LH Group Limited — Interim / Quarterly Report 2021

Sep 29, 2021

==> picture [36 x 353] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) Stock Code ： 1978

==> picture [36 x 283] intentionally omitted <==

==> picture [90 x 56] intentionally omitted <==

==> picture [36 x 563] intentionally omitted <==

INTERIM REPORT 2021

==> picture [243 x 37] intentionally omitted <==

==> picture [85 x 71] intentionally omitted <==

==> picture [208 x 281] intentionally omitted <==

==> picture [104 x 246] intentionally omitted <==

==> picture [105 x 211] intentionally omitted <==

CONTENTS

Corporate Information	2
Financial Highlights and Calendar	4
Management Discussion and Analysis	5
Other Information	14
Unaudited Condensed Consolidated
Statement of Comprehensive Income	18
Condensed Consolidated Statement of
Financial Position	19
Unaudited Condensed Consolidated
Statements of Changes in Equity	21
Unaudited Condensed Consolidated
Statements of Cash Flows	22
Notes to the Financial Statements	23

Corporate Information

BOARD OF DIRECTORS

AUTHORISED REPRESENTATIVES

Executive Directors

Mr. Wong Kit Lung Simon Prof, BBS, JP (Chairman and Chief Executive Officer) Ms. Ko Sau Chee Grace (Vice Chairperson)

Independent non-executive Directors

Mr. Sin Yat Kin SBS, CSDSM, JP Ms. Hung Lo Shan Lusan Mr. Hung Wai Man Prof, JP

Ms. Ko Sau Chee Grace Ms. Chan Hiu Yi

LEGAL ADVISER

ONC Lawyers 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

REGISTERED OFFICE

AUDIT COMMITTEE

Ms. Hung Lo Shan Lusan (Chairperson) Mr. Hung Wai Man Prof, JP Mr. Sin Yat Kin SBS, CSDSM, JP

Cayman Corporate Centre 190 Elgin Avenue George Town Grand Cayman KY1-9008 Cayman Islands

REMUNERATION COMMITTEE

Mr. Sin Yat Kin SBS, CSDSM, JP (Chairperson) Mr. Wong Kit Lung Simon Prof, BBS, JP Ms. Hung Lo Shan Lusan

NOMINATION COMMITTEE

Mr. Wong Kit Lung Simon Prof, BBS, JP (Chairperson) Mr. Sin Yat Kin SBS, CSDSM, JP Mr. Hung Wai Man Prof, JP

JOINT COMPANY SECRETARIES

Ms. Chan Hiu Yi (ACG, ACS) Ms. Yu Wing Sze (ACG, ACS)

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Unit 03, L22, Tower 1 Enterprise Square Five 38 Wang Chiu Road Kowloon Bay, Kowloon Hong Kong

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited Shops 1712–1716 17/F, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

AUDITOR

PricewaterhouseCoopers Certified Public Accountants Registered Public Interest Entity Auditor 22/F, Prince’s Building Central Hong Kong

2 LH GROUP LIMITED Interim Report 2021

Corporate Information

CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Walkers Corporate Limited 190 Elgin Avenue George Town Grand Cayman KY1-9008 Cayman Islands

PRINCIPAL BANKERS

Bank of China (Hong Kong) Limited Shanghai Commercial Bank Limited Industrial and Commercial Bank of China (Asia) Limited China Citic Bank (International) Limited

COMPANY WEBSITE

www.lhgroup.com.hk

STOCK CODE

1978

LISTING DATE

30 May 2018

Interim Report 2021 LH GROUP LIMITED 3

Financial Highlights and Calendar

FINANCIAL HIGHLIGHTS

For the six months ended 30 June

==> picture [485 x 162] intentionally omitted <==

----- Start of picture text -----

2021 2020 % Change
HK$ million HK$ million
Revenue 422.9 404.2 4.6%
Profit attributable to the shareholders
of the Company 25.6 24.3 5.7%
Earnings per share
Basic and diluted (HK cents) 3.20 3.03 5.7%
Interim dividend per share (HK cents) 2.40 — N/A
----- End of picture text -----

CALENDAR

==> picture [483 x 82] intentionally omitted <==

----- Start of picture text -----

Interim Results Announcement 27 August 2021
Closure of Register of Members 13 September 2021 – 15 September 2021
— Interim dividend (both dates inclusive)
Payment date of interim dividend On or around 27 September 2021
----- End of picture text -----

4 LH GROUP LIMITED Interim Report 2021

Management Discussion and Analysis

BUSINESS REVIEW

The Group is a top full service multi-brand restaurant group in Hong Kong specialising in Asian (in particular Japanese) and Cantonese cuisine.

As at 30 June 2021, the Group operated one Cantonese restaurant under a self-owned brand “ Pot Master ( 煲仔王 ) ”; and 39 Asian restaurants under two self-owned brands, namely, “ Mou Mou Club ( 牛涮鍋 ) ” and “ Peace Cuisine ( 和平飯店 ) ”, and four franchised brands, namely “ Gyu-Kaku ( 牛角 ) ”, “ Gyu-Kaku Jinan-Bou ( 牛角次男坊 ) ”, “ On-Yasai ( 溫野菜 ) ” and “ Yoogane ( 柳氏家 ) ”, which serve quality, value-for-money delicacies to diversified customer segments seeking a wide array of culinary experiences. We pride ourselves in the extensive market coverage of our brand portfolio, which allows us to tap into customer segments spanning across mid-to-high end market to mass market with different culinary preferences.

The following table sets forth the number of restaurants we operated as at the dates indicated.

==> picture [485 x 179] intentionally omitted <==

----- Start of picture text -----

As at 30 June
2021 2020
Cantonese cuisine restaurants
— Self-owned brands 1 2
Asian cuisine restaurants
— Self-owned brands 13 14
— Franchised brands 26 22
Sub-total of Asian restaurants: 39 36
Total: 40 38
----- End of picture text -----

Interim Report 2021 LH GROUP LIMITED 5

Management Discussion and Analysis

FINANCIAL REVIEW

Revenue

The Group’s revenue for the six months ended 30 June 2021 (the “ Period ”) was affected by the outbreak of COVID-19 pandemic (the “ Pandemic ”) and mandatory social distancing measures, such as seating restrictions, reduced operating hours and other measures which aim to contain the Pandemic. Despite the negative impact brought by the Pandemic, the Group’s revenue increased by approximately 4.6%, or approximately HK$18.6 million, from approximately HK$404.2 million for the six months ended 30 June 2020 (the “ Last Corresponding Period ”) to approximately HK$422.9 million for the Period.

The increase in revenue was mainly due to (i) the increase of number of franchised brands of Asian cuisine restaurants owned by the Group; and (ii) the gradual recovery of catering industry with the better control of the Pandemic in Hong Kong in the first half of 2021.

