China Lilang : Financial Statements - – ANNUAL REPORT 2023

Stock Code ٰ΅˾໮ : 1234

2023

Annual Report 年報

About ᗫ׵

China Lilang ʕ਷лࠛ

China Lilang is one of the leading PRC menswear enterprises. As an integrated fashion enterprise, the Group designs, sources and manufactures high-quality business and casual apparel for men and sells under the " лࠛ LILANZ" and " лࠛ LESS IS MORE" brands across an extensive retail and distribution network, covering 31 provinces, autonomous regions and municipalities in the PRC.

ʕ਷лࠛ݊ʕ਷ჯ΋ٙӲༀΆุʘɓfЪމɓ࢕ၝΥࣛༀΆุdණྠ ணࠇeમᒅe͛ପԨ˸ۜ೐˜лࠛ LILANZ™ʿ˜лࠛ LESS IS MORE™ቖਯ ᎴሯӲɻਠਕʿ;ඝ؂ༀfՉପۜ׵ཁбʕ਷ 31 ࡈ޲eІطਜʿٜᒍ ̹ٙᄿᒪཧਯʿʱቖၣഖቖਯf

Contents ͦ፽

Corporate Information 2 ʮ̡༟ࣘ

Financial Highlights 4 ৌਕ࿜ࠅ

Chairman's Statement 6 ˴ࢩజѓ

Management Discussion and Analysis 11 ၍ଣᄴীሞʿʱؓ

Environmental, Social and Governance Report 34 ᐑྤeٟึʿ၍طజѓ

Corporate Governance Report 79

Άุ၍طజѓ

Biographical Details of Directors and 98

Senior Management ໨ԫʿ৷ॴ၍ଣᄴᄵዝ

Report of the Directors 109 ໨ԫึజѓ

Independent Auditor's Report 124 ዹͭࣨᅰࢪజѓ

Consolidated Statement of Profit or Loss and 133

Other Comprehensive Income ၝΥฦूʿՉ˼Όࠦϗूڌ

Consolidated Statement of Financial Position 134 ၝΥৌਕًرڌ

Consolidated Statement of Changes in Equity 136 ၝΥᛆूᜊਗڌ

Consolidated Statement of Cash Flows 137 ၝΥତږݴඎڌ

Notes to the Financial Statements 138 ৌਕజڌڝൗ

Five Years Summary 204 ʞϋ฿ࠅ

Corporate Information
ʮ̡༟ࣘ
BOARD OF DIRECTORS	໨ԫึ
EXECUTIVE DIRECTORS	ੂБ໨ԫ
Mr. Wang Liang Xing	ˮԄ݋΋͛
Mr. Wang Cong Xing	ˮᑋ݋΋͛
Mr. Pan Rong Bin	ᆙ࿲੸΋͛
Mr. Wang Jun Hong	ˮڲ҃΋͛
(appointed on 5 February 2024)	€׵ɚཧɚ̬ϋɚ˜ʞ˚ᐏ։΂
Mr. Wang Zhi Yong	ˮ౽ۇ΋͛
(appointed on 5 February 2024)	€׵ɚཧɚ̬ϋɚ˜ʞ˚ᐏ։΂
NON-EXECUTIVE DIRECTORS	ڢੂБ໨ԫ
Mr. Wang Dong Xing (Chairman)	ˮ̆݋΋͛€˴ࢩ
Mr. Cai Rong Hua	ᇹ࿲ശ΋͛
Mr. Hu Cheng Chu	ߡ༐ڋ΋͛
INDEPENDENT NON-EXECUTIVE DIRECTORS	ዹͭڢੂБ໨ԫ
Mr. Lai Shixian	፠˰ሬ΋͛
Mr. Zhang Shengman	௝᳅ਟ΋͛
(appointed on 17 March 2023)	€׵ɚཧɚɧϋɧ˜ɤɖ˚ᐏ։΂
Prof. Liao Jianwen	࿋ܔ˖઺બ
(appointed on 5 February 2024)	€׵ɚཧɚ̬ϋɚ˜ʞ˚ᐏ։΂
Prof. Jiang Zhan	ᇸ࢝઺બ
(appointed on 5 February 2024)	€׵ɚཧɚ̬ϋɚ˜ʞ˚ᐏ։΂
Dr. Lu Hong Te	ѐᒿᅃ௹ɻ
(resigned on 5 February 2024)	€׵ɚཧɚ̬ϋɚ˜ʞ˚ᗘ΂
Mr. Nie Xing (resigned on 1 June 2023)	ᔗ݋΋͛€׵ɚཧɚɧϋʬ˜ɓ˚ᗘ΂
BOARD COMMITTEES	໨ԫ։ࡰึ
AUDIT COMMITTEE	ᄲࣨ։ࡰึ
Mr. Zhang Shengman (Chairman)	௝᳅ਟ΋͛€˴ࢩ
Mr. Lai Shixian	፠˰ሬ΋͛
Prof. Liao Jianwen	࿋ܔ˖઺બ
Prof. Jiang Zhan	ᇸ࢝઺બ
REMUNERATION COMMITTEE	ᑚཇ։ࡰึ
Mr. Lai Shixian (Chairman)	፠˰ሬ΋͛€˴ࢩ
Mr. Wang Cong Xing	ˮᑋ݋΋͛
Mr. Zhang Shengman	௝᳅ਟ΋͛
NOMINATION COMMITTEE	౤Τ։ࡰึ
Mr. Wang Dong Xing (Chairman)	ˮ̆݋΋͛€˴ࢩ
Mr. Zhang Shengman	௝᳅ਟ΋͛
Prof. Liao Jianwen	࿋ܔ˖઺બ
Prof. Jiang Zhan	ᇸ࢝઺બ
RISK MANAGEMENT COMMITTEE	ࠬᎈ၍ଣ։ࡰึ
Mr. Wang Dong Xing (Chairman)	ˮ̆݋΋͛€˴ࢩ
Mr. Wang Cong Xing	ˮᑋ݋΋͛
Mr. Pan Rong Bin	ᆙ࿲੸΋͛
COMPANY SECRETARY	ʮ̡।ࣣ
Mr. Shum Chi Chung	Ҋෛ֚΋͛

