Perfectech International : 2020 Interim Report

September 17, 2020 at 04:50 am EDT

Perfectech International Holdings Limited

Incorporated in Bermuda with limited liability

Stock Code: 00765

2 0 2 0

I N T E R I M R E P O R T

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors:

Mr. Li Shaohua

(Chief Executive Officer)

Mr. Poon Wai Yip, Albert

Non-executive Director:

Ms. Zhu Yuqi (Chairman)

(appointed on 19 June 2020)

Mr. Gao Xiaorui (Chairman)

(resigned on 19 June 2020)

Independent Non-executive Directors:

Mr. Lau Shu Yan

Mr. Xie Xiaohong

Mr. Qin Feng

(appointed on 26 August 2020)

Mr. Lam Tak Leung

(resigned on 26 August 2020)

AUDIT COMMITTEE

Mr. Lau Shu Yan (Committee Chairman)

Mr. Xie Xiaohong

Mr. Qin Feng

(appointed on 26 August 2020)

Mr. Lam Tak Leung

(resigned on 26 August 2020)

REMUNERATION COMMITTEE

Mr. Qin Feng (Committee Chairman)

(appointed on 26 August 2020)

Mr. Xie Xiaohong

Mr. Lau Shu Yan

Mr. Lam Tak Leung (Committee Chairman)

(resigned on 26 August 2020)

NOMINATION COMMITTEE

Ms. Zhu Yuqi (Committee Chairman)

(appointed on 19 June 2020)

Mr. Xie Xiaohong

Mr. Qin Feng

(appointed on 26 August 2020)

Mr. Gao Xiaorui (Committee Chairman)

(resigned on 19 June 2020)

Mr. Lam Tak Leung

(resigned on 26 August 2020)

COMPANY SECRETARY

Mr. Leung Tak Ho

AUTHORISED

REPRESENTATIVES

Mr. Li Shaohua

Mr. Leung Tak Ho

AUDITOR

HLM CPA Limited

Certified Public Accountants

LEGAL ADVISER

Cheung Tong & Rosa Solicitors

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking

Corporation Limited

Hang Seng Bank Limited

PRINCIPAL SHARE REGISTRAR

MUFG Fund Services (Bermuda) Limited 4th floor North Cedar House

41 Cedar Avenue Hamilton HM12 Bermuda

HONG KONG BRANCH SHARE REGISTRAR

Tricor Standard Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

REGISTERED OFFICE

Victoria Place 5th Floor

31 Victoria Street Hamilton HM 10 Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

15/F, Sun Hing Industrial Building

46 Wong Chuk Hang Road

Aberdeen

Hong Kong

WEBSITE

www.perfectech.com.hk

Perfectech International Holdings Limited Interim Report 2020

The board (the "Board") of directors (the "Directors", each a "Director") of Perfectech International Holdings Limited (the "Company") is pleased to present the unaudited condensed consolidated financial statements of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2020.

CONDENSED CONSOLIDATED STATEMENT OF

PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

		(Unaudited)
		For the six months ended
		30 June	2019
		2020
	Notes	HK$'000	HK$'000
Revenue	3 & 4	71,344	64,555
Cost of sales		(46,305)	(56,680)

Gross profit		25,039	7,875
Other income, gains and losses	5	1,741	1,902
Distribution costs		(1,405)	(1,521)
Loss from changes in fair value of			-
an investment property	10	(1,900)
Administrative expenses		(26,326)	(35,235)
Impairment loss on property, plant and			-
equipment	10	(1,056)
Finance costs		(1,442)	(674)
Loss before tax	6	(5,349)	(27,653)
Income tax (expense) credit	7	(737)	546
Loss for the period		(6,086)	(27,107)
Other comprehensive (expense) income for

the period, net of tax
Item that will not be reclassified to profit or
loss:
Surplus on revaluation of leasehold land
and building held for own use upon		-
change of use to earning rental		16,101
Item that may be reclassified subsequently
to profit or loss:
Exchange difference on translation of
overseas operations		(161)	16
Other comprehensive (expense) income for			16,117
the period, net of tax		(161)
Total comprehensive expense for the
		(10,990)
period		(6,247)

Perfectech International Holdings Limited Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF

PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

		(Unaudited)
		For the six months ended
		30 June
		2020	2019
	Note	HK$'000	HK$'000
Loss for the period attributable to:
Owners of the Company		(7,151)	(26,485)
Non-controlling interests		1,065	(622)

Loss for the period		(6,086)	(27,107)
Total comprehensive expense for the period

attributable to:
Owners of the Company		(7,296)	(10,372)
Non-controlling interests		1,049	(618)

Total comprehensive expense for the period		(6,247)	(10,990)
Loss per share	9

Basic (HK cents per share)		(2.19)	(8.10)

Diluted (HK cents per share)		(2.19)	(8.10)

Perfectech International Holdings Limited Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

At 30 June 2020

		(Unaudited)	(Audited)
		30 June	31 December
		2020	2019
	Notes	HK$'000	HK$'000
NON-CURRENT ASSETS
Property, plant and equipment	10	58,315	61,455
Investment property	10	38,000	39,900
Right-of-use assets		12,748	15,051
Deferred tax assets		3,688	3,688

		112,751	120,094
CURRENT ASSETS

Inventories		23,065	16,196
Trade and other receivables	11	20,762	15,415
Tax recoverable		6	855
Bank balances and cash		65,687	70,403

		109,520	102,869
CURRENT LIABILITIES

Trade and other payables	12	28,303	21,541
Lease liabilities		317	415
Amount due to a director
of subsidiaries	13	48,520	47,587
Bank borrowings		5,000	5,000
Tax liabilities		323	64

		82,463	74,607

NET CURRENT ASSETS		27,057	28,262
TOTAL ASSETS LESS CURRENT

LIABILITIES		139,808	148,356
NON-CURRENT LIABILITIES
		-
Deferred tax liabilities		4
Lease liabilities		12,834	14,915

		12,838	14,915

NET ASSETS		126,970	133,441

Perfectech International Holdings Limited Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

At 30 June 2020

	(Unaudited)	(Audited)
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
CAPITAL AND RESERVES
Share capital	32,692	32,692
Reserves	79,583	86,879

Equity attributable to owners of the Company	112,275	119,571
Non-controlling interests	14,695	13,870

TOTAL EQUITY	126,970	133,441

Perfectech International Holdings Limited Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the six months ended 30 June 2020

					(Unaudited)
							Equity
							attributable
			Capital	Property			to owners	Non-
	Share	Share	redemption	revaluation	Translation	Accumulated	of the	controlling
	capital	premium	reserve	reserve	reserve	losses	Company	interests	Total
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
At 1 January 2020	32,692	118,895	10,337	16,701	(3,530)	(55,524)	119,571	13,870	133,441
Loss for the period	-	-	-	-	-	(7,151)	(7,151)	1,065	(6,086)
Other comprehensive expense for the
period	-	-	-	-	(145)	-	(145)	(16)	(161)
Total comprehensive expense for the

period	-	-	-	-	(145)	(7,151)	(7,296)	1,049	(6,247)
Dividends paid to non-controlling

interests of subsidiaries	-	-	-	-	-	-	-	(224)	(224)
At 30 June 2020
32,692	118,895	10,337	16,701	(3,675)	(62,675)	112,275	14,695	126,970

At 1 January 2019	32,692	118,895	10,337	-	(3,127)	(486)	158,311	16,169	174,480
Loss for the period	-	-	-	-	-	(26,485)	(26,485)	(622)	(27,107)
Other comprehensive income for the
period	-	-	-	16,101	12	-	16,113	4	16,117
Total comprehensive expense for the

period	-	-	-	16,101	12	(26,485)	(10,372)	(618)	(10,990)

At 30 June 2019	32,692	118,895	10,337	16,101	(3,115)	(26,971)	147,939	15,551	163,490

Perfectech International Holdings Limited Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF

CASH FLOWS

For the six months ended 30 June 2020

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
NET CASH USED IN OPERATING ACTIVITIES	(2,332)	(26,986)
NET CASH USED IN INVESTING ACTIVITIES	(1,246)	(903)
NET CASH (USED IN) FROM FINANCING ACTIVITIES	(941)	21,250

NET DECREASE IN CASH AND CASH EQUIVALENTS	(4,519)	(6,639)
CASH AND CASH EQUIVALENTS AT 1 JANUARY	70,403	71,468
Effect of change in foreign exchange rates	(197)	16

CASH AND CASH EQUIVALENTS AT 30 JUNE	65,687	64,845
ANALYSIS OF CASH AND CASH EQUIVALENTS

Bank overdraft	-	(2,437)
Bank balances and cash	65,687	67,282

	65,687	64,845

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") and with Hong Kong Accounting Standard (the "HKAS") 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

The condensed consolidated financial statements are unaudited but have been reviewed by the audit committee of the Company (the "Audit Committee").

