The Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
NGAI HING HONG COMPANY LIMITED
(Incorporated in Bermuda with limited liability)
(Stock Code: 1047)
Website:http://www.nhh.com.hk
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31ST DECEMBER 2020
The Board of Directors (the "Board") of Ngai Hing Hong Company Limited (the "Company") announces the unaudited condensed consolidated interim results of the Company and its subsidiaries (the "Group") for the six months ended 31st December 2020 as follows:
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Six months ended 31st December 2020
2019
Note | HK$'000 | HK$'000 | |
Revenue from contracts with customers | 3 | 951,987 | 906,580 |
Cost of sales | (801,112) | (801,817) | |
Gross profit | 150,875 | 104,763 | |
Rental income | 3,676 | 3,986 | |
Other (losses)/gains, net | 4 | (1,249) | 568 |
Distribution costs | (40,272) | (37,864) | |
Administrative expenses | (57,571) | (54,906) | |
Operating profit | 5 | 55,459 | 16,547 |
Finance income | 6 | 441 | 469 |
Finance costs | 6 | (4,195) | (9,659) |
Finance costs, net | (3,754) | (9,190) | |
Profit before income tax | 51,705 | 7,357 | |
Income tax expense | 7 | (11,103) | (4,478) |
Profit for the period | 40,602 | 2,879 |
Unaudited Six months ended 31st December 2020
2019
Note | HK$'000 | HK$'000 | |
Attributable to: | |||
Equity holders of the Company | 37,114 | 587 | |
Non-controlling interests | 3,488 | 2,292 | |
40,602 | 2,879 | ||
Earnings per share for profit attributable to the | |||
equity holders of the Company during the | |||
period (expressed in HK cent per share) | |||
- Basic | 9 | 10.05 | 0.16 |
- Diluted | 9 | 10.05 | 0.16 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
Six months ended 31st December
2020 | 2019 | |
HK$'000 | HK$'000 | |
Profit for the period | 40,602 | 2,879 |
Other comprehensive income/(loss): | ||
Item that may be reclassified subsequently to | ||
income statement: | ||
Currency translation differences | 43,745 | (7,873) |
Other comprehensive income/(loss) for the period | 43,745 | (7,873) |
Total comprehensive income/(loss) for the period | 84,347 | (4,994) |
Total comprehensive income/(loss) attributable to: | ||
Equity holders of the Company | 79,862 | (7,174) |
Non-controlling interests | 4,485 | 2,180 |
84,347 | (4,994) |
CONDENSED CONSOLIDATED BALANCE SHEET
Note |
Unaudited | Audited | |
31st December | 30th June | |
2020 | 2020 | |
HK$'000 | HK$'000 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 111,079 | 105,307 |
Right-of-use assets | 24,215 | 25,167 |
Investment properties | 157,690 | 155,292 |
Financial assets at fair value through | ||
other comprehensive income | 1,863 | 1,863 |
Deferred income tax assets | 12,905 | 13,841 |
Prepayments | 7,657 | 7,951 |
315,409 | 309,421 | |
Current assets | ||
Inventories | 220,223 | 292,804 |
Trade and bills receivables | 276,576 | 195,245 |
Other receivables, prepayments and deposits | 31,031 | 36,005 |
Income tax recoverable | 835 | 372 |
Restricted bank deposits | 38,077 | 34,898 |
Cash and bank balances | 155,639 | 126,094 |
722,381 | 685,418 | |
Total assets | 1,037,790 | 994,839 |
10
Unaudited | Audited | ||
31st December | 30th June | ||
2020 | 2020 | ||
Note | HK$'000 | HK$'000 | |
EQUITY | |||
Capital and reserves attributable to | |||
the Company's equity holders | |||
Share capital | 36,920 | 36,920 | |
Share premium | 62,466 | 62,466 | |
Other reserves | 62,865 | 20,117 | |
Retained earnings | 382,933 | 345,819 | |
545,184 | 465,322 | ||
Non-controlling interests | 25,972 | 25,199 | |
Total equity | 571,156 | 490,521 | |
LIABILITIES | |||
Non-current liabilities | |||
Deferred income tax liabilities | 5,418 | 6,559 | |
Reinstatement provision | 884 | 884 | |
Lease liabilities | 1,523 | 3,216 | |
7,825 | 10,659 | ||
Current liabilities | |||
Trade payables | 11 | 76,118 | 87,257 |
Other payables and accruals | 45,976 | 27,656 | |
Lease liabilities | 3,944 | 3,803 | |
Borrowings | 321,762 | 365,377 | |
Derivative financial instruments | 386 | 1,246 | |
Income tax payable | 10,623 | 8,320 | |
458,809 | 493,659 | ||
Total liabilities | 466,634 | 504,318 | |
Total equity and liabilities | 1,037,790 | 994,839 | |
Net current assets | 263,572 | 191,759 | |
Total assets less current liabilities | 578,981 | 501,180 |
Notes
1 Basis of preparation
The condensed consolidated interim financial information for the six months ended 31st December 2020 has been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting". The condensed consolidated interim financial information does not included all the notes of the type normally included in an annual financial report. Accordingly, the condensed consolidated interim financial information is to be read in conjunction with the annual financial statements for the year ended 30th June 2020, which have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs").
