中漆集团(01932) - 2025 - 中期财报

Company Information This section provides an overview of the company's governance structure, including its board of directors, committees, and key professional service providers Board of Directors and Committees The company's board comprises executive, non-executive, and independent non-executive directors, with audit, remuneration, and nomination committees, maintaining a stable governance structure despite some board member changes - The Board of Directors includes Honorary Chairman Lam Ting Po, Executive Director and Chairman Tsui Ho Chuen (Managing Director), Executive Director Li Kwong Chung (Sales Director), Non-Executive Director Mak Chi Wah, and Independent Non-Executive Directors Choi Yu Man, Ha Jun, and Meng Jin Xia[5] - The Audit Committee is chaired by Choi Yu Man, the Remuneration Committee by Ha Jun, and the Nomination Committee by Ha Jun[5] Professional Services and Contact Information The company engages Ernst & Young as its auditor and Tricor Investor Services Limited as its Hong Kong share registrar, with key banking relationships including HSBC and DBS Bank (Hong Kong) - The auditor is Ernst & Young, and the share registrars are Tricor Investor Services Limited (Hong Kong) and Conyers Trust Company (Cayman) Limited (Cayman Islands)[5] - Key bankers include The Hongkong and Shanghai Banking Corporation Limited, DBS Bank (Hong Kong) Limited, Nanyang Commercial Bank, Limited (Hong Kong), and HSBC Bank (China) Company Limited, Agricultural Bank of China Limited, Bank of China Limited, Shenzhen Rural Commercial Bank Corporation Limited (China)[5] - The principal place of business in Hong Kong is located at 31/F, North Point Centre, 338 Hennessy Road, Wanchai, Hong Kong, with the company website at www.cpmgroup.com.hk[6](index=6&type=chunk) Condensed Consolidated Statement of Profit or Loss This section presents the group's financial performance, highlighting revenue, gross profit, and net loss for the six months ended June 30, 2025 Financial Performance Overview For the six months ended June 30, 2025, the group's revenue decreased by 28.3% to HK$106,338 thousand, gross profit fell by 27.7% to HK$41,974 thousand, and loss for the period expanded to HK$29,188 thousand, with basic and diluted loss per share at 2.92 HK cents Condensed Consolidated Statement of Profit or Loss Key Data (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 106,338 | 148,322 | -28.3% | | Cost of sales | (64,364) | (90,188) | -28.6% | | Gross profit | 41,974 | 58,134 | -27.7% | | Other income and net gains | 2,599 | 6,596 | -60.6% | | Selling and distribution expenses | (20,151) | (28,990) | -30.5% | | Administrative expenses | (34,132) | (37,684) | -9.5% | | Loss before tax | (27,022) | (13,434) | +101.1% | | Income tax expense | (2,166) | (1,201) | +80.3% | | Loss for the period | (29,188) | (14,635) | +99.4% | | Loss attributable to owners of the parent | (29,151) | (14,972) | +94.7% | | Basic and diluted loss per share | (2.92) HK cents | (1.50) HK cents | +94.7% | - Loss before tax significantly increased from HK$13,434 thousand in the same period of 2024 to HK$27,022 thousand in 2025, primarily due to decreased revenue and changes in fair value of investment properties[8] Condensed Consolidated Statement of Comprehensive Income This section details the group's total comprehensive loss, including the impact of foreign currency translation differences for overseas operations Analysis of Total Comprehensive Loss For the six months ended June 30, 2025, the group's total comprehensive loss narrowed to HK$14,218 thousand from HK$27,801 thousand in the prior year, primarily due to a favorable shift in exchange differences on translating overseas operations from loss to gain Condensed Consolidated Statement of Comprehensive Income Key Data (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Year-on-year Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Loss for the period | (29,188) | (14,635) | (14,553) | | Exchange differences on translating overseas operations | 14,970 | (13,166) | 28,136 | | Total comprehensive loss for the period | (14,218) | (27,801) | 13,583 | | Total comprehensive loss attributable to owners of the parent | (14,304) | (28,037) | 13,733 | - Exchange differences on translating overseas operations shifted from a loss of HK$13,166 thousand in the same period of 2024 to a gain of HK$14,970 thousand in 2025, positively impacting total comprehensive loss[9] Condensed Consolidated Statement of Financial Position This section outlines the group's financial position, detailing assets, liabilities, and equity as of June 30, 2025 Asset and Liability Structure As of June 30, 2025, the group's total assets less current