中漆集团(01932) - 2025 - 中期业绩

Financial Summary The Group's financial performance for the six months ended June 30, 2025, shows a significant increase in loss attributable to owners and a decrease in revenue, alongside a reduction in cash and borrowings. Financial Summary for the Six Months Ended June 30, 2025 | Metric | 2025 (HKD thousands) | 2024 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 106,338 | 148,322 | -28.3 | | Gross Profit | 41,974 | 58,134 | -27.8 | | Gross Profit Margin | 39.5% | 39.2% | 0.8 | | Loss Attributable to Owners of the Company | (29,151) | (14,972) | 94.7 | | Loss Per Share (HK cents) Basic and Diluted | (2.92) | (1.50) | 94.7 | Financial Position Summary as of June 30, 2025 | Metric | June 30, 2025 (HKD thousands) | December 31, 2024 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents and Pledged Deposits | 132,862 | 191,459 | -30.6 | | Bank and Other Borrowings | 160,250 | 195,972 | -18.2 | | Gearing Ratio | 44.2% | 52.0% | -15.0 | | Net Asset Value Per Share (HKD) | 0.37 | 0.38 | -2.6 | Interim Results This section provides an overview of the Group's performance during the interim period, highlighting key financial outcomes. Condensed Consolidated Statement of Profit or Loss The condensed consolidated statement of profit or loss details the Group's financial performance, showing a significant increase in loss for the period. Condensed Consolidated Statement of Profit or Loss (For the Six Months Ended June 30) | Metric | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Revenue | 106,338 | 148,322 | | Cost of Sales | (64,364) | (90,188) | | Gross Profit | 41,974 | 58,134 | | Other Income and Gains, Net | 2,599 | 6,596 | | Selling and Distribution Expenses | (20,151) | (28,990) | | Administrative Expenses | (34,132) | (37,684) | | Net Reversal of Impairment Provisions for Trade and Bills Receivables / (Provisions) | 928 | (956) | | Other Expenses, Net | (14,248) | (4,649) | | Finance Costs | (3,992) | (5,885) | | Loss Before Tax | (27,022) | (13,434) | | Income Tax Expense | (2,166) | (1,201) | | Loss for the Period | (29,188) | (14,635) | | Loss Attributable to Owners of the Parent | (29,151) | (14,972) | | Loss / (Profit) Attributable to Non-controlling Interests | (37) | 337 | | Basic and Diluted Loss Per Share (HK cents) | (2.92) | (1.50) | Condensed Consolidated Statement of Comprehensive Income This statement presents the Group's total comprehensive loss for the period, including exchange differences on translation of foreign operations. Condensed Consolidated Statement of Comprehensive Income (For the Six Months Ended June 30) | Metric | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Loss for the Period | (29,188) | (14,635) | | Exchange Differences on Translation of Foreign Operations | 14,970 | (13,166) | | Other Comprehensive Income / (Loss) for the Period | 14,970 | (13,166) | | Total Comprehensive Loss for the Period | (14,218) | (27,801) | | Total Comprehensive Loss Attributable to Owners of the Parent | (14,304) | (28,037) | | Total Comprehensive Income / (Loss) Attributable to Non-controlling Interests | 86 | 236 | Condensed Consolidated Statement of Financial Position The condensed consolidated statement of financial position provides a snapshot of the Group's assets, liabilities, and equity as of June 30, 2025. Condensed Consolidated Statement of Financial Position (As at June 30, 2025) | Metric | June 30, 2025 (HKD thousands) | December 31, 2024 (HKD thousands) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 87,905 | 90,786 | | Investment Properties | 296,124 | 295,283 | | Total Non-current Assets | 433,806 | 438,683 | | Current Assets | | | | Inventories | 20,342 | 18,664 | | Trade and Bills Receivables | 76,052 | 103,628 | | Cash and Cash Equivalents | 115,353 | 169,252 | | Total Current Assets | 283,163 | 365,313 | | Current Liabilities | | | | Trade and Bills Payables | 96,124 | 125,437 | | Interest-bearing Bank Borrowings | 77,852 | 88,075 | | Total Current Liabilities | 223,793 | 270,259 | | Net Current Assets | 59,370 | 95,054 | | Non-current Liabilities | | | | Loans from Parent Group | 33,927 | 107,897 | | Interest-bearing Bank Borrowings | 48,471 | – | | Total Non-current Liabilities | 126,310 | 152,674 | | Net Assets | 366,866 | 381,063 | | Total Equity | 366,866 | 381,063 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the condensed consolidated financial statements, offering further insights into the Group's accounting policies and financial performance. 