Haina Intelligent Equipment International : INTERIM REPORT 2020

CONTENTS

Corporate Information	2
Management Discussion and Analysis	4
Corporate Governance and Other Information	12
Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income	16
Unaudited Condensed Consolidated Statement of Financial Position	17
Unaudited Condensed Consolidated Statement of Changes in Equity	18
Unaudited Condensed Consolidated Statement of Cash Flows	20
Notes to the Unaudited Condensed Consolidated Financial Statements	21

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

1

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Hong Yiyuan (Chairman and Chief Executive Officer)

Mr. Zhang Zhixiong

Mr. Su Chengya

Mr. He Ziping

Non-Executive Director

Mr. Chang Chi Hsung

Independent Non-Executive Directors

Mr. Chan Ming Kit (appointed on 4 May 2020) Dr. Wang Fengxiang (appointed on 4 May 2020) Mr. Ng Tat Fung (appointed on 4 May 2020)

AUDIT COMMITTEE

Mr. Ng Tat Fung (Chairman of the committee) Mr. Chang Chi Hsung

Dr. Wang Fengxiang Mr. Chan Ming Kit

REMUNERATION COMMITTEE

Mr. Chan Ming Kit (Chairman of the committee) Mr. Hong Yiyuan

Mr. Zhang Zhixiong Mr. Ng Tat Fung Dr. Wang Fengxiang

NOMINATION COMMITTEE

Mr. Hong Yiyuan (Chairman of the committee)

Mr. Chan Ming Kit

Dr. Wang Fengxiang

Mr. Ng Tat Fung

AUTHORISED REPRESENTATIVES

Mr. Hong Yiyuan

Mr. Lau Wai Piu, Patrick

COMPANY SECRETARY

AUDITOR

Mazars CPA Limited

Certified Public Accountants, Hong Kong

REGISTERED OFFICE

Cricket Square, Hutchins Drive

PO Box 2681

Grand Cayman, KY1-1111

Cayman Islands

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN THE PRC

Wuli Technology Park

Economic Development Area

Jinjiang City

PRC

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Flat C, 21st Floor, Max Share Centre

373 King's Road

North Point

Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Conyers Trust Company (Cayman) Limited

Cricket Square, Hutchins Drive

PO Box 2681

Grand Cayman, KY1-1111

Cayman Islands

H O N G K O N G B R A N C H S H A R E REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited

Shops 1712-1716, 17th Floor

Hopewell Centre

183 Queen's Road East

Hong Kong

Mr. Lau Wai Piu, Patrick

2 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

CORPORATE INFORMATION

PRINCIPAL BANKERS

Bank of China (Hong Kong) Limited

Industrial Bank Co., Ltd., Jinjiang Anhai Branch

Industrial and Commercial Bank of China Limited,

Jinjiang Branch

LEGAL ADVISER

As to Hong Kong Law

Fangda Partners

As to PRC Law

Tian Yuan Law Firm

As to Cayman Islands Law

Appleby

COMPLIANCE ADVISOR

VBG Capital Limited

STOCK CODE

1645

WEBSITE

www.haina-intelligent.com

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

3

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

Haina Intelligent Equipment International Holdings Limited (the "Company") and its subsidiaries (collectively, the "Group") is an established manufacturer engaging in the design and production of automated machines for manufacturing disposable hygiene products, including baby diapers, adult diapers, lady sanitary napkins and medical disposable face mask in the PRC. During the six months ended 30 June 2020 (the "Period"), the Group designed, developed and produced machines for manufacturing disposable hygiene products under its proprietary brand "Haina Machinery" (the "Products"). The Group provided comprehensive services to customers, from collaborating with customers on product designs, customising products based on specifications provided by customers, conducting quality control, delivering products to customers, installing products for customers and to providing after-sales services.

The Group has two production bases in the PRC, namely the Jinjiang Production Base and the Hangzhou Production Base, with a total gross floor area of approximately 35,400 sq.m. As at the end of the Period, the Group operated 16 and 6 production lines in the Jinjiang Production Base and the Hangzhou Production Base, respectively. During the Period, the production process mainly involved in the assembly of components and parts that are used for the production of the Group's Products. The Group mainly procured the components and parts for its Products from third party sources.

The Group believes that strong research and development capabilities are key to maintaining its position in the disposable hygiene product machinery industry. The research and development team of the Group continuously monitors technological advancement in the disposable hygiene product machinery industry to keep abreast of industry knowledge. As at the end of the Period, the Group owned 127 patents in the PRC. The Group dedicates significant resources to research and development capabilities in order to develop new products and/or to enhance the quality of its Products.

For the Period, the Group recorded a total revenue of approximately RMB207.9 million, with a total number of 210 of machines sold, of which the portion of medical disposable face mask machines was approximately 96%. The Group's customers are located in the PRC, and the Group also sold its Products to other 6 overseas countries during the Period. The unaudited net profit after tax for the Period of the Group was approximately RMB32.4 million, representing a growth of approximately 17.9%.

