Web3 Meta Limited — Interim / Quarterly Report 2015

Feb 13, 2015

ODELLA LEATHER HOLDINGS LIMITED 愛 特 麗 皮 革 控 股 有 限 公 司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8093)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2014

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (‘‘GEM’’) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE ‘‘STOCK EXCHANGE’’)

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

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

This announcement, for which the directors (the ‘‘Directors’’) of Odella Leather Holdings Limited (the ‘‘Company’’) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the ‘‘GEM Listing Rules’’) for the purpose of giving information with regard to the Company.

The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

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The board of Directors (the ‘‘Board’’) of the Company is pleased to announce the audited consolidated result of the Company and its subsidiaries (the ‘‘Group’’) for the six months and three months ended 31 December 2014 together with the unaudited comparative figures for the corresponding periods in 2013 as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months and three months ended 31 December 2014

Notes REVENUE 3 Cost of sales Gross profit Other revenue and other income Selling and distribution expenses Administrative expenses Listing expenses Finance costs (Loss)/profit before tax 4 Income tax expense 5 Net (loss)/profit for the period attributable to owners of the Company Other comprehensive (expense)/income Items that may be reclassified subsequently to consolidated statement of profit or loss: Exchange differences on translation of foreign operations Other comprehensive (expense)/income for the period Total comprehensive (expense)/income for the period attributable to owners of the Company (Loss)/earnings per share attributable to owners of the Company 6 Basic and diluted	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 42,057 41,025 (23,149) (27,028) 18,908 13,997 7 4 (1,345) (1,269) (5,157) (4,528) (13,695) — (12) (14) (1,294) 8,190 (2,235) (1,454) (3,529) 6,736 (3) 8 (3) 8 (3,532) 6,744 HK(1.2) cents HK2.2 cents	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 19,813 15,221 (10,809) (9,776) 9,004 5,445 5 1 (610) (379) (2,774) (2,205) (9,465) — — — (3,840) 2,862 (1,011) (536) (4,851) 2,326 — — — — (4,851) 2,326 HK(1.6) cents HK0.8 cent

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes NON-CURRENT ASSETS Property, plant and equipment Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Trade receivables 8 Deposits, prepayments and other receivables Cash and cash equivalents Pledged deposits 9 Total current assets CURRENT LIABILITIES Trade payables 10 Accruals, other payables and trade deposits received Amounts due to Directors 11 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES EQUITY Capital and reserves attributable to owners of the Company Share capital 12 Reserves Total equity	31 December 2014 HK$’000 (audited) 238 4 242 3,191 9,640 615 9,970 3,012 26,428 3,481 9,181 — 3,390 16,052 10,376 10,618 100 10,518 10,618	30 June 2014 HK$’000 (audited) 283 4
		287
		8,236 9,806 431 15,133 —
		33,606
		1,811 5,918 4,824 3,990
		16,543
		17,063
		17,350
		200 17,150
		17,350

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

At 1 July 2014 (audited) (note iii) Effect of shares exchange (audited) (note iii) Issue of shares on group reorganisation (audited) Loss for the period (audited) Other comprehensive expense for the period (audited) Total comprehensive expense for the period (audited) Appropriation of statutory reserve (audited) Dividend of Perline to the then shareholders of Perline (audited) At 31 December 2014 (audited) At 1 July 2013 (audited) Profit for the period (unaudited) Other comprehensive income for the period (unaudited) Total comprehensive income for the period (unaudited) At 31 December 2013 (unaudited)		Attributable to owne	Attributable to owne	rs of the Company	rs of the Company	Reserves Sub-total HK$’000 17,150 200 (100)	Total HK$’000 17,350 — —	Total HK$’000 17,350 — —
	Share capital HK$’000 200 (200) 100	Statutory reserve HK$’000 (note i) 48 — —	Exchange fluctuation reserve HK$’000 (note ii) 179 — —	Other reserve HK$’000 — 200 (100)	Retained earnings HK$’000 16,923 — —
	— —	— —	— (3)	— —	(3,529) —	(3,529) (3)	(3,529) (3)
	— — — 100 200	— 160 — 208 36	(3) — — 176 171	— — — 100 —	(3,529) (160) (3,200) 10,034 4,039	(3,532) — (3,200) 10,518 4,246	(3,532) — (3,200) 10,618 4,446
	— —	— —	— 8	— —	6,736 —	6,736 8	6,736 8
	— 200	— 36	8 179	— —	6,736 10,775	6,744 10,990	6,744 11,190

Notes:

• (i) Statutory reserve

Pursuant to the relevant laws and regulations for business enterprises in the People’s Republic of China (the ‘‘PRC’’), a portion of the profits of the entities which are registered in the PRC has been transferred to the statutory reserve which is restricted as to use. When the balance of such reserve reaches 50% of the capital of that entity, any further appropriation is optional. The statutory reserve can be utilised, upon approval of the relevant authority, to offset prior years’ losses or to increase capital. However, the balance of the statutory reserve must be maintained at a minimum 25% of capital after such usage.

