中国波顿(03318) - 2020 - 年度财报

Chairman's Statement The Chairman's Statement reviews the challenging 2020 operating environment, noting the Group's performance growth in flavors, fragrances, and e-vapor despite the global economic recession caused by COVID-19, expressing cautious optimism for future recovery and commitment to sustainability, innovation, and shareholder value - Amidst the 2020 global public health crisis and economic recession, the Group's business maintained growth[7][8] - Looking ahead to 2021, the Group anticipates 4% global economic growth, focusing on long-term goals like green economy and carbon reduction, while developing innovative flavors, fragrances, and e-vapor products to reward shareholders[9] Key Performance Indicators for 2020 | Metric | Amount (RMB) | Year-on-Year Growth | | :--- | :--- | :--- | | Annual Revenue | RMB 1.8529 billion | +12.9% | | Net Profit | RMB 173.2 million | +5.9% | Management Discussion and Analysis Business Overview and Core Competencies The Group primarily engages in R&D, production, and sales of flavors and fragrances, alongside design and manufacturing of high-quality e-vapor products. In 2020, total revenue grew by 12.9% despite pandemic challenges, supported by a leading domestic full-chain R&D and production base, multiple proprietary e-vapor brands, and over 5,700 patents, ensuring a solid market position - The Group's core business spans two major segments: flavors and fragrances, and e-vapor, with products applied across tobacco, food, and daily chemical industries[13] - The Group operates nearly 250,000 square meters of e-vapor production bases in Huizhou and Jiangxi, holding multiple international quality system certifications, with its "HUOQI" brand ranking second in China and "BUBBLE" first in South Korea[18][19][21] Overall Performance Overview for 2020 | Metric | 2020 (RMB) | 2019 (RMB) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue | RMB 1.8529 billion | RMB 1.6413 billion | +12.9% | | Gross Profit | RMB 774.3 million | RMB 763.7 million | +1.4% | | Net Profit | RMB 173.2 million | RMB 163.5 million | +5.9% | Segment Revenue Analysis Total revenue grew by 12.9% to RMB 1.853 billion in 2020, primarily driven by the flavor enhancers segment. Flavor enhancers and e-vapor products were the two largest revenue sources, collectively accounting for 82.0% of total revenue, with all segments achieving growth, most notably daily flavors and flavor enhancers Revenue Breakdown by Business Segment (Year Ended December 31) | Business Segment | 2020 Revenue (RMB Million) | % of Total Revenue | 2019 Revenue (RMB Million) | % of Total Revenue | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Flavor Enhancers | 718.2 | 38.8% | 602.2 | 36.7% | +19.3% | | Food Flavors | 145.6 | 7.9% | 136.3 | 8.3% | +6.8% | | Daily Flavors | 153.4 | 8.3% | 132.4 | 8.1% | +15.9% | | E-vapor Products | 800.9 | 43.2% | 739.3 | 45.0% | +8.3% | | Investment Properties | 34.8 | 1.8% | 31.1 | 1.9% | +11.9% | | Total | 1,852.9 | 100.0% | 1,641.3 | 100.0% | +12.9% | - Revenue from the flavor enhancers segment increased by 19.3%, primarily due to stable sales growth from existing customers in the tobacco industry[27] - Revenue from the daily flavors segment increased by 15.9%, mainly driven by increased demand for cleaning and personal hygiene-related fragrance products due to the pandemic[29] - Revenue from the e-vapor products segment increased by 8.3%, benefiting from an expanded international distribution network and trade business growth in the Korean market[30] Gross Profit and Expense Analysis Gross profit slightly increased by 1.4% to RMB 774 million in 2020, but gross margin decreased from 46.5% to 41.8% primarily due to rising raw material costs. Sales and marketing expenses decreased by 9.0% due to lower commissions and transportation costs, while administrative expenses rose by 6.7% from increased R&D and office expenditures, and net finance costs declined due to reduced borrowings and interest expenses - Gross margin decreased from 46.5% in 2019 to 41.8% in 2020, primarily due to increased raw material costs in a challenging economic environment[33] - Sales and marketing expenses decreased by 9.0% year-on-year, with their proportion of revenue falling from 8.7% to 7.0%[34] - Administrative expenses increased by 6.7% year-on-year, mainly due to higher R&D and office expenditures[35] Financial Position Review As of year-end 2020, the Group's financial position remained robust, with net current assets increasing to RMB 63.6 