markdown [Company Information](index=3&type=section&id=Company%20Information) The company's board comprises executive, non-executive, and independent non-executive directors, with its registered office in the Cayman Islands and principal Hong Kong operations in Chater House, Central, audited by BDO Limited - The company's Board of Directors comprises executive directors Mr. Zhuang Weidong (Chairman), Mr. Qiu Chuanzhi (President), Mr. Wu Hangzheng (Vice Chairman), Mr. Mai Rongbin (Vice President), non-executive director Ms. Lin Ping, and independent non-executive directors Mr. Leung Ka Tin, Mr. Cheng Hong Ki, and Mr. Lau Wai King[4](index=4&type=chunk) - The company secretary is Mr. Yau Chi Chiu, with the registered office in the Cayman Islands and principal place of business in Hong Kong at Chater House, Central[4](index=4&type=chunk) - The Hong Kong share registrar is Tricor Investor Services Limited, and the auditor is BDO Limited[7](index=7&type=chunk) [Financial Highlights](index=5&type=section&id=Financial%20Highlights) The group reported a 42.7% revenue increase and a 60.1% reduction in loss for the six months ended June 30, 2021, while total assets remained stable and cash equivalents decreased Financial Highlights for the Six Months Ended June 30, 2021 | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | Change (+/-) | | :--- | :--- | :--- | :--- | | Revenue | 113,116 | 79,255 | 42.7% | | Gross Profit (HK$ thousand) | 30,956 | 18,635 | 66.1% | | Gross Profit Margin | 27.4% | 23.5% | 16.6% | | Loss for the period | (3,418) | (8,563) | (60.1%) | | Loss attributable to equity holders of the Company | (4,148) | (8,928) | (53.5%) | | Basic and diluted loss per share (HK cents) | (0.9) | (1.9) | (52.6%) | Balance Sheet Highlights as of June 30, 2021 | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | Change (+/-) | | :--- | :--- | :--- | :--- | | Total assets | 288,936 | 290,702 | (0.6%) | | Cash and cash equivalents | 38,673 | 60,930 | (36.5%) | | Total equity attributable to equity holders of the Company | 150,391 | 151,873 | (1.0%) | [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an in-depth review of the group's business performance, financial position, and future outlook, including detailed analysis of revenue, expenses, and liquidity [Business Review](index=6&type=section&id=Business%20Review) The group's core business is zipper manufacturing in China, with a significant reduction in loss attributable to equity holders due to market recovery and customer expansion - The group's core business is manufacturing **zippers** in China, primarily serving OEMs that produce garments for renowned Chinese and international apparel brands[11](index=11&type=chunk) - For the six months ended June 30, 2021, loss attributable to equity holders of the Company was approximately **HK$4.15 million**, a **53.5% reduction** from HK$8.93 million in the same period of 2020, primarily due to effective COVID-19 control, market improvement, garment industry rebound, and customer expansion[12](index=12&type=chunk) [Outlook](index=6&type=section&id=Outlook) The company anticipates continued economic recovery in China, with demand for zippers driven by domestic consumption and evolving fashion trends, while implementing strategic initiatives for growth - In the first half of 2021, China's economy continued to recover, but the evolution of the global COVID-19 pandemic remains uncertain, with China's economic growth in the second half relying on domestic demand[13](index=13&type=chunk) - The apparel industry rebounded post-pandemic, with domestic brands gaining consumer recognition, anticipating **low-speed demand growth** in the second half, and diversified fashion trends creating new opportunities for the zipper industry[13](index=13&type=chunk) - The company will implement multiple measures, including increasing new product development, expanding e-commerce markets, integrating and expanding production capacity, optimizing processes, strengthening capital management, accelerating digital transformation, and enhancing talent management[15](index=15&type=chunk) [Financial Review](index=7&type=section&id=Financial%20Review) The group's revenue increased by 42.7% to HK$113 million, with a substantial reduction in loss attributable to equity holders, driven by strong zipper sales and improved profitability - For the six months ended June 30, 2021, the group's revenue was approximately **HK$113.12 million**, an increase of approximately **42.7%** compared to the same period in 2020[16](index=16&type=chunk) - Loss attributable to equity holders of the Company was approximately **HK$4.15 million**, a significant reduction from approximately HK$8.93 million in the prior year period[16](index=16&type=chunk) [Revenue](index=8&type=section&id=Revenue) The group's