(ii) Exchange fluctuation reserve

Exchange fluctuation reserve represents exchange differences relating to the translation of the net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. Hong Kong dollars) that are recognised directly in other comprehensive income and accumulated in the exchange fluctuation reserve. Such exchange differences accumulated in the exchange fluctuation reserve are reclassified to profit or loss on the disposal of the foreign operations.

• (iii) The share capital as at 30 June 2014 represented the share capital of Perline Company Limited (‘‘Perline’’), the then holding company amounted to HK$200,000.

On 3 September 2014, the Company was incorporated in the Cayman Islands as an exempted company with limited liability, with an authorised share capital of HK$1,000,000 divided into 100,000,000 shares of HK$0.01 each. On 3 September 2014, one share (‘‘Share’’) of the Company of HK$0.01 was allotted and issued, nil paid, to Sharon Pierson (an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of the Company), which was transferred to Quality Century Limited (‘‘BVICheung’’) on the same date. On 3 September 2014, the Company further allotted and issued 999,999 Shares, nil paid, to BVICheung, Design Vanguard Limited (‘‘BVI-Lam’’) and Olson Global Limited (‘‘BVI-Ching’’).

On 11 September 2014, Odella International Limited (‘‘Odella BVI’’) was incorporated in the British Virgin Islands (‘‘BVI’’) with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each. On 11 September 2014, 100 shares in Odella BVI were issued to the Company, and the subscription price of each share was US$1 (i.e. the par value of such share).

On 4 December 2014, Odella BVI acquired from BVI-Cheung, BVI-Lam and BVI-Ching the entired share capital in Perline. In consideration of and in exchange for such acquisition, the Company credited as fully paid the 1,000,000 nil-paid Shares which were first issued on 3 September 2014, and issued to BVI-Cheung, BVI-Lam and BVI-Ching 9,000,000 new Shares (in the proportion of 68%, 17% and 15% respectively), all credited as fully paid. On completion, Odella BVI became the sole shareholder of Perline, and the number of issued shares in the Company was increased to 10,000,000.

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CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows from operating activities (Loss)/profit before tax Adjustments for: Interest income Interest expenses Depreciation (Outflow)/inflow from operations before working capital changes Decrease in inventories Decrease in trade receivables (Increase)/decrease in deposits, prepayments and other receivables Increase/(decrease) in trade payables Increase in accruals, other payables and trade deposits received Cash generated from operations Interest received Net income tax paid Net cash generated from operating activities Cash flows from investing activities Purchases of items of property, plant and equipment Increase in pledged deposits Net cash used in investing activities Cash flows from financing activities Proceeds from bank borrowings Repayment of bank borrowings Decrease in amounts due to directors Dividend paid to then shareholders of Perline Interest paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Effect of foreign exchange rate change, net Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Cash and cash equivalents as stated in the consolidated statement of financial position

Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) (1,294) 8,190 (4) (1) 12 14 65 53 (1,221) 8,256 5,045 3,955 142 4,118 (184) 499 1,689 (3,751) 3,269 5,564 8,740 18,641 4 1 (2,830) (510) 5,914 18,132 (20) (48) (3,012) — (3,032) (48) 3,389 — (3,389) (2,066) (4,824) — (3,200) — (12) (14) (8,036) (2,080) (5,154) 16,004 (9) — 15,133 5,702 9,970 21,706 9,970 21,706

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Notes:

1. BASIS OF PREPARATION

These financial statements of the Company have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) which include all individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretation issued by the Hong Kong Institute of Certified Public Accountants and accounting principles generally accepted in Hong Kong. All HKFRSs effective for the accounting period commencing from 1 July 2014, together with the relevant transitional provisions, have been adopted by the Group in the preparation of these financial statements throughout the periods covered in these financial statements. These financial statements have been prepared under the historical cost convention. The financial statements are presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (‘‘HK$000’’) except when otherwise indicated.

The accounting policies applied in the preparation of the consolidated results are consistent with those adopted in the preparation of the annual consolidated financial statements of the Group for the year ended 30 June 2014, except that the Group has adopted a number of new or revised HKFRSs, which are newly effective for the period under review. The adoption of these new or revised HKFRSs had no significant effect on the financial results of the current period. Accordingly, no change in significant accounting policies and no prior period adjustment is required.

The Group has not early applied the new or revised HKFRSs which are relevant to the Group and have been issued but are not yet effective for the accounting period covered by these financial statements.

Management is in the process of making an assessment of the impact of these new standards, amendments to existing standards and interpretations on the financial statements of the Group upon their initial application. The adoption of above is not expected to have a material effect on the Group’s operating results or financial position. It is anticipated that all of the pronouncements will be adopted in the Group’s accounting policies in the accounting periods when they first become effective.

The consolidated interim financial statements for the six months ended 31 December 2014 have been audited by the Company’s auditors, HLB Hodgson Impey Cheng Limited (‘‘HLB’’) and reviewed by the Company’s audit committee.