2 Accounting policies
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 30th June 2020, as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
2.1 New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies and make retrospective adjustments as a result of adopting the following standards:
Amendments to HKFRS 9, HKAS 39 and | Hedge Accounting (Amendments) |
HKFRS 7 | |
Amendments to HKAS 1 and HKAS 8 | Definition of Material (Amendments) |
Amendments to HKFRS 3 | Definition of a Business (Amendments) |
Conceptual Framework for Financial | Revised Conceptual Framework for Financial |
Reporting 2018 | Reporting |
Amendments to HKFRS 16 | COVID-19 Related Rent Concessions |
2.2
Impact of standards issued but not yet applied by the Group
The following new and amended HKFRSs have been issued, but are not effective for the Group's accounting period beginning on 1st July 2020 and have not been early adopted:
Amendments to HKFRS 3,
HKAS 16 and HKAS 37
Amendments to HKAS 39, HKFRS 4,
HKFRS 7, HKFRS 9 and HKFRS 16
Amendments to HKAS 1
Amendments to HKFRS 10
and HKAS 28
Annual improvements to
HKFRSs 2018-2020 cycleNarrow-scope amendments2
Interest Rate Benchmark Reform - Phase 21
Classification of Liabilities as Current or Non-current3
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture4
Amendments to HKFRS 1, HKFRS 9, HKFRS 16 and HKAS 412
HKFRS 17
Insurance Contracts3
(1) Effective for annual periods beginning on or after 1st January 2021
(2) Effective for annual periods beginning on or after 1st January 2022
(3) Effective for annual periods beginning on or after 1st January 2023
(4) To be determined
3 Revenue from contracts with customers and segment information
Unaudited
Six months ended 31st December
2020 | 2019 | |
HK$'000 | HK$'000 | |
Revenue from contracts with customers | ||
Sales of goods | 951,987 | 906,580 |
The Group is principally engaged in the manufacturing and trading of plastic materials, pigments, colorants, compounded plastic resins and engineering plastic products.
The Group derived revenue from the sales of goods at a point in time.
The chief operating decision-maker ("CODM") has been identified as the Executive Directors of the Company. Management has determined the operating segments based on the reports reviewed by the CODM that are used to assess performance and allocate resources. The CODM considers the business from the operations nature and the type of products perspective, including the trading of plastic materials ("Trading"), manufacturing and sale of colorants, pigments and compounded plastic resins ("Colorants"), manufacturing and sale of engineering plastic products ("Engineering plastic") and other corporate and business activities ("Others").
Each of the Group's operating segments represents a strategic business unit that is managed by different business unit leaders. Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. Information provided to the CODM is measured in a manner consistent with that in the condensed consolidated interim financial information.
The CODM assesses the performance of the operating segments based on a measure of revenue from contracts with customers and operating profit including corporate expneses, which is in a manner consistent with that of the condensed consolidated interim financial information.