OUTLOOK

The Group strives to maintain its position as one of the top disposable hygiene product machinery providers in the PRC by strengthening research and development capabilities, increasing the competitiveness of products, increasing production capacity of production bases and deepening its penetration in the PRC and overseas markets. The Group intends to implement the following strategies and expansion plans to capitalise on its strengths so as to enhance its business prospects and financial performance.

1. Strengthening research and development capabilities
   The Group intends to acquire a suitable site to set up a dedicated research and development centre (the "R&D Centre") in Jinjiang, Fujian Province, the PRC, and moves all current research and development activities to the R&D Centre, which would provide a dedicated area for the Group to develop new design of machines and also to support the development of products under the brand "Haina Machinery". Setting up the R&D Centre would allow the Group to have better control over the product development priorities and shorten the lead time needed for developing customised products so that the Group can conduct product production process and research and development activities concurrently. As products of the Group are divided into various modules, with the dedicated R&D Centre, the technologies for various modules can be developed simultaneously, which will significantly shorten the time required for the research and development of new products and enhance the efficiency of the product development process. As of the date of this report, there is no material development to be reported in setting up the R&D Centre.

4 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to setting up the R&D Centre, the Group also plans to strengthen research and development capabilities by conducting additional research and development activities through applying new technologies such as precision manufacturing and enhanced automation to improve the efficiency of existing products. The Group also intends to design and develop new products that cater for the trend and demand of the market. During the Period, the Group incurred research and development expenses of approximately RMB9.4 million which were funded by the Group's internal resources.

1. Increasing the competitiveness of products through the acquisition
   The Group plans to provide a comprehensive solution to customers through the acquisition of a company engaging in the development, design and manufacture of automatic packaging equipment. The Group considers that such integration will provide it with more competitive advantages and more flexibility in production.
   As of the date of this report, there has been no material development in this strategy and expansion plan, and no specific acquisition target has been identified.
2. Increasing production capacity of production bases
   The Group plans to expand the production capacity of Jinjiang Production Base by leasing additional production premises with a floor area of approximately 10,000 sq.m. in Jinjiang, which is intended to house the following facilities:
3. • approximately 8,000 sq.m. will be used for production and ancillary production purposes, including but not limited to the five new production lines and space for equipment access; and
   • approximately 2,000 sq.m. will be used for production support purposes, including but not limited to offices for its staff to handle administrative works and warehouses for storage.

As of the date of this report, there is no leasing of additional production premises to be reported for this strategy and expansion plan.

1. Deepening the Group's penetration in the PRC and overseas markets
   The PRC is the home market of the Group, and it forms the foundation for further growing the Group's business and forms the springboard from which the Group expands its operations internationally. In view of the temporary decline of market demand for disposable hygiene product machinery due to the shift of capacity by downstream disposable hygiene product towards production of disposable medical face masks in the midst of outbreak of coronavirus disease 2019 ("COVID-19"), the growth of sales value of disposable hygiene product machinery is expected to slowdown in the later part of 2020. However, with the continuous expansion of downstream market and regular upgrade and replacement of machinery, the demand for disposable hygiene product machinery in the PRC and overseas markets, including Southeast Asia, India, Pakistan and South Africa, are set to recover from 2021 onwards and the sales value of disposable hygiene product machinery in the PRC is estimated to increase at a rate of approximately 6.5% per year during 2020 to 2024, and to reach approximately RMB12.0 billion in 2024. The Group will continue to focus on solidifying its leading market position by deepening the Group's penetration in the PRC's growing disposable hygiene product machinery industry.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

5

MANAGEMENT DISCUSSION AND ANALYSIS

In addition, the Group intends to leverage on the established corporate brand name and research and development capabilities to increase resources to attract disposable hygiene product manufacturers in the overseas market, such as Southeast Asia and India where the economy, population and living standard have been growing continuously. During the Period, customers of the Group are located in the PRC and 6 overseas countries. In this regard, after the lifting of the travel restrictions, in order to promote the sales of the Group's baby diaper, adult diaper and lady sanitary napkin machines, the Group intends to (i) increase sales and marketing resources to promote the Group's Products by visiting offices and factories of potential customers which the Group met in trade exhibitions and participating in more trade exhibitions, and (ii) devote additional product development and design resources and to strengthen its research and development efforts to offer a wider range of designs tailored for preferences of different overseas markets.

As of the date of this report, there are 6 new customers (excluding those solely purchasing of medical disposable face mask machines from us) located in the PRC as a result of deepening the Group's penetration in the PRC.

Furthermore, the Group intends to leverage on the existing business relationship with disposable medical/hygiene product manufacturers and business connections with export agents to explore opportunities in supplying disposal medical/hygiene products in the PRC and overseas market in order to cope with the rapid changing market situation and consumers' needs.