2. BASIS OF PRESENTATION

Pursuant to a group reorganisation (the ‘‘Reorganisation’’) in preparation for the listing of Shares on GEM (the ‘‘Listing’’), the Company became the holding company of the subsidiaries now comprising the Group on 4 December 2014, the details of which are as set out in the prospectus issued by the Company dated 5 February 2015 (the ‘‘Prospectus’’).

Immediately prior to and after the Reorganisation, the principal business of the Group remained under the control of Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man (the ‘‘Management’’). The principal business of the Group is conducted through Perline including its subsidiary, 佛山市南海盛麗皮衣有限公司 (Foshan Nanhai Shengli Leather Garment Co. Ltd., being an English name for identification purpose only). Perline was directly owned by Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man immediately prior to the Reorganisation. The Company has not been involved in any business prior to the Reorganisation. Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group on 4 December 2014. The Reorganisation was merely reorganisations of the principal business of the Group with no change in management of such business and the ultimate owners of the business. Accordingly these financial statements have been prepared by applying the principles of merger accounting as if the Reorganisation had been completed since 1 July 2013.

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The consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the six months ended 31 December 2013 and 2014 include the results and cash flows of all companies now comprising the Group from the earliest date presented or since the date when the subsidiaries first came under the common control, where this is a shorter period. The consolidated statement of financial position of the Group’s subsidiaries as at 30 June 2014 have been prepared to present the assets and liabilities of the subsidiaries using the existing carrying values of the principal business of the Group for the periods presented. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation.

All intra-group transactions and balances have been eliminated on consolidation in full.

3. REVENUE AND OPERATING SEGMENT INFORMATION

Revenue, which is also the Group’s turnover, represents the aggregate of the net invoiced value of leather products sold, after allowances for returns.

The Group has only one single operating segment as the Group is principally engaged in the manufacturing and sales of leather products which is the basis to allocate resources and assess performance.

The chief operating decision-maker has been identified as the Management. The Management reviews the Group’s internal reporting in order to assess performance and allocate resources. The Group focuses primarily on manufacturing and sales of leather products during the periods. Information reported to the chief operating decisionmarker, for the purpose of resources allocation and performance assessment, focuses on the operating results of the Group as a whole as the Group’s resources are integrated and no discrete operating segment financial information is available. Accordingly, no operating segment information is presented.

(a) Information about major customers

Revenues from customer contributing over 10% of the total revenue of the Group during the periods are as follows:

Customer A Customer B Customer C Customer D Customer E	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 9,067 7,583 5,555 8,584 8,507 4,353	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 3,045 3,048 5,555 2,436 3,650 *

• The corresponding revenue did not contribute over 10% of the total sales of the Group for the respective period.

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(b) Geographical information

The following table sets out information about geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s non-current assets. The geographical location of customers is based on the location to which the goods are delivered. The geographical location of non-current assets is based on the physical location of the assets excluding deferred tax assets.

Revenue from external customers

United States of America Hong Kong PRC Australia Japan Malaysia South Africa Netherlands Others (Note)	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 15,041 21,355 7,356 5,734 6,255 189 6,138 2,451 2,310 2,105 2,217 4,330 1,314 — 776 3,823 650 1,038 42,057 41,025	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 4,286 7,704 3,346 2,615 5,732 189 4,074 1,248 343 341 971 986 493 — — 1,984 568 154 19,813 15,221	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 4,286 7,704 3,346 2,615 5,732 189 4,074 1,248 343 341 971 986 493 — — 1,984 568 154 19,813 15,221
			15,221

Note: Other countries included Canada, Italy, South Korea, Mexico, Singapore, New Zealand, Brazil and Cambodia.

Non-current assets

Hong Kong PRC	At 31 December 2014 HK$’000 (audited) 54 184 238	At 30 June 2014 HK$’000 (audited) 54 229
		283

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4. (LOSS)/PROFIT BEFORE TAX

The Group’s (loss)/profit before tax is arrived at after charging/(crediting):

Depreciation of property, plant and equipment Listing expenses Interest income Sales of scrap materials Staff costs (including directors’ remuneration): — Salaries and bonus — Pension scheme contributions	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 65 53 13,695 — (4) (1) (3) (3) 5,990 5,224 615 717 6,605 5,941	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 31 25 9,465 — (3) (1) (2) (1) 3,016 1,858 324 347 3,340 2,205

5. INCOME TAX EXPENSE

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profit for the periods.

The PRC Enterprise Income Tax (the ‘‘EIT’’) is provided on the assessable income of entity of the Group incorporated in the PRC. Pursuant to the PRC Corporate Income Tax Law, the EIT is unified at 25% for all types of entities effective from 1 January 2008.

The income tax expense is as follow:

Current income tax: Hong Kong Profits Tax The PRC Enterprise Income Tax Total income tax expense for the period	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 1,654 1,352 581 102 2,235 1,454	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 529 451 482 85 1,011 536	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 529 451 482 85 1,011 536
			536

6. (LOSS)/EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

For the purpose of this announcement, the calculation of the basic loss/earnings per Share attributable to owners of the Company was based on (i) the loss/profit attributable to owners of the Company for the periods and (ii) the weighted average number of 300,000,000 Shares.

