JIYI HOUSEHOLD INTERNATIONAL HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) ( ) Stock Code : 1495 Interim Report 2018

Transcription

1 JIYI HOUSEHOLD INTERNATIONAL HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) () Stock Code : 1495 Interim Report 2018

2 CONTENTS Page Corporate Information 2 Management Discussion and Analysis 5 Interim Condensed Consolidated Income Statement 16 Interim Condensed Consolidated Statement of Comprehensive Income 17 Interim Condensed Consolidated Balance Sheet 18 Interim Condensed Consolidated Statement of Changes in Equity 20 Interim Condensed Consolidated Cash Flow Statement 21 Notes to the Condensed Consolidated Interim Financial Information 22 Other Information 52 01

3 CORPORATE INFORMATION DIRECTORS Executive Directors Ms. Hou Wei (Chairlady) Mr. Liu Xianxiu Non-executive Directors Mr. Hou Bo Mr. Lam On Tai Independent Non-executive Directors Mr. Ye Yihui Mr. Ho Hin Yip Mr. Hou Lianchang AUTHORISED REPRESENTATIVES Ms. Hou Wei Mr. Leung Wai Hong COMPANY SECRETARY Mr. Leung Wai Hong AUDIT COMMITTEE Mr. Ye Yihui (Chairman) Mr. Ho Hin Yip Mr. Hou Lianchang REMUNERATION COMMITTEE Mr. Hou Lianchang (Chairman) Mr. Liu Xianxiu Mr. Ye Yihui NOMINATION COMMITTEE Ms. Hou Wei (Chairlady) Mr. Hou Lianchang Mr. Ye Yihui Jiyi Household International Holdings Limited Interim Report

4 CORPORATE INFORMATION AUDITOR PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince s Building Central, Hong Kong LEGAL ADVISER Ma Tang & Co., Solicitors Rooms , Nan Fung Tower 88 Connaught Road Central Hong Kong PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE IN CAYMAN ISLANDS Estera Trust (Cayman) Ltd. Clifton House 75 Fort Street, P.O. Box 1350 Grand Cayman KY Cayman Islands Estera Trust (Cayman) Ltd. Clifton House 75 Fort Street, P.O. Box 1350 Grand Cayman KY Cayman Islands HONG KONG SHARE REGISTRAR Computershare Hong Kong Investor Services Limited Shops , 17th Floor Hopewell Centre 183 Queen s Road East Wanchai, Hong Kong REGISTERED OFFICE Clifton House 75 Fort Street, P.O. Box 1350 Grand Cayman KY Cayman Islands Clifton House 75 Fort Street, P.O. Box 1350 Grand Cayman KY Cayman Islands HEADQUARTERS No.2 Xianzi Middle Road Meixian District, Meizhou Guangdong Province, PRC 2 03

5 CORPORATE INFORMATION PRINCIPAL PLACE OF BUSINESS IN HONG KONG Room 1405, 14th Floor, Jubilee Centre 18 Fenwick Street, Wanchai Hong Kong PRINCIPAL BANKERS Industrial and Commercial Bank of China (Asia) Limited 33rd Floor, ICBC Tower 3 Garden Road, Central Hong Kong Bank of China (Hong Kong) Limited 1 Garden Road, Central Hong Kong 1 Meizhou Branch, Bank of China No. 53 Meijiang Yi Road, Meizhou Guangdong Province, PRC 53 Meizhou Branch, Guangfa Bank No. 101 Binfang Avenue, Meizhou Guangdong Province, PRC 101 Meizhou Branch, Bank of Communications No. 14 Xinzhong Road, Meijiang District, Meizhou, Guangdong Province, PRC 14 Guangzhou Branch, Zheshang Bank No. 921 Guangzhou Dadao Nam, Guangzhou, Guangdong Province, PRC 921 WEBSITE STOCK CODE Jiyi Household International Holdings Limited Interim Report

6 MANAGEMENT DISCUSSION AND ANALYSIS The board (the Board ) of directors (the Directors ) of Jiyi Household International Holdings Limited (the Company ) is pleased to present in this interim report the unaudited condensed consolidated results of the Company and its subsidiaries (the Group ) for the six months ended 30 June 2018 (the Reporting Period ) together with the comparative figures for the corresponding period in 2017 (the Prior Period or FY2017 ). BUSINESS AND FINANCIAL REVIEW Revenue by business operations The Group is a well-established and integrated building and home improvement materials and furnishings supplier and interior design and engineering services provider in the PRC. The Group is mainly engaged in the sale and distribution of merchandise and the provision of services. The following table sets forth the breakdown of revenue by business operations for the Reporting Period with the comparative figures of FY2017: For the six months ended 30 June Changes RMB 000 RMB 000 % Sale and distribution of merchandise Building materials 96, ,022 (16.4) Home improvement materials 8,003 18,242 (56.1) Furnishings 6,961 9,412 (26.0) 111, ,676 (22.1) Provision of services 151,816 36, Total 262, ,

