美瑞健康国际(02327) - 2020 - 年度财报

Company Information The Board of Directors comprises executive, non-executive, and independent non-executive directors, supported by audit, remuneration, nomination, and strategy committees - The Board of Directors consists of executive, non-executive, and independent non-executive directors, with established audit, remuneration, nomination, and strategy committees[6][7][10][19][20][21][22] - Ernst & Young retired on June 24, 2020, and Zhonghui Anda Certified Public Accountants Limited was appointed as the new auditor[22] Co-Chairmen's Report The Group achieved a significant turnaround in 2020 with 12.9% revenue growth and a net profit of 85.1 million HKD, driven by strong performance in industrial hemp and healthcare businesses - In 2020, the Group's revenue increased by 12.9% year-on-year to 265.1 million HKD, achieving a net profit of 85.1 million HKD and turning losses into profits[27] - Industrial hemp business revenue grew by nearly 16 times to 25.4 million HKD, launching the "Mazhuang" skincare brand and expanding the CANNERGY CBD vaping brand in Japan[27][40] - Healthcare-related business revenue increased by 29.2% to 54.8 million HKD, turning losses into profits, primarily due to increased demand for health services during the pandemic and sales agency services for COVID-19 related products[27] - The Group continues to strengthen its upstream and downstream industrial chain layout for healthcare and industrial hemp businesses, increasing R&D, product, and marketing investments, and launching the "Scientific Sleep Project"[26][32][49] - The UN Commission on Narcotic Drugs lowered cannabis control levels, anticipating more relaxed global industrial hemp policies, which is beneficial for the Group[45] Management Discussion and Analysis This section analyzes the Group's 2020 financial performance, highlighting revenue growth, profit turnaround, segment contributions, and significant balance sheet changes Comparison of Financial Performance 2020 vs 2019 | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 265,135 | 234,779 | | Gross Profit | 111,251 | 71,832 | | Gross Profit Margin | 42.0% | 30.6% | | Profit/(Loss) Before Tax | 103,587 | (5,344) | | Profit/(Loss) for the Year | 85,066 | (23,010) | | Profit/(Loss) Attributable to Owners of the Company | 83,439 | (20,174) | - Revenue increased by 12.9%, primarily due to a 23.9 million HKD increase in CBD downstream product sales and 9.7 million HKD from COVID-19 related healthcare product sales agency services[55] - Gross profit increased by 55.0%, with gross margin rising to 42.0%, mainly benefiting from Mazhuang product sales and high-margin COVID-19 related healthcare product sales[56] - Annual profit turned into a gain, primarily due to increased gross profit, no goodwill impairment (compared to 33.0 million HKD impairment in 2019), a 31.7 million HKD gain from partial disposal of an associate, and a 14.1 million HKD gain from disposal of a subsidiary[62] Performance of Business Segments 2020 | Business Segment | Revenue (thousand HKD) | YoY Revenue Change | Segment Profit/(Loss) (thousand HKD) | | :--- | :--- | :--- | :--- | | Industrial Hemp Business | 25,371 | Increased by nearly 16 times | 4,027 (turned into profit) | | Healthcare-Related Business | 54,757 | Increased by 29.2% | 14,076 (turned into profit) | | Trading Business | 133,960 | Decreased by 6.2% | 22,603 (increased by approx. 2 times) | | Sales Agency Services | 29,805 | Increased by 1.7% | 24,090 (increased by 9.5%) | | Property Investment and Leasing | 21,242 | Increased by 13.4% | 1,845 (decreased by 95.1%) | - Net assets increased by 137.6 million HKD to 1,403.3 million HKD, primarily due to the annual profit of 85.1 million HKD and foreign exchange gains of 63.4 million HKD from overseas operations[80] - Bank loans decreased by 159.8 million HKD, leading to a 148.6 million HKD reduction in total liabilities, and the gearing ratio decreased from 14% to -1.4%, indicating a net cash position[79][95] - Significant acquisitions and disposals included the disposal of the entire equity of Dexin Pharmaceutical Development Co., Ltd. and 60% equity of La Clinique de Paris International Limited, alongside the acquisition of the entire equity of Bairui (Shenzhen) Health Management Co., Ltd., aiming to optimize business structure and focus on the China market[106][107] Directors' Report The report details the company's principal activities, key risks, regulatory compliance, dividend policy, share option scheme, and directors' interests - The Company's principal business is investment holding, with subsidiaries engaged in industrial hemp, healthcare, building materials trading, property sales agency, property investment and leasing, and residential property development[121] - Key risks include macroeconomic changes, legal and regulatory compliance risks, reputation and performance risks, and financial risks[123][124][125] - The Group complies with all relevant laws and regulations in China, Hong Kong, Australia, Japan, Switzerland, and Bermuda[127] - The Board has resolved not to declare a dividend for the year ended December 31, 2020[135] - The Company's share option scheme was approved and adopted on June 20, 2019, to incentivize eligible participants, with an exercise price not less than a specified market price or par value[141][1111] Interests of Directors and Chief Executives in Shares (as at December 31, 2020) | Director Name | Capacity | Total Interests (L) | Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Zhou Xuzhou | Interests in controlled corporations | 2,120,258,291 | 49.63% | | Mr. Zhou Xuzhou | Personal interests | 124,130,470 | 2.91% | | Dr. Zeng Wentao | Personal interests | 75,000,000 | 1.76% | | Ms. Zhou Wenchuan | Personal interests | 31,938,000 | 0.75% | | Dr. Mao Zhenhua | Interests in controlled corporations | 113,890,000 | 2.67% | - The Group entered into continuing connected transactions with Yuye Group Co., Ltd. (wholly owned by Mr. Zhou Xuzhou) to provide property sales and consulting services, with a maximum annual service fee not exceeding RMB 40,000,000 for 2021-2023[181][182] - Zhonghui Anda Certified Public Accountants Limited was appointed as the Company's auditor on June 24, 2020[202] Corporate Governance Report This report confirms the company's compliance with the Corporate Governance Code, detailing board structure, responsibilities, committee functions, and internal control systems - The Company adopted and complied with all applicable code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules during the 2020 financial year[207] - The Board of Directors comprises three executive directors, one non-executive director, and three independent non-executive directors, holding eight board meetings in 2020[209][211] - The Board is responsible for formulating and reviewing