The diluted loss/earnings per Share for the six months and three months ended 31 December 2013 and 2014 are equal to the basic loss/earnings per share as there were no dilutive potential ordinary Shares in issue.

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7. DIVIDENDS

The dividends declared by Perline to its then shareholders for the periods are as follows:

Dividend of Perline to its then shareholders of HK$16 per Perline’s share (2013: nil)	Six months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 3,200 —	Three months ended 31 December 2014 2013 HK$’000 HK$’000 (audited) (unaudited) 3,200 —

Subsequent to the year ended 30 June 2014, in October 2014, dividend of HK$3,200,000 was approved to be appropriated to the then shareholders of Perline.

The Company has not declared any dividends since its incorporation.

8. TRADE RECEIVABLES

Majority of the Group’s sales are based on letters of credit and advances before delivery, and the remaining sales are made with credit terms ranged from 10 to 45 days.

The following is an aging analysis of trade receivables of the Group, presented based on the invoice date.

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	At 31 December 2014 HK$’000 (audited) 7,695 1,382 403 160 9,640	At 30 June 2014 HK$’000 (audited) 8,329 1,197 70 210
		9,806

Trade receivables disclosed above include amounts which are past due at the end of the reporting period for which the Group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.

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9. PLEDGED DEPOSITS

Pledged deposits at 31 December 2014 represents deposits pledged to banks to secure banking facilities granted to the Group. The pledged deposits carry fixed interest rate of 0.4% per annum.

At 30 June 2014, the Group’s banking facilities were supported by the Special Loan Guarantee Scheme of the Government of Hong Kong. The trust receipt loan was not less than 80% guaranteed by the Government of Hong Kong and 100% personally guaranteed by an executive Director. During the six months ended 31 December 2014, new banking facilities were arranged to replace the then existing banking facilities. The aforesaid personal guarantee by an executive Director had been released following the termination of the aforesaid banking facilities. At 31 December 2014, the Group’s banking facilities are supported by pledged deposits of approximately HK$3 million.

10. TRADE PAYABLES

The following is an aging analysis of the trade payables, presented based on invoice date:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	At 31 December 2014 HK$’000 (audited) 2,962 347 115 57 3,481	At 30 June 2014 HK$’000 (audited) 1,740 35 7 29
		1,811

11. AMOUNTS DUE TO DIRECTORS

At 30 June 2014, amounts due to Directors were interest-free, unsecured and had no fixed terms of repayment. The amounts due to Directors have been fully settled during the six months ended 31 December 2014.

12. SHARE CAPITAL

As at 30 June 2014, the issued share capital of the Group represented the issued share capital of Perline.

For the purpose of the preparation of the consolidated statement of financial position as at 31 December 2014, the balance of share capital of the Group represents the issued share capital of the Company.

The Company was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability with an authorised share capital of HK$1,000,000 divided into 100,000,000 shares of HK$0.01 each. On 3 September 2014, one share of HK$0.01 each was allotted and issued at nil paid to the subscriber. As part of the Reorganisation, on the same date, the Company further allotted and issued 999,999 Shares at nil paid to BVI-Cheung, BVI-Lam and BVI-Ching.

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On 11 September 2014, Odella BVI was incorporated in the BVI with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each. On 11 September 2014, 100 shares in Odella BVI were issued to the Company, and the subscription price of each share was US$1 (i.e. the par value of such share).

On 4 December 2014, Odella BVI acquired from BVI-Cheung, BVI-Lam and BVI-Ching the entired share capital in Perline. In consideration of and in exchange for such acquisition, the Company credited as fully paid the 1,000,000 nil-paid Shares which were first issued on 3 September 2014, and issued to BVI-Cheung, BVI-Lam and BVI-Ching 9,000,000 new Shares in the proportion of 68%, 17% and 15% respectively, all credited as fully paid. On completion, Odella BVI became the sole shareholder of Perline, and the number of issued shares in the Company was increased to 10,000,000. Following the completion of Reorganisation on 4 December 2014, the Company became the holding company of the Group. On 12 February 2015, the Shares were listed on GEM of the Stock Exchange by way of placement (‘‘Placing’’) of 100,000,000 Shares of HK$0.01 each.

13. LEASE COMMITMENT

As lessee

	Six months	ended	Three months	ended
	31 December		31 December
	2014	2013	2014	2013
	HK$’000	HK$’000	HK$’000	HK$’000
	(audited)	(unaudited)	(audited)	(unaudited)
Minimum lease payments paid under operating
leases during the periods:
Premises	539	469	270	239

At the end of the reporting periods, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of premises which fall due as follows:

Within one year In the second to fifth years, inclusive	At 31 December 2014 HK$’000 (audited) 1,242 2,061 3,303	At 30 June 2014 HK$’000 (audited) 653 40
		693

Operating lease payments represent rentals payable by the Group for certain of its premises. Leases are negotiated at terms which ranged from 1 to 5 years. The Group does not have an option to purchase the leased premises at the expiry of the lease periods.

– 12 –

14. CONTINGENT LIABILITIES

The Group had no significant contingent liabilities at 30 June 2014 and 31 December 2014.

