CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Mr. Cheng Ting Kong (Chairman) Mr. Luk Wai Keung Mr. Leung Kwok Yin Independent Non-Executive Directors Mr. Fung Tze Wa Mr. Ting Wong Kacee Mr. Tse Ting Kwan AUDIT COMMITTEE Mr. Fung Tze Wa (Chairman) Mr. Ting Wong Kacee Mr. Tse Ting Kwan REMUNERATION COMMITTEE Mr. Ting Wong Kacee (Chairman) Mr. Fung Tze Wa Mr. Tse Ting Kwan NOMINATION COMMITTEE Mr. Tse Ting Kwan (Chairman) Mr. Fung Tze Wa Mr. Ting Wong Kacee COMPANY SECRETARY Mr. Luk Chi Keung AUDITORS RSM Hong Kong 29th Floor Lee Garden Two 28 Yun Ping Road Causeway Bay Hong Kong 28 29 2016 1
CORPORATE INFORMATION REGISTERED OFFICE Cricket Square, Hutchins Drive P. O. Box 2681 Grand Cayman KY1-1111 Cayman Islands HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG Room 1203-1204, 12/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong PRINICPAL BANKERS In Hong Kong: The Hongkong and Shanghai Banking Corporation Limited Cricket Square, Hutchins Drive P. O. Box 2681 Grand Cayman KY1-1111 Cayman Islands 168-200 12 1203 1204 In the PRC: Bank of China Bank of Hangzhou Co., Limited CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Maples Fund Services (Cayman) Limited PO Box 1093, Boundary Hall, Cricket Square Grand Cayman, KY1-1102 Cayman Islands HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong STOCK CODE 0776 INVESTOR RELATIONS For other information relating to the Company, please contact Corporate Communications Department website: www.776.hk e-mail: ir@776.hk Maples Fund Services (Cayman) Limited PO Box 1093, Boundary Hall, Cricket Square Grand Cayman, KY1-1102 Cayman Islands 183 22 0776 www.776.hk ir@776.hk 2 JF Household Furnishings Limited Interim I Report 2016
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2016 The board (the Board ) of directors (the Directors ) of JF Household Furnishings Limited (the Company ) is pleased to announce the unaudited results of the Company and its subsidiaries (collectively, the Group ) for the six months ended 30 June 2016, together with the unaudited comparative figures for the corresponding period in 2015 as follows: Unaudited Six months ended 30 June 2016 2015 Note REVENUE 69,752 70,789 Cost of goods sold (65,043) (64,704) Gross profit 4,709 6,085 Other income 4 1,271 1,011 Distribution costs (889) (334) Administrative expenses (9,807) (9,503) Other operating expenses (229) LOSS FROM OPERATIONS (4,945) (2,741) Finance costs (587) (1,352) LOSS BEFORE TAX (5,532) (4,093) Income tax expense 5 (136) LOSS FOR THE PERIOD (5,532) (4,229) Other comprehensive loss: Items that may be subsequently reclassified to profit or loss: Exchange differences arising on translating foreign operations (1,253) (2,951) Total comprehensive loss for the period (6,785) (7,180) LOSS PER SHARE Basic (HK cents) 7 (1.93) (1.47) 2016 3
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2016 Unaudited Audited 30 June 2016 31 December 2015 Note Non-current assets Property, plant and equipment 8 12,406 12,562 Investment properties 16,623 16,985 29,029 29,547 Current assets Inventories 19,615 25,772 Trade receivables 9 17,565 29,465 Due from related companies 4,737 4,815 Deposits, other receivables and prepayments 4,829 91,143 Cash and bank balances 120,141 42,537 166,887 193,732 Current liabilities Trade and other payables and accruals 10 25,144 36,816 Due to a related Company 11 11 251 Current tax liabilities 69 1,604 Bank borrowings 24,153 31,284 49,377 69,955 NET CURRENT ASSETS 117,510 123,777 TOTAL ASSETS LESS CURRENT LIABILITIES Non-current liabilities 146,539 153,324 Deferred tax liabilities 1,716 1,716 NET ASSETS 144,823 151,608 CAPITAL AND RESERVES Share capital 12 2,872 2,872 Reserves 141,951 148,736 TOTAL EQUITY 144,823 151,608 4 JF Household Furnishings Limited Interim I Report 2016
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2016 Six months ended 30 June 2016 2015 Total equity of the Group at 1 January 151,608 166,662 Changes in equity during the period: Exchange differences arising on translating on foreign operations (1,253) (2,951) Loss for the period (5,532) (4,229) Total comprehensive loss for the period (6,785) (7,180) Total equity of the Group at 30 June 144,823 159,482 2016 5
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2016 Six months ended 30 June 2016 2015 Net cash from/(used in) operating activities 87,628 (65,320) Net cash (used in)/from investing activities (557) 13 Net cash used in financing activities (7,958) (4,019) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 79,113 (69,326) CASH AND CASH EQUIVALENTS AT 1 JANUARY 42,537 125,304 EFFECT OF FOREIGN EXCHANGE RATE CHANGES (1,509) (1,268) CASH AND CASH EQUIVALENTS AT 30 JUNE 120,141 54,710 ANALYSIS OF CASH AND CASH EQUIVALENTS Cash and bank balances 120,141 54,710 6 JF Household Furnishings Limited Interim I Report 2016