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for investment property which is measured at fair value.

Other than changes in accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Application of amendments to HKFRSs

In the current period, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA that are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKFRS 3	Definition of a Business
Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS 9, HKAS 39	Interest Rate Benchmark Reform
and HKFRS 7

The application of the amendments to HKFRSs in the current period has had no material impact on the Group's financial performance and positions for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

3. REVENUE

Revenue represents the amounts received and receivable for goods sold by the Group to outside customers, less returns and trade discounts during the period.

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Revenue from contracts with customers
recognised at a point in time under
HKFRS 15:
Novelties and decoration products	1,827	3,044
Toy products	69,517	61,511

	71,344	64,555

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT REPORTING

For management purposes, the Group is currently organised into two operating segments, namely the manufacture and sale of novelties and decoration products and the manufacture and sales of toy products.

The following is an analysis of the Group's revenue and results by reportable segment:

For the six months ended 30 June 2020 (Unaudited)

	Novelties
	and
	decoration	Toy
	products	products	Consolidated
	HK$'000	HK$'000	HK$'000
REVENUE
External sales and total revenue	1,827	69,517	71,344
RESULT

Segment results	(2,522)	7,638	5,116
Loss from changes in fair value of

an investment property			(1,900)
Impairment loss on property,
plant and equipment			(1,056)
Unallocated corporate expenses, net			(6,067)
Finance costs			(1,442)
Loss before tax
		(5,349)
Income tax expense			(737)
Loss for the period
		(6,086)

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT REPORTING (CONTINUED)

At 30 June 2020 (Unaudited)
	Novelties
	and
	decoration	Toy
	products	products	Consolidated
	HK$'000	HK$'000	HK$'000
ASSETS
Segment assets	27,289	95,276	122,565
Unallocated corporate assets			99,706
Consolidated total assets
		222,271
LIABILITIES

Segment liabilities	25,985	68,372	94,357
Unallocated corporate liabilities			944
Consolidated total liabilities
		95,301

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT REPORTING (CONTINUED)

For the six months ended 30 June 2019 (Unaudited)

	Novelties
	and
	decoration	Toy
	products	products	Consolidated
	HK$'000	HK$'000	HK$'000
REVENUE
External sales and total revenue	3,044	61,511	64,555
RESULT

Segment results	(3,742)	(11,135)	(14,877)
Unallocated corporate expenses, net			(12,102)

Finance costs			(674)

Loss before tax			(27,653)
Income tax credit			546

Loss for the period			(27,107)

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT REPORTING (CONTINUED)

At 31 December 2019 (Audited)
	Novelties
	and
	decoration	Toy
	products	products	Consolidated
	HK$'000	HK$'000	HK$'000
ASSETS
Segment assets	29,357	81,972	111,329
Unallocated corporate assets			111,634

Consolidated total assets			222,963
LIABILITIES

Segment liabilities	25,311	62,597	87,908
Unallocated corporate liabilities			1,614

Consolidated total liabilities			89,522

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT REPORTING (CONTINUED)

Geographical Information

The Group's revenue from external customers by location of operations are detailed below:

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Revenue by geographical market:
Hong Kong	1,860	4,269
Europe	2,079	4,775
United States of America	2,346	277
Asia (other than Hong Kong)	64,781	55,167
Others	278	67

	71,344	64,555

The following is an analysis of the carrying amount of segment assets analysed by the geographical areas in where the assets are located:

	Carrying amount of
	segment assets
	(Unaudited)	(Audited)
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
Hong Kong	147,927	155,060
The People's Republic of China (the "PRC")	74,344	67,903

	222,271	222,963

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. OTHER INCOME, GAINS AND LOSSES

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Interest income from financial assets held for
cash management purposes	173	307
Rental income from investment property	408	204
Scrap sales (Note)	-	630
Gain on disposal of property,
plant and equipment	35	84
Net foreign exchange losses	(340)	(791)
Gain on termination of a lease	28	-
Tooling income (Note)	347	1,137
Laboratory Testing Income (Note)	198	178
Government subsidies	726	-
Others (Note)	166	153

	1,741	1,902

Note: Those income are the revenue from contracts with customers recognised at a point in time under HKFRS 15.

