Hengxin Technology Ltd. — Annual Report 2019

Mar 16, 2020

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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HENGXIN TECHNOLOGY LTD. 亨鑫科技有限公司[*]

(carrying on business in Hong Kong as HX Singapore Ltd.)

(incorporated in Republic of Singapore with limited liability)

(Stock Code: 1085)

ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 AND RECOMMENDATION FOR DECLARATION AND PAYMENT OF FINAL DIVIDEND FOR 2019 AND CLOSURE OF REGISTER OF MEMBERS

FINANCIAL HIGHLIGHTS

1. Revenue decreased by approximately 10.0% to approximately RMB1,428.6 million

2. Gross profit decreased by approximately 10.2% to approximately RMB338.4 million

3. Gross profit margin decreased by approximately 0.1 percentage point to approximately 23.7%

4. Net profit attributable to equity holders of the Company decreased by approximately 4.1% to approximately RMB113.5 million

5. Basic earnings per share was RMB0.292

6. Proposed final dividend of RMB0.0292 per share

– 1 –

The board of directors (the “ Director(s) ”) of Hengxin Technology Ltd. (the “ Company ”) is pleased to announce the consolidated results of the Company and its subsidiaries (collectively hereinafter referred as the “ Group ”) for the year ended 31 December 2019 (the “ Reporting Period ”) together with the comparative figures for the corresponding period in 2018 as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 31 December

Notes Revenue 5 Cost of sales Gross profit Other operating income 6 Selling and distribution expenses Administrative expenses Impairment loss on trade and other receivables Other operating expenses Profit from operations Interest expense 7 Share of loss of an associate Profit before taxation 8 Income tax 9 Profit for the year Attributable to: Equity shareholders of the Company Profit for the year Earnings per share(RMB) 12 Basic and diluted Dividends per share(RMB) 10	2019 RMB’000 1,428,564 (1,090,208) 338,356 35,476 (114,708) (45,389) (641) (68,041) 145,053 (15,024) – 130,029 (16,558) 113,471 113,471 113,471 0.292 0.0292	2018 (Note) RMB’000 1,586,950 (1,210,021) 376,929 30,048 (102,429) (56,883) (19,183) (74,407) 154,075 (1,042) (12,440) 140,593 (22,317) 118,276 118,276 118,276 0.305 0.0305

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, the comparative information is not restated. See Note 3.

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C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R COMPREHENSIVE INCOME

For the year ended 31 December

Profit for the year Other comprehensive income for the year (after tax and reclassification adjustments) Items that will not be reclassified to profit or loss: Equity investments at fair value through other comprehensive income – net movement in fair value reserves (non-recycling) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of – financial statements of entities with functional currencies other than RMB Other comprehensive income for the year Total comprehensive income for the year Attributable to: Equity shareholders of the Company Total comprehensive income for the year	2019 RMB’000 113,471 (1,020) (118) (1,138) 112,333 112,333 112,333	2018 (Note) RMB’000 118,276 – (306) (306) 117,970 117,970 117,970

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, the comparative information is not restated. See Note 3.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December

Notes Non-current assets Property, plant and equipment 13 Lease prepayments Interest in an associate Other investments Deferred tax assets Current assets Lease prepayments Inventories Trade and other receivables 14 Time deposits with original maturity more than 3 months Cash and cash equivalents Current liabilities Trade and other payables 15 Short–term loans Lease liabilities Income tax payable Net current assets Total assets less current liabilities	31 December 2019 RMB’000 177,748 – – 9,647 8,693 196,088 – 94,847 885,354 400,000 616,564 1,996,765 183,230 310,000 828 2,493 496,551 1,500,214 1,696,302	31 December 2018 (Note) RMB’000 129,391 47,985 – 10,847 10,488 198,711 1,355 168,853 788,557 – 978,604 1,937,369 207,446 315,000 – 16,627 539,073 1,398,296 1,597,007

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

As at 31 December

Non-current liabilities Deferred income Lease liabilities Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital General reserves Special reserve Fair value reserve Translation reserves Accumulated profits Total equity attributable to equity shareholders of the Company TOTAL EQUITY	31 December 2019 RMB’000 6,255 958 6,980 14,193 1,682,109 295,000 252,344 (6,017) (850) (1,541) 1,143,173 1,682,109 1,682,109	31 December 2018 (Note) RMB’000 3,146 – 6,353 9,499 1,587,508 295,000 233,658 (6,017) 170 (1,423) 1,066,120 1,587,508 1,587,508

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, the comparative information is not restated. See Note 3.

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December

Operating activities Profit before tax Adjustments for: Share of losses of an associate Depreciation of property, plant and equipment Amortisation of lease prepayment Impairment losses on trade and other receivables (Reversal of)/allowance for stock obsolescence provision Gain on disposal of property, plant and equipment Interest expense Interest income Amortisation of deferred income Changes in working capital: Inventories Trade and other receivables Trade and other payables Cash generated from operations Interest received Income tax paid Net cash generated from operating activities Investing activities Acquisition of property, plant and equipment Proceeds on maturity of other investments Interest received from other investments Proceeds from disposal of property, plant and equipment Changes in pledged bank deposits Interest received from time deposits Proceeds from time deposits Payment for time deposits Net cash (used in)/generated from investing activities	2019 RMB’000 130,029 – 21,404 – 641 (135) (260) 15,024 (20,445) (1,451) 144,807 74,008 (97,733) (19,326) 101,756 9,268 (28,090) 82,934 (18,560) – – 1,045 7,233 11,177 357,498 (757,498) (399,105)	2018 (Note) RMB’000 140,593 12,440 25,233 1,355 19,183 38 (18) 1,042 (8,311) (1,029) 190,526 42,316 (29,403) (19,466) 183,973 6,963 (23,235) 167,701 (15,033) 50,000 1,348 116 (4,948) – – – 31,483

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CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

For the year ended 31 December

Financing activities Capital element of lease rentals paid Interest element of lease rentals paid Repayment of short-term bank loans Proceeds from short-term bank loans Other interest expense paid Dividends paid to shareholders of the Company Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Effects of foreign exchange translation Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year	2019 RMB’000 (883) (82) (315,000) 310,000 (14,942) (17,732) (38,639) (354,810) 3 946,903 592,096	2018 (Note) RMB’000 – – – 315,000 (1,042) (11,407) 302,551 501,735 48 445,120 946,903

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, the comparative information is not restated. See Note 3.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity for the year ended 31 December

RMB’000 Balance at 1 January 2018 Total comprehensive income for the year Profit for the year Other comprehensive income for the year Total Dividends paid Transfer to reserves Balance at 31 December 2018 and 1 January 2019 Total comprehensive income for the year Profit for the year Other comprehensive income for the year Total Dividends paid Transfer to reserves Balance at 31 December 2019	RMB’000 Balance at 1 January 2018 Total comprehensive income for the year Profit for the year Other comprehensive income for the year Total Dividends paid Transfer to reserves Balance at 31 December 2018 and 1 January 2019 Total comprehensive income for the year Profit for the year Other comprehensive income for the year Total Dividends paid Transfer to reserves Balance at 31 December 2019	Share capital 295,000	General reserves 217,391	Special reserve (6,017)	Fair value reserve 170	Translation reserves (1,117)	Accumulated profits 975,518	Total 1,480,945
		– –	– –	– –	– –	– (306)	118,276 –	118,276 (306)
		– – – 295,000	– – 16,267 233,658	– – – (6,017)	– – – 170	(306) – – (1,423)	118,276 (11,407) (16,267) 1,066,120	117,970 (11,407) – 1,587,508
		– –	– –	– –	– (1,020)	– (118)	113,471 –	113,471 (1,138)
		– – – 295,000	– – 18,686 252,344	– – – (6,017)	(1,020) – – (850)	(118) – – (1,541)	113,471 (17,732) (18,686) 1,143,173	112,333 (17,732) – 1,682,109

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NOTES:

1. STATEMENT OF COMPLIANCE

Hengxin Technology Ltd. (“ the Company ”) is a limited liability company incorporated in Singapore on 18 November 2004 under the Singapore Companies Act and currently its shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ SEHK ”). The registered office of the Company is located at 138 Robinson Road, #26-03, Oxley Tower, Singapore 068906. The principal place of business of the Group is located at No. 138 Taodu Road, Dingshu Town, Yixing City, Jiangsu Province, the People’s Republic of China (the “ PRC ”).

