Smart Globe Holdings Limited — Interim / Quarterly Report 2021

Sep 3, 2021

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竣球控股有限公司

(Incorporated in the Cayman Islands with limited liability) Stock Code: 1481

INTERIM REPORT

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CONTENTS

Corporate Information	2
Financial Highlights	3
Management Discussion and Analysis	4
Other Information	11
Report on Review of Condensed Consolidated Financial Statements	16
Condensed Consolidated Statement of Profit or Loss and	18
Other Comprehensive Income
Condensed Consolidated Statement of Financial Position	19
Condensed Consolidated Statement of Changes in Equity	20
Condensed Consolidated Statement of Cash Flows	21
Notes to the Condensed Consolidated Financial Statements	22

1

Interim Report 2021 Smart Globe Holdings Limited

CORPORATE INFORMATION

Registered Office

P.O. Box 1350, Clifton House 75 Fort Street Grand Cayman KY1-1108 Cayman Islands

Principal Place of Business in Hong Kong

Unit 8, 17th Floor, Kodak House II 39 Healthy Street East North Point, Hong Kong

Principal Place of Business in the People’s Republic of China (“PRC”)

Heyuan Hi-Tech Development Zone Heyuan, Guangdong Province PRC

Company Secretary

Mr. Cheung Sum Chin

Remuneration Committee

Mr. Ong Chor Wei (Chairperson) Ms. Tse Yuen Shan Ivy Mr. Li Chun Hung Mr. Yam Kam Kwong, JP

Nomination Committee

Ms. Tse Yuen Shan Ivy (Chairperson) Mr. Li Chun Hung Mr. Ong Chor Wei Mr. Yam Kam Kwong, JP

Cayman Islands Share Registrar and Transfer Office

Ocorian Trust (Cayman) Limited

Windward 3 Regatta Office Park P.O. Box 1350 Grand Cayman KY1–1108 Cayman Islands

Authorised Representatives

(for the purposes of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited (“Listing Rules”) Mr. Lam Tak Ling Derek Mr. Chan Yee Yeung

Compliance Officer

Ms. Tse Yuen Shan Ivy

Board of Directors

Executive Directors

Mr. Lam Tak Ling Derek (Chairman) Mr. Chan Yee Yeung Ms. Tse Yuen Shan Ivy

Hong Kong Share Registrar and Transfer Office

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Company’s Websites http://www.smartglobehk.com

Legal Advisers Deacons

5th Floor Alexandra House 18 Charter Road Central, Hong Kong

Independent Non-Executive Directors

Mr. Li Chun Hung Mr. Ong Chor Wei Mr. Yam Kam Kwong, JP

Audit Committee

Mr. Li Chun Hung (Chairperson) Mr. Ong Chor Wei Mr. Yam Kam Kwong, JP

Auditor

Baker Tilly Hong Kong Limited 2nd Floor, 625 King’s Road, North Point, Hong Kong

Stock code

1481

2 Smart Globe Holdings Limited Interim Report 2021

FINANCIAL HIGHLIGHTS

• The Group’s revenue amounted to approximately HK$77.8 million for the six months ended 30 June 2021 (six months ended 30 June 2020: approximately HK$56.0 million), representing an increase of approximately 39.1% as compared to the six months ended 30 June 2020.

• The profit attributable to owners of the Company is approximately HK$2.3 million for the six months ended 30 June 2021 (six months ended 30 June 2020: approximately HK$2.5 million), representing a decrease of approximately 8.4% mainly due to the keen competition in the market and with an increase in production cost.

• Basic earnings per share for the six months ended 30 June 2021 was approximately HK$0.23 cents (six months ended 30 June 2020: approximately HK$0.25 cents).

• The board of Directors (the “ Board ”) does not recommend the payment of any interim dividend for the six months ended 30 June 2021.

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Interim Report 2021 Smart Globe Holdings Limited

MANAGEMENT DISCUSSION AND ANALYSIS

In view of the uncertain global economy, the Group will strive to launch various credit controls, and further tighten the control over operating expenses, while streamlining production control and improving manufacturing efficiency with advanced machinery to minimise the labour cost and maximise the facility utilisation rate.

Business Review

As one of the leading printing service providers, the Group is engaged in its core business of printing books products and novelty and packaging products. It provides a full suite of services from pre-press to printing to finishing services, as well as producing custom-made and value added printing products.

For the six months ended 30 June 2021, the Group recorded an increase in its total revenue by 39.1% to approximately HK$77.8 million from approximately HK$56.0 million for the six months ended 30 June 2020. This was mainly due to increase in sale in the book product segment in the United Kingdom (“ UK ”), Hong Kong (“ HK ”) and United States of America (“ USA ”). Profit attributable to owners of the Company was approximately HK$2.3 million, representing a decrease of 8.4% from approximately HK$2.5 million for the six months ended 30 June 2020 mainly due to a decrease of approximately more than 8.4% mainly due to the keen competition in the market and with an increase in production cost.