Corporate Information (Continued)

ʮ̡༟ࣘ€ᚃ

AUTHORISED REPRESENTATIVES

Mr. Wang Dong Xing

Mr. Shum Chi Chung

REGISTERED OFFICE

Cricket Square, Hutchins Drive P.O. Box 2681

Grand Cayman, KY1-1111 Cayman Islands

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Suite 3402

34th Floor, Lippo Centre Tower One

No. 89 Queensway Hong Kong

HEAD OFFICE IN THE PRC

Lilang Industrial Park

200 Chang Xing Road Jinjiang City

Fujian Province The PRC

SHARE REGISTRARS AND TRANSFER OFFICES

SUNTERA (CAYMAN) LIMITED

Suite 3204, Unit 2A

Block 3, Building D P.O. Box 1586 Gardenia Court Camana Bay

Grand Cayman, KY1-1100 Cayman Islands

HONG KONG REGISTRAR

Computershare Hong Kong Investor Services Limited Shops 1712-1716

17th Floor, Hopewell Centre 183 Queen's Road East Wanchai

Hong Kong

AUDITOR

KPMG, Certified Public Accountants

(Public Interest Entity Auditor registered in accordance with the Accounting and Financial Reporting Council Ordinance)

PRINCIPAL BANKERS

Industrial Bank Co., Ltd.