liabilities decreased to HK$493,176 thousand from HK$533,737 thousand, and net assets decreased to HK$366,866 thousand from HK$381,063 thousand at the beginning of the period Condensed Consolidated Statement of Financial Position Key Data (As of June 30) | Indicator | 2025 June 30 (HK$ thousand) | 2024 Dec 31 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Total non-current assets | 433,806 | 438,683 | (4,877) | | Total current assets | 283,163 | 365,313 | (82,150) | | Total current liabilities | 223,793 | 270,259 | (46,466) | | Net current assets | 59,370 | 95,054 | (35,684) | | Total assets less current liabilities | 493,176 | 533,737 | (40,561) | | Total non-current liabilities | 126,310 | 152,674 | (26,364) | | Net assets | 366,866 | 381,063 | (14,197) | | Total equity | 366,866 | 381,063 | (14,197) | - Total current assets decreased by HK$82,150 thousand, primarily due to a HK$27,576 thousand reduction in trade and bills receivables and a HK$53,899 thousand decrease in cash and cash equivalents[11] - Total non-current liabilities decreased by HK$26,364 thousand, mainly due to a significant HK$73,970 thousand reduction in loans from the parent company group, partially offset by a HK$48,471 thousand increase in interest-bearing bank borrowings[12] Condensed Consolidated Statement of Changes in Equity This section details the changes in the group's equity attributable to owners of the parent for the six months ended June 30, 2025 Details of Equity Changes For the six months ended June 30, 2025, total equity attributable to owners of the parent decreased from HK$377,088 thousand to HK$362,805 thousand, primarily due to a loss of HK$29,151 thousand for the period, partially offset by an increase in the exchange fluctuation reserve Changes in Equity Attributable to Owners of the Parent (For the six months ended June 30) | Equity Item | 2025 Jan 1 (HK$ thousand) | Loss for the period (HK$ thousand) | Exchange differences (HK$ thousand) | Share option arrangements (HK$ thousand) | Share option transfer (HK$ thousand) | 2025 June 30 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Issued share capital | 100,000 | – | – | – | – | 100,000 | | Share premium account | 94,614 | – | – | – | – | 94,614 | | Merger reserve | (15,017) | – | – | – | – | (15,017) | | Contributions | 2,630 | – | – | – | – | 2,630 | | Contributed surplus | (28,616) | – | – | – | – | (28,616) | | Fair value reserve | (500) | – | – | – | – | (500) | | Revaluation reserve for leasehold land and buildings | 179,200 | – | – | – | – | 179,200 | | General reserve | 10,485 | – | – | – | – | 10,485 | | Exchange fluctuation reserve | (59,316) | – | 14,847 | – | – | (44,469) | | Share option reserve | 6,982 | – | – | 21 | (842) | 6,161 | | Reserve fund | 29,819 | – | – | – | – | 29,819 | | Retained profits | 56,807 | (29,151) | – | – | 842 | 28,498 | | Total | 377,088 | (29,151) | 14,847 | 21 | (842) | 362,805 | - The loss for the period of HK$29,151 thousand was the primary factor contributing to the decrease in equity, though a gain of HK$14,847 thousand from exchange differences on translating overseas operations partially offset this loss[13] - Share option reserve increased by HK$21 thousand due to equity-settled share option arrangements and HK$842 thousand was transferred to retained profits due to lapsed share options[13] Condensed Consolidated Statement of Cash Flows This section presents the group's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 Operating Activities Cash Flow For the six months ended June 30, 2025, net cash used in operating activities improved to HK$22,523 thousand from HK$31,763 thousand in the prior year, primarily due to a decrease in trade and bills receivables Operating Activities Cash Flow (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Operating loss before working capital changes | (8,675) | (872) | (7,803) | | Decrease in trade and bills receivables | 29,689 | 28,546 | 1,143 | | Decrease in trade and bills payables | (32,528) | (50,950) | 18,422 | | Net cash used in operating activities | (22,523) | (31,763) | 9,240 | - A decrease of HK$29,689 thousand in trade and bills receivables positively impacted operating cash flow[16] - Interest paid decreased from HK$5,925 thousand in the same period of 2024 to HK$3,935 thousand in 2025[16] Investing Activities Cash Flow For the six months ended June 30, 2025, net cash from investing activities significantly decreased to HK$5,863 thousand from HK$61,854 thousand in the prior year, primarily due to a substantial reduction in the decrease of pledged time deposits Investing Activities Cash Flow (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Purchase of property, plant and equipment