For the six months ended 30 June 2021, approximately 89.2% of total revenue was contributed by the book products segment. Revenue contributed by the book products segment was approximately HK$69.4 million, representing an increase of approximately 43.8% compared to revenue contributed by the same segment for the six months ended 30 June 2020 of approximately HK$48.3 million. The increase was mainly due to the increase in orders placed by UK, HK and USA customers with us.

Outlook

In the year ahead, the Group will continue to explore and capture new business opportunities for potential growth by enhancing our marketing strategy to expand our quality customer base and promote our one-stop printing services to existing and potential customers as well as the Group will strive to further tighten control over its operating expenses and streamline the production processes.

Meanwhile, by leveraging its leading one-stop printing platform, the Group will continue to invest in enhancing its capabilities to improve the overall production efficiency and prepare for any opportunity and potential growth in the future.

4 Smart Globe Holdings Limited Interim Report 2021

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Review

Revenue

The revenue increased by approximately 39.1% from approximately HK$56.0 million for the six months ended 30 June 2020 to approximately HK$77.8 million for the six months ended 30 June 2021. This was mainly due to more customer orders received from USA, HK and UK in the book’s products segment compared to the same period of last year.

Gross profit margin

The overall gross profit margin decreased from approximately 28.0% for the six months ended 30 June 2020 to approximately 18.3% for the six months ended 30 June 2021. The decrease in gross profit margin was mainly due to decrease in product price to capture more market shares and with an increase in production cost.

Other income

The other income remains constant of approximately HK$0.2 million for both periods.

Reversal of allowance for credit losses on trade receivables, net

The reversal of allowance for credit losses on trade receivables, net decreased by more than 91.5% of approximately HK$0.2 million for the six months ended 30 June 2020 to approximately HK$0.02 million for the six months ended 30 June 2021. The decrease was mainly due to the decrease in recovery of credit-impaired debts.

Other gains and losses

The other gains decreased by 82.6% from approximately HK$0.6 million for the six months ended 30 June 2020 to approximately HK$0.1 million for the six months ended 30 June 2021. This was mainly due to decrease in exchange gain incurred during the reporting period.

Selling and distribution costs

The distribution costs increased by approximately 39.1% from approximately HK$3.2 million for six months ended 30 June 2020 to approximately HK$4.5 million for the six months ended 30 June 2021. This was mainly due to the increase in transportation and freight charges which is in line with increase in revenue during the reporting period.

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Interim Report 2021 Smart Globe Holdings Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Administrative expenses

The administrative expenses increased by approximately 3.5% from approximately HK$6.9 million for the six months ended 30 June 2020 to approximately HK$7.1 million for the six months ended 30 June 2021. No material fluctuation was noted.

Finance costs

The finance costs increased by more than 100.0% from approximately HK$0.05 million for the six months ended 30 June 2020 to approximately HK$0.2 million for the six months ended 30 June 2021. This was mainly due to new tenancy for the Group’s production site in Heyuan Hi-Tech Development Zone, Heyuan, Guangdong Province, the PRC (“ He Yuan Factory ”) started in November 2020 with more interest expense on lease liabilities.

Income tax expense

The income tax expense decreased by 56.1% from approximately HK$1.1 million for the six months ended 30 June 2020 to approximately HK$0.5 million for the six months ended 30 June 2021. It was mainly due to the decrease in assessable profits that was subject to taxation during the reporting period.

Profit for the period

As a result of the above factors, net profit for the reporting period stood at approximately HK$2.3 million.

CAPITAL STRUCTURE

The shares of the Company were successfully listed on Main Board of the Stock Exchange on 11 December 2020. There has been no change in the capital structure of the Group since then. The share capital of the Group only comprises ordinary shares.

As at 30 June 2021, the Company’s issued share capital was HK$10,000,000 and the number of its issued ordinary shares was 1,000,000,000 of HK$0.01 each.

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its operations with shareholders’ equity and cash generated from operations.

6 Smart Globe Holdings Limited Interim Report 2021

MANAGEMENT DISCUSSION AND ANALYSIS

The Group maintained bank balances and cash amounting to approximately HK$21.5 million as at 30 June 2021 (as at 31 December 2020: approximately HK$50.8 million), which decreased by approximately 57.7% as compared with that as at 31 December 2020 mainly due to increase in raw material purchased, purchase of property, plant and equipment and dividend paid during the reporting period.

The Group’s non-current assets increased to approximately HK$48.1 million as at 30 June 2021 (as at 31 December 2020: approximately HK$44.2 million), the increase is primarily due to the acquisition of plant and equipment during the reporting period.

As at 30 June 2021, the Group’s current assets amounted to approximately HK$126.2 million, which comprised inventories of approximately HK$44.4 million (as at 31 December 2020: approximately HK$22.8 million), trade and other receivables of approximately HK$59.9 million (as at 31 December 2020: approximately HK$43.6 million), tax recoverable of approximately HK$0.4 million (as at 31 December 2020: nil), and cash and cash equivalents of approximately HK$21.5 million (as at 31 December 2020: approximately HK$50.8 million).