revenue for the six months ended June 30, 2021, increased by 42.7% to HK$113 million, primarily driven by zipper and puller sales, with Mainland China contributing 90.8% Revenue Analysis by Product Category | Product Category | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Sale of goods | | | | | | Zipper chains and pullers | 111,410 | 98.5 | 78,128 | 98.6 | | Others | 1,706 | 1.5 | 1,127 | 1.4 | | Total | 113,116 | 100.0 | 79,255 | 100.0 | Revenue Analysis by Geographical Location | Geographical Location | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 102,673 | 90.8 | 69,850 | 88.1 | | Overseas | 10,443 | 9.2 | 9,405 | 11.9 | | Total | 113,116 | 100.0 | 79,255 | 100.0 | - The increase in zipper business revenue was primarily due to effective COVID-19 control, gradual improvement in the end consumer market, recovery of the apparel industry, and the group's further expansion of high-quality customers, leading to increased sales orders[19](index=19&type=chunk) [Gross Profit](index=9&type=section&id=Gross%20Profit) Gross profit increased by 66.1% to HK$30.956 million, mainly due to a significant increase in revenue without major changes in fixed expenses Gross Profit Analysis by Product Category | Product Category | 2021 (HK$ thousand) | 2021 (%) | 2020 (HK$ thousand) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Zipper chains and pullers | 30,038 | 97.0 | 18,833 | 101.1 | | Others | 918 | 3.0 | (198) | (1.1) | | Total | 30,956 | 100.0 | 18,635 | 100.0 | - The increase in gross profit was mainly due to a significant increase in revenue, while fixed expenses (such as amortization of right-of-use assets and depreciation) remained largely unchanged[22](index=22&type=chunk) [Expenses and Costs](index=9&type=section&id=Expenses%20and%20Costs) Distribution costs increased by 41.5% due to higher sales, while administrative expenses decreased by 6.7% primarily due to reduced staff salaries and benefits - Distribution costs increased by approximately **41.5%** from approximately HK$5.42 million in the same period of 2020 to approximately **HK$7.67 million** in the same period of 2021, primarily due to increased staff costs and transportation costs resulting from higher sales[23](index=23&type=chunk) - Administrative expenses decreased by approximately **6.7%** from approximately HK$25.92 million in the same period of 2020 to approximately **HK$24.18 million** in the same period of 2021, primarily due to a reduction in salaries and welfare expenses[23](index=23&type=chunk) [Profitability](index=9&type=section&id=Profitability) The group's loss attributable to equity holders significantly decreased to HK$4.15 million, with the loss ratio improving to 3.67%, reflecting overall enhanced profitability - For the six months ended June 30, 2021, the group recorded a loss attributable to equity holders of the Company of approximately **HK$4.15 million**, compared to approximately HK$8.93 million in the same period of 2020[24](index=24&type=chunk) - For the six months ended June 30, 2021, the loss ratio attributable to equity holders of the Company was approximately **3.67%**, with the reduction in loss primarily due to the combined effects mentioned above[24](index=24&type=chunk) [Right-of-Use Assets and Lease Liabilities](index=10&type=section&id=Right-of-Use%20Assets%20and%20Lease%20Liabilities) The group adopted HKFRS 16, recognizing lease liabilities of approximately HK$55.08 million and right-of-use assets of HK$46.54 million as of June 30, 2021 - The group has applied HKFRS 16 to recognize lease liabilities and right-of-use assets since January 1, 2019[26](index=26&type=chunk) - As of June 30, 2021, lease liabilities and right-of-use assets were approximately **HK$55.08 million** and **HK$46.54 million**, respectively[26](index=26&type=chunk) [Related Party Transactions and Continuing Connected Transactions](index=10&type=section&id=Related%20Party%20Transactions%20and%20Continuing%20Connected%20Transactions) The group entered into a new lease agreement for a China property with a related party, recognized as a one-off connected transaction, and has ongoing connected lease transactions - On August 27, 2021, the group entered into the Jingmen Lease Agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. (a related party) to lease a property in China, with a monthly rent of **RMB533,000** for a term from September 1, 2021, to August 31, 2023[27](index=27&type=chunk) - The Jingmen Lease Agreement was recognized as an acquisition of a right-of-use asset, constituting a one-off connected transaction for the Company, with additional assets recognized of approximately **HK$8.58 million**[30](index=30&type=chunk) - The group has a continuing connected lease agreement with Kaiyi Jingmen, with a monthly rent of **RMB400,000**, and a maximum annual