China Minsheng Banking Corp., Ltd. Bank of China (Hong Kong) Limited

બᛆ˾ڌ

ˮ̆݋΋͛ Ҋෛ֚΋͛

ൗ̅፬ԫஈ

Cricket Square, Hutchins Drive P.O. Box 2681

Grand Cayman, KY1-1111 Cayman Islands

࠰ಥ˴ࠅᐄุήᓃ

࠰ಥ ږᙒ༸ 89 ໮ ɢᘒʕː ɓࢭ 34 ᅽ 3402 ܃

ʕ਷ᐼ፬ԫஈ

ʕ਷ ၅ܔ޲ ࣜϪ̹ ڗጳ༩ 200 ໮ лࠛʈุ෤

ٰ΅ཀ˒೮াஈ

SUNTERA CAYMAN LIMITED

Suite 3204, Unit 2A

Block 3, Building D P.O. Box 1586 Gardenia Court Camana Bay

Grand Cayman, KY1-1100 Cayman Islands

࠰ಥٰ΅೮াஈ

࠰ಥʕ̯ᗇՎ೮াϞࠢʮ̡ ࠰ಥ ᝄ˺ ެΧɽ༸؇ 183 ໮ Υձʕː 17 ᅽ 1712-1716 ໮⧕

ࣨᅰࢪ

ଭ৵۾ึࠇࢪԫਕהdੂุึࠇࢪ €׵ึࠇʿৌਕ䁩జ҅ૢԷ'ɨٙൗ̅ʮ଺ лूྼ᜗ࣨᅰࢪ

˴ࠅֻԸვБ

ጳุვБٰ΅Ϟࠢʮ̡ ʕ਷͏͛ვБٰ΅Ϟࠢʮ̡ ʕ਷ვБ€࠰ಥϞࠢʮ̡

Financial Highlights

ৌਕ࿜ࠅ

Year ended 31 December

࿚Їɤɚ˜ɧɤɓ˚˟ϋܓ

2022
ɚཧɚɧϋ	ɚཧɚɚϋ
(RMB million)	(RMB million)	Changes(%)
€ɛ͏࿆ϵຬʩ	€ɛ͏࿆ϵຬʩ	ᜊష (%)
Revenue	ϗɝ	3,543.8	3,086.2	+14.8
Gross profit	ˣл	1,706.8	1,420.2	+20.2
Profit from operations	຾ᐄлᆗ	610.6	519.1	+17.6
Profit for the year	ϋܓлᆗ	530.4	448.1	+18.4
(RMB cents)	(RMB cents)	Changes(%)
€ɛ͏࿆ʱ	€ɛ͏࿆ʱ	ᜊష (%)
Earnings per share	ӊٰޮл
- Basic	- ਿ͉	44.30	37.42	+18.4
- Diluted	- ᛅᑛ	44.30	37.42	+18.4
Shareholders' equity per share	ӊٰٰ؇ᛆू	331.3	315.8	+4.9
Interim dividend per share	ӊٰʕಂٰࢹ	HK13 cents ಥ̀	HK13 cents ಥ̀	0
Special interim dividend per share	ӊٰतйʕಂٰࢹ	HK5 cents ಥ̀	HK5 cents ಥ̀	0
Final dividend per share	ӊٰ͋ಂٰࢹ	HK13 cents ಥ̀	HK9 cents ಥ̀	+44.4
Special final dividend per share	ӊٰतй͋ಂٰࢹ	HK5 cents ಥ̀	HK5 cents ಥ̀	0
(% points)
(%)	(%)	€ϵʱᓃ
Gross profit margin	ˣлଟ	48.2	46.0	+2.2
Operating profit margin	຾ᐄлᆗଟ	17.2	16.8	+0.4
Net profit margin	ଋлᆗଟ	15.0	14.5	+0.5
Return on average	̻ѩٰ؇ᛆू
shareholders' equity(1)	Ϋజ (1)	13.7	12.0	+1.7
Effective tax rate	Ϟࣖ೼ଟ	19.4	18.1	+1.3
Advertising, promotional and	ᄿѓe܁ෂʿ
renovation expenses	ༀࡌක˕
(as a percentage of revenue)	€Цϗɝϵʱˢ	14.7	13.0	+1.7

Financial Highlights (Continued)

ৌਕ࿜ࠅ€ᚃ

Six months ended

30 June 2023

Year ended 31 December

࿚Їɤɚ˜ɧɤɓ˚˟ϋܓ

࿚Ї

ɚཧɚɧϋ

2023	2022	ʬ˜ɧɤ˚
ɚཧɚɧϋ	ɚཧɚɚϋ	˟ʬࡈ˜
Average inventory turnover days(2)	̻ѩπ஬඄ᔷ˂ᅰ (2)	170	195	211
Average trade receivables	̻ѩᏐϗ൱׸ሪಛ
turnover days(3)	඄ᔷ˂ᅰ (3)	42	54	51
Average trade payables	̻ѩᏐ˹൱׸ሪಛ
turnover days(4)	඄ᔷ˂ᅰ (4)	130	111	140
Notes:	ڝൗj

• (1) Return on average shareholders' equity is equal to the profit for the year divided by the average of the beginning and closing balance of total shareholders' equity.

  • (1) ̻ѩٰ؇ᛆूΫజ˸ϋܓлᆗৰ˸ٰ؇ᛆ ूᐼᕘٙϋڋʿϋ̻͋ѩഐቱࠇၑf

• (2) Average inventory turnover days is equal to the average of the beginning and closing inventory balance divided by cost of sales and multiplied by the number of days in the year.

  • (2) ̻ѩπ஬඄ᔷ˂ᅰ˸ϋڋʿϋ̻͋ѩπ஬ ഐቱৰ˸ቖਯϓ͉dΎ࠱˸ϋʫ˂ᅰࠇ ၑf

• (3) Average trade receivables turnover days is equal to the average of the beginning and closing trade and bills receivables balance divided by revenue (including value-added tax) and multiplied by the number of days in the year.