As at 30 June 2021, the Group’s current liabilities amounted to approximately HK$38.5 million, which comprised trade and other payables of approximately HK$35.9 million (as at 31 December 2020: approximately HK$19.7 million), contract liabilities of approximately HK$0.02 million (as at 31 December 2020: approximately HK$0.01 million), taxation payable of approximately HK$0.2 million (as at 31 December 2020: approximately HK$0.8 million), lease liabilities of approximately HK$2.4 million (as at 31 December 2020: approximately HK$2.4 million).

As at 30 June 2021, the net current assets of the Group decreased by approximately HK$6.7 million or approximately 7.1% to approximately HK$87.8 million (as at 31 December 2020: approximately HK$94.4 million).

The Group had total lease liabilities of approximately HK$5.2 million as at 30 June 2021 (as at 31 December 2020: approximately HK$6.3 million).

The Group’s gearing ratio, which was calculated as total interest-bearing liabilities divided by total equity as at the relevant reporting date was approximately 3.9% (as at 31 December 2020: approximately 4.7%). The Group’s current ratio, which was calculated as current assets divided by current liabilities as at the relevant reporting date stood at approximately 3.3 as at 30 June 2021 (as at 31 December 2020: approximately 5.1).

Interim Report 2021 Smart Globe Holdings Limited 7

MANAGEMENT DISCUSSION AND ANALYSIS

TREASURY POLICIES

The Group has adopted a prudent financial management approach towards its treasury policies and thus maintained a healthy liquidity position throughout the period. To manage liquidity risk, the management monitors the Group’s liquidity position and maintain sufficient cash and cash equivalents, the availability of funding through an adequate amount of committed credit facilities and the ability to settle the payables of the Group.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES

As its revenue is mainly denominated in United States dollars (“ US$ ”) and Hong Kong dollars (“ HK$ ”), and HK$ is pegged to US$, the Group’s exposure to fluctuations in exchange rate in relation to the Group’s revenue is relatively low.

The Group is also exposed to foreign exchange risks as the Group’s production is mainly in the PRC. Any appreciation of Renminbi (“ RMB ”) may lead to an increase of our cost of production. During the six months ended 30 June 2021, the Group had not entered into any financial instrument for hedging purposes or other hedging instruments to hedge against foreign exchange rate risks. The Group will keep on reviewing and monitoring the exchange fluctuation between RMB and HK$, and will consider entering into hedging arrangement as and when appropriate.

CAPITAL EXPENDITURE

During the six months ended 30 June 2021, the Group had acquired property, plant and equipment of approximately HK$7.0 million (six months ended 30 June 2020: HK$3.3 million).

CAPITAL COMMITMENTS

As at 30 June 2021 and 31 December 2020, the Group had no significant capital commitments.

CONTINGENT LIABILITIES

As at 30 June 2021 and 31 December 2020, the Group had no material contingent liabilities.

DIVIDENDS

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2021 (six months ended 30 June 2020: nil).

8 Smart Globe Holdings Limited Interim Report 2021

MANAGEMENT DISCUSSION AND ANALYSIS

USE OF PROCEEDS

On 28 December 2017, the Company’s shares were listed (the “ Listing ”) on GEM and 250,000,000 new shares of HK$0.01 each were issued at HK$0.25. The Company’s listing of shares on GEM was transferred to Main Board on 11 December 2020. The net proceeds from the Listing were approximately HK$36.4 million after payment of transaction costs and listing expenses. As disclosed in the Company’s report dated 21 September 2018, the Board has resolved to reallocate the remaining balance of the net proceeds. In the light of the current market condition, the Company considers that the demand for novelty and packaging products is high and the packaging production segment represents great potential to generate stable revenue to the Group despite the uncertainty in the economy due to the trade conflicts between China and the United States. Therefore, the Board has resolved to allocate most of the remaining net proceeds to the purchasing of machinery for upgrading our production equipment to enhance level of automation and production efficiency with an aim to expand the packaging production capacity of the Group. For further details, please refer to the report of the Company dated 21 September 2018. As at the date of this report, utilisation of the net proceeds from the Listing is as follows:

	Revised utilization	Revised utilization
		as disclosure in
		the report dated
		21 September
		2018		Utilisation		Balance
		HK$’000		HK$’000		HK$’000
Expansion of production capacity		20,399		20,399		—
Loan repayment		10,933		10,933		—
Expansion of sale and distribution
network		1,466		834		632
General working capital		3,644		3,644		—

The remaining net proceeds for expansion of sale and distribution network is expected to be fully utilise by the end of 2021, which is based on the best estimation of the present and future market condition made by the Board.

MATERIAL INVESTMENTS

The Group had not made any significant investments during the six months ended 30 June 2021.

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Interim Report 2021 Smart Globe Holdings Limited

MANAGEMENT DISCUSSION AND ANALYSIS

FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

Save as disclosed in “Future Plans and Use of Proceeds” of the prospectus of the Company dated 13 December 2017 (the “ Prospectus ”), the Group did not have other plans for material investments or capital assets.

MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES AND ASSOCIATED COMPANIES

During six months ended 30 June 2021, the Group had not made any significant acquisition or disposal of subsidiaries, associates or joint ventures.