aggregate amount of **RMB6 million** for each of the three years ending August 31, 2021[31](index=31&type=chunk) [Liquidity and Capital Resources](index=12&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash outflow from operating activities significantly decreased, while cash and cash equivalents reduced, and the group maintained its adjusted net debt-to-capital ratio below 20% - For the six months ended June 30, 2021, the group's net cash outflow from operating activities was approximately **HK$1.35 million** (2020: HK$8.6 million), net cash outflow from investing activities was approximately **HK$12.7 million** (2020: HK$19.77 million inflow), and net cash outflow from financing activities was approximately **HK$11.68 million** (2020: HK$45.78 million)[33](index=33&type=chunk) - As of June 30, 2021, cash and cash equivalents were approximately **HK$38.67 million**, a decrease of approximately **HK$22.26 million** from December 31, 2020[34](index=34&type=chunk) - The group's strategy is to maintain an adjusted net debt-to-capital ratio below **20%**, with ratios of **9.5%** and **1.9%** as of June 30, 2021, and December 31, 2020, respectively[37](index=37&type=chunk) [Net Current Assets](index=13&type=section&id=Net%20Current%20Assets) Net current assets increased to approximately HK$73.01 million, primarily comprising inventory, trade and other receivables, and cash and cash equivalents - As of June 30, 2021, the group recorded current assets of approximately **HK$149.8 million** and current liabilities of approximately **HK$76.796 million**[38](index=38&type=chunk) - Net current assets increased by approximately **HK$5.57 million** from approximately HK$67.44 million as of December 31, 2020, to approximately **HK$73.01 million** as of June 30, 2021[38](index=38&type=chunk) [Pledged Assets](index=13&type=section&id=Pledged%20Assets) As of June 30, 2021, the group had no pledged assets - As of June 30, 2021, the group had no pledged assets[39](index=39&type=chunk) [Contingent Liabilities](index=13&type=section&id=Contingent%20Liabilities) As of June 30, 2021, the group had no significant contingent liabilities - As of June 30, 2021, the group had no significant contingent liabilities[40](index=40&type=chunk) [Foreign Currency Risk](index=13&type=section&id=Foreign%20Currency%20Risk) The group's foreign currency risk is limited as most transactions are denominated in the functional currency of its operations, with no hedging activities undertaken - The foreign currency risk for individual companies within the group is limited, as most transactions are denominated in the same functional currency related to their operations[41](index=41&type=chunk) - For the six months ended June 30, 2021, the group did not hedge against risks arising from exchange rate fluctuations[41](index=41&type=chunk) [Employees](index=14&type=section&id=Employees) The group's full-time employees increased to 804, with staff costs rising to approximately HK$52.04 million due to increased production - As of June 30, 2021, the group had **804 full-time employees** (June 30, 2020: 758 employees)[43](index=43&type=chunk) - Staff costs incurred for the six months ended June 30, 2021, were approximately **HK$52.04 million** (2020: approximately HK$42.65 million), primarily due to an increase in the number of workers resulting from increased production[43](index=43&type=chunk) [Changes in Remuneration of Three Executive Directors](index=14&type=section&id=Changes%20in%20Remuneration%20of%20Three%20Executive%20Directors) Three executive directors, Mr. Zhuang Weidong, Mr. Qiu Chuanzhi, and Mr. Mai Rongbin, each waived part of their remuneration, receiving HK$50,000 for the period - For the six months ended June 30, 2021, Mr. Zhuang Weidong, Mr. Qiu Chuanzhi, and Mr. Mai Rongbin each waived part of their remuneration as executive directors, receiving **HK$50,000** each[44](index=44&type=chunk) [Interim Dividend](index=14&type=section&id=Interim%20Dividend) The Board recommended no interim dividend payment for the six months ended June 30, 2021, or 2020 - The Board recommended no interim dividend payment for the six months ended June 30, 2021, and 2020[45](index=45&type=chunk) [Events After Reporting Period](index=14&type=section&id=Events%20After%20Reporting%20Period) Details of events after the reporting period are provided in Note 16 to the unaudited interim financial report on page 40 - Details of events after the reporting period are set out in Note 16 to the unaudited interim financial report on page 40 of this interim report[46](index=46&type=chunk) [Disclosure of Interests](index=15&type=section&id=Disclosure%20of%20Interests) This section details the interests and short positions of directors, chief executives, and substantial shareholders in the company's shares