items | (284) | (42) | (242) | | Interest received | 721 | 1,228 | (507) | | Decrease in pledged time deposits | 5,393 | 59,482 | (54,089) | | Net cash from investing activities | 5,863 | 61,854 | (55,991) | - The decrease in pledged time deposits fell from HK$59,482 thousand in the same period of 2024 to HK$5,393 thousand in 2025, which is the main reason for the significant reduction in investing activities cash flow[16] Financing Activities Cash Flow For the six months ended June 30, 2025, net cash used in financing activities increased to HK$40,966 thousand from HK$24,230 thousand in the prior year, primarily due to increased repayment of loans from the parent company group Financing Activities Cash Flow (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | New bank loans | 69,047 | 53,315 | 15,732 | | Repayment of bank loans | (33,242) | (59,733) | 26,491 | | Repayment of loans from parent company group | (75,000) | (49,601) | (25,399) | | Loans received from parent company group | – | 33,461 | (33,461) | | Net cash used in financing activities | (40,966) | (24,230) | (16,736) | - Repayment of loans from the parent company group increased from HK$49,601 thousand in the same period of 2024 to HK$75,000 thousand in 2025, with no new loans received from the parent company group during the period[16] Changes in Cash and Cash Equivalents For the six months ended June 30, 2025, cash and cash equivalents decreased by HK$57,626 thousand, with the period-end balance at HK$115,353 thousand, a significant decline from HK$169,252 thousand at the beginning of the period Changes in Cash and Cash Equivalents (For the six months ended June 30) | Indicator | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Net increase/(decrease) in cash and cash equivalents | (57,626) | 5,861 | (63,487) | | Cash and cash equivalents at beginning of period | 169,252 | 143,792 | 25,460 | | Net effect of exchange rate changes | 3,727 | (2,770) | 6,497 | | Cash and cash equivalents at end of period | 115,353 | 146,883 | (31,530) | - Cash and cash equivalents at the end of the period amounted to HK$115,353 thousand, a decrease of HK$31,530 thousand compared to HK$146,883 thousand in the same period of 2024[17] Notes to the Condensed Consolidated Financial Statements This section provides detailed notes on the basis of preparation, accounting policies, and specific financial statement items Basis of Preparation and Accounting Policies These interim financial statements are prepared in accordance with HKAS 34 and the Listing Rules, to be read in conjunction with the annual consolidated financial statements, with no significant impact from newly adopted HKFRSs this period - The unaudited condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[18] - The amendments to HKAS 21 (Lack of Exchangeability) had no impact on the condensed consolidated interim financial statements, as the transaction and functional currencies of the group entities are all exchangeable[20] Operating Segment Information The group operates in two segments: paint products and property investment, with paint products seeing reduced revenue and performance, and property investment shifting from profit to loss, while Mainland China remains the primary source of revenue and assets - The group has two reportable operating segments: (a) the paint products segment, engaged in the manufacture and sale of paint and coating products; and (b) the property investment segment, investing in commercial and industrial properties with rental income potential[25] Operating Segment Revenue and Results (For the six months ended June 30) | Segment | 2025 Revenue (HK$ thousand) | 2024 Revenue (HK$ thousand) | Revenue Change (%) | 2025 Results (HK$ thousand) | 2024 Results (HK$ thousand) | Results Change (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Paint products | 96,893 | 137,044 | -29.3% | (21,578) | (19,296) | (2,282) | | Property investment | 9,445 | 11,278 | -16.3% | (186) | 12,871 | (13,057) | | Total | 106,338 | 148,322 | -28.3% | (21,764) | (6,425) | (15,339) | Operating Segment Assets and Liabilities (As of June 30) | Segment | 2025 Assets (HK$ thousand) | 2024 Assets (HK$ thousand) | Assets Change (HK$ thousand) | 2025 Liabilities (HK$ thousand) | 2024 Liabilities (HK$ thousand) | Liabilities Change (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Paint products | 408,654 | 482,223 | (73,569) | 308,967 | 381,312 | (72,345) | | Property investment | 305,284 | 308,391 | (3,107) | 39,691 | 39,477 | 214 | | Total | 713,938 | 790,614 | (76,676) | 348,658 | 420,789 | (72,131) | - For the six months ended June 30, 2025, revenue from Mainland China accounted for 89.4% of total revenue, and 99.7% of non-current