million. Total equity grew to RMB 2.94 billion, and total borrowings decreased to RMB 1.449 billion, reducing the gearing ratio from 54.4% to 49.3%, with manageable foreign exchange risk as most transactions are RMB-denominated within China Key Balance Sheet Indicators (As of December 31) | Metric | 2020 (RMB) | 2019 (RMB) | | :--- | :--- | :--- | | Net Current Assets | RMB 63.6 million | RMB 45.3 million | | Total Equity | RMB 2.9403 billion | RMB 2.7569 billion | | Total Borrowings | RMB 1.4485 billion | RMB 1.5001 billion | | Gearing Ratio (Total Borrowings/Total Equity) | 49.3% | 54.4% | - Capital expenditure was approximately RMB 167.7 million, a decrease from RMB 282.5 million last year, primarily allocated to fixed asset investments[53] Human Resources and Significant Events As of year-end 2020, the Group's total employee count was 1,212, a decrease from the previous year, mainly due to reduced labor demand in production facilities. During the year, the Group completed a company name change, a connected transaction involving the sale of a 30% equity stake in its subsidiary Dongguan Boton, and initiated legal proceedings against the seller of an acquisition transaction - The Group's employee count decreased from 2,225 to 1,212, primarily due to reduced labor demand at production facilities in Huizhou and Dongguan, China[57] - The company's English name changed from "China Flavors and Fragrances Company Limited" to "China Boton Group Company Limited," and its Chinese name from "中國香精香料有限公司" to "中國波頓集團有限公司"[66] - The Group sold a 30% equity stake in Dongguan Boton to its management and employees for approximately RMB 68.85 million, establishing a five-year profit guarantee requiring an annual growth rate of no less than 10%[60][62][63] Directors and Senior Management Biographies of Directors and Senior Management This section details the personal résumés, professional backgrounds, and industry experience of the company's executive directors, independent non-executive directors, and senior management, highlighting the core management team's extensive experience in flavors, fragrances, e-vapor, finance, and legal fields - Mr. Wang Mingfan, Chairman and CEO, possesses over thirty years of enterprise management experience in the flavors and fragrances industry[75] - Mr. Li Qinglong, Executive Director, has over thirty years of R&D and production experience in the flavors and fragrances industry[76] - Independent Non-Executive Directors possess profound professional backgrounds in legal, accounting, and financial services[79][80][81] Corporate Governance Report Corporate Governance Practices and the Board The company is committed to maintaining high corporate governance standards, adhering to most Code provisions during the reporting period, with the sole deviation being the combined roles of Chairman and CEO held by Mr. Wang Mingfan, which the Board believes provides strong leadership. The Board comprises three executive and three independent non-executive directors, ensuring a balanced structure, and regularly convenes to fulfill its oversight and decision-making responsibilities - During the reporting period, the company complied with the Corporate Governance Code in Appendix 14 of the Listing Rules, with the only deviation being the combined roles of Chairman and CEO, both held by Mr. Wang Mingfan[88][106] - The Board comprises 6 members, including 3 executive directors and 3 independent non-executive directors, meeting the Listing Rules' requirement for at least one-third independent non-executive directors[90][102] - A total of five Board meetings were held during the year, with all directors attending in full[94] Board Committees and Risk Management The Board has three specialized committees: Remuneration, Nomination, and Audit, all chaired by independent non-executive directors to ensure independence and effectiveness. Each committee met during the reporting period, fulfilling responsibilities in remuneration review, director nomination, financial oversight, and risk management. The company has established risk management and internal control systems, annually reviewed by internal auditors, which the Board deems effective and adequate - The Remuneration Committee, Nomination Committee, and Audit Committee are all majority-comprised of independent non-executive directors, who also serve as chairmen[109][114][116] - The Audit Committee, composed of three independent non-executive directors, held three meetings during the year, reviewing financial reports and internal control