15. MATERIAL RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in the consolidated financial statements and the steps out in the Reorganisation and Placing, the Group has entered into the following transactions with related parties:

• (a) The remuneration of Directors and other member of key management during the periods was disclosed as follows:

	Six months	ended	Three months	ended
	31 December		31 December
	2014	2013	2014	2013
	HK$’000	HK$’000	HK$’000	HK$’000
	(audited)	(unaudited)	(audited)	(unaudited)
Salary and bonus	874	804	437	417
Pension scheme contributions	30	16	15	8

• (b) Details of the balances with related parties for the periods are set out in note 11 above.

• (c) Details of the banking facilities which were 100% personally guaranteed by a Director for the periods are set out in note 9 above.

16. EVENTS AFTER THE REPORTING PERIOD

The following significant events took place subsequent to 31 December 2014:

• (a) The Company adopted a share option scheme on 28 January 2015, a summary of the terms and conditions of which are set out in the paragraph headed ‘‘Share Option Scheme’’ in Appendix V ‘‘Statutory and General Information’’ to the Prospectus.

• (b) On 28 January 2015, the authorised share capital of the Company was increased from HK$1,000,000 to HK$40,000,000 by the creation of additional 3,900,000,000 shares of HK$0.01 each.

• (c) The Shares first became listed on GEM on 12 February 2015.

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DIVIDEND

The Directors do not recommend the payment of dividend for the six months ended 31 December 2014.

Dividend declared and paid by Perline, a subsidiary of the Company, to the then shareholders of Perline of HK$16 per Perline’s share for the six months ended 31 December 2014 was HK$3,200,000 (2013: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Listing of the Company’s Shares and Reorganisation

The Company was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability. In preparation for the Listing of the Shares on GEM of the Stock Exchange by way of placing of 100,000,000 Shares of HK$0.01 each, the Company and its subsidiaries underwent a corporate reorganisation in 2014. Pursuant to the Reorganisation which was completed on 4 December 2014, the Company became the holding company of the subsidiaries now comprising the Group. Details of the Reorganisation are set out in the section headed ‘‘History, Development and Reorganisation’’ to the Prospectus. On 12 February 2015, the Shares first became listed on GEM. Since the Company was first became listed on 12 February 2015, the disclosure requirement under Rule 18.08A of the GEM Listing rules is not applicable to this interim result announcement.

The total net proceeds from the Placing after deducting all related expenses was approximately HK$26.2 million. As stated in the Prospectus, the Company intends to apply the net proceeds from the Placing to the following purposes:

• (a) approximately 31% will be used for strengthening the Group’s business development capability by expanding its marketing function;

• (b) approximately 2% will be used for enhancing the Group’s manufacturing facilities through purchasing new production equipment and machineries;

• (c) approximately 31% will be used for expansion of the Group’s pre-production product development function;

• (d) approximately 29% will be used for expansion of the Group’s sourcing capability; and

• (e) the remaining amount will be used to provide funding for the Group’s working capital and other general corporate purposes.

Since the Company was listed after 31 December 2014, the disclosure requirement under Rule 18.08A of the GEM Listing Rules is not applicable in this interim results announcement.

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Financial Review

Overview

During the period under review, revenue of the Group has recorded a mild growth of about 3% from about HK$41.0 million to about HK$42.1 million for the first half of the financial year ended 31 December 2014 (‘‘FY2014’’) and the first half of the financial year ending 30 June 2015 (‘‘FY2015’’) respectively, significant growth was recorded as to the Group’s operating profit after tax (excluding listing expenses) of about 51% from about HK$6.7 million to about HK$10.2 million for the first half of FY2014 and FY2015 respectively. However, we reported a loss of about HK$3.5 million for the first half of FY2015. This is mainly attributable to the one-off listing expenses of about HK$13.7 million recorded during the first half of FY2015 in connection with the preparation for Listing.

Revenue

The Group’s revenue principally represented income derived from the manufacturing and sales of leather garment products.

Revenue of approximately HK$15.2 million and HK$19.8 million was recognised for each of the second quarter of FY2014 and FY2015 respectively, which represents an increase of about 30%. Revenue of approximately HK$41.0 million and HK$42.1 million was recognised for each of the six months ended 31 December 2013 and 2014 respectively, which represents a mild growth of about 3%.

The increase was mainly due to additional products being delivered in the second quarter of FY2015 to customers based in Australia, South Africa, Hong Kong and the PRC markets.

Cost of Sales and Gross Profit

Costs of sales mainly represent costs of raw materials, costs of accessories, labour costs and other manufacturing overheads.

The costs of sales amounted to about HK$9.8 million and HK$10.8 million in the second quarter of FY2014 and FY2015 respectively, representing a rise of about 11%. The costs of sales amounted to about HK$27.0 million and HK$23.1 million in the first half of FY2014 and FY2015 respectively, representing a drop of about 14%. The drop in costs of sales in the first half of FY2015 is mainly due to lower costs of accessories materials accrued in the first half of FY2015.