EMPLOYEES’ INFORMATION AND EMOLUMENT POLICIES

Our employees are based in Hong Kong and He Yuan, Guangdong Province, the PRC. As at 30 June 2021, there were 334 (as at 31 December 2020: 326) employees in the Group. The total staff costs, including directors’ emoluments, amounted to approximately HK$22.2 million during the six months ended 30 June 2021 (six months ended 30 June 2020: approximately HK$13.9 million). Staff remuneration packages are determined in consideration of market conditions and the performance of the individuals concerned, and are subject to review from time to time. The Group also provides other staff benefits including medical insurance, and grants discretionary incentive bonuses to eligible staff based on their performance and contributions to the Group.

The workers working at our production site located at He Yuan Factory are employed by the He Yuan Factory. As at 30 June 2021, there were 322 (as at 31 December 2020: 315) employees in the He Yuan Factory.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SECURITIES

Neither the Company nor any of its subsidiaries had purchased, sold, or redeemed any of the securities of the Company during the six months ended 30 June 2021.

UPDATE ON DIRECTORS’ INFORMATION

During the reporting period, there was no information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

SHARE OPTION SCHEME

The Company has conditionally adopted a share option scheme on 4 December 2017 (the “ Scheme ”). No share options have been granted since the adoption of the Scheme and there was no share option outstanding as at 30 June 2021.

10 Smart Globe Holdings Limited Interim Report 2021

OTHER INFORMATION

DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2021, the interests of the Directors and their associates in the shares, underlying shares and debentures of the Company and its associated corporations, as recorded in the register maintained by the Company pursuant to Section 352 of the Securities and Futures Ordinance, or as otherwise notified to the Company and the Stock Exchange of Hong Kong Limited pursuant to the Listing Rules, were as follows:

Long positions

Ordinary shares of HK$0.01 each of the Company

					Percentage of
				Number of	the share
			ordinary shares		capital of the
Name of Director	Capacity			held	Company
Lam Tak Ling Derek	Held by controlled corporation_(note 1)_			675,000,000	67.5%
(“Mr. Lam”)
Chan Yee Yeung	Held by controlled corporation_(note 1)_			675,000,000	67.5%
(“Mr. Chan”)
Tse Yuen Shan Ivy	Held by controlled corporation_(note 2)_			75,000,000	7.5%
(“Ms. Tse”)

Notes:

• (1) The Company is directly owned as to 67.5% by Master Sage Limited (“ Master Sage ”). Master Sage is directly owned as to 50% and 50% by Mr. Lam and Mr. Chan, respectively. By virtue of the SFO, each of Mr. Lam and Mr. Chan is deemed to be interested in the shares held by Master Sage.

• (2) The Company is directly owned as to 7.5% by Fortune Corner Holdings Limited (“ Fortune Corner ”). Fortune Corner is wholly owned by Ms. Tse. By virtue of the SFO, Ms. Tse is deemed to be interested in the shares held by Fortune Corner.

Other than as disclosed above, none of the Directors nor their associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations as at 30 June 2021.

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Interim Report 2021 Smart Globe Holdings Limited

OTHER INFORMATION

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

As at 30 June 2021, the following shareholders and persons (not being a Director or chief executive of the Company) had, or were deemed to have, interests or short positions in the shares or underlying shares of the Company which were recorded in the register required to be kept by the Company under section 336 of the SFO:

					Percentage of
					the issued
				Number of	share capital of
Name of shareholders	Capacity			Shares held	the Company
Master Sage	Beneficial owner			675,000,000	67.5%
Fortune Corner	Beneficial owner			75,000,000	7.5%

Other than disclosed above, as at 30 June 2021, the Directors are not aware of any other persons who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company and recorded in the register required to be kept by the Company under section 336 of the SFO.

MANAGEMENT CONTRACT

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company, which were not a contract of service with any Director or any person engaged in full-time employment of the Company, were entered into or existed during the six months ended 30 June 2021.

CONTROLLING SHAREHOLDER’S INTERESTS IN SIGNIFICANT CONTRACTS

As far as the Directors are aware, at no time during the six months ended 30 June 2021 had the Company or any of its subsidiaries and the controlling shareholders (the “ Controlling Shareholders ”) or any of their subsidiaries entered into any contract(s) of significance for the provision of services by the Controlling Shareholder or any of their subsidiaries to the Company or any of its subsidiaries.

12 Smart Globe Holdings Limited Interim Report 2021

OTHER INFORMATION

DIRECTORS’ AND CONTROLLING SHAREHOLDERS’ INTERESTS IN A COMPETING BUSINESS

None of the Directors and the Controlling Shareholders of the Company or their respective close associates (as defined in the Listing Rules) is or was interested in any business apart from the Group’s business, that competes or competed or is or was likely to compete, either directly or indirectly, with the Group’s business at any time during the six months ended 30 June 2021.