  • (3) ̻ѩᏐϗ൱׸ሪಛ඄ᔷ˂ᅰ˸ϋڋʿϋ͋ ̻ѩᏐϗ൱׸ሪಛʿᏐϗୃኽഐቱৰ˸ϗ ɝ€ўᄣ࠽೼dΎ࠱˸ϋʫ˂ᅰࠇၑf

• (4) Average trade payables turnover days is equal to the average of the beginning and closing trade and bills payables balance divided by cost of sales and multiplied by the number of days in the year.

• (4) ̻ѩᏐ˹൱׸ሪಛ඄ᔷ˂ᅰ˸ϋڋʿϋ͋ ̻ѩᏐ˹൱׸ሪಛʿᏐ˹ୃኽഐቱৰ˸ቖ ਯϓ͉dΎ࠱˸ϋʫ˂ᅰࠇၑf

Chairman's Statement ˴ࢩజѓ

Operating in such a challenging business environment, China Lilang actively responded to the changing market by continuously facilitating new retail business, promoting sales and driving store efficiency. By launching quality and iconic items as well as rejuvenating the brands, it enhanced the competitiveness of the Group's brands.

ࠦ࿁̂တܿ኷ٙᐄਠᐑྤdʕ਷лࠛጐ฽Ꮠ࿁̹ఙᜊʷdܵᚃપਗอ ཧਯุਕdપᄿڮቖe੭ਗֳࣖfપ̈฽ߧఊۜdԨ̋੶ۜ೐ϋڡ ʷd౤ʺණྠۜ೐ٙᘩنɢf

To all shareholders,

In 2023, China welcomed its first year of recovery after three years of pandemic. Despite the continued complex and ever-changing global situation, the economy in mainland demonstrated resilience. Under the guidance of the encourage consumption policy by the central government, the retail market has gradually recovered and achieved a moderate growth in the second half of the year. During the year, China Lilang Limited (the "Company" or "China Lilang", together with its subsidiaries, collectively known as the "Group") pushed forward the Lilang brand's strategic upgrade and achieved both revenue and profit growth, laying a solid foundation for future sustainable development.

ߧ΢Зٰ؇j

ɚཧɚɧϋdʕ਷຾ዝཀɧϋޥઋܝdڎ Ըూᘽٙୋɓϋfᒱ್Όଢ҅ැԱᔚልᕏ εᜊdШʫή຾᏶࢝ତද׌dίʕִ̯݁ ڮऊ൬݁ഄˏኬɨdཧਯ̹ఙ஼နΫาd ׵ɨ̒ϋܓྼତ๝ձᄣڗfʕ਷лࠛϞࠢ ʮ̡€˸ɨᔊ၈˜͉ʮ̡™א˜ʕ਷лࠛ™d ˸ʿՉڝ᙮ʮ̡୕၈˜ණྠ™ϋʫપආл ࠛۜ೐኷ଫٙʺॴʈЪdԨ՟੻ϗɝeл ᆗᕐᄣڗdމ͊Ը̙ܵᚃ೯࢝ఢ֛਺ྼٙ ਿᓾf

As of 31 December 2023, the Group's revenue for the year increased by 14.8% year-on-year to RMB3,543.8 million. Profit for the year increased by 18.4% year-on-year to RMB530.4 million.

࿚Їɚཧɚɧϋɤɚ˜ɧɤɓ˚dණྠϋ ܓϗɝΝˢᄣڗ 14.8% Їɛ͏࿆ 3,543.8 ϵ ຬʩiϋܓлᆗΝˢɪʺ 18.4%dЇɛ͏࿆ 530.4 ϵຬʩf