1.1 Basis of Preparation These condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and the Listing Rules, and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2024. - These interim financial statements are prepared in accordance with HKAS 34 and the Listing Rules, supplementing the annual consolidated financial statements[10] 1.2 Changes in Accounting Policies and Disclosures Accounting policies for the period are consistent with the prior year, except for the adoption of HKAS 21 amendments regarding lack of exchangeability, which had no material impact as the Group's transaction and functional currencies are convertible. - The Group adopted HKAS 21 amendments on lack of exchangeability, but it had no impact on the financial statements as all group currencies are convertible[11][12] 2. Operating Segment Information The Group operates in two segments: paint products and property investment, with paint products showing increased losses and property investment shifting from profit to loss, reflecting overall declines in revenue and assets due to market challenges. - The Group primarily operates in two segments: paint products and property investment, with management regularly reviewing their performance for resource allocation and evaluation[13][17] Operating Segment Results (For the Six Months Ended June 30) | Segment | 2025 Segment Revenue (HKD thousands) | 2024 Segment Revenue (HKD thousands) | 2025 Segment Results (HKD thousands) | 2024 Segment Results (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | Paint Products | 98,741 | 139,217 | (21,578) | (19,296) | | Property Investment | 9,475 | 14,473 | (186) | 12,871 | | Total | 108,216 | 153,690 | (21,764) | (6,425) | Operating Segment Assets and Liabilities (As at June 30) | Segment | 2025 Segment Assets (HKD thousands) | 2024 Segment Assets (HKD thousands) | 2025 Segment Liabilities (HKD thousands) | 2024 Segment Liabilities (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | Paint Products | 408,654 | 482,223 | 308,967 | 381,312 | | Property Investment | 305,284 | 308,391 | 39,691 | 39,477 | | Total | 713,938 | 790,614 | 348,658 | 420,789 | Geographical Information The Group's revenue is primarily from Mainland China, accounting for 89.4% of total revenue, with Hong Kong contributing 10.6%, and non-current assets also predominantly located in Mainland China. Revenue from External Customers (For the Six Months Ended June 30) | Region | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Hong Kong | 10,314 | 27,727 | | Mainland China | 96,024 | 120,595 | | Total | 106,338 | 148,322 | Non-current Assets (As at June 30) | Region | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Hong Kong | 1,186 | 855 | | Mainland China | 416,783 | 419,537 | | Total | 417,969 | 420,392 | - For the six months ended June 30, 2025 and 2024, no single customer accounted for 10% or more of the Group's total revenue[23] 3. Revenue, Other Income and Gains, Net The Group's total revenue decreased by 28.3% year-on-year, primarily due to reduced paint product sales and investment property rental income, with other income and gains also declining from lower government grants and property disposal gains. Revenue Analysis (For the Six Months Ended June 30) | Revenue Source | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Sales of Paint Products | 96,893 | 137,044 | | Gross Rental Income from Investment Properties | 9,445 | 11,278 | | Total | 106,338 | 148,322 | Types of Paint and Coating Products Sold (For the Six Months Ended June 30) | Product Type | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Industrial Paint and Coating Products | 56,485 | 64,904 | | Architectural Paint and Coating Products | 17,190 | 35,217 | | General Paint and Coating and Ancillary Products | 23,218 | 36,923 | | Total | 96,893 | 137,044 | Other Income and Gains, Net Analysis (For the Six Months Ended June 30) | Item | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Bank Interest Income | 721 | 1,228 | | Net Fair Value Gain on Investment Properties | – | 3,195 | | Government Grants | 40 | 204 | | Government Subsidies | 342 | 408 | | Total | 2,599 | 6,596 | 4. Finance Costs Finance costs for the period decreased by 32.2% year-on-year, primarily due to lower interest expenses on bank and other borrowings and lease liabilities. Finance Costs Analysis (For the Six Months Ended June 30) | Item | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Interest on Bank and Other Borrowings | 3,849 | 5,719 | | Interest Expense on Lease Liabilities | 143 | 166 | | Total | 3,992 | 5,885 | 5. Loss Before Tax The Group's loss before tax significantly increased year-on-year, primarily due to a shift from fair value gain to loss on investment properties, exchange differences turning from gain to loss, and higher employee termination costs. Components of Loss Before Tax (For the Six Months Ended June 30) | Item | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Cost of Inventories Sold | 64,364 | 90,188 | | Depreciation of Property, Plant and Equipment | 5,876 | 7,533 | | Depreciation of