6. LOSS BEFORE TAX

Loss before tax has been arrived at after charging:

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Depreciation
- property, plant and equipment	3,574	3,903
- right-of-use assets	360	586

	3,934	4,489

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. INCOME TAX EXPENSE (CREDIT)

Current tax:

Hong Kong Profits Tax

PRC Enterprise Income Tax

Underprovision in prior years:

Hong Kong Profits Tax

PRC Enterprise Income tax

Deferred tax

Origination (reversal) of temporary differences

Total income tax expense (credit) recognised in profit or loss

(Unaudited)

For the six months ended

30 June

20202019

HK$'000 HK$'000

624-

101-

828

10928

4(574)

737(546)

8. DIVIDENDS

The Board has resolved not to declare any interim dividend for the six months ended 30 June 2020 (2019: Nil).

9. LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the Group's loss for the period attributable to owners of the Company of approximately HK$7,151,000 (2019: HK$26,485,000) and the weighted average number of ordinary shares of 326,923,607 (2019: 326,923,607).

Diluted loss per share for the periods ended 30 June 2020 and 2019 was the same as basic loss per share as there were no dilutive potential ordinary shares in issue for both periods.

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY

During the period, the Group acquired property, plant and equipment of approximately HK$1,456,000 (2019: HK$1,341,000).

During the period, the Group recognised impairment loss on leasehold land and building of approximately HK$1,056,000 (2019: Nil). The estimate of recoverable amount of the leasehold land and building was based on its fair value less cost of disposal. The fair value of the leasehold land and building at 30 June 2020 was determined by the Directors with reference to recent transaction prices in the market for similar properties.

During the period, the Group also recongised loss from changes in fair value of investment property of approximately HK$1,900,000 (2019: Nil). The fair value of the investment property at 30 June 2020 was determined by the Directors with reference to recent transaction prices in the market for similar properties.

11. TRADE AND OTHER RECEIVABLES

Included in trade and other receivables are trade receivables of HK$18,597,000 (31 December 2019: HK$9,675,000). The Group allows an average credit period of 60 days to its trade customers. The following is an aging analysis of the Group's trade receivables, presented based on the invoice date and net of allowance for expected credit loss at the end of the reporting period:

	(Unaudited)	(Audited)
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
0-60 days	17,430	9,637
61-90 days	1,126	-
91-120 days	41	38

	18,597	9,675

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade payables of HK$14,303,000 (31 December 2019: HK$9,498,000). The following is an aging analysis of the Group's trade payables, presented based on invoice date at the end of reporting period:

	(Unaudited)	(Audited)
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
0-60 days	12,062	7,577
61-90 days	1,588	1,390
91-120 days	135	13
Over 120 days	518	518

	14,303	9,498

13. AMOUNT DUE TO A DIRECTOR OF SUBSIDIARIES

The amount represented advance from Mr. Poon Siu Chung (a former director of certain subsidiaries of the Company who passed away on 28 October 2019) which is now due to Ms. Lau Kwai Ngor, the wife of Mr. Poon Siu Chung, to whom such advance has been assigned by operation of law. It was conducted on normal commercial terms, bearing interest at a rate of 4% per annum, unsecured, and repayable on demand.

14. CAPITAL COMMITMENTS

Capital commitments in respect of the acquisition of property, plant and equipment:

Contracted but not provided for

(Unaudited)	(Audited)
30 June	31 December
2020	2019
HK$'000	HK$'000

Perfectech International Holdings Limited Interim Report 2020

NOTES TO THE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15. RELATED PARTY TRANSACTIONS

During the period, the Group had the following transactions with related parties who are not members of the Group:

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Rental expenses paid to:
Mr. Poon Siu Chung (Note)	-	60
Interest expenses payable to:
Ms. Lau Kwai Ngor (Note)	933	-

Note: Mr. Poon Siu Chung, who passed away on 28 October 2019, was a former director of certain subsidiaries of the Company. Ms. Lau Kwai Ngor, the wife of Mr. Poon Siu Chung, who is a beneficiary of Mr. Poon Siu Chung's estate.