The revenue from Asian cuisine restaurants — franchised brands increased by approximately HK$37.4 million or approximately 14.0%, from approximately HK$266.7 million to approximately HK$304.1 million. Asian cuisine restaurants — franchised brands remained as the main pillar of revenue, constituting approximately 71.9% of the total revenue for the Period (Last Corresponding Period: 66.0%).

The revenue from Asian cuisine restaurants — self-owned brands increased by approximately HK$4.3 million or approximately 4.5%, from approximately HK$94.7 million to approximately HK$98.9 million.

However, due to the combined effect of the Pandemic and the closure of one Cantonese cuisine restaurant in September 2020, the revenue from Cantonese cuisine restaurant decreased from approximately HK$40.4 million for the Last Corresponding Period to approximately HK$18.1 million for the Period.

Revenue by business segments is set out below:

	For the six months ended 30 June 2021 2020 Revenue % of total Revenue Revenue % of total Revenue HK$’000 (%) HK$’000 (%)	For the six months ended 30 June 2021 2020 Revenue % of total Revenue Revenue % of total Revenue HK$’000 (%) HK$’000 (%)	For the six months ended 30 June 2021 2020 Revenue % of total Revenue Revenue % of total Revenue HK$’000 (%) HK$’000 (%)	For the six months ended 30 June 2021 2020 Revenue % of total Revenue Revenue % of total Revenue HK$’000 (%) HK$’000 (%)
	2021 Revenue % of total Revenue HK$’000 (%)
	Revenue HK$’000		Revenue HK$’000
Cantonese cuisine restaurants
— Self-owned brands	18,070	4.3	40,421	10.0
Asian cuisine restaurants
— Self-owned brands	98,932	23.4	94,674	23.4
— Franchised brands	304,090	71.9	266,737	66.0
Sub-total of restaurant operations	421,092	99.6	401,832	99.4
Sale of food ingredients and others	1,789	0.4	2,402	0.6
Total	422,881	100.0	404,234	100.0

6

LH GROUP LIMITED Interim Report 2021

Management Discussion and Analysis

Other income and gains

The Group’s other income and gains decreased significantly by approximately 63.9%, or approximately HK$27.0 million, from approximately HK$42.3 million for the Last Corresponding Period to approximately HK$15.3 million for the Period. The decrease was mainly due to the net gain from lease modification of approximately HK$26.9 million recorded for the Last Corresponding Period while there was no such gain for the Period.

Cost of food and beverages

The Group’s cost of food and beverages increased by approximately 6.9%, or approximately HK$8.6 million, from approximately HK$125.1 million for the Last Corresponding Period to approximately HK$133.7 million for the Period. The increase was in line with the increase in revenue during the Period. The cost of food and beverages as a percentage of revenue increased slightly from approximately 30.9% for the Last Corresponding Period to approximately 31.6% for the Period.

Staff costs

The Group’s staff costs increased by approximately 5.9%, or approximately HK$7.5 million, from approximately HK$128.3 million for the Last Corresponding Period to approximately HK$135.8 million for the Period. Such increase was primarily due to the receipt of subsidies of approximately HK$7.2 million under the Employment Support Scheme of the Anti-Epidemic Fund launched by the Hong Kong Government for the Last Corresponding Period, while there were no such subsidies received for the Period. The staff costs as a percentage of revenue remained relatively stable at approximately 32.1% for the Period (Last Corresponding Period: approximately 31.7%).

Profit for the Period

Profit for the Period increased by approximately 5.7%, or approximately HK$1.4 million, from approximately HK$24.3 million for the Last Corresponding Period to approximately HK$25.6 million for the Period. Such increase was mainly due to the combined effect of provision for impairment of property, plant and equipment and right-of-use assets of a total of approximately HK$28.5 million made for the Last Corresponding Period, while no impairment was made for the Period, which is partially offset by the decrease in HK$27.0 million in other income discussed above.

Excluding one-off and non-recurring items, i.e. government grants, gain from lease modification, provision for impairment and over-provision of legal costs, the core profit from our operation for the Period was approximately HK$17.6 million, representing a significant increase by approximately 140.2%, or approximately HK$10.3 million, from approximately HK$7.3 million for the Last Corresponding Period.

Interim Report 2021 LH GROUP LIMITED 7

Management Discussion and Analysis

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its business with internally generated cash flows and proceeds received from the listing of the shares in the Company on the Stock Exchange (the “ Listing ”). As at 30 June 2021, the Group had short term bank deposits of approximately HK$102.7 million (as at 31 December 2020: approximately HK$159.6 million) and cash and cash equivalents of approximately HK$182.9 million (as at 31 December 2020: approximately HK$179.1 million). Most bank deposits and cash were denominated in HK$. The Group will continue to use the internal generated cash flows and proceeds received from the Listing as a source of funding for future developments.

As at 30 June 2021, the Group’s total current assets and current liabilities were approximately HK$349.0 million (as at 31 December 2020: approximately HK$397.8 million) and approximately HK$251.1 million (as at 31 December 2020: approximately HK$217.1 million) respectively, while the current ratio was about 1.4 times (as at 31 December 2020: about 1.8 times).

As at 30 June 2021, the gearing ratio of the Group was not applicable as it had no outstanding interest-bearing bank borrowings. The gearing ratio is calculated by total interest-bearing bank borrowings divided by total equity and multiplied by 100%.

SIGNIFICANT INVESTMENTS

As at 30 June 2021, the Group did not have any significant investments.

TREASURY POLICY

The Group operates a conservative set of treasury policies to ensure that no unnecessary risks are taken with the Group’s assets. No investment in financial instruments other than cash or bank deposits is currently used. The Directors will continue to follow a prudent policy in managing the Group’s cash and maintaining a strong and healthy liquidity to ensure that the Group is well placed to take advantage of future growth opportunities.

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The Group has no material acquisition or disposal of subsidiaries, associates or joint ventures during the Period.

CHARGES ON GROUP ASSETS

As at 30 June 2021, the Group did not have any charges on the assets.

CAPITAL STRUCTURE

There was no change in the capital structure of the Group during the six months ended 30 June 2021. The capital of the Group only comprises ordinary shares.

8 LH GROUP LIMITED Interim Report 2021

Management Discussion and Analysis

EVENTS AFTER THE REPORTING PERIOD

No significant events occurred since the end of the Period and up to the date of this report which requires disclosure.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2021, the Group had 1,434 employees (as at 31 December 2020: 1,344 employees). The remuneration of the employees is determined by reference to prevailing market terms and in accordance with the performance, qualification and experience of each individual employee. The Group offered induction training when a staff member joins the Group and regular trainings as to work safety, work procedures and other work related ad hoc trainings are given to staff members regularly.

The emoluments of the Directors are recommended by the remuneration committee of the Company, with reference to their respective contribution of time, effort and expertise on the Company’s matters. The Company has adopted a share option scheme (the “ Share Option Scheme ”) on 4 May 2018 to reward the participants defined thereunder for their contribution to the Group’s success and to provide them with incentives to further contribute to the Group. The Share Option Scheme has become effective on 30 May 2018. In addition, employees are entitled to performance and discretionary new year bonuses.