Right-of-use Assets | 2,314 | 2,294 | | Net Exchange Differences | 1,213 | (68) | | Net Fair Value Loss / (Gain) on Investment Properties | 8,363 | (3,195) | | Net Impairment Provisions for Trade and Bills Receivables / (Reversal of Provisions) | (928) | 956 | | Net Provisions for Inventories / (Reversal) to Net Realizable Value | (269) | 291 | | Employee Termination Costs | 1,128 | 600 | 6. Income Tax The Group has no Hong Kong profits tax provision due to no taxable profits, while Mainland China subsidiaries pay corporate income tax at a standard 25% rate, with high-tech qualified subsidiaries enjoying a preferential 15% rate. - No Hong Kong profits tax provision is made, while Mainland China subsidiaries are subject to a 25% corporate income tax rate, with high-tech enterprises enjoying a preferential 15% rate[29] 7. Loss Per Share Attributable to Owners of the Parent For the six months ended June 30, 2025, basic and diluted loss per share was 2.92 HK cents, a significant 94.7% increase from 1.50 HK cents in the prior year, with no dilution adjustment due to the anti-dilutive effect of share options. Loss Per Share (For the Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Loss for the Period Attributable to Owners of the Parent (HKD) | 29,151,000 | 14,972,000 | | Weighted Average Number of Ordinary Shares in Issue (Shares) | 1,000,000,000 | 1,000,000,000 | | Basic and Diluted Loss Per Share (HK cents) | (2.92) | (1.50) | - No diluted loss per share adjustment was made as the outstanding share options had an anti-dilutive effect on basic loss per share[30] 8. Dividends The Board resolved not to declare an interim dividend for the six months ended June 30, 2025, consistent with the prior year. - The Board resolved not to declare an interim dividend for the six months ended June 30, 2025[31] 9. Property, Plant and Equipment The cost of additions to property, plant and equipment significantly increased to HKD 284,000 for the period, while the net book value of disposals remained low. Changes in Property, Plant and Equipment (For the Six Months Ended June 30) | Item | 2025 (HKD) | 2024 (HKD) | | :--- | :--- | :--- | | Cost of Additions | 284,000 | 42,000 | | Net Book Value of Disposals | 1 | 2 | 10. Investment Properties The Group's investment property carrying value slightly increased, primarily due to positive exchange adjustments offsetting fair value losses, following revaluation by independent valuers. Changes in Carrying Value of Investment Properties (As at June 30) | Item | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Carrying Value at Beginning of Period / Year | 295,283 | 309,087 | | Fair Value Loss | (8,363) | (7,978) | | Exchange Adjustment | 9,204 | (9,785) | | Carrying Value at End of Period / Year | 296,124 | 295,283 | - Independent professional valuers revalued investment properties to HKD 296,124,000 as of June 30, 2025, with fair value generally derived using the income capitalization approach[33] 11. Trade and Bills Receivables Total trade and bills receivables decreased by 26.6% year-on-year, with a notable reduction in receivables aged within three months, as the Group closely monitors credit risk and has no significant concentration of credit risk. - The Group's trade receivables primarily arise from leasing investment properties and selling paint products, with credit terms generally one month, extendable to three months for major customers[34] Ageing Analysis of Trade and Bills Receivables (As at June 30) | Ageing | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Within 3 months | 37,069 | 55,670 | | Over 3 months but within 6 months | 8,431 | 7,511 | | Over 6 months | 30,552 | 40,447 | | Total | 76,052 | 103,628 | 12. Trade and Bills Payables Total trade and bills payables decreased by 23.3% year-on-year, primarily settled within three months, with some bills payable secured by pledged time deposits. Ageing Analysis of Trade and Bills Payables (As at June 30) | Ageing | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Within 3 months | 34,946 | 49,975 | | Over 3 months but within 6 months | 20,141 | 34,389 | | Over 6 months | 41,037 | 41,073 | | Total | 96,124 | 125,437 | - Trade and bills payables are unsecured, non-interest-bearing, and generally settled within two months, with bills payable of HKD 57,661,000 secured by pledged time deposits of HKD 17,509,000[36] 13. Share Option Scheme The Group granted 80,000,000 share options on June 15, 2022, with an exercise price of HKD 0.335 per share; as of June 30, 2025, 10,000,000 options lapsed due to director resignations, leaving 60,000,000 outstanding. - On June 15, 2022, 80,000,000 share options were granted with an exercise price of HKD 0.335 per share, a four-year vesting period, and a five-year exercise period[37] Outstanding Share