2019 net profit of RMB 30.8 million, with basic and diluted loss per share at RMB 0.3226 Key Data from Consolidated Statements of Comprehensive Income | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 162,718 | 472,888 | | Cost of Sales | (132,002) | (369,119) | | Gross Profit | 30,716 | 103,769 | | Other Income and Other Gains/(Losses) – Net | 1,100 | 1,272 | | Selling and Distribution Expenses | (35,878) | (43,734) | | Administrative Expenses | (19,167) | (14,098) | | Expected Credit Losses on Financial Assets | (3,309) | (261) | | Finance Costs | (444) | (226) | | Other Expenses | (3,358) | (693) | | (Loss)/Profit Before Income Tax | (30,340) | 46,029 | | Income Tax Expense | (1,915) | (15,189) | | (Loss)/Profit for the Year Attributable to Owners of the Company | (32,255) | 30,840 | | Other Comprehensive Income for the Year | 841 | (13) | | Total Comprehensive (Expense)/Income for the Year Attributable to Owners of the Company | (31,414) | 30,827 | | (Loss)/Earnings Per Share – Basic and Diluted (RMB) | (0.3226) | 0.3084 | - In 2020, the company shifted from profit to loss, primarily due to a significant decrease in revenue and an increase in expected credit losses[229] Consolidated Statements of Financial Position Financial Position Overview As of December 31, 2020, total assets slightly decreased to RMB 499.8 million, net current assets decreased to RMB 391.7 million, total liabilities increased to RMB 53.4 million due to higher trade payables and debentures, and total equity decreased to RMB 446.4 million Key Data from Consolidated Statements of Financial Position | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Property, Plant and Equipment | 56,979 | 67,356 | | Deferred Tax Assets | 731 | 372 | | Deposits Paid to Suppliers (Non-current) | 1,479 | 5,746 | | Inventories | 75,452 | 79,106 | | Trade Receivables | 133,482 | 102,278 | | Cash and Cash Equivalents | 213,479 | 242,578 | | Total Current Assets | 436,626 | 432,220 | | Trade Payables | 16,353 | 8,716 | | Debentures (Current) | 6,287 | – | | Lease Liabilities (Current) | 2,916 | 1,065 | | Total Current Liabilities | 44,901 | 27,950 | | Net Current Assets | 391,725 | 404,270 | | Debentures (Non-current) | 6,959 | 900 | | Lease Liabilities (Non-current) | 1,515 | 2,163 | | Net Assets | 446,417 | 477,831 | | Share Capital | 8,723 | 8,723 | | Reserves | 437,694 | 469,108 | | Total Equity | 446,417 | 477,831 | - Total assets and total equity both decreased, while total liabilities increased, reflecting financial pressure on the company[231] Consolidated Statements of Changes in Equity Equity Changes Overview For the year ended December 31, 2020, the company's total equity decreased from approximately RMB 477.8 million to RMB 446.4 million, primarily due to a net loss of RMB 32.3 million, despite other comprehensive income from exchange differences Key Data from Consolidated Statements of Changes in Equity | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 477,831 | 447,004 | | (Loss)/Profit for the Year | (32,255) | 30,840 | | Other Comprehensive Income for the Year | 841 | (13) | | Total Comprehensive (Expense)/Income for the Year | (31,414) | 30,827 | | Transfer to Statutory Reserve | – | (1,195) | | Balance at End of Year | 446,417 | 477,831 | - The company's total equity decreased in 2020, primarily due to the net loss incurred during the year[234] - Statutory reserves are amounts transferred from the net profit of subsidiaries in accordance with Chinese law until they reach 50% of the registered capital[237][238] Consolidated Statements of Cash Flows Cash Flow Overview For the year ended December 31, 2020, the company experienced a net cash outflow from operating activities of RMB 32.7 million, a reversal from the 2019 net inflow, primarily due to a pre-tax loss and increased trade receivables, while investing activities resulted in a net cash outflow of RMB 6.3 million, and financing activities generated a net cash inflow of RMB 9.5 million, mainly from debentures, leading to a decrease in cash and cash equivalents at year-end Key Data from Consolidated Statements of Cash Flows | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Net Cash (Used in)/Generated from Operating Activities | (32,652) | 5,634 | | Net Cash (Used in)/Generated from Investing Activities | (6,342) | 4,184 | | Net Cash Generated from/(Used in) Financing Activities | 9,516 | (1,480) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (29,478) | 8,338 | | Cash and Cash Equivalents at End of Year | 213,479 | 242,578 | - Operating cash flow turned negative, reflecting a deterioration in the company's operating performance[240] - Financing