中国蜀塔(08623) - 2021 - 中期财报

Company Information Board of Directors and Corporate Structure The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with audit, remuneration, and nomination committees ensuring robust corporate governance - Board members include Mr. Dang Fei (Chairman and CEO), Mr. Wang Xiaozhong, Ms. Luo Qian, Mr. Luo Qiang as executive directors, Mr. Wang Haichen as a non-executive director, and Dr. Zuo Xinzhang, Mr. Chen Aifa, Ms. Hu Xiaomin as independent non-executive directors[7] - The company has an Audit Committee (Chairman: Mr. Chen Aifa), Remuneration Committee (Chairman: Ms. Hu Xiaomin), and Nomination Committee (Chairman: Mr. Dang Fei)[7] Key Contact and Registration Information The company is registered in the Cayman Islands, with primary operations in Sichuan Province, China, and a principal place of business in Hong Kong, stock code 8623 - The company's registered office is in the Cayman Islands, with its principal place of business in China in Guangyuan City, Sichuan Province, and in Hong Kong in Tsim Sha Tsui, Kowloon[7][8] - The company's stock code is 8623, and its official website is www.saftower.cn[8](index=8&type=chunk) Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Profit or Loss Overview For the six months ended June 30, 2021, the Group turned from profit to loss, recording a net loss of RMB 5.392 million, primarily due to a slight decrease in revenue, increased cost of sales leading to reduced gross profit, and higher administrative expenses and expected credit loss provisions Key Profit or Loss Data for the Six Months Ended June 30, 2021 | Indicator | 2021 (RMB '000) | 2020 (RMB '000) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 204,537 | 208,550 | -1.92% | | Cost of sales | (196,152) | (193,665) | +1.28% | | Gross profit | 8,385 | 14,885 | -43.79% | | Other income | 3,036 | 1,435 | +111.57% | | (Loss)/Profit before income tax expense | (6,283) | 1,582 | Turned from profit to loss | | Income tax credit/(expense) | 891 | (266) | Turned from expense to credit | | Total (loss)/profit for the period | (5,392) | 1,316 | Turned from profit to loss | | (Loss)/profit for the period attributable to owners of the company | (5,240) | 1,144 | Turned from profit to loss | - Basic and diluted loss per share was RMB 0.65 cents, compared to earnings per share of RMB 0.19 cents in the prior period[11] Unaudited Condensed Consolidated Statement of Financial Position Asset and Liability Structure As of June 30, 2021, the Group's total assets grew to RMB 421.533 million, driven by increases in non-current and current assets; total liabilities significantly increased, reducing net current assets, but net assets still grew Key Financial Position Data as of June 30, 2021 | Indicator | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | Change | | :--- | :--- | :--- | :--- | | Total assets | 421,533 | 349,074 | +20.76% | | Non-current assets | 147,493 | 134,318 | +9.81% | | Current assets | 274,040 | 214,756 | +27.60% | | Total liabilities | 240,431 | 172,930 | +39.03% | | Current liabilities | 235,302 | 165,536 | +42.16% | | Net current assets | 38,738 | 49,220 | -21.30% | | Net assets | 181,102 | 176,144 | +2.82% | - The significant increase in current liabilities was primarily due to contract liabilities rising sharply from RMB 3.021 million to RMB 46.881 million, and amounts due to shareholders increasing from RMB 0.160 million to RMB 11.872 million[13] Unaudited Condensed Consolidated Statement of Changes in Equity Equity Movement Analysis For the six months ended June 30, 2021, total equity attributable to owners increased to RMB 152.912 million, primarily driven by proceeds from new share issuance, despite a loss and reduced exchange reserve during the period Equity Movements as of June 30, 2021 | Equity Item | January 1, 2021 (RMB '000) | June 30, 2021 (RMB '000) | Change | | :--- | :--- | :--- | :--- | | Share capital | 7,226 | 14,692 | +7,466 | | Share premium | 30,642 | 30,642 | 0 | | Capital reserve | 69,696 | 69,696 | 0 | | Exchange reserve | (535) | (834) | -299 | | Retained profits | 36,232 | 30,990 | -5,242 | | Statutory reserve | 7,724 | 7,726 | +2 | | Subtotal equity attributable to owners of the company | 150,985 | 152,912 | +1,927 | | Non-controlling interests | 25,159 | 28,190 | +3,031 | | Total equity | 176,144 | 181,102 | +4,958 | - New shares were issued via subscription during the period, with net proceeds of approximately RMB 7.466 million, increasing share capital[16][17] - Acquisition of a subsidiary resulted in an increase in non-controlling interests of RMB 3.183 million[16] Unaudited Condensed Consolidated Statement of Cash Flows Cash Flow Analysis For the six months ended June 30, 2021, the Group's cash and cash equivalents decreased by RMB 2.001 million, primarily due to increased cash outflows from operating and investing activities, despite significant cash