Options (As at June 30) | Item | Number of Share Options 2025 | Number of Share Options 2024 | | :--- | :--- | :--- | | At January 1 | 70,000,000 | 80,000,000 | | Lapsed during the period | (10,000,000) | (10,000,000) | | At June 30 | 60,000,000 | 70,000,000 | | Vested and exercisable at June 30 | 54,000,000 | 56,000,000 | - Net share option expense recognized for the six months ended June 30, 2025, was approximately HKD 21,000, a significant decrease from HKD 209,000 in the prior year[39] 14. Comparative Figures Certain comparative figures have been reclassified to conform with the current period's presentation. - Certain comparative figures have been reclassified to conform with the current period's presentation[40] Management Discussion and Analysis This section provides a comprehensive review of the Group's operational and financial performance, market conditions, and future outlook. Interim Dividend The Board resolved not to declare an interim dividend for the six months ended June 30, 2025. - The Board resolved not to declare an interim dividend for the six months ended June 30, 2025[41] Business Review The Group's loss attributable to shareholders for H1 2025 significantly increased by 94.7% to approximately HKD 29.15 million, primarily due to a shift from fair value gain to loss on investment properties and a 29.3% decline in paint and coating product sales, despite effective cash outflow control and loan portfolio restructuring through operational cost savings. - The Group recorded a loss attributable to owners of the Company of approximately HKD 29.15 million for H1 2025, a 94.7% increase from the HKD 14.97 million loss in H1 2024[43] - The increased loss was primarily due to an HKD 8.36 million fair value loss on investment properties (compared to an HKD 3.20 million gain in H1 2024) and a 29.3% decrease in paint and coating product sales[43] - Through strategic operational optimization, net operating cash outflow significantly decreased by 29.1% compared to H1 2024, with bank and other borrowings reduced from HKD 195.97 million to HKD 160.25 million[44] Paint and Coating Business The paint and coating business faced challenges from a sluggish Mainland China property market, slower construction, and increased competition, resulting in a 29.3% year-on-year sales revenue decrease, with architectural paint and coating products experiencing the largest decline; however, gross profit margin remained resilient due to lower raw material and labor costs. - The continuous downturn in Mainland China's property market and significant slowdown in construction activities pressured demand for paint and coating products, particularly architectural paint and coating products[45] - Weak demand in the Hong Kong market, coupled with oversupply from new competitors, led major contractors to directly source paint and coating products from Mainland China[45] - For the six months ended June 30, 2025, the Group's paint and coating product sales revenue decreased by 29.3% compared to the prior year[45] Operational Review The Group's total revenue was HKD 106.34 million, a significant 28.3% decrease from the prior year, primarily due to reduced sales revenue and investment property rental income. Total Revenue Composition (For the Six Months Ended June 30) | Revenue Source | 2025 (HKD thousands) | 2024 (HKD thousands) | | :--- | :--- | :--- | | Sales Revenue | 96,890 | 137,040 | | Rental Income from Investment Properties | 9,450 | 11,280 | | Total Revenue | 106,340 | 148,320 | Paint and Coating Products The paint and coating products segment experienced increased losses, with revenue significantly decreasing to HKD 96.89 million, and all product categories showing substantial sales declines, particularly architectural paint and coating products. - The paint and coating products segment recorded a loss of HKD 21.58 million, an increase from the HKD 19.30 million loss in H1 2024[48] Paint and Coating Products Revenue Analysis (For the Six Months Ended June 30) | Product Type | 2025 (HKD thousands) | 2025 (%) | 2024 (HKD thousands) | 2024 (%) | Net Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Industrial Paint and Coating Products | 56,485 | 58.3 | 64,904 | 47.4 | -13.0 | | Architectural Paint and Coating Products | 17,190 | 17.7 | 35,217 | 25.7 | -51.2 | | General Paint and Coating and Ancillary Products | 23,218 | 24.0 | 36,923 | 26.9 | -37.1 | | Total | 96,893 | 100.0 | 137,044 | 100.0 | -29.3 | Significant Decrease in Sales to Hong Kong Wholesale and Retail Distributors Sales to Hong Kong wholesale and retail distributors significantly decreased by 67.7%, primarily due to the negative impact of the construction and building industry on Hong Kong's GDP and contractors shifting to direct procurement from Mainland China. - Sales to Hong