corporate governance policies, overseeing director and senior management training, ensuring legal compliance, establishing codes of conduct, and reviewing the corporate governance report[216] - The Remuneration Committee, Nomination Committee, Audit Committee, and Strategy Committee have been established to oversee the Group's related affairs[215] Auditor's Remuneration (2020) | Service Nature | Amount (thousand HKD) | | :--- | :--- | | Audit services | 1,150 | | Non-audit services | 300 | | Total | 1,450 | - The Board Diversity Policy considers various aspects such as gender, age, cultural and educational background, professional experience, skills, knowledge, and length of service[264][265] - The Board is responsible for maintaining sound and effective internal control systems and regularly reviews the effectiveness of risk management and internal control systems at least once a year[278][281] Environmental, Social and Governance Report This report outlines the Group's commitment to sustainable development, detailing its environmental, social, and governance performance and strategies for a healthy future About This Report This report covers the environmental, social, and governance performance of Marianna Health International Industry Group Limited and its subsidiaries from January 1 to December 31, 2020, across six major operating segments in Hong Kong, China, Japan, and Australia, prepared in accordance with the HKEX ESG Reporting Guide - The reporting period is from January 1, 2020, to December 31, 2020[287] - The report covers the Group's six major operating segments in Hong Kong, China, Japan, and Australia[288][289] - The report is prepared in accordance with the "comply or explain" provisions of the Hong Kong Stock Exchange's Environmental, Social and Governance Reporting Guide[290] About the Group Marianna Health is an international medical and health industry group listed on the main board of the HKEX, headquartered in Hong Kong with operations across China, Japan, Australia, and Switzerland, focusing on health management and CBD downstream product applications, with a total turnover of 265.1 million HKD in 2020 - The Group is an international medical and health industry group listed on the Main Board of the Stock Exchange, headquartered in Hong Kong with operations across China, Japan, Australia, and Switzerland[300] - Core businesses include health management and CBD downstream product applications, primarily engaged in industrial hemp, healthcare-related, trading, sales agency, property investment and leasing, and property development businesses[300][301][302][303][304][305] - Total turnover in 2020 was 265.1 million HKD[300] 2020 Highlights In 2020, Marianna Health actively responded to COVID-19 challenges, focusing on high-growth industrial hemp and healthcare businesses, demonstrating corporate social responsibility in anti-epidemic efforts, and enhancing brand influence through international exhibitions and awards - The Group innovated and adapted during the pandemic, focusing on industrial hemp and healthcare-related businesses, achieving initial success with its "one body, two wings" strategy[308] - COVID-19 response actions included global procurement and donation of anti-epidemic supplies, transitioning to mask production, and exporting anti-epidemic supplies and test kits globally, contributing new profit growth to the Group[309][311][315][316] - Participated in international events such as the 3rd Tokyo International Beauty & Health Food Expo, Birmingham Cannabis Expo, and the 2nd World Health Expo in Wuhan, promoting CBD health consumer brands[320][321] - Received multiple awards, including "Outstanding Contribution Private Enterprise in Guangdong Province for Fighting COVID-19," "WISE 2020 China New Economy King Most Influential Consumer Brand in Lifestyle Sector" (Mazhuang), and "Best Small and Mid-Cap Enterprise" (5th Golden Hong Kong Stocks Awards Ceremony)[325][329][332] Marianna Health's Sustainability Marianna Health integrates sustainability into its strategy, with the Board committed to ESG performance, developing an "Embrace a Healthy Future" ESG strategy through stakeholder engagement and materiality assessment, covering business, products, people, and environment - The Board is committed to contributing to and pioneering the Group's environmental, social, and governance performance, risks, and opportunities[335] - Actively interacts with stakeholders including investors, employees, customers, suppliers, media, and government agencies through channels such as AGMs, press releases, meetings, performance appraisals, and focus group interviews[338][339] - Conducted a materiality assessment, identifying and prioritizing 20 material ESG issues, including resource use, waste management, customer health and safety, service quality, anti-corruption, and employee retention[342][343][349] - Formulated an ESG strategy themed "Embrace a Healthy Future," covering four core areas: business, products, people, and environment, aiming for global business distribution[354][355] Service Enhancement Marianna Health is dedicated to providing quality products and services, aiming for product globalization through active customer feedback, product innovation (especially in CBD applications), strict safety and quality standards, and responsible marketing and supply chain management to ensure customer satisfaction and compliance - Actively collects customer feedback, conducts customer satisfaction surveys, received no significant complaints, and is committed to continuous improvement of product and service quality[359] - Established Smart Plant Lab, hired experts to research industrial hemp ingredients, successfully creating the CBD skincare brand "Mazhuang" and CBD vaping brand "CANNERGY"[360][368][372] - Strictly adheres to international production standards (GMP, ISO 9001, ISO 22716), establishes QA and QC requirements, ensures purity and concentration of CBD products, with no product recalls or returns[363][364][365] - Upholds responsible marketing and advertising principles, clearly stating ingredients and concentrations for all cannabis-containing products, and obtaining relevant qualifications and approval numbers[376][377] - Implements a four-step supply chain management policy, including sample production and inspection, price comparison, professional judgment, and contract signing, ensuring smooth and legal supply chain operations[383] - Yunnan Hansu Biotechnology Co., Ltd. is the Group's sole industrial hemp supplier, with its extraction base operating under GMP standards and holding relevant licenses[387] Business Integrity Marianna Health is committed to developing a highly ethical and integrity-driven business, adhering to commercial regulations, implementing anti-corruption policies, data privacy protection, labor law