Glorious Sun Enterprises : Announcement of Interim Results for the six months ended 30 June 2020

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

GLORIOUS SUN ENTERPRISES LIMITED

旭日企業有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 393)

Interim Results Announcement

For the six months ended 30 June 2020

INTERIM RESULTS

The board of directors (the "Board") of Glorious Sun Enterprises Limited (the "Company") are pleased to announce the unaudited interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2020 together with the comparative figures for the same period as follows:

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS Six months ended 30 June 2020

		2020	2019
		(Unaudited)		(Unaudited)
	Notes	HK$'000		HK$'000
REVENUE
Revenue from contracts with customers		420,382	603,882
Revenue from other sources		37,403		59,662
	(3)	457,785	663,544
Cost of sales		(383,494)		(549,409)
Gross profit		74,291	114,135
Other income and gains		21,948	16,711
Selling and distribution expenses		(10,109)	(19,840)
Administrative expenses		(31,524)	(36,571)
Other expenses		(11,209)	(6,491)
Finance costs		(1,415)		(4,724)
PROFIT BEFORE TAX	(4)	41,982	63,220
Income tax expense	(5)	(4,471)		(6,377)
PROFIT FOR THE PERIOD		37,511		56,843

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

(CONTINUED)

Six months ended 30 June 2020

		2020	2019
		(Unaudited)		(Unaudited)
	Note	HK$'000		HK$'000
Attributable to:
Ordinary equity holders of the Company		36,484	55,761
Non-controlling interests		1,027		1,082
Profit for the period		37,511	56,843
		HK CENTS		HK cents
Earnings per share attributable to
ordinary equity holders of the Company	(7)
Basic		2.39		3.65
Diluted		2.39		3.65
Interim dividend per share		1.80		2.60

Details of the dividends paid and declared for the period are disclosed in note 6 to the financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 30 June 2020

		2020	2019
		(Unaudited)		(Unaudited)
		HK$'000		HK$'000
PROFIT FOR THE PERIOD	37,511	56,843
OTHER COMPREHENSIVE INCOME
Other comprehensive income that may be reclassified to
profit or loss in subsequent periods:
Exchange difference on translation
of foreign operations	-	34
Net other comprehensive income that may be reclassified
to profit or loss in subsequent periods	-	34
Other comprehensive income that will not be reclassified to
profit or loss in subsequent periods:
Change in fair value of equity investments designated at fair
value through other comprehensive income	(11,337)	53,102
Net other comprehensive income/(loss) that will not be
reclassified to profit or loss in subsequent periods	(11,337)	53,102
OTHER COMPREHENSIVE INCOME/(LOSS) FOR
THE PERIOD, NET OF TAX	(11,337)		53,136
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	26,174	109,979
Attributable to:
Ordinary equity holders of the Company	25,147	108,909
Non-controlling interests	1,027		1,070
		26,174		109,979