Each of Controlling Shareholders (together, the “ Covenantors ”) entered into a deed of noncompetition in favour of the Group (the “ Deed of Non-competition ”) on 4 December 2017, details of which are set out in the section headed “Relationship with Our Controlling Shareholders — Deed of Non-competition” in the Prospectus.

The Company received from each of the Covenantors confirmation on their respective compliance of the non-competition undertaking under the Deed of Non-competition for the six months ended 30 June 2021. The independent non-executive Directors have reviewed the compliance of such undertaking and evaluated the effective implementation of the Deed of Non-competition, and they were satisfied with the Covenantors’ compliance with their undertaking.

CORPORATE GOVERNANCE PRACTICES

The Company is committed to achieving high standards of corporate governance to safeguard the interests of its shareholders and enhance its corporate value. The Company’s corporate governance practices are based on the principles, code provisions and certain recommended best practices as set out in the Corporate Governance Code and Corporate Governance Report in Appendix 14 to Listing Rules (the “ CG Code ”).

During the six months ended 30 June 2021, the Company has complied with the code provisions in the CG Code, except the following deviations:

• (1) Code Provision A.4.1 of the CG Code provides that non-executive directors should be appointed for a specific term, subject to re-election. All independent non-executive directors of the Company are not appointed for specific terms, but they are subject to retirement by rotations and re-elections at the annual general meeting of the Company in accordance with the articles of associations of the Company (the “ Articles of Association ”).

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Interim Report 2021 Smart Globe Holdings Limited

OTHER INFORMATION

• (2) Code Provision A.2.1 of the CG Code provides that the roles of chairman and chief executive officer should not be performed by the same individual. Mr. Lam Tak Ling Derek (“ Mr. Lam ”) is currently performing the roles of chairman and chief executive officer of the Company. Taking into account Mr. Lam’s strong expertise in the printing industry, the Board considered that the roles of chairman and chief executive officer being performed by Mr. Lam enables more effective and efficient overall business planning, decision making and implementation thereof by the Group. In order to maintain good corporate governance and fully comply with such code provision, the Board will regularly review the need to appoint different individuals to perform the roles of chairman and chief executive officer separately.

• (3) Code Provision A.5.1 of the Code provides that issuers should establish a nomination committee which is chaired by the chairman of the board or an independent non-executive director and comprises a majority of independent non-executive directors. However, the Nomination Committee is currently chaired by Ms. Tse Yuen Shan Ivy (“ Ms. Tse ”), an executive Director. Taking into account Ms. Tse’s primary responsibility of handling administrative and human resources matters of the Group and her strong experience in the handling relevant matters as well as in the printing industry, the Directors consider that the role of chairman of the nomination committee being performed by Ms. Tse allows more effective and efficient execution of the responsibilities of the nomination committee. In addition, as there are three independent non-executive Directors offering independent perspectives in the nomination committee, the Board is of the view that there are adequate safeguards in place to ensure effective operation within the committee. In order to maintain good corporate governance and fully comply with such code provision, the Board will regularly review the need to appoint the chairman of the Board or an independent non-executive Director to perform the role of chairman of the nomination committee.

CG Code provision A.6.7 requires that independent non-executive Directors shall attend general meetings and develop a balanced understanding of the views of shareholders. All independent nonexecutive Directors attended the annual general meeting held on 6 May 2021.

The Board will continue to monitor and renew the Company’s corporate governance practices to ensure compliance with the CG Code.

14 Smart Globe Holdings Limited Interim Report 2021

OTHER INFORMATION

CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS BY DIRECTORS

The Group has adopted the required standards of dealings set out in the Listing Rules as the code of conduct for securities transactions by the Directors in respect of the shares of the Company (the “ Code of Conduct ”). Having made specific enquiries with the Directors, all Directors have confirmed that they have complied with the required standards set out in the Code of Conduct during the six months ended 30 June 2021.

AUDIT COMMITTEE

The Audit Committee currently comprises all three independent non-executive Directors, namely Mr. Li Chun Hung, Mr. Ong Chor Wei and Mr. Yam Kam Kwong. The chairman of the Audit Committee is Mr. Li Chun Hung, who holds the appropriate professional qualifications. None of the members of the Audit Committee are former partners of the Company’s existing external auditors. The Audit Committee has adopted terms of reference which are in line with the code provisions of the CG Code.

The Audit Committee has reviewed the Company’s unaudited condensed consolidated financial statements for the six months ended 30 June 2021 and the interim report.

By Order of the Board

Smart Globe Holdings Limited

Lam Tak Ling Derek

Chairman, Chief Executive Officer and Executive Director

Hong Kong, 27 August 2021

As at the date of this report, the executive Directors are Mr. Lam Tak Ling Derek, Mr. Chan Yee Yeung, Ms. Tse Yuen Shan Ivy; and the independent non-executive Directors are Mr. Li Chun Hung, Mr. Ong Chor Wei and Mr. Yam Kam Kwong.