The Company is an investment holding company, and the principal activities of the subsidiaries are research, design, development and manufacture of telecommunications and technological products, production of radio frequency coaxial cables for mobile communications and mobile communications systems exchange equipment. The Group’s operations are principally conducted in the PRC.

The Group’s consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“ IFRSs ”), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“ IASs ”) and Interpretations issued by the International Accounting Standards Board (“ IASB ”). These financial statements also comply with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities (the “ Listing Rules ”) on The Stock Exchange of Hong Kong Limited.

The IASB has issued certain new and revised IFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Company. Note 3 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these consolidated financial statements.

The financial information relating to the years ended 31 December 2019 and 2018 included in this preliminary announcement of annual results does not constitute the Company’s statutory annual consolidated financial statements for those years but is derived from those financial statements.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

These financial statements have been prepared on a historical cost basis except for the other investments, which are measured at fair value on each reporting date.

These financial statements are presented in Renminbi (“ RMB ”) and all values are rounded to the nearest thousand (“ RMB’000 ”) except when otherwise indicated. Renminbi (“ RMB ”) is also the functional currency of the Company and the presentation currency of the Group.

3. CHANGES IN ACCOUNTING POLICIES

The IASB has issued certain new and revised IFRSs that are first effective or available for early adoption for the current accounting period of the Group. Except for IFRS 16, Leases , none of the developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

The Group has initially applied IFRS 16 as from 1 January 2019. The Group has elected to use the modified retrospective approach and has therefore recognised the cumulative effect of initial application as an adjustment to the opening balance of equity at 1 January 2019. Comparative information has not been restated and continues to be reported under IAS 17.

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The following table summarises the impacts of the adoption of IFRS 16 on the Group’s consolidated statement of financial position:

	Carrying			Carrying
	amount at	Capitalisation		amount at
	31 December	of operating	Re-	1 January
	2018	lease contracts	classification	2019
	RMB’000	RMB’000	RMB’000	RMB’000
Line items in the
consolidated statement
of financial position
impacted by the
adoption of IFRS 16:
Property, plant and
equipment	129,391	2,669	49,340	181,400
Lease prepayments – non
current	47,985	–	(47,985)	–
Total non-current assets	198,711	2,669	1,355	202,735
Lease prepayments – current	1,355	–	(1,355)	–
Current assets	1,937,369	–	(1,355)	1,936,014
Lease liabilities (current)	–	883	–	883
Current liabilities	539,073	883	–	539,956
Net current assets	1,398,296	(883)	(1,355)	1,396,058
Total assets less current
liabilities	1,597,007	1,786	–	1,598,793
Lease liabilities (non-current)	–	1,786	–	1,786
Total non-current liabilities	9,499	1,786	–	11,285
Net assets	1,587,508	–	–	1,587,508

Impact on the financial result, segment results and cash flows of the Group

After the initial recognition of right-of-use assets and lease liabilities as at 1 January 2019, the Group as a lessee is required to recognise interest expense accrued on the outstanding balance of the lease liability, and the depreciation of the right-of-use asset, instead of the previous policy of recognising rental expenses incurred under operating leases on a straight-line basis over the lease term. This results in a positive impact on the reported profit from operations in the Group’s consolidated statement of profit or loss, as compared to the results if IAS 17 had been applied during the year.

In the cash flow statement, the Group as a lessee is required to split rentals paid under capitalised leases into their capital element and interest element. These elements are classified as financing cash outflows, rather than as operating cash outflows, as was the case for operating leases under IAS 17. Although total cash flows are unaffected, the adoption of IFRS 16 therefore results in a significant change in presentation of cash flows within the cash flow statement.

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The following tables give an indication of the estimated impact of the adoption of IFRS 16 on the Group’s financial result, segment results and cash flows for the year ended 31 December 2019, by adjusting the amounts reported under IFRS 16 in these consolidated financial statements to compute estimates of the hypothetical amounts that would have been recognised under IAS 17 if this superseded standard had continued to apply in 2019 instead of IFRS 16, and by comparing these hypothetical amounts for 2019 with the actual 2018 corresponding amounts which were prepared under IAS 17.

Financial result for year ended 31 December 2019 impacted by the adoption of IFRS 16: Profit from operations Interest expense Profit before taxation Profit for the year Line items in the consolidated cash flow statement for year ended 31 December 2019 impacted by the adoption of IFRS 16: Cash generated from operations Net cash generated from operating activities Capital element of lease rentals paid Interest element of lease rentals paid Net cash (used in)/ generated from financing activities		2019 2018 Amounts reported under IFRS 16 Add back: IFRS 16 depreciation and interest expense Deduct: Estimated amounts related to operating leases as if under IAS 17 (Note 1) Hypothetical amounts for 2019 as if under IAS 17 Compared to amounts reported for 2018 under IAS 17 (A) (B) (C) (D=A+B–C) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 145,053 2,256 (2,319) 144,990 154,075 (15,024) 82 – (14,942) (1,042) 130,029 2,338 (2,319) 130,048 140,593 113,471 2,338 (2,319) 113,490 118,276 2019 2018 Amounts reported under IFRS 16 Estimated amounts related to operating leases as if under IAS 17 (Notes 1 & 2) Hypothetical amounts for 2019 as if under IAS 17 Compared to amounts reported for 2018 under IAS 17 (A) (B) (C=A+B) RMB’000 RMB’000 RMB’000 RMB’000 101,756 (966) 100,790 183,973 82,934 (966) 81,968 167,701 (883) 883 – – (82) 82 – – (38,639) 965 (37,674) 302,551

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• Note 1: The “estimated amounts related to operating leases” is an estimate of the amounts of the cash flows in 2019 that relate to leases which would have been classified as operating leases, if IAS 17 had still applied in 2019. This estimate assumes that there were no differences between rentals and cash flows and that all of the new leases entered into in 2019 would have been classified as operating leases under IAS 17, if IAS 17 had still applied in 2019. Any potential net tax effect is ignored.

• Note 2: In this impact table these cash outflows are reclassified from financing to operating in order to compute hypothetical amounts of net cash generated from operating activities and net cash used in financing activities as if IAS 17 still applied.

4. SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products, and currently has three reportable operating segments as follows:

• Manufacturing and sale of RF Coaxial Cable Series for mobile communications (“ RF Coaxial Cables ”)

• Telecommunications equipment and accessories (“ Accessories ”)

• Manufacturing and sale of antennas (“ Antennas ”)

• Others (includes High Temperature Resistant Cables (“ HTRC ”) and antenna testing services)

Segment revenues and results

The Group determines its operating segments based on internal reports about components of the Group that are regularly reviewed by the Executive Directors (the chief operating decision makers) in order to allocate resources to the segments and to assess their performance.

Based on the segment information reported to the Executive Directors, the Group is organised into five product lines – radio frequency coaxial cables, telecommunication equipment and accessories, antennas, high temperature resistant cables and antenna testing services.

The Group has presented the three main products, radio frequency coaxial cables, telecommunication equipment and accessories and antennas, as reportable segments for the years ended 31 December 2018 and 2019.

Information related to each reportable segment is set out below. Segment profit before tax is used to measure performance because management believes that such information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

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An analysis by principal activity of contribution to the results is as follows:

2019 Disaggregated by timing of revenue recognition Point in time Over time Revenue from external customers Segment profit before tax Interest income Interest expense Reversal of stock obsolescence provision Depreciation and amortisation expense 2018 Disaggregated by timing of revenue recognition Point in time Over time Revenue from external customers Segment profit before tax Interest income Interest expense Amortisation of lease prepayment Stock obsolescence provision Depreciation		Reportable	segments	Total reportable segments RMB’000 1,346,216 – 1,346,216 123,672 19,266 (14,124) 135 (19,870) Total reportable segments RMB’000 1,519,364 – 1,519,364 142,501 7,931 (998) (1,297) (38) (24,152)	All other segments RMB’000 80,436 1,912 82,348 2,033 1,179 (864) – (1,215) All other segments RMB’000 67,149 437 67,586 (1,135) 380 (44) (58) – (1,074)	Total RMB’000 1,426,652 1,912 1,428,564 125,705 20,445 (14,988) 135 (21,085) Total RMB’000 1,586,513 437 1,586,950 141,366 8,311 (1,042) (1,355) (38) (25,226)
	Radio frequency coaxial cables RMB’000 608,114 – 608,114 47,848 8,703 (6,380) – (8,976)	Telecom- munication equipment and accessories RMB’000 341,448 – 341,448 47,191 4,887 (3,582) – (5,040) Reportable	Antennas RMB’000 396,654 – 396,654 28,633 5,676 (4,162) 135 (5,854) segments
	Radio frequency coaxial cables RMB’000 727,243 – 727,243 55,578 3,796 (478) (621) – (11,561)	Telecom- munication equipment and accessories RMB’000 359,018 – 359,018 59,208 1,874 (236) (306) – (5,707)	Antennas RMB’000 433,103 – 433,103 27,715 2,261 (284) (370) (38) (6,884)

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Note 1:

Segment profit before tax represent the profits earned by each segment without allocation of central administration costs, independent directors’ fees, interest income, foreign exchange gains and losses and interest expense at corporate level.