Gross profit for the second quarter of FY2014 and FY2015 were about HK$5.4 million and HK$9.0 million respectively, representing a growth of about 65%. Gross profit for the first half of FY2014 and FY2015 were about HK$14.0 million and HK$18.9 million respectively, representing a growth of about 35%.

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Although the number of pieces of leather garments shipped in the first half of FY2015 was at a similar level of the corresponding period in the previous year, orders in the first half of FY2015 consist of a substantial amount of leather garments involving more sophisticated designs or made of high value materials (such as shearling and calf skin) which need exceptional extent of experienced craftsmanship. Accordingly, the Group was able to charge a price with higher gross margins. On average, we enjoyed higher margin from old and new customers for the second quarter and first half of FY2015, as compared with those for the corresponding periods of FY2014.

Other Revenue and Other Income

Other revenue and other income amounted to about HK$7,000 and HK$5,000 for the first half and second quarter of FY2015, respectively, represented mainly sundry income that are incidental to our business principally including interest income and sales of scrap materials.

Selling and Distribution Expenses

Selling and distribution expenses comprise mainly logistic expenses and marketing expenses.

The selling and distribution expenses have increased from about HK$0.4 million in the second quarter of FY2014 to about HK$0.6 million in the second quarter of FY2015, representing an increase of about HK$0.2 million. The selling and distribution expenses for the first half of FY2015 were in line with those for the first half of FY2014.

The higher selling and distribution expenses in the second quarter of FY2015 is mainly attributable to higher marketing expenses as a result of more intensive marketing activities in that period.

Administrative Expenses

Administrative expenses comprise mainly payroll expenses, rent and rates and other office administrative expenses.

Administrative expenses have increased from about HK$2.2 million in the second quarter of FY2014 to about HK$2.8 million in the second quarter of FY2015, representing an increase of about 26%. Administrative expenses have increased from about HK$4.5 million in the first half of FY2014 to about HK$5.2 million in the first half of FY2015, representing an increase of about 14%.

The higher administrative expenses in the second quarter and first half of FY2015 are mainly attributable to higher rental and payroll expenses during those periods.

Listing Expenses

During the second quarter and first half of FY2015, the Group recorded listing expenses of about HK$9.5 million and HK$13.7 million, respectively, in connection with the preparation for listing. Total listing expenses are estimated to be about HK$28.8 million. According to Hong Kong Accounting Standard, part of these expenses is available for offsetting against the Company’s equity reserves.

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Finance Costs

Finance costs represent bank loan and trust receipt loan interests. For both of the second quarter and first half of FY2015 and 2014, there were insignificant amount of bank loan interests as there were no major outstanding bank loans.

Income Tax Expense

Income tax represents Hong Kong profits tax at 16.5% for the Company’s subsidiary in Hong Kong and PRC profits tax at 25% for the Company’s subsidiary in Foshan, the PRC.

Higher effective tax rates for the second quarter and first half of FY2015 as compared to the corresponding periods in FY2014 were recorded because the listing expenses which were only incurred in FY2015 mainly consisted of expenditures which may not be tax-deductible.

(Loss)/Profit for the Period

For the first half of FY2014, the Group recorded profit for the period of about HK$6.7 million. For the first half of FY2015, the Group recorded loss for the period of about HK$3.5 million. This is the net effect of recurring operational profit after tax for the period of about HK$10.2 million and nonrecurring listing expenses of about HK$13.7 million incurred for the preparation for Listing during the first half of FY2015.

After taking out the effect of the one-off non-recurring listing expenses of about HK$9.5 million for the second quarter of FY2015, the Group would have recorded profit after tax of about HK$4.6 million. For the second quarter of FY2014, the Group recorded profit after tax of about HK$2.3 million.

Financial Position, Liquidity and Financial Resources

The Group adopts a prudent cash and financial management policy. In order to achieve better cost control and minimise the costs of funds, the Group’s treasury activities are centralised and cash is generally deposited with banks in Hong Kong and PRC and denominated mostly in United States dollars and Renminbi. Hong Kong dollars are pegged to United States dollars under the current policy of the Government of Hong Kong.

The Group has remained at a sound financial resource level. Included in net current assets were cash and bank balances (including pledged deposits) as at 31 December 2014 totalling about HK$13.0 million (30 June 2014: HK$15.1 million). Gearing ratio is calculated by dividing the net debt by total equity, where net debt is calculated as bank borrowings and amounts due to Directors less cash and bank balances. The Group did not have any outstanding net debt as at 31 December 2014 and 30 June 2014 and thus no gearing ratio is applicable.

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In previous years before the Company became listed on the Stock Exchange, the Group’s operations were mainly financed by its shareholders’ fund injections, loans and internal resources. Following the Placing and the Listing, the Group’s liquidity position became stronger and this enables the Group to expand in accordance with its business directions.

Charge Over Assets of the Group

At 30 June 2014, the Group’s banking facilities were supported by the Special Loan Guarantee Scheme of the Government of Hong Kong. The trust receipt loan was not less than 80% guaranteed by the Government of Hong Kong and 100% personally guaranteed by an executive Director. During the six months ended 31 December 2014, new banking facilities were arranged to replace the then existing banking facilities. The aforesaid personal guarantee by an executive Director had been released following the termination of the aforesaid banking facilities.