7 MANAGEMENT DISCUSSION AND ANALYSIS Total revenue of the Group increased by approximately RMB84.2 million or approximately 47.1% from approximately RMB178.8 million for the Prior Period to approximately RMB263.0 million for the Reporting Period. Such increase was mainly driven by the significant growth in the revenue generated from the business of provision of services; and was partially offset by the decrease in revenue generated from the business of sale and distribution of merchandise during the Reporting Period % Revenue from sale of and distribution of merchandise Revenue of the Group from sale and distribution of merchandise, comprising (i) sale of building materials; (ii) sale of home improvement materials; and (iii) sale of furnishings, decreased by approximately RMB31.5 million or approximately 22.1% from approximately RMB142.7 million for the Prior Period to approximately RMB111.2 million for the Reporting Period. Sale of building materials, home improvement materials and furnishings decreased by approximately RMB18.8 million, RMB10.2 million and RMB2.5 million respectively during the Reporting Period. The sale of steel represented approximately 64.1% (FY2017: 25.0%) and 55.5% (FY2017: 20.2%) of the revenue generated from sale of building materials and the business of sale and distribution of merchandise respectively during the Reporting Period. (i) (ii) (iii) % %25.0% 55.5%20.2% The decline in performance of this business was mainly due to the keen market and price competition and the Group s development focus has been completely transformed into the provision of engineering services. Jiyi Household International Holdings Limited Interim Report

8 MANAGEMENT DISCUSSION AND ANALYSIS Revenue from provision of services The revenue from provision of services increased significantly by approximately RMB115.7 million or approximately 320.4% from approximately RMB36.1 million for the Prior Period to approximately RMB151.8 million for the Reporting Period. In light of the number and size of corporate projects secured by the Group at the moment, the business of provision of services will probably replace the business of sale of and distribution of merchandise to become the core business of the Group in 2018 and the Group feels confident that the growth of this business will continue in the coming few years % Gross profit and gross profit margin The following table sets forth the breakdown of gross profit and gross profit margin by the Group s business segments for the Reporting Period with the comparative figures of FY2017: For the six months ended 30 June Gross profit Gross profit margin Gross profit Gross profit margin RMB 000 % RMB 000 % Sale and distribution of merchandise Building materials 7, , Home improvement materials 2, , Furnishings 1, , , , Provision of services 17, , Total 28, ,

9 MANAGEMENT DISCUSSION AND ANALYSIS Although the Group s revenue increased by approximately RMB84.2 million or approximately 47.1% from approximately RMB178.8 million for the Prior Period to approximately RMB263.0 million for the Reporting Period, the Group s overall gross profit decreased by approximately RMB3.9 million or approximately 11.8% from approximately RMB32.5 million for the Prior Period to approximately RMB28.6 million for the Reporting Period. As a result, the Group s overall gross profit margin decreased from 18.2% for the Prior Period to 10.9% for the Reporting Period, which was mainly due to (i) the decrease in gross profit margin of the business of sale and distribution of merchandise and such decrease was due to the decrease in average selling price of merchandise because of the keen market and price competition and the change in product mix; and (ii) the increase in proportion of revenue generated from provision of services during the Reporting Period and the gross profit margin of provision of services was generally lower than that of sale and distribution of merchandise % % % 10.9% (i) (ii) The gross profit margin of sale and distribution of merchandise dropped from 19.9% for the Prior Period to 10.2% for the Reporting Period, which was mainly due to (i) the increase in proportion of revenue generated from sale of building materials which entails relatively lower gross profit margin within this business segment; (ii) the significant increase in proportion of sale of steel and the gross profit margin of sale of steel was only around 6.7%; and (iii) the decrease in the average selling price of merchandise because of the keen market and price competition. 19.9% 10.2% (i) (ii) 6.7%(iii) Jiyi Household International Holdings Limited Interim Report

10 MANAGEMENT DISCUSSION AND ANALYSIS The gross profit margin of provision of services was 11.4% for the Reporting Period, which was comparable to the gross profit margin of the Prior Period. The existing strategy of the Group is to focus on increasing the project size and volume in order to expand the Group s market share in this business. Although this strategy would weaken the gross profit margin in the early stage of business development, the Group believed that it will help to secure more sizeable projects with higher gross profit margin, such as Public- Private Partnership ( PPP ) project, in the near future. 11.4% PPP Selling expenses The Group s selling expenses dropped by approximately RMB1.3 million or approximately 12.9% from approximately RMB10.0 million for the Prior Period to approximately RMB8.7 million for the Reporting Period. The decrease was mainly due to the decrease in staff costs by approximately RMB0.9 million during the Reporting Period. The decrease in staff costs was mainly due to the reduction in headcount of store operation function starting from the second half of 2017, which was to tie in with the Group s business plan to develop the business of interior design and engineering services % Administrative expenses The Group s administrative expenses decreased by approximately RMB2.2 million or approximately 24.5% from approximately RMB8.9 million for the Prior Period to approximately RMB6.7 million for the Reporting Period. The decrease was mainly due to the decrease in staff costs of approximately RMB1.1 million. The decrease in staff costs was mainly due to the reduction in headcount of logistics and warehousing departments as the Group has outsourced the logistics and warehousing functions since the last quarter of %

