Cheerwin Group Limited — Interim / Quarterly Report 2021

Aug 30, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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Cheerwin Group Limited 朝雲集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 6601)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2021

FINANCIAL HIGHLIGHTS

	Six months ended	30 June
	2021	2020
	RMB’000	RMB’000
Revenue	1,271,905	1,211,672
Gross profit	557,988	509,306
Profit before tax	152,221	240,499
Profit for the period	119,330	192,365
Adjusted profit for the period#	129,477	215,851
Earnings per share
–Basic (cents)	9.95	18.45

Adjusted for charity donations and listing expenses.

OPERATING HIGHLIGHTS

• Stable revenue and gross profit growth: Our revenue increased by 5.0% from RMB1,211.7 million for the six months ended 30 June 2020 to RMB1,271.9 million for the six months ended 30 June 2021, among which our revenue increased by 12.2% for sales of products excluding those in relation to the COVID-19 pandemic during the same period. Our gross profit increased by 9.6% from RMB509.3 million for the six months ended 30 June 2020 to RMB558.0 million for the six months ended 30 June 2021.

• Implementation of multi-brand and multi-category strategies and comprehensive product mix achieved growth: Revenue from pet care products increased by 350.5% from the six months ended 30 June 2020 to the six months ended 30 June 2021. During the same period, revenue from household care products recorded an increase of 4.4%, among which revenue from household repellent and insecticide products increased by 11.4% and revenue from household cleaning products (excluding the sterilisation and disinfectant products) increased by 10.0%. Revenue from our personal care products (excluding hand sanitisers) increased by 18.2% during the same period.

• Comprehensive online and offline coverage with rapid growth: Revenue generated through online channels and offline distributors recorded an increase of 47.6% and 0.6% from the six months ended 30 June 2020 to the six months ended 30 June 2021, respectively. During the same period, revenue from self-operated online stores increased significantly by 51.4% and revenue from our newly developed sales channel, i.e. the community e-commerce platforms, contributed to an increase of RMB20.7 million in our overall revenue.

INTERIM DIVIDEND

• The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2021.

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The board (the “ Board ”) of directors (the “ Directors ”) of Cheerwin Group Limited (the “ Company ”) is pleased to announce the unaudited consolidated results (“ Interim Results ”) of the Company and its subsidiaries (collectively, the “ Group ”) for the six months ended 30 June 2021. The Interim Results have been reviewed by the audit committee of the Company (the “ Audit Committee ”).

BUSINESS OVERVIEW AND OUTLOOK

Business Overview

In the first half of 2021, a variety of short-term factors have brought huge pressure to the household care industry. With the implementation of our omni-channel development strategy of multi-brand, multi-category and various business deployments in advance, we effectively responded to the challenges during this period. In the meantime, due to the sudden outbreak of the COVID-19 pandemic in Guangzhou in May 2021, our Company suspended on-site work for 25 days according to the polices of the government authorities. Despite such unexpected adjustment, our forward-looking strategies and risk control measures have safeguarded a variety of our growth drivers for the long-term development of our Company.

With the effective implementation of our multi-brand and multi-category strategy, we achieved speedy development of pet care products and steadily improved the household care products growth.

• For the pet care products category, revenue increased by 350.5% from the six months ended 30 June 2020 to the six months ended 30 June 2021. Our Company has successfully launched the deodorisation and sterilisation products, cat litter products, and a pet food product line with a higher gross profit margin and will continue to develop the pet food product line in the second half of the year;

• For the household care products (including household repellents and insecticides, household cleaning and air care products), revenue increased steadily by 4.4% for the six months ended 30 June 2021 as compared with that for the six months ended 30 June 2020:

• Revenue from our household repellent and insecticide products, being our leading product category, increased by 11.4% from the six months ended 30 June 2020 to the same period in 2021 due to the penetration of omni-channels sales of such products;

• Revenue from our household cleaning products after excluding the sterilisation and disinfectant products increased by 10.0% from the six months ended 30 June 2020 to the six months ended 30 June 2021. However, the overall revenue from household cleaning products decreased by 16.8% during the same periods, primarily because (i) during the six months ended 30 June 2020, there was a surge in the demand for household cleaning products due to the COVID-19 outbreak; and (ii) for the six months ended 30 June 2021, competitors in the market sought to increase their market shares by adopting low price strategy, while our Company did not participate in the price competition taking into consideration that such low price competition is not in line with our long-term interest;

• Revenue from our air care products also increased by 0.6% from the six months ended 30 June 2020 to the six months ended 30 June 2021 due to the upgrade of such products; and

• Revenue from our personal care products (excluding hand sanitisers) increased by 18.2% from the six months ended 30 June 2020 to the six months ended 30 June 2021. However, due to the abnormal demand for hand sanitiser products during the COVID-19 pandemic in the first half of 2020 and our Company’s choice of not participating in the short-term price war in the market, the overall revenue from our personal care products decreased by 4.6% over the same periods.

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With the effective implementation of our multi-channel development strategy, we achieved rapid development of the online channels and steadily enhanced the offline distributor channels growth.

• During the six months ended 30 June 2021, revenue from online channels increased significantly by 47.6% from the six months ended 30 June 2020, primarily due to (i) the expansion and development of our self-operated online stores, the revenue from which increased by 51.4% over the same periods; and (ii) our advanced deployment in the new sales channel of community e-commerce platforms, which contributed to an increase in revenue of RMB20.7 million over the same periods;

• Revenue from the corporate and institutional customer channel grew significantly with a surge of 47.7% in revenue from the six months ended 30 June 2020 to the six months ended 30 June 2021;

• Revenue from the overseas sale channel grew rapidly with a period-to-period increase of 171.5% from the six months ended 30 June 2020 to the six months ended 30 June 2021;

• Revenue from the traditional offline distributor channel increased by 0.6% from the six months ended 30 June 2020 to the six months ended 30 June 2021; although this channel was challenged by other newly developed channels, we successfully expanded the sales and distribution network supported by our sufficient cash flows and sank into lower-tier markets; and

• Revenue from our traditional retail channel (Liby channel) decreased by 11.9% from the six months ended 30 June 2020 to the six months ended 30 June 2021. In response to the challenges of the traditional retail channels, our Company timely adjusted strategies and selected not to participate in the short-term price war in the market. We will strive to take effective measures to face challenges of the traditional retail channels based on our sustainable development strategy.

Business Outlook

Entering the second half of 2021, we will continue to implement the multi-brand and multi-category strategies, optimise our product portfolio and product mix, develop our omni-channel sales and distributions network, consolidate and strengthen our core business, deepen our presence in the pet care and personal care industries so as to achieve sustainable development of our Group.

To reinforce our position as a leader in China’s household care industry and to facilitate the rapid development of our pet care business, the Group is committed to implementing the following growth strategies:

• continue to build a talent incubation system and implement our multi-brand, multi-category and omnichannel strategies; continue to build a talent development system and an empowering organisation that attracts external talents and to implement employee incentive plans in phases binding with the Company’s business targets;

• with the upgrade of the existing leading categories and products and adoption of a multi-brand strategy within the same category, we cater to the needs of different consumer groups in a targeted manner. We will also continue to expand product categories and achieve sustainable growth, to optimise our product portfolio and category structure based on the latest market trends, to expand our pet care segment by launching new products and also to expand our personal care product portfolio. In addition, we also insist on upgrading product technology, deploying overseas R&D centers, leveraging the advantage of local research talents, researching and converting consumer demands to customise products. The Group will continue to implement environmental, social and governance and sustainable development strategies, highly customised strategy and to expand product offering so as to build a one-stop multi-category platform;

• to further strengthen the Group’s omni-channel strategy with the consolidation of the leading position of its offline channels and focus on online channels and other new channels, such as consumer community and proprietary platforms; to implement a customised marketing strategy by strengthening the establishment of image stores, building network of over one million distribution stores, conducting community marketing and promoting online marketing;

• to improve supply chain efficiency and flexibility and deploy overseas supply chains; and to ensure the implementation of the customised multi-brand, multi-category and omni-channel strategies; and

• to improve organisational and operational efficiency through digitalisation by digitalizing consumer management and channel management, and promoting Internet middle-office strategy.