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 June 2020

		30 June		31 December
		2020	2019
		(Unaudited)		(Audited)
	Notes	HK$'000		HK$'000
NON-CURRENT ASSETS
Debt investments at amortised cost		589,683	810,835
Equity investments designated at fair value through
other comprehensive income		339,076	349,977
Other non-current assets		57,473		60,036
Total non-current assets		986,232	1,220,848
CURRENT ASSETS
Trade receivables	(8)	130,601	166,411
Debt investments at amortised cost		37,671	225,744
Equity investments designated at fair value through
other comprehensive income		-	448,750
Pledged deposits		16,982	17,086
Cash and cash equivalents		1,612,199	734,736
Other current assets		224,966		198,372
Total current assets		2,022,419	1,791,099
CURRENT LIABILITIES
Trade payables	(9)	114,329	149,675
Other payables and accruals		199,400	214,386
Interest-bearing bank borrowings		16,456	16,456
Other current liabilities		144,430		68,939
Total current liabilities		474,615		449,456
NET CURRENT ASSETS		1,547,804	1,341,643
TOTAL ASSETS LESS CURRENT
LIABILITIES		2,534,036	2,562,491
NON-CURRENT LIABILITIES
Other non-current liabilities		27,349		30,015
Total non-current liabilities		27,349		30,015
Net assets		2,506,687	2,532,476
EQUITY
Equity attributable to ordinary equity holders of
the Company
Issued capital	(10)	152,834	152,834
Reserves		2,335,476		2,362,292
		2,488,310	2,515,126
Non-controlling interests		18,377		17,350
Total equity		2,506,687	2,532,476
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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation
   These interim condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34: Interim Financial Reporting and other relevant HKASs and Interpretations, the Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and the disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").
   The interim condensed consolidated financial statements does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
   These interim condensed consolidated financial statements have been prepared under the historical cost convention, except for certain equity investments which have been measured at fair value. These interim condensed consolidated financial statements are presented in Hong Kong dollars ("HK$") and all values are rounded to the nearest thousand ("HK$'000") except when otherwise indicated.
   These interim condensed consolidated financial statements for the six months ended 30 June 2020 are unaudited and have been reviewed by the Audit Committee of the Company.
2. Changes in accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those applied in the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of the following revised HKFRSs for the first time for the current period's financial statements.

Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, Interest Rate Benchmark Reform
HKAS 39 and HKFRS 7
Amendment to HKFRS 16	Covid-19-Related Rent Concessions (early adopted)
Amendments to HKAS 1	Definition of Material
and HKAS 8

Except as described below, the application of the amendments to HKFRSs in the current 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 interim condensed consolidated financial statements.

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1. Changes in accounting policies (Continued)
   The Group has early adopted the amendment to HKFRS 16 which provides relief to lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications.
   The practical expedient applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; (iii) there is no substantive change to other terms and conditions of the lease.

The Group elects to adopt the practical expedient to account for the COVID-19 pandemic related rent concession as negative variable lease payments. The application has no impact to the opening retained profits at 1 January 2020. The Group recognised changes in lease payments that resulted from rent concessions of HK$521,000 in the profit or loss during the current period.

The Group has not adopted any other standard, interpretation or amendment that has been issued but has not yet been effective.

1. Operating Segment information
   For management purposes, the Group is organised into business units based on their products and services and has four reportable operating segments as follows:
2. 1. the "financial investments" segment engages in treasury management;
   2. the "export operations" segment engages in exports apparel;
   3. the "interior decoration and renovation" segment engages in the interior decoration and renovation, and sale of furniture business; and
   4. the "retail, wholesale, franchise and others" segment mainly includes retail operation in Hong Kong, wholesale in the domestic market, and franchise sales under the "Jeanswest" brand in overseas markets within the casual wear and apparel domain.

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1. Operating Segment information (Continued)
   Information regarding the Group's reportable segments, together with their related comparative information, is presented below:

Six months ended 30 June 2020 (Unaudited)

					Interior		Retail,
					decoration		wholesale,
	Financial		Export		and		franchise
	investments		operations		renovation		and others		Total
	HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
Segment revenue:
Revenue from
external parties	37,403	90,400	313,023	16,959	457,785
Other income
and gains	3,544		822		1,265		2,287		7,918
Total	40,947		91,222		314,288		19,246		465,703
Segment result	32,585	3,992	3,312	20	39,909
Interest income								13,402
Unallocated revenue								628
Corporate and other
unallocated
expenses								(11,470)
Finance costs (other
than interest on
lease liabilities)									(487)
Profit before tax								41,982
Income tax expense									(4,471)
Profit for the period									37,511

Six months ended 30 June 2019 (Unaudited)