At 31 December 2014, the Group’s banking facilities are supported by pledged deposits of the Group of approximately HK$3 million.

Financial Management Policies

The Group in its ordinary course of business is exposed to market risks such as currency risk and interest rate risk. The Group’s risk management strategy aims to minimise the adverse effects of these risks on its financial performance.

As most of the Group’s trading transactions, monetary assets and liabilities are denominated mainly in Hong Kong dollars, (being the Group’s operating and reporting currencies), United States dollars (to which Hong Kong dollars were pegged) and Renminbi, the impact of foreign exchange exposure to the Group was minimal and there was no significant adverse effect on normal operations during the reporting period.

With the current interest rates staying at relatively low levels, the Group has not entered into any interest rate hedging contracts or any other interest rate related derivative financial instrument. However, the Group continues to monitor its related interest rate exposure closely.

Capital Commitments and Contingent Liabilities

At 31 December 2014, the Group did not have any significant capital commitment (30 June 2014: nil).

At 31 December 2014, the Group did not have any significant contingent liability (30 June 2014: nil).

Material Acquisitions and Disposals

Save for the Reorganisation, during the six months ended 31 December 2014, the Group did not have any material acquisition and disposal (six months ended 31 December 2013: nil).

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Employees and Remuneration Policy

As at 31 December 2014, the Group had a workforce of 119 employees (30 June 2014: 114). The increase in number of employees was mainly due to increase in production and administrative workforce. Total staff cost for the six months ended 31 December 2014 was about HK$6.6 million, representing an increase of about HK$0.7 million as compared to the staff cost for the six months ended 31 December 2013.

The Group’s remuneration policy is basically determined by the performance of individual employees and the Directors and the market conditions. In addition to salaries and discretionary bonuses, employee benefits included pension scheme contributions.

During the period under review, the Group did not experience any strikes, work stoppages or significant labor disputes which affected its operations in the past and it did not experience any significant difficulties in recruiting and retaining qualified staff.

The Group provides various training to our employees to enhance their technical skills and knowledge relevant to the employees’ responsibilities. The Group also provides our employees with quality control standards and work safety standards training to enhance their safety awareness.

Business Review

The Group produces all the leather garment products according to its customers’ specifications and under their brands or labels. It is considered that the customers’ orders, including the types, specification and design of the products, were made based on consumer preference, market trend, seasonality and their fashion style for a particular season, and the Group determines the price of each order with the customers with reference to the cost of sales such as the cost of raw materials, labour costs, the size of the order, the complexity of the product design and the manufacturing process, the packaging and transportation costs, the customer’s relationship with the Group, the customer’s approximate retail price of the products, and mark-up.

The management believes that the Group has earned its reputation and enjoyed a competitive advantage over its competitors as it has in its employ skilled and experienced workers, especially sewing workers and cutter workers who can produce products which conform to its customers’ stringent product design specifications and aesthetic requirements. Unlike other manufacturers who purely produce garments on original equipment manufacturer basis, the Group also offers a range of ancillary pre-production product development services to certain of its international and regional fashion brand customers at the early stage of their pre-production product development. It is considered that these international and regional fashion brands customers highly appreciate the Group’s craftsmanship, dedication in the valueadded pre-production product development services and experience in the leather garment manufacturing industry and they are willing to pay higher prices for the Group’s products.

The Group can effectively manage the risk as to the fluctuations in the raw materials price and are generally able to pass on any increase in the costs of raw materials to its customers.

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The Group has recorded similar level of revenue while much higher gross profit in second quarter and first half of FY2015. As an observation of fashion trend, customers are more interested in shearlings, calf skin and double faced leather, which are generally higher value in costs and require more complex and sophisticated craftsmanship. The Group has also further strengthened its marketing efforts to boost up sales to customers in Australia, South Africa, Hong Kong and the PRC markets.

Outlook

The management believes the global financial climate is going to recover gradually from the economic downturn. Recently, signs of recovery, especially in the United States market, have become apparent. With the gradual recovery of economy of the Group’s major markets, such as the United States market, the demand for leather garments are expected to improve gradually. All these bring positive impact to the growth of our garments sale in the foreseeable future.

Looking ahead, the management believes that the Listing of the Shares on GEM will enhance the Group’s corporate profile and image, and that the net proceeds from the Placing of approximately HK$26.2 million will strengthen its financial position.

The Group intends to further develop its business by:

• (i) strengthening its marketing capability by expanding its marketing team, participation in trade shows and fairs and pay more visits to our customers in Hong Kong and overseas to enhance its relations with existing customers and expand its customer base;

• (ii) expanding of the Group’s pre-production product development function by recruiting more staff for the Group’s design and development team;

• (iii) expanding of its sourcing capability by recruiting more staff or agents to expand our geographical coverage of suppliers and make more frequent supplier visits to strengthen the Group’s quality control on leather raw materials; and

• (iv) enhancing its manufacturing facilities through purchasing new production equipment and machineries to replace certain old equipment and machineries and enhance its technical ability and production capability in order to meet the increasing demand for the Group’s production capability.