compliance, and intellectual property protection, while actively expanding cross-industry collaborations to promote CBD product industrialization and marketization - Committed to developing a business with high ethical standards and integrity, strictly complying with anti-corruption and bribery laws, with no instances of bribery, extortion, fraud, or money laundering found[393] - Established strict confidentiality systems to protect confidential data of customers, suppliers, and contractors, with no serious violations of data privacy laws found[396][397] - Strictly adheres to labor standards, prohibits child and forced labor, manages overtime applications via DingTalk, and has no labor disputes[400] - Committed to intellectual property protection, timely applying for patent registrations, respecting and safeguarding IP rights of relevant holders, and obtained one CBD application business patent in 2020[401] - Actively expands close collaborations with allies across various industries, including partnerships with Yunnan Hansu, a strategic agreement with Yunnan Industrial Hemp Industry Investment Co., Ltd., and cooperation with Shenzhen Meishenwei Technology Co., Ltd. to develop CBD e-vaporizers[405][409] - Hosted the "Sleep and Health Summit Forum" and launched the "Scientific Sleep Project," aiming to promote healthy sleep concepts[409] Employee Care Marianna Health values employees as key assets, committed to attracting talent, fostering potential, and enhancing belonging through attractive compensation, fair recruitment, occupational health and safety, and comprehensive training for professional development - Formulated attractive and reasonable compensation packages, including basic salary, position salary, performance bonuses, adjusted based on operating conditions and employee positions[417] - Provides diverse benefits, including general bonuses, year-end/quarterly incentives, professional training, subsidies (health checks, dinner, rent, education, travel), and share option schemes[422] - Adheres to fair recruitment and evaluation systems, with no serious violations of equal opportunity, diversity, and anti-discrimination laws found[425][426] - Follows the "safety first, prevention paramount" principle, provides labor protection equipment, conducts safety education and training, and establishes emergency handling guidelines, with no serious industrial accidents occurring[427][428] - Developed comprehensive employee training policies, including internal guidance and external seminars, with training on securities trading and connected transactions provided to the Board in 2020[431] Giving Back to Society Marianna Health is committed to building a healthy and positive society, actively fulfilling corporate social responsibility during the 2020 pandemic by donating anti-epidemic supplies to hospitals, sponsoring sports events to promote healthy living, and organizing cultural activities to convey positive energy - Donated masks and supplies worth RMB 300,000 to Shenzhen Third People's Hospital on International Women's Day 2020, and partnered to donate over 6,000 boxes of masks to Wuhan University People's Hospital and Zhongnan Hospital[434] - Sponsored the 2020 Wuchang Super Marathon Online Run, promoting healthy living and expressing gratitude to healthcare workers[435] - Organized the "Journey of the Soul" National Poetry Competition, promoting the corporate mission of pursuing physical health and spiritual beauty[440] Green Environment Marianna Health is committed to environmental health and sustainable development, strictly complying with environmental laws. The Group advocates green office practices, implements sound waste management (especially medical waste), and identifies and reduces greenhouse gas emissions to mitigate operational environmental impact - Strictly complies with environmental laws and regulations, and is developing environmental policies to mitigate all environmental impacts and identify potential risks[444] - Advocates green office practices, encouraging employees to reduce unnecessary packaging, conserve water and electricity, and use energy-labeled appliances[445][446][449] - Implements a sound waste management strategy, entrusting licensed institutions to handle medical waste from clinics and sorting household waste for recycling[450][451][455] - Identified carbon emission sources primarily from electricity consumption and business travel, and continuously explores methods to reduce greenhouse gas emissions[456] Greenhouse Gas Emissions 2020 | Scope | Description | Quantity (tonnes CO2e) | | :--- | :--- | :--- | | Scope Two | Purchased electricity | 63.32 | | Scope Three | Business air travel | 3.49 | | Total | | 66.81 | Key Performance Indicators Summary This section summarizes Marianna Health's 2020 environmental and social key performance indicators, including greenhouse gas emissions, waste management, energy and water usage, total employees, turnover rate, health and safety, training, and supplier distribution, with comparisons to 2019 Environmental Key Performance Indicators (2020 vs 2019) | Metric | FY2020 | FY2019 | | :--- | :--- | :--- | | Total greenhouse gas emissions (tonnes CO2e) | 66.81 | 159 | | Greenhouse gas emissions intensity (tonnes CO2e/total full-time employees) | 0.64 | 1.7 | | Medical waste (tonnes) | 0.12 | 0.1 | | Total electricity consumption (kWh) | 82,008.29 | 157,561 | | Total water consumption (cubic meters) | 1,206.00 | 1,659 | | Total paper consumption (tonnes) | 0.37 | Not applicable | | Total packaging material consumption (tonnes) | 17.20 | Not applicable | Social Key Performance Indicators (FY2020) | Metric | Category | Quantity/Percentage | | :--- | :--- | :--- | | Total number of employees | – | 116 persons | | Number of employees by gender | Male | 50 persons | | | Female | 66 persons | | Turnover rate | Total turnover rate | 10.08% | | | Male | 10.71% | | | Female | 9.59% | | Number of work-related fatalities | – | 0 cases | | Number of work-related injuries | – | 0 cases | | Percentage of trained employees by gender | Male | 44.83% | | | Female | 55.17% | | Average training hours per employee by gender | Male | 99.69 hours | | | Female | 112.56 hours | | Number of suppliers by region | Guangdong (China) | 11 number | | | Jiangsu (China) | 7 number | | | Japan | 3 number | Biographies of Directors and Senior Management This section provides professional backgrounds and experience for the executive, non-executive, and independent non-executive directors, as well as key senior management personnel - Executive Directors include Co-Chairman Mr. Zhou Xuzhou (founder of Yuye Group, over 26 years of real estate experience), Co-Chairman Dr. Zeng Wentao (PhD in Economics, real estate and healthcare industry experience), and Vice Chairman and CEO Ms. Zhou Wenchuan (MBA)[518][519][522] - Non-executive