inflows from financing activities Key Cash Flow Data for the Six Months Ended June 30, 2021 | Cash Flow Activity | 2021 (RMB '000) | 2020 (RMB '000) | Change | | :--- | :--- | :--- | :--- | | Net cash (used in)/generated from operating activities | (15,026) | 348 | Turned from inflow to outflow | | Net cash used in investing activities | (10,980) | (3,324) | Increased outflow | | Net cash generated from financing activities | 24,005 | 8,337 | Increased inflow | | Net (decrease)/increase in cash and cash equivalents | (2,001) | 5,361 | Turned from increase to decrease | | Cash and cash equivalents at end of period | 9,773 | 8,087 | +1,686 | | Cash and cash equivalents at beginning of period | 12,073 | 2,726 | +9,347 | - Cash outflow from operating activities was primarily due to an increase in cash used in operations to RMB 14.482 million[19] - Cash inflow from financing activities significantly increased, mainly from proceeds from borrowings of RMB 52.3 million and proceeds from share issuance of RMB 7.466 million[19] Notes to the Unaudited Condensed Consolidated Financial Statements 1. General Information China Shutower International Holdings Group Limited, incorporated in the Cayman Islands, primarily engages in the production and sale of wires and cables and aluminum products in China, and was listed on GEM of the Stock Exchange on July 10, 2020 - The company's principal activities are the production and sale of wires and cables and the sale of aluminum products[20] - The company's shares were listed on GEM of the Stock Exchange on July 10, 2020[21] 2. Basis of Preparation The interim financial statements are prepared in accordance with HKAS 34 and GEM Listing Rules, using the historical cost basis and presented in RMB, with accounting policies consistent with the annual report, and new standards having no material impact - The financial statements are prepared in accordance with HKAS 34 and the applicable disclosure requirements of the GEM Listing Rules[22] - Accounting policies are consistent with those used in the preparation of the accountant's report, and new and revised HKFRSs have no material impact on the interim financial statements[26] 3. Changes in Hong Kong Financial Reporting Standards The Group first applied new or revised HKFRSs issued by the HKICPA during this accounting period, but these changes had no material impact on the Group's accounting policies - The Group has first applied the amendments to HKFRS 7, HKFRS 9 and HKAS 39: Interest Rate Benchmark Reform — Phase 2[27] - The new or revised HKFRSs will not have a material impact on the Group's accounting policies[27] 4. Application of Judgements and Estimates In preparing the interim financial statements, the significant judgments made by management in applying accounting policies and the key sources of estimation uncertainty are the same as those in the annual accountant's report - The significant judgments made by management in applying accounting policies and the key sources of estimation uncertainty are the same as those in the accountant's report[29] 5. Financial Risk Management The Group's business involves credit risk, market risk (including foreign currency and interest rate risk), and liquidity risk, but it has historically not used derivatives for hedging or trading, and risk management policies have not changed since December 31, 2020 - The Group is exposed to credit risk, market risk (foreign currency risk and interest rate risk), and liquidity risk[30] - The Group has historically not used derivative instruments for hedging or trading purposes[30] - Risk management policies have remained unchanged since December 31, 2020[31] 6. Segment Reporting The Group primarily engages in the production and sale of wires and cables and aluminum products in China, with only one reportable operating segment, thus no operating segment information is presented; all revenue and non-current assets are from China - The Group has only one reportable operating segment, which is the production and sale of wires and cables and the sale of aluminum products[32] - All of the Group's revenue and non-current assets are derived from China[33] Revenue Contribution by Major Customers (for the Six Months Ended June 30) | Customer | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Customer B | 23,053 | Not applicable(1) | | Customer C | 28,290 | Not applicable(1) | (1) The corresponding revenue accounted for not more than 10% of the Group's total revenue 7. Revenue The Group's revenue primarily derives from the production and sale of wires and cables and aluminum products, with total revenue of RMB 204.537 million for the six months ended June 30, 2021 Revenue Sources (for the Six Months Ended June 30) | Product Type | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Production and sale of wires and cables | 204,376 | 208,550 | | Sale of aluminum products | 161 | — | | Total