cash flow turned into a net inflow, primarily driven by proceeds from debentures[242] Notes to the Consolidated Financial Statements General Information and Accounting Standards This section outlines the company's registration, principal activities, controlling shareholder, and adopted Hong Kong Financial Reporting Standards, noting its primary business as investment holding and seafood packaging/sales, with a new fast-moving consumer goods business in 2020, and no significant impact from newly adopted accounting standards - The company was incorporated in the Cayman Islands, and its shares have been listed on the Main Board of the Hong Kong Stock Exchange since July 18, 2017[244] - The company's principal activities are investment holding, with subsidiaries primarily engaged in packaging and selling seafood products, and procuring and selling fast-moving consumer goods and other products[244] - The company has adopted several newly revised Hong Kong Financial Reporting Standards, but they have no significant impact on the results or financial position for the current or prior periods[244] - The consolidated financial statements are prepared on a historical cost basis and presented in RMB[275] Significant Accounting Policies This section details the company's accounting policies for revenue recognition, property, plant and equipment, leases, inventories, asset impairment, financial instruments, foreign currency, and income tax, noting revenue is recognized upon transfer of control, fast-moving consumer goods revenue is recognized on a net basis, and financial asset impairment uses an expected credit loss model - Revenue is recognized when control of goods or services is transferred to the customer, with fast-moving consumer goods business revenue recognized on a net basis[277][279] - Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, and depreciated using the straight-line method[281][284][286] - All leases are capitalized as right-of-use assets and lease liabilities, except for short-term leases and leases of low-value assets[288][290] - Inventories are recognized at the lower of cost and net realizable value, with cost calculated using the weighted average method[294] - Impairment losses on financial assets are measured using the expected credit loss (ECL) model, with trade receivables applying a simplified approach based on lifetime ECL[303][305][306] - The company primarily operates in China, with most transactions settled in RMB, and foreign currency monetary assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period[322][324][325][326] Critical Accounting Estimates and Judgements This section outlines the company's critical accounting estimates and judgments regarding depreciation, impairment of receivables, current and deferred tax estimates, and determining whether it acts as a principal or agent in procurement services, all based on historical experience, relevant factors, and considering macroeconomic uncertainties from COVID-19, with management judging the company acts as an agent in fast-moving consumer goods sales, recognizing revenue on a net basis - Depreciation estimates are based on directors' judgment of assets' expected useful lives, with management reassessing at each reporting period end[341] - Impairment of receivables is based on assumptions about default risk and expected credit loss rates, considering customer historical data, market conditions, and forward-looking estimates[341] - Current and deferred tax estimates require significant judgment, and final tax outcomes may differ from initial records[343][346] - Management judges the company acts as an agent in the fast-moving consumer goods sales business, recognizing revenue on a net basis, as the company does not bear price and inventory risks and does not obtain control of goods before sale[344][345][347] Revenue and Segment Information In 2020, the company's total revenue was RMB 162.7 million, comprising RMB 155.6 million from food business and RMB 7.2 million from fast-moving consumer goods and other businesses, with revenue recognized when control of goods or services is transferred, and two reportable segments identified: packaging and selling seafood products, and all other businesses, with the food business segment recording a loss of RMB 25.9 million and the fast-moving consumer goods and other businesses segment recording a profit of RMB 3.2 million Revenue by Nature of Goods Sold or Services Provided | Product Type | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Sales of Aquatic Products | 155,553 | 472,888 | | Procurement and Sales of FMCG and Others | 7,165 | – | | Total | 162,718 | 472,888 | Revenue by Geographical Market | Region | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Mainland China | 155,553 | 472,888 | | Hong Kong | 236 | – | | South Korea | 6,929 | – | | Total | 162,718 | 472,888 | Segment Results | Segment | 2020 Results (RMB thousand) | 2019 Results (RMB thousand) | | :--- | :--- | :--- | | Sales of Aquatic Products | (25,887) | 51,045 | | All Other Segments | 3,179 | – | | Total | (22,708) | 51,045 | - In 2020, the food business segment shifted from profit to loss, while the newly launched fast-moving consumer goods and other businesses segment achieved profitability[355] Other Income and Expenses In 2020, the company's net other income and gains were RMB 1.1 million, primarily from bank interest, rental income, and government grants, while finance costs totaled RMB 0.444 million, mainly from lease liabilities and debenture interest, resulting in a pre-tax loss of RMB 30.3 million and income tax expense of RMB 1.9 million Other Income and Other Gains/(Losses) – Net | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Bank Deposit Interest Income | 857 | 866 | | Rental Income | 55 | 55 | | Government Grants | 145 | – | | Total | 1,100 | 1,272 | Finance Costs | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Interest Expense on Lease Liabilities | 215 | 221 | | Interest Expense on Debentures | 229 | – | | Total | 444 | 226 | Income Tax Expense | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Current Tax | 434 | 12,723 | | Under-provision in Prior Years | 149 | 744 | | Deferred Tax | 1,332 | 1,722 | | Total | 1,915 | 15,189 | - In 2020, the company received RMB 0.145 million in government grants under the Employment Support Scheme from the HKSAR Government's Anti-epidemic Fund[370][372] Earnings Per Share and Remuneration In 2020, the company reported a basic and diluted loss per share of RMB 0.3226, a reversal from the 2019 earnings per share of RMB 0.3084, with total remuneration for directors and employees amounting to RMB 3.9 million, including RMB 2.285 million for executive directors, and the five highest-paid individuals comprising three directors and two non-directors with total remuneration of RMB 3.9 million (Loss)/Earnings Per Share | Indicator | 2020 (RMB) | 2019 (RMB) | | :--- | :--- | :--- | | Basic and Diluted (Loss)/Earnings Per Share | (0.3226) | 0.3084 | | Weighted Average Number of Ordinary Shares (thousand shares) | 100,000 | 100,000 | - In 2020, the company shifted from earnings per share to loss per share, reflecting a deterioration in operating performance[380] Total Directors' Remuneration | Category | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Executive Directors | 2,285 | 2,371 | | Non-Executive Directors | 1,319 | – | | Independent Non-Executive Directors | 296 | 323 | | Total | 3,900 | 2,694 | - In 2020, the five highest-paid individuals included three directors and two non-directors, with their total remuneration amounting to RMB 3.9 million[396][397] Assets and Liabilities Details This section provides detailed changes and composition of property, plant and equipment, deposits paid to suppliers, inventories, trade receivables, deposits, prepayments and other receivables, cash and cash equivalents, trade payables, and accrued expenses, deposits received and other payables, noting a decrease in net property, plant and equipment, an inventory write-down of RMB 2.105 million, and increases in both trade receivables and trade payables in 2020 Net Property, Plant and Equipment | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Electrical Equipment | 1,568 | 3,798 | | Plant and Machinery | 17,819 | 21,177 | | Motor Vehicles | 18 | 25 | | Furniture and Fixtures | 2,429 | 2,971 | | Leasehold Improvements | 30,226 | 36,150 | | Right-of-use Assets | 4,919 | 3,235 | | Total | 56,979 | 67,356 | - In 2020, the net value of property, plant and equipment decreased, and an impairment provision of RMB 0.675 million was made[405] - In 2020, inventories were written down by RMB 2.105 million, recognized as other expenses in the consolidated statement of comprehensive income[416] Aging Analysis of Trade Receivables | Aging | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | 0 – 30 days | 20,677 | 40,754 | | 31 – 60 days | 24,847 | 36,638 | | 61 – 90 days | 18,747 | 22,643 | | 91 – 120 days | 11,515 | 3,531 | | 121 – 365 days | 62,276 | – | | Total | 138,062 | 103,566 | - The provision for impairment losses on trade receivables increased to RMB 4.58 million in 2020[423] - Trade payables increased to RMB 16.353 million in 2020, primarily due to increased procurement of