Reconciliation of information on reportable segments

Profit before tax Total profit before tax for reportable segments Profit/(loss) before tax for other segments Unallocated amounts: – Other income – Other expenses – Share of losses of an associate – Other unallocated amounts Other material items For the year ended 31 December 2019 Depreciation and amortisation expense For the year ended 31 December 2018 Depreciation expense	Reportable and all other segment totals RMB’000 (21,085) (25,226)	Group For the year ended 31 December 2019 2018 RMB’000 RMB’000 123,672 142,501 2,033 (1,135) 15,032 21,737 (1,368) (1,905) – (12,440) (9,304) (8,165) 130,029 140,593 Adjustments Consolidated totals RMB’000 RMB’000 (319) (21,404) (7) (25,233)

Geographical segment

The geographical regions of the customers of the Group principally comprise the People’s Republic of China (“ PRC ”), India and other countries.

– 14 –

The following table sets out the geographic information analyses the Group’s revenue and specified non-current assets including property, plant and equipment and lease prepayments. In presenting the geographic information, segment revenue has been based on the geographic location of customers and segment assets have been based on the geographic location of the assets.

PRC India Others Total	Revenue from external customer 2019 2018 RMB’000 RMB’000 1,228,711 1,261,818 27,974 101,742 171,879 223,390 1,428,564 1,586,950	Specified non-current assets As at 31 December 31 December 2019 2018 RMB’000 RMB’000 174,970 176,362 1,628 1,003 1,150 11 177,748* 177,376	Specified non-current assets As at 31 December 31 December 2019 2018 RMB’000 RMB’000 174,970 176,362 1,628 1,003 1,150 11 177,748* 177,376
			177,376

• excludes other investments and deferred tax assets

5. REVENUE

Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold and services rendered, after deduction of relevant taxes and allowances for returns and trade discounts. An analysis of the Group’s revenue is as follows:

Sales of goods: – Radio frequency coaxial cables – Telecommunication equipment and accessories – Antennas – Others Service income Total 6. OTHER OPERATING INCOME	For the year ended 31 December 2019 2018 RMB’000 RMB’000 608,114 727,243 341,448 359,018 396,654 433,103 80,436 67,149 1,912 437 1,428,564 1,586,950	For the year ended 31 December 2019 2018 RMB’000 RMB’000 608,114 727,243 341,448 359,018 396,654 433,103 80,436 67,149 1,912 437 1,428,564 1,586,950
		1,586,950

Interest income Government grants Compensation claims received Gain on disposal of property, plant and equipment Net foreign exchange gains Rental income Service fee income Others Total	For the year ended 31 December 2019 2018 RMB’000 RMB’000 20,445 8,311 11,368 11,527 1,048 1,620 260 18 – 5,648 – 2,803 1,377 – 978 121 35,476 30,048	For the year ended 31 December 2019 2018 RMB’000 RMB’000 20,445 8,311 11,368 11,527 1,048 1,620 260 18 – 5,648 – 2,803 1,377 – 978 121 35,476 30,048
		30,048

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7. INTEREST EXPENSE

Interest on short-term bank borrowings Interest on lease liabilities Other interest expense	For the year ended 31 December 2019 2018 RMB’000 RMB’000 13,874 1,042 82 – 1,068 – 15,024 1,042	For the year ended 31 December 2019 2018 RMB’000 RMB’000 13,874 1,042 82 – 1,068 – 15,024 1,042
		1,042

8. PROFIT BEFORE INCOME TAX

Profit before tax is arrived at after charging/(crediting) the following during the year:

Cost of inventories recognised as expense (including effect of inventory obsolescence provision) Depreciation of owned property, plant and equipment Depreciation of right-of-use assets Amortisation of lease prepayment under IAS 17 Impairment losses on trade and other receivables Auditors’ remuneration Salaries and bonus Contributions to defined contribution plans Directors’ fees – non-executive directors of the Company Directors’ remuneration: Executive directors of the Company Directors of the subsidiaries Total staff costs Research and development expenses (included in other operating expenses) Net foreign exchange losses/(gains) Gain on disposal of property, plant and equipment INCOME TAX Current Over-provision in prior years Deferred tax: origination and reversal of temporary differences	For the year ended 31 December 2019 2018 RMB’000 RMB’000 1,090,073 1,210,059 19,148 25,233 2,256 – – 1,355 641 19,183 1,817 1,591 116,912 124,344 5,622 6,540 1,638 1,568 2,190 2,129 – – 126,362 134,581 66,673 72,501 419 (5,648) (260) (18) For the year ended 31 December 2019 2018 RMB’000 RMB’000 17,382 30,284 (3,426) (2,471) 2,602 (5,496) 16,558 22,317	For the year ended 31 December 2019 2018 RMB’000 RMB’000 1,090,073 1,210,059 19,148 25,233 2,256 – – 1,355 641 19,183 1,817 1,591 116,912 124,344 5,622 6,540 1,638 1,568 2,190 2,129 – – 126,362 134,581 66,673 72,501 419 (5,648) (260) (18) For the year ended 31 December 2019 2018 RMB’000 RMB’000 17,382 30,284 (3,426) (2,471) 2,602 (5,496) 16,558 22,317
		22,317

9. INCOME TAX

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• (i) Singapore, PRC and India income tax liabilities are calculated at the applicable rates in accordance with the relevant tax laws and regulation in respective countries.

• (ii) The provision for PRC Income Tax is based on the respective corporate income tax rates applicable to the subsidiaries located in the PRC as determined in accordance with the relevant income tax rules and regulations of the PRC.

The statutory corporate income tax rate of the Group’s operating subsidiaries in the PRC is 25% (2018: 25%).

Jiangsu Hengxin Technology Co., Ltd (“ Jiangsu Hengxin ”) and Jiangsu Hengxin Wireless Technology Co., Ltd. (“ Hengxin Wireless ”), are subject to a preferential income tax rate of 15% in 2019 available to enterprises which qualify as a High and New Technology Enterprise (2018: 15%).

• (iii) Hong Kong Profits Tax has been provided for Hengxin Technology International Co., Ltd. (“ Hengxin International ”) at the rate of 16.5% (2018: 16.5%) on the estimated assessable profits arising in Hong Kong for the year ended 31 December 2019.

10. DIVIDENDS

	2019	2018
	RMB’000	RMB’000
Proposed final cash dividend of RMB0.0292
(2018: RMB0.0457) per ordinary share	11,330	17,732

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

11. SHARE CAPITAL

Details of the changes in the Company’s share capital are as follows:

Share capital – Ordinary Shares	No. of shares	RMB’000	S$’000
	’000
Balance as at 31 December 2019 and 2018	388,000	295,000	58,342

In accordance with the Constitution of the Company, treasury shares are not allowed in the Company.

12. EARNINGS PER SHARE

Earning per share_(RMB) – Basic – Diluted Weighted average no. of shares applicable to basic EPS(’000) Weighted average no. of shares based on fully diluted basis(’000)_	Year ended 31 December 2019 31 December 2018 0.292 0.305 0.292 0.305 388,000 388,000 388,000 388,000	Year ended 31 December 2019 31 December 2018 0.292 0.305 0.292 0.305 388,000 388,000 388,000 388,000
		0.305
		388,000 388,000

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Earnings per share is calculated by dividing the Group’s net profit attributable to shareholders for the period/year by the weighted average number of ordinary shares outstanding during the year.

There were no potential dilutive ordinary shares in existence during the two years ended 31 December 2019 and 2018.

13. PROPERTY, PLANT AND EQUIPMENT

During the financial year ended 31 December 2019, the Group’s additions of property, plant and equipment during the year was approximately RMB18.6 million (2018: RMB15.0 million).