Compensation of key management personnel
The remuneration of Directors and other members of key management during the period were as follows:

	(Unaudited)
	For the six months ended
	30 June
	2020	2019
	HK$'000	HK$'000
Short-term benefits	4,480	4,012
Post-employment benefits	40	39

	4,520	4,051

Perfectech International Holdings Limited Interim Report 2020

SHARE OPTION SCHEME

A share option scheme (the "Scheme") of the Company was adopted on 30 May 2012. The key terms of the Scheme had been summarised in the annual report of the Company for the year ended 31 December 2019.

At 30 June 2020, the number of shares available for issue under the Scheme were 32,692,360, representing approximately 10% of the shares of the Company in issue at that date.

There were no movements in the Company's share options during the six months ended 30 June 2020. There were no outstanding share options of the Company as at 1 January 2020 and 30 June 2020.

Perfectech International Holdings Limited Interim Report 2020

DIRECTORS' AND CHIEF EXECUTIVE'S

INTERESTS IN SHARES AND OPTIONS

At 30 June 2020, none of the Directors and chief executive of the Company or their respective associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations (as defined in Part XV of the Securities and Futures Ordinance (the "SFO")) as recorded in the register maintained under Section 352 of Part XV of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") as set out in Appendix 10 to the Listing Rules.

Perfectech International Holdings Limited Interim Report 2020

SUBSTANTIAL SHAREHOLDERS

At 30 June 2020, the register of substantial shareholders' interests maintained by the Company pursuant to Section 336 of the SFO showed that the following shareholders had notified the Company of the relevant interests in the issued shares of the Company as follows:

Long position in shares of the Company

			No. of
			underlying		% of issued
			shares held		share capital of
		No. of shares	under equity		the Company
Shareholders	Capacity	held	derivatives	Total	(approximately)
Mr. Zhai Jun	Interest of controlled	125,297,040	-	125,297,040(1)	38.33
	corporation
Star Fly Limited	Beneficial owner	125,297,040	-	125,297,040(1)	38.33
Mr. Gao Xiaorui	Interest of controlled	119,297,041	-	119,297,041(2)	36.49
	corporation
Fresh Choice Holdings	Beneficial owner	119,297,041	-	119,297,041(2)	36.49
Limited

Notes:

For the purpose of Part XV of the SFO, as at 30 June 2020, Mr. Zhai Jun was deemed to be interested in the 125,297,040 shares of the Company held by Star Fly Limited. Star Fly Limited is a limited company incorporated in the British Virgin Islands wholly owned by Mr. Zhai Jun.
For the purpose of Part XV of the SFO, as at 30 June 2020, Mr. Gao Xiaorui was deemed to be interested in 119,297,041 shares of the Company held by Fresh Choice Holdings Limited. Fresh Choice Holdings Limited is a limited company incorporated in the British Virgin Islands owned as to 90% by Mr. Gao Xiaorui and 10% by Mr. Wu Zhenlong.

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend for the six months ended 30 June 2020 (2019: Nil).

BUSINESS AND FINANCIAL REVIEW

Affected by the unresolved Sino-American trade disputes, the political instability in Europe and the outbreak of Coronavirus Disease 2019 (the "COVID-19") pandemic, the global economy remained sluggish and the Group's operating environment remained challenging in the first half of 2020. During the six months ended 30 June 2020, the Group's revenue rose by 11% year-on-year to approximately HK$71,344,000 (2019: HK$64,555,000) despite facing the tough operating environment. Revenue rose was driven by higher sales of toy products, which offset decline in sales of novelties and decorations products. The Group recorded a loss for the period attributable to owners of the Company of approximately HK$7,151,000 (2019: HK$26,485,000). The basic and diluted loss per share were both at 2.19 HK cents (2019: both 8.10 HK cents).

For the six months ended 30 June 2020, the Group's core business recorded a profit of HK$5,116,000 (2019: loss of HK$14,877,000). Detailed performance of each segment of the core business is discussed below.