fast-moving consumer goods[427] Deferred Tax Assets and Share Capital As of December 31, 2020, deferred tax assets totaled RMB 0.731 million, mainly from impairment losses on trade receivables, while the company's share capital remained unchanged despite a share consolidation on May 26, 2020, which merged every ten HKD 0.01 shares into one HKD 0.10 share, resulting in 100 million issued shares Movement in Deferred Tax Assets | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 372 | 281 | | (Charged to)/Credited to Profit or Loss for the Year | 359 | 91 | | Balance at End of Year | 731 | 372 | - Tax losses carried forward in Hong Kong generally have no time limit, while tax losses in China of RMB 29.823 million will expire between 2021 and 2025[439] - On May 26, 2020, the company conducted a share consolidation, merging every ten HKD 0.01 shares into one HKD 0.10 share, resulting in 100 million issued shares, but the total share capital remained unchanged[441] Holding Company Financial Position and Subsidiaries As of December 31, 2020, the holding company's total equity was RMB 91.979 million, with its principal subsidiaries, including Xiamen Wofeng Food Co., Ltd., Fujian Wofeng Food Co., Ltd., and Hanzhong Trading Co., Ltd., all wholly-owned and primarily engaged in seafood packaging and sales, and fast-moving consumer goods procurement and sales Key Data from Holding Company's Statement of Financial Position | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Investments in Subsidiaries | 347 | 694 | | Amounts Due from Subsidiaries | 107,381 | 104,763 | | Cash and Cash Equivalents | 186 | 141 | | Net Current Assets | 98,591 | 103,628 | | Net Assets | 91,979 | 104,322 | | Total Equity | 91,979 | 104,322 | - The holding company's total distributable reserves to shareholders amounted to RMB 85.117 million[447][450] Principal Subsidiaries | Subsidiary Name | Place of Incorporation and Operation | Interest Held (%) | Principal Activities | | :--- | :--- | :--- | :--- | | Xiamen Wofeng Food Co., Ltd. | People's Republic of China | 100% indirectly held | Packaging and sales of seafood products | | Fujian Wofeng Food Co., Ltd. | People's Republic of China | 100% indirectly held | Packaging and sales of seafood products | | Hanzhong Trading Co., Ltd. | Hong Kong | 100% indirectly held | Procurement and sales of fast-moving consumer goods | Related Party Transactions and Leases The company engaged in lease and procurement transactions with related parties, including right-of-use assets and lease liabilities with a company controlled by a major shareholder's spouse, and procurement transactions with Mr. Liu Rongru's cousins, all conducted on terms similar to those with independent third parties, with total lease liabilities of RMB 4.431 million and total cash outflow from leases of RMB 2.611 million in 2020 Related Party Transactions | Related Party | Transaction Type | 2020 Transaction Amount (RMB thousand) | 2019 Transaction Amount (RMB thousand) | | :--- | :--- | :--- | :--- | | Xiamen Yehong Food Co., Ltd. | Right-of-use Assets | 186 | 186 | | Xiamen Yehong Food Co., Ltd. | Lease Liabilities | 14 | 23 | | Mr. Liu Rongjian | Procurement – Cost of Sales | 576 | 622 | | Mr. Liu Rongzhong | Procurement – Cost of Sales | 644 | 696 | - All related party transactions were entered into on terms similar to those with independent third parties[453] Lease Liabilities | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Office and Factory Premises | 3,521 | 3,228 | | Motor Vehicles | 910 | – | | Total | 4,431 | 3,228 | - Total cash outflow from leases in 2020 was RMB 2.611 million, a decrease from RMB 2.805 million in 2019[467] Debentures and Commitments As of December 31, 2020, the company's total debentures amounted to RMB 13.246 million, with a current portion of RMB 6.287 million, new debentures of RMB 19.776 million issued during the year, and repayments of RMB 6.967 million, with interest rates ranging from 0.1% to 10%, and capital commitments of RMB 3.45 million primarily for property, plant and equipment Debenture Overview | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 900 | – | | Additions | 19,776 | 900 | | Repayments | (6,967) | – | | Interest Expense | 229 | – | | Exchange Difference | (692) | – | | Balance at End of Year | 13,246 | 900 | | Current Portion | 6,287 | – | | Non-current Portion | 6,959 | 900 | - Debenture interest rates range from 0.1% to 10% (2019: 5%), are unsecured, and have repayment periods ranging from 4 months to 8 years[472] Capital Commitments | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Property, Plant and Equipment | 3,450 | – | Capital