It is expected that the performance of the Group for the financial year ending 30 June 2015 will be impacted by the further recognition of additional listing expenses.

DIRECTORS’ INTEREST IN COMPETING BUSINESS

For the six months ended 31 December 2014, the Directors are not aware of any business or interest of the Directors and their respective associates (as defined under the GEM Listing Rules) that compete or may compete with the business of the Group and any other conflicts of interests which any such person has or may have with the Group.

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COMPLIANCE ADVISOR’S INTERESTS

In accordance with Rule 6A.19 of the GEM Listing Rules, the Company has appointed Halcyon Capital Limited (‘‘Halcyon’’) to be the compliance advisor. Halcyon, being the sponsor, has declared its independence pursuant to Rule 6A.07 of the GEM Listing Rules. Save as provided for under the underwriting agreement relating to the placing of the Shares during the Listing, neither Halcyon nor any of its associates and none of the directors or employees of Halcyon who have been involved in providing advice to the Company as the sponsor, has or may, as a result of the Placing, have any interest in any securities of the Company or any other companies of the Group (including options or rights to subscribe for such securities).

The compliance advisor’s appointment is for a period commencing on 12 February 2015 (i.e. date of Listing) and ending on the date on which the Company complies with Rule 18.03 of the GEM Listing Rules in respect of the despatch of its annual report of the financial results for the second full financial year commencing after that date, i.e. for the year ending 30 June 2017, or until the compliance advisor agreement is terminated in accordance with its terms and conditions, whichever is earlier. Pursuant to the compliance advisor agreement entered into between Halcyon and the Company, Halcyon will receive fees for acting as the Company’s compliance advisor.

COMPLIANCE WITH CODE OF CONDUCT FOR DIRECTORS’ SECURITIES TRANSACTION

The Company has adopted a code of conduct regarding securities transactions by Directors (‘‘Model Code’’) on terms no less exacting than the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules.

The Shares were listed on GEM on 12 February 2015. As of 31 December 2014, the Shares were not yet listed on GEM, the requirements in the GEM Listing Rules were not applicable. In response to specific inquiry made by the Company, each of the Directors excluding those appointed after 31 December 2014 gave confirmation that other than the steps taken out in connection with the Reorganisation and the Placing, he/she complied with the Model Code throughout the six months ended 31 December 2014. For information purpose and assuming the period upto the latest practicable date (i.e. 12 February 2015) prior to the publication of this announcement is the period required to be reported under the GEM Listing Rules, each of the Directors gave confirmation that other than the steps taken out in connection with the Placing, he/she was in compliance the Model Code from the date of Listing upto the latest practicable date.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE

The Company is committed to achieving high standards of corporate governance with a view to safeguarding the interests of its shareholders. To accomplish this, the Company has adopted the principles and the code provisions of the Corporate Governance Code (the ‘‘CG Code’’) contained in Appendix 15 of the GEM Listing Rules.

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The Shares were listed on GEM on 12 February 2015. As of 31 December 2014, the Shares were not yet listed on GEM, the requirements in the CG Code were not applicable during the six months ended 31 December 2014. For information purpose and assuming the period upto the latest practicable date (i.e. 12 February 2015) prior to the publication of this announcement is the period required to be reported under the GEM Listing Rules, the Company was in compliance to the CG Code from the date of Listing upto the latest practicable date.

AUDIT COMMITTEE

The audit committee of the Company has been established in accordance with the GEM Listing Rules. Members of the audit committee comprise Mr. Wong Wai Kong (chairman of the audit committee), Mr. How Sze Ming and Mr. Philip David Thacker, all of them are independent non-executive Directors.

The consolidated financial statements for the six months ended 31 December 2014 were audited by HLB and HLB that the consolidated financial statements for the six months ended 31 December 2013 were unaudited.

The committee has reviewed with the management this interim results announcement, the accounting principles and practices adopted by the Group, financial reporting matters including a review of the audited consolidated results for the six months ended 31 December 2014 prior to recommending them to the Board for approval.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

The Shares were first listed on GEM of the Stock Exchange on 12 February 2015. During the six months ended 31 December 2014, save for the Reorganisation and Placing disclosed in the Prospectus, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s securities.

PUBLICATION OF INTERIM RESULTS

The interim results announcement is published on the websites of the Company (www.odella.com) and the Stock Exchange (www.hkexnews.com.hk). The interim report for the six months ended 31 December 2014 containing all the information required by Appendix 18 to the GEM Listing Rules will be dispatched to shareholders of the Company and available on the said websites in due course.

By Order of the Board Cheung Woon Yiu Chairman

Hong Kong, 13 February 2015

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As at the date of this announcement, the Board comprises:

Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man as executive Directors; Ms. Ng Lai Hung as nonexecutive Director; and Mr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker as independent nonexecutive Directors.

This announcement will remain on the ‘‘Latest Company Announcement’’ page of the GEM website at www.hkgem.com for at least 7 days from the day of its posting and on the Company’s website at www.odella.com.

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