assets were located in Mainland China[29] Revenue, Other Income and Net Gains Total revenue for the period was HK$106,338 thousand, with paint and coating product sales contributing HK$96,893 thousand and rental income HK$9,445 thousand, while other income and net gains significantly decreased by 60.6% year-on-year Revenue Composition (For the six months ended June 30) | Revenue Source | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Sales of paint products | 96,893 | 137,044 | -29.3% | | Gross rental income from investment properties | 9,445 | 11,278 | -16.3% | | Total Revenue | 106,338 | 148,322 | -28.3% | Other Income and Net Gains (For the six months ended June 30) | Item | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Bank interest income | 721 | 1,228 | -41.3% | | Net fair value gain on investment properties | – | 3,195 | -100.0% | | Government grants | 40 | 204 | -80.4% | | Government subsidies | 342 | 408 | -16.2% | | Total | 2,599 | 6,596 | -60.6% | Finance Costs For the six months ended June 30, 2025, total finance costs decreased by 32.2% to HK$3,992 thousand from HK$5,885 thousand in the prior year, primarily due to reduced interest on bank and other borrowings Finance Costs (For the six months ended June 30) | Item | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Interest on bank and other borrowings | 3,849 | 5,719 | -32.7% | | Interest expense on lease liabilities | 143 | 166 | -13.9% | | Total | 3,992 | 5,885 | -32.2% | Components of Loss Before Tax Loss before tax was primarily impacted by cost of sales, depreciation, fair value loss on investment properties, and staff severance costs, with investment properties recording a fair value loss of HK$8,363 thousand this period, compared to a gain in the prior year Key Components of Loss Before Tax (For the six months ended June 30) | Item | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Cost of inventories sold | 64,364 | 90,188 | (25,824) | | Depreciation of property, plant and equipment | 5,876 | 7,533 | (1,657) | | Net fair value loss/(gain) on investment properties | 8,363 | (3,195) | 11,558 | | Net impairment provision/(reversal of provision) for trade and bills receivables | (928) | 956 | (1,884) | | Staff severance costs | 1,128 | 600 | 528 | - Fair value of investment properties shifted from a gain of HK$3,195 thousand in the same period of 2024 to a loss of HK$8,363 thousand in 2025, significantly impacting loss before tax[38] - Impairment provision for trade and bills receivables changed from HK$956 thousand in the same period of 2024 to a reversal of HK$928 thousand in 2025, improving operating expenses[38] Income Tax The group had no assessable profits in Hong Kong, while Mainland China subsidiaries are subject to a 25% corporate income tax rate, with high-tech enterprises enjoying a preferential 15% rate - The group did not generate any assessable profits in Hong Kong during the period, thus no provision for Hong Kong profits tax was made[40] - Mainland China subsidiaries are subject to a standard corporate income tax rate of 25%, while those qualified as high-tech enterprises apply a lower rate of 15%[40] Loss Per Share and Dividends For the six months ended June 30, 2025, basic and diluted loss per share was 2.92 HK cents, and the Board resolved not to declare an interim dividend - Loss for the period attributable to ordinary equity holders of the parent was HK$29,151 thousand, resulting in a basic and diluted loss per share of 2.92 HK cents[41] - No adjustment for dilution was made to the basic loss per share amount as the outstanding share options had an anti-dilutive effect on the basic loss per share amount[41] - The directors resolved not to declare an interim dividend for the six months ended June 30, 2025[42] Property, Plant and Equipment and Investment Properties Property, plant and equipment acquisitions totaled HK$284 thousand this period; investment properties valuation slightly increased to HK$296,124 thousand but recorded a fair value loss of HK$8,363 thousand, primarily influenced by unobservable inputs like market rents and capitalization rates - For the six months ended June 30, 2025, the group acquired property, plant and equipment items at a cost of HK$284 thousand, a significant increase from HK$42 thousand in the same period of 2024[43] - Investment properties were revalued at HK$296,124 thousand as of June 30, 2025, a slight increase from HK$295,283 thousand as of December 31, 2024[44] - The fair value loss on investment properties was HK$8,363 thousand, primarily valued using the income capitalization approach, with key unobservable inputs including prevailing market rents (RMB7 to RMB52 per sq. meter/month) and capitalization