No share option was granted since the date of adoption of the Share Option Scheme and during the Period. As at 30 June 2021, the Company had no outstanding share option under the Share Option Scheme.

FOREIGN EXCHANGE EXPOSURE

Most of the transactions of the Group are denominated in Hong Kong dollars and the Group is not exposed to any significant foreign exchange exposure. The Company did not engage in hedging of foreign currency during the Period.

CONTINGENT LIABILITIES

As at 30 June 2021, the Group did not have any material contingent liabilities.

PROSPECTS

Owing to the outbreak of COVID-19 since 2020 and the stringent and mandatory social distancing measures in place earlier this year, the revenue of the Group has been severely impacted and recorded operating loss from January to early February 2021. However, thanks to the constant support from our customers, the Group showed strong resilience and agility in the remaining months of the first half of 2021 since mid-February 2021, during which the anti-Pandemic measures began to be gradually relieved, which had rapidly recouped the revenue and have been bringing considerable profits to the Group in the overall for the first half of 2021.

Interim Report 2021 LH GROUP LIMITED 9

Management Discussion and Analysis

Looking forward, the management expects that the overall vaccination progress on a mass scale both locally and globally and the consumption voucher scheme recently commenced will help facilitate the speedy recovery of the local consumption market and bring significant opportunity to the business growth of the Group. Moreover, after almost two years of Pandemic along with various difficulties and challenges, the Group became stronger through hardship, making breakthrough in all aspects such as cost control, management quality and crisis management, with its overall capacity reaching the highest point since its listing and continues to improve. The management is confident that the Group is better positioned than ever before to overcome the difficulties that may arise in the future.

As at 24 August 2021, the overall vaccination rate of the first dose for the Group’s permanent frontline staff reached 74.83% (the overall vaccination rate in Hong Kong was 58.70% on the same date), and is increasing in preparation for the eventuality of the fifth wave of the Pandemic.

The Group will also launch its new self-owned brand “Wing Wah Allday” and introduce a new franchised brand “The Matcha Tokyo” in the second half of the year, to provide diverse dining experiences to customers and further expand the Group’s business presence to traditional local cuisines restaurants and fine casual cafés.

With a robust financial position and brand layout of the Group, provided that the Pandemic situation in Hong Kong would not deteriorate in 2021, the management remains optimistic on the financial performance of the Group in the second half of 2021 and believes that the Group will achieve further growth.

10 LH GROUP LIMITED Interim Report 2021

Management Discussion and Analysis

USE OF NET PROCEEDS FROM LISTING

The net proceeds from the Listing on 30 May 2018 (the “ Net Proceeds ”), after deducting underwriting commissions and listing expenses, was approximately HK$178,610,000. As at 30 June 2021, the Company had used approximately HK$102,642,000 of the Net Proceeds for the purposes as set out in the prospectus of the Company dated 15 May 2018, representing approximately 57.5% of the Net Proceeds. Below sets out the details of the use of the Net Proceeds as at 30 June 2021:

Use of Net Proceeds	Actual Net Proceeds HK$’000	Amount utilised for the Period HK$’000	Amount utilised as at 30 June 2021 HK$’000	Unutilised Net Proceeds Expected timeline for utilisation of the unutilised Net Proceeds HK$’000
Opening restaurants under our self-owned and franchised brands	160,721	9,695	84,753	75,968 On or before 31 December 2022
Additional working capital, strategic investment and other general corporate purposes	17,889	—	17,889	— —
Total	178,610	9,695	102,642	75,968

As disclosed in the announcement of the Company dated 26 April 2021 (the “ Change in UOP Announcement ”), the Board resolved to consolidate the remaining unutilised portion of the Net Proceeds of approximately HK$37.3 million and HK$43.1 million as at the date of the Change in UOP Announcement previously allocated to (i) opening restaurants under our self-owned brands and (ii) opening restaurants under our franchised brands, respectively, to opening of new restaurants under our self-owned brands and franchised brands. The Board considered that change in the use of proceeds would allow the Company to expand its business with greater agility and flexibility in developing its restaurants network and brand portfolio. For further information in relation to the change in the use of the Net Proceeds, please refer to the Change in UOP Announcement. Due to the fast-changing social landscape in the past two years and the outbreak of the Pandemic in early 2020, there has been a delay in the use of the Net Proceeds than the disclosure in the prospectus of the Company dated 13 May 2018 (the “ Prospectus ”) and the unutilised portion of the Net Proceeds is currently expected to be fully utilised by 31 December 2022.

The unutilised portion of the Net Proceeds is intended to be applied in accordance with the proposed application set out in the section headed “Future Plans and Use of Proceeds” in the Prospectus and the Change in UOP Announcement.

Interim Report 2021 LH GROUP LIMITED 11

Management Discussion and Analysis

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors, the Company has maintained a sufficient public float of at least 25% of the issued shares for the Period and up to the date of this report under the Listing Rules.

INTERIM DIVIDEND

Having considered the economic outlook, the Group’s financial position, its future expansion plans and other factors, the Board has declared payment of an interim dividend of HK2.40 cents per share for the Period (the “ Interim Dividend ”) (Last Corresponding Period: Nil), totalling HK$19,200,000, payable to the Shareholders whose names appear on the register of members of the Company (the “ Register of Members ”) on Wednesday, 15 September 2021. The Interim Dividend will be paid to the Shareholders on or around Monday, 27 September 2021.

CLOSURE OF REGISTER OF MEMBERS

For the purpose of determination of entitlement to receiving the Interim Dividend, the Register of Members will be closed from Monday, 13 September 2021 to Wednesday, 15 September 2021, both dates inclusive, during which no transfer of shares will be registered. In order to qualify for the interim dividend, all completed transfer forms accompanied by the relevant share certificates, must be lodged with the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Friday, 10 September 2021.

CORPORATE GOVERNANCE PRACTICES

The Group is committed to maintaining high standards of corporate governance to safeguard the interests of the Shareholders and to enhance corporate value and accountability. The Company has adopted the code provisions in the Corporate Governance Code (the “ CG Code ”) as set out in Appendix 14 to the Listing Rules as its own code of corporate governance.

For the Period, save for the deviation from code provision A.2.1 of the CG Code, which is explained in the paragraph below, the Board considers that the Company has in all material respects complied with all the code provisions of the CG Code.