The segment information provided to the CODM for the reportable segments for the six months ended 31st December 2020 is as follows:
Unaudited Engineering
Trading HK$'000
Colorants HK$'000
plastic HK$'000
Others HK$'000
Group HK$'000
Revenue from contracts with customers - Gross revenue - Inter-segment revenue
683,880 (31,494)
180,795 (3,834)
122,697
- 987,372
(57)
- (35,385)
Revenue from external customers
Operating profit/(loss)
652,386 23,524
176,961 15,751
122,640 17,156
- 951,987
(972) 55,459
Finance income Finance costs
77 (3,234)
317 (696)
47 - 441 (265) - (4,195)
Profit/(loss) before income tax
Other information:
Additions to non-current assets
(other than financial instruments and deferred income tax assets) Depreciation of property, plant and equipment Depreciation of rights-of-use assets (Reversal of)/provision for impairment of inventories, net (Reversal of)/provision for loss allowance on trade receivables Fair value gains on derivative financial instruments
20,367
15,372
16,938
(972) 51,705
47 327 228
7,084 4,302 2,083 2,847
1,224
- 8,355
3,836
260 8,725
16
39 2,366
(2,466)
(268)
(47)
515 - 896 203 - (112)
(958)
-
- - (958)
The segment information provided to the CODM for the reportable segments as at 31st December 2020 is as follows:
Unaudited | |||||
Engineering | |||||
Trading | Colorants | plastic | Others | Group | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Segment assets | 392,720 | 341,097 | 163,434 | 140,539 | 1,037,790 |
Segment liabilities | (75,235) | (37,525) | (28,687) | (3,425) | (144,872) |
Segment borrowings | (265,128) | (26,234) | (30,400) | - | (321,762) |
(340,363) | (63,759) | (59,087) | (3,425) | (466,634) |
The segment information provided to the CODM for the reportable segments for the six months ended 31st December 2019 is as follows:
Unaudited Engineering
Trading HK$'000
Colorants HK$'000
plastic HK$'000
Others HK$'000
Group HK$'000
Revenue from contracts with customers - Gross revenue - Inter-segment revenue
646,971 (28,326)
187,627
101,029
- 935,627
(633)
(88)
- (29,047)
Revenue from external customers
Operating (loss)/profit
618,645
186,994 16,057
100,941
- 906,580
(10,539)
12,241 (1,212) 16,547
Finance income Finance costs
25 (8,363)
420 (776)
24 - 469 (520) - (9,659)
(Loss)/profit before income tax
Other information:
Additions to non-current assets
(other than financial instruments and deferred income tax assets) Depreciation of property, plant and equipment Depreciation of rights-of-use assets Provision for impairment of inventories, net Reversal of loss allowance on trade receivables
Fair value gains on derivative financial instruments
(18,877)
15,701
11,745 (1,212) 7,357
195 373 225 2,784
2,128 4,032 1,973
964 3,792
- 3,287
260 8,457
105
39 2,342
501 - -
- - 3,285
-
(140) - (140)
(330)
- - (330)The segment information provided to the CODM for the reportable segments as at 30th June 2020 is as follows:
Audited | |||||
Engineering | |||||
Trading | Colorants | plastic | Others | Group | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Segment assets | 424,868 | 296,882 | 132,536 | 140,553 | 994,839 |
Segment liabilities | (91,706) | (29,958) | (13,530) | (3,747) | (138,941) |
Segment borrowings | (327,445) | (22,907) | (15,025) | - | (365,377) |
(419,151) | (52,865) | (28,555) | (3,747) | (504,318) |
The entity is domiciled in Hong Kong. The revenue from external customers from Hong Kong for the six months ended 31st December 2020 is approximately HK$436,544,000 (2019: HK$383,416,000) and the total of its revenue from external customers from other locations (mainly in Mainland China) is approximately HK$515,443,000 (2019: HK$523,164,000).
At 31st December 2020, the total of non-current assets other than financial instruments and deferred income tax assets located in Hong Kong is approximately HK$171,550,000 (30th June 2020: HK$175,586,000) and the total of these non-current assets located in other locations (mainly in Mainland China) is approximately
HK$129,091,000 (30th June 2020: HK$118,131,000).