14. TRADE AND OTHER RECEIVABLES

Trade receivables from: – third parties – affiliated corporation* Bills receivables Less: Loss allowance Net trade and bills receivables Loans to associate Non-trade amounts due from associate Less: Loss allowance Advances to suppliers Advances to staff Refundable deposits Tax recoverables Prepayments Others Net prepayments and non-trade receivables	As at 31 December 2019 2018 RMB’000 RMB’000 696,080 673,819 4,828 1,449 129,078 72,134 (9,705) (9,705) 820,281 737,697 21,191 21,191 1,680 1,680 (22,871) (22,871) – – 13,401 6,143 4,064 2,218 11,839 7,349 34,590 34,212 1,179 921 – 17 65,073 50,860 885,354 788,557

• An affiliated corporation is defined as one:

• (a) in which a director of the Company has substantial financial interests or who is in a position to exercise significant influence; and/or

• (b) which directly or indirectly, through one or more intermediaries, are under the control of a common shareholder.

– 18 –

The Group allows credit period of 90–270 days from the date of billing. As of the end of the reporting period, the ageing analysis of trade debtors and bills receivable (which are included in trade and other receivables), based on the invoice date and net of loss allowance, is as follows:

Within 6 month 7 to 12 months 1 to 2 years Over 2 years	As at 31 December 2019 2018 RMB’000 RMB’000 614,610 614,491 163,802 106,622 41,303 15,812 566 772 820,281 737,697	As at 31 December 2019 2018 RMB’000 RMB’000 614,610 614,491 163,802 106,622 41,303 15,812 566 772 820,281 737,697
		737,697

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Balance at 1 January Reversal of impairment loss on trade receivables Impairment loss recognised during the year Amounts written off during the year	2019 RMB’000 (9,705) – (641) 641 (9,705)	2018 RMB’000 (13,393 13,393 (9,705 –
		(9,705

15 TRADE AND OTHER PAYABLES

Trade payables due to: – third parties – affiliated corporation Accrued operating expenses Contract liabilities Advanced receipt Tender deposit Value added tax, business tax and other taxes payable Other payables	As at 31 December 2019 2018 RMB’000 RMB’000 90,925 116,490 5,499 1,277 96,424 117,767 58,153 59,681 13,265 9,404 2,441 7,000 6,890 6,405 4,044 6,047 2,013 1,142 183,230 207,446	As at 31 December 2019 2018 RMB’000 RMB’000 90,925 116,490 5,499 1,277 96,424 117,767 58,153 59,681 13,265 9,404 2,441 7,000 6,890 6,405 4,044 6,047 2,013 1,142 183,230 207,446
		117,767
		59,681 9,404 7,000 6,405 6,047 1,142
		207,446

– 19 –

Trade payables comprise amounts outstanding for trade purchases. Payment terms with suppliers are mainly on credit within 90 days from the invoice date. The aging of trade payables based on the invoice date are as follows:

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	As at 31 December 2019 2018 RMB’000 RMB’000 91,604 113,417 1,157 1,442 1,341 1,508 2,322 1,400 96,424 117,767	As at 31 December 2019 2018 RMB’000 RMB’000 91,604 113,417 1,157 1,442 1,341 1,508 2,322 1,400 96,424 117,767
		117,767

16. NET ASSET VALUE

The net asset value per ordinary share of the Group is shown below:

Net Assets_(RMB’000) Number of ordinary shares(’000) Net Asset Value per ordinary share(RMB)_	Group As at 31 December As at 31 December 2019 2018 1,682,109 1,587,508 388,000 388,000 4.34 4.09	Group As at 31 December As at 31 December 2019 2018 1,682,109 1,587,508 388,000 388,000 4.34 4.09
		4.09

17. RELATED PARTY TRANSACTIONS

(a) Transactions

	Year ended 31 December	Year ended 31 December
	2019	2018
	RMB’000	RMB’000
Sale of finished goods	8,548	5,998
Purchase of raw materials	33,200	23,420
Purchase of power*	–	5,209

During the financial year, the Group entered into the above significant transactions with Suzhou Hengli Telecommunications Materials Co., Ltd. (sale of finished goods and purchase of raw materials).

• During the year 31 December 2018, the Group purchased of power from Jiangsu Hengtong Sell Electricity Co., Ltd (“ Hengtong SE ”). Since Hengtong SE was no longer held by Hengtong Group Co., Ltd., commencing on 17 August 2018, Hengtong SE was no longer the Group’s related party thereafter.

– 20 –

(b) Compensation of key management personnel

The remuneration of directors and other members of key management during the year were as follows:

Short term benefits Retirement benefits scheme contributions Total	Year ended 31 December 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 8,026 8,478 182 61 8,208 8,539	Year ended 31 December 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 8,026 8,478 182 61 8,208 8,539
		8,539

18. DONATIONS & CAPITAL COMMITMENTS

Contracted for but not provided for property, plant and equipment Donation commitment	As at 31 December 2019 2018 RMB’000 RMB’000 1,474 1,250 3,500 4,000 4,974 5,250	As at 31 December 2019 2018 RMB’000 RMB’000 1,474 1,250 3,500 4,000 4,974 5,250
		5,250

The Group’s PRC subsidiary has signed an intention letter and committed to donate RMB500,000 per annum from 2007 for a period of 20 years to a charitable organization in the PRC when making profit in the year.

– 21 –

(I) MANAGEMENT DISCUSSION AND ANALYSIS

Consolidated statement of profit or loss

Material fluctuations of the consolidated statement of profit or loss items are explained below:

Revenue

The Group’s revenue for the financial year ended 31 December 2019 (“ FY2019 ” or the “ Reporting Period ”) decreased by approximately RMB158.4 million, or approximately 10.0% from approximately RMB1,587.0 million in the previous financial year ended 31 December 2018 (“ FY2018 ”) to approximately RMB1,428.6 million in FY2019.

RF Coaxial Cables

Revenue generated from the segment of RF Coaxial Cables decreased by approximately RMB119.1 million or approximately 16.4% from approximately RMB727.2 million in FY2018 to approximately RMB608.1 million in FY2019. In particular, the decrease in sales for this segment is due to the decrease in sales of feeder cables of approximately RMB188.4 million or 30.0% from FY2018’s approximately RMB627.5 million to approximately RMB439.1 million in FY2019 amidst the declining demand in feeder cable in the context of weakening 4G investment with 5G technology being at the initial stage of official commercial application.

Included in the segment revenue of RF Coaxial Cables are the revenue from leaky cables of approximately RMB169.0 million for FY2019, representing an increase of approximately RMB69.2 million or 69.3% from approximately RMB99.8 million in FY2018. Leaky cables are special coaxial cables commonly used for the tunnels and underground mobile communication in mass transit railways and thus normally have higher gross profit margins than other RF Coaxial Cables products. In FY2019, the overall gross profit margin of RF Coaxial Cables increased by approximately 1.3 percentage point as compared with that of FY2018 due to the improvement of the gross profit margin of leaky cables as compared with that of FY2018, despite that the gross profit margin of RF Coaxial Cables (feeder cables) decreased as a result of weakened demand. During FY2019, the Group has continued to increase its effort in business transformation, and also allocated more resources for promoting leaky cables relating to usage in tunnels and underground mobile communications while consolidating its position in existing RF Coaxial Cables (feeder cables) markets and expanding into the overseas markets.

– 22 –

Telecommunication equipment and accessories

Revenue generated from the segment of telecommunication equipment and accessories decreased by approximately RMB17.6 million or approximately 4.9% from approximately RMB359.0 million in FY2018 to approximately RMB341.4 million in FY2019. As the demand for feeder cables decreased, the revenue for related telecommunication equipment and accessories also decreased.

Antennas

Revenue generated from Antennas during FY2019 was approximately RMB396.7 million and the revenue of Antennas during FY2018 decreased by approximately RMB36.4 million to approximately RMB433.1 million, representing a decrease of approximately 8.4%. As 4G products entered its life cycle tail stage during FY2019 with 5G products pending large-scale commercialization, our sales of 5G related Antennas remained yet to achieve the satisfactory results. In line with gradual introduction of commercialized 5G products, the Group will continue to increase its efforts in antennas market promotion during the future telecommunications network upgrade for the major domestic telecom operators.