12 LH GROUP LIMITED Interim Report 2021

Management Discussion and Analysis

Pursuant to code provision A.2.1 of the CG Code, the roles of the chairperson and the chief executive officer should be separate and should not be performed by the same individual. Mr. Wong Kit Lung Simon (“ Mr. Wong ”) currently holds both positions. Mr. Wong has been the key leadership figure of the Group who has been primarily involved in the formulation of business strategies and determination of the overall direction of the Group. He has also been chiefly responsible for the Group’s operations as he directly supervises the senior management of the Group. Taking into account the experience and expertise of Mr. Wong in the catering industry and the continuation of the implementation of the business plans, the Directors (including the independent non-executive Directors) consider Mr. Wong as the best candidate for both positions and the present arrangements are beneficial and in the interests of the Company and the Shareholders as a whole. The balance of power and authority is ensured by the operation of the senior management and the Board, which comprises experienced and high-calibre individuals. The Board currently comprises two executive Directors (including Mr. Wong) and three independent non-executive Directors and therefore has a strong independence element in its composition.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuer (the “ Model Code ”) as set out in Appendix 10 to the Listing Rules as its own code of conduct regarding securities transactions of the Directors. Having made specific enquiry with the Directors, all Directors confirmed that they have fully complied with the required standards as set out in the Model Code for the Period.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

Neither the Company nor its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities for the Period.

AUDIT COMMITTEE

The Board has established an audit committee (the “ Audit Committee ”) which comprises three independent non-executive Directors, namely Ms. Hung Lo Shan Lusan (Chairperson), Mr. Hung Wai Man and Mr. Sin Yat Kin. The primary duties of the Audit Committee are to assist the Board by providing an independent view of the effectiveness of the financial reporting process, internal control and risk management system of the Group, to oversee the audit process, to develop and review our policies and to perform other duties and responsibilities as assigned by the Board. The Audit Committee has held meetings to discuss the financial reporting process, internal control and risk management system of the Group, including the review of the unaudited interim results and the unaudited interim condensed consolidated financial information of the Group for the Period.

The unaudited condensed consolidated interim results of the Group for the Period have not been audited or reviewed by the Company’s auditor but have been reviewed by the Audit Committee and the management of the Company.

Interim Report 2021 LH GROUP LIMITED 13

Other Information

CHANGE IN DIRECTORS’ BIOGRAPHICAL DETAILS UNDER RULE 13.51B(1) OF THE LISTING RULES

There has been no change in the Directors’ biographical details which are required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

(i) Interest in the Company

As at 30 June 2021, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “ SFO ”)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code are as follows:

			Approximate	Long
			percentage of	position/
		Number of	shareholding in	Short
Name of Director	Capacity/Nature of interest	Shares	the Company	position
			(%)
Mr. Wong Kit Lung Simon(2) Ms. Ko Sau Chee Grace(2)	Interest held jointly with other persons; interest in a controlled corporation Interest held jointly with other persons; interest in a controlled corporation	600,000,000 600,000,000	75% 75%	L(1) L(1)

Notes:

• (1) The letter “L” denotes the person’s long position in the shares of the Company (the " Shares ").

• (2) Mr. Wong Kit Lung Simon, Mr. Ko Cheuk Kuen, Mr. Wong Yiu Hung, Mr. Liu Cheung, Mr. Liu Chi Hung Peter, Mr. Lau Kwong Kwan, Hop Kwan Holdings Limited (“ Hop Kwan ”) and Ms. Ko Sau Chee Grace are parties acting in concert (having the meaning ascribed to it under the Hong Kong Codes on Takeovers and Mergers and Share Repurchases (the “ Takeovers Code ”)). Under the SFO, Mr. Lam Kwan Ying and Ms. Chan Wai Chun are deemed or taken to be interested in the shares to be held by Hop Kwan. As such, Mr. Wong Kit Lung Simon, Mr. Ko Cheuk Kuen, Mr. Wong Yiu Hung, Mr. Liu Cheung, Mr. Liu Chi Hung Peter, Mr. Lau Kwong Kwan, Hop Kwan, Mr. Lam Kwan Ying, Ms. Chan Wai Chun and Ms. Ko Sau Chee Grace will for the purpose of the SFO together through LHG Holdings Limited (" LHG Holdings ") control 75% of the entire share capital of the Company.

14 LH GROUP LIMITED Interim Report 2021

Other Information

(ii) Interest in the associated corporation

				Approximate
		Name of associated	Number of	percentage of
Name of Director	Position in the Company	corporation	Shares held	shareholding
				(%)
Mr. Wong Kit Lung Simon Ms. Ko Sau Chee Grace	Executive Director Executive Director	LHG Holdings LHG Holdings	290,358 100,100	29.03% 10.01%

Save as disclosed above, as at 30 June 2021, none of the Directors or chief executives of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required to be recorded in the register to be kept by the Company pursuant to section 352 of the SFO, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

Interim Report 2021 LH GROUP LIMITED 15

Other Information

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 30 June 2021, within the knowledge of the Directors, the following persons (other than the Directors or chief executive of the Company) had an interest or a short position in the Shares or underlying Shares which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

==> picture [485 x 500] intentionally omitted <==

----- Start of picture text -----

Approximate Long position/
Number of percentage of Short position/
Name of Shareholder Capacity/Nature of interest Shares shareholding Lending pool
(%)
LHG Holdings [(2)] Beneficial owner 600,000,000 75% L [(1)]
Mr. Ko Cheuk Kuen [(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Mr. Wong Yiu Hung [(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Mr. Liu Cheung [(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Mr. Liu Chi Hung Peter [(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Mr. Lau Kwong Kwan [(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Hop Kwan [(3)(6)] Interest held jointly with other 600,000,000 75% L [(1)]
persons; interest in a controlled
corporation
Mr. Lam Kwan Ying [(3)(4)(6)] Interest of spouse; interest held 600,000,000 75% L [(1)]
jointly with other persons; interest
in a controlled corporation
Ms. Chan Wai Chun [(3)(5)(6)] Interest of spouse; interest held 600,000,000 75% L [(1)]
jointly with other persons; interest
in a controlled corporation
----- End of picture text -----

16 LH GROUP LIMITED Interim Report 2021

Other Information

Notes:

• (1) The letter “L” denotes the person’s long position in the Shares.

• (2) LHG Holdings is an investment-holding company incorporated in the British Virgin Islands and owned as to 29.03%, 2.99%, 10.01%, 11.99%, 11.99%, 11.99%, 11.99% and 10.01% by Mr. Wong Kit Lung Simon, Mr. Wong Yiu Hung, Mr. Ko Cheuk Kuen, Mr. Liu Cheung, Mr. Liu Chi Hung Peter, Mr. Lau Kwong Kwan, Hop Kwan and Ms. Ko Sau Chee Grace respectively.

• (3) Mr. Lam Kwan Ying and Ms. Chan Wai Chun each owns 18.33% and 68.33% of Hop Kwan respectively and therefore under the SFO, Mr. Lam Kwan Ying and Ms. Chan Wai Chun are deemed or taken to be interested in the Shares to be held by Hop Kwan.

• (4) Mr. Lam Kwan Ying is the spouse of Ms. Chan Wai Chun and is deemed or taken to be interested in all the Shares in which Ms. Chan Wai Chun has, or is deemed to have, an interest for the purpose of the SFO.