Director Dr. Mao Zhenhua is the Chairman of China Chengxin Credit Management Co., Ltd., with extensive experience in credit services, banking, real estate, and industrial investment[523] - Independent Non-executive Directors include Mr. Gao Guanjiang (PhD in Economics, banking, investment banking, and securities finance experience), Professor Zhou Zhiwei (DBA, direct investment and corporate capital experience), and Mr. Wu Peng (PhD, supply chain management and green supply chain research)[524][527][528] - Senior management Mr. Li Shupai serves as Chief Financial Officer and Company Secretary, with over 18 years of experience in auditing, corporate finance, and financial management[529] Independent Auditor's Report The auditor confirms the fair presentation of the consolidated financial statements, highlighting key audit matters such as investment property valuation and impairment of properties under development - The auditor (Zhonghui Anda Certified Public Accountants Limited) believes that the consolidated financial statements truly and fairly reflect the Group's consolidated financial position as at December 31, 2020, and its consolidated financial performance and cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards[533] - Key audit matters include the valuation of investment properties (2020 balance of 559.7 million HKD, fair value loss of 16.9 million HKD) and impairment of properties under development for sale (2020 balance of 245.3 million HKD), both involving significant judgment and estimation[536][541] Audited Consolidated Financial Statements This section presents the Group's comprehensive audited financial statements, including income statements, balance sheets, cash flows, and detailed explanatory notes Consolidated Statement of Profit or Loss The Group's 2020 consolidated statement of profit or loss shows revenue growth to 265.1 million HKD, a significant increase in gross profit, and a successful turnaround from a 2019 loss to an annual profit of 85.1 million HKD, primarily due to increased income and reduced goodwill impairment Key Data from Consolidated Statement of Profit or Loss (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 265,135 | 234,779 | | Gross Profit | 111,251 | 71,832 | | Fair value (loss)/gain on investment properties | (16,869) | 21,990 | | Gain on partial disposal of an associate | 31,713 | – | | Gain on disposal of subsidiaries | 14,072 | – | | Other income and gains, net | 32,255 | 17,303 | | Selling and distribution expenses | (8,717) | (3,107) | | Administrative expenses | (41,691) | (36,753) | | Goodwill impairment | – | (33,017) | | Finance costs | (13,682) | (16,393) | | Share of loss of associates | (4,316) | (22,960) | | Profit/(Loss) for the year | 85,066 | (23,010) | | Profit/(Loss) attributable to owners of the Company | 83,439 | (20,174) | | Basic and diluted earnings/(loss) per share | 1.95 HK cents | (0.48) HK cents | Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group's 2020 consolidated statement of profit or loss and other comprehensive income shows a total comprehensive income of 138.9 million HKD, building on an annual profit of 85.1 million HKD and including exchange differences from translating overseas operations, a significant improvement from the 2019 comprehensive loss Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Profit/(Loss) for the year | 85,066 | (23,010) | | Fair value change of equity investments at fair value through other comprehensive income | (8,562) | 721 | | Exchange differences arising from translation of overseas operations | 63,411 | (14,037) | | Exchange differences reclassified to profit or loss on disposal of subsidiaries | (967) | – | | Other comprehensive income/(loss) for the year, net of tax | 53,882 | (13,316) | | Total comprehensive income/(loss) for the year | 138,948 | (36,326) | | Attributable to owners of the Company | 137,899 | (33,084) | | Non-controlling interests | 1,049 | (3,242) | Consolidated Statement of Financial Position The Group's 2020 consolidated statement of financial position shows a slight decrease in total assets but an increase in current assets, with significant reductions in both current and non-current liabilities, leading to a substantial increase in net assets to 1,403.3 million HKD and an improved financial structure Key Data from Consolidated Statement of Financial Position (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Total non-current assets | 742,681 | 824,039 | | Total current assets | 960,179 | 889,814 | | Total Assets | 1,702,860 | 1,713,853 | | Total current liabilities | 108,897 | 242,489 | | Total non-current liabilities | 190,700 | 205,704 | | Total Liabilities | 299,597 | 448,193 | | Net Assets | 1,403,263 | 1,265,660 | | Equity attributable to owners of the Company | 1,400,922 | 1,259,605 | | Non-controlling interests | 2,341 | 6,055 | Consolidated Statement of Changes in Equity The Group's 2020 consolidated statement of changes in equity shows that equity attributable to owners of the Company increased from 1,259.6 million HKD in 2019 to 1,400.9 million HKD in 2020, primarily influenced by total comprehensive income for the year and recognition of share-based payments - Equity attributable to owners of the Company increased from 1,259,605 thousand HKD as at December 31, 2019, to 1,400,922 thousand HKD as at December 31, 2020[577] - Total comprehensive income for the year was 138,948 thousand HKD, of which 137,899 thousand HKD was attributable to owners of the Company[576] - Share-based payments settled in equity of 4,279 thousand HKD were recognized[576] Consolidated Statement of Cash Flows The Group's 2020 consolidated statement of cash flows shows a significant increase in net cash inflow from operating activities, a shift from net outflow to net inflow from investing activities, and net cash outflow from financing activities, resulting in a net increase of 70.1 million HKD in cash and cash equivalents Key Data from Consolidated Statement of Cash Flows (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Net cash from operating activities | 70,805 | 25,409 | | Net cash from/(used in) investing activities | 108,138 | (360,094) | | Net cash (used in)/from financing activities | (108,877) | 327,780 | | Net increase/(decrease) in cash and cash equivalents | 70,066 | (6,905) | | Effect of exchange rate changes | 7,172 | 1,992 | | Cash and cash equivalents at December 31 | 233,467 | 156,229 | Notes to the Consolidated Financial Statements This section provides detailed notes to the audited consolidated financial statements, covering general information, accounting policies, key judgments and estimates, financial risk management, fair value measurements, segment information, revenue breakdown, specific explanations for various expenses and assets/liabilities, equity, reserves, share-based payments, cash