					Interior		Retail,
					decoration		wholesale,
	Financial		Export		and		franchise
	investments		operations		renovation		and others		Total
	HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
Segment revenue:
Revenue from
external parties	59,662	264,463	309,973	29,446	663,544
Other income
and gains	2,728		5,668		401		2,169		10,966
Total	62,390	270,131	310,374	31,615		674,510
Segment result	58,690	5,773	4,452	2,009	70,924
Interest income								5,433
Unallocated revenue								312
Corporate and other
unallocated
expenses								(8,725)
Finance costs (other
than interest on
lease liabilities)									(4,724)
Profit before tax								63,220
Income tax expense									(6,377)
Profit for the period									56,843

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1. Profit before tax
   The Group's profit before tax is arrived at after charging/ (crediting):

	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Depreciation of property, plant and equipment	959	1,211
Depreciation of right-of-use assets	5,837	8,319
Loss on disposal/write-off of items of
property, plant and equipment	7	1
Interest income	(13,402)		(5,433)

1. Income tax expense
   Under the two-tiered profits tax rate regime, the first HK$2,000,000 of assessable profits of qualifying corporations is taxed at 8.25% and the assessable profits above HK$2,000,000 will continue to be subject to the rate of 16.5%. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates:

	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Current - Hong Kong	3,901	4,993
Current - Elsewhere	1,074	1,393
Deferred	(504)		(9)
	4,471		6,377

(6) Dividends
	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Dividends for ordinary equity holders of the Company:
Final dividend paid	51,963		51,352
Interim dividend declared	27,510		39,737

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1. Earnings per share
2. 1. Basic earnings per share
      The calculations of basic earnings per share are based on:

Six months ended 30 June

Earnings

Profit attributable to ordinary equity holders of the Company used in the basic earnings per share calculation:

Shares

Weighted average number of ordinary shares in issue during the period used in the basic earnings per share calculation

2020	2019
(Unaudited)	(Unaudited)
HK$'000	HK$'000

36,48455,761

Number of shares Six months ended 30 June

2020	2019
(Unaudited)	(Unaudited)
'000	'000

1,528,3361,528,354

1. 1. Diluted earnings per share
      The diluted earnings per share is not presented as the Company does not have dilutive potential ordinary share for both periods presented.
2. Trade receivables
   An ageing analysis of trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowances, is as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Less than 4 months	61,940	120,913
4 to 6 months	60,772	19,672
Over 6 months	7,889		25,826
	130,601		166,411

The credit period is generally 15 days to 85 days. The trade receivables are non-interest bearing.

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1. Trade payables
   An ageing analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Less than 4 months	113,560	148,185
4 to 6 months	68	423
Over 6 months	701		1,067
	114,329		149,675

The trade payables are non-interest bearing and are normally settled on 90-days terms.

(10) Share capital
	Number of		Nominal value
	ordinary shares
	30 June		31 December		30 June		31 December
	2020	2019	2020	2019
	(Unaudited)		(Audited)		(Unaudited)		(Audited)
	'000		'000		HK$'000		HK$'000
Issued and fully paid:
Ordinary shares of
HK$0.10 each	1,528,336	1,528,336	152,834	152,834

INTERIM DIVIDEND

The Board has resolved to pay an interim dividend of HK1.80 cents (2019: HK2.60 cents) per share for the six months ended 30 June 2020 to shareholders whose names appear on the register of members of the Company as at the close of business on Thursday, 17 September 2020. The interim dividend will be paid to shareholders on Tuesday, 29 September 2020.

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REVIEW OF OPERATIONS

It was anticipated that after reaching the first phase of Sino-American trade agreement, there would be a smooth economic development ahead. However, the outburst of the new corona virus (COVID-19) in Mainland China before the Chinese New Year caused nearly all economic activities there to stand still. The COVID-19 pandemic then spread to Korea, Japan, Europe, America and the south hemisphere and caused serious problems there.

Although governments resolutely launched out quantitative easing measures with all their might including direct cash aid to those unemployed and lost no time to encourage business establishments to resume operations, it might take quite a while for the businesses to bounce back to the previous level. Meanwhile, the pandemic was not yet contained and it might further spread. Ever since the Second World War, people in the world were never alienated from one another in such a big scale. Even family gathering had to strictly follow social distancing requirements. Restaurants, shopping malls, sports grounds and entertainment arena all had to be closed. It hit all business activities heavily, especially retailing, with only a few exceptions such as cyber activities and those which could be conducted at home.