• (5) Ms. Chan Wai Chun is the spouse of Mr. Lam Kwan Ying and is deemed or taken to be interested in all the Shares in which Mr. Lam Kwan Ying has, or is deemed to have, an interest for the purpose of the SFO.

• (6) Mr. Wong Kit Lung Simon, Mr. Ko Cheuk Kuen, Mr. Wong Yiu Hung, Mr. Liu Cheung, Mr. Liu Chi Hung Peter, Mr. Lau Kwong Kwan, Hop Kwan and Ms. Ko Sau Chee Grace are parties acting in concert (having the meaning ascribed to it under the Takeovers Code). Under the SFO, Mr. Lam Kwan Ying and Ms. Chan Wai Chun are deemed or taken to be interested in the shares to be held by Hop Kwan. As such, Mr. Wong Kit Lung Simon, Mr. Ko Cheuk Kuen, Mr. Wong Yiu Hung, Mr. Liu Cheung, Mr. Liu Chi Hung Peter, Mr. Lau Kwong Kwan, Hop Kwan, Mr. Lam Kwan Ying, Ms. Chan Wai Chun and Ms. Ko Sau Chee Grace will for the purpose of the SFO together through LHG Holdings control 75% of the entire share capital of the Company.

Save as disclosed above, as at 30 June 2021, the Directors are not aware of any other person (other than the Directors or chief executives of the Company) who had an interest or a short position in the Shares or underlying Shares as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

Interim Report 2021 LH GROUP LIMITED 17

Unaudited Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2021

==> picture [485 x 442] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June
2021 2020
Note HK$’000 HK$’000
(Unaudited) (Unaudited)
Revenue 4 422,881 404,234
Other income and gains 5 15,289 42,315
Cost of food and beverages (133,711) (125,089)
Staff costs (135,788) (128,276)
Depreciation and amortisation (14,891) (18,712)
Depreciation of right-of-use assets (47,190) (47,730)
Property rentals and related expenses (19,609) (18,085)
Fuel and utility expenses (8,977) (9,842)
Advertising and marketing expenses (2,560) (3,230)
Other operating expenses (45,338) (40,592)
Provision for impairment of property, plant and
—
equipment (9,111)
—
Provision for impairment of right-of-use assets (19,417)
Finance income 6 1,003 2,584
Finance costs 6 (2,285) (2,804)
Profit before taxation 8 28,824 26,245
Income tax expense 7 (3,186) (1,990)
Profit and total comprehensive income
for the period attributable to the shareholders
of the Company 25,638 24,255
Earnings per share
Basic and diluted 9 HK3.20 cents HK3.03 cents
----- End of picture text -----

18 LH GROUP LIMITED Interim Report 2021

Condensed Consolidated Statement of Financial Position

As at 30 June 2021

==> picture [485 x 458] intentionally omitted <==

----- Start of picture text -----

As at As at
30 June 31 December
2021 2020
Note HK$’000 HK$’000
(Unaudited) (Audited)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11(a) 106,710 106,952
Right-of-use assets 11(b) 148,037 169,332
Investment property 658 670
Intangible assets 5,074 5,419
Rental and utilities deposits 12 39,001 39,463
Prepayments for property, plant and equipment 12 845 1,805
Deferred income tax assets 27,567 26,040
327,892 349,681
CURRENT ASSETS
Inventories 29,182 32,414
Trade receivables 12 4,236 4,962
Prepayments, deposits and other receivables 12 29,231 20,983
Tax recoverable 686 686
Short term bank deposits 102,723 159,623
Cash and cash equivalents 182,942 179,148
349,000 397,816
Total assets 676,892 747,497
----- End of picture text -----

Interim Report 2021 LH GROUP LIMITED 19

Condensed Consolidated Statement of Financial Position

As at 30 June 2021

==> picture [485 x 555] intentionally omitted <==

----- Start of picture text -----

As at As at
30 June 31 December
2021 2020
Note HK$’000 HK$’000
(Unaudited) (Audited)
EQUITY
Equity and reserves attributable to
the shareholders of the Company
Share capital 13 80,000 80,000
Share premium 122,781 122,781
Reserves 132,178 211,820
Total equity 334,959 414,601
LIABILITIES
NON-CURRENT LIABILITIES
Provision for reinstatement costs 14 12,484 14,932
Lease liabilities 11(b) 73,196 95,752
Deferred income tax liabilities 5,155 5,155
90,835 115,839
CURRENT LIABILITIES
Trade payables 14 51,440 37,657
Other payables and accruals 14 66,937 59,886
Contract liabilities 27,115 21,819
Lease liabilities 11(b) 98,525 93,401
Tax payable 7,081 4,294
251,098 217,057
Total liabilities 341,933 332,896
Total equity and liabilities 676,892 747,497
----- End of picture text -----

20 LH GROUP LIMITED Interim Report 2021

Unaudited Condensed Consolidated Statements of Changes in Equity

For the six months ended 30 June 2021

==> picture [485 x 336] intentionally omitted <==

----- Start of picture text -----

Attributable to shareholders of the Company
Share Share Retained Other
(Unaudited) Capital Premium Earnings Reserves Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance as at 1 January 2021 80,000 122,781 184,201 27,619 334,601
Profit and total comprehensive
income for the Period — — 25,638 — 25,638
— — —
Dividends (Note 10) (105,280) (105,280)
Balance as at 30 June 2021 80,000 122,781 104,559 27,619 334,959
Attributable to shareholders of the Company
Share Share Retained Other
(Unaudited) Capital Premium Earnings Reserves Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance as at 1 January 2020 80,000 122,781 43,873 27,619 274,273
Profit and total comprehensive
income for the Period — — 24,255 — 24,255
Balance as at 30 June 2020 80,000 122,781 68,128 27,619 298,528
----- End of picture text -----

Interim Report 2021 LH GROUP LIMITED 21

Unaudited Condensed Consolidated Statements of Cash Flows

==> picture [485 x 438] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 110,779 132,079
Interest received 118 184
Hong Kong profits tax paid, net (1,926) (16,850)
Net cash flows generated from operating activities 108,971 115,413
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (12,710) (6,899)
Interest received 579 1,084
Decrease in short term bank deposits 56,900 3,853
Net cash flows generated from/(used in) investing activities 44,769 (1,962)
CASH FLOWS FROM FINANCING ACTIVITIES
—
Dividend paid (105,280)
Principal elements of lease payments (44,666) (50,814)
Net cash flows used in financing activities (149,946) (50,814)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,794 62,637
Cash and cash equivalents at the beginning of the period 179,148 130,759
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD 182,942 193,396
----- End of picture text -----

22 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on 9 June 2017 as an exempted company with limited liability under the Companies Act of the Cayman Islands and its shares have been listed (the “ Listing ”) on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) since 30 May 2018 (the “ Listing Date ”). The address of the Company’s registered office is 190 Elgin Avenue, George Town, Grand Cayman KY1-9008, Cayman Islands.