and underlying shares [Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, or Debentures of the Company or its Associated Corporations](index=15&type=section&id=Directors%27%20and%20Chief%20Executive%27s%20Interests%20and%20Short%20Positions%20in%20Shares%2C%20Underlying%20Shares%2C%20or%20Debentures%20of%20the%20Company%20or%20its%20Associated%20Corporations) As of June 30, 2021, several directors held long positions in the company's shares through controlled corporations, with Mr. Qiu Chuanzhi holding approximately 28.77% and Mr. Zhuang Weidong holding 28.16% Directors' Long Positions in Shares and Underlying Shares of the Company | Name of Director | Nature of Interest | Number of Shares | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Qiu Chuanzhi | Interest in controlled corporation | 133,706,331 | 28.77% | | Zhuang Weidong | Interest in controlled corporation | 130,897,663 | 28.16% | | Lin Ping | Interest in controlled corporation | 82,342,606 | 17.72% | | Mai Rongbin | Interest in controlled corporation | 82,342,606 | 17.72% | - Mr. Qiu Chuanzhi wholly owns China Sun Corporation, Mr. Zhuang Weidong holds **90%** interest in Central Eagle Limited, and Ms. Lin Ping and Mr. Mai Rongbin hold **60%** and **25%** interests in Golden Diamond Inc., respectively[51](index=51&type=chunk) [Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares or Underlying Shares of the Company](index=17&type=section&id=Substantial%20Shareholders%27%20and%20Other%20Persons%27%20Interests%20and%20Short%20Positions%20in%20Shares%20or%20Underlying%20Shares%20of%20the%20Company) As of June 30, 2021, substantial shareholders included China Sun, Central Eagle, Golden Diamond, and China Huarong Overseas Investment Holdings Co., Ltd. and its affiliates, holding a combined 70.16% interest Substantial Shareholders' and Other Persons' Long Positions in Shares and Underlying Shares of the Company | Name of Shareholder | Capacity | Number of Shares | Percentage | | :--- | :--- | :--- | :--- | | China Sun | Beneficial owner | 133,706,331 | 28.77% | | Central Eagle | Beneficial owner | 130,897,663 | 28.16% | | Golden Diamond | Beneficial owner | 82,342,606 | 17.72% | | Noble Wisdom Ever Limited | Interest in security | 326,089,600 | 70.16% | | China Huarong Overseas Investment Holdings Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Huaqiao Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | Huarong Zhiyuan Investment Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | | China Huarong Asset Management Co., Ltd. | Interest in controlled corporation | 326,089,600 | 70.16% | - China Huarong Overseas wholly owns Noble Wisdom, Huarong Huaqiao wholly owns China Huarong Overseas, Huarong Zhiyuan holds **91%** interest in Huarong Huaqiao, and China Huarong Asset Management wholly owns Huarong Zhiyuan[59](index=59&type=chunk) [Directors' Interests in Competing Businesses](index=19&type=section&id=Directors%27%20Interests%20in%20Competing%20Businesses) No director held any interest in businesses directly or indirectly competing with the group's business during the reporting period or up to the date of this interim report - For the six months ended June 30, 2021, and up to the date of this interim report, no director held or had held any interest in any business (other than the group's business) that directly or indirectly competes or is likely to compete with the group's business[62](index=62&type=chunk) [Corporate Governance and Other Information](index=20&type=section&id=Corporate%20Governance%20and%20Other%20Information) The company adheres to stringent corporate governance practices, including compliance with the Corporate Governance Code and a model code for securities transactions by directors and employees [Corporate Governance Practices](index=20&type=section&id=Corporate%20Governance%20Practices) The company is committed to maintaining strict corporate governance guidelines and procedures, fully complying with all provisions of the Corporate Governance Code - The company has complied with all provisions set out in the Corporate Governance Code[65](index=65&type=chunk) [Compliance with Model Code by Directors and Relevant Employees](index=20&type=section&id=Compliance%20with%20Model%20Code%20by%20Directors%20and%20Relevant%20Employees) The company adopted the Model Code for directors' securities transactions, with all directors confirming compliance, and also implemented a code for relevant employees - The company has adopted the Model Code as the code of conduct for directors' securities transactions, with all directors confirming compliance during the period from January 1, 2021, to June 30, 2021[66](index=66&type=chunk) - The company has also adopted a code of conduct for securities transactions by relevant employees, with terms no less exacting than those