Revenue | 204,537 | 208,550 | 8. Other Income For the six months ended June 30, 2021, the Group's other income significantly increased to RMB 3.036 million, primarily due to higher government grants and subsidies Other Income Details (for the Six Months Ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Interest income | 19 | 4 | | Government grants and subsidies | 2,347 | 1,190 | | Sale of scrap metal and consumables | 134 | 130 | | Rental income | 249 | — | | Others | 287 | 111 | | Total | 3,036 | 1,435 | - Government grants and subsidies increased by approximately RMB 1.2 million, mainly to support the Group's operations in China, purchase of plant and machinery, and employment of disabled persons[40] 9. Finance Costs For the six months ended June 30, 2021, the Group's finance costs slightly increased to RMB 4.649 million, primarily due to higher interest expenses on bank and other borrowings Finance Costs Details (for the Six Months Ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Interest expense on bank and other borrowings | 4,586 | 4,449 | | Interest expense on lease liabilities | 26 | 7 | | Others | 205 | — | | Finance costs capitalized in construction in progress | (168) | — | | Finance costs recognized in profit or loss | 4,649 | 4,456 | 10. (Loss)/Profit Before Income Tax Expense For the six months ended June 30, 2021, the Group recorded a loss before income tax expense of RMB 6.283 million, primarily impacted by expenses such as inventory costs, depreciation, expected credit loss provisions, and employee costs Key Expense Items (for the Six Months Ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Cost of inventories recognized as expense | 196,152 | 193,665 | | Depreciation of property, plant and equipment | 3,816 | 3,372 | | Expected credit loss provision for trade receivables | 1,621 | 134 | | Employee costs (including directors' emoluments) | 5,061 | 4,662 | | Contributions to defined contribution retirement plans | 964 | 454 | | Total employee costs | 6,025 | 5,116 | 11. Income Tax (Credit)/Expense For the six months ended June 30, 2021, the Group recorded an income tax credit of RMB 0.891 million, mainly due to taxable losses recognized during the period; some PRC subsidiaries enjoy preferential corporate income tax rates of 15% or 10% Income Tax (Credit)/Expense (for the Six Months Ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Income tax expense | 60 | 506 | | Deferred tax (credit)/expense | (951) | (240) | | Income tax (credit)/expense | (891) | 266 | - Sichuan Shutower Industrial Co., Ltd., as a high-tech enterprise, is subject to a preferential corporate income tax rate of 15%[49] - Guangyuan Tongchuang New Material Co., Ltd. is entitled to a reduced income tax rate of 10% under the Western Development Tax Incentive Policy[51] 12. Dividends The Directors do not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The Directors do not recommend the payment of an interim dividend for the six months ended June 30, 2021[52] 13. (Loss)/Earnings Per Share For the six months ended June 30, 2021, basic and diluted loss per share attributable to owners was RMB 0.65 cents, compared to earnings in the prior period, with no potential dilutive ordinary shares (Loss)/Earnings Per Share (for the Six Months Ended June 30) | Indicator | 2021 (RMB cents) | 2020 (RMB cents) | | :--- | :--- | :--- | | Basic and diluted (loss)/earnings per share | (0.65) | 0.19 | - (Loss)/earnings per share is calculated based on the loss attributable to owners of RMB 5.24 million and the weighted average of 809,282,000 ordinary shares outstanding[11][53] 14. Property, Plant and Equipment For the six months ended June 30, 2021, the Group's cost of acquiring machinery and office equipment was RMB 6.274 million, a significant increase from the prior period - For the six months ended June 30, 2021, the Group's cost of acquiring machinery and office equipment was RMB 6,274,000, compared to RMB 101,000 in the prior period[54] 15. Trade and Other Receivables As of June 30, 2021, the Group's total trade receivables and bills receivable increased to RMB 193.846 million, with significant increases in prepayments, deposits, and other receivables; some trade receivables are pledged as collateral for borrowings Trade and Other Receivables (as of June 30) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Trade receivables and bills receivable | 193,846 | 161,483 | | Prepayments, deposits and other receivables | 43,687 | 24,456 | | Non-current prepayments and deposits | 6,620 | 1,185 | | Total | 244,153 | 187,124 | - Expected credit loss provision for trade receivables increased from RMB 2.463 million to RMB 4.084 million[55] - Approximately RMB 20.965 million of trade receivables were pledged as collateral for other borrowings[56] 16. Trade and Other Payables As of June 30, 2021, the Group's trade payables slightly decreased, but