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Interim Report 2021 Smart Globe Holdings Limited

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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To the board of directors of Smart Globe Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

INTRODUCTION

We have reviewed the interim financial information set out on pages 18 to 30 which comprises the condensed consolidated statement of financial position of Smart Globe Holdings Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) as at 30 June 2021 and the related condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six-month period then ended and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“ HKAS 34 ”) issued by the Hong Kong Institute of Certified Public Accountants. The directors are responsible for the preparation and presentation of the interim financial information in accordance with HKAS 34.

Our responsibility is to form a conclusion, based on our review, on this interim financial information and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of the interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

16 Smart Globe Holdings Limited Interim Report 2021

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.

OTHER MATTER

The comparative condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six-month period ended 30 June 2020 and the relevant explanatory notes included in this interim financial information were extracted from the condensed consolidated financial statements of the Group for the six-month period ended 30 June 2020 reviewed by another auditor who expressed an unmodified conclusion on those condensed consolidated financial statements on 7 August 2020. The comparative condensed consolidated statement of financial position as at 31 December 2020 were extracted from the consolidated financial statements of the Group for the year ended 31 December 2020 audited by the same auditor who expressed an unmodified opinion on those consolidated financial statements on 23 March 2021.

Baker Tilly Hong Kong Limited

Certified Public Accountants Hong Kong, 27 August 2021 Chan Kwan Ho, Edmond Practising certificate number P02092

Interim Report 2021 Smart Globe Holdings Limited 17

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

Note	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)
Revenue 3 Cost of sales Gross profit Other income 4 Reversal of allowance for credit losses on trade receivables, net Other gains and losses 5 Selling and distribution costs Administrative expenses Professional fees for Transfer of Listing Finance costs Profit before taxation Taxation 6 Profit for the period Other comprehensive income/(expense) Item that may be reclassified subsequently to profit or loss: — Exchange differences arising from translation of a foreign operation, net of nil tax Total comprehensive income for the period Earnings per share — Basic and diluted (HK cents) 8	77,821 (63,570) 14,251 165 16 109 (4,483) (7,114) — (187) 2,757 (480) 2,277 1,021 3,298 0.23	55,953 (40,266) 15,687 215 188 626 (3,222) (6,875) (2,994) (45) 3,580 (1,094) 2,486 (1,420) 1,066 0.25

The notes on pages 22 to 30 form part of this interim financial information.

18 Smart Globe Holdings Limited Interim Report 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

(Expressed in Hong Kong dollars)

Note	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Non-current assets Property, plant and equipment 9 Current assets Inventories Trade and other receivables 10 Taxation recoverable Bank balances and cash Current liabilities Trade and other payables 11 Contract liabilities Taxation payable Lease liabilities Net current assets Total assets less current liabilities Non-current liabilities Lease liabilities NET ASSETS Capital and reserves Share capital 12 Reserves TOTAL EQUITY	48,137 44,374 59,925 441 21,506 126,246 35,875 16 238 2,357 38,486 87,760 135,897 2,851 133,046 10,000 123,046 133,046	44,236 22,845 43,598 — 50,837 117,280 19,651 7 770 2,420 22,848 94,432 138,668 3,920 134,748 10,000 124,748 134,748

The notes on pages 22 to 30 form part of this interim financial information.

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Interim Report 2021 Smart Globe Holdings Limited

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

	Share capital HK$’000	Share premium HK$’000	PRC statutory reserves HK$’000 (Note (a))	Special reserve HK$’000 (Note (b))	Translation reserve HK$’000	Retained profits HK$’000	Total HK$’000
At 1 January 2020 (audited) Profit for the period Other comprehensive expense for the period: — Exchange differences arising on translation of a foreign operation, net of nil tax Total comprehensive income for the period Transfer Final dividend paid for the year ended 31 December 2019 (Note 7) At 30 June 2020 (unaudited) At 1 January 2021 (audited) Profit for the period Other comprehensive income for the period: — Exchange differences arising on translation of a foreign operation, net of nil tax Total comprehensive income for the period Final dividend paid for the year ended 31 December 2020 (Note 7) At 30 June 2021 (unaudited) Notes:	10,000 — — — — — 10,000 10,000 — — — — 10,000	43,645 — — — — (4,000) 39,645 39,645 — — — (5,000) 34,645	— — — — 64 — 64 287 — — — — 287	12,290 — — — — — 12,290 12,290 — — — — 12,290	(3,656) — (1,420) (1,420) — — (5,076) (231) — 1,021 1,021 — 790	57,043 2,486 — 2,486 (64) — 59,465 72,757 2,277 — 2,277 — 75,034	119,322 2,486 (1,420) 1,066 — (4,000) 116,388 134,748 2,277 1,021 3,298 (5,000) 133,046

• (a) The People’s Republic of China (“ PRC ”) statutory reserves are non-distributable and the transfer to these reserves are determined according to the relevant laws in the PRC and by the board of directors of the PRC subsidiary in accordance with the Articles of Association of the subsidiary.

• (b) The special reserve of the Group represented the difference between the nominal value of the share capital of the Company and the nominal value of the share capital of CP Printing Limited pursuant to a group reorganisation in preparation for the listing of the Company’s shares.

The notes on pages 22 to 30 form part of this interim financial information.