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL AND BASIS OF PREPARATION 1. The Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands. The address of its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The address of its principal place of business is Room 1203-1204, 12/F., China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong. The Company s shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands 168-200 12 1203 1204 The Company is an investment holding company. The condensed consolidated financial information are presented in Hong Kong dollars ( HK$ ) and all values are rounded to the nearest thousand except when otherwise indicated, which is the Company s functional and presentation currency. In the opinion of the Directors, Power Ocean Holdings Limited, a company incorporated in the British Virgin Islands, is the immediate parent and Mr. Chau Cheok Wa and Mr. Cheng Ting Kong are the ultimate controlling parties of the Company. The condensed consolidated financial information have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ). 34 16 2016 7
2. PRINCIPAL ACCOUNTING POLICIES 2. The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain properties and financial instruments, which are measured at fair value, as appropriate. Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2016 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31 December 2015. Application of a new amendments to Hong Kong Financial Reporting Standards ( HKFRSs ) In the current period, the Group has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective for its accounting year beginning on 1 January 2016. HKFRSs comprise Hong Kong Financial Reporting Standards ( HKFRS ); HKAS and Interpretations. The following standards have been adopted by the Group for the first time for the financial period beginning on 1 January 2016: HKFRS 14 Amendments to HKFRSs Amendments to HKAS 1 Amendments to HKAS 16 and HKAS 38 Amendments to HKAS 27 Amendments to HKFRS 10, HKFRS 12 and HKAS 28 Amendments to HKFRS 11 Regulatory Deferral Accounts Annual Improvements to HKFRSs 2012-2014 Cycle Disclosure Initiative Clarification of Acceptable Methods of Depreciation and Amortisation Equity Method In Separate Financial Statements Investment Entities: Applying the Consolidation Exception Accounting for Acquisitions of Interests in Joint Operations 14 1 16 38 27 10 12 28 11 8 JF Household Furnishings Limited Interim I Report 2016
2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. The adoption of these new and revised HKFRSs did not result in significant changes to the Group s accounting policies, presentation of the Group s condensed consolidated financial statements and amounts reported for the current period and prior years. The Group has not early applied new and revised HKFRSs that have been issued but are not yet effective for the financial period beginning on I January 2016. The Directors anticipate that the new and revised HKFRSs will be adopted in the Group s condensed consolidated financial statements when they become effective. The Group is in the process of assessing, where applicable, the potential effect of all new and revised HKFRSs that will be effective in future periods but is not yet in a position to state whether these new and revised HKFRSs would have a material impact on its results of operations and financial position. 3. SEGMENT INFORMATION 3. Information reported to the chief executive officer of the Company, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered. For management purposes, the Group has two reportable segments, stainless steel furnishings and property investment. Information about reportable segment revenue, profit or loss and assets: Stainless steel furnishings Property investment Total Six months ended 30 June 2016 Revenue from external customers 69,641 111 69,752 Intersegment revenue Segment loss (842) (149) (991) Interest revenue 47 47 Interest expense (587) (587) Depreciation (927) (927) Additions to segment non-current assets 2,531 2,531 Other material non-cash item: Fair value change of investment properties (229) (229) As at 30 June 2016 Segment assets 61,912 16,644 78,556 2016 9
3. SEGMENT INFORMATION (Continued) 3. Stainless steel furnishings Property investment Total Six months ended 30 June 2015 Revenue from external customers 70,685 104 70,789 Intersegment revenue Segment profit 10 589 599 Interest revenue 71 71 Interest expense (1,019) (1,019) Depreciation (1,610) (1,610) Income tax expense (136) (136) Additions to segment non-current assets 133 133 Other material non-cash item: Fair value change of investment property 500 500 As at 30 June 2015 Segment assets 70,857 6,522 77,379 Reconciliations of segment assets: 30 June 2016 31 December 2015 (audited) Assets Total assets of reportable segments 78,556 90,727 Unallocated corporate assets 117,360 132,552 Consolidated total assets 195,916 223,279 10 JF Household Furnishings Limited Interim I Report 2016