set out in the Model Code[66](index=66&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=20&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) Neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the six months ended June 30, 2021 - For the six months ended June 30, 2021, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[67](index=67&type=chunk) [Audit Committee](index=20&type=section&id=Audit%20Committee) The unaudited interim financial report for the six months ended June 30, 2021, has been reviewed by the Board's Audit Committee - The group's unaudited interim financial report for the six months ended June 30, 2021, has been reviewed by the Board's Audit Committee[68](index=68&type=chunk) [Condensed Consolidated Statement of Profit or Loss](index=21&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) This statement presents the group's financial performance, showing revenue, costs, and loss for the six months ended June 30, 2021 Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 113,116 | 79,255 | | Cost of Sales (HK$ thousand) | (82,160) | (60,620) | | Gross Profit (HK$ thousand) | 30,956 | 18,635 | | Other Income and (Losses) / Gains, Net (HK$ thousand) | (622) | 6,079 | | Distribution Costs (HK$ thousand) | (7,663) | (5,416) | | Administrative Expenses (HK$ thousand) | (24,182) | (25,924) | | Interest on Lease Liabilities (HK$ thousand) | (1,944) | (1,961) | | Loss Before Tax (HK$ thousand) | (3,455) | (8,587) | | Income Tax Credit (HK$ thousand) | 37 | 24 | | Loss for the period | (3,418) | (8,563) | | Loss attributable to equity holders of the Company | (4,148) | (8,928) | | Loss attributable to non-controlling interests | 730 | 365 | | Basic and diluted loss per share (HK cents) | (0.9) | (1.9) | [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=22&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This statement details the group's total comprehensive income, including profit or loss and other comprehensive income components for the period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Loss for the period | (3,418) | (8,563) | | Other comprehensive income for the period: | | | | －Exchange differences arising on translation of financial statements of Mainland China subsidiaries (HK$ thousand) | 3,183 | (4,664) | | Total Comprehensive Income for the Period (HK$ thousand) | (235) | (13,227) | | Attributable to Equity Holders of the Company (HK$ thousand) | (1,482) | (12,807) | | Attributable to Non-controlling Interests (HK$ thousand) | 1,247 | (420) | [Condensed Consolidated Statement of Financial Position](index=23&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) This statement provides a snapshot of the group's assets, liabilities, and equity as of June 30, 2021 Condensed Consolidated Statement of Financial Position (As of June 30, 2021) | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment (HK$ thousand) | 83,056 | 86,616 | | Right-of-Use Assets (HK$ thousand) | 46,542 | 56,408 | | Intangible Assets (HK$ thousand) | 358 | 140 | | Deferred Tax Assets (HK$ thousand) | 5,970 | 5,834 | | **Current Assets** | | | | Inventories (HK$ thousand) | 32,048 | 26,881 | | Trade and Other Receivables (HK$ thousand) | 77,268 | 49,082 | | Cash and Cash Equivalents (HK$ thousand) | 38,673 | 60,930 | | **Current Liabilities** | | | | Trade and Other Payables (HK$ thousand) | 59,804 | 52,245 | | Lease Liabilities (Current Portion) (HK$ thousand) | 16,869 | 18,880 | | **Non-current Liabilities** | | | | Lease Liabilities (Non-current Portion) (HK$ thousand) | 38,210 | 45,290 | | Deferred Tax Liabilities (HK$ thousand) | 1,124 | 1,124 | | Total Equity (HK$ thousand) | 172,806 | 173,041 | | Total equity attributable to equity holders of the Company | 150,391 | 151,873 | | Non-controlling Interests (HK$ thousand) | 22,415 | 21,168 | [Condensed Consolidated Statement of Changes in Equity](index=25&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This statement outlines the changes in the group's equity attributable to owners and non-controlling interests for the reporting period Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | June 30, 2021 (HK$ thousand) | January 1, 2021 (HK$ thousand) | June 30, 2020 (HK$ thousand) | January 1, 2020 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Share capital | 4,648 | 4,648 | 4,648 | 4,648 | | Share premium | 145,830 | 145,830 | 145,830 | 180,690 | | Capital reserve | 18,324 | 18,324 | 18,324 | 18,324 | | Statutory reserve | 26,492 | 25,856 | 26,027 | 25,856 | | Exchange reserve | 18,395 | 15,729 | (5,133) | (1,254) | | Accumulated losses | (63,298) | (58,514) | (20,706) | (11,607) | | Total attributable to equity holders of the Company | 150,391 | 151,873 | 168,990 | 216,657 | | Non-controlling interests | 22,415 | 21,168 | 22,219 | 22,639 | | Total equity | 172,806 | 173,041 | 191,209 | 239,296 | - For the six months ended June 30, 2021, loss attributable to equity holders of the Company was **HK$4.148 million**, and loss attributable to non-controlling interests was **HK$0.73 million**[80](index=80&type=chunk) - For the six months ended June 30, 2020, a special dividend of **HK$34.86 million** was distributed[78](index=78&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=27&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,346) | (8,598) | | Net cash (used in) / from investing activities | (12,702) | 19,771 | | Net cash used in financing activities | (11,683) | (45,783) | | Net decrease in cash and cash equivalents | (25,731) | (34,610) | | Cash and cash equivalents at January 1 | 60,930 | 91,174 | | Effect of exchange rate changes | 3,474 | (2,300) | | Cash and cash equivalents at June 30 | 38,673 | 54,264 | [Notes to the Unaudited Interim Financial Report](index=28&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Report) This section provides detailed explanatory notes supporting the condensed consolidated interim financial statements, covering accounting policies, segment information, and significant transactions [1 General Information](index=28&type=section&id=1%20General%20Information) China Everbright Group Limited is an exempted company incorporated in the Cayman Islands, with its shares listed on The Stock Exchange of Hong Kong Limited - China Everbright Group Limited is an exempted company incorporated in the Cayman Islands under the Companies Act, with its shares listed on The Stock Exchange of Hong Kong Limited[86](index=86&type=chunk) [2 Basis of Preparation](index=28&type=section&id=2%20Basis%20of%20Preparation) The unaudited condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and Listing Rules, involving judgments, estimates, and assumptions - The unaudited condensed consolidated interim financial statements are prepared in accordance with the applicable disclosure provisions of the Listing Rules of the Stock Exchange, including compliance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants[87](index=87&type=chunk) - The preparation of the condensed consolidated interim financial statements requires the use of certain judgments, estimates, and assumptions, and actual results may differ from these estimates[87](index=87&type=chunk) [3 Principal Accounting Policies](index=29&type=section&id=3%20Principal%20Accounting%20Policies) The interim financial statements follow the same accounting policies as the 2020 annual financial statements, with new HKFRS standards having no significant impact - The condensed consolidated interim financial statements are prepared in accordance with the same accounting policies adopted in the 2020 annual financial statements, except for changes in accounting policies required to be adopted in the 2021 annual financial statements[89](index=89&type=chunk) - New or revised Hong Kong Financial Reporting Standards (including amendments to HKFRS 16 and interest rate benchmark reform) effective from January 1, 2021, had no significant impact on the group's condensed consolidated interim financial statements[90](index=90&type=chunk) [4 Segment Reporting](index=29&type=section&id=4%20Segment%20Reporting) The group operates in two reportable segments: Zipper (Mainland China) and Zipper (Overseas), with inter-segment transactions priced at market rates - The group has two reportable segments: Zipper (Mainland China) and Zipper (Overseas)[91](index=91&type=chunk) - The Zipper (Mainland China) segment manufactures zipper products primarily for customers in the Mainland China market; the Zipper (Overseas) segment purchases zipper products from the Mainland China segment and sells them to overseas market customers[92](index=92&type=chunk)[93](index=93&type=chunk) Segment Results (For the six months ended June 30, 2021) | Indicator | Zipper - Mainland China (HK$ thousand) | Zipper - Overseas (HK$ thousand) | Total (HK$ thousand) | | :--- | :--- | :--- | :--- | | Revenue from external customers | 102,673 | 10,443 | 113,116 | | Inter-segment revenue | 7,280 | – | 7,280 | | Reportable segment revenue | 109,953 | 10,443 | 120,396 | | Reportable segment profit / (loss) | 9,324 | (1,362) | 7,962 | | Depreciation and amortization for the period | 15,028 | 541 | 15,569 | [5 Revenue](index=33&type=section&id=5%20Revenue) The group's primary business is manufacturing and selling zippers and related products, with total revenue of HK$113 million for the period, and no single customer exceeding 10% of total revenue - The group's principal business is the manufacturing and sale of zippers, pullers, and other related products[106](index=106&type=chunk) Amounts of Each Major Revenue Category (For the six months ended June 30) | Revenue Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Sale