Chairman's Statement (Continued)
˴ࢩజѓ€ᚃ
During the year, the Group maintained a healthy financial position with	ණྠ׵ϋʫڭܵৌ݁ᖢ਄dତږݴ̂ԑd
sufficient cash flow. The Board of Directors has resolved to pay a final	໨ԫึӔᙄݼ˹͋ಂٰࢹӊٰ 13 ಥ̀€ɚ
dividend of HK13cents (2022: HK9 cents) per share and a special final	ཧɚɚϋj9 ಥ̀ʿतй͋ಂٰࢹӊٰ 5
dividend of HK5 cents (2022: HK5 cents) per share, thus maintaining a stable	ಥ̀€ɚཧɚɚϋj5 ಥ̀dΌϋᘱᚃၪ
payout ratio throughout the year.	ܵᖢ֛ٙݼࢹˢଟf
During the year, the Group continued to strengthen the development	ϋʫdණྠܵᚃ੶ʷอཧਯุਕٙ೯࢝d
of the new retail business. It optimised the integration of online and	ʔᓙᎴʷᇞɪᇞɨፄΥٙБቖᅼόdᘱ
offline models and continued investment in new product research and	ᚃҳɝอପۜ޼೯d˸ቇᏐ̹ఙცӋٙᜊ
development capacity to adapt to changes in market demand and	ʷdપਗ˜лࠛᔊߒӲༀ™ۜ೐኷ଫٙʺ
promoted the strategic upgrade of "Lilang's Minimalist Men's Fashion". By	ॴdீཀࠠอணࠇٙᅺᏏeΌอٙۜ೐Җ
redesigned logo, revitalizing its brand image and diversified promotional	൥ձεʩʷٙ܁ෂપᄿdΫᏐอࣛ˾ऊ൬
campaigns to respond to the personalised needs of the new generation of	٫ٙࡈ׌ʷცӋdˏჯʕ਷Ӳༀࣛ֠ᆓ
consumers and leading the fashion trend for Chinese menswear.	ݴf
To ride on the growing popularity of e-commerce, the Group continued	ϞԈཥɿਠ൱һᒈ౷ʿdණྠ׵ϋʫܵᚃ
to expand its new retail business during the year and intensified the	ן࢝อཧਯุਕd̋ɽҥࠪഃ̨̻ɪٙ܁
promotion on Tiktok and leverage the e-commerce live streaming to drive	ෂɢܓdлٜ͜ᅧ੭஬މᚨਗุਕٙᄣڗ
business growth. Prior to the "Double 11 Shopping Festival", the Group	ᓃfί˜ᕐ 11 ™ۃɼdණྠீཀҥࠪᅧ׳
broadcasted the highlights from "LESS IS MORE Grand Anping Bridge	ί၅ܔࣜϪ˰፲̚༦τ̻዗ᑘ፬ٙ˜LESS
Show: Knowledge and Practice of the Youth" ("Anping Bridge Show") held	IS MORE τ̻዗ڡϋٝБϋܓɽӸ™€˸ɨᔊ
at Anping Bridge, a world heritage site in Jinjiang, Fujian through TikTok to	၈˜τ̻዗ɽӸ™ʘၚശ˪ݬd࢝ତʕ਷
showcase the minimalist fashion style of China's Lilang's menswear and laid	лࠛӲༀᔊߒࣛ֠ٙ߈ഹࠬࣸdމ˜ᕐ 11™
a good foundation for the sales during the Double 11 Shopping Festival.	ٙቖਯЪ቗ྦfණྠ͵೯౨ίᇞ̨̻ၾᇞ
The Group also leveraged complementary advantages of its online platform	ɨژֳٙʝ໾Ꮄැd੭ਗֳࣖᄣڗfϋʫ
and the offline in-stores to foster the growth of the store performance.	อཧਯቖਯΝˢᄣڗ 17.6%f
During the year, the new retail sales grew by 17.6%. year-on-year.
The Group pragmatically developed its own retail network and supported	ණྠਕྼή೯࢝Չཧਯၣഖʿપਗʱቖਠ
distributors in optimising the retail network. As of the end of 2023, the	Ꮄʷཧਯၣ༩d࿚Їɚཧɚɧϋϋֵdණ
Group had a total of 2,695 stores, including 296 smart casual collection	ྠІᐄٙჀਠਕژֳ΍ 296 ࢕d Ⴠ ਠ ਕ ʱ
stores operated under the direct-to-retail model, 6 smart casual collection	ቖژֳ΍ 6 ࢕d˴ӻΐֳ⧕΍ 2,393 ࢕dΥ
stores operated by distributors and a total of 2,393 core collection stores,	ࠇ΍ 2,695 ࢕dΝˢଋᄣ̋ 51 ࢕fϾණྠ
representing a net year on year increase of 51 stores. The Group has	પਗٙቖਯಬ༸ҷࠧd຾ཀɧϋрɢ׵ϋ
completed the sales channel reform during the year after three years of	ʫҁϓdהܔ̬ͭٙࡈቖਯಬ༸j˴ӻΐ
hard work, and the four main sales channels established were as follow:	ٙʱቖʿ˾ቖᅼόeჀਠਕٙІᐄᅼόe
The distribution and consignment models of the core collection, the direct-	Іᐄٙཥਠ̨̻d΢Іѩ፽੻ޮлdԨϓ
to-retail stores of the smart casual collection and the direct-to-retail stores	̌౤ʺֳࣖd౤ʺණྠٙޮлঐɢf
under the e-commerce sales model has recorded profits respectively, and
successfully enhanced store efficiency and profitability of the Group.