FINANCIAL REVIEW

Revenue
By products type:
			Six months ended 30 June
		2020			2019
	Units	RMB'000	%	Units	RMB'000	%
		(Unaudited)			(Unaudited)
Baby diaper machines	7	44,832	22	15	104,136	59
Adult diaper machines	2	11,212	5	8	63,710	36
Lady sanitary napkin machines	-	-	-	1	4,874	3
Medical disposable face mask machines	201	144,734	70	-	-	-
Components and parts	N/A	7,095	3	N/A	3,717	2
Total	210	207,873	100	24	176,437	100

During the Period, the Group's revenue increased by approximately RMB31.4 million (or 18%) to approximately RMB207.9 million for the Period as compared to approximately RMB176.4 million for the six months ended 30 June 2019 (the "Prior Period"). This was mainly due to the increase in the sales of medical disposable face mask machines (approximately RMB144.7 million) and components and parts (approximately RMB3.4 million). The increase was partially offset by the decrease in sales of baby diaper machines (approximately RMB59.3 million), adult diaper machines (approximately RMB52.5 million) and lady sanitary napkin machines (approximately RMB4.9 million).

The increase in sales of medical disposable face mask machines was mainly due to the outbreak of COVID-19, which there was a strong demand of medical disposal face mask machines of the Group introduced to the market in February 2020. During the Period, the Group sold 201 units of medical disposable face mask machines which contributed a significant portion of its revenue.

6 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

During the Period, the contribution from the sales of baby diaper machines, adult diaper machines and lady sanitary napkin machines decreased from approximately 98% of the Group's total revenue for the Prior Period to approximately 27% on total revenue for Period. This was mainly due to the Group rescheduling the production capacity in response to the strong demand of medical disposable face mask machines by the customers. The directors of the Company (the "Directors") believe that the high demand for disposable face mask machines may be temporarily, so the Group will temporarily increased the number of hours worked by each shift and also to better cooperate with suppliers in timely delivery of raw materials so as to catch up with the production schedule of diaper and lady sanitary napkin machines as agreed with its customers. Once the supply of medical disposable face masks in the market stabilises, and there is a slow-down in the spread of the COVID-19, the Directors expect that there will be a gradual decrease in global demand for medical disposable face mask machines and the Group will then resume the normal production schedules for baby diaper machines, adult diaper machines and lady sanitary napkin machines.

In respect of the Group's baby diaper, adult diaper and lady sanitary napkin machines, the Directors confirm that up to the date of this report, there had been no cancellation or delays of orders by any of the Group's customers of these products due to the outbreak of COVID-19. The Group also agreed with its customers on extending production period of baby diaper, adult diaper and lady sanitary napkin machines due to the rescheduling of the production capacity to cater for the high demand of medical disposable face masks machines. Notwithstanding the temporary effect of COVID-19 and the upsurge in demand for medical disposable face mask machines, on the basis of the orders for the other machine types on hand, the Directors believe that in the long run, the demand for the baby diaper, adult diaper and lady sanitary napkin machines will resume to their ordinary levels after the outbreak has been effectively contained. As at the end of the Period, the Group has entered into sales contracts with its customers for the sales and purchase of 34, 15, 6, 16 and 2 units of baby diaper machines, adult diaper machines, medical disposable face mask machines, lady sanitary napkin machines and underpad machines with aggregate contract values of approximately RMB213.6 million, RMB144.3 million, RMB4.7 million, RMB73.1 million and RMB4.7 million, respectively. Subsequent to the end of the Period, the Group further entered into sales contracts with its customers for the sales and purchase of 6, 6, 4 and 3 units of baby diaper machines, adult diaper machines, medical disposable face mask machines and lady sanitary napkin machines with aggregate contract values of approximately RMB36.2 million, RMB50.3 million, RMB1.0 million and RMB10.2 million, respectively. The machines under these contracts are expected to be delivered during the second half of 2020 and the first half of 2021.

GROSS PROFIT AND GROSS MARGIN

The gross profit for the Period increased by approximately RMB35.1 million as compared with the Prior Period of approximately RMB43.7 million. The gross profit margin increased by 13% to approximately 38% for the Period (Prior Period: approximately 25%). The increases in both gross profit and gross profit margin were mainly due to lower production cost of producing the medical disposable face mask machines as a result of the outbreak of COVID-19, there was a strong demand of medical disposable face mask machines of the Group introduced to the market since February 2020. The medical disposable face mask machines, which contributed a significant portion of its revenue and commanded favourable profit margins for the Group due to the strong market demand, shorter production time and lower production space requirements for their production.

OTHER INCOME

The other income mainly comprised government grants, bank interest income and income from the sale of scrap materials. The government grants mainly represent the government grants received from government authorities of Fujian Province such as Jinjiang Finance Bureau, Jinjiang Bureau of Economy and Information Technology and Quanzhou Municipal People's Government, which the entitlements were unconditional and at the discretion of the relevant authorities. All the government grants received during the Period and/or the Prior Period were one-off and unconditional.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

7

MANAGEMENT DISCUSSION AND ANALYSIS

SELLING AND DISTRIBUTION COSTS

The selling and distribution costs mainly comprised expenses incurred for business trips and entertainment, depreciation, promotional expenses and repairment costs. The selling and distribution costs decreased from approximately RMB6.1 million for the Prior Period by approximately RMB0.6 million or 9.8% to approximately RMB5.5 million for the Period. The decrease in selling and distribution costs was mainly attributable to (i) the decrease in depreciation of demo units from approximately RMB1.9 million for the Prior Period by approximately RMB0.8 million or 42.1% to approximately RMB1.1 million for the Period; (ii) the decrease in expense for business trips and entertainment from approximately RMB2.3 million for the Prior Period by approximately RMB0.4 million or 17.4% to approximately RMB1.9 million for the Period. Such decrease was offset by agent fee of approximately RMB0.6 million mainly paid for the PRC agent of a Korean customer during the Period (Prior Period: Nil).