Others (HTRC and antennas testing services)

Revenue generated in this segment increased by approximately RMB14.7 million or approximately 21.7% from approximately RMB67.6 million during FY2018 to approximately RMB82.3 million during FY2019, of which the increase was mostly attributable to the increase in sales of HTRC during FY2019. Such increase was mainly because the Group has managed to establish favourable business relationships with a number of domestic antennas and equipment companies in FY2019 and thus can boost revenue for this business segment.

Gross profit margin

The Group achieved an overall gross profit margin of approximately 23.7% during FY2019 compared to approximately 23.8% during FY2018, representing a decrease of approximately 0.1 percentage point year-on-year. Although higher than average gross profit margin for the product line of leaky cables in FY2019 of approximately 8.7 percentage points has lifted the overall gross profit margin of the Group, facing intense market competition and declining market demand, gross profit margin of RF Coaxial Cables (feeder cables) has decreased by approximately 2.0 percentage points from FY2018’s approximately 18.3% to approximately 16.3% in FY2019. On the other hand, the gross profit margin of Antennas has increased by approximately 1.0 percentage point from FY2018’s approximately 25.4% to approximately 26.4% in FY2019 (mainly because the Antennas sold in FY2019 generally have higher profitability), but revenue from Antennas reported a year-to-year decrease. As a result, the overall gross profit margin of the Group did not increase. The Group will continue to monitor production

– 23 –

efficiencies to ensure optimal raw materials and labour utilisation, stringent selection of suppliers in tender biddings to keep costs to a minimum, coupled with efficient use of various resources to keep up with price pressure resulting from keen competition.

Other income

Other income increased by approximately RMB5.5 million or approximately 18.3% from approximately RMB30.0 million in FY2018 to approximately RMB35.5 million in FY2019. The increase is primarily due to:

• (i) increase in interest income earned due to a significant year-to-year increase in cash and cash equivalents and time deposits in FY2019;

• (ii) no rental income earned from the lease of the Group’s testing facilities during FY2019; and

• (iii) exchange losses of approximately RMB0.4 million arising from movements in renminbi exchange rate in FY 2019, which was classified as other operating expenses as compared to net exchange gains of approximately RMB5.6 million in FY2018.

Selling and distribution expenses

Selling and distribution expenses increased by approximately RMB12.3 million or approximately 12.0% from approximately RMB102.4 million in FY2018 to approximately RMB114.7 million in FY2019 due to an increase in salary expenses under selling and distribution expenses, which is attributed to the increase in the salary payable to our sales staff in FY 2019 for the purpose of motivating our sales staff to boost the marketing activities of the Group and stimulate the demand for our products.

Administrative expenses

Administrative expenses decreased by approximately RMB11.5 million or approximately 20.2% from approximately RMB56.9 million in FY2018 to approximately RMB45.4 million in FY2019. The decrease is mainly due to the decrease in staff costs attributable to a decrease in the number of staff of the Group in FY 2019, as well as a decrease in annual incentives payable to our staff in light of the decrease in revenue.

Other operating expenses

Other operating expenses decreased by approximately RMB6.4 million or approximately 8.6% from approximately RMB74.4 million in FY2018 to approximately RMB68.0 million in FY2019. Such decrease is mainly due to (i) a decrease in research and development (“ R&D ”) expenses incurred from continuing R&D activities under taken

– 24 –

for the modifications and improvements to the Group’s products in FY2019; and (ii) net exchange losses of RMB0.4 million incurred in FY2019 (as compared to net exchange gains of approximately RMB5.6 million in FY2018 recorded as other income).

Impairment loss on trade and other receivables

The impairment loss on trade and other receivables for FY2018 represented the combined effects of (i) the expected credit loss of approximately RMB22.9 million relating to the other receivables of the outstanding amount of the loan to Mianyang Xintong Industrial Co., Ltd. (formerly known as Mianyang City Siemax Industrial Co., Ltd.) (“ Mianyang Xintong ”, a limited liability company established in PRC held through Jiangsu Hengxin Technology Co., Ltd. (“ Hengxin (Jiangsu) ”) due to the poor operating results of Mianyang Xintong in FY2018 and the expected deteriorating future business of Mianyang Xintong; and (ii) the reversal of the allowance for impairment in respect of trade receivables of the amount of approximately RMB3.7 million. Upon the assessment on the recoverability of the outstanding amount of the loan to Mianyang Xintong, no change in the expected credit loss relating to Mianyang Xintong is recorded in FY2019.

Share of loss of an associate

As the Group’s equity interest in Mianyang Xintong has been fully impaired in FY2018, the Group recorded no share of loss of an associate for FY2019. The amount of approximately RMB12.4 million for FY2018 represents: (i) the Group’s proportionate share of the loss incurred by the Group’s 24% equity interest in Mianyang Xintong recognised during FY2018 of approximately RMB1.8 million (after tax); and (ii) the impairment loss on the equity interest in Mianyang Xintong of approximately RMB10.6 million.

Interest expense

Interest expense increased by approximately RMB14.0 million from approximately RMB1.0 million in FY2018 to approximately RMB15.0 million in FY2019, mainly because the Group has increased its short-term loans during the final quarter of FY2018 and such short-term loans incurred interest expenses during FY2019.

Profit before income tax

Profit before income tax decreased by approximately RMB10.6 million or approximately 7.5% from approximately RMB140.6 million in FY2018 to approximately RMB130.0 million in FY2019.

– 25 –

Income tax

The Group’s main subsidiary, Hengxin (Jiangsu), has been subject to an incentive tax rate of 15% as it has been awarded as a high-tech enterprise in the PRC since 2008. It had been awarded the same status for a further three years commencing on 7 December 2018.

Income tax expense decreased by approximately RMB5.7 million or approximately 25.5% from approximately RMB22.3 million in FY2018 to approximately RMB16.6 million in FY2019, mainly due to the increase in additional deduction for qualified research and development costs during the Reporting Period.

Net profit

In view of the above, net profit attributable to equity holders of the Company decreased approximately RMB4.8 million or approximately 4.1% from approximately RMB118.3 million in FY2018 compared to approximately RMB113.5 million in FY2019.

Consolidated statement of financial position

Material fluctuations of the consolidated statement of financial position items are explained below:

Trade and other receivables

• (i) Net trade and bills receivables increased by approximately RMB82.6 million or approximately 11.2% from approximately RMB737.7 million as at 31 December 2018 to approximately RMB820.3 million as at 31 December 2019.

Average trade receivables turnover days was 202 days as at 31 December 2019 compared to 169 days as at 31 December 2018. The increase in trade receivables turnover by approximately 33 days was mainly because more customers have used bills for settlement thus leading to an extension of the settlement cycle. Bill receivables was approximately RMB129.1 million as at 31 December 2019 representing an increase by approximately RMB57.0 million from approximately RMB72.1 million as at 31 December 2018. Although the collection of trade receivables from certain customers of the Group had been stretched longer as some adopted the payment by bank bills of exchange which had a longer period of maturity, the Group focused on other collections to mitigate the longer turnover effects by certain customers as mentioned above.

Nonetheless, most of the trade and bills receivables balances were recent sales which were within the average credit period given to the Group’s customers. As at 31 December 2019, approximately 74.2% of the trade and bills receivable were within the credit period given as compared with that of approximately 82.2% as at 31 December 2018.

– 26 –

For amounts due more than six months and longer, they mainly pertain to final payment owed by the two main PRC telecom operators. These operators have been the Group’s long-time customers and the Group has been receiving regular payments from them. In view of the Group’s long-standing dealings with such two main PRC telecom operators and the regular receipts of payments from these customers, the Group does not foresee any issue in the collection of these receivables. The Group will continue to endeavour in its collection efforts on the outstanding balances.

• (ii) Net prepayments and non-trade receivables increased by approximately RMB14.2 million or approximately 27.9% from approximately RMB50.9 million as at 31 December 2018 to approximately RMB65.1 million as at 31 December 2019. The increase was mainly due to (i) the increase in advance payment to suppliers for the purchase of raw materials; and (ii) an increase in the bid bond for certain projects.

Inventories

Inventories (comprising raw materials, work-in-progress and finished goods) decreased by approximately RMB74.1 million or approximately 43.9% from approximately RMB168.9 million as at 31 December 2018 to approximately RMB94.8 million as at 31 December 2019. The decrease was mainly due to a significant decrease in raw materials for inventories, work in progress, and finished goods amidst the decrease in revenue for FY2019 and the Group’s measure to control inventory level on implementing business transformation.

