水发兴业新材料(08073) - 2021 - 中期财报

Corporate Information This section outlines the company's core corporate data, including board composition, committees, and key advisors - The report details core corporate information, including the board, committees, and advisors; notably, Mr. Du Peng and Mr. Nie Yuanzhou were appointed as executive directors on January 25, 2021, following the resignation of Mr. Sun Jinli and Mr. Tang Liwen[12] Corporate Governance The company details its corporate governance practices, noting compliance with the code despite a deviation in the roles of Chairman and CEO Corporate Governance Overview The company reports compliance with the Corporate Governance Code, except for the deviation of combining the Chairman and CEO roles - Mr. Zhang Chao has served as both Chairman and CEO since January 25, 2021, a deviation from code provision A.2.1 which requires these roles to be separate[24][26] - The Audit Committee, composed of three independent non-executive directors, has reviewed the unaudited interim financial statements and found them compliant with accounting principles and adequately disclosed[31][32][33] - The company and its subsidiaries did not purchase, sell, or redeem any of the company's listed securities during the reporting period[30] Other Information This section discloses details on the share option scheme, major shareholder interests, director holdings, and non-compete undertakings Share Option Scheme The company details its share option scheme, noting no new grants or exercises during the period, with some options forfeited upon employee departure - The share option scheme, adopted on October 17, 2017 for a 10-year period, aims to incentivize contributions from eligible participants[38][39][58] Changes in Share Option Scheme in H1 2021 | Item | Number ('000) | | :--- | :--- | | Outstanding at January 1, 2021 | 8,590 | | Granted during the period | – | | Exercised during the period | – | | Forfeited during the period | (800) | | Lapsed during the period | – | | Outstanding at June 30, 2021 | 7,790 | Interests and Short Positions of Substantial Shareholders This section discloses substantial shareholders with interests of 5% or more as of June 30, 2021, led by Top Access Management Limited Substantial Shareholders' Holdings (as at June 30, 2021) | Shareholder Name | Number of Shares | Approximate Percentage of Shareholding | | :--- | :--- | :--- | | Top Access Management Limited | 324,324,325 | 62.37% | | China Shuifa Singyes Energy Holdings Limited | 324,324,325 | 62.37% | | Shuifa Group Co, Ltd | 324,324,325 | 62.37% | | AMATA Limited | 40,000,000 | 7.69% | | Kunlun Holding Group Co, Ltd | 26,021,206 | 5.00% | Directors' and Chief Executive's Interests This section discloses director and chief executive interests in the company and its associated corporations, including a notable holding by a non-executive director - Non-executive Director Liu Hongwei is deemed interested in 203,538,750 shares (8.07%) of the intermediate holding company, Shuifa Singyes (HKEX: 750)[82][88] Interest in Competing Businesses The company confirms its controlling shareholder has complied with the non-compete undertaking and no directors engaged in competing businesses - The controlling shareholder, Shuifa Singyes, confirmed its compliance with the non-compete undertaking dated June 23, 2017, for the reporting period[92][93] Management Discussion and Analysis This section provides a comprehensive review of the Group's business performance, financial results, and future outlook Business Review The Group's sales grew in H1 2021, but intense price competition eroded gross profit, leading to a significant drop in net profit Revenue Performance by Product Line in H1 2021 (RMB million) | Product Line | H1 2021 Revenue | H1 2020 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | ITO conductive film | 25.1 | 21.5 | +16.4% | | Smart dimming film | 13.0 | 14.2 | -8.5% | | Smart dimming glass | 4.3 | 5.0 | -13.9% | | LED glass | 6.7 | 0 | N/A | | Subway media display | 2.9 | 3.1 | -7.4% | - Despite a 15.2% YoY revenue increase, profit attributable to company owners plunged 83.1% to RMB 0.4 million from RMB 2.5 million in the prior period[111] - The profit decline was primarily driven by a swing in financial asset impairment, from a RMB 5.6 million reversal in H1 2020 to a RMB 2.8 million loss in H1 2021[111] Outlook and Prospects Management anticipates continued market competition, focusing on product diversification while maintaining a cautious approach to expansion