ADMINISTRATIVE EXPENSES AND OTHER OPERATING EXPENSES

The administrative and other operating expenses mainly comprised research and development expenses, staff costs, depreciation, amortisation and donation. The administrative and other operating expenses increased from approximately RMB18.7 million for the Prior Period by approximately RMB1.9 million or 10.2% to approximately RMB20.6 million for the Period. The increase in administrative and other operating expenses was mainly due to donation of approximately RMB2.4 million paid by a PRC subsidiary to charitable organizations during the Period (Prior Period: Nil). Such increase was offset by slight decrease in research and development expenses from approximately RMB9.8 million for the Prior Period by approximately RMB0.5 million or 5.1% to approximately RMB9.4 million for the Period.

LISTING EXPENSES

Listing expenses represent professional fees, underwriting commissions and other fees incurred in connection with the listing (the "Listing") of the shares of the Company on the Main Board of the Stock Exchange by way of share offer (the "Share Offer"). The total listing expenses in relation to the Listing and the Share Offer are approximately HK$64.4 million (equivalent to approximately RMB58.2 million), of which approximately HK$31.8 million (equivalent to approximately RMB29.2 million) is directly attributable to the issue of shares to the public and capitalised during the Period, and approximately HK$32.6 million (equivalent to approximately RMB29.0 million) was reflected in profit or loss in accordance with the relevant accounting standards. Approximately HK$17.4 million (equivalent approximately RMB16.0 million) of the listing expenses in relation to services performed was reflected in profit or loss for the Period, and the remaining amount of approximately HK$15.2 million (equivalent to approximately RMB13.0 million) has been reflected in profit or loss with prior period(s). The total listing expenses represented approximately 46.5% of the gross proceeds from the Share Offer (including the partial exercise of the Over-allotment Option (as defined below)).

FINANCE COSTS

For the Period, finance costs was approximately RMB0.7 million, which increased by approximately 71% as compared with the Prior Period (approximately RMB0.4 million). The increase was mainly due to an increase in financial charges on lease liabilities for right-of-use assets in respect of the Group's leased properties.

INCOME TAX EXPENSES

For the Period, income tax expenses were approximately RMB9.2 million, increased by approximately 299% as compared with the Prior Period (approximately RMB2.3 million). The increase was mainly due to the increase in taxable profits of the Group's operating subsidiaries for the Period.

8 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

For the Period, the Company's profit attributable to owners of the Company were approximately RMB24.6 million (Prior Period: approximately RMB11.6 million), respectively. Excluding listing expenses, the Company's profit attributable to owners for the Period amounted to approximately RMB40.6 million (Prior Period: approximately RMB19.4 million). The increase in profit attributable to owners of the Company (including and excluding the effect of Listing expenses) was mainly due to the increase in revenue and gross profit as discussed above.

INTERIM DIVIDEND

The Board has resolved not to declare an interim dividend for the Period.

USE OF PROCEEDS

The shares of the Company have been listed on the Main Board of the Stock Exchange on 3 June 2020 with a total of 122,004,000 offer shares being issued (including the partial exercise of the Over-allotment Option) based on the share price of HK$1.38 per share. The aggregate nominal value of the said offer shares is HK$1,220,040. The net proceeds of the Share Offer, after deducting underwriting commissions and other fees in connection with the Listing, were approximately HK$130.1 million or RMB119.5 million. The net price per offer share is approximately HK$1.07. The Directors intend to deploy the proceeds according to the manner set out in the prospectus of the Company dated 20 May 2020 (the "Prospectus"). The use of net proceeds will be in accordance with the implementation plan as set out in the Prospectus. Set out below is the actual use of net proceeds up to 30 June 2020.

				Amount to be
				applied in
				the first
		Utilised net	Unutilised net	6 months
		proceeds	proceeds	upon listing
		up to	up to	disclosed
	Net proceeds	30 June	30 June	in the	Time frame
	allocation	2020	2020	Prospectus	for utilisation
	RMB million	RMB million	RMB million	RMB million
Setting up the research and	24.1	-	24.1	2.2	Within 2 years
development centre					from the
					Listing Date
Strengthening research and	22.9	-	22.9	5.9	Within 2 years
development capabilities					from the
					Listing Date
Increasing production capacity	16.8	-	16.8	1.1	Within 3 years
					from the
					Listing Date
Increasing competitiveness	43.5	-	43.5	-	Within 2 years
through acquisitions					from the
					Listing Date
Working capital and general	12.2	(0.1)	12.1	0.8	Within 2 years
corporate purposes					from the
					Listing Date
	119.5	(0.1)	119.4	10.0

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

9

MANAGEMENT DISCUSSION AND ANALYSIS

As at 30 June 2020, unutilised proceeds of approximately RMB119.4 million were deposited in licensed banks in Hong Kong and the PRC.