Under such difficult environment, the Group's performance in all aspects was affected. The turnover of our garment export to US market declined 65.82%. A drop of 35.48% revenue was registered in our Jeanswest Retail Operations in Hong Kong and Overseas Franchising. The move to downsize by nearly half of our bond portfolio in January did keep our investment far from the impact of extreme volatility caused by the COVID-19 pandemic in the capital market. However, the revenue derived from the Financial Investment also decreased by 37.31% due to the percentage of cash in hand was higher. As our Interior Decoration and Renovation business came mainly from telecommunication related sectors, we still managed to have a mild growth at the expense of narrowing our profit margin.

During the period under review, the Group recorded a turnover of HK$457,785,000, representing a decrease of 31.01% when compared with the corresponding period in last year (2019: HK$663,544,000).

Due to the above-mentioned reasons, profit attributable to ordinary equity holders of the Group was HK$36,484,000, representing a decrease of 34.57% when compared with the corresponding period in last year (2019: HK$55,761,000).

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The following are the main operating data of the Group during the first half of the year under review:

	2020	2019
	1st Half	1st Half	Changes
(Unit: HK$'000)
Consolidated sales	457,785	663,544	↓31.01%
of which:
A. Financial investments	37,403	59,662	↓37.31%
B. Total export sales	90,400	264,463	↓65.82%
C. Interior decoration and renovation	313,023	309,973	↑0.98%
D. Hong Kong retailing and overseas
franchising and wholesale
operations	16,935	26,246	↓35.48%
Profit attributable to ordinary equity
holders of the Company	36,484	55,761	↓34.57%
(Unit: HK cents)
Interim earnings per share (basic)	2.39	3.65	↓34.52%
Interim dividend per share	1.80	2.60	↓30.77%
	As at	As at
	30 June 2020	31 December 2019	Changes
(Unit: HK$'000)
Net cash and near cash in hand*	2,571,973	2,563,490	↑0.33%

• "Net cash and near cash in hand" consists of debt investments at amortised cost, listed equity investments designated at fair value through other comprehensive income, pledged deposits, cash and cash equivalents, net of interest-bearing bank borrowings.

1. Financial and Real Estates Investments
   At the beginning of the year, in view of the uncertainties ahead, the Management decided to increase the cash in hand in our investment portfolio. Before the Chinese New Year, our bond holding in the portfolio was thus reduced from HK$1,828 million to HK$1,199 million. Furthermore, some bonds were redeemed upon maturity in May 2020; the book value of our investment portfolio was thus decreased to HK$959 million. We always refrained from using gearing to get higher investment yield. Thus the impact from extreme volatility caused by the COVID-19 pandemic was irrelevant to us. As at 30 June 2020, the revenue derived from investment was HK$37,403,000 showing a decrease of 37.31% when compared with previous period (2019: HK$59,662,000). It was caused by higher cash percentage in the portfolio.
   At the beginning of the year, the Group's bond portfolio was HK$1,828 million. As at 30 June 2020, the Group's holding of bond had a book value of HK$959 million with the average yield of around 5.97%.
2. Export Operations
   The export operations of the Group were composed of oversea agency trading and design centre targeting US as our main market. Commencing from the second quarter, the COVID-19 pandemic was dominating in US. Thereafter, our US customers either demanded delay shipments or outright cancellation of orders notwithstanding that our supply chain was no longer based in Mainland China. In the period under review, our export turnover dropped from the previous HK$264,463,000 to HK$90,400,000 representing a decrease of 65.82%.
3. • 12 -