flow notes, capital commitments, and related party transactions, offering a comprehensive understanding for report users General Information Marianna Health International Industry Group Limited is an investment holding company incorporated in Bermuda and listed on the Main Board of the HKEX, with principal activities covering industrial hemp, healthcare, building materials trading, property sales agency, property investment and leasing, and residential property development, ultimately controlled by Mr. Zhou Xuzhou - The Company is incorporated in Bermuda, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited[588] - Principal activities include industrial hemp business, healthcare-related business, building materials trading, property sales agency services, property investment and leasing, and residential property development[588] - The ultimate controlling party is Mr. Zhou Xuzhou, Co-Chairman and Executive Director of the Board[588] Adoption of New and Revised Hong Kong Financial Reporting Standards The Group adopted all new and revised Hong Kong Financial Reporting Standards effective for 2020, with no significant impact on accounting policies or financial statement presentation, except for the practical expedient applied to COVID-19 related rent concessions under HKFRS 16, resulting in a 311,000 HKD reduction in lease liabilities - The Group has adopted all new and revised Hong Kong Financial Reporting Standards effective from January 1, 2020[589] - The adoption of these standards had no significant changes to accounting policies, financial statement presentation, or amounts, except for the amendments to HKFRS 16 "COVID-19-Related Rent Concessions"[589][592] - The practical expedient was applied to eligible COVID-19 related rent concessions, resulting in a 311,000 HKD reduction in total lease liabilities, recognized in profit or loss[593] Significant Accounting Policies This section details Marianna Health's significant accounting policies for preparing consolidated financial statements, covering consolidation, business combinations, associates and joint arrangements, recognition and measurement of various assets (e.g., property, plant and equipment, investment properties, intangible assets, inventories, financial assets), revenue recognition, employee benefits, share-based payments, borrowing costs, government grants, income tax, segment reporting, and related party transactions - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and Hong Kong Generally Accepted Accounting Principles, using the historical cost convention, modified by fair value revaluation[596] - Subsidiaries are consolidated based on the control principle, while associates and joint ventures are accounted for using the equity method[598][606][614] - Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, while investment properties are measured at fair value, with changes recognized in profit or loss[625][627] - Financial assets are classified as measured at amortized cost, equity investments at fair value through other comprehensive income, and financial assets at fair value through profit or loss[643] - Revenue is recognized when performance obligations are satisfied by transferring control of products or services to customers, either over time or at a point in time, depending on contract terms[664] - Equity-settled share-based payments are measured at fair value at the grant date and expensed over the vesting period[674] - Income tax comprises current tax and deferred tax, with deferred tax recognized on differences between the carrying amounts of assets and liabilities and their tax bases[683] Critical Judgments and Key Estimates This section clarifies Marianna Health's critical judgments in applying accounting policies, including property lease classification and deferred tax on investment properties, and identifies key estimation uncertainties affecting financial statement amounts, such as net realizable value of properties under development, fair value of investment properties and financial instruments, goodwill impairment, expected credit loss provisions for financial assets, and income tax - Critical judgments include property lease classification (the Group as lessor) and deferred tax on investment properties (rebutting the presumption of recovery through sale)[707][708] - Key estimation uncertainties include the net realizable value of properties under development for sale, fair value of investment properties and financial instruments, goodwill impairment, expected credit loss provisions for financial assets measured at amortized cost, and income tax[710][713][714][715][716][717] Financial Risk Management The Group's financial risk management aims to minimize adverse impacts of foreign exchange, credit, liquidity, and interest rate risks on financial performance through strict monitoring, counterparty financial assessment, regular review of receivables, and maintaining sufficient cash reserves, while using the gearing ratio to monitor capital structure - The Group is exposed to foreign exchange risk (AUD, RMB, USD, JPY, and CHF), credit risk, liquidity risk, and interest rate risk[721][760] - Credit risk is mitigated through careful selection of counterparties, continuous assessment of debtors' financial conditions, and strict monitoring of receivables aging[726] - Liquidity risk is managed by regularly monitoring current and anticipated liquidity needs, ensuring sufficient cash reserves to meet demands[755] - Capital management aims to ensure going concern ability and maintain an optimal capital structure to reduce capital cost, with a gearing ratio of -1.4% in 2020 (2019: 14%), indicating a net cash position[766][769] Fair Value Measurement This section discloses the Group's fair value measurements for financial instruments and investment properties, using a three-level fair value hierarchy. Unlisted equity investments, financial product investments, and Hong Kong investment properties are primarily measured using Level 2 inputs, while China investment properties and derivative instruments are mainly measured using Level 3 unobservable inputs, with detailed valuation techniques and key input data provided - Fair value measurement uses a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[770] - Level 2 fair value measurements include unlisted equity investments (recent market prices of similar transactions), unlisted fund investments (net asset value statements), financial product investments (market prices), and investment properties in Hong Kong (direct comparison approach)[826] - Level 3 fair value measurements include unlisted equity investments (valuation multiples, discount for lack of marketability), derivative financial instruments (Black-Scholes option pricing model, expected volatility), and investment properties in China (term and reversion