LIQUIDITY AND FINANCIAL RESOURCES

During the Period, the Group's working capital was mainly financed by internal resources. The current ratio of the Group, which is calculated based on the current assets divided by current liabilities, was approximately 2.35 times as at 30 June 2020 (31 December 2019: approximately 1.44 times). The Group generally financed its daily operations from cash flows generated internally.

FINANCIAL POLICIES

The Group is exposed to liquidity risk in respect of settlement of its trade payables, bank borrowings and financing obligations, and also in respect of its cash flow management. The Group's policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term.

CAPITAL STRUCTURE

As at 30 June 2020, the capital structure of the Group consisted of equity of approximately RMB282.0 million (31 December 2019: approximately RMB113.3 million) and bank borrowings of nil (31 December 2019: nil) as more particularly described in the paragraph headed "Borrowings" below.

BORROWINGS

As at 30 June 2020, the Group did not have any outstanding bank borrowings. The Directors confirmed that the Group had neither experienced any difficulties in obtaining or repaying its bank borrowings, nor breached any major covenant or restriction of the Group's facilities up to the date of this report. There are no material covenants related to the Group's outstanding debts that would materially limit its ability to undertake additional debt or equity financing.

GEARING RATIO

The Group's gearing ratio, which is calculated based on the total interest-bearing liabilities divided by the total equity (defined as the sum of bank loans and lease liabilities as at the respective year end divided by total equity as at the respective period end) was approximately 7.9% as at 30 June 2020 (31 December 2019: approximately 22.9%).

CAPITAL COMMITMENT AND CONTINGENT LIABILITIES

The Group had no material capital commitment or contingent liabilities as at 30 June 2020.

SHARE OPTION SCHEME

On 8 May 2020, a share option scheme (the "Share Option Scheme") was approved and adopted by the Shareholders, under which, options may be granted to any eligible participants (including any executive Directors) to subscribe for shares in the Company subject to the terms and conditions stipulated in the Share Option Scheme. The Share Option Scheme shall be valid and effective for a period of 10 years after the date of adoption.

No share option has been granted, exercised, cancelled or lapsed under the Share Option Scheme since its adoption, and there was no outstanding share option at 30 June 2020 and at the date of this report.

10 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

FOREIGN EXCHANGE RISK MANAGEMENT

The Group's monetary assets, liabilities and transactions are principally denominated in Renminbi, Hong Kong dollars and United States dollars. The Group has not experienced any difficulties or effects on its operations or liquidity as a result of the fluctuations in currency exchange rates during the Period. The Group did not enter into any foreign exchange derivative contract to manage the currency translation risk of Renminbi against United States dollars and Hong Kong dollars during the Period, but the Group will continue to review its foreign exchange exposure regularly and might consider using financial instruments to hedge against foreign exchange exposure at appropriate time.

HUMAN RESOURCES

The Group has employed a total of approximately 389 employees as at 30 June 2020 (30 June 2019: approximately 362 employees) in Hong Kong and the PRC. Staff costs (including Directors' emoluments) amounted to approximately RMB18.2 million for the Period (Prior Period: approximately RMB15.8 million). The remuneration was determined based on the performance and professional experience of employees as well as the prevailing market conditions. The management will regularly review the remuneration policy and arrangement of the Group. In addition to pension, the Group will also distribute discretionary bonus to certain employees as incentives according to their performance. The Group recruits and selects candidates on the basis of their qualifications and suitability for the position. It is the Group's policy to recruit the most capable person available for each position.

CHARGES ON GROUP'S ASSETS

No assets of the Group were charged or pledged as at 30 June 2020.

SIGNIFICANT INVESTMENTS AND MATERIAL ACQUISITIONS AND DISPOSALS

The Group has made no significant investment or any material acquisition or disposal of subsidiaries during the Period.

FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

Save as disclosed in the Prospectus, the Group currently has no plan for material investments and capital assets.

SUBSEQUENT EVENT

Up to the date of this report, the Group has no significant subsequent event after 30 June 2020 which required disclosure.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

11

CORPORATE GOVERNANCE AND OTHER INFORMATION

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

The Group is committed to maintaining high standards of corporate governance to safeguard the interests of the shareholders of the Company and to enhance corporate value and accountability. In the opinion of the Directors, except for the below deviation, the Company has adopted the applicable code provisions ("CG Code") as set out in the Corporate Governance Code as set out in Appendix 14 to the Rules (the "Listing Rules") Governing the Listing of Securities on the Stock Exchange during the period from 3 June 2020 (the "Listing Date") to 30 June 2020.

Pursuant to code provision A.2.1 of the CG Code, the roles of chairman and chief executive should be separated and should not be performed by the same individual. Mr. Hong Yiyuan, the chairman of the Board and the chief executive officer of the Company, currently performs these two roles. The Board believes that vesting the roles of both chairman and chief executive officer in the same person has the benefit of ensuring consistent leadership within the Group and enables more effective and efficient overall strategic planning for the Group. The Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively. The Board will continue to review and consider splitting the roles of chairman of the Board and chief executive officer of the Company at a time when it is appropriate and suitable by taking into account the circumstances of the Group as a whole.