Toy products

The revenue of toy products segment increased by about 13% year-on-year to approximately HK$69,517,000 (2019: HK$61,511,000), and accounted for about 97% of total revenue of the Group. The increase in revenue of this segment was largely driven by the higher sales in Asia (other than Hong Kong) and the United States of America, which offset the decline in sales in Europe and Hong Kong. The segment recorded a profit of approximately HK$7,638,000 for the six months ended 30 June 2020 while it incurred a loss of HK$11,135,000 in the same period last year. The result of this segment has improved as the Group streamlined the production process and cost structure after the Group relocated all production plants together at Zhongshan, the PRC, in recent years. In this regard, the Group has made provision for a special incentive bonus of approximately HK$2,000,000 as incentive for relocation of the relevant employees with a view to recognising their efforts in ensuring the smooth transition during the process of plant relocation.

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW (CONTINUED)

Novelties and decorations products

The revenue of the novelties and decoration products segment decreased by about 40% year-on-year to approximately HK$1,827,000 (2019: HK$3,044,000), which was mainly attributable to the decline in sales in Europe. The loss of this segment slightly reduced to approximately HK$2,522,000 (2019: HK$3,742,000), as a result of strict cost management implemented by the Group.

Distribution costs and administrative expenses

Distribution costs decreased by about 8% year-on-year to approximately HK$1,405,000 (2019: HK$1,521,000) as a result of stringent cost control measures implemented by the Group. Administrative expenses mainly represented staff costs (including directors' emoluments), legal and professional fee, depreciation of property, plant and equipment and right-of-use assets and other administrative expenses. The amount decreased by about 25% year-on-year to approximately HK$26,326,000 (2019: HK$35,235,000), which was mainly attributable to the decrease in legal and professional costs incurred by the Group of approximately HK$7,700,000 and the effective cost management implemented by the Group during the period.

Finance costs

Finance costs increased to approximately HK$1,442,000 (2019: HK$674,000), as a result of the increase in interest on amount due to a director of subsidiaries during the period.

Significant investments, acquisitions and disposals

There was no significant investment held as at 30 June 2020, nor other material acquisitions and disposals of subsidiaries, associates and/or joint ventures during the six months ended 30 June 2020.

Liquidity and financial resources

As at 30 June 2020, the Group had amount due to a director of subsidiaries of approximately HK$48,520,000 (31 December 2019: HK$47,587,000) and short term bank borrowings of approximately HK$5,000,000 (31 December 2019: HK$5,000,000). The Group's gearing ratio, calculated on the basis of the aggregate of the amount due to a director of subsidiaries and bank borrowings over the equity attributable to owners of the Company, was approximately 48% (31 December 2019: 44%).

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW (CONTINUED)

Liquidity and financial resources (Continued)

As at 30 June 2020, the Group had bank balances and cash of approximately HK$65,687,000 (31 December 2019: HK$70,403,000). With total current assets as at

30 June 2020 of approximately HK$109,520,000 (31 December 2019: HK$102,869,000) as well as available banking facilities, the Group had sufficient financial resources to satisfy its commitments and working capital requirements.

Pledge of Assets

As at 30 June 2020, the Group had pledged its leasehold land and building with carrying value of approximately HK$32,000,000 (31 December 2019: HK$33,703,000) and investment property of approximately HK$38,000,000 (31 December 2019: HK$39,900,000) to secure banking facilities granted to the Group.

Contingent Liabilities

There have been no changes in the Group's contingent liabilities since the year ended 31 December 2019.

Net asset value

The	net asset value per share	as at 30 June 2020 was approximately HK$0.34
(31	December 2019: HK$0.37),	calculated on the basis of the equity attributable to

owners of the Company of approximately HK$112,275,000 (31 December 2019: HK$119,571,000) over the actual number of shares in issue on that date of 326,923,607 (31 December 2019: 326,923,607).

Employees and remuneration policies

As at 30 June 2020, the Group employed approximately 720 (31 December 2019: 680) full time employees. The Group remunerates its employees primarily based on prevailing industry practice as well as individual merits. The Group has also established a share option scheme for its full time employees.

Foreign currency exposure

The Group's sales and purchases are mainly denominated in Hong Kong Dollar and United States Dollar (the "US Dollar"). As all of its factories are located in the PRC, expenses incurred there are denominated in Renminbi.