and R&D - The Group's strategy to counter market challenges is to enrich and diversify its product portfolio[112][115] - The Group will maintain a prudent and stable strategy, remaining cautious about production line expansion and new R&D projects[113] Financial Review Revenue grew 15.2% to RMB 52.2 million, but gross margin fell to 20.1% due to price competition, while the gearing ratio remained stable Key Financial Indicators for H1 2021 | Indicator | H1 2021 | H1 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | RMB 52.2 million | RMB 45.3 million | +15.2% | | Gross Profit | RMB 10.5 million | RMB 11.7 million | -10.5% | | Gross Margin | 20.1% | 25.8% | -5.7pp | | Administrative Expenses | RMB 10.3 million | RMB 12.2 million | -15.8% | - As of June 30, 2021, the Group had no bank borrowings and maintained a stable gearing ratio of 32.5%[127][134] - The company faces a customer lawsuit over product quality, resulting in a RMB 10 million freeze on bank cash, though management has not made a provision, citing a strong defense[136][140] - Of the HK$93.5 million net proceeds from the 2017 listing, HK$77.1 million had been utilized by June 30, 2021, with some production line plans delayed[155][156] Review Report This section contains the independent auditor's review report on the interim financial information Auditor's Review Report Independent auditor KPMG issued a standard review conclusion, stating no issues were found to suggest the interim financials were not prepared in accordance with IAS 34 - The auditor, KPMG, conducted its review in accordance with Hong Kong Standard on Review Engagements 2410[169] - The review conclusion provides a standard negative assurance, indicating no matters were found suggesting non-compliance in the preparation of the financial report[170] Interim Condensed Financial Report This section presents the unaudited interim condensed consolidated financial statements, including the income statement, balance sheet, cash flow statement, and related notes Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue for H1 2021 grew 15.2% to RMB 52.2 million, but profit attributable to equity holders fell 83.1% to RMB 0.4 million due to lower gross profit and other factors Summary of Income Statement for H1 2021 (RMB '000) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Revenue | 52,172 | 45,295 | | Gross Profit | 10,470 | 11,701 | | Profit before tax | 1,263 | 2,514 | | Profit for the period | 1,097 | 2,411 | | Profit attributable to equity holders of the Company | 422 | 2,497 | | Basic earnings per share (RMB) | 0.001 | 0.005 | Condensed Consolidated Statement of Financial Position As of June 30, 2021, the company's net assets remained stable at RMB 241.5 million, with net current assets of RMB 152.7 million indicating healthy short-term liquidity Summary of Statement of Financial Position (RMB '000) | Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Non-current assets | 103,435 | 96,357 | | Current assets | 216,479 | 219,700 | | Current liabilities | 63,782 | 65,448 | | Non-current liabilities | 14,647 | 9,157 | | Net Assets | 241,485 | 241,452 | Condensed Consolidated Statement of Cash Flows Operating activities generated a net cash inflow of RMB 4.4 million in H1 2021, a significant improvement, though overall cash decreased due to investment and financing outflows Summary of Cash Flow Statement for H1 2021 (RMB '000) | Item | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net cash from/(used in) operating activities | 4,432 | (12,040) | | Net cash (used in)/from investing activities | (2,462) | 3,220 | | Net cash (used in)/from financing activities | (3,066) | 1,285 | | Net decrease in cash and cash equivalents | (1,096) | (7,535) | | Cash and cash equivalents at end of period | 7,191 | 19,429 | Notes to Unaudited Interim Condensed Financial Report The notes provide supplementary details, highlighting revenue concentration in mainland China, aging trade receivables, and the acquisition of a subsidiary - Revenue is predominantly generated from Mainland China, accounting for approximately 90.8% of the total[214] - Net trade and bills receivables stood at RMB 149 million, with approximately 89% (RMB 133 million) aged over 6 months, indicating elevated credit risk; an impairment loss of RMB 2.8 million was recognized[254][259] - The Group acquired a 60% stake in Sishui Yixin Renewable Resources for zero consideration on February 8, 2021, recognizing goodwill of approximately RMB 0.7 million due to the target's net liabilities[321][323]