COMPLIANCE WITH THE MODEL CODE

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules as its own code of conduct regarding securities transactions by the Directors. Having made specific enquiry of all Directors, all the Directors have confirmed that they have fully complied with the required standards set out in the Model Code during the period from the Listing Date to 30 June 2020.

AUDIT COMMITTEE

The audit committee of the Company (the "Audit Committee") assists the Board in discharging its responsibilities for corporate governance, financial reporting and corporate control. The duties of the Audit Committee include reviewing, in draft form, the annual report and accounts, half-year report and provide advice and comments to the Board. The Audit Committee currently consists of three independent non-executive Directors, namely Mr. Chan Ming Kit, Dr. Wang Fengxiang and Mr. Ng Tat Fung and one non-executive Director, namely Mr. Chang Chi Hsung. The chairman of the Audit Committee is Mr. Ng Tat Fung, who holds the appropriate professional accounting qualification and financial management expertise as required under the Listing Rules to chair the Audit Committee.

The financial information in this report has not been reviewed nor audited by the Company's auditor, but the Audit Committee has reviewed the unaudited condensed consolidated financial statements of the Group for the Period and is of the opinion that the preparation of such statements complied with the applicable accounting standards, the requirements under the Listing Rules and other applicable legal requirements, and that adequate disclosures have been made.

ISSUANCE AND LISTING OF SECURITIES

The Company was listed on the Stock Exchange on 3 June 2020. The offer price was determined to be HK$1.38 per Offer Share (excluding brokerage of 1%, SFC transaction levy of 0.0027% and Hong Kong Stock Exchange trading fee of 0.005%). The Company issued a total of 116,000,000 ordinary shares in the Share Offer. After deducting the underwriting fees and commissions and estimated expenses payable by the Company in relation to the Share Offer without considering the effect of the exercise of the Over-allotment Option, the net proceeds from the Share Offer received by the Company were approximately HK$123.1 million.

12 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

CORPORATE GOVERNANCE AND OTHER INFORMATION

On 24 June 2020, the over-allotment option described in the prospectus dated 20 May 2020 (the "Over-allotmentOption") was partially exercised by the joint global coordinators, for themselves and on behalf of the placing underwriters, on 24 June 2020, in respect of an aggregate of 6,004,000 Shares (the "Over-allotmentShares"), representing approximately 5.2% of the total number of the Offer Shares initially available under the Share Offer to, among other things, cover over-allocations in the Placing. The Over-allotment Shares were issued and allotted by the Company at HK$1.38 per Share (exclusive of brokerage of 1%, SFC transaction levy of 0.0027% and Hong Kong Stock Exchange trading fee of 0.005%), being the Offer Price per Share under the Share Offer. The listing of and dealing in the Over-allotment Shares commenced on the Stock Exchange on 24 June 2020. The additional net proceeds of approximately HK$7.0 million were received by the Company from the issue and allotment of the Over-allotment Shares after deducting the underwriting commissions and other estimated expenses in connection with the partial exercise of the Over-allotment Option.

PURCHASE, SALE OR REDEMPTION OF SHARES

Save for the issue of shares by the Company due to the partial exercise of the Over-allotment Option granted to the joint global coordinators, details of which are set out in the paragraph above, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the period from the Listing Date to 30 June 2020.

DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2020, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) ("SFO")) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

Interest in the Shares of the Company
			Approximate
		Number	percentage
		of Shares	of the issued
Name of Directors	Capacity	held(1)	Shares
Mr. Hong Yiyuan ("Mr. Hong")(2,3)	Interest in a controlled corporation	348,000,000	74.04%
Mr. Zhang Zhixiong ("Mr. Zhang")(2,3)	Interest in a controlled corporation	348,000,000	74.04%
Mr. Su Chengya ("Mr. Su")(2,3)	Interest in a controlled corporation	348,000,000	74.04%
Mr. He Ziping ("Mr. He")(2,3)	Interest in a controlled corporation	348,000,000	74.04%

Notes:

1. Interests in shares stated above represent long positions.
2. The Company is directly owned as to 74.04% by Prestige Name International Limited ("Prestige Name"), a company incorporated in the British Virgin Islands with liability limited by shares. Prestige Name is beneficially owned and legally owned as to 45.0%, 25.0%, 18.0% and 12.0% by Mr. Hong, Mr. Zhang, Mr. Su and Mr. He (the "Controlling Shareholders"), respectively.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

13

CORPORATE GOVERNANCE AND OTHER INFORMATION

1. Mr. Hong, Mr. Zhang, Mr. Su, Mr. He and Prestige Name are parties acting in concert pursuant the acting in concert confirmation entered into on 21 March 2019 (the "Acting In Concert Confirmation"). By virtue of the SFO, they are deemed to be interested in (i) the indirect attributable interest of the ordinary shares of the Company held by their controlled corporation; and (ii) the respective numbers of shares in Prestige Name held by other parties acting in concert. Therefore, the Controlling Shareholders together are deemed to be interested in a total of 74.04% of the issued share capital of the Company.