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW (CONTINUED)

Foreign currency exposure (Continued)

Since Hong Kong Dollar remains pegged to US Dollar, the Group does not foresee a substantial exposure in this area, and will closely monitor the trend of Renminbi to see if any action is required.

As at 30 June 2020, the Group did not enter into any financial instrument for the hedging of exposure in foreign currencies.

Future plans for material investments

As referred to in the Company's announcement titled "Inside Information in Relation to Framework Sale and Purchase Agreement" dated 15 August 2019 and further discussed in the annual report of the Company for the year ended 31 December 2019, on 15 August 2019, the Company entered into a framework sale and purchase agreement with Sino-Science Netherlands Petroleum B.V., a company incorporated under the laws of Netherlands ("SSNP"), pursuant to which the Company has conditionally agreed to acquire more than 50% of the total participating interests or shares of Sozak Oil and Gas LLP ("Sozak"), a limited liability partnership established under the laws of Kazakhstan ("Proposed Acquisition"). Sozak is principally engaged in the exploration of oil and natural gas in South-Kazakhstan and Kyzylorda region and the petroleum assets are located in the Marsel Block in the Chu-Sarysu Basin of Kazakhstan which is currently under appraisal. The consideration for the Proposed Acquisition shall be paid by the Company through a combination of cash, the allotment and issue of new shares of the Company and/or other forms of securities issued by the Company at a price to be agreed upon by SSNP and the Company. The material terms of the Proposed Acquisition are yet to be agreed and are subject to the execution of the final definitive agreement.

Up to the date of this report, the Directors are still in the course of negotiating material terms with SSNP and making appropriate arrangements for the Proposed Acquisition, with the aim of materialising the Proposed Acquisition as soon as practicable.

As mentioned in the annual report of the Company for the year ended 31 December 2019, it is the intention of the Group to actively identify good merger and acquisition opportunities in order to acquire new business or assets that will bring additional value and new income streams to the Group. Leveraging on the extensive experience in the areas of oil and natural gas industry and corporate management, the Board believes that the Proposed Acquisition will help the Company navigate its business focus towards natural gas and clean energy to meet the growing natural gas demand in the PRC, and create long-term returns for the shareholders of the Company with enhanced values.

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW (CONTINUED)

Prospect

The unresolved Sino-American trade disputes, the political instability in Europe and the outbreak of COVID-19 pandemic are expected to continue to cast uncertainty and challenges to the Group's operating environment in this year. The Directors are moving ahead cautiously. The Group will continue to optimise its product mix to meet the demand of the customers, strengthen production and operational efficiency, as well as implement stringent cost management in order to minimise the impact of these challenges.

Meanwhile, the Directors endeavour to materialise the Proposed Acquisition in order to bring additional value and new income streams to the Group, and create long-term returns for the shareholders of the Company with enhanced values.

With the joint efforts of all of its employees, the Group endeavors to maintain a good business relationship with its customers, business partners and shareholders to maximise its corporate value and deliver promising returns to its shareholders.

PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the six months ended 30 June 2020, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities whether on the Stock Exchange or otherwise.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company has adopted the corporate governance code and amended it from time to time, based on the code provisions (the "Code Provisions") of the latest revised code on corporate governance as set out in Appendix 14 to the Listing Rules.

Throughout the six months ended 30 June 2020, the Company has complied with the Code Provisions.

Perfectech International Holdings Limited Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Board has adopted a code of conduct regarding Directors' securities transaction on terms no less exacting than the required standard as set out in the Model Code.

Specific enquiries have been made with all Directors and they have confirmed that throughout the six months ended 30 June 2020, they complied with the required standard set out in the Model Code and the Company's code of conduct regarding Directors' securities transactions.

AUDIT COMMITTEE

The Audit Committee comprises three independent non-executive Directors, Mr. Xie Xiaohong, Mr. Qin Feng and Mr. Lau Shu Yan, who is also the chairman of the Audit Committee. The Audit Committee has reviewed the Group's interim report for the six months ended 30 June 2020.