The Company is an investment holding company and its subsidiaries are principally engaged as full-service restaurants operator serving Asian cuisine including Japanese, Korean, Cantonese and Shanghainese cuisine in Hong Kong.

The unaudited condensed consolidated interim financial information is presented in Hong Kong dollars (“ HK$ ”), unless otherwise stated, and has been approved for issue by the Board on 27 August 2021.

2. BASIS OF PREPARATION

The unaudited condensed consolidated interim financial information have been prepared in accordance with Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”). The Group’s unaudited condensed consolidated interim financial information should be read in conjunction with the Company’s annual report for the year ended 31 December 2020 (the “ 2020 Annual Report ”).

The preparation of the unaudited condensed consolidated interim financial information in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses on a year-to-date basis. Actual results may differ from these estimates. In preparing this unaudited consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the 2020 Annual Report, except as stated below.

Income tax expense is recognised based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year.

Interim Report 2021 LH GROUP LIMITED 23

Notes to the Financial Statements

3. ACCOUNTING POLICIES

The accounting policies and methods of computation used in preparing the unaudited condensed consolidated interim financial information are consistent with those followed in preparing the 2020 Annual Report, except for the adoption of the following amended Hong Kong Financial Reporting Standards (“ HKFRSs ”) and HKASs (collectively “ new HKFRSs ”) as set out below.

New and amended standards adopted by the Group

The following amended standards have been adopted by the Group for the financial period beginning on or after 1 January 2021:

HKFRS 16 (Amendments)	Covid-19-Related Rent Concessions
HKFRS 9, HKAS 39, HKFRS 7,	Interest Rate Benchmark Reform
HKFRS 4 and HKFRS 16	— Phase 2
(Amendments)

These amended standards have no material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

The Group has adopted Amendment to HKFRS 16 — Covid-19-Related Rent Concessions for the financial period beginning on or after 1 January 2021. The amendment provides an optional practical expedient allowing lessees to elect not to assess whether a rent concession related to COVID-19 is a lease modification. Lessees adopting this election may account for qualifying rent concessions in the same way as they would if they were not lease modifications. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; b) any reduction in lease payments affects only payments due on or before 30 June 2021; and c) there is no substantive change to other terms and conditions of the lease.

The Group has applied the practical expedient to all qualifying COVID-19-related rent concessions. Rent concessions of approximately HK$2,703,000 have been accounted for as negative variable lease payments and recognised in property rentals and related expenses in the consolidated statement of comprehensive income for the six months ended 30 June 2021, with a corresponding adjustment to the lease liability.

The Group has not adopted any new or amended standards or interpretations that are not yet effective during the six months ended 30 June 2021.

24 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

4. REVENUE AND SEGMENT INFORMATION

(a) Revenue

Revenue, which is also the Group’s turnover, represents amounts received and receivable from the operation of restaurants and sales of food ingredients and others in Hong Kong, net of discount. An analysis of revenue is as follows:

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Recognised at a point in time:
Restaurant operations	421,092	401,832
Sale of food ingredients and others	1,789	2,402
	422,881	404,234

(b) Segment information

The Directors, who are the chief operating decision makers of the Group, review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on reports reviewed by the Directors that are used to make strategic decisions.

The Group is principally engaged in the operation of restaurant chains and sales of food ingredients in Hong Kong. Management reviews the operating results of the business of major cuisine and sale of food ingredients and others which the Group operates to make decisions about resources to be allocated.

The Group has the following reporting segments:

• (a) Cantonese cuisine — self-owned brands

Operation of Cantonese cuisine restaurants under the self-established “ Pot Master ” brand, offering Cantonese cuisine

(b) Asian cuisine — Operation of Asian cuisine restaurants under the franchised brands franchised “ Gyu-Kaku ”, “ On-Yasai ”, “ Gyu-Kaku Jinan-Bou ” and “ Yoogane ” brands

• (c) Asian cuisine — self-owned brands

Operation of Asian cuisine restaurants under self-owned brands, including “ Mou Mou Club ” and “ Peace Cuisine ”

• (d) Sale of food ingredients and others

Sale of food ingredients to related parties and external third parties and other business

Interim Report 2021 LH GROUP LIMITED 25

Notes to the Financial Statements

4. REVENUE AND SEGMENT INFORMATION (Continued)

(b) Segment information (Continued)

Segment revenue and segment profit/(loss) are the measures reported to the Directors for the purpose of resources allocation and performance assessment. Segment profit/(loss), which is a measure of adjusted profit/(loss) before tax, is measured consistently with the Group’s profit/(loss) before tax except that unallocated finance income and unallocated cost are excluded from this measurement.

Segment assets consist primarily of property, plant and equipment, right-of-use assets, intangible assets, inventories, trade receivables, prepayments, deposits and other receivables. They exclude property, plant and equipment and prepayments, deposits and other receivables and cash and cash equivalents for general use, investment property, deferred income tax assets and tax recoverable.

Segment liabilities consist primarily of trade payables, contract liabilities, lease liabilities and other payables and accruals. They exclude other payables and accruals for general use, tax payables and deferred income tax liabilities.

All operating entities of the Group are domiciled in Hong Kong. All of the Group’s revenue are derived in Hong Kong. As at 30 June 2021 and 31 December 2020, all of non-current assets of the Group are located in Hong Kong.

26 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

4. REVENUE AND SEGMENT INFORMATION (Continued)

(b) Segment information (Continued)

An analysis of the Group’s revenue, profit before taxation and depreciation and amortisation for the six months ended 30 June 2021 and 2020 and segment assets and liabilities as at 30 June 2021 and 31 December 2020 is as follows:

==> picture [428 x 514] intentionally omitted <==

----- Start of picture text -----

For the six months ended 30 June 2021
Cantonese Asian Asian
cuisine — cuisine — cuisine — Sale of food
self-owned franchised self-owned ingredients
(Unaudited) brands brands brands and others Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue
Revenue 18,070 304,090 98,932 46,169 467,261
— — —
Inter-segment revenue (44,380) (44,380)
External revenue 18,070 304,090 98,932 1,789 422,881
Segment profit/(loss) 2,196 47,635 8,222 (842) 57,211
Segment profit includes
Depreciation and
amortisation (144) (9,262) (3,640) (684) (13,730)
Depreciation of right-of-use
assets (15) (31,104) (13,926) — (45,045)
Segment profit 57,211
Unallocated depreciation
and amortisation (1,161)
Unallocated depreciation of
right-of-use assets (2,145)
Unallocated cost (25,825)
Unallocated finance income 778
Unallocated finance costs (34)
Profit before taxation 28,824
As at 30 June 2021
Segment assets 12,988 203,217 76,676 92,838 385,719
Segment liabilities (7,480) (195,014) (73,048) (17,761) (293,303)
----- End of picture text -----

Interim Report 2021 LH GROUP LIMITED 27

Notes to the Financial Statements

4. REVENUE AND SEGMENT INFORMATION (Continued)

(b) Segment information (Continued)