systems, and making recommendations to the Board regarding the appointment of external auditors[116][117] - The Board engaged a professional accounting firm as internal auditor to conduct an annual review of the company's risk management and internal control systems, which were deemed effective and adequate[121] Shareholder Rights and Communication The company outlines procedures for shareholders to convene extraordinary general meetings, make inquiries, and submit proposals to the Board, safeguarding shareholder rights. Emphasizing investor communication, the company ensures timely and fair information disclosure through announcements, financial reports, and general meetings - Shareholders holding not less than one-tenth of the company's paid-up capital have the right to request the Board to convene an extraordinary general meeting[124] - The company encourages shareholders to submit inquiries to the Board or propose suggestions at general meetings by written correspondence mailed to the Hong Kong head office[125][126] Directors' Report Business Review, Results and Dividends This report outlines the Group's principal business as an investment holding company, with subsidiaries engaged in flavors, fragrances, and e-vapor. Group results for the reporting period are presented in the consolidated income statement. Based on the company's dividend policy, and considering financial performance, capital requirements, and future expansion plans, the Board decided not to recommend any dividend for the year ended December 31, 2020 - The Board does not recommend the payment of any dividend for the year ended December 31, 2020[136] - The company's dividend policy stipulates that dividend declarations are determined by the Board based on multiple factors, including financial performance, capital requirements, and future expansion plans[137][138] Share Capital, Directors and Shareholder Interests During the reporting period, the total number of issued ordinary shares increased to 1,080,512,146 due to the full conversion of perpetual subordinated convertible securities. The report details shareholdings of directors and major shareholders, with Chairman Mr. Wang Mingfan as the controlling shareholder, holding approximately 65.66% of equity interests, and also outlines all directors' service contracts and emoluments - Due to the full conversion of perpetual subordinated convertible securities with a principal amount of HK$552.7 million, the company issued 184,237,332 new ordinary shares[140] Major Directors' Shareholdings (As of December 31, 2020) | Director Name | Nature of Interest | Total Shares | % of Total Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Wang Mingfan | Personal, Family & Corporate Interest | 709,456,226 | 65.66% | | Mr. Yang Yingchun | Personal Interest | 2,000,000 | 0.19% | Connected Transactions and Other Matters During the reporting period, the Group undertook a discloseable connected transaction involving the sale of a 30% equity stake in its subsidiary Dongguan Boton to its management and connected persons, aimed at facilitating its proposed A-share listing. The report also disclosed customer and supplier concentration, with the top five customers accounting for 35.3% of total revenue and top five suppliers for 30.4% of total purchases, indicating certain dependency risks. The company confirmed maintaining sufficient public float - The Group sold a 30% equity stake in Dongguan Boton to its management and employees for approximately RMB 68.85 million, constituting a connected transaction under the Listing Rules[170][172] - The top five customers accounted for 35.3% of total revenue, with the largest customer at 11.9%; the top five suppliers accounted for 30.4% of total purchases, with the largest supplier at 6.7%[183] - During the year, neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities[178] Independent Auditor's Report Independent Auditor's Report PricewaterhouseCoopers issued an unmodified opinion on the Group's consolidated financial statements for the year ended December 31, 2020, affirming that the statements present a true and fair view of the Group's financial position, performance, and cash flows, prepared in accordance with relevant accounting standards and the Companies Ordinance. The report highlighted two key audit matters: goodwill impairment assessment and fair value assessment of investment properties - The auditor concluded that the consolidated financial statements present a true and fair view of the Group's financial position in