Kong wholesale and retail distributors significantly decreased by 67.7% compared to the prior year[49] - The sales decline is primarily attributed to the negative impact of Hong Kong's construction and building industry on local GDP, and major contractors shifting to direct procurement of paint and coating products from Mainland China[49] Significant Decrease in Sales to Mainland China Wholesale and Retail Distributors Sales to Mainland China wholesale and retail distributors decreased by 13.8%, primarily impacted by a sluggish property market, industry saturation, and price wars driven by intensified competition. - Sales to Mainland China wholesale and retail distributors significantly decreased by 13.8% compared to the prior year[50] - The decline is mainly due to the sluggish Mainland China property market and saturation and competitive pressures within the paint and coating industry[50] Significant Decrease in Sales to Mainland China Private Residential Property Project Developers and their Contractors Sales to Mainland China private residential property project developers and contractors significantly decreased by 97.5%, primarily due to the ongoing sluggish property market, stalled new projects, and pending tender results. - Sales to Mainland China private residential property project developers and their contractors significantly decreased by 97.5% compared to the prior year[51] - The decline is attributed to the continuous downturn in Mainland China's property market, stalled progress on new real estate projects, and pending tender results[51] Significant Decrease in Sales to Mainland China Industrial Manufacturers Sales to Mainland China industrial manufacturers decreased by 13.0%, primarily due to intensified competition in the paint and coating industry and architectural paint manufacturers shifting to industrial paint production. - Sales to Mainland China industrial manufacturers significantly decreased by 13.0% compared to the prior year[52] - The decrease is mainly due to intensified competition in the paint and coating industry and architectural paint manufacturers shifting to industrial paint production, exacerbating market competitive pressure[52] Geographical Distribution of Revenue The Group's revenue primarily originated from Mainland China, increasing its share from 79.8% to 89.4%, while Hong Kong's share decreased from 20.2% to 10.6%, with South, Central, and East China remaining key revenue sources. - The Group's revenue from Mainland China and Hong Kong sales accounted for 89.4% and 10.6% respectively (compared to 79.8% and 20.2% in the prior year)[53] - Revenue generated from South, Central, and East China regions collectively accounted for 82.0% of the Group's sales (compared to 74.0% in the prior year)[53] Cost of Sales Cost of sales decreased due to lower raw material costs, direct and indirect labor costs, and depreciation and manufacturing overheads; falling crude oil prices positively impacted raw material costs, and the Group improved operational efficiency through cost-saving strategies. - A 19.2% decrease in crude oil prices (USD 59-68 per barrel) positively impacted raw material costs, enabling the Group to offer more competitive pricing[54] - Direct and indirect labor costs significantly decreased by 15.7% year-on-year, primarily due to lower sales and improved operational efficiency from production facility consolidation[55] - Depreciation and manufacturing overheads decreased by 18.7% year-on-year, with depreciation down 26.5% and manufacturing overheads down 8.2%[56] The Group's Gross Profit and Gross Profit Margin The Group's gross profit decreased by 30.6%, primarily due to lower sales; despite intense market competition and reduced demand, the gross profit margin remained resilient, declining by only 0.6 percentage points. - The Group's gross profit decreased by 30.6%, primarily due to a 29.3% reduction in sales compared to the prior year[57] - Despite challenges, the gross profit margin demonstrated resilience, decreasing by only 0.6 percentage points compared to the prior year[57] Other Income and Gains, Net Other income and gains, net, decreased by 14.7% year-on-year, primarily due to reduced government grants and gains from the disposal of property, plant and equipment. - Other income and gains, net, amounted to HKD 1.85 million, a 14.7% decrease from HKD 2.17 million in the prior year[58] - The decrease was mainly due to a HKD 160,000 reduction in government grants and a HKD 160,000 decrease in gains from the disposal of property, plant and equipment[58] Selling and Distribution Expenses and Administrative Expenses Selling and distribution expenses significantly decreased by 30.5%, primarily due to reduced legal and professional fees and cost savings, while administrative