11 MANAGEMENT DISCUSSION AND ANALYSIS Finance costs net The Group s net finance costs decreased by approximately RMB0.8 million or approximately 22.2% from approximately RMB3.6 million in the Prior Period to approximately RMB2.8 million in the Reporting Period, which was mainly due to the decrease in the Group s average bank borrowings during the Reporting Period % 2.8 Profit for the period As a result of the foregoing, the Group s profit for the period slightly increased by approximately RMB0.2 million or approximately 3.1% from approximately RMB6.8 million for the Prior Period to approximately RMB7.0 million for the Reporting Period % 7.0 PROSPECTS The expansion of the Group s business of provision of interior design and engineering services provided a force for the growth of the Group s revenue. However, the revenue and gross profit margin of the business of sale and distribution of merchandise were weakened by the keen market and price competition and the change of the Group s business strategy. Therefore, the Group s profit for the Reporting Period was just comparable to the Prior Period. Jiyi Household International Holdings Limited Interim Report

12 MANAGEMENT DISCUSSION AND ANALYSIS The Group s current business strategy is to focus on the development of the engineering services business, which will probably replace the business of sale and distribution of merchandise as the core business of the Group in The gross profit margin of this business was still at a relatively low level, which was mainly due to the Group intended to obtain more sizeable corporate projects in order to upgrade its Construction Enterprise Qualification and expand its market share of this business. The Group is now actively seeking its first PPP project from the PRC government. The Group believes that the overall gross profit margin of the Group will be improved and the reputation of the Group within this industry will be enhanced if a PPP project can be secured. PPP PPP The Company announced a proposed rights issue to raise approximately HK$ million before expenses, on the basis of two rights shares for every five existing shares in April 2018 ( Rights Issue ), which offered existing shareholders a fair and equal opportunity to participate in the Company s long-term development without having their shareholding diluted. The Rights Issue was fully underwritten by Xinling Limited ( Xinling ), the Company s controlling shareholder. This demonstrated Xinling s confidence in and commitment to the Company s future and growth prospects. The net proceeds from the Rights Issue will be mainly used as funds for project costs for the interior design and engineering work for several projects in progress in Meizhou, Guangdong Province, the PRC. The Rights Issue will benefit the Company and shareholders as a whole, and will serve as a cornerstone for future development The Group will continue to build on from the existing businesses, and will actively look for new investment opportunities to enhance the Group s profitability and the return of the shareholders. 11

13 MANAGEMENT DISCUSSION AND ANALYSIS LIQUIDITY, FINANCIAL AND CAPITAL RESOURCES As at 30 June 2018, the Group had a total cash and bank balances of approximately RMB63.3 million (31 December 2017: RMB93.0 million) mainly denominated in Renminbi and Hong Kong Dollars. The decrease in total cash and bank balances was mainly due to the net cash used in operating activities of approximately RMB48.0 million, which was partially offset by the increase in bank borrowings of RMB19 million during the Reporting Period As at 30 June 2018, the Group had net current assets of approximately RMB266.9 million, as compared to approximately RMB257.4 million as at 31 December BORROWINGS AND PLEDGE OF ASSETS As at 30 June 2018, the Group had unutilised banking facilities for short term financing of approximately RMB20.0 million (31 December 2017: RMB108.0 million) and total bank borrowings of approximately RMB107.2 million (31 December 2017: RMB88.2 million) As at 30 June 2018, the bank borrowings of the Group were secured by buildings and land use right of the Group at the carrying amounts of approximately RMB39.4 million (31 December 2017: RMB39.4 million) and RMB2.8 million (31 December 2017: RMB2.8 million) respectively CAPITAL EXPENDITURE The Group s capital expenditure for the Reporting Period amounted to approximately RMB1.1 million, which was mainly for the purchasing and constructing of the Group s property, plant and equipment. 1.1 Jiyi Household International Holdings Limited Interim Report

14 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL RATIO As at 30 June December 2017 Current ratio (1) (1) Quick ratio (2) (2) Gearing ratio (%) (3) (%) (3) Net debt to equity ratio (%) (4) (%) (4) 12.8 (1.5) (1) Current ratio is calculated as the total current assets divided by the total current liabilities. (1) (2) Quick ratio is calculated as total current assets less inventories and divided by total current liabilities. (2) (3) Gearing ratio is calculated as the total debt divided by total equity and multiplied by 100%. (3) 100% (4) Net debt to equity ratio is calculated as total borrowings net of cash and cash equivalents and restricted cash, and divided by total equity and multiplied by 100%. (4) 100% 13

15 MANAGEMENT DISCUSSION AND ANALYSIS FOREIGN EXCHANGE EXPOSURE The Group mainly transacts and recognises its revenue in Renminbi and also incurs cost in Hong Kong dollars and Renminbi. The Group is exposed to foreign exchange risk with respect mainly to Hong Kong dollars which may affect the Group s performance. The management is aware of the possible exchange rate exposure due to the continuing fluctuation of Hong Kong dollars and will closely monitor its impact on the performance of the Group to see if any hedging policy is necessary. The Group currently does not have any foreign currency hedging policy. CONTINGENT LIABILITIES The Group had no significant contingent liabilities as at 30 June 2018 (31 December 2017: Nil). CAPITAL COMMITMENTS The Group had no significant outstanding capital commitment as at 30 June 2018 (31 December 2017: Nil). EMPLOYEE AND REMUNERATION POLICY As at 30 June 2018, the Group had a total number of 137 employees (30 June 2017: 232) and the total staff costs, including Directors remuneration, amounted to approximately RMB5.4 million for the Reporting Period (FY2017: RMB7.0 million). The decrease was a combined result of (i) the reduction in headcount starting from the second half year of 2017, in particular the headcount of store operation function, which was to tie in with the Group s business plan to develop the business of interior design and engineering services; (ii) the logistics and warehousing functions of the Group has been outsourced since the last quarter of 2017; and (iii) the salary increment of employees of the business segment of engineering services during the Reporting Period (i) (ii) (iii) Jiyi Household International Holdings Limited Interim Report

16 MANAGEMENT DISCUSSION AND ANALYSIS The Group offers competitive remuneration packages commensurate with industry practice and provides various fringe benefits to employees. The Group conducts induction training for all of its new employees and on-going training from time to time during their employment. The nature of training offered depends on their specific field of operation. The objective of the Group s remuneration policy is to maintain fair and competitive packages based on business requirements and industry practice. In order to determine the level of remuneration paid to its employees (including Directors and senior management), the following factors are considered: workload, responsibility and job complexity; business requirements; individual performance and contribution to results; company performance and profitability; retention considerations and the potential of individuals; corporate goals and objectives; market rates and changes in relevant markets, including supply and demand fluctuations and changes in competitive conditions; and general economic situation. 15

17 INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2018 Unaudited Six months ended 30 June Note RMB 000 RMB 000 Revenue 6 262, ,786 Cost of sales 6 (234,357) (146,331) Gross profit 28,615 32,455 Selling expenses (8,722) (10,016) Administrative expenses (6,749) (8,944) Other income and gains net 80 Operating profit 7 13,144 13,575 Finance income Finance expenses (2,819) (3,654) Finance costs net (2,765) (3,555) Profit before income tax 10,379 10,020 Income tax expense 8 (3,365) (3,218) Profit for the period, all attributable to equity holders of the Company 7,014 6,802 Earnings per share attributable to equity holders of the Company for the period Basic and diluted (RMB cents) The notes on pages 22 to 51 are an integral part of this condensed consolidated interim financial information Jiyi Household International Holdings Limited Interim Report

18 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2018 Unaudited Six months ended 30 June RMB 000 RMB 000 Profit for the period 7,014 6,802 Other comprehensive income: Items that may be reclassified to profit or loss Currency translation differences 115 (1,908) Total comprehensive income for the period, all attributable to equity holders of the Company 7,129 4,894 The notes on pages 22 to 51 are an integral part of this condensed consolidated interim financial information

19 INTERIM CONDENSED CONSOLIDATED BALANCE SHEET As at 30 June 2018 Unaudited Audited 30 June December 2017 Note RMB 000 RMB 000 ASSETS Non-current assets Property, plant and equipment 11 69,673 72,515 Land use right 2,778 2,823 Intangible assets Deferred income tax assets 15 2,256 1,750 75,165 77,572 Current assets Inventories 68,823 38,127 Due from customers on construction contracts 12 70,896 51,517 Trade and other receivables , ,284 Restricted cash Cash and cash equivalents 63,311 92, , ,198 Total assets 546, ,770 Jiyi Household International Holdings Limited Interim Report

20 INTERIM CONDENSED CONSOLIDATED BALANCE SHEET As at 30 June 2018 Unaudited Audited 30 June December 2017 Note RMB 000 RMB 000 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 16 35,638 35,638 Share premium , ,832 Other reserves (53,185) (53,300) Retained earnings 115, ,754 Total equity 342, ,924 LIABILITIES Current liabilities Trade and other payables 17 55,156 71,383 Due to customers on construction contracts 12 29,559 3,240 Bank borrowings ,200 88,200 Current income tax liabilities 12,253 10, , ,846 Total liabilities 204, ,846 Total equity and liabilities 546, ,770 The notes on pages 22 to 51 are an integral part of this condensed consolidated interim financial information

21 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2018 Unaudited Attributable to equity holders of the Company Share capital Share premium Other reserves Retained earnings Total equity RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Balance at 1 January , ,832 (52,362) 99, ,881 Comprehensive income: Profit for the period ended 30 June ,802 6,802 Other comprehensive income: Currency translation differences (1,908) (1,908) Balance at 30 June , ,832 (54,270) 106, ,775 Balance at 1 January , ,832 (53,300) 108, ,924 Comprehensive income: Profit for the period ended 30 June ,014 7,014 Other comprehensive income: Currency translation differences Balance at 30 June , ,832 (53,185) 115, ,053 Jiyi Household International Holdings Limited Interim Report

22 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2018 Unaudited Six months ended 30 June Note RMB 000 RMB 000 Cash flows from operating activities Cash used in operations (43,652) (25,643) Interest paid (2,690) (3,507) Income tax paid (1,641) (1,288) Net cash used in operating activities (47,983) (30,438) Cash flows from investing activities Purchase of property, plant and equipment 11 (1,068) (1,793) Disposal of property, plant and equipment 145 Release of restricted cash Addition of restricted cash (300) Net cash used in investing activities (768) (1,648) Cash flows from financing activities Proceeds from bank borrowings 103,000 45,300 Repayments of bank borrowings (84,000) (49,000) Net cash generated from/(used in) financing activities 19,000 (3,700) Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the period (29,751) (35,786) 92, ,804 Exchange gains/(losses) on cash and cash equivalents 92 (1,908) Cash and cash equivalents at end of the period 63,311 68,110 The notes on pages 22 to 51 are an integral part of this condensed consolidated interim financial information

23 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 1 GENERAL INFORMATION 1 Jiyi Household International Holdings Limited (the Company ) was incorporated in the Cayman Islands on 2 February 2015 as an exempted company with limited liability under the Companies Law (as revised) of the Cayman Islands. The address of the Company s registered office is Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands. The address of its principal place of business is Room 1405, 14/F., Jubilee Centre, 18 Fenwick Street, Wanchai, Hong Kong. Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands The Company is an investment holding company and its subsidiaries (together the Group ) are principally engaged in the business of sale and distribution of building and home improvement materials and furnishings and provision of interior design and engineering services in the People s Republic of China (the PRC ). The controlling shareholder of the Group is Xinling Limited, a company incorporated in the British Virgin Islands ( BVI ) which is wholly-owned by Ms. Hou Wei ( Ms. Hou ). This condensed consolidated interim financial information is presented in thousands of Renminbi ( RMB ), unless otherwise stated. This condensed consolidated interim financial information was approved for issue on 30 August Jiyi Household International Holdings Limited Interim Report

24 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 1 GENERAL INFORMATION (Continued) 1 The financial information relating to the year ended 31 December 2017 that is included in the condensed consolidated interim financial information for the six months ended 30 June 2018 as comparative information does not constitute the Company s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows: The Company has delivered the financial statements for the year ended 31 December 2017 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622) (3)6 3 2 BASIS OF PREPARATION 2 This condensed consolidated interim financial information for the six months ended 30 June 2018 has been prepared in accordance with HKAS 34, Interim financial reporting. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with Hong Kong Financial Reporting Standards (the HKFRS )

25 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES 3 Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2017, as described in those annual financial statements. (a) New and amended standards that are effective for the financial year beginning on or after 1 January 2018 are as followings: (a) Amendments to HKAS 28 Investments in Associates and Joint Ventures ; Amendments to HKAS 40 Transfer of Investment Property ; Amendments to HKFRS 1 First time adoption of HKFRS ; Amendments to HKFRS 2 Classification and Measurement of Share- Based Payment Transactions ; Amendments to HKFRS 4 Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts ; HKFRS 9 Financial Instruments ; HKFRS 15 Revenue from Contracts with Customers ; HK(IFRIC)-Int 22 Foreign Currency Transactions and Advance Consideration The Group has adopted the following new standards for the first time that are relevant to the Group and are effective for the current period. Jiyi Household International Holdings Limited Interim Report

26 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (a) New and amended standards that are effective for the financial year beginning on or after 1 January 2018 are as followings: (Continued) (a) HKFRS 9 Financial Instruments 9 HKFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. 9 There is no impact on the Group s accounting for financial assets and liabilities, as the new requirements only affect the accounting for financial assets and liabilities that are designated at fair value and the Group does not have any such assets and liabilities. Accordingly, the new guidance does not have a significant impact on the classification and measurement of its financial assets and liabilities. The new hedge accounting rules align the accounting for hedging instruments more closely with the Group s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. While the Group does not hold any hedging instruments, accordingly, adoption of HKFRS 9 does not have a significant impact on the accounting for its hedging relationships. 9 25

27 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (a) New and amended standards that are effective for the financial year beginning on or after 1 January 2018 are as followings: (Continued) (a) HKFRS 9 Financial Instruments (Continued) 9 The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under HKAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under HKFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts Based on the current assessment, the Group considers that the initial application of HKFRS 9 does not have a significant impact on the Group s consolidated financial statements. 9 HKFRS 15 Revenue from Contracts with Customers 15 HKFRS 15 supersedes HKAS 11 Construction Contracts, HKAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer Jiyi Household International Holdings Limited Interim Report

28 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (a) New and amended standards that are effective for the financial year beginning on or after 1 January 2018 are as followings: (Continued) (a) HKFRS 15 Revenue from Contracts with Customers (Continued) 15 The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. Based on the current assessment, the Group considers that the adoption of HKFRS 15 does not have any material impact on the Group s condensed consolidated financial statements based on the existing business model of the Group

29 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (b) New standards, new interpretations and amendments to standards and interpretations that have been issued but are not effective for the financial year beginning on 1 January 2018 and have not been early adopted by the Group: (b) Effective for the financial year beginning on or after Amendments to HKAS Long-term Interests in Associates and Joint Ventures 1 January 2019 Amendments to HKFRS 9 9 Prepayment Features with Negative Compensation 1 January 2019 HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments 1 January HKFRS 16 Leases 1 January HKFRS 17 Insurance Contracts 1 January Amendments to HKFRS 10 and HKAS Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be determined Jiyi Household International Holdings Limited Interim Report

30 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (b) New standards, new interpretations and amendments to standards and interpretations that have been issued but are not effective for the financial year beginning on 1 January 2018 and have not been early adopted by the Group: (Continued) (b) None of these is expected to have a significant impact on the condensed consolidated interim financial information of the Group, except for the following: HKFRS 16, Leases 16 HKFRS 16 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. 16 The accounting for lessors will not significantly change. The standard will affect primarily the accounting for operating leases. The Group has not yet determined to what extent of the Group s existing noncancellable operating lease commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group s profit and classification of cash flows. 29

31 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 3 ACCOUNTING POLICIES (Continued) 3 (b) New standards, new interpretations and amendments to standards and interpretations that have been issued but are not effective for the financial year beginning on 1 January 2018 and have not been early adopted by the Group: (Continued) (b) HKFRS 16, Leases (Continued) 16 Some of the commitments may be covered by the exception for short-term and low value leases and some commitments may relate to arrangements that will not qualify as leases under HKFRS The new standard is mandatory for financial years commencing on or after 1 January At this stage, the Group does not intend to adopt the standard before its effective date. 4 ESTIMATES 4 The preparation of condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December Jiyi Household International Holdings Limited Interim Report

32 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS 5 Financial risk factors The Group s activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. The interim condensed consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements as at 31 December There have been no change in the risk management policies since year end. 6 SEGMENT INFORMATION 6 The chief operating decision-maker ( CODM ) has been identified as the chief executive officer of the Company. The chief executive officer reviews the Group s internal reporting in order to assess performance and allocate resources. The chief executive officer has determined the operating segments based on these reports. The chief executive officer considers the business from products and services perspective, and determines that the Group has the following operating segments: (i) Sale and distribution of merchandise (i) (ii) Provision of interior design and engineering services (ii) 31

33 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 6 SEGMENT INFORMATION (Continued) 6 The CODM assesses the performance of the operating segments mainly based on segment revenue and gross profit of each operating segment. The Company currently does not allocate assets and liabilities to its segments, as the CODM does not use this information to allocate resources to or evaluate the performance of the operating segments. Therefore, the Company does not report a measure of total assets or total liabilities for each reportable segment. The segment information provided to the CODM for the reportable segments for the period is as follows: Six months ended 30 June RMB 000 RMB 000 Segment Revenue Sale and distribution of merchandise Total segment revenue 168, ,958 Inter-segment revenue (57,362) (16,282) Revenue from external customers 111, ,676 Provision of interior design and engineering services Total segment revenue 151,816 38,924 Inter-segment revenue (2,814) Revenue from external customers 151,816 36, , ,786 Jiyi Household International Holdings Limited Interim Report

34 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 6 SEGMENT INFORMATION (Continued) 6 Six months ended 30 June RMB 000 RMB 000 Segment Cost Sale and distribution of merchandise 99, ,337 Provision of interior design and engineering services 134,515 31, , ,331 Six months ended 30 June RMB 000 RMB 000 Segment gross profit Sale and distribution of merchandise 11,314 28,339 Provision of interior design and engineering services 17,301 4,116 28,615 32,455 33