==> picture [428 x 542] intentionally omitted <==

----- Start of picture text -----

For the six months ended 30 June 2020
Cantonese
cuisine — Asian cuisine — Asian cuisine — Sale of food
self-owned franchised self-owned ingredients
(Unaudited) brands brands brands and others Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue
Revenue 40,421 266,737 94,674 47,178 449,010
Inter-segment revenue — — — (44,776) (44,776)
External revenue 40,421 266,737 94,674 2,402 404,234
Segment profit/(loss) 30,619 32,826 (21,021) 639 43,063
Segment profit includes
Depreciation and
amortisation (1,617) (9,117) (6,861) — (17,595)
Depreciation of right-of-use
assets (1,104) (28,415) (16,067) — (45,586)
Provision for impairment — (9,770) (18,758) — (28,528)
Segment profit 43,063
Unallocated depreciation
and amortisation (1,117)
Unallocated depreciation of
right-of-use assets (2,144)
Unallocated cost (15,336)
Unallocated finance income 1,862
Unallocated finance costs (83)
Profit before taxation 26,245
As at 31 December 2020
Segment assets 11,942 200,949 90,422 82,532 385,845
Segment liabilities (6,473) (182,898) (87,368) (10,899) (287,638)
----- End of picture text -----

28 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

4. REVENUE AND SEGMENT INFORMATION (Continued)

(b) Segment information (Continued)

A reconciliation of segment assets to the Group’s total assets is as follows:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Segment assets	385,719	385,845
Unallocated assets	291,173	361,652
	676,892	747,497

A reconciliation of segment liabilities to the Group’s total liabilities is as follows:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Segment liabilities	293,303	287,638
Unallocated liabilities	48,630	45,258
	341,933	332,896

5. OTHER INCOME AND GAINS

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Government grants	9,727	13,330
Net gain from lease modification due to early termination on leases	—	26,933
Sponsorship income	2,163	—
Over-provision of legal costs	1,468	—
Promotion income from a credit card company	1,600	1,550
Sundry income	331	502
	15,289	42,315

Interim Report 2021 LH GROUP LIMITED 29

Notes to the Financial Statements

6. FINANCE INCOME AND COSTS

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Interest income from bank deposits	747	1,795
Finance income on financial assets	256	789
Finance income	1,003	2,584
Finance costs on lease liabilities	(2,285)	(2,804)

7. TAXATION

Hong Kong profits tax has been provided on the estimated assessable profits at a rate of 16.5% for the six months ended 30 June 2021 and 2020.

The major components of the income tax expense are as follows:

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Hong Kong profits tax
Current income tax	4,713	4,259
Deferred income tax	(1,527)	(2,269)
	3,186	1,990

30 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

8. PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting) the followings:

==> picture [456 x 418] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
Depreciation of property, plant and equipment 14,534 18,419
Depreciation of right-of-use assets 47,190 47,730
Depreciation of investment property 12 12
Amortisation of intangible assets 345 281
COVID-19 related rent concessions (2,703) (8,319)
Lease payments under operating leases in respect
of land and buildings:
— Short term lease payments 523 2,260
— Contingent rental 6,147 7,627
6,670 9,887
Employee benefit expenses
Wages and salaries 117,509 112,157
Discretionary bonuses 12,025 8,956
Retirement benefit scheme contributions 5,535 5,712
Staff welfare 1,641 1,886
Reversal of provision for untaken annual leave (1,010) (802)
Provision for long service payment 88 367
135,788 128,276
Auditors’ remuneration
— Audit services 1,050 1,100
— Non-audit services 329 532
----- End of picture text -----

Interim Report 2021 LH GROUP LIMITED 31

Notes to the Financial Statements

9. EARNINGS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY

(a) Basic

The calculation of basic earnings per share is based on the profit attributable to shareholders of the Company (the “ Shareholders ”) of approximately HK$25,638,000 (six months ended 30 June 2020: HK$24,255,000) and the 800,000,000 ordinary shares in issue during the six months ended 30 June 2021 and 2020.

	Six months ended 30 June 2021 2020 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 (Unaudited) (Unaudited)
	2021 (Unaudited)
Profit attributable to the Shareholders_(HK$’000)_	25,638	24,255
Number of ordinary shares in issue_(’000)_	800,000	800,000
Earnings per share	HK3.20 cents	HK3.03 cents

(b) Diluted

Diluted earnings per share for the six months ended 30 June 2021 and 2020 are the same as the basic earnings per share as there were no potentially dilutive ordinary shares issued.

10. DIVIDEND

A final dividend for the year ended 31 December 2020 of HK13.16 cents per ordinary share, totalling HK$105,280,000, was declared by the Board on 29 March 2021 and approved by the Shareholders at the annual general meeting of the Company held on 3 June 2021, which was paid on Friday, 25 June 2021.

An interim dividend in respect of the six months ended 30 June 2021 of HK2.40 cents per ordinary share, totalling HK$19,200,000, was proposed by the Board on 27 August 2021. The proposed dividend is not reflected as dividend payable in the consolidated statement of financial position.

32 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

11(a). PROPERTY, PLANT AND EQUIPMENT

==> picture [456 x 336] intentionally omitted <==

----- Start of picture text -----

Restaurants
Land and Leasehold and kitchen Furniture Office Motor
buildings improvements equipment and fixtures equipment vehicles Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited)
At 31 December 2020
Cost 68,343 139,491 106,603 9,638 2,321 4,253 330,649
Accumulated depreciation (11,863) (102,121) (77,523) (9,062) (2,321) (3,869) (206,759)
— —
Accumulated impairment (1,689) (9,035) (6,097) (117) (16,938)
Net carrying amount 54,791 28,335 22,983 459 — 384 106,952
(Unaudited)
Period ended 30 June
2021
Opening net book amount 54,791 28,335 22,983 459 — 384 106,952
Additions — 5,530 8,340 81 — 341 14,292
—
Depreciation (1,049) (7,149) (5,927) (178) (231) (14,534)
Closing net book amount 53,742 26,716 25,396 362 — 494 106,710
As at 30 June 2021
Cost 68,343 140,747 112,851 9,693 2,321 4,318 338,273
Accumulated depreciation (12,912) (104,996) (81,358) (9,214) (2,321) (3,824) (214,625)
— —
Accumulated impairment (1,689) (9,035) (6,097) (117) (16,938)
Net carrying amount 53,742 26,716 25,396 362 — 494 106,710
----- End of picture text -----

The Group regards each individual restaurant as a separately identifiable cash-generatingunit (“ CGU ”) and performed impairment assessments on each of the CGU with impairment indicators by considering the recoverable amount of such assets at restaurant level. As at 30 June 2021, the Group’s management had considered the impact of COVID-19 for impairment assessment and estimated corresponding recoverable amounts of the property, plant and equipment of the restaurants.