Other investments

Other investments relates to an equity investment held by the Group. As at 31 December 2019, based on the valuation report prepared by an independent valuer, an adjustment for the decrease in the valuation of that equity investment of RMB1.2 million as compared with 31 December 2018 is recorded as an other comprehensive income item.

Short-term loans

During the second half of FY2018, the Group has raised funds from short-term loans provided by banks in the PRC, which expired in the fourth quarter of FY2019 and was extended at a fixed interest rate. Such short-term loans aim to enhance the working capital position of the Group. Short-term loans as at 31 December 2019 will become due for repayment by the fourth quarter of 2020.

– 27 –

Trade payables

Trade payables decreased by approximately RMB21.4 million or approximately 18.2% from approximately RMB117.8 million as at 31 December 2018 to approximately RMB96.4 million as at 31 December 2019. The decrease is mainly due to the gradual decrease in revenue throughout FY2019 and is in line with the decrease in the inventory levels.

Income tax payable

Income tax payable decreased by approximately RMB14.1 million or approximately 84.9% from RMB16.6 million as at 31 December 2018 to approximately RMB2.5 million as at 31 December 2019. The decrease mainly arose from the timing differences in the payment of income taxes.

Deferred income

Deferred income increased by approximately RMB3.2 million or approximately 103.2% from approximately RMB3.1 million as at 31 December 2018 to approximately RMB6.3 million as at 31 December 2019. This relates to the subsidies received from local government on acquisition of equipment for certain projects for supporting the Group’s project of transformation of science and technology achievements in the PRC.

Cash and cash equivalents and time deposits

Cash and cash equivalents and time deposits increased by approximately RMB38.0 million or approximately 3.9% from approximately RMB978.6 million as at 31 December 2018 to approximately RMB1,016.6 million as at 31 December 2019. The increase is mainly due to the cash of approximately RMB82.9 million generated from operating activities, cash outflows of approximately RMB18.6 million on acquisition of fixed assets from investing activities, interest expense of approximately RMB13.9 million incurred from funds raised from short-term loans and final dividends of approximately RMB17.7 million paid for FY2018 during the Reporting Period under financing activities.

(II) SUBSIDIARIES

The subsidiaries of the Company are Hengxin (Jiangsu), Jiangsu Hengxin Wireless Technology Co., Ltd, Hengxin Technology (India) Pvt Ltd and Hengxin Technology International Co., Limited.

– 28 –

(III) FOREIGN CURRENCY EXPOSURE

Renminbi (“ RMB ”) is the functional currency of the Group. Currencies other than RMB expose the Group to foreign currency risk. The Group has foreign currency sales and its revenue and costs are denominated in RMB, India Rupees (“ INR ”) and United States dollars (“ USD ”). Some of the Group’s bank balances are denominated in USD, Singapore dollars (“ SGD ”), Hong Kong dollars (“ HKD ”) and INR, whilst some costs may be denominated in Hong Kong dollars, SGD and INR. The Group has implemented a hedging policy to strike a balance between the uncertainty and the risk of opportunity loss in light of the growing significance of its exposure to the fluctuations in foreign currency, under which policy foreign exchange forward contracts may be used to eliminate the currency exposure. The Group has not entered into such forward contracts as at the end of the Reporting Period but will continue to monitor foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

(IV) DONATION AND CAPITAL COMMITMENTS

As at 31 December 2019, the capital commitments of the Group in respect of the purchase of property, plant and equipment were approximately RMB1,474,000 (2018: approximately RMB1,250,000).

The Group’s PRC subsidiary has signed an intention letter and committed to donate RMB500,000 per annum from 2007 for a period of 20 years to a charitable organization in the PRC when making profit in the year. As at 31 December 2019, the donation commitment was approximately RMB3,500,000 (2018: approximately RMB4,000,000).

(V) CHARGE OR PLEDGE OF ASSETS

As at 31 December 2019, the Group did not charge nor pledge any assets (2018: Nil) as securities for banking facilities granted by its bankers.

(VI) CONTINUING CONNECTED TRANSACTION ENTERED INTO DURING THE REPORTING PERIOD

References are made to the announcement and circular of the Company dated 10 October 2019 and 22 November 2019 respectively in relation to renewal of the continuing connected transactions (“ CCTs ”) agreements.

In contemplation of the expiry of the Raw Materials Purchase Master Agreement and the Products Sales Master Agreement entered into in 2016 on 31 December 2019, on 10 October 2019, Hengxin (Jiangsu) and Suzhou Hengli entered into the CCTs agreements to renew them, each for a term of three years commencing from 1 January 2020 to 31 December 2022, and to revise the annual caps for the transactions contemplated thereunder.

– 29 –

The CCTs agreements were duly passed at the extraordinary general meeting of the Company held on 17 December 2019.

For further details of the CCTs agreements, please refer to the announcements of the Company dated 10 October 2019 and 17 December 2019 and the circular of the Company dated 22 November 2019.

(VII) LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2019, the Group’s total assets were approximately RMB2,192,853,000 (2018: RMB2,136,080,000) (of which current assets were approximately RMB1,996,765,000 (2018: RMB1,937,369,000) and non-current assets were approximately RMB196,088,000 (2018: RMB198,711,000)), the total liabilities were approximately RMB510,744,000 (2018: RMB548,572,000) (of which current liabilities were approximately RMB496,551,000 (2018: RMB539,073,000) and noncurrent liabilities were approximately RMB14,193,000 (2018: RMB9,499,000)), and shareholder’s equity reached approximately RMB1,682,109,000 (2018: RMB1,587,508,000). As at 31 December 2019, the Group’s cash and cash equivalents and time deposits were approximately RMB1,016.6 million (31 December 2018: approximately RMB978.6 million). The Group’s time deposits were all due within one year. As at 31 December 2019, the Group has short-term bank borrowings due within one year of RMB310,000,000 (2018: RMB315,000,000) carrying fixed interest rate.

The Group generally finances its operations from cash flows generated internally and short-term bank borrowings.

The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to shareholders through the optimization of debt and equity balance.

Management monitors capital based on the Group’s debt-to-assets ratio. This ratio is calculated as total liabilities divided by total assets.

As at the end of the Reporting Period, the Group is in compliance with all capital requirements on its external borrowings.

The debt-to-assets ratio at the end of the reporting period is as follows:

Total liabilities Total assets Debt-to-assets ratio	As at 31 December 2019 2018 RMB’000 RMB’000 510,744 548,572 2,192,853 2,136,080 23% 26%	As at 31 December 2019 2018 RMB’000 RMB’000 510,744 548,572 2,192,853 2,136,080 23% 26%
		26%

– 30 –

The following tables show the remaining contractual maturities at the end of the Reporting Period of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the Reporting Period) and the earliest date the Group can be required to pay:

2019 Non-derivative financial liabilities Short-term loans Trade and other payables# Lease liabilities At 31 December 2019 2018 Non-derivative financial liabilities Short-term loans Trade and other payables# At 31 December 2018		Contractual	cash flows	Total Carrying amount at 31 December RMB’000 RMB’000 322,503 310,000 163,480 163,480 1,882 1,786 487,865 475,266 Total Carrying amount at 31 December RMB’000 RMB’000 315,000 315,000 184,995 184,995 499,995 499,995
	Within 1 year or on demand RMB’000 322,503 163,480 884 486,867	More than 1 year but less than 2 years RMB’000 – – 514 514 Contractual	More than 2 years but less than 5 years RMB’000 – – 484 484 cash flows
	Within 1 year or on demand RMB’000 315,000 184,995 499,995	More than 1 year but less than 2 years RMB’000 – – –	More than 2 years but less than 5 years RMB’000 – – –

Exclude contract liabilities, advanced receipt, value added tax, business tax and other taxes payable.

– 31 –

(VIII) PROSPECTS (A COMMENTARY AT THE DATE OF THIS ANNOUNCEMENT OF THE COMPETITIVE CONDITIONS OF THE INDUSTRY IN WHICH THE GROUP OPERATES AND ANY KNOWN FACTORS OR EVENTS THAT MAY AFFECT THE GROUP IN THE NEXT REPORTING PERIOD AND THE NEXT 12 MONTHS)

The unexpected advent of COVID-19 in early 2020 halts social and economic development throughout China, which also almost causes the stagnation of economic activities. Since then, the epidemic has gradually spread globally. The raging epidemic caused a significant decline in the overall economy, with almost no demand and greatly damaged supply chain. The grave impacts will inevitably prejudice the development of the telecommunication industry and the operation of the Group. Currently, the epidemic is gradually brought under control in China, evidenced by resumed production activities in companies, as well as recovering market demand and supply chain. In this view, the Group is mainly exposed to negative impacts during the first quarter. At this point, the Group has at large resumed our production activities on the condition that our employee safety is safeguarded. The Group will keep a close track of the epidemic development, and give all-out efforts to recover our losses as soon as normal market activities are restored.