4 Other (losses)/gains, net
Net exchange loss
Gain on disposal of property, plant and equipment Fair value gains from derivative financial instruments Others
5 Operating profit
Operating profit is stated after charging/(crediting) the following:Cost of inventories recognised as expenses included in cost of sales
Depreciation of property, plant and equipment Depreciation of rights-of-use assets
Operating lease rentals in respect of land and buildings Employee benefit expenses, including
Directors' emoluments
Reversal of provision for loss allowance on trade receivables, net
Provision for impairment of inventories, net Provision for claim related to a legal case
Gain on disposal of property, plant and equipment Fair value gains on derivative financial instruments
Unaudited
Six months ended 31st December
2020 HK$'000
2019 HK$'000
(3,286) (183)
- 114
958 330
1,079 307
(1,249) 568
Unaudited
Six months ended 31st December
2020 HK$'000
2019 HK$'000
755,021 754,314
8,725 8,457
2,366 2,342
3,356 3,516
67,670 51,726
(112) (140)
896 3,285
3,802
-
- (114)
(958) (330)
Note:During the period, the Hong Kong Special Administrative Region Government has launched the "Employment Support Scheme" (ESS) providing wage subsidies to eligible subsidiaries of the Group. Government grants amounted to HK$4,043,000 are deducted in the employee benefit expenses. There are no unfulfilled conditions or other contingencies attached to the grants.
6 | ||
2020 | 2019 | |
HK$'000 | HK$'000 | |
Finance income: | ||
- Interest income from bank deposits | 441 | 469 |
Finance costs: | ||
- Interests on bank borrowings wholly repayable | ||
within five years | (5,290) | (8,764) |
- Interests on lease liabilities | (141) | (191) |
- Net exchange gains/(losses) on financing activities | 1,236 | (704) |
(4,195) | (9,659) | |
Finance costs, net | (3,754) | (9,190) |
7 | Income tax expense |
Finance income and costs
Unaudited
Six months ended 31st December
Hong Kong profits tax has been provided for at the rate of 16.5% (2019: 16.5%) on the estimated assessable profit for the period. Income tax on the Group's subsidiaries established and operate in Mainland China has been calculated on the estimated assessable profit for the period at the rates of taxation as applicable to the relevant subsidiaries.
The amount of income tax charged to the interim consolidated income statement represents:
Unaudited
Six months ended 31st December
2020 | 2019 | |
HK$'000 | HK$'000 | |
Current income tax | ||
- Hong Kong profits tax | 2,097 | 824 |
- Mainland China corporate income tax | 7,967 | 3,431 |
10,064 | 4,255 | |
Deferred income tax | 1,039 | 223 |
11,103 | 4,478 |
8 Dividends
On 27th September 2019, the Directors resolved not to declare any final dividend for the year ended 30th
June 2019.
On 27th February 2020, the Directors resolved not to declare any interim dividend for the period ended
31st December 2019.
On 29th September 2020, the Directors resolved not to declare any final dividend for the year ended 30th
June 2020.
On 25th February 2021, the Directors declared an interim dividend of HK1.0 cent per share, totaling
HK$3,692,000 for the six months ended 31st December 2020.
On 25th February 2021, the Directors declared a special dividend of HK1.0 cent per share, totaling HK$3,692,000 for the six months ended 31st December 2020.
9 Earnings per share
The calculation of basic earnings per share is based on the profit attributable to equity holders of the Company for the period of HK$37,114,000 (2019: HK$587,000) and 369,200,000 (2019: 369,200,000) ordinary shares in issue during the period.
Dilutive earnings per share for the period ended 31st December 2020 and 2019 equal basic earnings per share as there was no dilutive potential ordinary share as at the period ended 31st December 2020 and 2019.
10 Trade and bills receivables
Unaudited
Audited
31st December
30th June
2020
2020
HK$'000
HK$'000
Trade receivables
253,001
175,944
Less: loss allowance
(5,088)
(4,797)
247,913
171,147
Bills receivables
28,663
24,098
276,576
195,245
At 31st December 2020, the aging analysis of trade receivables, based on invoice date, is as follows:
Unaudited | Audited | |
31st December | 30th June | |
2020 | 2020 | |
HK$'000 | HK$'000 | |
Below 90 days | 242,626 | 42,546 |
91-180 days | 5,198 | 109,515 |
Over 180 days | 5,177 | 23,883 |
253,001 | 175,944 |
The majority of the Group's sales are with credit terms of 30 to 90 days. The remaining amounts are on letter of credit or documents against payment.