Risk Management and Financial Instruments The company manages its capital structure by optimizing debt and equity balance to ensure continuous operation, with total equity of RMB 446.4 million as of December 31, 2020, and faces interest rate, credit, and liquidity risks, with all borrowings being fixed-rate, credit risk concentrated in trade receivables from top five customers, and liquidity risk managed by maintaining sufficient reserves and bank financing - The company manages capital by optimizing the balance between debt and equity to ensure continuous operation[475] Overview of Financial Assets and Liabilities | Category | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Total Financial Assets | 359,917 | 352,884 | | Total Financial Liabilities | 49,433 | 25,891 | - All of the company's borrowings are fixed-rate, thus no interest rate sensitivity analysis is provided[483][484] - Credit risk is primarily concentrated in trade receivables from the top five customers, accounting for 35% of total trade receivables[488] Expected Loss Rates for Trade Receivables | Aging | 2020 Expected Loss Rate | 2019 Expected Loss Rate | | :--- | :--- | :--- | | Current | 1.62% | 0.41% | | 1 – 30 days overdue | 1.72% | 1.14% | | 31 – 60 days overdue | 2.88% | 2.52% | | 61 – 90 days overdue | 3.01% | 3.78% | | 91 – 120 days overdue | 3.84% | N/A | | Over 120 days overdue | 7.81% | N/A | - Liquidity risk is managed by maintaining sufficient reserves and bank financing[502] Events After Reporting Period and Effect of COVID-19 Subsequent to the reporting period, the company conditionally agreed to acquire a 51% equity interest in a target company for RMB 19.7 million on March 23, 2021, which is yet to be completed, while the COVID-19 pandemic negatively impacted the company's business through increased costs and reduced or delayed revenue, though the company believes these effects were reflected in 2020 and anticipates no further negative impact if the pandemic remains stable - On March 23, 2021, the company signed an agreement to conditionally acquire a 51% equity interest in a target company for RMB 19.7 million, with the acquisition yet to be completed[510] - The COVID-19 pandemic led to increased costs in procuring and selling fast-moving consumer goods and other businesses, as well as reduced or delayed revenue from seafood sales[510] - The company believes the negative impact of COVID-19 on its business was reflected in 2020 and anticipates no further negative impact if the pandemic remains stable[510] Five-year Financial Summary Summary of Results This section provides a summary of the company's results for the past five fiscal years, highlighting a significant decline in revenue to RMB 162.7 million in 2020 and a net loss of RMB 32.3 million, a reversal from profitability in 2016-2019, with earnings per share also turning from a profit of RMB 0.0308 in 2019 to a loss of RMB 0.3226 in 2020 Five-Year Summary of Results | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | 2018 (RMB thousand) | 2017 (RMB thousand) | 2016 (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 162,718 | 472,888 | 667,958 | 644,407 | 468,039 | | Gross Profit | 30,716 | 103,769 | 169,094 | 163,506 | 118,397 | | Profit Before Income Tax | (30,340) | 46,029 | 104,415 | 104,385 | 85,416 | | Profit for the Year Attributable to Owners of the Company | (32,255) | 30,840 | 76,414 | 70,202 | 61,152 | | Earnings Per Share – Basic and Diluted (RMB) | 0.3226 | 0.0308 | 0.0764 | 0.0812 | 0.0815 | - In 2020, the company experienced a significant decline in both revenue and profit, shifting from profitability to a loss, marking its worst performance in the past five years[514] Summary of Assets, Liabilities and Equity This section provides a summary of the company's assets, liabilities, and equity for the past five fiscal years, showing that as of December 31, 2020, total assets were RMB 499.8 million, total liabilities were RMB 53.4 million, and total equity was RMB 446.4 million, with total assets and total equity decreasing and total liabilities increasing compared to 2019 Five-Year Summary of Assets, Liabilities and Equity | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | 2018 (RMB thousand) | 2017 (RMB thousand) | 2016 (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 499,792 | 508,844 | 503,103 | 444,958 | 222,630 | | Total Liabilities | 53,375 | 31,013 | 56,099 | 73,981 | 67,044 | | Total Equity | 446,417 | 477,831 | 447,004 | 370,977 | 155,586 | - In 2020, both total assets and total equity decreased, while total liabilities increased, indicating challenges in the company's financial structure[514]