3. SEGMENT INFORMATION (Continued) 3. Reconciliation of reportable segment revenue and results: Six months ended 30 June 2016 2015 Revenue Total revenue of reportable segments 69,752 70,789 Elimination of intersegment revenue Consolidated revenue 69,752 70,789 Profit or loss Total (loss)/profit of reportable segments (991) 599 Unallocated finance costs (333) Unallocated corporate income 1,139 440 Unallocated corporate expenses (5,680) (4,935) Consolidated loss for the period (5,532) (4,229) 4. OTHER INCOME 4. Six months ended 30 June 2016 2015 Fair value gain on investment property 500 Interest income 97 136 Investment income 919 374 Net exchange gain 216 Others 39 1 1,271 1,011 2016 11
5. INCOME TAX EXPENSE 5. No provision for Hong Kong Profits Tax is required since the Group has no assessable profit for the period. Under the Law of the PRC on Enterprise Income Tax and Implementation Rules, the statutory tax rate of PRC subsidiaries is 25% (2015: 25%). 2525 Tax charge on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof. 6. DIVIDEND 6. No dividend was paid, declared or proposed during the period. The Directors have determined that no dividend will be paid in respect of the interim period (2015: Nil). 7. LOSS PER SHARE 7. The calculation of basic loss per share is based on the following: Six months ended 30 June 2016 2015 Loss Loss attributable to owners of the Company, used in the basic loss per share calculation (5,532) (4,229) Six months ended 30 June 2016 2015 Number of shares Weighted average number of ordinary shares used in basic loss per share calculation 287,206,000 287,206,000 8. PROPERTY, PLANT AND EQUIPMENT 8. During the six months ended 30 June 2016, the Group had additions to property, plant and equipment in the amount of approximately HK$2,531,000 (2015: approximately HK$135,000). The Group has no material disposal of property, plant and equipment on both periods. 2,531,000 135,000 12 JF Household Furnishings Limited Interim I Report 2016
9. TRADE RECEIVABLES The Group normally granted customers with credit terms of 30 to 90 days. The aging analysis of the Group s trade receivables, based on the invoice date, and net of allowance, is as of follows: 9. 30 90 30 June 2016 31 December 2015 (audited) 0 30 days 0 30 13,659 16,539 31 60 days 31 60 3,906 12,926 Total 17,565 29,465 10. TRADE AND OTHER PAYABLES AND ACCRUALS 10. 30 June 2016 31 December 2015 (audited) Trade payables 8,942 15,636 Other payables and accruals 16,202 21,180 25,144 36,816 The Group normally obtains credit terms ranging from 30 to 90 days from its suppliers. The aging analysis of the Group s trade payables, based on invoice date, is as follows: 30 90 30 June 2016 31 December 2015 (audited) 0 30 days 0 30 6,160 10,985 31 60 days 31 60 1,042 4,644 61 90 days 61 90 1,728 Over 90 days 90 12 7 Total 8,942 15,636 2016 13
11. DUE TO A RELATED COMPANY 11. The balance is unsecured, interest-free and has no fixed repayment terms. 12. SHARE CAPITAL 12. Number of shares 000 Ordinary shares of HK$0.01 each: Authorised: 1 January 2015 (audited), 31 December 2015 (audited) and 30 June 2016 0.01 5,000,000 50,000 Issued and fully paid: 1 January 2015 (audited), 31 December 2015 (audited) and 30 June 2016 287,206 2,872 13. OPERATING LEASE COMMITMENTS 13. The Group as lessee The Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of leasehold land and buildings which full due as follow: 30 June 31 December 2016 2015 (audited) Within one year 2,612 3,911 In the second to fifth years, inclusive 6,204 6,353 After five years 6,979 7,877 15,795 18,141 14 JF Household Furnishings Limited Interim I Report 2016
13. OPERATING LEASE COMMITMENTS (Continued) 13. The Group as lessor The Group s total future minimum lease payments under noncancellable operating leases are receivables as follows: 30 June 31 December 2016 2015 (audited) Within one year 72 14. FAIR VALUE MEASUREMENTS 14. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value: Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs: unobservable inputs for the asset or liability. The Group s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer. 2016 15
14. FAIR VALUE MEASUREMENTS (Continued) 14. (a) Disclosure of level in fair value hierarchy at 30 June 2016 and 31 December 2015: (a) Fair value measurements using: Level 3 30 June 31 December 2016 2015 (audited) Description Recurring fair value measurements: Investment property Residential unit Hong Kong 6,300 6,400 Commercial units the PRC 10,323 10,585 16,623 16,985 (b) Reconciliation of assets measured at fair value based on level 3: (b) 30 June 2016 31 December 2015 Investment properties (audited) 1 January 16,985 6,000 Additions 12,767 Total losses recognised in profit or loss (#) (#) (229) (1,296) Exchange realignment (133) (486) 30 June/31 December 16,623 16,985 (#) Include losses for assets held at end of reporting (#) period (229) (1,296) The total losses recognised in profit or loss including those for assets held at end of reporting period are presented in other operating expenses in the condensed consolidated statement of profit or loss and other comprehensive income. 16 JF Household Furnishings Limited Interim I Report 2016
14. FAIR VALUE MEASUREMENTS (Continued) 14. (c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements at 30 June 2016 and 31 December 2015: (c) The Group s financial controller is responsible for the fair value measurements of assets and liabilities required for financial reporting purposes, including level 3 fair value measurements. The financial controller reports directly to the Board for these fair value measurements. Discussions of valuation processes and results are held between the financial controller and the Board at least twice a year. For level 3 fair value measurements, the Group will normally engage external valuation experts with the recognised professional qualifications and recent experience to perform the valuations. Key unobservable inputs used in level 3 fair value measurements are mainly: Inflation (estimated based on private domestic price indices by class published by Rating and Valuation Department of the Government of the Hong Kong Special Administrative Region) Floor level difference (estimated based on actual data) Size difference (estimated based on actual data) view difference (estimated based on valuation experts in-house database) Market quote adjustment factor (estimated based on valuation experts in-house database) 2016 17
14. FAIR VALUE MEASUREMENTS (Continued) 14. (c) (Continued) (c) Level 3 fair value measurements Description Valuation technique Unobservable inputs Range Effect on fair value for increase of inputs Fair value 30 June 2016 Fair value 31 December 2015 (audited) % Investment property Residential unit located in Hong Kong Market comparable approach Inflation 0% (2015: 4.46%) 0% 4.46%) Increase 6,300 6,400 Floor difference 9.0% to 8.5% (2015: -3.5% to 8.5%) 9.0% 8.5% 3.5% 8.5%) Size difference 4.36% to 7.76% (2015: 3.38% to 4.39%) 4.36% 7.76% 3.38% 4.39% Increase Increase View difference 5% (2015: 3%) Increase 5%3%) Investment property Commercial units located in the PRC Market comparable approach Market quote adjustment factor 5% (2015: 5%) 5% 5% Decrease 10,323 10,585 Floor difference 35% to -45% (2015: 35% to -45%) Decrease 35% -45% 35% -45% There were no changes in the valuation techniques used as at 30 June 2016 and 31 December 2015. 18 JF Household Furnishings Limited Interim I Report 2016
15. RELATED PARTY TRANSACTIONS 15. In addition to those related party transactions and balances disclosed elsewhere in the condensed financial statements, the Group had the following transactions and balances with related parties during the period: (a) Key management personnel compensation (a) The key management personnel of the Group comprises all Directors. Details of their emoluments were disclosed as follows: Six months ended 30 June 2016 2015 Directors remuneration 553 553 (b) Transactions with related parties (b) Six months ended 30 June 2016 2015 Rental income (Ningbo JF Furniture Co., Limited*) 525 369 Leasing charges paid to (Yuyao Jiefeng Air Conditioning Equipment Co., Limited*) 84 Processing charges paid to (Ningbo JF Furniture Co., Limited*) 477 124 Purchase from (Ningbo JF Furniture Co., Limited*) 1,751 526 License fees paid to A.C.R. Equipment Supplies Limited 60 60 Rental expenses paid to (Ningbo JF Furniture Co., Limited*) 787 Senior management 45 41 An executive Director, Mr. Leung Kwok Yin has beneficial interests in above companies. 2016 19
15. RELATED PARTY TRANSACTIONS (Continued) 15. (c) Balance with related parties (c) Due from related companies 30 June 2016 31 December 2015 (audited) JF Household Furnishings (BVI) Limited 4,737 4,737 (Yuyao Jiefeng Air Conditioning Equipment Co., Limited*) 78 4,737 4,815 Due to a related company (Ningbo JF Furniture Co., Limited*) 30 June 2016 31 December 2015 (audited) 251 (Yuyao Jiefeng Air Conditioning Equipment Co., Limited*) 11 11 251 * for identification purpose only * 20 JF Household Furnishings Limited Interim I Report 2016
16. EVENTS AFTER REPORTING PERIOD 16. On 8 July 2016, the Group as purchaser, entered into a sale and purchase agreement with an independent third party to acquire the entire issued share capital of Best Gold Corporation Limited (''Best Gold''), a company holds a money lender s licence under the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) ( MLO ). Mr. Cheng Ting Kong ( Mr. Cheng ), the Chairman of the Board and an executive Director, (i) is a director and a beneficial owner of Sun Finance Company Limited ( SFCL ), a company incorporated in Hong Kong and a licensed money lender engaged in money lending business under the MLO; and (ii) is a director and a substantial shareholder (as defined under the Listing Rules) of Sun International Resources Limited ( SIRL ), a company incorporated in the Cayman Islands with limited liability, the issued shares of which are listed on the Growth Enterprise Market of the Stock Exchange (stock code: 8029), which engages in money lending business through its subsidiary, Sun International Credit Limited ( SICL ), a company incorporated in Hong Kong and a licensed money lender under the MLO. 163 (i) (ii) 8029 Sun International Credit LimitedSICL SICL In light of the above, Mr. Cheng will abstain from voting on any matter where there is or may be a conflict of interest in accordance with the requirements of the articles of association of the Company; and Mr. Cheng will allow Best Gold to remain as an independent operating entity with its own management team and distribution network and will not involve in its daily management. Taking into account (i) Mr. Cheng is fully aware of his fiduciary duty to the Group and he will abstain from voting on any matter when there is or may be a conflict of interest; (ii) the Group is capable of, and does carry on its business independently of, and on an arm s length basis with the competing businesses of SFCL and SIRL; and (iii) an executive committee will be formed to ensure business opportunities and the performance of Best Gold will be independently assessed and reviewed from time to time. The Board considered that Mr. Cheng does not, by himself or in his individual capacity, compete with the Company and/or the business of the Group and the Group s interest is adequately safeguarded. The details of acquisition is set out in the Company s announcement dated 8 July 2016. (i) (ii) (iii) 2016 21
MANAGEMENT DISCUSSION AND ANALYSIS Financial review The Group s revenue for the six months ended 30 June 2016 amounted to approximately HK$69.8 million, representing a decrease of approximately 1.5% over the corresponding period of 2015. Such decrease is due to the intense competition in household product market and slow grow of economy in China. 69,800,000 1.5% Gross profit margin of the Group decreased 1.8% to approximately 6.8% for the six months ended 30 June 2016 due to the increase in costs of labour and raw materials during the period. 1.8% 6.8% Other income increased from approximately HK$1.0 million for the six months ended 30 June 2015 to approximately HK$1.3 million for the six months ended 30 June 2016, mainly due to the investment income and net exchange gain. 1,000,000 1,300,000 Distribution costs increased from approximately HK$0.3 million for the six months ended 30 June 2015 to approximately HK$0.9 million for the six months ended 30 June 2016, mainly due to the increase in declaration charge and transportation cost. 300,000 900,000 Administrative expenses increased from approximately HK$9.5 million for the six months ended 30 June 2015 to approximately HK$9.8 million for the six months ended 30 June 2016, mainly due to the increase in staff costs and rental expenses. Business Review and Outlook Household products business During 2015, market condition remains challenging as the Europe s economy continuous weak and the slow growth in China economy. Besides, the rising of staff costs and intense competition also deteriorates to household market in China. The revenue from household products business for the six months ended 30 June 2016 was approximately HK$69,641,000 (2015: approximately: HK$70,685,000), representing a slightly decrease of 1.5%. The segment loss for the reporting period was approximately HK$842,000 (2015: segment profit of approximately HK$10,000). 9,500,000 9,800,000 69,641,00070,685,000 1.5 842,00010,000 In 2015, the Municipal People s Government of Ningbo carried out an urban renewal plan for reorganising the use of land in Yuyao City, China. In early of 2016, JF A.C.R. Equipment Supplies (Ningbo) Co., Ltd., a wholly-owned subsidiary of the Company which located in Yuyao City, has migrated its production base to the periphery area of Yuyao City. As a result, the capital expenditure increased and much distribution cost was incurred during the reporting period. 22 JF Household Furnishings Limited Interim I Report 2016
The Group will take active measure to strengthen its operational efficiency, reduce the cost of production and improve the product mix in order to improve the gross profit margin and increase the market share. Property investment business The Group has diversified its business to property investment in 2013 by acquired an investment property for rental purpose. The Group s revenue from property investment business during the reporting period was approximately HK$111,000 (2015: approximately HK$104,000). The segment loss was approximately HK$149,000 (2015: segment profit of approximately HK$589,000), mainly due to fair value loss on investment property which is noncash in nature. 111,000 104,000149,000 589,000 In 2015, the Group has acquired commercial properties situated in Liaoning Province, the PRC and have been renovated to a hotel during the period. The Group planned to lease out the hotel to earn for rental income. Future prospects To diversify the Group s business scope and broaden the Group s sources of income, subsequent to the end of the reporting period, the Group has acquired a company which holds a money lender s licence under the MLO. The Group is now engaged in money lending business which provides customers with a wide range of loan products and services to meet their financial needs. The financial performance of money lending business will review separately from that of the other operating segments and its results will be presented as a separate operating and reportable segment. Looking forward, the Group will from time to time aims to focus on money lending business and seek the business opportunities that can broaden the income base of the Group and create the maximum returns to the shareholder. 2016 23
Liquidity, Financial Resources, Funding and Treasury Policy As at 30 June 2016, the Group had cash and bank balances of approximately HK$120.1 million (as at 31 December 2015: approximately HK$42.5 million) and short-term bank borrowings of approximately HK$24.2 million (as at 31 December 2015: approximately HK$31.3 million) respectively. 120,100,000 42,500,000 24,200,000 31,300,000 As at 30 June 2016, the Group had current assets of approximately HK$166.9 million (31 December 2015: HK$193.7 million) and current liabilities of approximately HK$49.4 million (31 December 2015: HK$69.9 million). Gearing ratio As at 30 June 2016, the Group s gearing ratio, which was derived from the total borrowings to total assets, decreased to 12.3% from that of 14.0% as at 31 December 2015. Capital Structure The share capital of the Company comprises of ordinary shares only. Material Acquisition and Disposal Save as disclosed, the Group did not have any material acquisition and disposal for the six months ended 30 June 2016. Foreign Exchange Exposure Most of the trading transactions, assets and liabilities of the Group were denominated in Renminbi, European dollars, United States dollars and Hong Kong dollars. 166,900,000 193,700,000 49,400,000 69,900,000 14.0%12.3% Contingent Liabilities As at 30 June 2016, the Group had no material contingent liabilities. Employees and Remuneration Policy As at 30 June 2016, the Group employed approximately 400 staff in the PRC and Hong Kong. The Group s remuneration to employees, including Directors emoluments, amounted to approximately HK$15,633,000 for the period. The Group reviews employee remuneration annually and rewards its employee with reference to the length of services and performance. The Group also grants share options and bonuses to employees of the Group at the discretion of the Directors and based on the financial performance of the Group. 400 15,633,000 24 JF Household Furnishings Limited Interim I Report 2016
DIRECTORS INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ITS ASSOCIATED CORPORATIONS As at 30 June 2016, none of the Directors and the chief executives of the Company nor each of their respective associates (as defined under the Listing Rules), had or was deemed to have any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ( SFO ) which (a) were required, to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of the Part XV of the SFO (including interests and short positions which the Directors were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange. As at 30 June 2016, none of the Directors have options to subscribe for shares in the Company. SUBSTANTIAL SHAREHOLDERS As at 30 June 2016, the following substantial shareholders had interests or short positions in the shares or the underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO. Other than the interests disclosed below, the Directors were not aware of any other persons who had interests or short positions in the shares or the underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO: 571 XV (a) XV7 8 (b)352 (c) 336 336 Name of Substantial Shareholders Number of shares interested in Capacity Approximate Percentage of the total issue Capital of the Company (Note 3) 3 Power Ocean Holdings Limited (Note 1&2) 179,407,488 Beneficial owner 62.46% 1 2 Chau Cheok Wa (Note 1) 179,407,488 Interest through a controlled corporation 62.46% 1 Cheng Ting Kong (Note 2) 179,407,488 Interest through a controlled corporation 62.46% 2 2016 25
Notes 1. According to the record in the register kept under section 336 of the SFO, Power Ocean Holdings Limited, which 50% of issued share capital is owned by Mr. Chau Cheok Wa and he is therefore deemed to be interested in 179,407,488 shares of the Company. 1. 336 50% 179,407,488 2. According to the record in the register kept under section 336 of the SFO, Power Ocean Holdings Limited, which 50% of issued share capital is owned by Mr. Cheng Ting Kong and he is therefore deemed to be interested in 179,407,488 shares of the Company. 2. 336 50% 179,407,488 3. The percentage has been adjusted based on the total number of shares of the Company in issue as at 30 June 2016 (i.e. 287,206,000 shares). 3. 287,206,000 SHARE OPTION AND SHARE OPTION SCHEME The Company s share option scheme (the Scheme ) was adopted pursuant to the shareholder s resolution passed on 26 November 2008. No options granted under the Scheme since its adoption are still outstanding. During the six months ended 30 June 2016, no share option were granted, exercised and lapsed. DIRECTORS INTERESTS IN CONTRACTS No contract of significance to which the Company or any of its subsidiaries or its holding company, was a party and in which a Director had a material interest, whether directly or indirectly, subsisted at the end of the period under review or any time during the period under review save and except for the transactions disclosed as connected and/or related party transactions in accordance with the requirements of the Listing Rules and accounting principles generally accepted in Hong Kong. PURCHASE, SALE OR REDEMPTION OF SHARES Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company s shares for the six months ended 30 June 2016. 26 JF Household Furnishings Limited Interim I Report 2016
CORPORATE GOVERNANCE In the opinion of the Directors, save as disclosed below, the Company has complied with the code provisions as set out in the Corporate Governance Code and Corporate Governance Report ( CG Code ) set out in Appendix 14 of the Listing Rules throughout the six months ended 30 June 2016. Under the CG Code provision E.1.2, the chairman of the Board should attend the annual general meeting ( AGM ) and invite the chairman of audit, remuneration and nomination committee to attend. However, in the AGM held on 2 June 2016 ( 2016 AGM ), the chairman of the Board was unable to attend the meeting as he had to attend to other business commitments. He then appointed an executive Director to chair the 2016 AGM on his behalf and answer any question from the shareholders concerning the Company s corporate governance. As provided for in the CG Code provision A.6.7, independent non-executive directors should attend general meetings and develop a balanced understanding of the views of shareholders. An independent non-executive Director, Mr. Ting Wong Kacee, was unable to attend the 2016 AGM due to other business commitments. E.1.2 A.6.7 The Company reviews its corporate governance practices from time to time to ensure compliance with the CG Code. AUDIT COMMITTEE The Company has established an Audit Committee with written terms of reference in accordance with the Listing Rules. The primary duties of the Audit Committee are to review the Company s interim and annual reports and accounts and to provide advice and comments thereon to the Board. The Audit Committee is also responsible for reviewing internal control procedures of the Group. The Audit Committee comprises of three independent non-executive Directors, namely Mr. Fung Tze Wa (Chairman), Mr. Ting Wong Kacee and Mr. Tse Ting Kwan. The Audit Committee has reviewed the unaudited condensed financial statements for the six months ended 30 June 2016. 2016 27
CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, as amended from time to time (the Model Code ), set out in Appendix 10 to the Listing Rules as its code of conduct regarding securities transactions of the directors of the Company. On specific enquiries made, all directors have confirmed that they have complied with the required standard as set out in the Model Code during the six months ended 30 June 2016. Employees who are likely to be in possession of unpublished price sensitive information of the Company are also subject to compliance with guidelines on no less exacting terms than the Model Code. APPROVAL OF INTERIM REPORT The interim report were approved and authorised for issue by the Board on 31 August 2016. Hong Kong, 31 August 2016 By order of the Board JF Household Furnishings Limited Cheng Ting Kong Chairman 28 JF Household Furnishings Limited Interim I Report 2016