Bill receivables are mainly with maturity period of within 180 days.
At 31st December 2020, there are bills of exchange of HK$12,845,000 (30th June 2020: HK$16,584,000) transferred to banks with recourse in exchange for cash. The transactions had been accounted for as collateralised bank advances.
11 Trade payables
At 31st December 2020, the aging analysis of trade payables, based on invoice date, is as follows:
Unaudited 31st December 2020 HK$'000
Audited 30th June 2020 HK$'000
Below 90 days 91-180 days Over 180 days
75,187 85,622
221 1,279
710 356
76,118 87,257
12 Events after reporting period
During the year ended 30th June 2016, the Group received a claim from a customer in respect of the sales of alleged defective goods with claim amount approximately RMB5,000,000 (equivalent to approximately HK$5,952,000). On 7th May 2019, Wenling City People's Court of Zhejiang Province (the "Court") has made a judgement, ordering the customer to return the unused goods to the Group for a refund of the respective sales.
During the year ended 30th June 2020, the customer further lodged a claim amounted to approximately RMB5,000,000 (equivalent to approximately HK$5,952,000) in respect of originally closed claim disclosed as above. Following the hearing on 19th January 2021, the court has made its judgement on 29th January 2021, holding the Group liable to pay the customer compensation amounted to RMB3,193,000 (equivalent to approximately HK$3,802,000). As at 31st December 2020, a full provision against such compensation has been made by the Group.
The Directors intended to lodge an appeal to the Court. As at the date of this report, no further court hearing has been held.
INTERIM AND SPECIAL DIVIDENDS
The Directors are pleased to declare an interim dividend of Hong Kong 1.0 cent per share for the six months ended 31st December 2020 to members whose names appear on the Register of Members on 26th March 2021. As a reward to the shareholders for their continuous support, having considered the business, financial and cash flow position of the Group, the Directors have also declared a special dividend of Hong Kong 1.0 cent per share for the six months ended 31st December 2020 to members whose names appear on the Register of Members on 26th March 2021. The interim dividend and the special dividend will be paid on or before 12th April 2021.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from Wednesday, 24th March 2021 to Friday, 26th March 2021 (both dates inclusive) during which period no transfer of shares will be registered. In order to qualify for the interim dividend and the special dividend, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company's Branch Share Registrar in Hong Kong, Union Registrars Limited, Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong not later than 4:00 p.m. on Tuesday, 23rd March 2021.
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS REVIEW
In the second half of 2020, the COVID-19 pandemic continued spreading across the world and disabled global economies from returning to normal. However, stabilised oil prices and increased demand for raw materials became conducive to rising plastic material prices. Furthermore, with the pandemic brought under control and with the implementation of the inner circulation policy in Mainland China, the release of demand and resumption of production and exports grew faster than expected. As domestic consumption began to heat up, Mainland China's economy posted gradual recovery. International capital inflows to Mainland China led to the Renminbi exchange rate's appreciation. Riding on the boost from related short-term favourable factors, the sales performance of the Group's customers gradually returned to normal and their orders increased. As a result, the Group's business improved steadily. For the six months ended 31st December 2020, the Group's total turnover amounted to HK$951,987,000 (2019: HK$906,580,000), 5% higher than the previous year.
In addition to the improved operating environment during the period, the Group effectively implemented the strategy of continuously optimising its product mix, exerting greater efforts in clearing inventory and streamlining costs. Hence, the overall gross profit spiked by 44% to HK$150,875,000 (2019: HK$104,763,000) while the gross profit margin rose by 4.3 percentage points to 15.8% compared to the level in the last cooresponding period. Profit attributable to the Company's equity holders increased by 63.2 times to HK$37,114,000 (2019: HK$587,000). Basic earnings per share were HK10.05 cents (2019: HK0.16 cents).
To reward shareholders for their unwavering support, the Board of Directors ("the "Board") recommended the payment of an interim dividend of HK1.0 cent per share (2019: Nil) and a special dividend of HK1.0 cent per share.