rates (5.1% to 6.0%)[44][47][49] Trade and Bills Receivables and Payables As of June 30, 2025, total trade and bills receivables were HK$76,052 thousand, with HK$30,552 thousand over six months, while total trade and bills payables were HK$96,124 thousand, with HK$41,037 thousand over six months Ageing Analysis of Trade and Bills Receivables (As of June 30) | Ageing | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Within 3 months | 37,069 | 55,670 | (18,601) | | Over 3 months but within 6 months | 8,431 | 7,511 | 920 | | Over 6 months | 30,552 | 40,447 | (9,895) | | Total | 76,052 | 103,628 | (27,576) | Ageing Analysis of Trade and Bills Payables (As of June 30) | Ageing | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Within 3 months | 34,946 | 49,975 | (15,029) | | Over 3 months but within 6 months | 20,141 | 34,389 | (14,248) | | Over 6 months | 41,037 | 41,073 | (36) | | Total | 96,124 | 125,437 | (29,313) | - Of the trade and bills payables, HK$57,661 thousand was secured by time deposits of HK$17,509 thousand[52] Share Option Scheme The company adopted a share option scheme in 2020 to incentivize employees; as of June 30, 2025, 60,000,000 share options remained unexercised, representing 6% of issued shares, with 10,000,000 options lapsing due to a director's resignation during the period - The share option scheme was adopted on June 4, 2020, aiming to attract and retain employees and other eligible participants of the group[53] - As of June 30, 2025, the company had 60,000,000 outstanding share options, a decrease from 70,000,000 as of December 31, 2024, primarily due to the lapse of 10,000,000 options upon a director's resignation[59][60] - Net share option expense recognized during the period was approximately HK$21 thousand, a significant decrease from HK$209 thousand in the same period of 2024[59] Capital Commitments and Related Party Transactions As of June 30, 2025, the group's contracted but unprovided capital commitments amounted to HK$1,279 thousand, with related party transactions primarily involving lease payments, pledge fees, and interest expenses paid to the parent company group Capital Commitments (As of June 30) | Item | 2025 (HK$ thousand) | 2024 (HK$ thousand) | | :--- | :--- | :--- | | Contracted but not provided for: construction and purchase of property, plant and equipment items | 1,279 | 1,222 | Related Party Transactions (For the six months ended June 30) | Item | 2025 (HK$ thousand) | 2024 (HK$ thousand) | | :--- | :--- | :--- | | Lease payments to parent company group | 1,016 | 1,077 | | Pledge fees paid to parent company group | 273 | 273 | | Interest expenses paid to parent company group | 2,026 | 3,135 | | Total | 3,315 | 4,485 | - Total remuneration for key management personnel was HK$4,230 thousand, a decrease from HK$4,619 thousand in the same period of 2024[63] Fair Value and Fair Value Hierarchy of Financial Instruments Most of the group's financial instruments have fair values approximating their carrying amounts, while equity investments designated at fair value through other comprehensive income are measured at Level 2 fair value, amounting to HK$300 thousand - Management assesses that the fair values of financial instruments such as cash and cash equivalents, trade and bills receivables, and trade and bills payables approximate their respective carrying amounts, primarily due to their short-term maturities[65] Assets Measured at Fair Value (As of June 30) | Item | Fair Value Hierarchy | 2025 (HK$ thousand) | 2024 (HK$ thousand) | | :--- | :--- | :--- | :--- | | Equity investments designated at fair value through other comprehensive income | Level 2 | 300 | 300 | Management Discussion and Analysis This section provides management's perspective on the group's financial performance, operational highlights, and future outlook Business Review The group recorded a loss attributable to shareholders of HK$29,150 thousand in the first half, a significant increase from HK$14,970 thousand in the prior year, primarily due to fair value adjustments of investment properties and a substantial decrease in paint and coating product sales, yet net cash outflow from operations decreased by 29.1% through cost control and loan restructuring - For the six months ended June 30, 2025, the group recorded a loss attributable to shareholders of approximately HK$29,150 thousand, an increase of HK$14,180 thousand from the HK$14,970 thousand loss in the same period of 2024[73] - The significant increase in loss was primarily due to a fair value loss of HK$8,360 thousand on investment properties (compared to a gain of HK$3,200 thousand in the same period of 2024) and a 29.3% decline in paint and coating product sales[73] - Net