训修实业(01962) - 2024 - 中期财报

Company Information This section provides an overview of the company's governance structure, including its board and committees, along with essential contact and operational details Board of Directors and Committees The company's board comprises executive, non-executive, and independent non-executive directors, supported by audit, remuneration, and nomination committees to ensure robust corporate governance - The Board of Directors includes Executive Directors Mr. Cheung Yau Chong (Chairman and CEO), Mr. Chan Kwok Keung, Ms. Jia Ziying, Mr. Li Yanbo, Non-Executive Director Mr. Chan Lau Yee, and Independent Non-Executive Directors Mr. Sin Hon Di, Mr. Sze-to Yuk Ting, and Ir. Cheung Siu Wah[1] - The company has an Audit Committee (Chairman: Mr. Sin Hon Di), a Remuneration Committee (Chairman: Mr. Sze-to Yuk Ting), and a Nomination Committee (Chairman: Mr. Cheung Yau Chong)[1] Key Contact Information The company lists its principal bankers, legal advisors, registered office, main Hong Kong business location, share registrar, listing venue, and website for key operational and contact details - Principal bankers include Bank of China (Hong Kong), The Hongkong and Shanghai Banking Corporation Limited, and Fubon Bank (Hong Kong)[2] - The Hong Kong share registrar is Tricor Investor Services Limited, and the company's shares are listed on The Stock Exchange of Hong Kong Limited (Stock Code: 1962)[2] - The company's website is www.epfhk.com[2](index=2&type=chunk) Management Discussion and Analysis This section provides an in-depth review of the group's operational performance, financial results, and future outlook for the reporting period Business Review The Group's revenue increased by 9.6% to HK$525.2 million in H1 2024, driven by strong sales of braids and specialty braided products, and a steady recovery in human hair extension products Key Financial Indicators for H1 2024 | Indicator | H1 2024 (HK$ Million) | H1 2023 (HK$ Million) | Y-o-Y Change (%) | | :------------------ | :-------------------- | :-------------------- | :--------------- | | Revenue | 525.2 | 479.2 | 9.6 | | Gross Profit Margin | 22.4% | 23.0% | -0.6pp | | Net Profit Margin | 4.5% | 6.2% | -1.7pp | - Revenue growth was primarily driven by strong sales of lower-margin braids and specialty braided products and a steady recovery in higher-margin human hair extension products[4] - The decrease in gross profit margin was mainly due to the implementation of a new minimum gross wage in Bangladesh, partially offset by the continuous depreciation of the Bangladeshi Taka against the US Dollar[4] - The decline in net profit margin was attributed to increased finance costs due to sustained high interest rates, higher start-up and ongoing expenses for the new hair styling business, and the expiry of the income tax holiday in Bangladesh[4] Outlook The Group plans to pursue growth strategies, including optimizing financial performance, expanding online presence, and entering the hair styling business, anticipating continued recovery in demand for higher-margin products - The Group will continue to strengthen financial performance optimization measures across its businesses[5] - Plans include opening more online stores on several well-known cross-border e-commerce platforms and venturing into the hair styling business to expand sales channels and customer base[5] - Demand for higher-margin products is expected to continue recovering until the end of the year[5] Financial Review The Group's financial performance declined year-on-year due to increased finance costs, new business start-up expenses, and the expiry of Bangladesh's income tax holiday, despite a 9.6% revenue growth - Financial performance significantly declined this period, primarily due to increased finance costs from sustained high interest rates, higher start-up and ongoing expenses for the new hair styling business, and increased income tax and deferred tax expenses due to the expiry of the income tax holiday in Bangladesh[6] Revenue Revenue increased by 9.6% to HK$525.2 million, driven by wigs, hair accessories, and high-end human hair extension products, with the US remaining the primary market Revenue by Product Category (HK$ Million) | Product Category | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :------------------------------ | :------ | :------ | :--------------- | | Wigs, Hair Accessories and Others | 441.8 | 394.0 | 12.1 | | High-end Human Hair Extension Products | 65.1 | 54.2 | 20.1 | | Halloween Products | 18.3 | 31.0 | -41.0 | | Total Revenue | 525.2 | 479.2 | 9.6 | - Revenue from hair products manufactured at the Bangladesh factory accounted for 98.9% of the Group's total revenue (H1 2023: 98.6%)[7] - The United States remained the Group's primary market, contributing 92.1% of total revenue (H1 2023: 89.6%)[7] Cost of Sales Cost of sales increased by 10.4% to HK$407.6 million, aligning with revenue growth and impacted by the new minimum wage in Bangladesh Cost of Sales by Product Category (HK$ Million) | Product Category | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :------------------------------ | :------ | :------ | :--------------- | | Wigs, Hair Accessories and Others | 351.2 | 312.0 | 12.6 | | High-end Human Hair Extension Products | 44.2 | 36.8 | 19.8 | | Halloween Products | 12.1 | 20.3 | -40.2 | | Total Cost of Sales | 407.6 | 369.2 | 10.4 | - The increase in cost of sales was primarily due to higher direct labor costs resulting from the implementation of a new minimum gross wage in Bangladesh[9] Gross Profit Gross profit increased by 6.9% to HK$117.6 million, but the gross profit