expenses also decreased by 8.5% from savings in staff costs and other operating expenses. - Selling and distribution expenses decreased by 30.5% from HKD 28.99 million to HKD 20.15 million, mainly due to a HKD 5.55 million reduction in legal and professional fees and HKD 3.29 million in cost savings[59] - Administrative expenses decreased by 8.5% to HKD 31.88 million, primarily due to a HKD 1.86 million reduction in staff costs and HKD 1.09 million in other operating expenses[59] Other Operating Expenses Other operating expenses decreased by 13.0% year-on-year, primarily due to a net reversal of impairment provisions for trade and bills receivables, despite an increase in employee termination costs. - Other operating expenses decreased by 13.0% compared to the prior year[60] - This was mainly due to a HKD 930,000 reversal of net impairment provisions for trade and bills receivables (compared to a HKD 960,000 provision in the prior year), resulting in a HKD 1.89 million improvement in impairment adjustments[60] - Employee termination costs increased by HKD 530,000 compared to the prior year[60] Property Investment The Group strategically reallocated investment properties, converting underutilized plants, and despite declining rental income and fair value losses from a sluggish Mainland China property market, RMB appreciation positively impacted asset valuation, leading to a slight increase in total investment property valuation, with investment properties now comprising 41.3% of total assets. - The Group strategically reallocated investment properties, effectively converting underutilized production plants and office premises to optimize asset allocation[61] - A 3.1% appreciation of the Renminbi positively impacted asset valuation, offsetting fair value losses and increasing investment property valuation from HKD 295.28 million to HKD 296.12 million[61] - Rental income from investment properties was HKD 9.45 million, a decrease from HKD 11.28 million in the prior year, resulting in a segment loss of HKD 190,000 (compared to a profit of HKD 12.87 million in the prior year)[62] - Investment property fair value adjustments amounted to HKD 11.56 million, leading to a fair value loss of HKD 8.36 million (compared to a gain of HKD 3.20 million in the prior year)[62] Financial Review The Group's total cash and cash equivalents decreased due to bank loan repayments, but total bank and other borrowings also significantly declined, improving both the gearing ratio and current ratio; inventory and trade and bills receivables turnover days increased, reflecting lower sales and the impact of some receivable litigations, while RMB appreciation generated positive exchange gains on equity. - Total cash and cash equivalents were approximately HKD 115.35 million, a decrease from December 31, 2024, primarily due to net repayment of bank and other borrowings of HKD 39.20 million[65] - Bank and other borrowings were approximately HKD 160.25 million, an 18.2% decrease from HKD 195.97 million as of December 31, 2024[65] Liquidity and Gearing Ratios (As at June 30) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Gearing Ratio | 44.2% | 52.0% | | Current Ratio | 1.27 times | 1.35 times | | Inventory Turnover Days | 57 days | 36 days | | Trade and Bills Receivables Turnover Days | 142 days | 127 days | - Due to RMB appreciation, exchange differences on translation of foreign operations recognized in other comprehensive income resulted in a HKD 14.97 million gain (compared to a HKD 13.17 million loss in the prior year)[68] Liquidity and Gearing The Group's cash and cash equivalents decreased, but bank and other borrowings also significantly declined, improving both the gearing ratio and current ratio; inventory and trade receivables turnover days increased, reflecting lower sales and the impact of some receivable litigations. - The Group's cash and bank balances are primarily denominated in HKD and RMB, with all bank borrowings denominated in HKD and RMB[66] - Inventory turnover days increased by 58.3% from 36 days to 57 days, and trade and bills receivables turnover days increased by 11.8% from 127 days to 142 days[67] Equity and Net Assets Shareholders' funds and net asset value per share slightly decreased, while RMB appreciation generated positive exchange gains on translation of foreign operations, positively impacting equity. Equity and Net Assets (As at June 30) | Metric | June 30, 2025 (HKD thousands) | December 31, 2024 (HKD thousands) | | :--- | :--- | :--- | | Shareholders' Funds | 362,810 | 377,090 | | Net Asset Value Per Share (HKD) | 0.37 | 0.38 | Contingent Liabilities The utilized amount of bank financing guarantees provided by the Company for its subsidiaries significantly increased to HKD 58 million, while performance bonds, secured