Save as disclosed above, as at 30 June 2020, none of the directors and the chief executives of the Company had any interest or short position in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

SUBSTANTIAL SHAREHOLDERS' INTERESTS

As at 30 June 2020, according to the register kept by the Company under section 336 of the SFO, the corporations or persons (other than a Director or chief executive of the Company) who had interests or short positions in the Shares, or underlying shares which fell to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO were as follows:

			Approximate
		Number of	percentage
		of the issued
Name	Capacity	Shares held(1)	Shares
Prestige Name(2,3)	Beneficial owner	348,000,000	74.04%

Notes:

1. Interests in Shares stated above represent long positions.
2. The Company is directly owned as to 74.04% by Prestige Name. Prestige Name is beneficially owned and legally owned as to 45.0%, 25.0%, 18.0% and 12.0% by Mr. Hong, Mr. Zhang, Mr. Su and Mr. He, respectively.
3. Mr. Hong, Mr. Zhang, Mr. Su, Mr. He and Prestige Name are parties acting in concert pursuant the Acting In Concert Confirmation. By virtue of the SFO, they are deemed to be interested in (i) the indirect attributable interest of the ordinary shares of the Company held by their controlled corporation; and (ii) the respective numbers of shares in Prestige Name held by other parties acting in concert. Therefore, the Controlling Shareholders together are deemed to be interested in a total of 74.04% of the issued share capital of the Company.

Save as disclosed above, as at 30 June 2020, no other person (other than a Director or chief executive of the Company) had registered an interest or short position in the Shares or underlying Shares which fell to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO.

14 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

CORPORATE GOVERNANCE AND OTHER INFORMATION

UPDATE ON DIRECTORS' INFORMATION UNDER RULE 13.51B(1) OF THE LISTING RULES

Mr. Chang Chi Hsung has been appointed as an independent non-executive director of Rich Capital Holdings Limited, whose shares are listed on the Singapore Exchange Limited (SGX stock code: 5G4) with effect from 23 June 2020.

The annual director's fee of Dr. Wang Fengxiang has been reduced to RMB6,000 with effect from 29 June 2020.

Save as disclosed, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules during the Period.

By order of the Board

Haina Intelligent Equipment International Holdings Limited

Hong Yiyuan

Chairman and executive Director

Hong Kong, 24 August 2020

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

15

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

		Six months ended 30 June
		2020	2019
	Note	RMB'000	RMB'000
		(Unaudited)	(Unaudited)
Revenue	5	207,873	176,437
Cost of sales		(129,053)	(132,690)
Gross profit		78,820	43,747
Other income	6	5,234	5,279
Selling and distribution costs		(5,479)	(6,141)
Administrative and other operating expenses		(20,561)	(18,665)
Reversal of impairment loss of trade receivables, net		228	311
Finance costs	7	(670)	(392)
Listing expenses		(15,985)	(7,845)
Profit before tax	7	41,587	16,294
Income tax expenses	8	(9,175)	(2,296)
Profit for the period		32,412	13,998
Other comprehensive (loss) income:
Item that may be reclassified subsequently to profit or loss:
Exchange difference on consolidation/combination		(1,652)	53
Total comprehensive income for the period		30,760	14,051
Profit for the period attributable to:
Owners of the Company		24,603	11,600
Non-controlling interests		7,809	2,398
		32,412	13,998
Total comprehensive income for the period attributable to:
Owners of the Company		22,951	11,653
Non-controlling interests		7,809	2,398
		30,760	14,051
		RMB cents	RMB cents
		(Unaudited)	(Unaudited)
Earnings per share	10
Basic and diluted		6.73	2.46

16 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		At	At
		30 June	31 December
		2020	2019
	Note	RMB'000	RMB'000
		(Unaudited)	(Audited)
Non-current assets		33,508
Plant and equipment	11	39,594
Intangible assets		3,310	5,306
Goodwill		1,369	1,369
		38,187	46,269
Current assets		167,518
Inventories		144,839
Trade and other receivables	12	79,587	98,527
Income tax recoverable		-	1,203
Restricted bank deposits		5,000	10,000
Bank balances and cash		204,055	35,701
		456,160	290,270
Current liabilities		183,836
Trade and other payables	13	141,992
Lease liabilities		6,091	6,977
Amount due to ultimate holding company	14	-	52,150
Income tax payable		4,569	2
Deferred tax liabilities		-	1,000
		194,496	202,121
Net current assets		261,664	88,149
Total assets less current liabilities		299,851	134,418
Non-current liabilities		16,116
Lease liabilities		18,949
Deferred tax liabilities		1,734	2,198
		17,850	21,147
NET ASSETS		282,001	113,271
Capital and reserves		4,315
Share capital	15	-*
Reserves		256,136	99,530
Equity attributable to owners of the Company		260,451	99,530
Non-controlling interests		21,550	13,741
TOTAL EQUITY		282,001	113,271

• Represents amounts less than RMB1,000.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

17

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN EQUITY

			Attributable to owners of the Company
				Reserves
								Non-
	Share	Share	Capital	Statutory	Translation	Accumulated		Controlling	Total
	capital	premium	reserve	reserve	reserve	profits	Total	interests	equity
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
At 1 January 2019 (audited)	-*	-	-	8,257	(1,404)	67,373	74,226	9.076	83,302
Profit for the period	-	-	-	-	-	11,600	11,600	2,398	13,998
Other comprehensive
income:
Item that may be
reclassified subsequently
to profit or loss:
Exchange difference
on consolidation/
combination	-	-	-	-	53	-	53	-	53
At 30 June 2019 (unaudited)	-*	-	-	8,257	(1,351)	78,973	85,879	11,474	97,353

• Represents amounts less than RMB1,000.