margin slightly decreased by 0.6 percentage points to 22.4%, mainly due to increased manufacturing expenses Gross Profit and Gross Profit Margin by Product Category (HK$ Million) | Product Category | Gross Profit H1 2024 | Gross Profit H1 2023 | Y-o-Y Change (%) | Gross Profit Margin H1 2024 | Gross Profit Margin H1 2023 | Change (pp) | | :------------------------------ | :------------------- | :------------------- | :--------------- | :-------------------------- | :-------------------------- | :---------- | | Wigs, Hair Accessories and Others | 90.6 | 82.0 | 10.5 | 20.5% | 20.8% | -0.3 | | High-end Human Hair Extension Products | 20.9 | 17.4 | 20.4 | 32.1% | 32.0% | +0.1 | | Halloween Products | 6.1 | 10.7 | -42.5 | 33.5% | 34.4% | -0.9 | | Total Gross Profit | 117.6 | 110.0 | 6.9 | 22.4% | 23.0% | -0.6 | - The slight decrease in gross profit margin was mainly due to an increase in total manufacturing overheads during the period[10] Other Income Other income increased by 40.7% to HK$4.1 million, primarily driven by higher bank interest and rental income Other Income (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :--------- | :------ | :------ | :--------------- | | Other Income | 4.1 | 2.9 | 40.7 | - The increase was mainly due to higher bank interest income and rental income during the period[12] Other Gains and Losses Other gains and losses increased by 11.9% to HK$2.9 million, primarily from foreign exchange gains, partially offset by fair value losses on financial assets Other Gains and Losses (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :----------------- | :------ | :------ | :--------------- | | Other Gains and Losses | 2.9 | 2.6 | 11.9 | - This period primarily included a loss of HK$0.2 million from changes in fair value of financial assets measured at fair value through profit or loss, and a gain of HK$3.2 million from foreign currency exchange[13] Impairment Losses under Expected Credit Loss Model Impairment provisions for trade receivables remained stable at approximately HK$0.1 million for the period Impairment Provisions for Trade Receivables (HK$ Million) | Indicator | H1 2024 | H1 2023 | | :----------------- | :------ | :------ | | Impairment Provisions | 0.1 | 0.1 | Distribution and Selling Expenses Distribution and selling expenses increased by 15.3% to HK$13.2 million, mainly due to higher transportation and commission expenses Distribution and Selling Expenses (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :------------------------- | :------ | :------ | :--------------- | | Distribution and Selling Expenses | 13.2 | 11.4 | 15.3 | - The increase was mainly due to higher transportation and commission expenses during the period[15] Administrative Expenses Administrative expenses slightly increased by 1.0% to HK$61.5 million, primarily due to higher salaries and employee benefits from increased headcount for the new hair styling business Administrative Expenses (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :------------------- | :------ | :------ | :--------------- | | Administrative Expenses | 61.5 | 60.9 | 1.0 | - The increase was mainly due to higher salaries and employee benefits (including directors' emoluments) resulting from increased headcount for the new hair styling business[16] Other Expenses Other expenses decreased by 55.9% to HK$0.2 million, primarily due to a reduction in donations Other Expenses (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :----------- | :------ | :------ | :--------------- | | Other Expenses | 0.2 | 0.4 | -55.9 | - The decrease was mainly due to a reduction in donations made during the period[17] Finance Costs Finance costs significantly increased by 27.6% to HK$21.5 million, primarily due to the sustained high interest rate environment Finance Costs (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :----------- | :------ | :------ | :--------------- | | Finance Costs | 21.5 | 16.9 | 27.6 | - The increase was mainly due to sustained high interest rates[18] Taxation Income tax expense surged by 581.2% to HK$4.3 million, primarily due to the expiry of the income tax holiday in Bangladesh Income Tax Expense (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :--------------- | :------ | :------ | :--------------- | | Income Tax Expense | 4.3 | 0.6 | 581.2 | - The increase was mainly due to the expiry of the income tax holiday in Bangladesh[19] Profit for the Period Profit for the period decreased by 19.6% to HK$23.9 million, impacted by higher finance costs, new business start-up expenses, and increased tax expenses Profit for the Period (HK$ Million) | Indicator | H1 2024 | H1 2023 | Y-o-Y Change (%) | | :--------------- | :------ | :------ | :--------------- | | Profit for the Period | 23.9 | 29.7 | -19.6 | - The decrease in profit for the period was mainly due to increased finance costs from sustained high interest rates, higher start-up and ongoing expenses for the new hair styling business, and increased income tax and deferred tax expenses due to the expiry of the income tax holiday in Bangladesh[20] Liquidity and Financial Resources The Group's cash and bank balances increased by 6.2% to HK$195.6 million as of June 30, 2024, primarily due to increased trade receivables collection and proceeds from subsidiary disposal Liquidity Indicators (HK$ Million) | Indicator | June 30, 2024 | December 31, 2023 | Change (%) | | :-------------------------------------- | :------------ | :---------------- | :--------- | | Total Bank Balances, Pledged Bank Deposits and Cash | 195.6 | 184.2 | 6.2 | | Trade and Other Receivables | 271.9 | 274.3 | -0.8 | - The increase in cash