Despite challenges during the period, domestic consumption was fully restored, driven by the inner circulation policy. Moreover, increasing public awareness to hygiene due to the pandemic outbreak boosted surging demand for post-pandemic products, such as medical devices and air filter systems, generating more orders for the Group's plastic material trading business. Consequently, turnover grew by 5.5% to HK$652,386,000 compared to the same period last year, making it the most improved performer among three major businesses during the interim period. Apart from maintaining close ties with existing customers and continuously producing electrical appliances and traditional automobiles to bring stable orders, the Group also provided materials to the developers of smart products, household goods and high-end kitchenware to open up income sources. Rising oil prices resulted in growing demand for raw materials, thereby leading to increasing plastic material prices. Due to the Group's effective reduction and control of inventory, inventory level has improved. Gross profit margin climbed by 3.6 percentage points compared to the same period in the previous year.
During the period under review, the work-from-home mode in different countries across the world that encouraged citizens to stay home and to go out less became the new normal, thus reshaping people's way of living and driving up the continued increase in demand for general home appliances such as kitchenware. Facing changes in consumers' consumption categories and habits, the Group's export customers also changed their sales strategy and shifted to the export of high-end kitchenware, such as cooking utensils, coffee machines and ovens for baking cakes and bread, in order to explore new income streams. Meanwhile, the Group also flexibly modified its existing product portfolio to meet the huge order demand from customers. As a result, turnover of the engineering plastic product business jumped by 21.5% to HK$122,640,000. With the reduction of the Group's inventory due to rising plastic material prices, as well as the effective cost control measures, gross profit margin grew by 4.3 percentage points and profit before taxation surged by 44.2% to HK$16,938,000 when compared to the same period in the previous year. Apart from maintaining its orders from internationally-renowned brands, the Group continued to enrich its product portfolio, leverage its business advantages, focus on promoting higher-margin products, and actively approach and engage in discussions with end customers, all in a bid to explore new income streams and expand its customer base. By capitalising on its industry experience of more than 50 years and excellent reputation, the Group is set to secure more orders and broaden its existing customer portfolio.
The pandemic has caused delays in the date of completion of various property projects. These delays, coupled with short-term demand for food packaging and basic necessities gradually returning to normal level, have led to a drop in the turnover of the colorants, pigments and compounded plastic resins segment to HK$176,961,000 during the period. However, with the rise in plastic material prices, its gross profit margin increased by 4.8 percentage points, while profit before taxation was maintained at a similar level as that during the same period in the previous year. With the market undergoing consolidation in which only competent enterprises are able to survive, small enterprises, engaged in low-end manufacturing businesses with relatively lower cost control ability and lower technical standards, have been acquired and phased out. In this regard, the Group will continue implementing its proven business strategies and centralise resources in the production of high-end sanitary and electronic products. It will also raise the production capacity of its factories to secure high gross profit margin orders and maintain stable business development.
PROSPECTS
The world's economy is expected to recover with the launch of COVID-19 vaccines and the conclusion of the US presidential election. Looking ahead to the first half of 2021, Mainland China will continue focusing on the "domestic circulation" development strategy and rely on strong domestic demand to support economic recovery. Europe and the US will continue to be affected by the pandemic, making global economic growth prospects highly uncertain. If no widespread outbreak recurs going forward, the Group expects to see stable business development in the first half of 2021. The management is also cautiously optimistic in the Group's long term development.
As the post-COVID-19 new normal emerges, the Group believes kitchenware will become its growth driver in the future, particularly those which employ high-production technologies that will grab market attention. In addition to producing traditional products, the Group will draw on its corporate advantage and years of extensive industry experience to invest in resources that will advance high-end production technologies, including electric vehicles and other new energy vehicles-related products so as to further optimise its product mix.
Various real estate market data continued to improve at the end of last year according to the "National Real Estate Development and Sales in January to December 2020" issued by the National Bureau of Statistics. It is expected that the property market to gradually rebound in 2021, with annual growth rate estimated between 5% and 10% that will be favourable to the Group's sales of quality sanitary products.
As for cost control, the Group will continue implementing stringent cost control measures, including improving financing methods to maintain the existing low borrowing level and reducing administrative and distribution fees and production costs. It will also enhance overall administrative efficiency by sharing internal resources to achieve greater synergies and a solid financial position.