DIRECTORS OF THE COMPANY

At the date of this report, the Board is composed of Mr. Li Shaohua and Mr. Poon Wai Yip, Albert as executive Directors, Ms. Zhu Yuqi as non-executive Director, and Mr. Xie Xiaohong, Mr. Lau Shu Yan and Mr. Qin Feng as independent non-executive Directors.

By order of the Board

Perfectech International Holdings Limited

Zhu Yuqi

Chairman

Hong Kong, 28 August 2020

Perfectech International Holdings Limited Interim Report 2020

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

Original document
Permalink

Disclaimer

Perfectech International Holdings Ltd. published this content on 17 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 September 2020 08:49:06 UTC

Market Closed - Hong Kong S.E. Other stock markets 04:09:00 2024-05-03 am EDT			5-day change	1st Jan Change
0.84 ^HKD	-1.18%		+7.69%	-26.96%

Mar. 28	Perfectech International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI
Mar. 22	Perfectech International Expects 375% Jump in Losses in 2023	MT

Perfectech International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 28	CI
Perfectech International Expects 375% Jump in Losses in 2023	Mar. 22	MT
Perfectech International Holdings Limited Provides Group Earnings Guidance for the Year Ended 31 December 2023	Mar. 21	CI
Perfectech Subsidiary Signs Non-Binding Agreement with New Energy Manufacturer	Nov. 17	MT
Perfectech International Holdings Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-31	CI
Perfectech International to Widen Loss in H1	23-08-22	MT
Perfectech International Holdings Limited Provides Group Consolidated Earnings Guidance for the Six Months Ended 30 June 2023	23-08-21	CI
Perfectech International Signs Cooperation Agreement to Build New Energy Infrastructure	23-08-02	MT
Perfectech International Holdings Limited Sign Cooperation Framework Agreement with Huaneng Jinxin Hengshun New Energy Co., Ltd	23-08-01	CI
Perfectech International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-31	CI
Perfectech International Holdings Limited Appoints Fang Guohong as Executive Director	23-03-13	CI
Perfectech International CEO Steps Down	22-11-17	MT
Perfectech International Holdings Limited Announces Resignation of Li Shaohua as Chief Executive Officer	22-11-17	CI
Perfectech International Holdings Limited Announces Executive Changes	22-09-13	CI
Perfectech International Holdings Limited Reports Earnings Results for the Half Year Ended June 30, 2022	22-08-31	CI
Perfectech International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2021	22-03-30	CI
Perfectech International Holdings Limited Provides Earnings Guidance for the Year Ending December 31, 2021	22-03-25	CI
Perfectech International Holdings Limited Announces Executive Changes	21-08-30	CI
Perfectech International Holdings Limited Announces Resignation of Leung Tak Ho as Chief Financial Officer	21-08-30	CI
Perfectech International Holdings Limited Reports Earnings Results for the Half Year Ended June 30, 2021	21-08-30	CI
Perfectech International Holdings Limited Provides Unaudited Consolidated Earnings Guidance for the Six Months Ended June 30, 2021	21-08-05	CI
Perfectech International : Shareholders to Vote June 1 on Share Issuance, Repurchase	21-04-22	MT
Perfectech International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2020	21-03-30	CI
Perfectech International : Signs Cryptocurrency Cooperation Deals; Shares Soar 110%	21-03-19	MT
Perfectech International Holdings Limited Announces Board Changes	20-12-15	CI

	1st Jan change	Capi.
PERFECTECH INTERNATIONAL HOLDINGS LIMITED	-26.96%	35.15M
HASBRO, INC.	+20.41%	8.56B
MATTEL, INC.	-2.28%	6.35B
GAMES WORKSHOP GROUP PLC	-3.95%	3.92B
SPIN MASTER CORP.	-12.51%	2.32B
ALPHA GROUP	-18.97%	1.45B
TONIES SE	-2.94%	606M
DREAM INTERNATIONAL LIMITED	+22.05%	412M
FUNKO, INC.	-15.01%	337M
BROGENT TECHNOLOGIES INC.	+10.96%	254M

Perfectech International Holdings Limited

Equities

765

BMG7004C1073

Toys & Juvenile Products

Perfectech International : 2020 Interim Report

Latest news about Perfectech International Holdings Limited

Chart Perfectech International Holdings Limited

Company Profile

Income Statement Evolution

Annual profits - Rate of surprise

Sector Other Toys & Juvenile Products