and bank balances was mainly attributable to increased collection of trade receivables and proceeds from the disposal of a subsidiary during the period[21] Borrowings and Gearing Ratio As of June 30, 2024, the Group had bank facilities of HK$840.1 million, with HK$182.3 million unused, and its gearing ratio increased to 74.4% from 72.8% at the end of 2023 Borrowings and Gearing Ratio | Indicator | June 30, 2024 (HK$ Million) | December 31, 2023 (HK$ Million) | | :------------------ | :-------------------------- | :------------------------------ | | Bank Facilities | 840.1 | N/A | | Unused Facilities | 182.3 | N/A | | Gearing Ratio | 74.4% | 72.8% | - The Group believes it has sufficient financial resources to meet its commitments and working capital requirements[22] Capital Expenditure and Capital Commitments Capital expenditure for the period was approximately HK$13.3 million for property, plant, and equipment, primarily to maintain manufacturing capacity in Bangladesh, with capital commitments of HK$1.0 million as of June 30, 2024 Capital Expenditure and Commitments (HK$ Million) | Indicator | H1 2024 | H1 2023 | | :---------------------------------- | :------ | :------ | | Expenditure on Acquisition of Fixed Assets | 13.3 | 13.9 | | Capital Commitments | 1.0 | 0.6 | - Capital expenditure was primarily for maintaining its manufacturing capacity in Bangladesh[23] Foreign Exchange Risk The Group faces foreign currency risk from transactions denominated in USD, RMB, and BDT, but considers the risk minimal due to the HKD-USD peg and increased overall USD usage from Bangladesh factory output - The Group's trading items are denominated in foreign currencies (such as USD and RMB), operating expenses are denominated in RMB and Bangladeshi Taka, and the vast majority of sales are settled in USD[24] - Due to the pegging of the Hong Kong Dollar to the US Dollar, the Group's exposure to currency risk is considered extremely low[24] - During the period, revenue from the Bangladesh factory increased to 98.9%, leading to an overall increase in USD usage[24] Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group had no significant contingent liabilities[25] Pledge of Assets The Group's bank borrowings are secured by pledged bank deposits, land and buildings in Hong Kong, land and buildings in China, negative pledges on subsidiary assets in China and Bangladesh, and certain life insurance contracts - Bank borrowings are secured by pledged bank deposits of approximately HK$85.2 million[26] - Land and buildings and car parking spaces in Hong Kong of approximately HK$85.7 million, and land and buildings of approximately HK$26.0 million serve as collateral[26] - Negative pledges over assets of certain subsidiaries in China and Bangladesh, and certain life insurance contracts also serve as collateral[26] Employees and Remuneration Policy As of June 30, 2024, the Group employed 23,851 employees, with total employee expenses of HK$182.1 million, and provides retirement plans including MPF in Hong Kong and a self-managed provident fund in Bangladesh Employee and Remuneration Data | Indicator | June 30, 2024 | June 30, 2023 | | :-------------------- | :------------ | :------------ | | Total Number of Employees | 23,851 | 24,454 | | Total Employee Expenses | HK$182.1 Million | HK$151.9 Million | - The Group operates a defined contribution retirement scheme for all eligible employees in accordance with Hong Kong legislation[28] - Employees in Bangladesh are covered by the Group's self-administered provident fund[28] Significant Investments Held, Material Acquisitions and Disposals, and Future Plans for Material Investments or Capital Assets The Group held no significant investments, conducted no material acquisitions or disposals, and had no authorized plans for future material investments or capital asset additions during the period - During the period, the Group did not hold any significant investments or undertake any material acquisitions or disposals[29] - As of June 30, 2024, the Board had not authorized any plans for material investments or additions to capital assets[29] Interim Dividend The Board declared an interim dividend of 3.0 HK cents per share, totaling approximately HK$19.7 million, representing a payout ratio of 83.6%, payable on September 20, 2024 Interim Dividend Information | Indicator | H1 2024 | H1 2023 | | :--------------- | :----------- | :------ | | Dividend Per Share | 3.0 HK cents | 4.2 HK cents | | Total Dividend Amount | HK$19.7 Million | N/A | | Payout Ratio | 83.6% | 97.0% | - The interim dividend will be paid on Friday, September 20, 2024, to shareholders whose names appear on the register of members of the Company on Friday, September 13, 2024[30] Closure of Register of Members The company's share register will be closed from September 11 to September 13, 2024, to determine eligible shareholders for the interim dividend - The register of members will be closed from Wednesday, September 11, 2024, to Friday, September 13, 2024[31] - All transfer forms, accompanied by the relevant share certificates, must be lodged with Tricor Investor Services Limited by 4:30 p.m. on Tuesday, September 10, 2024, for registration[31] Corporate Governance and Other Information This section details the company's adherence to corporate governance principles, directors' interests, and other relevant statutory disclosures Compliance with the Corporate Governance Code The company has adopted the Corporate Governance Code, complying with all code provisions except for the combined roles of Chairman and CEO, which the Board believes ensures consistent leadership and efficient strategic planning - The Company has complied with all code provisions in the Corporate Governance Code, except for code provision C.2.1 which stipulates that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual[32] - Executive Director Mr. Cheung Yau Chong currently holds both the Chairman and Chief Executive Officer positions, an arrangement the Board believes benefits the Group through consistent leadership and more efficient and effective overall strategic planning[32] Compliance with the Model Code for Securities Transactions by Directors The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance during the period - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing Rules as its own code of conduct regarding securities transactions by Directors[33] - All Directors confirmed that they have complied with the required standards set out in the Model Code during the period[33] Directors' and Chief Executive's Interests in Shares and Underlying Shares of the Company and its Associated Corporations As of June 30, 2024, several directors and the chief executive held share interests in the company and its associated corporations, with Mr. Cheung Yau Chong holding a significant stake through a trust and beneficial ownership Directors' and Chief Executive's Long Positions in the Company's Shares (as of June 30, 2024) | Name of Director/Chief Executive | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Issued Share Capital | | :------------------------------- | :----------------------------------- | :--------------- | :----------------------------------- | | Mr. Cheung Yau Chong | Beneficiary of a trust/Settlor of a discretionary trust | 343,369,803 | 52.37% | | | Beneficial owner | 12,790,000 | 1.95% | | Mr. Chan Kwok Keung | Beneficial owner | 1,000,000 | 0.15% | | Ms. Jia Ziying | Beneficial owner | 394,000 | 0.06% | | | Interest of spouse | 100,000 | 0.02% | | Mr. Li Yanbo | Beneficial owner | 100,000 | 0.02% | | | Interest of spouse | 394,000 | 0.06% | - Mr. Cheung Yau Chong indirectly controls a majority of the Company's shares through a trust structure and directly beneficially owns a portion of the shares[35][36][41] - Mr. Cheung Yau Chong also holds 100% or majority interests in several associated corporations, including Evergreen Holdings, Golden Evergreen, and CLC Investment[38][39][40][41] Substantial Shareholders' Interests in Shares and Underlying Shares of the Company As of June 30, 2024, Evergreen Holdings and its associated companies collectively held 52.37% of the company's issued share capital, with other major shareholders including Precision Global Capital Management LLC and SEAVI Advent Investments Ltd Substantial Shareholders' Interests in the Company's Shares (as of June 30, 2024) | Name of Shareholder | Capacity/Nature of Interest | Number of Shares (Long Position) | Approximate Percentage of the Company's Issued Share Capital | | :---------------------------------------- | :-------------------------- | :------------------------------- | :------------------------------------------- | | Evergreen Holdings | Beneficial owner | 343,369,803 | 52.37% | | Golden Evergreen | Interest in controlled corporation | 343,369,803 | 52.37% | | FC Investment | Interest in controlled corporation | 343,369,803 | 52.37% | | FC Management | Interest in controlled corporation | 343,369,803 | 52.37% | | CLC Investment | Interest in controlled corporation | 343,369,803 | 52.37% | | CLC Management | Interest in controlled corporation | 343,369,803 | 52.37% | | HSBC International Trustee Limited | Trustee | 343,369,803 | 52.37% | | Ms. Wong Ho Yan | Interest of spouse | 356,159,803 | 54.32% | | SEAVI Advent Investments Ltd. | Beneficial owner | 46,132,196 | 7.04% | | SEAVI Advent Equity V (A) Ltd | Interest in controlled corporation | 46,132,196 | 7.04% | | Precision Global Capital Management LLC | Beneficial owner | 56,464,000 | 8.61% | - Ms. Wong Ho Yan, as the spouse of Mr. Cheung Yau Chong, is deemed to be interested in the shares in which Mr. Cheung Yau Chong is interested[43] Share Option Scheme The company adopted a share option scheme in 2017 to provide ownership opportunities to employees and directors, with no options granted or agreed to be granted as of June 30, 2024 - The Share Option Scheme aims to provide an opportunity for any director and full-time employee of any member of the Group who has contributed or will contribute to the Group to acquire ownership interests in the Company[44] - As of June 30, 2024, no share options had been granted or agreed to be granted under the Share Option Scheme[44] Purchase, Sale or Redemption of the Company's Listed Securities Neither the company nor its subsidiaries purchased, sold, or redeemed any of its listed securities during the period - During the period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[45] Changes in Directors' Information No changes in directors' information requiring disclosure under Listing Rule 13.51B(1) have occurred since the publication of the company's 2023 annual report - There have been no changes in directors' information required to be disclosed under Rule 13.51B(1) of the Listing Rules since the publication of the Company's annual report for the year ended December 31, 2023[46] Review of Interim Results by Audit Committee The Audit Committee, in conjunction with the Board and Deloitte Touche Tohmatsu, reviewed the Group's unaudited condensed consolidated financial statements for the period, confirming their preparation in accordance with applicable accounting standards and fair presentation - The Audit Committee has reviewed the Group's unaudited condensed consolidated financial statements for the period[47] - The Audit Committee is satisfied that the Group's unaudited condensed consolidated financial statements have been prepared in accordance with applicable accounting standards and fairly present the Group's financial position and performance for the period[47] Review Report on Condensed Consolidated Financial Statements This section presents the independent auditor's review report on the company's condensed consolidated financial statements for the six months ended June 30, 2024 Introduction Deloitte Touche Tohmatsu reviewed Evergreen Products Group Limited's condensed consolidated financial statements for the six months ended June 30, 2024, prepared under Listing Rules and HKAS 34 - Deloitte Touche Tohmatsu has reviewed the Company's unaudited condensed consolidated financial statements for the six months ended June 30, 2024[47] - The condensed consolidated financial statements have been prepared in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[47] Scope of Review The review was conducted in accordance with HKSRE 2410, involving inquiries and analytical procedures, and is less extensive than an audit, thus no audit opinion is expressed - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants[48] - A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to express an audit opinion[48] Conclusion Based on the review, the auditor found no matters suggesting that the condensed consolidated financial statements were not prepared in all material respects in accordance with HKAS 34 - Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34[49] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the Group's financial performance, including profit or loss and other comprehensive income, for the six months ended June 30, 2024 Profit or Loss for the Period For the six months ended June 30, 2024, the Group's revenue increased by 9.6% to HK$525.2 million, but profit for the period decreased by 19.6% to HK$23.9 million due to higher costs and taxes Condensed Consolidated Statement of Profit or Loss Summary (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :---------------- | :------------ | :------------ | | Revenue | 525,178 | 479,193 | | Cost of sales | (407,551) | (369,190) | | Gross profit | 117,627 | 110,003 | | Finance costs | (21,528) | (16,870) | | Income tax expense | (4,346) | (638) | | Profit for the period | 23,882 | 29,701 | Other Comprehensive Income (Expense) Total other comprehensive expense for the period was HK$24.1 million, mainly comprising a property revaluation deficit and exchange differences from translating foreign operations Other Comprehensive Income (Expense) Summary (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------------------------------------ | :------------ | :------------ | | Deficit on revaluation of properties | (2,731) | – | | Exchange differences arising from translating foreign operations | (21,347) | (13,806) | | Other comprehensive expense for the period, net of income tax | (24,078) | (12,534) | | Total comprehensive (expense) income for the period | (196) | 17,167 | Earnings Per Share Basic earnings per share attributable to owners of the company decreased to HK$0.04 from HK$0.05, with diluted earnings per share not applicable due to no potential ordinary shares Earnings Per Share (HK$) | Indicator | June 30, 2024 | June 30, 2023 | | :---------- | :------------ | :------------ | | Basic EPS | 0.04 | 0.05 | | Diluted EPS | Not applicable | Not applicable | Condensed Consolidated Statement of Financial Position This statement presents the Group's financial position, detailing its assets, liabilities, and equity, as of June 30, 2024 Assets As of June 30, 2024, total non-current assets were HK$622.8 million and total current assets were HK$971.9 million, with inventory and trade and other receivables being the main current assets Assets Summary (HK$ Thousand) | Indicator | June 30, 2024 | December 31, 2023 | | :------------------------ | :------------ | :---------------- | | Total non-current assets | 622,807 | 646,996 | | Property, plant and equipment | 546,467 | 580,600 | | Total current assets | 971,931 | 984,570 | | Inventories | 496,276 | 521,359 | | Trade and other receivables | 271,934 | 274,262 | | Cash and cash equivalents | 103,974 | 90,583 | Liabilities and Equity As of June 30, 2024, total current liabilities were HK$719.1 million and total non-current liabilities were HK$49.7 million, with secured bank and other borrowings being the primary liabilities Liabilities and Equity Summary (HK$ Thousand) | Indicator | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Total current liabilities | 719,118 | 734,054 | | Secured bank and other borrowings | 572,372 | 568,563 | | Total non-current liabilities | 49,730 | 52,412 | | Equity attributable to owners of the Company | 833,670 | 851,626 | | Total equity | 825,890 | 845,100 | Condensed Consolidated Statement of Changes in Equity This statement outlines the changes in the Group's equity attributable to owners of the company for the six months ended June 30, 2024 Overview of Equity Changes Equity attributable to owners of the company decreased from HK$851.6 million to HK$833.7 million, primarily due to profit for the period, property revaluation deficit, exchange differences, and dividends paid Summary of Changes in Equity (HK$ Thousand) | Indicator | January 1, 2024 (Audited) | June 30, 2024 (Unaudited) | | :------------------------------------------ | :------------------------ | :------------------------ | | Equity attributable to owners of the Company | 851,626 | 833,670 | | Profit for the period | N/A | 24,882 | | Deficit on revaluation of properties | N/A | (2,731) | | Exchange differences on translation of foreign operations | N/A | (21,093) | | Dividends recognised as distribution | N/A | (19,014) | - Total comprehensive income (expense) for the period was HK$1,058 thousand, with total comprehensive expense attributable to non-controlling interests being HK$1,254 thousand[53] Condensed Consolidated Statement of Cash Flows This statement provides an overview of the Group's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024 Overview of Cash Flows Net cash from operating activities was HK$212.8 million, net cash used in investing activities was HK$20.1 million, and net cash used in financing activities was HK$188.8 million, resulting in cash and cash equivalents of HK$104.0 million at period-end Condensed Consolidated Statement of Cash Flows Summary (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :-------------------------------- | :------------ | :------------ | | Net cash from operating activities | 212,752 | 177,312 | | Net cash used in investing activities | (20,134) | (19,014) | | Net cash used in financing activities | (188,839) | (134,907) | | Net increase in cash and cash equivalents | 3,779 | 23,391 | | Cash and cash equivalents at end of period | 103,974 | 99,267 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes supporting the condensed consolidated financial statements, covering accounting policies, segment information, and financial instrument disclosures 1. Basis of Preparation The condensed consolidated financial statements are prepared in HKD under HKAS 34 and Appendix 16 of the Listing Rules, with the company's functional currency being USD - The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[58] - The condensed consolidated financial statements are presented in Hong Kong Dollars, and the Company's functional currency is US Dollars[58] 2. Principal Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, applying revised HKFRSs, with the application of HKAS 7 and HKFRS 7 (Amendments) on supplier finance arrangements expected to impact disclosures on liabilities, cash flows, and liquidity risk - The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments and properties that are measured at fair values or revalued amounts, as appropriate[59] - During the current interim period, the Group has applied, for the first time, the revised Hong Kong Financial Reporting Standards ("HKFRSs") issued by the HKICPA[60] - The application of HKAS 7 and HKFRS 7 (Amendments) Supplier Finance Arrangements is expected to impact the disclosures in the annual consolidated financial statements regarding the Group's liabilities, cash flows, and liquidity risk related to supplier finance arrangements entered into by the Group[61] 3. Revenue and Segment Information The Group's revenue, primarily from wigs, hair accessories, and high-end human hair extension products, totaled HK$525.2 million as of June 30, 2024, with the US market being the largest contributor, and all revenue recognized upon transfer of goods control The Group's Revenue by Product (HK$ Thousand) | Product Category | June 30, 2024 | June 30, 2023 | | :------------------------------ | :------------ | :------------ | | Wigs, hair accessories and others | 441,842 | 394,009 | | High-end human hair extension products | 65,100 | 54,200 | | Halloween products | 18,236 | 30,984 | | Total revenue | 525,178 | 479,193 | The Group's Revenue by Geographical Location of Delivery to Customers (HK$ Thousand) | Location | June 30, 2024 | June 30, 2023 | | :-------------------------- | :------------ | :------------ | | United States of America | 483,924 | 429,571 | | Germany | 15,215 | 22,008 | | United Kingdom | 11,046 | 10,146 | | Japan | 3,342 | 7,544 | | The People's Republic of China | 5,368 | 6,480 | | Others | 6,283 | 3,444 | | Total revenue | 525,178 | 479,193 | - All revenue is recognized when control over the goods has been transferred, which is when the goods are delivered to the customers at their specified locations[65] 4. Other Gains and Losses Net other gains and losses for the period amounted to HK$2.9 million, primarily from net foreign exchange gains, partially offset by net losses on financial assets measured at fair value through profit or loss Other Gains and Losses (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------------------------------------ | :------------ | :------------ | | Net loss on financial assets measured at fair value through profit or loss | (230) | (206) | | Net foreign exchange gain | 3,152 | 2,817 | | Total | 2,922 | 2,611 | 5. Impairment Assessment of Trade Receivables under Expected Credit Loss Model Impairment losses on trade receivables for the period were HK$7 thousand, consistent with the prior year, with assessment inputs and assumptions remaining unchanged Impairment Losses on Trade Receivables (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------ | :------------ | :------------ | | Impairment losses | 7 | 4 | - The basis of the inputs and assumptions used in determining the impairment assessment and the valuation techniques are the same as those applied in the Group's annual financial statements for the year ended December 31, 2023[67] 6. Other Expenses Other expenses for the period decreased to HK$164 thousand from HK$372 thousand, primarily due to reduced donation expenses Other Expenses (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------- | :------------ | :------------ | | Donation expenses | 164 | 372 | 7. Finance Costs Total finance costs for the period increased by 27.6% to HK$21.5 million, mainly driven by higher interest on bank borrowings Finance Costs (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :-------------------------------- | :------------ | :------------ | | Interest on bank borrowings | 19,899 | 15,847 | | Interest on lease liabilities | 336 | 324 | | Interest on other borrowings | 494 | 516 | | Interest on amounts due to an associated company | 73 | 183 | | Others | 726 | – | | Total | 21,528 | 16,870 | 8. Income Tax Expense Income tax expense for the period significantly increased to HK$4.3 million, primarily due to the expiry of the income tax holiday in Bangladesh and under-provision in prior years Income Tax Expense (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------------------------------------ | :------------ | :------------ | | Current tax: Bangladesh | 916 | 552 | | Current tax: Other jurisdictions | 81 | 70 | | Under-provision in prior years: Other jurisdictions | 997 | 76 | | Deferred tax: Current period | 1,596 | (60) | | Total | 4,346 | 638 | - The increase in income tax expense was mainly due to the expiry of the income tax holiday in Bangladesh[19][70] 9. Profit for the Period Profit for the period was stated after deducting depreciation of property, plant, and equipment of HK$19.4 million, and including interest income of HK$1.4 million and government grants of HK$0.2 million Profit for the Period Adjustments (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :---------------------------------- | :------------ | :------------ | | Depreciation of property, plant and equipment | 19,443 | 24,184 | | Interest income | (1,383) | (929) | | Government grants | (205) | – | - Government grants refer to grants under the Technology Voucher Programme under the Innovation and Technology Fund provided by the Hong Kong Government[71] 10. Dividends A final dividend of HK$0.029 per share, totaling approximately HK$19.0 million, was paid for the year ended December 31, 2023, and an interim dividend of HK$0.03 per share, totaling HK$19.7 million, was declared after the period-end Dividend Distribution (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :---------------------- | :------------ | :------------ | | Total final dividend paid | 19,014 | 25,385 | | Total interim dividend declared | 19,670 | N/A | - The interim dividend of HK$0.03 per share will be paid to the owners of the Company whose names appear on the register of members of the Company on September 13, 2024[72] 11. Earnings Per Share Basic earnings per share attributable to owners of the company was HK$0.04, based on a weighted average of 655,652 thousand ordinary shares, with diluted earnings per share not applicable Earnings Per Share Calculation Data | Indicator | June 30, 2024 (HK$ Thousand/Thousand Shares) | June 30, 2023 (HK$ Thousand/Thousand Shares) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Profit attributable to owners of the Company | 24,882 | 31,621 | | Weighted average number of ordinary shares | 655,652 | 686,082 | | Basic earnings per share (HK$) | 0.04 | 0.05 | | Diluted earnings per share | Not applicable | Not applicable | 12. Property, Plant and Equipment and Investment Properties The Group acquired HK$13.3 million in property, plant, and equipment, recognized a revaluation deficit of HK$2.7 million on industrial buildings, and recognized new right-of-use assets and lease liabilities of HK$216 thousand from new and renewed lease agreements Property, Plant and Equipment Related Data (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :---------------------------------- | :------------ | :------------ | | Acquisition of property, plant and equipment | 13,260 | 13,853 | | Deficit on revaluation of properties | 2,731 | – | | New right-of-use assets | 216 | 1,624 | | New lease liabilities | 216 | 1,624 | 13. Inventories Total inventories decreased to HK$496.3 million as of June 30, 2024, from HK$521.4 million at the end of 2023, primarily due to reductions in raw materials and work-in-progress Inventory Composition (HK$ Thousand) | Inventory Category | June 30, 2024 | December 31, 2023 | | :----------------- | :------------ | :---------------- | | Raw materials | 322,907 | 352,177 | | Work-in-progress | 81,217 | 98,470 | | Finished goods | 92,152 | 70,712 | | Total | 496,276 | 521,359 | 14. Trade and Other Receivables Total trade and other receivables amounted to HK$289.6 million as of June 30, 2024, with trade receivables at HK$226.8 million, and the Group typically grants an average credit period of 90 days to trade customers Trade and Other Receivables (HK$ Thousand) | Indicator | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Trade receivables, net | 226,779 | 214,926 | | Other receivables | 19,201 | 21,840 | | Deposits for acquisition of a subsidiary | 10,000 | – | | Total | 289,555 | 281,815 | Ageing Analysis of Trade Receivables (HK$ Thousand) | Ageing | June 30, 2024 | December 31, 2023 | | :----------- | :------------ | :---------------- | | 0 to 60 days | 159,614 | 150,053 | | 61 to 90 days | 43,427 | 46,294 | | 91 to 120 days | 10,792 | 10,888 | | Over 120 days | 12,946 | 7,691 | | Total | 226,779 | 214,926 | - The Group grants an average credit period of 90 days to its trade customers[78] 15. Pledged Bank Deposits Pledged bank deposits, classified as current assets, serve as collateral for bank and other borrowings and will be released upon repayment of the related borrowings - Pledged bank deposits refer to deposits pledged to banks and financial institutions as security for bank and other borrowings, and are therefore classified as current assets[79] - The pledged bank deposits will be released upon repayment of the relevant bank and other borrowings[79] 16. Trade and Other Payables Trade payables decreased to HK$56.9 million as of June 30, 2024, from HK$73.7 million at the end of 2023, with accrued staff costs at HK$32.2 million, and management is negotiating out-of-court settlements for certain trade payables under legal dispute Trade and Other Payables (HK$ Thousand) | Indicator | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Trade payables | 56,933 | 73,729 | | Accrued staff costs | 32,229 | 32,671 | | Accruals and other payables | 13,151 | 7,837 | Ageing Analysis of Trade Payables (HK$ Thousand) | Ageing | June 30, 2024 | December 31, 2023 | | :------------- | :------------ | :---------------- | | 0 to 60 days | 26,195 | 39,934 | | 61 to 120 days | 40 | 2 | | Over 120 days | 30,698 | 33,793 | | Total | 56,933 | 73,729 | - During the year ended December 31, 2023, certain suppliers initiated legal proceedings against the Company's wholly-owned subsidiary in China for settlement of trade payables, and management is negotiating with the relevant suppliers for out-of-court settlements[81] 17. Secured Bank and Other Borrowings/Bank Overdrafts Total secured bank and other borrowings amounted to HK$604.3 million as of June 30, 2024, with an average effective annual interest rate ranging from 3.25% to 8.85% for floating-rate bank borrowings, and the Group complied with all loan covenants Secured Bank and Other Borrowings (HK$ Thousand) | Indicator | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :---------------- | | Bank overdrafts | 665 | – | | Bank borrowings | 502,937 | 454,243 | | Bank borrowings under supplier finance arrangements | 89,467 | 130,034 | | Other borrowings | 11,242 | 19,458 | | Total | 604,311 | 603,735 | - The average effective annual interest rate for the Group's bank borrowings under floating rate arrangements ranged from 3.25% to 8.85%[82] - Bank facilities are secured by pledged bank deposits, land and buildings, negative pledges over assets of subsidiaries, and certain life insurance contracts[83] - The Group has complied with the financial covenants at the end of the reporting period[85] 18. Share Capital of the Company As of June 30, 2024, the company's authorized share capital was 1,000,000,000 shares, par value US$0.01, with 655,652,000 issued and fully paid shares amounting to HK$51.01 million Share Capital Information | Indicator | Number of Shares (Thousand Shares) | Amount (HK$ Thousand) | | :------------------------ | :--------------------------------- | :-------------------- | | Authorised share capital | 1,000,000 | 10,000 (US$ Thousand) | | Issued and fully paid share capital | 655,652 | 51,010 | 19. Share-based Payment Transactions The Group adopted a share option scheme in 2017 to incentivize employees, but no share options have been granted as of the publication date of these condensed consolidated financial statements - The Share Option Scheme aims to provide an opportunity for any director and full-time employee of any member of the Group who has contributed or will contribute to the Group to acquire ownership interests in the Company[86] - As of the date of publication of these condensed consolidated financial statements, no share options have been granted by the Group[86] 20. Fair Value Measurement of Financial Instruments The Group's financial assets measured at fair value, primarily investment funds and life insurance contracts, are classified as Level 3, with no transfers between Level 1 and Level 2 during the period Financial Assets Measured at Fair Value on a Recurring Basis (HK$ Thousand) | Financial Asset Category | June 30, 2024 | December 31, 2023 | Fair Value Hierarchy | Valuation Techniques and Key Inputs | | :----------------------- | :------------ | :---------------- | :------------------- | :---------------------------------- | | Investment funds | 1,334 | 2,010 | Level 3 | Based on the net asset value of the investment funds | | Life insurance contracts | 42,803 | 41,790 | Level 3 | Account value as reported by the insurance company | - The directors of the Company consider the account value (i.e. surrender value) as reported by the insurance company to be an appropriate estimate of fair value[88] - There were no transfers between Level 1 and Level 2 during the reporting period[89] 21. Major Non-cash Transactions Bank borrowings under supply chain finance arrangements, amounting to approximately HK$129.9 million, represent payments made directly by banks to suppliers during the six months ended June 30, 2024 Bank Borrowings under Supply Chain Finance Arrangements (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :------------------------------------------ | :------------ | :------------ | | Bank borrowings under supply chain finance arrangements | 129,913 | 88,667 | 22. Related Party Transactions The Group engaged in computer products and services transactions with a related party totaling HK$540 thousand, and remuneration for directors and other key management personnel amounted to HK$2.9 million during the period Related Party Transactions and Key Management Personnel Remuneration (HK$ Thousand) | Indicator | June 30, 2024 | June 30, 2023 | | :-------------------------------- | :------------ | :------------ | | Computer products and services expenses | 540 | 540 | | Key management personnel remuneration | 2,938 | 2,808 | - The transactions for computer products and services expenses were entered into with Sunshine Software Limited, which is controlled by Mr. Cheung Yau Chong[92] - The remuneration of directors and other key management personnel is determined based on individual performance and market trends[93]