Looking into 2020, unfavorable factors will continue to constrain China’s economic development. For instance, due to the insufficient total social demand, enterprises demonstrate weaker investment ability and appetite, while the consumers’ capacity and willingness is also limited by the level of income growth. Although the United StatesChina “Phase 1” trade agreement has been concluded, the economic and trade relations between the United States and China will remain obscure, coupled with the rising protectionism in international trade, thereby overshadowing China’s exports. However, formal commercialization of 5G technology undoubtedly highlights the development of the telecommunications industry in the PRC, as this represents not only an initiative to expand related investments but also an avenue for stimulating new consumer demands. Considering that the commercialized 5G technology becomes increasingly crystalized and shaped in the areas for application, such as the Industrial Internet of Things, smart factories, and the Internet of Vehicles, in addition to the rapidly increasing number of 5G base stations and users and the constant expanding applications, the industrial players find hope and a bright future against the current adverse environment. In this regard, the Group proposes to strategically re-position from “the world’s leading expert of antenna feeder systems” to “the world’s leading expert of wireless access systems”. Furthermore, the Group will strive to break through “the research and development of 5G network RF products” and “the research and development of various intelligent terminal communication modules vertically integrated with the 5G technology”. These actions will help drive and facilitate the Company’s overall transformation. In 2020, we will strengthen our commitments to mainly 5G antennas, filters, 5G indoor leaky cables, and UHF cables. By comprehensively tapping into the strengths of all parties in research and development, production and sales, we will actively explore new products, businesses, markets and areas, while advancing the development of enterprise-level

– 32 –

customers. Besides seeking breakthroughs in system solutions, the Group will gradually evolve from a simple manufacturer into a system solution provider and engineering contractor in terms of business model. We recognize that the business transformation will experience a myriad of difficulties, uncertainties and setbacks, which are believed to be the only path for the Group to the prosperity in the future.

(IX) DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES AND DEBENTURES

As at 31 December 2019, the interests and short positions of the Directors and chief executives of the Company in shares and underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”)), which are required to be notified to the Company and the SEHK pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are deemed or taken to have under such provisions of the SFO) or which are required to be entered into, as recorded in the register required to be kept by the Company pursuant to Section 352 of Part XV of the SFO, or as otherwise notified to the Company and the SEHK pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 to the Listing Rules, were as follows:

Long positions in the Company:

			Approximate
			percentage of
		Number of	the Company’s
	Capacity and	ordinary	issued
Name of Directors	nature of interests	shares held	share capital
Mr. Cui Wei(1)	Deemed interest and interest	96,868,662	24.97%
	in controlled corporation
Ms. Zhang Zhong(2)	Deemed interest and interest	28,082,525	7.24%
	in controlled corporation
Mr. Du Xiping	Beneficial owner	11,468,000	2.96%
Notes:

• (1) Mr. Cui Wei beneficially owns the entire issued share capital of Kingever Enterprises Limited (“ Kingever ”), and Kingever in turn holds approximately 24.97% of the total issued shares in the Company. According to the register of the Company, during FY2018, Mr. Cui Wei has acquired a total of 4,240,000 ordinary shares of the Company in April 2018 through Kingever.

• (2) Ms. Zhang Zhong beneficially owns the entire issued share capital of Wellahead Holdings Limited (“ Wellahead ”), and Wellahead in turn holds approximately 7.24% of the total issued shares in the Company.

– 33 –

Short position in the Company:

			Approximate
			percentage of
		Number of	the Company’s
	Capacity and	ordinary	issued
Name of Director	nature of interests	shares held	share capital
Ms. Zhang Zhong(1)	Deemed interest and interest	12,000,000	3.09%
	in controller corporation

Note:

• (1) Ms. Zhang Zhong is deemed to have short position in the Company through her interest in the entire issued share capital of Wellahead.

Saved as disclosed above, as at 31 December 2019, none of the Directors and chief executives of the Company nor their associates had or deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which has been recorded in the register maintained by the Company pursuant to Section 352 of Part XV of the SFO or which has been notified to the Company and the SEHK pursuant to the Model Code.

(X) SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 31 December 2019, in so far as is known to the Directors, the following shareholders having interests of 5% or more of the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of Part XV of the SFO:

Long positions in the Company:

			Approximate
			percentage of
		Number of	the Company’s
Name of substantial	Capacity and	ordinary	issued
shareholders	nature of interests	shares held	share capital
Kingever(1)	Beneficial owner	96,868,662	24.97%
Mr. Cui Wei(1)	Deemed interest and interest	96,868,662	24.97%
	in controlled corporation
Wellahead(2)	Beneficial owner	28,082,525	7.24%
Ms. Zhang Zhong(2)	Deemed interest and interest	28,082,525	7.24%
	in controlled corporation

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Short positions in the Company:

			Approximate
			percentage of
		Number of	the Company’s
Name of substantial	Capacity and	ordinary	issued
shareholders	nature of interests	shares held	share capital
Wellahead(2)	Beneficial owner	12,000,000	3.09%
Ms. Zhang Zhong(2)	Deemed interest and interest	12,000,000	3.09%
	in controlled corporation

Notes:

• (1) Kingever is a company incorporated in the British Virgin Islands, the entire issued share capital of which is beneficially owned by Mr. Cui Wei.

• (2) Wellahead is a company incorporated in the British Virgin Islands, the entire issued share capital of which is beneficially owned by Ms. Zhang Zhong.

Saved as disclosed above, as at 31 December 2019, no person, other than the Directors, whose interests are set out in the paragraph headed “Directors’ and Chief Executives’ Interests and Short Positions in Shares and Underlying Shares and Debentures” above, had an interest or short position in the shares or underlying shares of the Company that was required to be recorded in the register required to be kept by the Company under Section 336 of Part XV of the SFO.

(XI) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the Reporting Period nor at any time during the Reporting Period did there subsist any arrangement which objective is to enable the Directors of the Company to acquire benefits by means of acquisition of shares or debentures in the Company or any other body corporate, except for the share option scheme (the “ Share Option Scheme ”) adopted by the Company at its extraordinary general meeting held on 27 October 2010 and the employee equity incentive scheme (the “ Incentive Scheme ”) adopted by the Company at its extraordinary general meeting held on 26 April 2019.

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(XII) SHARE OPTION SCHEME

The Company adopted the Share Option Scheme on 27 October 2010, as approved by its shareholders at the extraordinary general meeting held on the same date. The Share Option Scheme is valid and effective for a period of 10 years from 27 October 2010. It is a share incentive scheme and is established to provide the people and the parties working for the interests of the Group with an opportunity to obtain an equity interest in the Company, thus linking their interests with the Group’s interest and providing them with an incentive to work better for the interest of the Group. Pursuant to the Share Option Scheme, the Board may, at its discretion, offer to grant an option to all Directors (whether executive or non-executive and whether independent or not), any employee (whether full time or part time) of the Group (whether on an employment or contractual or honorary basis and whether paid or unpaid), who in the absolute opinion of the remuneration committee of the Company (the “ Remuneration Committee ”), has contributed to the Group. An option granted under the Share Option Scheme entitles the option holder to subscribe for a specific number of new ordinary shares in the Company.

The Share Option Scheme is administered by the Remuneration Committee which comprises:

Dr. Li Jun (Chairman)

Mr. Cui Wei

Mr. Tam Chi Kwan Michael

Mr. Xu Guoqiang

• Mr. Pu Hong

The total number of shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes must not in aggregate exceed 10% of the shares of the Company in issue on 27 October 2010 (i.e. 33,600,000 shares), representing approximately 8.66% of the total number of the issued shares of the Company as at 31 December 2019.

The total number of the shares issued and to be issued upon exercise of the options granted under the Share Option Scheme to any eligible participants (including exercised, cancelled and outstanding options) in any 12-month period must not exceed 1% of the shares of the Company in issue, unless approved by the shareholders of the Company in general meeting at which the relevant participant and his/her associates shall abstain from voting.