method, estimated rental value, rental growth, long-term vacancy rate, discount rate)[832] - In 2020, 22,648,000 HKD of unlisted equity investments classified as fair value through other comprehensive income were reclassified from Level 2 to Level 3 due to a lack of observable market data[823] Segment Information The Group has reorganized its reportable segments into six strategic business units: industrial hemp, healthcare-related, trading, sales agency services, property investment and leasing, and property development. This section provides an analysis of each segment's revenue, results, assets, and liabilities, as well as revenue and non-current assets by geographical area, and lists major customer revenue contributions - The Group has six reportable segments: industrial hemp business, healthcare-related business, trading business, sales agency services, property investment and leasing, and property development[835] Segment Revenue and Profit/(Loss) (2020 vs 2019) | Segment | 2020 Revenue (thousand HKD) | 2019 Revenue (thousand HKD) | 2020 Segment Profit/(Loss) (thousand HKD) | 2019 Segment Profit/(Loss) (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Industrial Hemp Business | 25,371 | 1,504 | 4,027 | (1,035) | | Healthcare-Related Business | 54,757 | 42,405 | 14,076 | (5,686) | | Trading Business | 133,960 | 142,801 | 22,603 | 7,505 | | Sales Agency Services | 29,805 | 29,344 | 24,090 | 21,991 | | Property Investment and Leasing | 21,242 | 18,725 | 1,845 | 36,832 | | Property Development | – | – | (79) | (1,342) | Geographical Information (2020 vs 2019) | Region | 2020 Revenue (thousand HKD) | 2019 Revenue (thousand HKD) | 2020 Non-current Assets (thousand HKD) | 2019 Non-current Assets (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | China | 241,653 | 214,201 | 699,572 | 683,492 | | Hong Kong | 13,357 | 20,578 | 1,662 | 103,350 | | Other | 10,125 | – | 307 | – | | Consolidated Total | 265,135 | 234,779 | 701,541 | 786,842 | - Customer A in the sales agency services segment contributed 29,805 thousand HKD to 2020 revenue, accounting for 11% of total sales[868] Revenue The Group's total revenue for 2020 was 265.1 million HKD, primarily from sales of building materials, healthcare management services, CBD downstream products, and property sales and consulting services. This section details the revenue contributions from various products and services, broken down by geographical market and timing of revenue recognition Revenue Sources (2020 vs 2019) | Revenue Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Sales of CBD downstream products | 25,371 | 1,504 | | Healthcare management services income | 39,528 | 38,861 | | Healthcare-related product sales agency services income | 10,940 | – | | Sales of healthcare-related products | 2,810 | 3,544 | | Medical beauty services income | 1,479 | – | | Sales of building materials | 133,960 | 142,801 | | Property sales and consulting services income | 29,805 | 29,344 | | Rental income | 21,242 | 18,725 | | Total Revenue | 265,135 | 234,779 | - In 2020, revenue from customer contracts was 243,893 thousand HKD, with 204,365 thousand HKD recognized at a point in time and 39,528 thousand HKD recognized over time[868][872] - Revenue recognition policies include: CBD downstream products recognized upon transfer of product control; healthcare management services recognized over time; healthcare-related product sales agency services recognized on a net basis; building materials sales recognized upon transfer of product control; property sales and consulting services recognized when services are provided and buyer enters into a sales agreement[880][881][882][883][886][888] Other Income and Gains, Net The Group's other income and gains, net, for 2020 was 32.3 million HKD, a significant increase from 2019, primarily from interest income, government grants, fair value gains on investments at fair value through profit or loss, and net foreign exchange gains Other Income and Gains, Net (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Interest income | 8,237 | 8,252 | | Government grants | 2,368 | 884 | | Dividend income from equity investments at fair value through other comprehensive income | 346 | 451 | | COVID-19 related rent concessions | 311 | – | | Fair value gains on investments at fair value through profit or loss | 14,713 | 10,298 | | Net foreign exchange gains/(losses) | 5,218 | (640) | | Fair value loss on derivative financial assets | (271) | – | | Total | 32,255 | 17,303 | - Government grants include 1,513 thousand HKD in local government operating subsidies and 855 thousand HKD from the Hong Kong SAR Government's Employment Support Scheme under the Anti-epidemic Fund[892] Finance Costs The Group's finance costs for 2020 were 13.7 million HKD, a decrease from 2019, primarily comprising interest on bank loans and lease liabilities Finance Costs (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Interest on bank loans | 12,989 | 15,949 | | Interest on lease liabilities | 693 | 444 | | Total | 13,682 | 16,393 | Income Tax Expense The Group's income tax expense for 2020 was 18.5 million HKD, mainly comprising China corporate income tax, Hong Kong profits tax, and Australian interest income withholding tax, with deferred tax adjustments. This section provides a reconciliation of income tax expense to profit/(loss) before tax Income Tax Expense (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Current tax – China | 23,539 | 11,339 | | Current tax – Hong Kong | (1,242) | 2,478 | | Withholding tax on interest income – Australia | 2,278 | – | | Deferred tax | (6,024) | 3,849 | | Income Tax Expense | 18,521 | 17,666 | - Hong Kong profits tax rate is 16.5% (with 8.25% for certain qualifying corporations), China corporate income tax rate is 25%, and Australian corporate income tax rate is 30%[896][899][900] Profit/(Loss) for the Year The Group's profit for 2020 was 85.1 million HKD. This section lists the main expense and income items affecting this profit, including depreciation and amortization, gains on disposal of investments, fair value changes of investment properties, auditor's remuneration, cost of inventories sold, impairment losses on receivables, and staff costs Major Components of Profit/(Loss) for the Year (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Amortization of other intangible assets | 256 | 267 | | Depreciation of property, plant and equipment | 782 | 802 | | Depreciation of right-of-use assets | 6,871 | 5,123 | | Gain on partial disposal of an associate | (31,713) | – | | Gain on disposal of subsidiaries | (14,072) | – | | Fair value loss/(gain) on investment properties | 16,869 | (21,990) | | Auditor's remuneration | 1,150 | 1,783 | | Cost of inventories sold | 123,595 | 132,647 | | Net impairment loss on receivables | 544 | 5,436 | | Goodwill impairment | – | 33,017 | | Staff costs (including directors' emoluments) | 32,297 | 30,744 | Directors' Emoluments This section details the emoluments of each director for 2020, including fees, salaries and allowances, and equity-settled share-based payments, totaling 4.6 million HKD, with Executive Director Ms. Zhou Wenchuan receiving the highest remuneration Directors' Emoluments (2020) | Director Name | Fees (thousand HKD) | Salaries and Allowances (thousand HKD) | Share-based Payments (thousand HKD) | Total (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Mr. Zhou Xuzhou | – | 800 | – | 800 | | Dr. Zeng Wentao | – | 325 | 592 | 917 | | Ms. Zhou Wenchuan | – | 1,200 | 989 | 2,189 | | Dr. Mao Zhenhua | 180 | – | – | 180 | | Professor Zhou Zhiwei | 180 | – | – | 180 | | Mr. Gao Guanjiang | 180 | – | – | 180 | | Mr. Wu Peng | 120 | – | – | 120 | | 2020 Total | 660 | 2,325 | 1,581 | 4,566 | - No director waived or agreed to waive any emoluments during the year, nor were any emoluments paid as compensation for joining or leaving[915][916] Five Highest Paid Individuals The total emoluments for the Group's five highest-paid individuals (one director and four other individuals) in 2020 amounted to 7.5 million HKD, primarily comprising salaries and allowances, discretionary bonuses, and equity-settled share-based payments Emoluments of Five Highest Paid Individuals (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Salaries and allowances | 6,570 | 5,120 | | Discretionary bonuses | 420 | 2,238 | | Equity-settled share-based payments | 354 | – | | Retirement benefit scheme contributions | 120 | 98 | | Total | 7,464 | 7,456 | - Emoluments ranged from 1,000,001 HKD to 3,500,000 HKD[920] Retirement Benefit Schemes The Group operates a Mandatory Provident Fund Scheme for Hong Kong employees, participates in local government central pension schemes for China subsidiary employees, and provides various defined contribution retirement schemes for overseas subsidiaries, with contributions based on fixed percentages or agreed amounts - Hong Kong employees participate in the Mandatory Provident Fund Scheme, with the Group contributing 5% of salary, up to a maximum of 1,500 HKD per month[922] - Employees of China subsidiaries participate in local government-operated central pension schemes, with the Group contributing a certain percentage of employees' basic salaries and wages[922] - Overseas subsidiaries offer various defined contribution retirement schemes, with Group and employee contributions calculated as a fixed percentage of basic remuneration or agreed amounts[922] Dividends The Board has decided not to declare a dividend for the year ended December 31, 2020 - The Board has resolved not to declare a dividend for the year ended December 31, 2020 (2019: nil)[923] Earnings/(Loss) Per Share The Group's basic earnings per share for 2020 was 1.95 HK cents, a significant improvement from a loss of 0.48 HK cents per share in 2019. No diluted adjustment was made to basic earnings per share for 2020 as the average market share price was below the assumed exercise price - Basic earnings per share for 2020 was 1.95 HK cents (2019: loss per share of 0.48 HK cents)[924] - No diluted adjustment was made to basic earnings per share for 2020, as the average market share price was below the assumed exercise price of the share options[925] Property, Plant and Equipment The Group's property, plant and equipment had a carrying amount of 1.7 million HKD as at December 31, 2020, a decrease from 2019. This section provides detailed changes in cost, accumulated depreciation, and carrying amount, including the impact of additions, disposal of subsidiaries, and exchange differences Changes in Property, Plant and Equipment (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Cost | | | | At January 1 | 9,118 | 8,676 | | Additions | 365 | 135 | | Disposal of subsidiaries | (5,611) | – | | Exchange differences | 226 | 307 | | At December 31 | 4,098 | 9,118 | | Accumulated Depreciation | | | | At January 1 | 7,058 | 5,909 | | Expense for the year | 782 | 802 | | Disposal of subsidiaries | (5,545) | – | | Exchange differences | 115 | 347 | | At December 31 | 2,410 | 7,058 | | Carrying Amount (at December 31) | 1,688 | 2,060 | Leases and Right-of-Use Assets The Group's right-of-use assets had a carrying amount of 5.1 million HKD and lease liabilities had a present value of 4.0 million HKD as at December 31, 2020. This section details depreciation expense, interest expense, total cash outflow for leases, the impact of COVID-19 related rent concessions, and provides a maturity analysis of lease liabilities Key Data for Leases and Right-of-Use Assets (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Right-of-use assets – properties (at December 31) | 5,118 | 18,126 | | Depreciation expense of right-of-use assets | 6,871 | 5,123 | | Interest on lease liabilities | 693 | 444 | | Total cash outflow for leases | 7,074 | 5,526 | | Additions to right-of-use assets | 2,204 | 17,721 | | COVID-19 related rent concessions | 311 | – | | Present value of lease liabilities (at December 31) | 4,012 | 18,739 | - Lease agreements are typically entered into for fixed terms of two to five years, with average effective borrowing rates ranging from 2% to 6%[939][1077] - COVID-19 related rent concessions resulted in a 311,000 HKD reduction in total lease liabilities, recognized in profit or loss[939] Investment Properties and Investment Properties Held for Sale The Group's investment properties and investment properties held for sale had a total carrying amount of 565.5 million HKD as at December 31, 2020. This section provides detailed changes in these properties, including fair value losses, disposal of subsidiaries, and exchange differences, along with valuation methods and encumbrance information Changes in Investment Properties and Investment Properties Held for Sale (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Investment Properties | | | | At January 1 | 594,177 | 586,522 | | Disposal of subsidiaries | (50,300) | – | | Fair value loss/(gain) | (16,869) | 21,990 | | Exchange differences | 32,677 | (9,322) | | At December 31 | 559,685 | 594,177 | | Investment Properties Held for Sale | | | | At January 1 | 5,450 | 17,583 | | Exchange differences | 336 | (171) | | At December 31 | 5,786 | 5,450 | | Total (at December 31) | 565,471 | 599,627 | - The fair value of investment properties in China is determined by independent professional valuers using the income approach (term and reversion method)[947] - Investment properties in China with a carrying amount of 338.7 million HKD (2019: 503.8 million HKD) have been pledged as collateral for bank loans[949] Goodwill The Group's goodwill had a carrying amount of 18.5 million HKD as at December 31, 2020, primarily allocated to the healthcare-related business segment in China. This