35 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 6 SEGMENT INFORMATION (Continued) 6 Six months ended 30 June RMB 000 RMB 000 Segment gross profit 28,615 32,455 Other income and gains net 80 Selling expenses (8,722) (10,016) Administrative expenses (6,749) (8,944) Finance costs net (2,765) (3,555) Income tax expense (3,365) (3,218) Profit for the period 7,014 6,802 During the period, all revenues of the Group were derived from the PRC. Non-current assets, other than deferred income tax assets, were mainly located in the PRC as at 30 June 2018 and 31 December Jiyi Household International Holdings Limited Interim Report

36 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 6 SEGMENT INFORMATION (Continued) During the period, there were two (2017: one) external customers contributed over 10% of the total revenue of the Group. The revenues derived from these customers during the Reporting Period were as follows: 6 10% Six months ended 30 June RMB 000 RMB 000 Provision of interior design and engineering services Customer A A 71,352 Customer B B 37,383 Sale and distribution of merchandise Customer B B 13,418 Customer C C 21,393 Breakdown of the revenue by products or services is as follow: Six months ended 30 June RMB 000 RMB 000 Segment Revenue Sale and distribution of merchandise Building materials 140, ,576 Home improvement materials 19,239 20,370 Furnishings 8,725 10, , ,958 Provision of interior design and engineering services 151,816 38,924 Elimination (57,362) (19,096) 262, ,786 35

37 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 7 OPERATING PROFIT 7 An analysis of the amounts presented as operating items in the financial information is given: Six months ended 30 June RMB 000 RMB 000 Operating items 12,473 13,529 Provision for/(reversal of) write-down of inventories 60 (57) Provision for impairment of trade receivables Operating profit 13,144 13,575 8 INCOME TAX EXPENSE 8 Six months ended 30 June RMB 000 RMB 000 Current income tax 3,871 3,550 Deferred income tax (Note 15) 15 (506) (332) 3,365 3,218 Jiyi Household International Holdings Limited Interim Report

38 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 8 INCOME TAX EXPENSE (Continued) 8 The taxation on the Group s profit before income tax differs from the theoretical amount that would arise using the tax rate applicable to profit of the Group as follows: Six months ended 30 June RMB 000 RMB 000 Profit before income tax 10,379 10,020 Tax calculated at the tax rate of 25% 25% 2,595 2,505 Tax losses for which no deferred income tax asset was recognised Tax exemptions Expenses not deductible for tax purposes ,365 3,218 Cayman Islands income tax The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law (as revised) of the Cayman Islands and accordingly, is exempted from the Cayman Islands income tax. BVI income tax The Company s subsidiary in the BVI was incorporated under the International Business Companies Act of the BVI and, accordingly, is exempted from the BVI income tax. 37

39 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 8 INCOME TAX EXPENSE (Continued) 8 Hong Kong profits tax Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% for the six months ended 30 June 2018 (six months ended 30 June 2017: 16.5%) on the estimated assessable profit for the period. No Hong Kong profits tax has been provided for as there was no business operation that is subject to Hong Kong profits tax during the period. 16.5% 16.5% PRC enterprise income tax ( EIT ) The entities incorporated in the PRC are subject to EIT. According to the EIT law effective from 1 January 2008, all PRC enterprises are subject to a standard EIT rate of 25%. 25% PRC withholding tax ( WHT ) According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after 1 January 2008 are generally subject to a 10% WHT. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant WHT rate will be reduced from 10% to 5%. During the period, the directors of the Company reassessed the dividend policy of the major subsidiary established in the PRC, Guangdong Jiyi Household Building Materials Chain Co., Ltd. ( Jiyi Household ), based on the Group s current business plan and financial position, no retained earnings as of 30 June 2018 generated by Jiyi Household would be distributed to its non-prc registered intermediate holding company and as such, no deferred tax liability has been provided by the Group for the earnings expected to be retained by Jiyi Household in the PRC and not to be remitted out of the PRC in the foreseeable future. 10% 10%5% Jiyi Household International Holdings Limited Interim Report

40 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 9 EARNINGS PER SHARE 9 Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. Six months ended 30 June Profit attributable to equity holders of the Company (RMB 000) 7,014 6,802 Weighted average number of ordinary shares in issue (thousands of shares) 432, ,000 Basic earnings per share (RMB cents) For the six months ended 30 June 2018, diluted earnings per share were the same as basic earnings per share due to the absence of dilutive potential ordinary shares as at period end date. 10 DIVIDEND 10 The Board does not recommend any payment of interim dividend for the six months ended 30 June

41 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 11 PROPERTY, PLANT AND EQUIPMENT 11 Buildings Motor vehicles Furniture, fittings and equipment Leasehold improvements Construction in progress Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Six months ended 30 June 2017 Opening net book amount 41,188 3, ,947 19,967 75,249 Additions 329 1,464 1,793 Disposal (170) (170) Transfer ,000 (18,452) Depreciation (820) (262) (164) (1,352) (2,598) Closing net book amount 40,820 3, ,595 2,979 74,274 Six months ended 30 June 2017 Cost 52,202 4,612 1,798 49,356 2, ,947 Accumulated depreciation (11,382) (1,328) (1,202) (22,761) (36,673) Net book amount 40,820 3, ,595 2,979 74,274 Six months ended 30 June 2018 Opening net book amount 39,423 3, ,854 5,176 72,515 Additions 9 1,059 1,068 Transfer 788 1,224 (2,012) Depreciation (854) (187) (161) (2,731) (3,933) Exchange difference Closing net book amount 39,357 3, ,347 4,223 69,673 Six months ended 30 June 2018 Cost 52,180 4,611 2,032 52,873 4, ,919 Accumulated depreciation (12,823) (1,602) (1,295) (30,526) (46,246) Net book amount 39,357 3, ,347 4,223 69,673 Jiyi Household International Holdings Limited Interim Report

42 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 12 DUE FROM/(TO) CUSTOMERS ON CONSTRUCTION CONTRACTS 12 As at 30 June 2018 RMB December 2017 RMB 000 Due from customers on construction contracts 70,896 51,517 Due to customers on construction contracts (29,559) (3,240) At end of the period 41,337 48,277 Contract costs Incurred plus recognised profits to date 370, ,630 Less: Progress billings received and receivable (329,109) (170,353) At end of the period 41,337 48,277 All amounts due from customers on construction contracts were not considered impaired and there was no concentration of credit risk with respect to these balances. 41

43 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 TRADE AND OTHER RECEIVABLES 13 As at 30 June 2018 RMB December 2017 RMB 000 Trade receivables due from third parties 175, ,902 Trade receivables due from a related party (Note 19) 19 6,661 6,866 Less: allowance for impairment of trade receivables (1,966) (1,355) Trade receivables, net 180, ,413 The credit period granted to customers is between 0 to 360 days. The ageing analysis of the trade receivables from the date of sales is as follows: As at 30 June 2018 RMB December 2017 RMB 000 Up to 6 months 111, ,512 6 to 12 months 66,195 59,440 Over 12 months 4,379 3, , ,768 Jiyi Household International Holdings Limited Interim Report

44 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 TRADE AND OTHER RECEIVABLES (Continued) 13 As at 30 June 2018, trade receivables of RMB2,413,000 (31 December 2017: RMB2,461,000) was past due but not impaired. These relate to a number of independent customers for whom there is no significant financial difficulty and based on past experience, the overdue amounts can be recovered. The aging analysis of these trade receivables is as follows: 2,413,000 2,461,000 As at 30 June 2018 RMB December 2017 RMB 000 Over 12 months 2,413 2,461 As at 30 June 2018, trade receivables of RMB1,966,000 (31 December 2017: RMB1,355,000) were impaired. The amount of the provision was RMB1,966,000 as at 30 June 2018 (31 December 2017: RMB1,355,000). 1,966,000 1,355,000 1,966,000 1,355,000 43

45 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 TRADE AND OTHER RECEIVABLES (Continued) 13 The ageing analysis of these trade receivables is as follows: As at 30 June 2018 RMB December 2017 RMB 000 Over 12 months 1,966 1, RESTRICTED CASH 14 As at 30 June 2018 RMB December 2017 RMB 000 Restricted cash 300 As at 30 June 2018, no bank deposit (31 December 2017: RMB300,000) was placed as guarantee deposits for issuing notes payable. 300,000 Jiyi Household International Holdings Limited Interim Report

46 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 15 DEFERRED INCOME TAX 15 As no deferred income tax liabilities were recognised, there are no offset amounts as at 30 June 2018 (31 December 2017: Nil). As at 30 June 2018 RMB December 2017 RMB 000 Deferred tax assets: to be recovered within 12 months 2,256 1,750 The movements in deferred tax assets are as follows: Deferred tax assets: Accrued rental Accrued payroll Provision for impairment of trade and other receivables Provision for impairment of inventories Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January ,790 Credited/(Charged) to profit or loss 338 (18) 26 (14) 332 At 30 June ,122 At 1 January , ,750 Credited to profit or loss At 30 June , ,256 45

47 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 15 DEFERRED INCOME TAX (Continued) 15 At 30 June 2018, the Group did not recognise deferred income tax assets of RMB89,000 (30 June 2017: RMB106,000) in respect of losses amounting to RMB357,000 (30 June 2017: RMB426,000) as it is not probable that future taxable profits against which the losses can be utilised. The estimated tax losses are subject to approval by the relevant tax authorities. 357, ,000 89, , SHARE CAPITAL AND SHARE PREMIUM 16 Ordinary shares, issued and fully paid: Share Share Capital Premium Number of ordinary shares (of HK$0.10 each) RMB 000 RMB At 1 January 2017, 30 June 2017, 1 January 2018 and 30 June ,000,000 35, ,832 Jiyi Household International Holdings Limited Interim Report