accordance with Hong Kong Financial Reporting Standards, issuing an unmodified opinion[192] - Key Audit Matter One: Goodwill impairment assessment, involving impairment testing of approximately RMB 1.626 billion in goodwill, primarily from acquisitions of Kimree, Inc. and four tobacco businesses, where the auditor reviewed management's key assumptions including cash flow forecasts, discount rates, and growth rates[198] - Key Audit Matter Two: Fair value assessment of investment properties, involving the fair value assessment of approximately RMB 554 million in investment properties, where the auditor evaluated the valuation methods and key assumptions used by external valuers, such as market rent, capitalization rates, and reversionary yields[198][201] Consolidated Financial Statements Summary of Consolidated Financial Statements This section presents the Group's core financial statements for 2020, including the balance sheet, income statement, statement of comprehensive income, statement of changes in equity, and cash flow statement. Financial data indicates stable total asset size, increased total equity, slightly decreased debt levels, and positive cash flow from operating activities Key Financial Data for 2020 (Consolidated Statements) | Metric | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Income Statement: | | | | Revenue | 1,852,933 | 1,641,338 | | Operating Profit | 316,402 | 298,626 | | Profit for the Year | 173,205 | 163,533 | | Balance Sheet (Period-end): | | | | Total Assets | 5,489,194 | 5,459,003 | | Total Liabilities | 2,548,858 | 2,702,137 | | Total Equity | 2,940,336 | 2,756,866 | | Cash Flow Statement: | | | | Net Cash Generated from Operating Activities | 145,741 | 323,274 | | Net Cash Used in Investing Activities | (166,608) | (300,897) | | Net Cash Used in Financing Activities | (42,604) | (4,443) | Notes to the Financial Statements Notes to the Financial Statements This section provides detailed explanations and supplementary information for the consolidated financial statements, including principal accounting policies, critical accounting estimates and judgments, financial risk management, segment information, and detailed analysis of each statement item. The notes are crucial for understanding the Group's financial position, operating results, and cash flows - Segment information (Note 5) indicates that flavor enhancers and e-vapor products are the Group's primary sources of revenue and profit[387][390] - Within intangible assets (Note 9), goodwill has a carrying amount of approximately RMB 1.626 billion, primarily from acquisitions of Kimree and four tobacco businesses, which management has tested for impairment with no impairment found[419][422][428] - Total borrowings (Note 23) amounted to RMB 1.449 billion, with approximately RMB 891 million being non-current borrowings, mostly secured by collateral including subsidiary equity, properties, and land use rights[511][515] - Related party transactions (Note 34) disclose that the Group's ultimate controlling company is Chuanghua Limited and detail key management personnel's emoluments[558][560] Five-Year Financial Summary Five-Year Financial Summary This section provides a summary of the Group's key financial data for five consecutive fiscal years from 2016 to 2020, illustrating historical trends in core metrics such as revenue, profit, assets, liabilities, and equity. The data indicates a continuous growth trend in the Group's revenue and asset size over the past five years Five-Year Financial Data Summary (RMB Thousand) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,852,933 | 1,641,338 | 1,146,419 | 1,089,202 | 963,459 | | Gross Profit | 774,311 | 763,672 | 588,206 | 617,563 | 496,334 | | Profit Attributable to Owners of the Company | 116,622 | 119,434 | 127,465 | 130,108 | 92,051 | | Total Assets | 5,489,194 | 5,459,003 | 5,006,914 | 4,578,377 | 4,351,142 | | Total Liabilities | 2,548,858 | 2,702,137 | 2,355,188 | 2,077,075 | 2,077,254 | Details of Investment Properties Details of Investment Properties This section lists the Group's investment properties, detailing each property's geographical location and current use. These properties are primarily located in Shenzhen, Guangdong Province, China, and are used for office or industrial purposes - The Group's investment properties are primarily located in Nanshan District and Futian District, Shenzhen, Guangdong Province, China, including parts of Boton Technology Park and United Plaza, currently used for office and industrial purposes[582]