of goods | | | | Zipper chains and pullers | 111,410 | 78,128 | | Others | 1,706 | 1,127 | | Total | 113,116 | 79,255 | - No single customer's transactions exceeded **10%** of the group's revenue[108](index=108&type=chunk) [6 Loss Before Tax](index=33&type=section&id=6%20Loss%20Before%20Tax) Loss before tax for the period reflects increased staff costs and depreciation, offset by a reversal of inventory impairment loss, with other income and losses turning negative Staff Costs (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Salaries, Wages and Other Benefits (HK$ thousand) | 47,536 | 40,641 | | Contributions to Defined Contribution Retirement Plans (HK$ thousand) | 4,500 | 2,005 | | Total | 52,036 | 42,646 | Other Income and (Losses) / Gains, Net (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Other income and (losses) / gains, net | (622) | 6,079 | Other Items (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Depreciation and Amortization: | | | | －Plant and equipment | 7,899 | 6,323 | | －Intangible Assets (HK$ thousand) | 101 | 601 | | －Right-of-Use Assets (HK$ thousand) | 10,422 | 9,454 | | Total | 18,422 | 16,378 | | Impairment Loss on Inventories (Reversal) / Provision (HK$ thousand) | (9) | 461 | | Cost of inventories | 82,160 | 60,620 | [7 Income Tax (Credit) / Expense](index=35&type=section&id=7%20Income%20Tax%20%28Credit%29%20%2F%20Expense) The group recorded an income tax credit of HK$37 thousand, with varying tax rates for its subsidiaries in Hong Kong and Mainland China, including preferential rates for high-tech enterprises Income Tax (Credit) / Expense (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Current Tax - PRC Enterprise Income Tax (HK$ thousand) | 32 | (30) | | Deferred Tax (HK$ thousand) | (69) | 6 | | Total | (37) | (24) | - Kaiyi (Guangdong) Garment Accessories Co., Ltd. is recognized as a high-tech enterprise, enjoying a preferential income tax rate of **15%** until 2021, while other Mainland China subsidiaries have a statutory income tax rate of **25%**[115](index=115&type=chunk) - Dividends paid by Chinese resident enterprises to non-Chinese resident enterprise investors are subject to a **10% withholding income tax**, with eligible Hong Kong tax residents subject to a reduced rate of **5%**[115](index=115&type=chunk) [8 Loss Per Share](index=36&type=section&id=8%20Loss%20Per%20Share) Basic loss per share was HK$0.9 cents, with diluted loss per share being the same due to the absence of potential dilutive shares - Basic loss per share is calculated based on the loss attributable to equity holders of the Company of **HK$4.148 million** for the six months ended June 30, 2021, and the weighted average number of ordinary shares outstanding of **464.804 million**, resulting in **HK$0.9 cents**[117](index=117&type=chunk) - As there were no potential dilutive shares outstanding for the six months ended June 30, 2020, and 2021, diluted loss per share is equal to basic loss per share[118](index=118&type=chunk) [9 Property, Plant and Equipment](index=36&type=section&id=9%20Property%2C%20Plant%20and%20Equipment) During the six months ended June 30, 2021, the group acquired property, plant, and equipment items, including payments for construction in progress, totaling HK$4.814 million - For the six months ended June 30, 2021, the group acquired property, plant, and equipment items (including payments for construction in progress) at a cost of **HK$4.814 million** (six months ended June 30, 2020: HK$5.027 million)[119](index=119&type=chunk) [10 Trade and Other Receivables](index=37&type=section&id=10%20Trade%20and%20Other%20Receivables) Total trade and other receivables amounted to HK$77.268 million, with most trade receivables and bills due within one month, and all expected to be recovered within one year Aging Analysis of Trade Receivables and Bills Receivable (As of reporting period end) | Aging | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Within one month | 62,391 | 18,049 | | Over one month but within two months | 5,424 | 13,065 | | Over two months but within three months | 2,556 | 6,144 | | Over three months | 2,418 | 6,278 | | Trade receivables and bills receivable, net of loss allowance (HK$ thousand) | 72,789 | 43,536 | | Lease deposits (HK$ thousand) | 2,783 | 2,665 | | Other prepayments (HK$ thousand) | 1,183 | 1,155 | | Other receivables (HK$ thousand) | 513 | 1,726 | | Total | 77,268 | 49,082 | - All trade and other receivables are expected to be recovered or recognized as expenses within one year[121](index=121&type=chunk) [11 Cash and Cash Equivalents](index=38&type=section&id=11%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased to HK$38.673 million as of June 30, 2021, from HK$60.93 million at December 31, 2020 Cash and Cash Equivalents (As of June 