total accrued expenses and other payables increased, mainly due to the recognition of consideration payable Trade and Other Payables (as of June 30) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Trade payables | 52,156 | 56,674 | | Accrued expenses and other payables | 14,904 | 6,989 | | Total | 67,060 | 63,663 | - Consideration payable (Note 20) was RMB 9.8 million, a major new payable in the current period[58] - The credit period for trade payables generally ranges from 0 to 120 days[58] 17. Borrowings As of June 30, 2021, the Group's total current borrowings increased to RMB 107.515 million, primarily comprising secured and guaranteed bank and other borrowings; various assets and related party properties are pledged or guaranteed Borrowings Details (as of June 30) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Secured and guaranteed interest-bearing bank borrowings repayable within one year | 74,868 | 80,097 | | Secured and guaranteed interest-bearing other borrowings repayable within one year | 30,100 | 14,100 | | Sale and leaseback liabilities (current) | 2,547 | 3,101 | | Total current borrowings | 107,515 | 97,298 | - Borrowings are secured by buildings, land use rights, plant and machinery, trade receivables, shareholders' inventories, and properties of the company's directors and their close family members[62] - The Group's bank and other borrowings, totaling RMB 104.968 million, are repayable within one year or on demand[63] 18. Share Capital As of June 30, 2021, the company's issued and fully paid share capital increased to RMB 14.692 million, primarily due to the allotment and issuance of 120,000,000 subscription shares to an independent third party Share Capital Movements (as of June 30) | Item | June 30, 2021 (Number of Shares) | June 30, 2021 (RMB '000) | | :--- | :--- | :--- | | Authorized share capital | 4,000,000,000 | 35,994 | | Issued and fully paid share capital | 920,000,000 | 14,692 | | Of which: | | | | As at December 31, 2020 | 800,000,000 | 7,226 | | New shares issued by way of subscription | 120,000,000 | 7,466 | - On June 17, 2021, 120,000,000 subscription shares were allotted and issued at a subscription price of HKD 0.075 per share, with gross proceeds of approximately HKD 9.0 million[67] 19. Related Party Transactions Remuneration for key management personnel increased, and properties of the company's directors and their close family members, and key management personnel and their close family members, are pledged as collateral for bank and other borrowings Key Management Personnel Remuneration (for the Six Months Ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Salaries, allowances and other benefits | 533 | 315 | | Contributions to defined contribution retirement plans | 72 | 12 | | Total | 605 | 327 | - Properties of the company's directors and their close family members, and key management personnel and their close family members, have been pledged as collateral for bank and other borrowings[70][71] 20. Acquisition of a Subsidiary In May 2020, the Group acquired a 70% equity interest in Ya'an Baosheng Metal Material Co., Ltd. for RMB 9.8 million, whose principal business is manufacturing and selling aluminum products; this acquisition generated RMB 2.372 million in goodwill - The Group acquired a 70% equity interest in Ya'an Baosheng Metal Material Co., Ltd. for RMB 9.8 million, whose principal business is the manufacturing and sale of aluminum products[72] - The acquisition generated RMB 2.372 million in goodwill, which management believes will allow the Group to expand upstream, reduce production costs, and increase profit margins[75] - The acquisition was completed in May 2021 and did not have a material impact on the revenue or profit for this interim period[76] Management Discussion and Analysis Business Review and Outlook The Group, a regional wire and cable manufacturer and supplier primarily operating in Sichuan Province, China, offers finished wires and cables, semi-finished wires, and aluminum products; it recorded a loss this period due to COVID-19, but successfully listed on GEM in July 2020 - The Group is primarily engaged in the manufacturing and sale of wires and cables and the sale of aluminum products[77] - For the six months ended June 30, 2021, the Group recorded a loss of approximately RMB 5.4 million, compared to a net profit of approximately RMB 1.3 million in the prior period, primarily impacted by the COVID-19 pandemic[77] - The company's shares were successfully listed on GEM on July 10, 2020[78] Future Prospects The Group acquired a 70% equity interest in Ya'an Baosheng using proceeds from new share allotment, aiming to expand upstream, reduce costs, and enhance profit margins; the company will capitalize on opportunities from Sichuan's Western Development Strategy and Guangyuan's aluminum industry growth, actively seeking geographical expansion to