20 Smart Globe Holdings Limited Interim Report 2021

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

	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)
Operating activities Profit before taxation Adjustments for: — Depreciation of property, plant and equipment — Other non-cash items Operating cash flows before movements in working capital Increase in inventories Increase in trade and other receivables Increase in trade and other payables Other working capital items Cash (used in)/generated from operations Income tax paid Net cash (used in)/generated from operating activities Investing activities Proceeds received on maturity of certificates of deposit Purchase of property, plant and equipment Deposits paid for acquisition of property, plant and equipment Other investing cash flows, net Net cash used in investing activities Financing activities Repayment of lease liabilities Dividend paid Other financing cash flows, net Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of foreign exchange rate changes Cash and cash equivalents at the end of the period Represented by bank balances and cash	2,757 3,668 116 6,541 (21,109) (16,252) 16,030 9 (14,781) (1,456) (16,237) — (7,036) — 77 (6,959) (1,200) (5,000) (169) (6,369) (29,565) 50,837 234 21,506	3,580 2,878 (236) 6,222 (5,959) (244) 7,853 (103) 7,769 (3,683) 4,086 2,989 (2,930) (329) 128 (142) (2,214) (4,000) (45) (6,259) (2,315) 42,735 (479) 39,941

The notes on pages 22 to 30 form part of this interim financial information.

Interim Report 2021 Smart Globe Holdings Limited 21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

1 BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”) as well as with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”).

2 PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis.

Other than changes in accounting policies resulting from application of new and amendments to Hong Kong Financial Reporting Standards (“ HKFRSs ”), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those presented in the annual consolidated financial statements of the Company and its subsidiaries (collectively referred to as the “ Group ”) for the year ended 31 December 2020.

Application of amendments to HKFRSs

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

Amendment to HKFRS 16 “COVID-19 — Related Rent Concessions” Amendments to HKFRS 9, “Interest Rate Benchmark Reform — Phase 2” HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16

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

22 Smart Globe Holdings Limited Interim Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

3 REVENUE AND SEGMENT INFORMATION

Revenue represents amounts received or receivable from production and printing of books, novelty and packaging products. Revenue is recognised when control of the goods has transferred, being when the goods have been shipped to the customer’s specified location. Following delivery, the customer has full discretion over the manner of distribution and price to sell the goods and bears the risks of obsolescence and loss in relation to the goods. The normal credit term is 60 to 120 days upon delivery.

All sales contracts are for periods of one year or less. As permitted under HKFRS 15 “Revenue from Contracts with Customers”, the transaction price allocated to these unsatisfied contracts is not disclosed.

Information reported to the board of directors of the Company, being the chief operating decision maker, for the purpose of resources allocation and assessment of performance, focuses specifically on the revenue analysis the Group’s core business of printing books products and novelty and packaging products. No further discrete financial information is provided. Accordingly, no segment information is presented other than entity wide disclosures. The Group’s operations are located in Hong Kong and the PRC.

The disaggregated information of revenue is as follows:

Revenue from major products

The following is an analysis of the Group’s revenue from its major products which is recognised at a point in time:

	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)
Books products Novelty and packaging products	69,419 8,402 77,821	48,290 7,663 55,953

Interim Report 2021 Smart Globe Holdings Limited 23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

3 REVENUE AND SEGMENT INFORMATION (continued)

Geographical information

Information about the Group’s revenue from external customers are presented based on the geographical location of the customers 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)
Hong Kong United States United Kingdom The PRC Australia Netherlands Others	30,170 26,870 7,691 3,765 2,672 2,067 4,586 77,821	15,604 22,932 4,116 2,379 2,645 6,109 2,168 55,953

4 OTHER INCOME

OTHER INCOME
	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
Bank interest income Government grants Sundry income	20 140 5 165	99 107 9 215

Government grants represent export incentive and other incentive payments received by the Group from the relevant government department. There are no unfulfilled conditions attach to those grants.

24 Smart Globe Holdings Limited Interim Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

5 OTHER GAINS AND LOSSES

OTHER GAINS AND LOSSES
	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
Net exchange gain Gain/(loss) on disposal of property, plant and equipment	92 17 109	632 (6) 626

6 TAXATION

The charge comprises:

	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)
Hong Kong Profits Tax — Charge for the period PRC Enterprise Income Tax — Charge for the period — Under-provision in prior period	209 268 3 271 480	853 220 21 241 1,094

Hong Kong Profits Tax is calculated at 8.25% on the first HK$2 million of the estimated assessable profit and at 16.5% on the remaining estimated assessable profit.

Under the Law of the PRC on Enterprise Income Tax (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiary is 25% for both periods.

Interim Report 2021 Smart Globe Holdings Limited 25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

7 DIVIDENDS

During the six months ended 30 June 2021, a final dividend of HK$0.5 cent per share in respect of the year ended 31 December 2020 (six months ended 30 June 2020: HK$0.4 cent per share for the year ended 31 December 2019) was declared and paid to the owners of the Company. The aggregate amount of the final dividend declared and paid in the current interim period amounted to HK$5,000,000 (six months ended 30 June 2020: HK$4,000,000).