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Pursuant to the Share Option Scheme, the option has an exercise price[#] per share determined with reference to the market price of the shares at the time of grant of the option. The consideration for the grant of an option is S$1.00, payable to the Company within 28 days from the offer date (or such other period as the Remuneration Committee may determine). Options granted with the exercise price set at the market price shall only be exercised after the first anniversary but before the tenth anniversary of the date of grant of that option. The shares under option may be exercised in whole or in part on the payment of the relevant exercise price (provided that an option may be exercised in part only in respect of a board lot or any integral multiple thereof). Options granted will lapse when the option holder ceases to be a full-time employee of the Company or any company of the Group subject to certain exceptions at the discretion of the Remuneration Committee.

• exercise price or subscription price shall be at least the highest of:

• (i) the closing price of the shares as stated in the daily quotation sheet issued by SEHK on the offer date, which must be a business day; and

• (ii) the average closing price of the shares as stated in the daily quotation sheet issued by SEHK for the five consecutive business days immediately preceding the offer date.

There were no unissued shares of the Company under options granted pursuant to the Share Option Scheme.

During the Reporting Period, no options to take up unissued shares of any subsidiary were granted and there were no shares of any subsidiary issued by virtue of the exercise of an option to take up unissued shares.

As at the end of the Reporting Period, there were no unissued shares of the Company or of any corporation in the Group under option.

(XIII) INCENTIVE SCHEME

On the extraordinary general meeting of the Company held on 26 April 2019, the Company adopted the Incentive Scheme to implement the long-term incentive and binding mechanism of Jiangsu Hengxin, a wholly-owned subsidiary of the Company, and fully mobilize the proactiveness of core and key employees of Jiangsu Hengxin to ensure the sustainable and healthy development of the Company and Jiangsu Hengxin, and for which this Incentive Scheme is formulated with reference to the actual situation of the Company and Jiangsu Hengxin. For details of the Incentive Scheme, please refer to the announcements of the Company dated 29 March 2019, 12 November 2019 and 28 February 2020 and the circular of the Company dated 29 March 2019.

Subsequent to the shareholders’ approval of the Incentive Scheme at the extraordinary general meeting held on 26 April 2019, the Company is in the process of implementing the Incentive Scheme. As at the date of this announcement, the Incentive Scheme has not yet acquired any shares of the Company.

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(XIV) SUPPLEMENTARY INFORMATION

1. Operational and Financial Risk Management

(i) Market risk

The major market risks that the Group is exposed to include business risks relating to the global state of economy, industry risks relating to certain policies and its product adoption approaches, technology risks relating to changes in technology and credit risks relating to the non-payment by the Group’s customers.

(ii) Commodity price risk

The Group is also exposed to commodity price risk arising from fluctuations in costs of raw materials.

(iii) Interest rate risk

The major interest rate risk that the Group is exposed to includes the Group’s short-term debt obligations, if any, which may be subject to variable interest rates.

(iv) Foreign currency risk

The Group’s revenue and costs are denominated in Renminbi, Indian Rupees (“ INR ”) and United States Dollars. Some costs may be denominated in Hong Kong Dollars, INR and Singapore Dollars.

2. Contingent liabilities

There were no material contingent liabilities as at 31 December 2019.

3. Employees and Remuneration Policies

As at 31 December 2019, there were 824 (31 December 2018: 845) employees in the Group. Staff remuneration packages are determined in consideration of the market conditions and the performance of the individual concerned, and are subject to review from time to time. The Group also provides other staff benefits including medical and life insurance, and grants discretionary incentive bonuses and share options to eligible staff based on their performance and contributions to the Group.

The Company adopted the Share Option Scheme for its employees at its extraordinary general meeting held on 27 October 2010. No option has been granted under the Share Option Scheme since its adoption and up to the date of this announcement.

– 38 –

The Company also adopted the Incentive Scheme at its extraordinary general meeting held on 26 April 2019 to implement the long-term incentive and binding mechanism of Jiangsu Hengxin and fully mobilize the proactiveness of core and key employees of Jiangsu Hengxin to ensure the sustainable and healthy development of the Company.

4. Material Litigation and Arbitration

As at 31 December 2019, the Group was not involved in any material litigation or arbitration.

5. Discloseable Transactions During the Reporting Period

During the year ended 31 December 2019, the Company has not carried out any discloseable transaction.

6. Audit Committee

The Company’s audit committee members are Mr. Tam Chi Kwan Michael, Mr. Cui Wei, Ms. Zhang Zhong, Dr. Li Jun and Mr. Pu Hong. The audit committee, which is chaired by Mr. Tam Chi Kwan Michael, has reviewed the annual results of the Group for the year ended 31 December 2019.

7. Compliance with Corporate Governance Code

The Company has complied with all the code provisions as set out in the Corporate Governance Code contained in Appendix 14 to the Listing Rules for the year ended 31 December 2019.

8. Compliance with the Model Code for Securities Transactions by Directors of Listed Issuer

Having made specific enquiries with all the Directors, the Directors have confirmed that they have complied with the required standards of the Model Code during the Reporting Period.

9. Annual General Meeting

The 2019 annual general meeting of the Company will be held on 28 April 2020 (Tuesday) in Hong Kong. For further details of the annual general meeting, please refer to the notice of annual general meeting, which will be published and despatched by the Company in due course.

– 39 –

10. Review of financial results

The work in respect of this results announcement done by KPMG was limited to checking the accuracy of extraction of the financial information in this results announcement from the Group’s consolidated financial statements and will be carried out in accordance with the Hong Kong Standard on Related Services 4400 “Engagements to Perform Agreed-Upon Procedures Regarding Financial Information” and with reference to Practice Note 730 (Revised) “Guidance for Auditors Regarding Preliminary Announcements of Annual Results” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). The procedures that KPMG performed in connection with this results announcement will not constitute an assurance engagement in accordance with assurance standards issued by the HKICPA and, consequently, no assurance will be expressed.

11. Dividends

(a) Final dividend recommended for the Reporting Period

Name of Dividend: Final Dividend Type: Cash Dividend Rate: RMB0.0292 per share Number of shares: 388,000,000 Total amount: RMB11,329,600

(b) Actual final dividend for FY2018

Name of Dividend: Final Dividend Type: Cash Dividend Rate: RMB0.0457 per share Number of shares: 388,000,000 Total amount: RMB17,731,600

(c) Record date and dividend payment date

Subject to the approval by shareholders of the Company at the forthcoming annual general meeting to be held on Tuesday, 28 April 2020, the final dividend for the Reporting Period will be distributed on or about Friday, 29 May 2020 to shareholders whose names appear on the Company’s register of members on Friday, 15 May 2020 (the record date).

– 40 –

(d) Book closure date

In order to determine the entitlement to the proposed final dividend for the Reporting Period (subject to the approval by the shareholders at the forthcoming annual general meeting), the Company’s register of members will be closed on Friday, 15 May 2020, on which date no transfer of shares will be registered. In order to qualify for the proposed final dividend for the Reporting Period, unregistered holders of shares of the Company shall ensure that all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Principal Share Registrar in Singapore, Boardroom Corporate & Advisory Services Pte. Ltd., at 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623 (for shareholders registered in Singapore), or at the office of the Company’s Branch Share Registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for shareholders registered in Hong Kong) not later than 4:30 p.m. on Thursday, 14 May 2020. Any removal of shares of the Company from the Company’s Principal Share Registrar in Singapore to the Branch Share Registrar in Hong Kong shall be made not later than 4:30 p.m. on Thursday, 30 April 2020.

12. Purchase, Sales or Redemption of the Company’s Securities

For the year ended 31 December 2019, neither the Company nor its subsidiaries had purchased, sold or redeemed any of the securities of the Company.

13. Disclosure on the Websites of the SEHK and the Company

This announcement shall be published on the website of the SEHK (http://www.hkexnews.hk) and on the Company’s website (http://www.hengxin.com.sg).

By Order of the Board Hengxin Technology Ltd. Cui Wei Chairman

Singapore, 16 March 2020

As at the date of this announcement, the executive Directors are Mr. Du Xiping and Mr. Xu Guoqiang; the non-executive Directors are Mr. Cui Wei and Ms. Zhang Zhong; and the independent non-executive Directors of the Company are Mr. Tam Chi Kwan Michael, Dr. Li Jun and Mr. Pu Hong.

• For identification purposes only

– 41 –