mitigate regional concentration risk, while remaining cautious about financial performance uncertainties due to the pandemic - The Group successfully allotted and issued 120,000,000 shares, with net proceeds of approximately HKD 8.9 million used to acquire a 70% equity interest in Ya'an Baosheng, aiming to expand upstream operations, reduce production costs, and increase profit margins[80] - Sichuan Province benefits from the Western Development Strategy, driving strong demand for wire and cable products, and the Guangyuan Municipal Government is actively developing the aluminum industry, which the company will leverage[80] - The Group is seeking business opportunities to expand its presence in Southwest China and reduce regional concentration, but anticipates potential impacts on second-half financial performance due to pandemic uncertainties[80][82] Financial Review The Group's financial performance for the six months ended June 30, 2021, showed a slight decrease in revenue, with gross profit and margin significantly reduced due to rising raw material costs; increased administrative expenses and expected credit loss provisions led to a loss for the period Revenue Revenue for the period was approximately RMB 204.5 million, a 1.9% decrease from the prior period, primarily due to reduced aluminum product sales offsetting increased copper product sales Revenue and Gross Profit by Product Type (for the Six Months Ended June 30) | Product Type | 2021 Revenue (RMB '000) | 2020 Revenue (RMB '000) | 2021 Gross Profit (RMB '000) | 2020 Gross Profit (RMB '000) | 2021 Gross Margin | 2020 Gross Margin | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Classic finished wires and cables (Copper) | 17,943 | 16,806 | 1,038 | 2,357 | 5.8% | 14.0% | | Classic finished wires and cables (Aluminum) | 46,131 | 51,603 | 3,118 | 3,119 | 6.8% | 6.0% | | Special finished wires and cables (Copper) | — | 4,550 | — | 1,309 | — | 28.8% | | Special finished wires and cables (Aluminum) | 23,053 | 21,524 | 3,039 | 4,834 | 13.2% | 22.5% | | Semi-finished wires (Bare copper wire) | 75,278 | 44,243 | 1,085 | 651 | 1.4% | 1.5% | | Semi-finished wires (Aluminum rod) | 41,970 | 69,252 | 87 | 2,523 | 0.2% | 3.6% | | Others | 162 | 572 | 18 | 92 | 11.1% | 16.1% | | Total | 204,537 | 208,550 | 8,385 | 14,885 | 4.1% | 7.1% | - Revenue slightly decreased by approximately 1.9%, with copper product sales increasing by approximately RMB 27.6 million and aluminum product sales decreasing by approximately RMB 31.2 million[85] Cost of Sales Cost of sales increased by RMB 2.5 million to RMB 196.2 million, a 1.28% increase, primarily due to continuous inflation in average market prices of raw materials like copper and aluminum - Cost of sales increased from RMB 193.7 million to RMB 196.2 million, an increase of 1.28%[86] - The increase in cost of sales was due to the continuous inflation in the average market prices of copper and aluminum for the six months ended June 30, 2021[86] Gross Profit and Gross Margin Gross profit decreased from RMB 14.9 million to RMB 8.4 million, and gross margin fell from 7.1% to 4.1%, primarily due to increased unit costs of raw materials, especially copper and aluminum - Gross profit decreased from RMB 14.9 million to RMB 8.4 million, and gross margin decreased from 7.1% to 4.1%[87] - The decrease in gross margin was primarily due to increased unit costs of raw materials, especially copper and aluminum[87] Other Income and Gains Other income and gains increased from RMB 1.4 million to RMB 3.0 million, primarily due to an increase in government grants of approximately RMB 1.2 million - Other income and gains increased from RMB 1.4 million to RMB 3.0 million[88] - This increase was mainly due to an increase in government grants of approximately RMB 1.2 million related to supporting the Group's operations in China, purchasing plant and machinery, and employing disabled persons[88] Selling and Distribution Expenses Selling and distribution expenses decreased by RMB 0.9 million or 37.4%, primarily due to reduced travel by the sales team amidst the pandemic - Selling and distribution expenses decreased by RMB 0.9 million or 37.4%[90] - The decrease was due to reduced travel by the sales team amidst the pandemic[90] Administrative and Other Expenses Administrative and other expenses increased by RMB 4.6 million or 66.1% to RMB 11.5 million, primarily due to increased post-listing professional fees, expected credit loss provisions for trade receivables, and staff costs - Administrative and other expenses increased from RMB 6.9 million to RMB 11.5 million, an increase of 66.1%[91] - Reasons for the increase include higher post-listing professional fees, an increase in expected credit loss provision for trade receivables of approximately RMB 1.5 million, and an increase in staff costs of approximately RMB 0.9 million[91] Finance Costs Finance costs slightly