18 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN EQUITY

			Attributable to owners of the Company
				Reserves
								Non-
	Share	Share	Capital	Statutory	Translation	Accumulated		controlling	Total
	capital	premium	reserve	reserve	reserve	profits	Total	interests	equity
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
At 1 January 2020
(audited)	-*	-	-	12,195	(2,523)	89,858	99,530	13,741	113,271
Profit for the period	-	-	-	-	-	24,603	24,603	7,809	32,412
Other comprehensive
loss:
Item that may be
reclassified subsequently
to profit or loss:
Exchange difference on
consolidation	-	-	-	-	(1,652)	-	(1,652)	-	(1,652)
Total comprehensive
income for the period	-	-	-	-	(1,652)	24,603	22,951	7,809	30,760
Transaction with owners:
Contributions and
distributions
Waiver of amount due
to ultimate holding
company (Note 14)	-	-	12,559	-	-	-	12,559	-	12,559
Issue of shares pursuant
to the Capitalisation
Issue (Note 15(ii))	3,195	(3,195)	-	-	-	-	-	-	-
Issue of shares pursuant
to the Share Offer
(including the partial
exercise of the over-
allotment option)
(Note 15(iii))	1,120	153,444	-	-	-	-	154,564	-	154,564
Transaction costs
attributable to issue of
shares (Note 15(iv))	-	(29,153)	-	-	-	-	(29,153)	-	(29,153)
At 30 June 2020
(unaudited)	4,315	121,096	12,559	12,195	(4,175)	114,461	260,451	21,550	282,001

• Represents amounts less than RMB1,000.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

19

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended 30 June
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
Operating Activities	41,587
Profit before tax	16,294
Adjustments for:	1,996	1,454
Amortisation of intangible assets
Depreciation of plant and equipment	5,629	6,067
Finance costs	670	392
Gain on disposal of plant and equipment	(40)	(108)
Bank interest income	(488)	(191)
Reversal of impairment loss on trade receivables, net	(228)	(311)
Changes in working capital	18,258	16,512
Trade and other receivables
Inventories	(22,679)	(13,364)
Trade and other payables	41,773	(16,988)
Cash generated from operations	86,478	9,757
Income tax paid	(4,888)	(3,095)
Net cash from operating activities	81,590	6,662
Investing Activities	488
Interest received	191
Purchase of plant and equipment	(506)	(747)
Proceeds from disposal of plant and equipment	-	140
Decrease in restricted bank deposits, net	5,000	11,040
Additions of intangible assets	-	(979)
Net cash from investing activities	4,982	9,645
Financing Activities	(3,296)
Repayment of lease liabilities	(4,181)
Interest paid	(90)	(392)
New bank borrowings raised	10,000	-
Repayment of bank borrowings	(10,000)	-
Repayment to the Controlling Shareholders, net	-	(7,699)
Advance from ultimate holding company	409	2,194
Repayment to ultimate holding company	(40,000)	-
Partial settlement on capital contribution due from the	-	1,500
non-controlling shareholders of a subsidiary
Proceeds from issue of shares	154,564	-
Payment for transaction costs attributable to issue of shares	(29,153)	-
Net cash from (used in) financing activities	82,434	(8,578)
Net increase in cash and cash equivalents	169,006	7,729
Cash and cash equivalents at the beginning of the reporting period	35,701	27,709
Effect on exchange rate changes	(652)	(42)
Cash and cash equivalents at the end of the reporting period,	204,055
represented by bank balances and cash	35,396

20 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands under the Companies Law of the Cayman Islands as an exempted company with limited liability on 20 December 2017, and its shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 3 June 2020 (the "Listing"). The Company's registered office is located at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1- 1111, Cayman Islands. The Company's principal place of business in Hong Kong is situated at Flat C, 21/F, Max Share Centre, 373 King's Road, North Point, Hong Kong.

The principal activity of the Company is investment holding. The Group is principally engaged in the design and production of automated machines for disposable hygiene products in the People's Republic of China (the "PRC").

In the opinion of the Directors, the immediate and ultimate holding company is Prestige Name International Limited, a limited liability company incorporated in the British Virgin Islands (the "BVI"). The ultimate controlling parties are Mr. Hong Yiyuan, Mr. Zhang Zhixiong, Mr. Su Chengya and Mr. He Ziping (collectively referred to as the "Controlling Shareholders"), who have been acting in concert over the course of the Group's business history.

Pursuant to a group reorganisation (the "Reorganisation"), which was completed on 11 March 2019, as detailed in the section headed "History, