盛诺集团(01418) - 2025 - 中期财报

Corporate Information Board of Directors The Board of Directors of Sinomax Group Limited comprises executive, non-executive, and independent non-executive directors, with Lam Chi Fan as Chairman and Cheung Tung as President, while Lam Kam Cheung also serves as CFO and Company Secretary - The Board members include Executive Directors Cheung Tung (President), Chan Fung, Lam Kam Cheung (CFO and Company Secretary), Lam Fei Man; Non-executive Director Lam Chi Fan (Chairman of the Board); and Independent Non-executive Directors Wong Chi Keung, Cheung Kit, Cheung Wah Keung[5][6] Committees The company has established an Audit Committee, Nomination Committee, Remuneration Committee, and Corporate Governance Committee to ensure effective corporate governance - The Audit Committee Chairman is Wong Chi Keung, Nomination Committee Chairman is Lam Chi Fan, Remuneration Committee Chairman is Cheung Kit, and Corporate Governance Committee Chairman is Wong Chi Keung[5][6][8] Company Secretary and Authorised Representatives Lam Kam Cheung serves as the Company Secretary, with Cheung Tung and Lam Kam Cheung as the authorised representatives - The Company Secretary is Lam Kam Cheung, and the authorised representatives are Cheung Tung and Lam Kam Cheung[9] Auditor and Legal Advisor PricewaterhouseCoopers serves as the company's auditor, and Maples and Calder (Hong Kong) LLP is the legal advisor - The auditor is PricewaterhouseCoopers, and the legal advisor is Maples and Calder (Hong Kong) LLP[9] Trading Bankers The company maintains banking relationships with several prominent banks, including China Construction Bank (Asia), Citibank Hong Kong Branch, and Hang Seng Bank - Trading bankers include China Construction Bank (Asia) Corporation Limited, Citibank Hong Kong Branch, Hang Seng Bank Limited, OCBC Wing Hang Bank Limited, The Hongkong and Shanghai Banking Corporation Limited, and United Overseas Bank Limited[10][11] Share Registrars Tricor Investor Services Limited is the Hong Kong share registrar, and Maples Fund Services (Cayman) Limited is the principal share registrar in the Cayman Islands - The Hong Kong share registrar is Tricor Investor Services Limited, and the principal share registrar in the Cayman Islands is Maples Fund Services (Cayman) Limited[10][11] Registered Office and Headquarters The company's registered office is in the Cayman Islands, with its headquarters and principal place of business in Hong Kong's Kowloon Bay - The registered office is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands[13] - The headquarters and principal place of business in Hong Kong are located at Units 2005-2007, 20th Floor, Tower 1, MegaBox, Enterprise Square Five, 38 Wang Chiu Road, Kowloon Bay, Hong Kong[14] Listing Information and Investor Relations The company is listed on The Stock Exchange of Hong Kong Limited with stock code 1418 and provides investor relations contact details - The company is listed on The Stock Exchange of Hong Kong Limited with stock code 1418[14] - The investor relations contact email is ir@sinomax.com[14] Management Discussion and Analysis Business Review During the reporting period, the Group's total revenue decreased by 5.5% to HK$1,892.1 million year-on-year, primarily due to sales declines in China and North America, offset by strong performance in Europe and other overseas markets; gross profit and profit for the period both significantly decreased due to increased indirect costs from new factory leases and reduced marketing expenses - During the reporting period (six months ended June 30, 2025), the Group's revenue decreased by approximately HK$110.7 million or 5.5% year-on-year to approximately HK$1,892.1 million[16][18] - Gross profit decreased by approximately HK$64.9 million or 12.8% year-on-year to approximately HK$442.4 million, primarily due to increased indirect costs from new factory leases in Vietnam and the US in 2024[24][29] - Profit for the period decreased by approximately HK$43.8 million or 59.0% year-on-year to approximately HK$30.4 million[27][31] Revenue by Operating Segments Sales in the China and North American markets decreased by 8.2% and 14.9% respectively, influenced by economic weakness, low consumer sentiment, intense price competition, and US tariff policies, while Europe and other overseas markets saw a 25.2% increase due to higher sales to European customers Revenue by Operating Segments (For the six months ended June 30) | Market | 2025 (HK$’000) | 2024 (HK$’000) | Change (%) | | :--- | :--- | :--- | :--- | | China Market | 792,541 | 863,566 | -8.2% | | North American Market | 692,022 | 813,581 | -14.9% | | Europe and Other Overseas Markets | 407,564 | 325,628 | 25.2% | | Total | 1,892,127 | 2,002,775 | -5.5% | - The decline in China market sales was primarily due to a weak economy, low consumer sentiment, and intense price competition[19][21] - The decrease in North American market sales was mainly affected by global trade fluctuations under US tariff policies, leading to increased supply chain uncertainty and operational disruptions[20][21] - The growth in sales in Europe and other overseas markets was primarily due to increased sales to European customers[23][28] Costs and Expenses Selling and distribution costs decreased by 7.1% to HK$235.1 million, mainly due to reduced marketing and advertising expenses, while administrative expenses decreased by 4.0% to HK$119.2 million, primarily due to lower staff costs - Selling and distribution costs decreased by approximately HK$17.9 million or 7.1% to approximately HK$235.1 million, primarily due to a reduction in marketing and advertising expenses of approximately HK$20.2 million[25][30] - Administrative expenses decreased by approximately HK$5.0 million or 4.0% to approximately HK$119.2 million, mainly due to a reduction in staff costs of approximately HK$2.8 million[26][30] Liquidity, Finance and Capital Resources As of June 30, 2025, the Group's net current assets slightly decreased, but bank balances and cash significantly increased; net cash from operating activities substantially declined, while bank financing utilization rose, with capital expenditures primarily for plant and machinery acquisition; current and quick ratios decreased, while capital gearing and debt-to-equity ratios increased - As of June 30, 2025, the Group's net current assets were approximately HK$353.1 million, a decrease from HK$370.2 million as of December 31, 2024[32][36] - Bank balances and cash increased by approximately HK$85.9 million or 32.7% to approximately HK$348.3 million[32][36] - Net cash generated from operating activities during the reporting period was approximately HK$33.8 million, a significant decrease from HK$136.9 million in the same period last year[33][36] - Utilized bank borrowings increased from HK$430.8 million as of December 31, 2024, to HK$621.2 million as of June 30, 2025[34][37] - Capital expenditure was approximately HK$46.2 million, primarily for the purchase of plant and machinery[35][38] Financial Ratios As of June 30, 2025, both current and quick ratios decreased, while capital gearing and debt-to-equity ratios significantly increased, reflecting a slight tightening of liquidity and higher leverage Financial Ratios | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current Ratio | 123.6% | 128.6% | | Quick Ratio | 89.6% | 91.8% | | Capital Gearing Ratio | 57.9% | 40.1% | | Debt to Equity Ratio | 23.2% | 13.9% | Foreign Currency Exposure The Group primarily faces foreign exchange risks from RMB and VND, but fluctuations of HKD against these currencies are not expected to materially impact operating results, thus no hedging instruments are used - The Group primarily operates in Hong Kong, China, the United States, and Vietnam, facing foreign exchange risks from Renminbi and Vietnamese Dong[42][43] - Appreciation or depreciation of the Hong Kong Dollar against the Renminbi and Vietnamese Dong is not expected to have a material impact on the Group's operating results, thus no hedging instruments are used[42][43] Treasury Policy and Market Risks The Group has a treasury policy to control treasury operations, reduce borrowing costs, and ensure sufficient cash and bank facilities for daily operations and short-term funding needs - The Group's treasury policy aims to control treasury operations and reduce borrowing costs[44][47] - The policy requires maintaining sufficient cash and cash equivalents and bank facilities to meet daily operations and short-term funding needs[44][47] Prospects Facing an unstable global economic environment in H1 2025, the Group anticipates continued challenges but will invest in high-growth potential businesses, consolidate strategic cooperation by increasing its stake in a European target company to 55% to expand its customer base, and plans to deepen market expansion in Europe and the US, particularly for Mattress-in-a-box products - The global economic environment is expected to remain volatile and challenging in the coming year[45][48] - The Group increased its equity interest in European entity M DK Holdings ApS to 55%, making it a subsidiary, and its financial results will be consolidated into the Group's accounts in 2025[46][48] - This strategic investment aims to strengthen business relationships, leverage operational synergies, consolidate long-term strategic cooperation, and expand the customer base[50][55] - Looking ahead, the Group will deepen its expansion in European and US markets, with Mattress-in-a-box sales expected to continue growing[51][55] Future Plans for Material Investments or Capital Assets Apart from the investment in the European target company disclosed in the "Prospects" section, the Group currently has no other plans for material investments or capital assets - Other than the investment disclosed in the 'Prospects' section, the Group has no other plans for material investments or capital assets[52][56] [Purchase, Sale or Redemption of the Company's Listed Securities](index=12&type=section&id=PURCHASE%2C%20SALE%20OR%20REDEMPTION%20OF%20THE%20COMPANY%27S%20LISTED%20SECU RITIES) During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[53][57] Interim Dividend The Board has resolved to declare an interim dividend of HK$0.5 cents per share, totaling approximately HK$8.75 million, a decrease from HK$1.0 cents per share in the prior year - The Board has resolved to declare an interim dividend of HK$0.5 cents per share for the reporting period (2024: HK$1.0 cents per share)[54][58] - The total interim dividend of approximately HK$8.75 million will be paid in cash on October 8, 2025[54][58] Closure of Register of Members The company will suspend its share transfer registration from September 16 to September 19, 2025, to determine eligibility for the interim dividend - The register of members will be closed from Tuesday, September 16, 2025, to Friday, September 19, 2025[59][62] - The record date is September 19, 2025, and all share transfer documents must be submitted by 4:30 p.m. on September 15, 2025[59][62] Employee and Remuneration Policy As of June 30, 2025, the Group's total workforce increased to 3,742 employees, with a corresponding rise in total staff costs; the Group offers competitive remuneration, benefits, and continuous training - As of June 30, 2025, the Group's total number of employees was 3,742 (June 30, 2024: 3,208), indicating an increase in headcount[60][63] - Total staff costs for the reporting period were approximately HK$312.2 million (2024: HK$303.0 million), primarily due to the increase in employee numbers[60][63] - The Group provides competitive remuneration packages, housing and travel allowances, medical insurance, and offers induction and continuous training for new employees[61][63] Other Information Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2025, the company's directors and chief executive held interests in the associated corporation Sinomax Enterprise Limited, primarily as beneficiaries of trusts - Directors Lam Chi Fan, Cheung Tung, Chan Fung, and Lam Fei Man hold shares in Sinomax Enterprise Limited as beneficiaries of trusts[67] Directors' Interests in Associated Corporation Sinomax Enterprise Limited | Director's Name | Nature of Interest | Number of Shares (L) | Approximate Percentage of Equity | | :--- | :--- | :--- | :--- | | Lam Chi Fan | Beneficiary of Frankie Trust | 15 | 30% | | Cheung Tung | Beneficiary of Cheung Family Trust | 5 | 10% | | Chan Fung | Beneficiary of Chan Fung Family Trust | 5 | 10% | | Lam Fei Man | Beneficiary of Lam Trust | 10 | 20% | Interests and Short Positions of Substantial Shareholders As of June 30, 2025, Sinomax Enterprise and Vistra Trust (BVI) Limited were the company's substantial shareholders, each holding 72.91% of the shares, primarily through trust structures Interests and Short Positions of Substantial Shareholders (As of June 30, 2025) | Name of Substantial Shareholder | Nature of Interest | Number of Shares (L) | Approximate Percentage of Equity | | :--- | :--- | :--- | :--- | | Sinomax Enterprise | Beneficial owner | 1,275,906,000 | 72.91% | | Vistra Trust (BVI) Limited | Trustee of various trusts | 1,275,906,000 | 72.91% | - Sinomax Enterprise is beneficially owned by various trusts, including Frankie Trust, Cheung Family Trust, James Family Trust, Chan Fung Family Trust, and Lam Trust[73] - Vistra Trust (BVI) Limited acts as trustee for Frankie Trust, James Family Trust, Cheung Family Trust, and Chan Fung Family Trust[73] Share Option Scheme The post-IPO share option scheme expired on July 9, 2024, with no outstanding share options as of June 30, 2025, and no share-based payment expenses recognized during the reporting period - The post-IPO share option scheme expired on July 9, 2024, and no further share options have been granted since then[75][79] - As of January 1, 2025, and June 30, 2025, there were no outstanding share options under the scheme[75][79] - No share-based payment expenses were recognized by the Group during the reporting period[228] Disclosure of Information on Directors There have been no changes in directors' biographical details requiring disclosure under the Listing Rules since the publication date of the 2024 annual report - There have been no changes in directors' biographical details requiring disclosure under Rule 13.51B(1) of the Listing Rules since the publication date of the annual report for the year ended December 31, 2024[76][80] Corporate Governance Practices The company is committed to maintaining high standards of corporate governance, has adopted the Corporate Governance Code in Appendix C1 Part 2 of the Listing Rules, and complied with all code provisions during the reporting period - The company has adopted the Corporate Governance Code set out in Appendix C1 Part 2 of the Listing Rules as its own corporate governance code[77][81] - During the reporting period, the company complied with all code provisions contained in the Corporate Governance Code[77][81] [Model Code for Securities Transactions](index=18&type=section&id=MODEL%20CODE%20FOR%20SECU RITIES%20TRANSACTIONS) The company has adopted a code of conduct for directors' securities transactions that is no less exacting than the Model Code, and all directors confirmed compliance with the relevant standards during the reporting period - The company has adopted a code of conduct for directors' securities transactions that is no less exacting than the standards set out in the Model Code[82][85] - All directors confirmed their compliance with the standards for securities transactions by directors as set out in the Model Code during the reporting period[82][85] Review of Interim Results The Board's Audit Committee, in conjunction with management, reviewed and recommended the adoption of the Group's unaudited condensed consolidated interim financial information, which PricewaterhouseCoopers has reviewed in accordance with Hong Kong Standard on Review Engagements - The Board's Audit Committee, in conjunction with management, reviewed the accounting principles and policies adopted by the Group and recommended the Board to adopt the unaudited condensed consolidated financial information[83][86] - PricewaterhouseCoopers has reviewed the Group's unaudited condensed consolidated interim financial information for the reporting period in accordance with Hong Kong Standard on Review Engagements 2410[84][86] Report on Review of Interim Financial Information Introduction PricewaterhouseCoopers was engaged to review Sinomax Group Limited's condensed consolidated interim financial information for the six months ended June 30, 2025, prepared in accordance with Hong Kong Accounting Standard 34 - The auditor has reviewed Sinomax Group Limited's unaudited condensed consolidated interim financial information for the six months ended June 30, 2025[88][89] - The financial information is prepared in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants[88][89] Scope of Review The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, which is less extensive than an audit, thus no audit opinion is expressed, and conclusions are based solely on the review - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, primarily involving inquiries of persons responsible for financial and accounting matters and applying analytical and other review procedures[91][93] - The scope of a review is substantially less than an audit, and accordingly, no audit opinion is expressed[91][93] Conclusion Based on the review, the auditor found no matters suggesting that the Group's interim financial information was not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 - The auditor has not become aware of any matter that makes them believe that the Group's interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting'[92][94] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2025, Group revenue decreased by 5.5% to HK$1,892.1 million, gross profit decreased by 12.8% to HK$442.4 million, profit for the period significantly declined by 59.0% to HK$30.4 million, and basic earnings per share were HK$1.54 cents Key Data from Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2025 (HK$’000) | 2024 (HK$’000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,892,127 | 2,002,775 | -5.5% | | Cost of sales | (1,449,684) | (1,495,485) | -3.1% | | Gross profit | 442,443 | 507,290 | -12.8% | | Selling and distribution expenses | (235,071) | (252,982) | -7.1% | | Administrative expenses | (119,227) | (124,161) | -4.0% | | Operating profit | 53,287 | 115,842 | -54.0% | | Profit before income tax | 35,829 | 92,746 | -61.4% | | Profit for the period | 30,415 | 74,205 | -59.0% | | Profit for the period attributable to owners of the Company | 26,911 | 62,096 | -56.7% | | Basic earnings per share (cents) | 1.54 | 3.55 | -56.6% | Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2025, the Group's total comprehensive income for the period was HK$44.7 million, a decrease from HK$54.2 million in the prior year, primarily impacted by exchange differences Key Data from Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Profit for the period | 30,415 | 74,205 | | Exchange differences on translation of overseas operations | 14,289 | (19,976) | | Total comprehensive income for the period | 44,704 | 54,229 | | Total comprehensive income for the period attributable to owners of the Company | 22,569 | 43,269 | | Total comprehensive income for the period attributable to non-controlling interests | 22,135 | 10,960 | - Exchange differences on translation of overseas operations turned from a loss of HK$19.976 million in the same period of 2024 to a gain of HK$14.289 million in the same period of 2025[98] Condensed Consolidated Statement of Financial Position As of June 30, 2025, the Group's total assets increased to HK$2,727.5 million, and total liabilities rose to HK$1,723.0 million; current assets saw increases in inventories, trade and other receivables, and cash and cash equivalents, while non-current lease liabilities decreased, and current unsecured bank borrowings and trade and other payables significantly increased Key Data from Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Non-current assets | 880,717 | 891,892 | -1.3% | | Current assets | 1,846,790 | 1,665,094 | 10.9% | | Total assets | 2,727,507 | 2,556,986 | 6.7% | | Equity | | | | | Equity attributable to owners of the Company | 973,524 | 973,705 | 0.0% | | Non-controlling interests | 30,959 | 26,051 | 18.8% | | Total equity | 1,004,483 | 999,756 | 0.5% | | Liabilities | | | | | Non-current liabilities | 229,331 | 262,334 | -12.6% | | Current liabilities | 1,493,693 | 1,294,896 | 15.4% | | Total liabilities | 1,723,024 | 1,557,230 | 10.6% | | Total equity and liabilities | 2,727,507 | 2,556,986 | 6.7% | - Cash and cash equivalents within current assets increased from HK$262.4 million to HK$348.3 million[100] - Unsecured bank borrowings within current liabilities increased from HK$401.1 million to HK$581.1 million[102] Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2025, equity attributable to owners of the company slightly decreased, non-controlling interests increased, and total comprehensive income for the period was HK$44.7 million Key Data from Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | June 30, 2025 (HK$’000) | January 1, 2025 (HK$’000) | | :--- | :--- | :--- | | Subtotal of equity attributable to owners of the Company | 973,524 | 973,705 | | Non-controlling interests | 30,959 | 26,051 | | Total equity | 1,004,483 | 999,756 | | Profit for the period (attributable to owners of the Company) | 26,911 | - | | Exchange differences on translation of overseas operations (attributable to owners of the Company) | (4,342) | - | | Total comprehensive income for the period (attributable to owners of the Company) | 22,569 | - | - Statutory reserves increased from HK$100.476 million as of January 1, 2025, to HK$105.321 million as of June 30, 2025[103] - Dividends declared amounted to HK$22.75 million[103] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2025, net cash inflow from operating activities significantly decreased to HK$33.8 million; net cash outflow from investing activities was HK$39.4 million, while net cash inflow from financing activities was HK$91.9 million, resulting in a net increase in cash and cash equivalents of HK$86.3 million Key Data from Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Net cash inflow from operating activities | 33,791 | 136,875 | | Net cash (outflow)/inflow from investing activities | (39,442) | 13,672 | | Net cash inflow/(outflow) from financing activities | 91,902 | (103,052) | | Net increase in cash and cash equivalents | 86,251 | 47,495 | | Cash and cash equivalents at end of period | 348,320 | 357,604 | - Net cash generated from operating activities significantly decreased by 75.3% year-on-year[106] - Cash flow from financing activities shifted from an outflow last year to an inflow this year, primarily due to increased proceeds from unsecured bank borrowings[106] Notes to the Condensed Consolidated Interim Financial Information 1 Basis of Preparation The condensed consolidated interim financial information is prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2024 - The financial information is prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting' issued by the Hong Kong Institute of Certified Public Accountants[107][111] - This report should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2024[107][111] 2 Accounting Policies The Group's accounting policies are consistent with the previous financial year, with initial application of HKFRS amendments not expected to have a material impact; new standards and amendments not yet adopted are disclosed, with HKFRS 18 anticipated to broadly affect presentation and disclosures - The accounting policies adopted are consistent with those applied in the previous financial year and the corresponding interim reporting period, except for the initial application of amendments to Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants[108][112] - The adopted amendments (such as HKAS 21 and HKFRS 1 amendments) had no material impact on prior period amounts and are not expected to have a material impact on current or future periods[110][113] - HKFRS 18, effective January 1, 2027, is expected to have a pervasive impact on the presentation and disclosures in the financial statements, particularly the statement of profit or loss and management-defined performance measures[118][122] 3 Estimation and Judgement The preparation of interim financial information involves management judgments, estimates, and assumptions, consistent with the significant judgments and sources of estimation uncertainty applied in the consolidated financial statements for the year ended December 31, 2024 - The preparation of the condensed consolidated interim financial information requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expenses[125][130] - The key sources of estimation and judgment are consistent with those applied in the consolidated financial statements for the year ended December 31, 2024[126][130] 4 Financial Risk Management and Financial Instruments The Group faces market risks (including foreign exchange, interest rate, and price risks), credit risk, and liquidity risk; risk management policies have not materially changed since year-end, nor have contractual undiscounted cash outflows of financial liabilities; trade receivables at FVTOCI use discounted cash flow valuation, with sensitivity analysis disclosed - The Group is exposed to market risks (including foreign exchange risk, cash flow and fair value interest rate risk, and price risk), credit risk, and liquidity risk[127][131] - Risk management policies have not changed materially since year-end, and there have been no material changes in the contractual undiscounted cash outflows of financial liabilities[129][131][132][134] - Trade receivables at fair value through other comprehensive income (FVTOCI) are valued using discounted cash flow techniques, with their fair value hierarchy classified as Level 3[138][139] - An increase in risk-adjusted discount rates or an extension of the estimated settlement period would result in a decrease in fair value[138] 5 Revenue and Segment Information The Group primarily sells health and home products (e.g., pillows, mattresses) and polyurethane foam, directly through retail networks and the internet, and to wholesalers, retailers, and furniture manufacturers; revenue is segmented by China, North America, Europe, and other overseas markets - The Group primarily sells health and home products (such as memory foam pillows, mattresses, and mattress toppers) and polyurethane foam[143][145] - Sales channels include self-operated standalone retail stores, consignment counters in department stores, and internet sales[143][145] Revenue from Contracts with Customers by Category (For the six months ended June 30) | Product Category | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Sales of health and home products | 1,324,940 | 1,341,486 | | Sales of polyurethane foam | 567,187 | 661,289 | | Total | 1,892,127 | 2,002,775 | Revenue by Geographical Market (For the six months ended June 30) | Geographical Market | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | China Market | 792,541 | 863,566 | | North American Market | 692,022 | 813,581 | | Europe and Other Overseas Markets | 407,564 | 325,628 | | Total | 1,892,127 | 2,002,775 | 6 Other Income For the six months ended June 30, 2025, the Group's other income was HK$16.8 million, a decrease from HK$32.2 million in the prior year, primarily due to a reduction in other income items Other Income (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Interest income | 2,240 | 3,388 | | Government grants | 690 | 911 | | Rental income | 5,257 | 5,635 | | Others | 8,655 | 22,305 | | Total | 16,842 | 32,239 | - Total other income decreased by 47.8% year-on-year[149] 7 Other (Losses)/Gains, Net For the six months ended June 30, 2025, the Group recorded a net other loss of HK$10.5 million, compared to a net gain of HK$3.2 million in the prior year, primarily due to net exchange losses Other (Losses)/Gains, Net (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Gain/(loss) on disposal of property, plant and equipment | 289 | (202) | | Net exchange (losses)/gains | (10,823) | 3,401 | | Total | (10,534) | 3,199 | - Net exchange differences shifted from a gain of HK$3.401 million in the same period of 2024 to a loss of HK$10.823 million in the same period of 2025[151] 8 Finance Costs For the six months ended June 30, 2025, the Group's finance costs increased to HK$24.7 million, primarily due to higher interest on bank borrowings and lease liabilities Finance Costs (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Interest on bank borrowings | 13,759 | 12,585 | | Interest on lease liabilities | 9,513 | 7,720 | | Interest and fees on factoring of trade receivables | 1,477 | 2,791 | | Total | 24,749 | 23,096 | - Total finance costs increased by 7.1% year-on-year[153] 9 Income Tax Expense For the six months ended June 30, 2025, the Group's income tax expense significantly decreased to HK$5.4 million, with the effective tax rate falling to 15%, mainly due to underperformance of certain Chinese subsidiaries Income Tax Expense (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Hong Kong profits tax | 3,339 | 1,529 | | PRC enterprise income tax | 5,812 | 12,942 | | PRC withholding tax | 1,077 | 1,203 | | Overseas income tax | 222 | 4,148 | | Deferred tax | (5,036) | (1,281) | | Total | 5,414 | 18,541 | - The estimated average annual tax rate decreased from 20% in the same period of 2024 to 15% in the same period of 2025[155][156] - The lower effective tax rate was primarily due to the underperformance of certain subsidiaries in China subject to higher statutory tax rates[155][156] 10 Profit for the Period For the six months ended June 30, 2025, profit for the period was HK$30.4 million, influenced by factors such as inventory costs, staff costs, depreciation and amortization, and marketing expenses Key Factors Affecting Profit for the Period (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | Cost of inventories recognized | 1,104,100 | 1,161,730 | | Total staff costs | 312,243 | 302,983 | | Depreciation of property, plant and equipment | 43,138 | 35,751 | | Depreciation of right-of-use assets | 45,571 | 39,261 | | Marketing expenses | 62,210 | 82,443 | - Total staff costs increased, primarily due to an increase in employee numbers[159] - Marketing expenses significantly decreased[159] 11 Earnings Per Share For the six months ended June 30, 2025, both basic and diluted earnings per share were HK$1.54 cents, a significant decrease from HK$3.55 cents in the prior year, with no significant dilutive effect due to option exercise prices being higher than the average share price Earnings Per Share Data (For the six months ended June 30) | Indicator | 2025 (HK$’000/Number of shares) | 2024 (HK$’000/Number of shares) | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company | 26,911 | 62,096 | | Weighted average number of ordinary shares for basic earnings per share | 1,750,002,000 | 1,750,002,000 | | Basic earnings per share (cents) | 1.54 | 3.55 | | Diluted earnings per share (cents) | 1.54 | 3.55 | - Diluted earnings per share for the six months ended June 30, 2025, and 2024 were equal to basic earnings per share, as the outstanding share options had no dilutive effect because the exercise price of each option was higher than the average share price during the period[162] 12 Dividend The Board has decided to declare an interim dividend of HK$0.5 cents per share for the six months ended June 30, 2025, totaling approximately HK$8.75 million, to be paid on October 8, 2025 - The Board has decided to declare an interim dividend of HK$0.5 cents per share (2024: HK$1.0 cents per share)[164][165] - The total dividend of approximately HK$8.75 million will be paid in cash on October 8, 2025[164][165] 13 Property, Plant and Equipment, Right-of-Use Assets, Investment Properties, Goodwill and Intangible Assets As of June 30, 2025, the carrying amounts of the Group's property, plant and equipment, right-of-use assets, investment properties, goodwill, and intangible assets all changed; management assessed impairment for cash-generating units in the US and China, recognizing no impairment, but sensitivity analysis indicates that a slight decrease in growth rate could lead to impairment Changes in Carrying Amounts of Assets (As of June 30) | Asset Category | June 30, 2025 (HK$’000) | January 1, 2025 (HK$’000) | | :--- | :--- | :--- | | Property, plant and equipment | 426,826 | 415,760 | | Right-of-use assets | 264,720 | 299,327 | | Investment properties | 23,669 | 28,026 | | Goodwill | 5,318 | 5,170 | | Intangible assets | 6,732 | 7,621 | - During the reporting period, additions to property, plant and equipment amounted to HK$46.236 million, and additions to right-of-use assets amounted to HK$10.462 million[167] - Management performed impairment assessments for property, plant and equipment and right-of-use assets of cash-generating units in the US and China, with no impairment recognized[171][173][176][178] - If the average growth rate of the US cash-generating unit decreases by 1%, an impairment of HK$18.29 million would be recognized[175][178] - If the average growth rate of the Dormeo cash-generating unit decreases by 1%, an impairment of HK$4.665 million would be recognized[183][185] 14 Interest in an Associate As of June 30, 2025, the Group's interest in associate M DK Holdings ApS was HK$70.016 million, an increase from the beginning of the year, primarily due to its share of the associate's profit and exchange differences Changes in Interest in an Associate (For the six months ended June 30) | Item | 2025 (HK$’000) | 2024 (HK$’000) | | :--- | :--- | :--- | | At January 1 | 54,654 | – | | Share of profit of an associate | 7,291 | – | | Exchange differences | 8,071 | – | | At June 30 | 70,016 | – | - The Group holds a 45% ownership interest in M DK Holdings ApS, a Danish associate, accounted for using the equity method[189] 15 Inventories As of June 30, 2025, the Group's total inventories amounted to HK$509.082 million, an increase from December 31, 2024, driven by increases in raw materials and work-in-progress; inventory impairment provision was approximately HK$78.142 million Composition of Inventories (As of June 30) | Item | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Raw materials | 206,469 | 199,443 | | Work-in-progress | 76,306 | 43,242 | | Finished goods | 226,307 | 233,863 | | Total | 509,082 | 476,548 | - Cost of inventories recognized was HK$1,104.1 million[191][193] - Inventory impairment provision was approximately HK$78.142 million[192][193] 16 Trade Receivables, Deposits, Prepayments and Other Receivables As of June 30, 2025, net trade receivables increased to HK$697.3 million, and total trade and other receivables rose to HK$857.4 million; credit terms typically range from 7 to 120 days Composition of Trade and Other Receivables (As of June 30) | Item | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Trade receivables, net | 697,318 | 626,007 | | Deposits, prepayments and other receivables | 160,055 | 181,088 | | Total trade and other receivables | 857,373 | 807,095 | - Credit terms for trade receivables typically range from 7 to 120 days[198][200] Ageing Analysis of Trade Receivables (As of June 30) | Ageing | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Within 30 days | 327,188 | 299,538 | | 31 to 60 days | 202,000 | 182,853 | | 61 to 90 days | 94,610 | 96,867 | | 91 to 180 days | 67,949 | 32,678 | | 181 to 365 days | 532 | 14,071 | | Over 365 days | 5,039 | – | | Total | 697,318 | 626,007 | 17 Bill Receivables As of June 30, 2025, total bill receivables amounted to HK$112.559 million, with most endorsed to settle trade payables, and all bills maturing within one year Ageing Analysis of Bill Receivables (As of June 30) | Ageing | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Within 30 days | 27,643 | 23,374 | | 31 to 60 days | 18,369 | 18,956 | | 61 to 90 days | 16,188 | 23,810 | | 91 to 180 days | 50,267 | 43,704 | | 181 to 365 days | 92 | 2,521 | | Total | 112,559 | 112,365 | - Approximately HK$92.16 million of bill receivables were endorsed to settle trade payables[203][204] - All bill receivables have maturity periods of less than one year[203][204] 18 Trade Receivables at Fair Value Through Other Comprehensive Income ("FVTOCI") The Group sells certain trade receivables (whose cash flows are solely principal and interest payments) to financial institutions via non-recourse factoring arrangements, classifying them as FVTOCI financial assets; as of June 30, 2025, the effective interest rate for FVTOCI trade receivables ranged from 5.45% to 6.95% - The Group sells certain trade receivables through non-recourse factoring arrangements to financial institutions, classifying them as FVTOCI financial assets[206][208] - As of June 30, 2025, the effective interest rate for FVTOCI trade receivables ranged from 5.45% to 6.95% per annum[207][208] - Fair value changes were not material and were not recognized as FVTOCI reserves in equity[207][208] 19 Trade and Other Payables As of June 30, 2025, total trade payables were HK$470.4 million, and total trade and other payables were HK$762.2 million; credit terms range from 30 to 60 days Composition of Trade and Other Payables (As of June 30) | Item | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Trade payables | 470,404 | 487,035 | | Accrued operating expenses | 130,633 | 90,303 | | Accrued salaries | 65,002 | 89,572 | | Other taxes payable | 19,487 | 27,700 | | Accrued right-of-use fees | 35,639 | 33,226 | | Refundable deposits received | 8,717 | 9,794 | | Dividends payable | 26,733 | – | | Deferred government grants | 701 | 869 | | Other payables and accrued expenses | 4,880 | 5,361 | | Total trade and other payables | 762,196 | 743,860 | - Credit terms for trade payables range from 30 to 60 days[213][214] Ageing Analysis of Trade Payables (As of June 30) | Ageing | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Within 30 days | 275,696 | 302,254 | | 31 to 60 days | 113,793 | 96,598 | | 61 to 90 days | 28,139 | 38,806 | | 91 to 180 days | 45,627 | 39,894 | | Over 180 days | 7,149 | 9,483 | | Total | 470,404 | 487,035 | 20 Bill Payables As of June 30, 2025, total bill payables amounted to HK$40.083 million, guaranteed by the company and certain of its subsidiaries Ageing Analysis of Bill Payables (As of June 30) | Ageing | June 30, 2025 (HK$’000) | December 31, 2024 (HK$’000) | | :--- | :--- | :--- | | Within 30 days | 13,161 | 3,305 | | 31 to 60