The Group was able to alleviate the pandemic's negative impact with the strong support of its management team and customers, as well as the diligence and contribution of all staff. I would like to extend to them my sincerest appreciation. As always, the Group will continue exerting relentless efforts to achieve long-term and stable growth as well as generate long-term returns for shareholders.
LIQUIDITY AND FINANCIAL RESOURCES
The Group generally finances its operations with internally generated cashflow and banking facilities provided by its principal bankers. As at 31st December 2020, the Group has available aggregate bank loan facilities of approximately HK$646,167,000 of which HK$324,820,000 have been utilised and were secured by corporate guarantee issued by the Group and legal charges on certain leasehold land and buildings, investment properties and machinery and equipment in Mainland China and Hong Kong owned by the Group. The Group's cash and bank balances as at 31st December 2020 amounted to approximately HK$155,639,000. The Group's gearing ratio as at 31st December 2020 was approximately 59%, based on the total bank borrowings of approximately HK$321,762,000 and the shareholders' funds of approximately HK$545,184,000.
FOREIGN EXCHANGE RISK
The Group's bank borrowings and cash and cash equivalents are primarily denominated in Hong Kong dollars, Renminbi and US dollars. The Group's purchases were principally denominated in US dollars. The Group closely monitors currency fluctuations and manages its exchange risk by entering into forward exchange contracts from time to time.
As at 31st December 2020, the Group had outstanding forward foreign exchange contracts mainly to purchase US dollars. The maximum notional principal amounts of these outstanding forward foreign exchange contracts at 31st December 2020 were as follows:
2020
HK$'000
Sell HK dollars for US dollars
185,640
EMPLOYEE INFORMATION
As at 31st December 2020, the Group employed a total of approximately 620 full-time employees. The Group's emolument policies are formulated on the performance of individual employees and are reviewed annually. The Group has an incentive scheme which is geared to the profit of the Group and the performance of its employees, as an incentive to motivate its employees to increase their contribution to the Group. The Group also provides social and medical insurance coverage, and provident fund scheme (as the case may be) to its employees depending on the location of such employees.
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES
The Company has not redeemed any of its shares during the period. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company's listed securities during the period.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted a code of conduct regarding Directors' securities transactions on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Companies (the "Model Code") set out in Appendix 10 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). Having made specific enquiry to all Directors of the Company, all Directors have confirmed that they had complied with the required standard set out in the Model Code and the Company's code of conduct regarding Directors' securities transactions during the period.
CORPORATE GOVERNANCE PRACTICE
The Company is committed to the establishment of good corporate governance practices and procedures which serve as an important element of risk management throughout the growth and expansion of the Company. The Company emphasises on maintaining and carrying out sound, solid and effective corporate governance principles and structures.
The Company has complied with all the applicable code provisions as set out in Corporate Governance Code and Corporate Governance Report to the Appendix 14 of the Listing Rules (the "CG Code") throughout the six months ended 31st December 2020, except for the deviation as mentioned below.
According to the code provision A.2.1 of the CG Code, the roles of chairman and chief executive should be separate and should not be performed by the same individual. Up to the date of this interim report, the Board has not appointed any individual to be the chief executive. The roles of the chief executive have been performed collectively by all the executive directors, including the chairman, of the Company. The Board considers that this arrangement allows contributions from all executive directors with different expertise and is beneficial to the continuity of the Company's policies and strategies. Going forward, the Board will periodically review the effectiveness of this arrangement and considers appointing an individual to chief executive when it thinks appropriate.
For the purpose of enhancing the risk management and internal control systems, the Company has engaged an external consultant to assist the Board and the audit committee of the Company (the "Audit Committee") in ongoing monitoring and in performing the internal audit functions for the Group. Deficiencies in the design and implementation of internal controls are identified and recommendations are proposed for improvement. Significant internal control deficiencies are reported to the Audit Committee and the Board on a timely basis to ensure prompt remediation actions are taken.