cash outflow from operations significantly decreased by 29.1% compared to the same period in 2024, with bank and other borrowings reducing from HK$195,970 thousand as of December 31, 2024, to HK$160,250 thousand as of June 30, 2025[74] - The persistent downturn in Mainland China's real estate market and significant slowdown in construction activities have intensified demand pressure and competition for paint and coating products[75] Operations Review The group's total revenue significantly decreased by 28.3%, with paint and coating product sales falling by 29.3%, as all paint product categories were affected by market downturn and intensified competition; while cost of sales decreased due to lower raw material prices and improved operational efficiency, gross profit still declined by 30.6% - For the six months ended June 30, 2025, the group's total revenue was HK$106,340 thousand, a significant 28.3% decrease from HK$148,320 thousand in the same period of 2024[77] Paint and Coating Product Revenue by Major Product Analysis (For the six months ended June 30) | Product Category | 2025 (HK$ thousand) | 2024 (HK$ thousand) | Net Change (%) | | :--- | :--- | :--- | :--- | | Industrial paint and coating products | 56,485 | 64,904 | -13.0% | | Architectural paint and coating products | 17,190 | 35,217 | -51.2% | | General paint and coating and ancillary products | 23,218 | 36,923 | -37.1% | | Total | 96,893 | 137,044 | -29.3% | - 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 sourcing from Mainland China[81] - Raw material costs decreased due to a 19.2% drop in crude oil prices, enabling the group to offer more competitive pricing, with raw material costs as a percentage of sales decreasing by 2.9 percentage points compared to the prior year[86] - Direct and indirect labor costs significantly decreased by 15.7% compared to the prior year, primarily benefiting from improved operational efficiency and cost-saving strategies, including production facility consolidation[87] - Gross profit decreased by 30.6%, with gross profit margin only declining by 0.6 percentage points, demonstrating the group's resilience amidst intense competition[89] - Selling and distribution expenses decreased by 30.5% to HK$20,150 thousand, and administrative expenses decreased by 8.5% to HK$31,880 thousand, mainly due to reduced legal and professional fees, lower staff costs, and other cost-saving measures[91] Property Investment The group strategically reallocated investment properties to optimize asset allocation; despite a fair value loss of HK$8,360 thousand, a 3.1% appreciation of RMB positively impacted asset valuation, leading to a slight increase in investment property valuation, while rental income fell by 16.3% due to the sluggish Mainland China real estate market - The group strategically reallocated its investment properties, converting underutilized production plants and office premises into investment properties to optimize asset allocation and improve operating cash flow[93] - Investment property valuation increased from HK$295,280 thousand as of December 31, 2024, to HK$296,120 thousand as of June 30, 2025, primarily due to the positive impact of a 3.1% appreciation of RMB, which offset the fair value loss[93] - Rental income from investment properties was HK$9,450 thousand, a 16.3% decrease from HK$11,280 thousand in the same period of 2024, mainly due to the persistent downturn in Mainland China's real estate market and a fair value loss of HK$11,560 thousand[94] - The group's investment property portfolio comprises 6 industrial and commercial properties located in Mainland China, with a total land area of 175,675.8 sq. meters, aiming to generate stable recurring income and capital appreciation[95] Financial Review The group's total cash and cash equivalents decreased to HK$115,350 thousand, mainly due to repayment of bank and other borrowings; both debt-to-capital and current ratios declined, while inventory and trade and bills receivables turnover days increased, reflecting challenges from decreased sales and collection efficiency - As of June 30, 2025, total cash and cash equivalents were approximately HK$115,350 thousand, a decrease from HK$169,250 thousand as of December 31, 2024, primarily due to net repayment of bank and other borrowings of HK$39,200 thousand[96] Liquidity and Debt Ratios (As of June 30) | Indicator | 2025 June 30 | 2024 Dec 31 | Change | | :--- | :--- | :--- | :--- | | Debt-to-capital ratio | 44.2% | 52.0% | -7.8 percentage points | | Current ratio | 1.27 times | 1.35 times | -0.08 times | | Inventory turnover days | 57 days | 36 days | +21 days | | Trade and bills receivables turnover days | 142 days | 127 days | +15 days | - Inventory turnover days increased by 58.3% to 57 days, and trade and bills receivables turnover days increased by 11.8% to 142 days, mainly due to a 29.3% decrease in sales and the impact of some long-aged receivables involved in legal disputes[98] - As of June 30, 2025, the group employed a total of 426 staff, a 11.1% decrease from June 30, 2024, with staff costs decreasing by 12.8% to HK$34,960 thousand[103] Business Plan and Outlook Looking ahead to the second half, the group will continue implementing business revitalization measures to address market volatility and insufficient domestic demand, focusing on enriching product portfolios, expanding distribution networks, enhancing operational efficiency, reducing costs, and prioritizing repayment of high-interest borrowings to lower finance costs - The group will actively respond to market volatility stemming from external environmental changes, insufficient domestic demand, and a challenging economic landscape, anticipating that synergistic effects of policy guidance and market dynamics will foster sustainable industry growth[104] - Key developments include strengthening the Anti-Unfair Competition Law to alleviate excessive market competition pressure and accelerating the supply chain and market clearing processes[104] - The group will continue to expand its reach and explore business opportunities, committed to providing high-quality products and excellent after-sales service to customers, while avoiding product homogenization and vicious competition[104] - Business revitalization measures and actions are targeted in three areas: (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[105] Other Information This section covers additional disclosures, including interim dividend policy, share dealings, directors' and major shareholders' interests, and corporate governance updates Interim Dividend and Share Dealings The Board resolved not to declare an interim dividend for the six months ended June 30, 2025, and neither the company nor its subsidiaries bought back or redeemed any company shares during the review period - The directors resolved not to declare an interim dividend for the six months ended June 30, 2025[107] - During the review period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's shares[108] Directors' and Major Shareholders' Interests As of June 30, 2025, Executive Directors Tsui Ho Chuen and Li Kwong Chung each held 10,000,000 share options, representing 1.00% of issued shares, while major shareholder CNT Enterprises Limited and its parent Beihai Group Limited held 75.00% of the shares Directors' Interests in Shares and Underlying Shares (As of June 30) | Name | Capacity | Number of Underlying Shares (Share Options) | Total | Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | :--- | | Tsui Ho Chuen | Beneficial owner | 10,000,000 | 10,000,000 | 1.00% | | Li Kwong Chung | Beneficial owner | 10,000,000 | 10,000,000 | 1.00% | Major Shareholders' Interests (As of June 30) | Name | Capacity | Number of Shares | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | CNT Enterprises Limited | Beneficial owner | 750,000,000 | 75.00% | | Beihai Group Limited | Interest of controlled corporation | 750,000,000 | 75.00% | - As of June 30, 2025, 60,000,000 share options remained unexercised under the share option scheme, with 10,000,000 options previously held by former Non-Executive Director Chuang Chih Kun having lapsed[111] Corporate Governance and Changes in Directors' Information The company complies with the Corporate Governance Code, except for the combined roles of Chairman and Chief Executive Officer held by Mr. Tsui Ho Chuen; during the period, board changes included Mr. Chuang Chih Kun's resignation as Non-Executive Director, and Ms. Meng Jin Xia and Mr. Mak Chi Wah's appointments to committees - The company applies the principles and complies with the provisions of the Corporate Governance Code, except for the combined roles of Chairman and Chief Executive Officer held by Mr. Tsui Ho Chuen, an arrangement the Board believes helps maintain policy continuity and business operational stability[116] - Mr. Chuang Chih Kun resigned as a Non-Executive Director and ceased to be a member of the Audit Committee and Remuneration Committee, effective June 6, 2025[118] - Ms. Meng Jin Xia was appointed as a member of the Audit Committee and Nomination Committee, and Mr. Mak Chi Wah was appointed as a member of the Remuneration Committee, re-designated as a Non-Executive Director, and appointed as a member of the Audit Committee[118] - All directors confirmed compliance with the standards of the Model Code and the company's own code throughout the six months ended June 30, 2025[119]