by pledged deposits, were zero for the period. - As of June 30, 2025, the utilized amount of bank financing guaranteed by the Company for its subsidiaries was HKD 58 million (compared to HKD 21 million as of December 31, 2024)[69] - Performance bonds, secured by pledged deposits, were zero as of June 30, 2025 (compared to HKD 640,000 as of December 31, 2024)[69] Pledge of Assets Certain investment properties, property, plant and equipment, right-of-use assets, and cash deposits with a total net book value of HKD 306.24 million were pledged to financial institutions as collateral for bills payable, bank borrowings, performance bonds, and lease liabilities. - As of June 30, 2025, certain assets with a total net book value of HKD 306.24 million were pledged to financial institutions as collateral for bills payable, bank borrowings, performance bonds, and lease liabilities[71] - Changes in pledged assets were due to transitional performance from strategic financial restructuring and optimization, as well as the appreciation of the Renminbi[71] Employees The Group's total headcount decreased by 11.1% to 426 employees, with staff costs decreasing by 12.8% year-on-year, reflecting the Group's cost control efforts. Employee Headcount and Costs (For the Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Number of Employees (Persons) | 426 | 479 | | Staff Costs (HKD thousands) | 34,960 | 40,110 | - The Group provides comprehensive and competitive employee remuneration and benefits based on individual performance, along with training opportunities[72] Business Plan and Outlook For H2 2025, the Group will continue its "Business Revitalization Measures and Actions" to address market volatility and insufficient domestic demand, focusing on enriching product portfolios, expanding distribution networks, enhancing operational efficiency, reducing costs, and prioritizing high-interest loan repayment to lower financial costs. - The Group will implement "Business Revitalization Measures and Actions" to address market volatility, anticipating policy guidance to promote sustainable industry growth[73] - A core strategy is prioritizing repayment of high-interest borrowings to reduce financial costs and enhance liquidity, with bank and other borrowings already significantly reduced by 18.2%[74] - The objectives are threefold: (a) enriching the product portfolio and ensuring competitiveness; (b) expanding and strengthening distribution networks in Mainland China, Hong Kong, and other regions; and (c) enhancing operational efficiency and reducing costs[75] Significant Investments Held, Material Acquisitions and Disposals of Subsidiaries, and Future Plans for Material Investments or Capital Assets During the review period, the Group made no significant investments, acquisitions, or disposals of subsidiaries, and the Board has not approved any other plans for material investments or additions to capital assets. - During the review period, there were no acquisitions of other significant investments, nor any other material acquisitions or disposals of subsidiaries[76] - The Board has not approved any other plans for material investments or additions to capital assets[76] Purchase, Sale or Redemption of the Company's Shares During the review period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's shares. - During the review period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's shares[77] Corporate Governance This section outlines the Company's adherence to corporate governance principles and practices during the reporting period. Corporate Governance The Company applied and complied with the Corporate Governance Code in Appendix C1 of the Listing Rules during the period, except for the combined roles of Chairman and Chief Executive Officer, which the Board deems appropriate for policy continuity and business stability at this stage, subject to regular review. - The Company complied with the Corporate Governance Code during the period, except for Mr. Xu Haoquan holding both the Chairman and Chief Executive Officer positions[78] - The Board believes that Mr. Xu Haoquan holding both roles is appropriate at this stage to maintain policy continuity and business stability, and this arrangement will be regularly reviewed[78][79] Code for Securities Transactions by Directors The Company adopted a code for directors' securities transactions no less exacting than the Listing Rules' Model Code, and all directors confirmed compliance throughout the period. - The Company adopted a code for directors' securities transactions no less exacting than the Model Code set out in Appendix C3 of the Listing Rules[80] - All directors confirmed compliance with the standards of the Model Code and the Company's own code for the six months ended June 30, 2025[80]