30, 2021) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Bank and cash in hand (HK$ thousand) | 38,673 | 60,930 | | Cash and cash equivalents in condensed consolidated cash flow statement (HK$ thousand) | 38,673 | 60,930 | [12 Trade and Other Payables](index=38&type=section&id=12%20Trade%20and%20Other%20Payables) Total trade and other payables were HK$59.804 million, with trade payables primarily due within one month, and significant amounts for wages and property, plant, and equipment purchases Aging Analysis of Trade and Other Payables (As of reporting period end) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Within one month | 17,204 | 8,072 | | Over one month but within three months | 984 | 1,362 | | Over three months but within six months | 5 | 1 | | Over six months | 192 | 162 | | Trade payables (HK$ thousand) | 18,385 | 9,597 | | Accrued wages and staff welfare (HK$ thousand) | 20,498 | 17,004 | | Accrued expenses (HK$ thousand) | 6,824 | 5,582 | | Payables for purchase of property, plant and equipment (HK$ thousand) | 9,408 | 18,723 | | Contract liabilities (HK$ thousand) | 1,134 | 841 | | Other receivables (HK$ thousand) | 3,555 | 498 | | Total | 59,804 | 52,245 | [13 Capital, Reserves and Dividends](index=39&type=section&id=13%20Capital%2C%20Reserves%20and%20Dividends) No interim dividends were declared for the periods ended June 30, 2021, or 2020, though a special dividend was paid in 2020, and the company's share capital remained unchanged Dividends (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Special dividend: declared per ordinary share: Nil (2020: HK$0.075) | - | 34,860 | - No interim dividends were declared for the periods ended June 30, 2021, and 2020[128](index=128&type=chunk) Share Capital (As of June 30, 2021) | Category | June 30, 2021 Number of Shares (thousand shares) | June 30, 2021 Share Capital (HK$ thousand) | December 31, 2020 Number of Shares (thousand shares) | December 31, 2020 Share Capital (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Authorised: Ordinary shares of HK$0.01 each | 2,000,000 | 20,000 | 2,000,000 | 20,000 | | Ordinary shares, issued and fully paid | 464,804 | 4,648 | 464,804 | 4,648 | [14 Commitments](index=40&type=section&id=14%20Commitments) Capital commitments contracted but not provided for in the financial statements increased to HK$0.522 million as of June 30, 2021 Unfulfilled Capital Commitments (As of June 30, 2021) | Category | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Contracted | 522 | 288 | [15 Significant Related Party Transactions](index=40&type=section&id=15%20Significant%20Related%20Party%20Transactions) The group engaged in several lease agreements with related parties, including senior management and their controlled entities, with total rent paid amounting to approximately HK$6.236 million - For the six months ended June 30, 2021, the group paid **HK$2.831 million** in rent to senior management Mr. Xu Xipeng and Mr. Xu Xinan for certain lease and building renewal lease agreements[132](index=132&type=chunk) - For the six months ended June 30, 2021, the group paid rent of **HK$0.36 million** and **HK$2.999 million** respectively to Shengdian Co., Ltd. and Foshan Nanhai Jinheming Investment Co., Ltd., owned by Mr. Xu Xipeng and Mr. Xu Xinan, for leased-back assets[133](index=133&type=chunk) - For the six months ended June 30, 2021, the group paid **HK$2.875 million** in rent under a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd[135](index=135&type=chunk) Key Management Personnel Remuneration (For the six months ended June 30) | Category | 2021 (HK$ thousand) | 2020 (HK$ thousand) | | :--- | :--- | :--- | | Short-term employee benefits | 2,518 | 5,334 | | Retirement scheme contributions | 177 | 95 | | Total | 2,695 | 5,429 | [16 Events After Reporting Period](index=41&type=section&id=16%20Events%20After%20Reporting%20Period) The group renewed a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. through its Jingmen branch, a company owned by Mr. Xu Xipeng and Mr. Xu Xinan - The group renewed a lease agreement with Kaiyi (Jingmen) Garment Accessories Co., Ltd. through its Jingmen branch, as lessee, with the company owned **50%** by lessor Mr. Xu Xipeng and **50%** by Mr. Xu Xinan[137](index=137&type=chunk) [Glossary](index=42&type=section&id=Glossary) This section defines key terms and abbreviations used throughout the report to ensure clarity and consistent understanding - This section provides definitions for key terms used in the report, including Board, Corporate Governance Code, Company, Directors, Group, HK$, Hong Kong, Listing Rules, Main Board, Model Code, OEM, PRC or Mainland China, RMB, SFO, Shares, Shareholders, Stock Exchange, etc[139](index=139&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)
进腾集团(02011) - 2021 - 中期财报