1. Interior Decoration and Renovation
   In the period under review, the turnover in our Interior Decoration and Renovation Operations increased marginally even under the COVID-19 pandemic. It was because more than 60% of our business was telecommunication related. Telecommunication and 5G related businesses were on the top of government favour list and also in their expanding phase. In order to win in the bidding, our margin was thus under pressure.
   In the first half of the year, turnover amounted to HK$313,023,000 showing an improvement of 0.98% when compared with last period (2019: HK$309,973,000).
2. Hong Kong Retailing and Overseas Franchising and Wholesale Operations
   The COVID-19 pandemic was devastating to retailing businesses. Our Jeanswest retailing in Hong Kong and our overseas franchising and wholesale operations were inevitably affected. As the prevalence of COVID-19 pandemic in Mainland China and in our oversea markets did not take place simultaneously, the decrease in turnover was lesser than that of the Export Operations. In the period under review, turnover of HK$16,935,000 was registered showing a decline of 35.48% from last period (2019: HK$26,246,000).
3. Financial Position
   Liquidity and financial resources
   In the period, the financial position of the Group was solid. As at 30 June 2020, the Group held net cash and near cash in hand of HK$2,571,973,000 (31 December 2019: HK$2,563,490,000).
   Significant investments held
   The Group's significant investments held are marketable debt instruments which as at 30 June 2020 amounted to HK$959,248,000 (31 December 2019: HK$1,828,124,000). The decrease of HK$868,876,000 was mainly attributed to the disposals of part of debt instruments at the beginning of the year and the redemption of certain debt instruments upon maturity.
4. Human Resources

As at 30 June 2020, the Group employed about 498 members of staff. The Group offered competitive remuneration packages to its employees. Furthermore, incentives were granted to employees depending on the Group's overall performance and individual performance.

PROSPECTS

Looking forward to the ensuing months of this financial year, the macro economic development will be highly affected by the development of COVID-19 and the Sino-American conflict. The Management cautiously expects that the COVID-19 pandemic may be contained in the third quarter or even the fourth quarter and hopes that the Sino-American conflict can be kept from further deterioration due to national self-restraint of respective decision makers. If our expectation is not deviated materially from the actual development, the profits variation of the Group in the second half of the year will be similar to that of the first half of the year.

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CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Tuesday, 15 September 2020 to Thursday, 17 September 2020, both days inclusive, during which period no transfer of shares shall be effected. In order to qualify for the interim dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong for registration no later than 4:30 p.m. on Monday, 14 September 2020.

CORPORATE GOVERNANCE

Throughout the six months ended 30 June 2020, the Company has complied with the code provisions of the Corporate Governance Code (the "CG Code") as set out in Appendix 14 of the Listing Rules, save and except for the deviation from code provision E.1.2 of the CG Code.

Under code provision E.1.2 of the CG Code, the chairman of the board should attend the annual general meeting. Due to COVID-19 pandemic control measures, Mr. Charles Yeung (Chairman of the Board) was not present at the Company's annual general meeting for the year 2020, Mr. Yeung Chun Fan (Vice-chairman of the Board) was appointed as the chairman and addressed questions raised by shareholders at the meeting.

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

Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.

By Order of the Board

Glorious Sun Enterprises Limited

Dr. Charles Yeung, GBS, JP

Chairman

Hong Kong, 25 August 2020

As at the date of this announcement, the directors of the Company are as follows:

Executive Directors:

Dr. Charles Yeung, GBS, JP, Mr. Yeung Chun Fan, Mr. Pau Sze Kee, Jackson, Mr. Hui Chung Shing, Herman, SBS, MH, JP, Ms. Cheung Wai Yee, Mr. Chan Wing Kan, Archie and Ms. Yeung Yin Chi, Jennifer

Independent Non-executive Directors:

Mr. Lau Hon Chuen, Ambrose, GBS, JP, Dr. Chung Shui Ming, Timpson, GBS, JP, Dr. Chan Chung Bun, Bunny, GBS, JP and Mr. Ng Wing Ka, Jimmy, BBS, JP

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