The Board has reviewed and considered the Group's risk management and internal control systems were effective and adequate during the period. The risk management and internal control systems of the Group are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
NOMINATION COMMITTEE
The Company has formulated written terms of reference for the nomination committee of the Company (the "Nomination Committee") in accordance with the requirements of the Stock Exchange. The Nomination Committee consists of all independent non-executive Directors, namely Mr. HO Wai Chi, Paul, Mr. CHING Yu Lung and Mr. YU Chi Kwong and an executive Director, Mr. HUI Sai Chung.
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board (including the skills, knowledge and experience) on a regular basis and make recommendations to the Board regarding any proposed changes; identifying individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of, individuals nominated for directorships; assessing the independence of independent non-executive Directors; and making recommendations to the Board on relevant matters relating to the appointment or re- appointment of Directors and succession planning for Directors. The Nomination Committee would review the Board's composition from time to time where Board diversity would be considered from a number of aspects, including but not limited to gender, age, cultural and education background, ethnicity, professional experience, skills, knowledge and length of services. The Nomination Committee meets at least once a year to assess the structure, size and composition of the Board.
AUDIT COMMITTEE
The Company has formulated written terms of reference for the Audit Committee in accordance with the requirements of the Stock Exchange. The Audit Committee consists of all independent non-executive Directors, namely Mr. HO Wai Chi, Paul, Mr. CHING Yu Lung and Mr. YU Chi Kwong.
The principal duties of the Audit Committee are to ensure the objectivity and credibility of financial reporting and internal control procedures as well as to maintain an appropriate relationship with the external auditor of the Company. The terms of reference of the Audit Committee are aligned with the recommendations set out in "A Guide for Effective Audit Committees" issued by the Hong Kong Institute of Certified Public Accountants and Listing Rules.
The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed internal controls and financial reporting matters including a review of the unaudited condensed consolidated interim financial information for the six months ended 31st December 2020 with the Directors.
REMUNERATION COMMITTEE
The Company has formulated written terms of reference for the remuneration committee of the Company (the "Remuneration Committee") in accordance with the requirements of the Stock Exchange. The Remuneration Committee consists of three independent non-executive Directors, namely Mr. HO Wai Chi, Paul, Mr. CHING Yu Lung and Mr. YU Chi Kwong and an executive Director, Mr. HUI Sai Chung.
The Remuneration Committee is responsible for ensuring formal and transparent procedures for developing remuneration policies and making recommendations to the Board on the remuneration packages of the individual executive Director and senior management. This includes benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment. It takes into consideration on factors such as salaries paid by comparable companies, time commitment and responsibilities of Directors and senior management. The Remuneration Committee meets at least once a year to assess the performance and review the annual salaries and bonus of the senior executives.
CORPORATE GOVERNANCE COMMITTEE
The Company has formulated written terms of reference for the corporate governance committee of the Company (the "Corporate Governance Committee") in accordance with the CG Code. The Corporate Governance Committee consists of all independent non-executive Directors, namely Mr. HO Wai Chi, Paul, Mr. CHING Yu Lung and Mr. YU Chi Kwong.
The Corporate Governance Committee is responsible for developing and reviewing the policies and practices on corporate governance of the Group and making recommendations to the Board; reviewing and monitoring the training and continuous professional development of Directors and senior management; reviewing and monitoring the Group's policies and practices on compliance with legal and regulatory requirements; developing, reviewing and monitoring the code of conduct and compliance manual (if any) applicable to employees and Directors; and reviewing the Group's compliance with the CG Code and disclosure in the Corporate Governance Report of the Company. The Corporate Governance Committee meets at least once a year to review the corporate governance functions.
On behalf of the Board
Ngai Hing Hong Company Limited
HUI Sai Chung
Chairman
Hong Kong, 25th February 2021
As at the date of this announcement, the Board of Directors comprises six Executive Directors, namely Mr. HUI Sai Chung (Chairman), Mr. HUI Kwok Kwong, Mr. NG Chi Ming, Mr. HUI Yan Kuen, Mr. HUI Man Wai and Mr. HUI Yan Lung, Geoffrey and three Independent Non-executive Directors, namely Mr. HO Wai Chi, Paul, Mr. CHING Yu Lung and Mr. YU Chi Kwong.
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NHH - Ngai Hing Hong Company Ltd. published this content on 25 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2021 10:45:01 UTC.