section details changes in goodwill cost, accumulated impairment losses, and carrying amount, and explains the impairment testing methodology and key assumptions, including the 33.0 million HKD impairment loss recognized in 2019 Changes in Goodwill (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Cost | | | | At January 1 | 82,790 | 82,790 | | Disposal of subsidiaries | (35,282) | – | | At December 31 | 47,508 | 82,790 | | Accumulated Impairment Losses | | | | At January 1 | 50,551 | 17,534 | | Impairment loss recognized | – | 33,017 | | Disposal of subsidiaries | (21,543) | – | | At December 31 | 29,008 | 50,551 | | Carrying Amount (at December 31) | 18,500 | 32,239 | - Goodwill is allocated to the cash-generating unit of the healthcare-related business in China[965] - Impairment tests determine value in use based on discounted cash flow method, with key assumptions including discount rate (23.11%), growth rate (3%), budgeted gross margin, and revenue during the period[968][969] - Goodwill impairment loss of 33,017,000 HKD was recognized in 2019, reducing goodwill to its recoverable amount of 32,239,000 HKD[969] Other Intangible Assets The Group's other intangible assets had a carrying amount of 59,000 HKD as at December 31, 2020, primarily comprising computer systems. This section details changes in cost, accumulated amortization, and carrying amount, including the impact of additions, disposal of subsidiaries, and exchange differences Changes in Other Intangible Assets (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Cost | | | | At January 1 | 1,953 | 1,950 | | Additions | 52 | 4 | | Disposal of subsidiaries | (1,879) | – | | Exchange differences | 71 | (1) | | At December 31 | 197 | 1,953 | | Accumulated Amortization | | | | At January 1 | 1,584 | 1,318 | | Amortization for the year | 256 | 267 | | Disposal of subsidiaries | (1,769) | – | | Exchange differences | 67 | (1) | | At December 31 | 138 | 1,584 | | Carrying Amount (at December 31) | 59 | 369 | Subsidiaries This section lists details of Marianna Health's significant subsidiaries as at December 31, 2020, including their place of incorporation, issued share capital, percentage of equity interest attributable to the Group, and principal activities. These subsidiaries are located in the British Virgin Islands, Hong Kong, China, Japan, Switzerland, and Australia, with businesses covering investment holding, industrial hemp, healthcare, property leasing, and development - The Group has subsidiaries located in the British Virgin Islands, Hong Kong, China, Japan, Switzerland, and Australia[978][981][984][989][990] - Principal activities include investment holding, industrial hemp-related business, healthcare-related business, trading business, sales agency services, property investment and leasing, property development, and health management[978][981][984][989][990] - Ruilong Bio-Technology Co., Limited (Hong Kong) and Ruilong Bio-Technology Co., Ltd. (Japan) are key subsidiaries for industrial hemp-related businesses, with the Group indirectly holding a 71% equity interest[978] - Bairui (Shenzhen) Health Management Co., Ltd. and Shenzhen Bairui Clinic are key subsidiaries for health management businesses, with the Group indirectly holding 100% and 80% equity interests, respectively[984][989][990] Investments in Associates The Group's investments in associates had a carrying amount of 47.3 million HKD as at December 31, 2020, primarily including Yunnan Hansu Biotechnology Co., Ltd. and Beijing Meiaikang Technology Co., Ltd. This section details equity changes, disposal gains, and financial summaries for these associates, also mentioning foreign exchange controls on RMB - Investments in associates had a carrying amount of 47,327 thousand HKD (2019: 74,839 thousand HKD)[998] - In 2020, 4.55% equity interest in Yunnan Hansu Biotechnology Co., Ltd. was disposed of, generating a gain of 31,713 thousand HKD, reducing equity interest from 25.55% to 21%[999] - In 2020, equity interest in Beijing Meiaikang Technology Co., Ltd. was subscribed, with an additional capital injection of RMB 10,000,000, increasing equity interest from 5% to 20.83%, and recognizing a call option of 487 thousand HKD[1000] Financial Information Summary of Major Associates (2020) | Name | Principal Business | Percentage of Voting Rights Held by Group | Net Assets (thousand HKD) | Carrying Amount of Group's Share of Equity (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Yunnan Hansu | Cannabis processing | 21% | 172,914 | 36,312 | | Meiaikang | Immune cell R&D | 20.83% | 11,153 | 11,015 | Investments in Joint Ventures The Group's investments in joint ventures had a carrying amount of 69.2 million HKD as at December 31, 2020, primarily including Shenzhen Yinguan Biotechnology Co., Ltd. and Shenzhen Meishenrui Technology Co., Ltd. This section provides details on the equity structure, principal activities, and financial summaries of these joint ventures, also mentioning foreign exchange controls on RMB - Investments in joint ventures had a carrying amount of 69,164 thousand HKD (2019: 65,032 thousand HKD)[1011] - Major joint ventures include Shenzhen Yinguan Biotechnology Co., Ltd. (bio-services and storage) and Shenzhen Meishenrui Technology Co., Ltd. (manufacturing CBD vaping products and other materials), with the Group holding a 45% equity interest in both[1013] Financial Information Summary of Major Joint Ventures (2020) | Name | Principal Business | Percentage of Voting Rights Held by Group | Net Assets (thousand HKD) | Carrying Amount of Group's Share of Equity (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Shenzhen Yinguan | Bio-services and storage | 45% | 38,844 | 65,498 | | Shenzhen Meishenrui | Manufacturing CBD vaping products and other materials | 45% | 8,147 | 3,666 | Equity Investments at Fair Value Through Other Comprehensive Income The Group's equity investments at fair value through other comprehensive income amounted to 28.6 million HKD as at December 31, 2020, primarily unlisted equity investments intended for long-term holding. Dividends of 346,000 HKD were received from these investments during the year Equity Investments at Fair Value Through Other Comprehensive Income (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Unlisted equity investments | 28,572 | 33,825 | - These investments are intended for long-term holding to avoid the volatility impact of fair value changes on profit or loss[1023] - Dividends of 346,000 HKD were received in 2020 (2019: 451,000 HKD)[1023] Derivative Financial Assets The Group's derivative financial assets amounted to 243,000 HKD as at December 31, 2020, primarily a call option arising from the subscription of certain equity interests in Beijing Meiaikang Technology Co., Ltd. This option is not for hedging purposes, and its fair value loss was deducted