The directors of the Company have determined that no dividends will be paid or proposed in respect of the six months period ended 30 June 2021.

8 EARNINGS PER SHARE

The calculation of the basic earnings per share for the period is based on the following data:

	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited)
Profit for the period attributable to owners of the Company	2,277 2,486 Six months ended 30 June 2021 2020 ’000 ’000
Number of ordinary shares for the purpose of basic earnings per share	1,000,000 1,000,000

No diluted earnings per share is presented as there were no potential ordinary shares in issue during both periods.

26 Smart Globe Holdings Limited Interim Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

9 PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2021, the Group acquired property, plant and equipment, excluding right-of-use assets, amounting to HK$7,036,000 (six months ended 30 June 2020: HK$3,265,000).

During the six months ended 30 June 2020, two leased machineries with a carrying amount of HK$10,661,000 was transferred to machineries under property, plant and equipment on full settlement of the relevant lease liabilities. In addition, the Group entered into a new lease agreement for the office in Hong Kong with a lease term of two years. On lease commencement, the Group recognised right-of-use assets and relevant lease liabilities of HK$1,012,000.

10 TRADE AND OTHER RECEIVABLES

TRADE AND OTHER RECEIVABLES
	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Trade receivables Less: Allowance for credit losses Rental deposits Prepayments, deposits and other receivables Total trade and other receivables	57,815 (1,826) 55,989 171 3,765 59,925	42,490 (1,841) 40,649 171 2,778 43,598

Interim Report 2021 Smart Globe Holdings Limited 27

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

10 TRADE AND OTHER RECEIVABLES (continued)

The Group allows credit period ranging from 60 to 120 days. The following is an aged analysis of trade receivables, net of allowance for credit losses, presented based on the goods delivery date, which were the respective revenue recognition dates, at the end of reporting period:

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Within 30 days 31 to 60 days 61 to 90 days Over 90 days	9,975 25,064 14,009 6,941 55,989	11,675 10,790 6,053 12,131 40,649

Included in trade receivables as at 30 June 2021 are debtors with aggregate carrying amount of HK$11,690,000 (31 December 2020: HK$11,998,000), which are past due at the end of the reporting period. Out of the past due balances, HK$2,342,000 (31 December 2020: HK$2,107,000) has been past due over 90 days or more and is not considered as in default, as the Group considered such balances could be recovered based on historical experience and reference to subsequent settlement. The Group does not hold any collateral over these balances.

Included in trade receivables as at 30 June 2021 is a balance of HK$3,000 (31 December 2020: HK$285,000) due from a related company which is owned by Ms. Tse Yuen Shan Ivy (“ Ms. Tse ”), a key management personnel of the Group, and her family. The amount is repayable within three months from the goods delivery dates.

The expected credit losses on trade receivables are assessed individually and/or collectively using a provision matrix as at 30 June 2021. Certain trade receivables as at 30 June 2021 were assessed individually and were not included in provision matrix. During the current interim period, the Group provided an additional allowance for credit losses of HK$Nil and reversal of credit losses of HK$15,000 was made on credit-impaired debtors (six months ended 30 June 2020: allowance for credit losses of HK$29,000 and reversal of credit losses of HK$217,000).

28 Smart Globe Holdings Limited Interim Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

11 TRADE AND OTHER PAYABLES

TRADE AND OTHER PAYABLES
	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Trade payables Accrued expenses Other payables Total trade and other payables	26,854 6,681 2,340 35,875	11,438 5,988 2,225 19,651

The credit period of trade payables is 30 to 90 days.

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

	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Within 30 days 31 to 60 days 61 to 90 days Over 90 days	24,285 763 1,352 454 26,854	11,038 235 37 128 11,438

Interim Report 2021 Smart Globe Holdings Limited 29

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

(Expressed in Hong Kong dollars)

12 SHARE CAPITAL

SHARE CAPITAL
	Number of shares	Share capital HK$’000
Authorised: At 1 January 2020, 31 December 2020 and 30 June 2021 — Ordinary share of HK$0.01 each Issued and fully paid: At 1 January 2020, 31 December 2020 and 30 June 2021 — Ordinary share of HK$0.01 each	2,000,000,000 1,000,000,000	20,000 10,000

13 RELATED PARTY DISCLOSURES

In addition to the amount due from a related company as disclosed in note 10, the Group has the following transactions with related parties during the period:

• (a) The emoluments of directors and other members of key management were HK$1,088,000 (for the six months ended 30 June 2020: HK$911,000).

• (b) The Group received income for sales of novelty and packaging products totalling HK$276,000 (six months ended 30 June 2020: HK$755,000), from Tse Wing Hang Limited (trading as Richmond Company), a company of which Ms. Tse, the key management personnel of the Group, and her family, hold 100% equity interest.

14 FAIR VALUE OF MEASUREMENTS OF FINANCIAL INSTRUMENTS

The directors of the Company consider that the carrying amounts of the Group’s financial assets and liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.

30 Smart Globe Holdings Limited Interim Report 2021