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2021

NOTES Revenue 4 Cost of sales Gross profit Other income Other gains and losses 5 Impairment losses under expected credit loss model, net of reversal Selling and distribution expenses 6 Administrative expenses Finance costs 7 Listing expenses Profit before tax Income tax expense 8 Profit for the period 9 Other comprehensive expense Item that may be subsequently reclassified to profit or loss: Exchange differences arising on translation of a foreign operation Total comprehensive income for the period Profit (loss) for the period attributable to: Owners of the Company Non-controlling interests Total comprehensive income (expense) for the period attributable to: Owners of the Company Non-controlling interests Earnings per share Basic (cents) 11 Diluted (cents) 11

Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,271,905 1,211,672 (713,917) (702,366) 557,988 509,306 13,980 12,681 (6,621) (18,463) (918) 40 (321,004) (219,521) (79,965) (37,524) (1,209) (988) (10,030) (5,032) 152,221 240,499 (32,891) (48,134) 119,330 192,365 (191) – 119,139 192,365 120,028 182,747 (698) 9,618 119,330 192,365 119,860 182,747 (721) 9,618 119,139 192,365 9.95 18.45 9.95 18.45

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2021

NOTES Non-current assets Property, plant and equipment Right-of-use assets Deposits paid for acquisition of property, plant and equipment Deferred tax assets Time deposits Current assets Inventories Trade and other receivables 12 Tax recoverable Amounts due from related parties Financial assets at fair value through profit or loss (“FVTPL”) Time deposits Bank balances and cash Current liabilities Trade and other payables 13 Contract liabilities Amounts due to related parties Lease liabilities Income tax payables Bank borrowing Net current assets Total assets less current liabilities	As at 30 June 2021 RMB’000 (Unaudited) 161,711 23,527 3,593 55,626 60,000 304,457 184,385 99,806 3,047 156,265 50,000 850,000 1,676,950 3,020,453 414,468 58,232 57,524 4,169 4,077 – 538,470 2,481,983 2,786,440	As at 31 December 2020 RMB’000 (Audited) 152,812 14,872 5,160 37,313 –
		210,157
		359,794 102,167 3,802 47,739 – – 884,766
		1,398,268
		411,380 486,752 110,222 1,783 42,658 300,000
		1,352,795
		45,473
		255,630

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Non-current liability Lease liabilities Net assets Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	As at 30 June 2021 RMB’000 (Unaudited) 11,672 2,774,768 2 2,772,634 2,772,636 2,132 2,774,768	As at 31 December 2020 RMB’000 (Audited) 5,096
		250,534
		1 247,680
		247,681 2,853
		250,534

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30 June 2021

1. GENERAL AND GROUP REORGANISATION

Cheerwin Group Limited (the “ Company ”) was incorporated as an exempted company in the Cayman Islands with limited liability on 11 April 2018 under the Companies Act, Cap. 22 of the Cayman Islands. Its immediate holding company is Cheerwin Global Limited (“ Cheerwin Global BVI ”), a company incorporated in the British Virgin Islands (the “ BVI ”) on 27 March 2018. The ultimate controlling shareholders of the Company are Mr. Chen Kaixuan (“ Mr. KX Chen ”), Ms. Li Ruohong (“ Ms. Li ”), the spouse of Mr. KX Chen, Mr. Chen Kaichen (“ Mr. KC Chen ”) and Ms. Ma Huizhen (“ Ms. Ma ”), the spouse of Mr. KC Chen (collectively referred as “ Controlling Shareholders ”). The shares of the Company had been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) on 10 March 2021.

The address of the registered office and the principal place of business of the Company in Hong Kong and the PRC are disclosed in the corporate information section of the interim report of the Company for the six months ended 30 June 2021.

The Company is an investment holding company. The principal activities of the Company and its subsidiaries (collectively referred to as the “ Group ”) are manufacturing and trading of household insecticides and repellents, household cleaning, air care, personal care, pet care and other products in the PRC.

In preparation for the listing of the Company’s shares on the Stock Exchange (the “ Listing ”), the companies comprising the Group underwent a group reorganisation (the “ Group Reorganisation ”) as described below. Prior to the Group Reorganisation, the operating subsidiaries of the Group comprise:

• (a) Guangzhou Cheerwin Biotechnology Company Limited ( 廣州超威生物科技有限公司 ) (“ Cheerwin Biotechnology* ”), a company established in the PRC;

• (b) Guangzhou Cheerwin Household Chemicals Company Limited (廣州超威日用化學用品有限公司) (“ Panyu Cheerwin* ”), a company established in the PRC;

• (c) Anfu Cheerwin Rihua Company Limited (安福超威日化有限公司) (“ Anfu Cheerwin* ”), a company established in the PRC;

• (d) Guangzhou Tongli Daily Supplies Company Limited (廣州通力日用品有限公司) (“ Guangzhou Tongli* ”), a company established in the PRC;

• (e) Guangzhou Yuncheng Network Technology Company Limited (廣州雲成網絡科技有限公司) (“ Guangzhou Yuncheng* ”), a company established in the PRC;

• (f) Guangzhou Leda Automobile Supplies Company Limited (廣州樂達汽車用品有限公司) (“ Leda Automobile* ”), a company established in the PRC;

• (g) Shanghai Runzhisu Biotechnology Company Limited (上海潤之素生物科技有限公司) (“ Shanghai Runzhisu* ”), a company established in the PRC;

• (h) Guangzhou Yuntuo E-commerce Company Limited (廣州雲拓電子商務有限公司) (“ Guangzhou Yuntuo* ”), a company established in the PRC; and

• (i) Shanghai Cheerwin Biotechnology Company Limited (上海朝雲生物科技有限公司) (“ Shanghai Cheerwin* ”), a company established in the PRC.

• The translation of name in English is for identification purpose only.

These operating subsidiaries have been under the collective control of the Controlling Shareholders before and after the Group Reorganisation, and interests held by parties other than the Controlling Shareholders before the completion of the Group Reorganisation are presented as non-controlling interests of the Group in the condensed consolidated financial statements.

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The major steps of the Group Reorganisation include the following:

• (i) On 27 March 2018, Cheerwin Global BVI was incorporated as a limited liability company under the laws of BVI authorised to issue a maximum number of 50,000 shares of par value of United States dollars (“ USD ”) 1 each. On the same date, 65 shares and 35 shares in Cheerwin Global BVI were allotted and issued at par to Ms. Li and Ms. Ma, respectively.

• (ii) On 27 March 2018, Cheerwin Group Limited (“ Cheerwin Group BVI ”) was incorporated as a limited liability company under the laws of BVI authorised to issue a maximum number of 50,000 shares of par value of USD1 each. On the same date, 65 shares and 35 shares in Cheerwin Group BVI were allotted and issued at par to Ms. Li and Ms. Ma, respectively.

• (iii) On 13 April 2018, Cheerwin Group Limited (“ Cheerwin Group HK ”) was incorporated in Hong Kong as a limited company with an issued share capital of HK$100 divided into 100 shares of Hong Kong dollars (“ HK$ ”) 1 each. On the same date, 65 shares and 35 shares in Cheerwin Group HK were allotted and issued to Ms. Li and Ms. Ma, respectively, at a cash consideration of HK$100.

On 13 April 2018, Cheerwin Global Limited (“ Cheerwin Global HK ”) was incorporated in Hong Kong as a limited company with an issued share capital of HK$100 divided into 100 shares of HK$1 each. On the same date, 65 shares and 35 shares in Cheerwin Group HK were allotted and issued to Ms. Li and Ms. Ma, respectively, at a cash consideration of HK$100.

• (iv) On 11 April 2018, the Company was incorporated under the Companies Act, Cap. 22 of the Cayman Islands as an exempted company with limited liability. The initial authorised share capital of the Company was USD50,000 divided into 50,000 shares with a par value of USD1 each. Upon incorporation, 65 shares and 35 shares in the Company were allotted and issued at par to Ms. Li and Ms. Ma, respectively.

• (v) On 19 October 2018, Guangzhou Cheerwin Holding Company Limited (廣州朝雲控股有限公司) (“ Guangzhou Cheerwin* ”) was established under the laws of the PRC with a registered capital of RMB30,000,000 divided into 30,000,000 shares and fully paid up in cash by the Controlling Shareholders.

• (vi) On 14 November 2018 and 19 November 2018, Guangzhou Cheerwin established two wholly-owned subsidiaries, Guangzhou Yuntuo and Shanghai Runzhisu under the laws of the PRC, each with a registered capital of RMB1,000,000 divided into 1,000,000 shares.

• (vii) On 27 March 2019, Ms. Li and Ms. Ma transferred their entire equity interests in Cheerwin Group HK to Cheerwin Group BVI at a cash consideration of HK$100. On 27 March 2019, Ms. Li and Ms. Ma transferred their entire equity interests in Cheerwin Group BVI to the Company at a cash consideration of USD100. Upon the completion of the transfers, Cheerwin Group HK and Cheerwin Group BVI became the wholly-owned subsidiaries of the Company.

• (viii) On 27 March 2019, Ms. Li and Ms. Ma transferred their entire equity interests in the Company to Cheerwin Global BVI, and as a consideration, 5,850 shares and 3,150 shares in Cheerwin Global BVI were allotted and issued to Ms. Li and Ms. Ma, respectively.

• (ix) On 27 March 2019, Cheerwin Global BVI further allotted and issued 650 shares and 350 shares at par to Mr. KX Chen and Mr. KC Chen, respectively. Upon completion of the above allotment and issues, Cheerwin Global BVI was held as to 58.5%, 31.5%, 6.5% and 3.5% by Ms. Li, Ms. Ma, Mr. KX Chen and Mr. KC Chen, respectively.

• (x) On 16 May 2019, the Controlling Shareholders transferred 5% of equity interest in Guangzhou Cheerwin to Bestart (Hong Kong) Investments Company Limited (“ Bestart HK ”), a company incorporated in Hong Kong and wholly owned by Mr. Mao (“ Mr. Mao ”), who is independent to the Group, at a cash consideration of RMB1,500,000.

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• (xi) On 29 July 2019, Guangzhou Cheerwin established a wholly-owned subsidiary, Shanghai Cheerwin under the laws of the PRC with a registered capital of RMB5,000,000, divided into 5,000,000 shares.

• (xii) On 7 November 2019, Guangzhou Cheerwin acquired the entire equity interests in Cheerwin Biotechnology from the Controlling Shareholders for a cash consideration of RMB7,801,000.

• (xiii) On 27 November 2019, Guangzhou Cheerwin acquired the entire equity interests in Guangzhou Tonli, Guangzhou Yuncheng and Leda Automobile from Cheerwin Biotechnology for an aggregate cash consideration of RMB1,830,000.

• (xiv) On 10 December 2019, Cheerwin Biotechnology acquired 52% of equity interest in Panyu Cheerwin from a company and a limited partnership owned and controlled by the Controlling Shareholders for a cash consideration of RMB18,046,000.

• (xv) On 31 December 2019, Cheerwin Biotechnology acquired the entire equity interest in Anfu Cheerwin from the Controlling Shareholders and a company controlled by the Controlling Shareholders for an aggregate cash consideration of RMB53,677,000.

• (xvi) On 24 June 2020, Cheerwin Group HK acquired 95% of equity interest in Guangzhou Cheerwin from the Controlling Shareholders for a cash consideration of RMB29,370,000.

• (xvii) On 24 June 2020, Cheerwin Group HK acquired the remaining 5% of equity interest in Guangzhou Cheerwin from Bestart HK for a cash consideration of RMB1,550,000. Upon the completion of the acquisition, Guangzhou Cheerwin and its wholly-owned subsidiaries became the wholly-owned subsidiaries of the Company.

• (xviii) On 24 June 2020, the Company further allotted and issued 100 shares, among 98 shares were allotted and issued at par to Cheerwin Global BVI and 2 shares were allotted and issued to Bestart International Holdings Limited (“ Bestart BVI ”), a company incorporated in the BVI and wholly owned by Mr. Mao at a cash consideration of RMB1,550,000. Upon the completion of the above allotment and issues, the Company was held as to 99% and 1% by Cheerwin Global BVI and Bestart BVI, respectively.

• (xix) On 26 June 2020, Cheerwin Group HK acquired the entire equity interests in Cheerwin Global HK from the Controlling Shareholders for a cash consideration of HK$100.

• The translation of name in English is for identification purpose only.

Pursuant to the Group Reorganisation detailed above, the Company has become the holding company of the companies now comprising the Group on 26 June 2020. The Group comprising the Company and its subsidiaries resulting from the Group Reorganisation is regarded as a continuing entity, as the Company and its subsidiaries have been under the collective control of the Controlling Shareholders before and after the Group Reorganisation, or since their respective dates of incorporation/ establishment/acquisition by the Company, where is a shorter period. Accordingly, the condensed consolidated financial statements have been prepared as if the Company had always been the holding company of the Group.

The condensed consolidated financial statements are presented in Renminbi (“ RMB ”), which is also the functional currency of the Company.

2. BASIS OF PREPARATION

The condensed consolidated financial statements of the Group have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” issued by the International Accounting Standards Board as well as the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”).

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3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as appropriate.

The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those presented in the Group’s annual financial statements for the year ended 31 December 2020.

Application of amendments to International Financial Reporting Standards (“IFRSs”)

In the current interim period, the Group has applied the following amendments to IFRSs issued by the International Accounting Standards Board, for the first time, which are mandatorily effective for the annual periods beginning on or after 1 January 2021 for the preparation of the Group’s condensed consolidated financial statements:

Amendment to IFRS 16

Amendment to IFRS 16 Covid-19-Related Rent Concessions Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2

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

4. REVENUE AND SEGMENT INFORMATION

(i) Disaggregation of revenue from contracts with customers

Revenue by types of products Household insecticides and repellents Household cleaning Air care Personal care Pet care Others (Note) Total Timing of revenue recognition At a point in time	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 918,932 825,226 218,371 262,423 34,414 34,203 71,615 75,068 26,150 5,805 2,423 8,947 1,271,905 1,211,672 1,271,905 1,211,672	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 918,932 825,226 218,371 262,423 34,414 34,203 71,615 75,068 26,150 5,805 2,423 8,947 1,271,905 1,211,672 1,271,905 1,211,672
		1,211,672
		1,211,672

Note: Others included numerous household supplies, appliances and other products, none of them accounted for a material portion individually.

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(ii) Transaction price allocated to the remaining performance obligations for contracts with customers

As at 30 June 2021, the Group had aggregate amount of the transaction price allocated to remaining performance obligations (unsatisfied or partially unsatisfied) amounted to approximately RMB58,232,000 (unaudited) (31 December 2020: RMB486,752,000 (audited)). The amounts were equivalent to the contract liabilities as at 30 June 2021 and 31 December 2020, which represented payments received from customers by the Group while the underlying goods are yet to be delivered.

Based on the information available to the Group at the end of the reporting period, management of the Group expects the transaction price allocated to the above unsatisfied (or partially unsatisfied) contracts as at 30 June 2021 and 31 December 2020 will be recognised as revenue within next twelve months.

(iii) Segment information

Revenue and operating result of the Group are reported to the executive directors of the Company, being the chief operating decision maker (the “ CODM ”), for the purposes of resource allocation and performance assessment. The accounting policies are the same as the Group’s accounting policies. No other analysis of the Group’s results nor assets and liabilities is regularly provided to the CODM for review and the CODM reviews the overall results and financial position of the Group as a whole. Accordingly, the CODM has identified one operating segment and only entity-wide disclosures on revenue, major customers and geographical information are presented in accordance with IFRS 8 Operating Segments.

(iv) Geographic information

The Group principally operates in the PRC, which is also the place of domicile. The Group’s revenue is almost all derived from operations in the PRC and the Group’s non-current assets are almost all located in the PRC.

(v) Information about major customers

Revenue attributed from customers that accounted for 10% or more of the Group’s total revenue are as follows:

	Six months ended 30 June	Six months ended 30 June
	2021	2020
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
Customer A (Note)	216,017	245,243

Note: Customer A represented a group of entities under common control of the Controlling Shareholders. No single entity other than Customer A contributes 10% or more of total revenue of the Group for the respective periods.

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5. OTHER GAINS AND LOSSES

Losses on disposal/write-off of property, plant and equipment Donations (Note) Foreign exchange losses, net	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) – (9) (117) (18,454) (6,504) – (6,621) (18,463)	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) – (9) (117) (18,454) (6,504) – (6,621) (18,463)
		(18,463)

Note: During the six months ended 30 June 2020, the Group made a donation of disinfectant and relevant anti-epidemic products with carrying value of RMB18,454,000 (unaudited) to the Red Cross Society of China.

6. SELLING AND DISTRIBUTION EXPENSES

Staff costs Promotion expenses E-commerce channel promotion expenses Advertising service expenses Transportation and storage expenses Marketing expenses Others	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 47,960 29,832 75,627 52,233 97,539 39,326 31,294 33,190 59,092 56,616 7,055 8,101 2,437 223 321,004 219,521	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 47,960 29,832 75,627 52,233 97,539 39,326 31,294 33,190 59,092 56,616 7,055 8,101 2,437 223 321,004 219,521
		219,521

7. FINANCE COSTS

Interest expense on lease liabilities Interest expense on bank borrowing	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 346 219 863 769 1,209 988	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 346 219 863 769 1,209 988
		988

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8. INCOME TAX EXPENSE

PRC Enterprise Income Tax (“EIT”): Current tax Deferred tax	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 51,204 62,022 (18,313) (13,888) 32,891 48,134

The Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act, Cap 22 of the Cayman Islands and is exempted from the Cayman Islands income tax.

No provision for Hong Kong Profits Tax has been made in the condensed consolidated financial statements as the Group had no assessable profit subject to Hong Kong Profits Tax for both periods.

Under the Law of the PRC on EIT (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the PRC EIT rate of subsidiaries of the Group operating in the PRC was 25% for both periods, except for those described below.

Anfu Cheerwin has been qualified as a New and Hi-Tech Enterprise and entitled to a preferential tax rate of 15% from 2019 to 2021 granted by the local tax authority.

9. PROFIT FOR THE PERIOD

Profit for the period has been arrived at after charging (crediting): Staff costs (including directors’ remuneration) (Note i): – Directors’ remuneration – Salaries and other allowances – Contributions to retirement benefits scheme (excluding directors) Depreciation of property, plant and equipment Depreciation of right-of-use assets Total depreciation Less: capitalised in inventories Auditor’s remuneration Cost of inventories recognises as an expense (Note ii)

Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 10,507 1,036 79,021 63,558 2,755 1,818 92,283 66,412 12,163 5,147 2,157 1,660 14,320 6,807 (3,800) (1,874) 10,520 4,933 1,960 375 711,616 701,813

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Notes:

(i) Total staff costs have been charged to the condensed consolidated statement of profit or loss and other comprehensive income as follows:

Staff costs included in cost of inventories and recognised as an expense Selling and distribution expenses Administrative expenses	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 10,504 12,943 47,960 29,832 33,819 23,637 92,283 66,412	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 10,504 12,943 47,960 29,832 33,819 23,637 92,283 66,412
		66,412

(ii) Amount included allowance for inventories of approximately RMB2,301,000 (unaudited) (six months ended 30 June 2020: RMB553,000 (unaudited)).

10. DIVIDENDS

During the current interim period, a final dividend of RMB0.044 per ordinary share (equivalent to HK$0.0524 per ordinary share) in respect of the year ended 31 December 2020 (six months ended 30 June 2020: nil) was declared and paid to owners of the Company. The aggregate amount of the final dividend declared and paid in the interim period amounted to approximately RMB58,667,000 (six months ended 30 June 2020: nil).

11. EARNINGS PER SHARE

The calculation of basic earnings per share attributable to the owners of the Company is based on the following data:

Earnings for the purposes of calculating basic earnings per share (profit for the period attributable to the owners of the Company) Weighted average number of ordinary shares for the purpose of calculating basic earnings per share	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 120,028 182,747 No. of Shares No. of Shares ’000 ’000 1,206,262 990,385	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 120,028 182,747 No. of Shares No. of Shares ’000 ’000 1,206,262 990,385
		No. of Shares ’000 990,385

The weighted average number of ordinary shares for the purpose of calculating basic earnings per share has been determined based on the assumption that the Group Reorganisation and share subdivision had been effective on 1 January 2020.

The computation of diluted earnings per share for the six months ended 30 June 2021 did not assume the exercise of overallotment option issued by the Company because the exercise price of those options was higher than the average market price for shares during the stabilisation period of the over-allotment option.

No diluted earnings per share is presented for the six months ended 30 June 2020 as there was no potential ordinary share in issue.

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12. TRADE AND OTHER RECEIVABLES

Trade receivables Less: Allowances for credit losses Prepayments for purchase of raw materials Prepaid promotion service expenses Other tax recoverables Deferred issue costs Receivables from payment intermediaries (Note) Other receivables	As at 30 June 2021 RMB’000 (Unaudited) 37,372 (3,717) 33,655 9,876 15,715 18,886 – 3,453 18,221 99,806	As at 31 December 2020 RMB’000 (Audited) 18,675 (2,799)
		15,876
		13,272 2,897 39,809 11,660 603 18,050
		102,167

Note: Receivables from payment intermediaries represent the sales received by Alipay, Jingdong and other payment on behalf of the Group for the online platform sales. The balance will be transferred back to the bank accounts of the Group upon the Group’s instruction.

Trade receivables

Before accepting any new customer, the Group has assessed the potential customer’s credit quality and defined credit limit to each customer on an individual basis. Limits attributed to customers are reviewed regularly.

The Group generally requires advance payments from majority of its customers before delivery of goods. For certain customers, the Group allows credit terms of 5 to 60 days from the invoice date for trade receivables.

The following is an aged analysis of trade receivables, net of allowance for credit losses, presented based on the invoice date which approximated the revenue recognition date at the end of each reporting period:

Within 30 days 31 – 60 days 61 – 90 days 91 – 120 days	As at 30 June 2021 RMB’000 (Unaudited) 12,084 16,929 2,277 2,365 33,655	As at 31 December 2020 RMB’000 (Audited) 8,678 4,585 2,613 –
		15,876

15

As at 30 June 2021, included in the Group’s trade receivables balance are debtors with an aggregate carrying amount of RMB21,571,000 (unaudited) (31 December 2020: RMB7,198,000 (audited)) which are past due as at the reporting date. In particular, for trade receivable past due as at 30 June 2021, carrying amount of RMB11,980,000 (unaudited) (31 December 2020: RMB6,576,000 (audited)) is due from one single customer. The directors of the Company are of the opinion that there has not been a significant change in credit quality and the balances are still considered fully recoverable considering factors such as historical settlement patterns from and on-going business relationship with this customer. Out of the past due balances as at 30 June 2021, RMB2,365,000 (unaudited) (31 December 2020: nil) have been past due over 90 days or more and are not considered as in default as there has not been a significant change in credit quality and amounts are still considered as recoverable based on historical experience. The Group does not hold any collateral over these balances.

As at 31 December 2020, the Group considered trade receivables with gross amount of approximately RMB1,943,000 (audited) became credit-impaired, as these debts were outstanding for more than one year and several attempts have been made by the Company to recover the debts but remained unsettled. Management of the Group determined to terminate the business relationship with these debtors.

The Group applies the simplified approach to provide for expected credit losses (“ ECL ”) prescribed by IFRS 9 “Financial Instruments”, which permits the use of the lifetime expected loss provision for trade receivables.

Trade receivables with significant balances and credit-impaired are assessed for ECL individually. The remaining trade receivables are assessed collectively, grouped by internal credit rating taking into account past due status of respective receivables. The estimated loss rates are estimated based on historical observed default rates over the expected life of the debtors and are adjusted for forward-looking information that is available without undue cost or effort.

During the six months ended 30 June 2021, the Group recognised credit loss allowance of approximately RMB918,000 (unaudited) (six months ended 30 June 2020: reversal of credit loss allowance of approximately RMB40,000 (unaudited)) for trade receivables.

13. TRADE AND OTHER PAYABLES

Trade payables Accrued sales rebates (Note) Other accrued expenses Accrued staff payroll and welfare Construction costs payables Other tax payables Other payables Accrued issued costs and listing expenses	As at 30 June 2021 RMB’000 (Unaudited) 171,845 122,793 40,928 25,129 2,715 15,937 3,482 31,639 414,468	As at 31 December 2020 RMB’000 (Audited) 221,238 96,362 28,483 29,758 8,097 6,560 3,305 17,577
		411,380

Note: The accrued sales rebates will be settled in cash or through offsetting future sales orders, at the discretion of the Group’s customers.

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Trade payables

The credit period of trade payables is normally within 20 to 60 days from the invoice date.

The following is an aged analysis of trade payables, presented based on the invoice date at the end of each reporting period:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	As at 30 June 2021 RMB’000 (Unaudited) 105,526 35,673 24,471 6,175 171,845	As at 31 December 2020 RMB’000 (Audited) 126,308 85,494 6,754 2,682
		221,238

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MANAGEMENT DISCUSSION AND ANALYSIS

Financial Review

Revenue

The Group derived its revenue primarily from the sales of (i) household care products; (ii) personal care products; (iii) pet care products; and (iv) others to customers through our omni-channel sales and distribution network. Our revenue is stated net of allowances for returns, sales discounts and value-added tax.

Our revenue increased by 5.0% from RMB1,211.7 million for the six months ended 30 June 2020 to RMB1,271.9 million for the six months ended 30 June 2021. The increase in our revenue was primarily due to (i) an increase of RMB82.9 million in the revenue generated from sales through our online channels as we continue to expand and develop our self-operated online stores and developed a new sales channel, i.e. the community e-commerce platforms; (ii) an increase of RMB20.3 million in the revenue generated from the sales of pet care products due to our successful launch of the deodorisation and sterilisation products, cat litter products, and a pet food product line with a higher gross profit margin; and (iii) an increase in the revenue generated from the sales of household insecticides and repellents products due to our continuing efforts in developing and optimising the omni-channels sales of such products.

Revenue by product categories

Household Care Household Insecticides and Repellents Household Cleaning Air Care Sub-total Personal Care Pet care Others(1) Total	Six months ended 30 June	Six months ended 30 June	Six months ended 30 June
	2021 RMB’000 % 918,932 72.2 218,371 17.2 34,414 2.7 1,171,717 92.1 71,615 5.6 26,150 2.1 2,423 0.2 1,271,905 100.0	2020
	RMB’000 918,932 218,371 34,414 1,171,717 71,615 26,150 2,423 1,271,905	RMB’000 825,226 262,423 34,203 1,121,852 75,068 5,805 8,947 1,211,672	% 68.1 21.7 2.8
			92.6 6.2 0.5 0.7
			100.0

Note:

(1) Others included household supplies and appliances and other products and none of them accounted for a material portion individually.

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Our revenue from household insecticides and repellents products increased by 11.4% from RMB825.2 million for the six months ended 30 June 2020 to RMB918.9 million for the six months ended 31 June 2021, primarily due to our continuing efforts in developing and optimising the omni-channels sales of such products.

Our revenue from household cleaning products decreased by 16.8% from RMB262.4 million for the six months ended 30 June 2020 to RMB218.4 million for the six months ended 30 June 2021, primarily because (i) during the six months ended 30 June 2020, there was a surge in the demand for household cleaning products as a result of the increasing customer awareness on personal hygiene which increased the demand for sanitisers, disinfectant and antibacterial products during the COVID-19 outbreak; and (ii) for the six months ended 30 June 2021, competitors in the market of household cleaning products sought to increase their market shares by adopting low price strategy, while our Company did not participate in the price competition taking into consideration that such low price competition is not in line with our long-term interest.

Our revenue from air care products increased by 0.6% from RMB34.2 million for the six months ended 30 June 2020 to RMB34.4 million for the six months ended 30 June 2021, which was primarily due to the upgrade of air care products during the six months ended 30 June 2021.

Our revenue from personal care products decreased by 4.6% from RMB75.1 million for the six months ended 30 June 2020 to RMB71.6 million for the six months ended 30 June 2021, primarily because (i) during the six months ended 30 June 2020, there was a surge in the demand for personal care products such as hand sanitisers as a result of the increasing customer awareness on personal hygiene which increased the demand for sanitisers, disinfectant and antibacterial products during the COVID-19 outbreak; and (ii) for the six months ended 30 June 2021, competitors in the market of personal care products sought to increase their market shares by adopting low price strategy, while our Company did not participate in the price competition taking into consideration that such low price competition is not in line with our long-term interest.

Our revenue from pet care products increased significantly by 350.5% from RMB5.8 million for the six months ended 30 June 2020 to RMB26.2 million for the six months ended 30 June 2021, primarily due to our successful launch of the deodorisation and sterilisation products, cat litter products, and a pet food product line with a higher gross profit margin.

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Revenue by sales channel

Offline Distributors Online Channels – Online Distributors – Self-operated Online Stores – Community e-commerce platforms Corporate and Institutional Customers Overseas Distributors Retail Channel (Liby Channel)(1) Total	Six months ended 30 June	Six months ended 30 June	Six months ended 30 June
	2021 RMB’000 % 795,002 62.5 256,947 20.2 81,083 6.4 155,163 12.2 20,701 1.6 3,338 0.3 601 0.0 216,017 17.0 1,271,905 100.0	2020
	RMB’000 795,002 256,947 81,083 155,163 20,701 3,338 601 216,017 1,271,905	RMB’000 789,921 174,028 71,559 102,469 – 2,259 221 245,243 1,211,672	% 65.2 14.4 5.9 8.5 – 0.2 0.0 20.2
			100.0

Note:

• (1) Primarily included sales to key accounts and certain overseas distributors and corporate and institutional customers through Guangzhou Liby Group Company Limited and its subsidiaries (the “ Liby Group ”).

As of 30 June 2021, our sales and distribution network primarily consisted of (i) an offline network of more than 1,150 distributors with approximately 640,000 points of sales across China; (ii) 49 key account clients, including operators of national and regional hypermarkets, supermarkets, department stores and convenience stores through Liby Group, covering approximately 11,000 points of sales; and (iii) online channels, including sales to consumers through our 18 self-operated online stores on major e-commerce platforms, such as Tmall, sales to a network of online third party distributors and sales to customers through community e-commerce platforms, such as Xingsheng Youxuan (興盛優選).

Revenue from offline distributors increased by 0.6% from RMB789.9 million for the six months ended 30 June 2020 to RMB795.0 million for the six months ended 30 June 2021, primarily due to the increase in the sales of our household insecticides and repellents products despite the decrease in sales of such products in the market.

Revenue from online channels increased by 47.6% from RMB174.0 million for the six months ended 30 June 2020 to RMB256.9 million for the six months ended 30 June 2021, primarily due to (i) our continuing efforts in expanding and developing self-operated online stores, the revenue from which increased by 51.4% from RMB102.5 million to RMB155.2 million over the same periods; and (ii) an increase of RMB20.7 million in the revenue generated from our newly developed sales channel, i.e. the community e-commerce platforms.

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Revenue from corporate and institutional customers increased from RMB2.3 million for the six months ended 30 June 2020 to RMB3.3 million for the six months ended 30 June 2021, primarily because we actively explored new business opportunities with corporate and institutional customers. Revenue from overseas distributors increased from RMB0.2 million for the six months ended 30 June 2020 to RMB0.6 million for the six months ended 30 June 2021, primarily because during the six months ended 30 June 2020, overseas market demands reduced as the overall overseas business activities were limited due to the COVID-19 pandemic, while during the six months ended 30 June 2021, we actively explored new business opportunities with overseas customers and strived to further develop our overseas channel.

Revenue from the retail channel (Liby channel) decreased by 11.9% from RMB245.2 million for the six months ended 30 June 2020 to RMB216.0 million for the six months ended 30 June 2021, primarily because (i) there was an unusual increase in the demand for sanitisers and disinfectant products in 2020 due to the COVID-19 outbreak; and (ii) during the six months ended 30 June 2021, there was a price war in certain household cleaning products market, while our Company selected not to participate in such short-term market competition.

Gross Profit and Gross Profit Margin

As a result of the foregoing, our gross profit increased by 9.6% from RMB509.3 million for the six months ended 30 June 2020 to RMB558.0 million for the six months ended 30 June 2021. Our overall gross profit margin remained relatively stable at 42.0% and 43.9% for the six months ended 30 June 2020 and 2021, respectively.

Gross profit and gross profit margin by product categories

Household Care Household Insecticides and Repellents Household Cleaning Air Care Sub-total Personal Care Pet care Others(1) Total	Six months ended 30 June 2021 2020 Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin RMB’000 % RMB’000 % 375,143 40.8 319,909 38.8 117,877 54.0 139,962 53.3 18,372 53.4 19,830 58.0 511,392 43.6 479,701 42.8 29,960 41.8 25,259 33.6 16,383 62.7 3,203 55.2 253 10.4 1,143 12.8 557,988 43.9 509,306 42.0	Six months ended 30 June 2021 2020 Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin RMB’000 % RMB’000 % 375,143 40.8 319,909 38.8 117,877 54.0 139,962 53.3 18,372 53.4 19,830 58.0 511,392 43.6 479,701 42.8 29,960 41.8 25,259 33.6 16,383 62.7 3,203 55.2 253 10.4 1,143 12.8 557,988 43.9 509,306 42.0
	2021 Gross Profit Gross Profit Margin RMB’000 % 375,143 40.8 117,877 54.0 18,372 53.4 511,392 43.6 29,960 41.8 16,383 62.7 253 10.4 557,988 43.9
	Gross Profit RMB’000 375,143 117,877 18,372 511,392 29,960 16,383 253 557,988	Gross Profit RMB’000 319,909 139,962 19,830 479,701 25,259 3,203 1,143 509,306

Note:

(1) Others included household supplies and appliances and other products and none of them accounted for a material portion individually.

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With respect to product categories, primarily due to our efforts in the optimisation of product category structure and cost in 2021, gross profit margin of our household insecticides and repellents products increased from 38.8% for the six months ended 30 June 2020 to 40.8% for the six months ended 30 June 2021. Gross profit margin for the household cleaning products increased from 53.3% for the six months ended 30 June 2020 to 54.0% for the six months ended 30 June 2021 primarily because of our continuous efforts in optimizing product category structure. Gross profit margin for the air care products decreased from 58.0% for the six months ended 30 June 2020 to 53.4% for the six months ended 30 June 2021, primarily due to the ever increasing cost of raw materials from the COVID-19 pandemic in 2020 to June 2021. Gross profit of our personal care products increased by 18.6% from the six months ended 30 June 2020 to the six months ended 30 June 2021 mainly due to our efforts in the optimisation of product category structure and cost. Gross profit of pet care products increased significantly by 411.5% from the six months ended 30 June 2020 to the six months ended 30 June 2021 and gross profit margin of pet care products increased from 55.2% to 62.7% during the same periods primarily due to the increase in the revenue by 350.5% generated from sales of such products over the same periods due to the enrichment of products categories and the launch of a pet food product line.

Gross profit and gross profit margin by sales channels

Offline Distributors Online Channels – Online Distributors – Self-operated Online Stores – Community e-commerce platforms Corporate and Institutional Customers Overseas Distributors Retail Channel (Liby Channel)(1) Total	Six months ended 30 June 2021 2020 Gross profit Gross Profit Margin Gross profit Gross Profit Margin RMB’000 % RMB’000 % 336,127 42.3 321,516 40.7 129,554 50.4 87,245 50.1 36,682 45.2 34,140 47.7 86,266 55.6 53,105 51.8 6,606 31.9 – – 2,039 61.1 1,362 60.3 295 49.0 110 49.8 89,973 41.7 99,073 40.4 557,988 43.9 509,306 42.0	Six months ended 30 June 2021 2020 Gross profit Gross Profit Margin Gross profit Gross Profit Margin RMB’000 % RMB’000 % 336,127 42.3 321,516 40.7 129,554 50.4 87,245 50.1 36,682 45.2 34,140 47.7 86,266 55.6 53,105 51.8 6,606 31.9 – – 2,039 61.1 1,362 60.3 295 49.0 110 49.8 89,973 41.7 99,073 40.4 557,988 43.9 509,306 42.0
	2021 Gross profit Gross Profit Margin RMB’000 % 336,127 42.3 129,554 50.4 36,682 45.2 86,266 55.6 6,606 31.9 2,039 61.1 295 49.0 89,973 41.7 557,988 43.9
	Gross profit RMB’000 336,127 129,554 36,682 86,266 6,606 2,039 295 89,973 557,988	Gross profit RMB’000 321,516 87,245 34,140 53,105 – 1,362 110 99,073 509,306

Note:

(1) Primarily included sales to key accounts and certain overseas distributors and corporate and institutional customers through Liby Group.

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With respect to sales channels, gross profit of offline distributors increased by RMB14.6 million from the six months ended 30 June 2020 to the six months ended 30 June 2021 primarily due to our efforts in the optimisation of product category structure and cost in 2021. Gross profit and gross profit margin of online channels increased from the six months ended 30 June 2020 to the six months ended 30 June 2021 mainly due to the increase in revenue from this channel and the optimisation of product category structure and cost. Over the same period, gross profit of the retail channel (Liby channel) decreased primarily due to the decrease in revenue from this sales channel. Gross profit margin of the retail channel (Liby channel) improved from 40.4% for the six months ended 30 June 2020 to 41.7% for the six months ended 30 June 2021 largely attributable to our efforts in the optimisation of product category structure and cost.

Other Income

Our other income increased by 10.2% from RMB12.7 million for the six months ended 30 June 2020 to RMB14.0 million for the six months ended 30 June 2021 primarily due to the increase in bank interests over the same periods. Our other income as a percentage of our total revenue increased slightly from 1.0% for the six months ended 30 June 2020 to 1.1% for the six months ended 30 June 2021.

Selling and Distribution Expenses

Our selling and distribution expenses increased by 46.2% from RMB219.5 million for the six months ended 30 June 2020 to RMB321.0 million for the six months ended 30 June 2021 which is in line with our business expansion and reflects our increasing investments in offline and online sales channels.

Administrative Expenses

Our administrative expenses increased by 113.1% from RMB37.5 million for the six months ended 30 June 2020 to RMB80.0 million for the six months ended 30 June 2021, partially attributable to the increase in the number of employees and staff cost over the same periods.

Other Gains and Losses

We recorded other losses of RMB6.6 million for the six months ended 30 June 2021, compared to other losses of RMB18.5 million for the same period in 2020, primarily due to the charity donation we made in 2020.

Finance Costs

Our finance costs increased from RMB1.0 million for the six months ended 30 June 2020 to RMB1.2 million for the six months ended 30 June 2021 primarily due to the increase in right-of-use assets and interest expenses related to lease liabilities.

Profit before Tax

As a result of the foregoing, our profit before income tax decreased by 36.7% from RMB240.5 million for the six months ended 30 June 2020 to RMB152.2 million for the six months ended 30 June 2021.

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Income Tax Expense

Our income tax expense decreased by 31.7% from RMB48.1 million for the six months ended 30 June 2020 to RMB32.9 million for the six months ended 30 June 2021 in line with the decrease of our profit before tax. Our effective tax rate remained relatively stable at 20.0% and 21.6%, respectively, for the six months ended 30 June 2020 and 2021, which are lower than the PRC statutory income tax rate of 25% primarily because Anfu Cheerwin Rihua Company Limited* (安福超威日化有限公司), one of our subsidiaries, was recognised as a high-tech enterprise and entitled to a preferential tax rate of 15%.

Profit for the Period

As a result of the foregoing, our profit decreased by 38.0% from RMB192.4 million for the six months ended 30 June 2020 to RMB119.3 million for the same period in 2021. Our net profit margin decreased from 15.9% for the six months ended 30 June 2020 to 9.4% for the six months ended 30 June 2021.

Non-IFRS Measures: Adjusted Net Profit

Adjusted net profit, as we present, represents profit and total comprehensive income for the period before charity donations and listing expenses. Adjusted net profit is not a standard measure under IFRSs. We believe that adjusted net profit helps identify underlying trends in our business that could otherwise be distorted by the effect of the expenses that we include in income from operations and net profit through eliminating potential impacts of items that our management does not consider to be indicative of our operating performance, such as certain impacts of our charity donations and listing expenses. We believe that adjusted net profit provides useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

While adjusted net profit provides an additional financial measure for investors to assess our operating performance, the use of adjusted net profit has certain limitations because it does not reflect all items of income and expense that affect our operations. The item that is adjusted for may continue to be incurred and should be considered in the overall understanding and assessment of our results.

As a measure of our operating performance, we believe that the most directly comparable IFRSs measure to adjusted net profit is profit for the period. The following table reconciles profit for the periods under IFRSs to adjusted net profit for the periods indicated:

Profit for the period Adjustments for: Charity donations Listing expenses Adjusted net profit	For the six months ended 30 June 2021 2020 RMB’000 119,330 192,365 117 18,454 10,030 5,032 129,477 215,851	For the six months ended 30 June 2021 2020 RMB’000 119,330 192,365 117 18,454 10,030 5,032 129,477 215,851
		215,851

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Adjusted net profit should not be considered in isolation or construed as a substitute for analysis of IFRSs financial measures, such as operating profit or profit for the year or period. In addition, because adjusted net profit may not be calculated in the same manner by all companies, our adjusted net profit may not be comparable to the same or similarly titled measures presented by other companies.

Operating Cash Flows

Net operating cash outflow for the six months ended 30 June 2021 was RMB318.5 million, as compared to net operating cash outflow of RMB87.4 million for the six months ended 30 June 2020, resulting from our profit before tax of RMB152.2 million, adjustment of non-cash and non-operating items, movements in working capital, and income tax paid. Our movements in working capital primarily reflected (i) a decrease in contract liabilities of RMB428.5 million as a result of the seasonal concentration of customer prepayments; (ii) an increase of RMB14.8 million in trade and other payables; and (iii) an increase in amounts due from related parties of RMB108.5 million which was primarily because there was a sales peak during the second quarter of the year and we typically settled the amounts in the third quarter which is within our normal credit terms.

Capital Expenditures

Our capital expenditures increased from RMB12.1 million for the six months ended 30 June 2020 to RMB31.9 million for the six months ended 30 June 2021. Our capital expenditures were used primarily for purchase of items of property, plant and equipment and right-of-use assets. We financed our capital expenditures primarily through our cash generated from our operating activities.

Financial Position

Historically, we funded our operations primarily with net cash generated from our business operations. After the global offering the Company (the “ Global Offering ”), we intend to finance our future capital requirements through the same sources of funds above, together with the net proceeds we received from the Global Offering.

As of 30 June 2021, we had RMB1,677.0 million in cash and cash equivalents, most of which were denominated in Hong Kong dollars and RMB. Our cash and cash equivalents primarily consist of cash on hand and bank balances.

Gearing Ratio

The gearing ratio decreased from 122.5% as of 31 December 2020 to 0.6% as of 30 June 2021, primarily due to the repayment of bank borrowings of RMB300.0 million during the six months ended 30 June 2021.

Significant Investments Held

As at 30 June 2021, the Group held time deposits of RMB910.0 million which were denominated in RMB and carried fixed-rates ranging from 2.25% to 3.47% per annum. Save as disclosed above, the Group had no significant investments with a value of 5% or above of the Group’s total asset as at 30 June 2021.

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Funding and Treasury Policy

The Group adopts a stable approach on its finance and treasury policy, aiming to maintain an optimal financial position, the most economic finance costs, and minimal financial risks. The Group regularly reviews its funding requirements to maintain adequate financial resources in order to support its current business operations as well as its future investments and expansion plans.

Material Acquisitions and Future Plans for Major Investment

During the six months ended 30 June 2021, the Group did not conduct any material acquisitions or disposals. In addition, save for the expansion plans as disclosed in the section headed “Future Plans and Use of Proceeds” in the prospectus of the Company dated 26 February 2021 (the “ Prospectus ”), the Group has no specific plan for major investment or acquisition for major capital assets or other businesses. However, the Group will continue to identify new opportunities for business development.

Exposure to Fluctuations in Exchange Rates

The Group operates mainly in China with most of its transactions settled in RMB. However, the Group is exposed to foreign exchange risk arising mainly from bank deposits denominated in Hong Kong dollars. The Group will consider to use derivative financial instruments, including foreign exchange option contracts and interest rate option contracts, to mitigate foreign currency risks.

Pledge of Assets

The Group did not have any pledged assets as at 30 June 2021 and 31 December 2020.

Contingent Liabilities

As at 30 June 2021, the Group had no significant contingent liabilities.

Human Resources

As at 30 June 2021, the number of employees of the Group was 855 as compared to 784 as at 30 June 2020. The total cost of staff, including basic salary and wages, social insurance and bonus, for the six months ended 30 June 2021 was RMB92.3 million as compared to RMB66.4 million for the same period in 2020. The increase was mainly attributable to (i) the increase in the number of employees; and (ii) the expansion and development of our business.

26

OTHER INFORMATION

USE OF NET PROCEEDS FROM GLOBAL OFFERING

The shares of the Company (the “ Shares ”) were listed on the Stock Exchange on 10 March 2021 (the “ Listing Date ”). The Company received net proceeds (after deduction of the underwriting commissions and related costs and expenses) from the Global Offering of approximately RMB2,418.8 million (equivalent to approximately HK$2,883.8 million). The Company intends to apply such net proceeds in accordance with the purposes as set out in the Prospectus. The details of intended application of net proceeds from the Global Offering are set out as follows:

			Actual net
		Net proceeds	amount utilised	Actual net		Expected timeline
	Approximate	from the	for the six	amount utilised	Unutilised net	of full utilisation
	% of total net	Global	months ended	up to 30 June	amount as at 30	of the unutilised
Item	proceeds	Offering	30 June 2021	2021	June 2021	proceeds
		(RMB million)	(RMB million)	(RMB million)	(RMB million)
Research and development of new products, upgrade	7.1%	171.8	–	–	171.8	Expected to be
of existing products and development of new						fully utilised by
brands and categories						the end of 2026
Facilitate the construction and upgrade of relevant	10.2%	246.7	–	–	246.7	Expected to be
research and development centers and support						fully utilised by
their research activities						the end of 2026
Motive existing research personnel and recruit	2.7%	65.3	–	–	65.3	Expected to be
additional experienced and talented personnel for						fully utilised by
our research and development team						the end of 2026
Further develop online distribution channels	10.0%	241.9	15.3	15.3	226.6	Expected to be
						fully utilised by
						the end of 2026
Further enhance our offline distribution network	5.0%	120.9	3.4	3.4	117.5	Expected to be
						fully utilised by
						the end of 2026
Establish and optimise our overseas online and	5.0%	120.9	–	–	120.9	Expected to be
offline sales network and develop new markets						fully utilised by
						the end of 2026
Enhance our market penetration in lower-tier cities	5.0%	120.9	–	–	120.9	Expected to be
						fully utilised by
						the end of 2026
Invest in online brand marketing activities to	10.0%	241.9	16.3	16.3	225.6	Expected to be
enhance brand and product awareness and educate						fully utilised by
customers						the end of 2026
Establish overseas supply chain to improve our cost	1.5%	36.3	–	–	36.3	Expected to be
advantage for our overseas operations						fully utilised by
						the end of 2026

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Item Upgrade our existing production facilities and existing production lines at our Anfu and Panyu plants, and to establish new production lines to increase production capacity and efficiency Establish a supply chain base in Shanghai which include a warehouse and a logistic center and offices Deepen our digitalisation strategy, enhance information technology infrastructure, and further develop our technology and data-driven middle- office for our supply chain management, consumer community and proprietary platform operation and distribution channel management to improve operating efficiency Strategic acquisitions of upstream and downstream businesses to acquire external high-qualify, complementary technologies, brands and businesses Working capital and other general corporate purposes Total

Approximate % of total net proceeds Net proceeds from the Global Offering Actual net amount utilised for the six months ended 30 June 2021 Actual net amount utilised up to 30 June 2021 Unutilised net amount as at 30 June 2021 Expected timeline of full utilisation of the unutilised proceeds (RMB million) (RMB million) (RMB million) (RMB million) 1.5% 36.3 – – 36.3 Expected to be fully utilised by the end of 2026 7.0% 169.3 – – 169.3 Expected to be fully utilised by the end of 2026 10.0% 241.9 – – 241.9 Expected to be fully utilised by the end of 2026 15.0% 362.8 – – 362.8 Expected to be fully utilised by the end of 2026 10.0% 241.9 – – 241.9 Expected to be fully utilised by the end of 2026 100.0% 2,418.8 35.0 35.0 2,383.8

As at 30 June 2021, the remaining proceeds of approximately RMB2,383.8 million (equivalent to approximately HK$2,864.8 million) will continue to be used in accordance with the purposes as set out in the Prospectus and follow the expected implementation timetable as disclosed in the Prospectus. Most of the unutilised net proceeds were placed in licensed banks in Hong Kong as at 30 June 2021.

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INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2021.

CORPORATE GOVERNANCE

The Company was listed on the Stock Exchange on 10 March 2021 and the Corporate Governance Code (the “ CG Code ”) as set out in Appendix 14 to the Listing Rules was not applicable to the Company before the Listing Date.

The Company is committed to maintaining high standards of corporate governance to safeguard the interests of the shareholders of the Company (the “ Shareholders ”) and to enhance corporate value and accountability. The Company has adopted the CG Code as its own code of corporate governance. Since the Listing Date and up to 30 June 2021, the Company has complied with all applicable code provisions under the CG Code and adopted most of the best practices set out therein except for the following provision.

Under code provision A.2.1 of the CG Code, the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. However, the Company does not have a separate chairman and chief executive officer and the responsibilities of both chairman and chief executive officer vest in Ms. Chen Danxia. The Board believes that vesting the responsibilities of both chairman and chief executive officer in the same person has the benefit of ensuring the consistent leadership within the Group and enables more effective and efficient overall strategic planning of the Group. Besides, with three independent non-executive Directors out of a total of seven Directors in the Board, there will be sufficient independent voice within the Board to protect the interests of the Company and the Shareholders as a whole. Therefore, the Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively. The Board will continue to review and consider splitting the roles of chairman of the Board and chief executive officer of the Company at a time when it is appropriate and suitable by taking into account the circumstances of the Group as a whole.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) set out in Appendix 10 to the Listing Rules as its own code of conduct regarding Directors’ securities transactions since the Listing Date. Having been made specific enquiries, all of the Directors confirmed that he/she has complied with the required standards as set out in the Model Code during the period from the Listing Date and up to 30 June 2021.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SHARES

During the period from the Listing Date and up to 30 June 2021, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

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PUBLIC FLOAT

Based on the information publicly available to the Company and to the knowledge of the Directors, the Company has maintained sufficient public float as required by the Listing Rules since the Listing Date and up to the date of this announcement. The Company maintained the minimum level of public float of 25% of its total issued share capital.

EVENTS AFTER THE PERIOD

Adoption of Share Option Scheme

On 23 July 2021, an extraordinary general meeting of the Company was held to approve the adoption of a share option scheme (the “ Share Option Scheme ”). The purpose of the Share Option Scheme is to attract, retain and motivate talented employees (including directors and employees) to strive towards long-term performance targets set by the Group and to provide them with an incentive to work better for the interest of the Group.

The options may be granted to any director or employee who the Directors consider, in their sole discretion, have contributed or will contribute to the Group. The exercise price shall be at a price determined by the Directors at their absolute discretion and shall be at least the highest of (i) the closing price of the shares as stated in the daily quotation sheet issued by the Stock Exchange on the offer date; (ii) the average closing price of the shares as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the offer date; and (iii) the nominal value of a share on the offer date.

The Share Option Scheme will remain in force for a period of ten years from the date of its adoption. Options granted must be taken up not later than 7 days after the date of grant. A consideration of HK$1 is payable on acceptance of the offer of grant of an option. The exercisable period of an option shall not exceed 10 years from the date of grant.

Details are set out in the announcements made by the Company on 3 June 2021 and 23 July 2021 and the circular of the Company dated 8 July 2021.

AUDIT COMMITTEE

The Board has established the Audit Committee, which comprises three independent non-executive Directors, namely, Mr. Chan Wan Tsun Adrian Alan (Chairman), Dr. De-Chao Michael Yu and Mr. Guo Sheng, and one non-executive Director, namely Mr. Chen Zexing. The Audit Committee has adopted written terms of reference which clearly set out its duties and obligations (the terms of reference are available on the websites of the Company and the Stock Exchange).

The Audit Committee has, together with the senior management of the Company, reviewed the accounting principles and practices adopted by the Group as well as the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2021.

The unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2021 have also been reviewed by the Company’s independent auditor, Deloitte Touche Tohmatsu, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.

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PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT

This interim results announcement is published on the website of the Stock Exchange at www.hkexnews.hk and the website of the Company at www.cheerwin.com. The interim report of the Company for the six months ended 30 June 2021 containing all the information required by the Listing Rules will be despatched to the Shareholders and published on the respective websites of the Stock Exchange and the Company in accordance with the requirements under the Listing Rules.

By order of the Board Cheerwin Group Limited Chen Danxia

Executive Director, Chairman and Chief Executive Officer

Hong Kong, 30 August 2021

As at the date of this announcement, the Board comprises Ms. Chen Danxia, Mr. Xie Rusong and Mr. Zhong Xuyi as executive Directors; Mr. Chen Zexing as non-executive Director; and Dr. De-Chao Michael Yu, Mr. Guo Sheng and Mr. Chan Wan Tsun Adrian Alan as independent non-executive Directors.

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