increased to approximately RMB 4.6 million, primarily due to an increase in the average borrowing amount during the period - Finance costs increased from approximately RMB 4.5 million to approximately RMB 4.6 million[92] - This increase was mainly due to an increase in the average borrowing amount during the six months ended June 30, 2021[92] Income Tax Expense The Group recognized a tax credit of approximately RMB 0.9 million during the period, primarily due to recording a taxable loss - The Group recorded a tax credit of approximately RMB 0.9 million for the six months ended June 30, 2021, due to the recognition of a taxable loss during the period[93] (Loss)/Profit Attributable to Owners for the Period The Group recorded a loss attributable to owners of approximately RMB 5.2 million, primarily due to reduced gross profit from increased raw material costs, higher expected credit loss provisions for trade receivables, and increased staff costs - The Group recorded a loss attributable to owners of approximately RMB 5.2 million, compared to a profit of approximately RMB 1.1 million in the prior period[95] - The increase in net loss was primarily due to a decrease in gross profit of approximately RMB 6.5 million from increased raw material costs, an increase in expected credit loss provision for trade receivables of approximately RMB 1.5 million, and an increase in staff costs of approximately RMB 0.9 million[95] Liquidity, Financial Resources and Capital Structure The Group primarily funds its operations through cash generated from operations, borrowings, and advances from shareholders; as of June 30, 2021, cash and cash equivalents were RMB 9.8 million, and the gearing ratio was 67.1%, an improvement from year-end - The Group primarily funds its operations through cash generated from operations, borrowings, and advances from shareholders[96] - As of June 30, 2021, the Group's cash and cash equivalents were approximately RMB 9.8 million (December 31, 2020: RMB 12.1 million)[96] - The Group's gearing ratio as of June 30, 2021, was 67.1% (December 31, 2020: 79.9%)[96] Subscription of Shares Under General Mandate On June 17, 2021, the company completed the allotment and issuance of 120,000,000 subscription shares to an independent third party, with net proceeds of approximately HKD 8.9 million, primarily used to acquire a 70% equity interest in Ya'an Baosheng - The company allotted and issued 120,000,000 subscription shares to Mr. Fu Chuanrong at a subscription price of HKD 0.075 per share[98] - The gross and net proceeds from the subscription were HKD 9.0 million and approximately HKD 8.9 million, respectively[99] - The purpose of issuing the subscription shares was to fund the acquisition of a 70% equity interest in Ya'an Baosheng[99] Pledge of the Group's Assets As of June 30, 2021, the Group had pledged assets with a total net book value of approximately RMB 85.447 million, including buildings, land use rights, plant and machinery, and trade receivables, to secure bank and other borrowings Net Book Value of Pledged Assets (as of June 30) | Pledged Assets | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Buildings | 48,334 | 48,650 | | Land use rights | 6,565 | 6,647 | | Plant and machinery | 9,583 | 3,418 | | Trade receivables | 20,965 | 20,965 | | Total | 85,447 | 79,680 | Capital Commitments As of June 30, 2021, the Group had no capital commitments - As of June 30, 2021, the Group had no capital commitments[102] Contingent Liabilities The Group had no significant contingent liabilities as of June 30, 2021 - The Group had no significant contingent liabilities as of June 30, 2021[103] Principal Risks and Uncertainties The Group faces several principal risks, including the impact of the pandemic on operations, raw material price fluctuations, customer demand dependency, changes in tax incentives, credit risk, and relatively low operating profit margins - The Group's business and operations may be materially affected by the pandemic or public health events[107] - The Group's operations may be materially affected by fluctuations in the prices of principal raw materials[107] - The Group's revenue is primarily derived from sales to customers without long-term contracts, and demand for products largely depends on customer businesses and the performance of their respective industries or markets[107] - The preferential tax policies and government subsidies currently enjoyed by the Group in China may be subject to adverse changes or termination[107] - The Group faces credit risk from customers and has relatively low operating profit margins[107] Foreign Currency Risk The Group has no significant foreign currency risk, as most assets and liabilities are denominated in its functional currency, RMB, and no hedging instruments were used during the period - The Group has no significant foreign currency risk, as most recognized assets