The recoverable amounts of the CGUs are determined based on value-in-use calculations, which are higher than the fair value less costs of disposal calculations. The value-in-use calculations covering a period of the remaining lease term were lower than the carrying amounts of the CGUs. Accordingly, no provision for impairment of property, plant and equipment was recognised for the Period (Last Corresponding Period: approximately HK$9,111,000).

Interim Report 2021 LH GROUP LIMITED 33

Notes to the Financial Statements

11(b). LEASES

(i) Amounts recognised in the balance sheet

The unaudited condensed consolidated statement of financial position shows the following amounts relating to leases:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Right-of-use assets
Restaurant outlets	145,812	164,786
Offices	2,137	4,282
Warehouse	88	264
	148,037	169,332

The unaudited condensed consolidated statement of financial position shows the following amounts relating to leases:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Lease liabilities
Current	98,525	93,401
Non-current	73,196	95,752
	171,721	189,153

34 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

11(b). LEASES (Continued)

(ii) Amounts recognised in the unaudited condensed statement of profit or loss

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Depreciation charge of right-of-use assets	47,190	47,730
Finance costs	2,285	2,804
Expense relating to short-term leases (included in property rentals and related expenses)	523	2,260
Expense relating to variable lease payments not included in lease liabilities (included in property rentals and related expenses)	6,147	7,627
COVID-19-related rent concessions (included in property rentals and related expenses)	(2,703)	(8,319)
Provision for impairment of right-of-use assets	—	19,417

The total cash outflow for leases for the Period was approximately HK$51,336,000 (Last Corresponding Period: HK$60,701,000).

(iii) The Group’s leasing activities and how these are accounted for

The Group leases various offices, warehouses and restaurant outlets. Rental contracts are typically made for fixed periods of 2 to 5 years.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

(iv) Variable lease payments

Some property leases contain variable payment terms that are linked to sales generated from a restaurant outlet. The basis of variable payment terms range from 7.5% to 15% of sales. Variable payment terms are used for a variety of reasons, including minimising the fixed costs base for newly established restaurant outlets. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

Interim Report 2021 LH GROUP LIMITED 35

Notes to the Financial Statements

11(b). LEASES (Continued)

(v) Provision for impairment of right-of-use assets

As at 30 June 2021, the Group’s management had considered the impact of COVID-19 for impairment assessment and estimated corresponding recoverable amounts of the right-of-use assets of the restaurants.

The recoverable amounts of the CGUs are determined based on value-in-use calculations, which are higher than the fair value less costs of disposal calculations. The value-in-use calculations covering a period of the remaining lease term were lower than the carrying amounts of the CGUs. Accordingly, no provision for impairment of right-ofuse assets was recognised for the Period (Last Corresponding Period: approximately HK$19,417,000).

12. TRADE AND OTHER RECEIVABLES

Trade receivables mainly represent receivables from financial institutions in relation to the payment settled by credit cards by customers of which the settlement period is normally within 3 days from transaction date. Generally, there is no credit period granted to customers, except for certain corporate customers in relation to sales of food ingredients, to which a credit period of 30 days is granted by the Group.

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
External customers	4,236	4,962

An ageing analysis of the trade receivables as at 30 June 2021 and 31 December 2020, based on the invoice date, is as follows:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Within 30 days	3,610	3,237
31–60 days	356	105
61–180 days	270	1,620
	4,236	4,962

36 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

12. TRADE AND OTHER RECEIVABLES (Continued)

There was no recent history of default in respect of the Group’s debtors. Based on past experience, management believes that no impairment allowance is necessary in respect of the past due balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group did not hold any collateral over these balances. No impairment loss was recognised by the Group as at 30 June 2021 and 31 December 2020.

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Prepayments	13,760	7,881
Rental and utilities deposits	53,667	51,013
Other receivables	1,650	3,357
	69,077	62,251
Less: non-current portion
— Rental and utilities deposits	(39,001)	(39,463)
— Prepayments for property, plant and equipment	(845)	(1,805)
Current portion	29,231	20,983

As at 30 June 2021 and 31 December 2020, the balances of deposits and other receivables were neither past due nor impaired. Financial assets included in the above balances relate to receivables for which there was no recent history of default.

The maximum exposure to credit risk as at 30 June 2021 and 31 December 2020 was the carrying value of each class of receivable mentioned above. The Group did not hold any collateral as security.

Interim Report 2021 LH GROUP LIMITED 37

Notes to the Financial Statements

13. SHARE CAPITAL

(a) Authorised:

	As at 30 June 2021 Number of shares Nominal value HK$’000	As at 30 June 2021 Number of shares Nominal value HK$’000	As at 31 December 2020 Number of shares Nominal value HK$’000	As at 31 December 2020 Number of shares Nominal value HK$’000
	Number of shares		Number of shares
At beginning and end of the period/year	4,000,000,000	400,000	4,000,000,000	400,000

(b) Issued and fully paid:

	As at 30 June 2021 Number of shares Nominal value HK$’000	As at 30 June 2021 Number of shares Nominal value HK$’000	As at 31 December 2020 Number of shares Nominal value HK$’000	As at 31 December 2020 Number of shares Nominal value HK$’000
	Number of shares		Number of shares
At beginning and end of the period/year	800,000,000	80,000	800,000,000	80,000

38 LH GROUP LIMITED Interim Report 2021

Notes to the Financial Statements

14. TRADE PAYABLES, OTHER PAYABLES AND ACCRUALS

An ageing analysis of the trade payables as at 30 June 2021 and 31 December 2020, based on the invoice date, is as follows:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Within 30 days	33,975	19,436
31–60 days	17,242	18,012
61–180 days	11	94
Over 180 days	212	115
	51,440	37,657

The trade payables are non-interest-bearing with payment terms of 30–60 days in general.

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Rent payable	2,472	1,545
Accrued employee benefit expenses	22,325	18,280
Provision for long service payment	1,110	994
Provision for untaken annual leave	7,225	8,235
Provision for reinstatement costs	18,429	18,105
Other accrued expenses	23,134	23,555
Payables for purchase of property, plant and equipment	4,094	3,472
Other payables	632	632
	79,421	74,818
Less: non-current portion
— Provision for reinstatement costs	(12,484)	(14,932)
Current portion	66,937	59,886

Interim Report 2021 LH GROUP LIMITED 39

Notes to the Financial Statements

15. CAPITAL COMMITMENTS

The Group had the following capital expenditure contracted but not yet incurred and provided for as follows:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Capital expenditure
Contracted but not provided for	4,152	4,335

16. RELATED PARTY TRANSACTIONS

Save as transactions detailed elsewhere in the unaudited condensed consolidated interim financial information, the Group had the following transactions with related parties:

(a) Key management compensation

Key management includes executive directors and the senior management of the Group.

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
	2021 HK$’000 (Unaudited)
Salaries and other short term employee benefits	3,512	3,315
Discretionary bonuses	3,270	2,011
Retirement benefit scheme contribution	27	24
	6,809	5,290

40 LH GROUP LIMITED Interim Report 2021