and liabilities are primarily denominated in its functional currency, RMB[108] - The Group did not use any hedging instruments to hedge other foreign currency transactions during the six months ended June 30, 2021[108] Employees and Remuneration Policy As of June 30, 2021, the Group employed 254 full-time employees, with total employee benefit expenses of approximately RMB 6.0 million; remuneration policy refers to market terms and individual performance - As of June 30, 2021, the Group employed a total of 254 full-time employees (June 30, 2020: 243 employees)[109] - Total employee benefit expenses for the six months ended June 30, 2021, were approximately RMB 6.0 million (prior period 2020: approximately RMB 5.1 million)[109] - Remuneration is determined with reference to market terms and individual employees' performance, qualifications, and experience[109] Material Investments Held, Material Acquisitions or Disposals of Subsidiaries and Associates, and Plans for Material Investments or Capital Assets On May 27, 2021, the Group acquired a 70% interest in Ya'an Baosheng, constituting a discloseable transaction; other than this, there were no other material investments, acquisitions or disposals of subsidiaries, associates, and joint ventures, nor any plans for material investments or capital assets during the period - The company's wholly-owned subsidiary, Shutower Enterprise Management (Guangyuan) Co., Ltd., acquired a 70% equity interest in Ya'an Baosheng (a limited company incorporated in the PRC) for a consideration of approximately RMB 9.8 million[110] - This acquisition constituted a discloseable transaction under the GEM Listing Rules, and upon completion, Ya'an Baosheng became a non-wholly owned subsidiary of the company[110] - Save for the aforementioned acquisition, the Group held no material investments, made no material acquisitions or disposals of subsidiaries, associates, and joint ventures, and had no plans for material investments or capital assets as of the date of this report[112] Use of Net Proceeds from Listing After deducting listing-related expenses, net proceeds from listing of approximately HKD 20.6 million (approximately RMB 18.6 million) were fully utilized as of June 30, 2021, in accordance with the proposed allocation outlined in the prospectus - Net proceeds from the listing were approximately HKD 20.6 million (equivalent to approximately RMB 18.6 million)[113] - The net proceeds were fully utilized as of June 30, 2021, in a manner consistent with the proposed allocation described in the section headed 'Future Plans and Use of Proceeds' in the prospectus[113] Use of Proceeds from Subscription Net proceeds from the subscription of approximately HKD 8.9 million were fully used to pay the consideration for acquiring a 70% equity interest in Ya'an Baosheng - The gross and net proceeds from the subscription were HKD 9.0 million and approximately HKD 8.9 million, respectively[114] Use of Proceeds from Subscription (as of June 30) | Intended Use | Amount of Net Proceeds Allocated | Amount of Net Proceeds Used | Amount of Net Proceeds Unused | | :--- | :--- | :--- | :--- | | As consideration for the acquisition of 70% equity interest in Ya'an Baosheng | HKD 8.9 million | HKD 8.9 million | — | Other Information Interim Dividend The Directors decided not to declare any interim dividend for the six months ended June 30, 2021 - The Directors decided not to declare any interim dividend for the six months ended June 30, 2021[118] Purchase, Sale or Redemption of the Company's Listed Securities 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 - 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[119] Compliance with Corporate Governance Code The company has complied with the Corporate Governance Code in Appendix 15 of the GEM Listing Rules, with a deviation where the Chairman and CEO roles are held by the same person (Mr. Dang Fei), which the Board believes is in the Group's best interest - The company has complied with the provisions of the Corporate Governance Code from the six months ended June 30, 2021, up to the date of this report[120] - There is a deviation from code provision A.2.1, which states that the roles of chairman and chief executive should be separate, but Mr. Dang Fei holds both positions concurrently[120] - The Board believes that Mr. Dang Fei holding both positions maximizes the Group's interests, achieving effective management and business development[120] Code of Conduct for Securities Transactions by Directors The company has adopted the required standard of dealings set out in the GEM Listing Rules as the code of conduct for directors' securities transactions, with all directors fully complying during the period - The company has adopted the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules as the code of conduct for directors' securities transactions[122] - All Directors have fully complied with the required standard of dealings set out in the Model Code for the six months ended June 30, 2021, and up to the date of this report[122] Compliance Adviser's Interests The company appointed Tung Ren Finance as its compliance adviser; as of June 30, 2021, neither the compliance adviser nor its associates held any interests related to the Group, other than the compliance adviser agreement - The company has appointed Tung Ren Finance as its compliance adviser in accordance with Rule 6A.19 of the GEM Listing Rules[123] - As of June 30, 2021, neither the compliance adviser nor its directors, employees, or close associates held any interests in relation to the Group that are required to be notified to the Group under Rule 6A.32 of the GEM Listing Rules, other than the compliance adviser agreement[123] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or its Associated Corporations As of June 30, 2021, several directors and the chief executive held long positions in the company's shares, primarily through controlled corporate interests or interests held jointly with other parties Directors' and Chief Executive's Long Positions in Shares (as of June 30, 2021) | Director/Chief Executive Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Mr. Dang Fei | Interest in controlled corporation | 351,280,000 | 38.18% | | Mr. Dang Fei | Interest held jointly with another person | 351,280,000 | 38.18% | | Mr. Wang Xiaozhong | Interest in controlled corporation | 99,760,000 | 10.84% | | Ms. Luo Qian | Interest in controlled corporation | 6,350,000 | 0.69% | | Ms. Luo Qian | Beneficial owner | 2,160,000 | 0.23% | - Mr. Dang Fei holds shares through Red Fly Investment Limited and, together with Mr. Dang Jun as parties acting in concert, jointly controls 38.18% of the company's issued share capital[126] Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2021, besides the directors, Red Fly, Mr. Dang Jun, Ms. Li Li, Mr. Fu Chuanrong, Xseven Investment, and Ms. Gao Hong were substantial shareholders and other persons holding long positions in the company's shares Substantial Shareholders' and Other Persons' Long Positions in Shares (as of June 30, 2021) | Director Name | Capacity/Nature of Interest | Number of Shares Held (Long Position) | Approximate Percentage of Interest | | :--- | :--- | :--- | :--- | | Red Fly | Beneficial owner | 351,280,000 | 38.18% | | Mr. Dang Jun | Interest held jointly with another person | 351,280,000 | 38.18% | | Ms. Li Li | Interest of spouse | 351,280,000 | 38.18% | | Mr. Fu Chuanrong | Beneficial owner | 120,630,000 | 13.10% | | Xseven Investment | Beneficial owner | 99,760,000 | 10.84% | | Ms. Gao Hong | Interest of spouse | 99,760,000 | 10.84% | - Mr. Fu Chuanrong holds 120,630,000 shares due to the subscription, representing approximately 13.10% of the issued share capital[133] Competing Interests For the six months ended June 30, 2021, neither the company's controlling shareholders nor directors, nor their respective close associates, held any interests in any business directly or indirectly competing with the Group's business - For the six months ended June 30, 2021, none of the company's controlling shareholders or directors and their respective close associates held any interests in any business that directly or indirectly competes with the Group's business[132] Share Option Scheme The company conditionally adopted a share option scheme on June 10, 2020, but no share options have been granted, exercised, cancelled, or lapsed from the listing date up to the date of this report - The company conditionally adopted a share option scheme on June 10, 2020, whose terms comply with Chapter 23 of the GEM Listing Rules[134] - No share options have been granted, exercised, cancelled, or lapsed under the share option scheme from the listing date up to the date of this report[134] Events After Reporting Period No significant events requiring disclosure have occurred from June 30, 2021, up to the date of this report - No significant events requiring disclosure have occurred from June 30, 2021, up to the date of this report[135] Audit Committee and Interim Business Review The company's Audit Committee has reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2021, and believes they are prepared in compliance with applicable accounting standards and GEM Listing Rules, with adequate disclosures - The Audit Committee comprises three independent non-executive directors, with Mr. Chen Aifa serving as Chairman[136] - The Audit Committee has reviewed the accounting principles and practices adopted by the Group and the unaudited condensed consolidated financial statements for the six months ended June 30, 2021[138] - The Audit Committee believes that the preparation of these statements by the Group complies with applicable accounting standards, the GEM Listing Rules, and includes adequate disclosures[138]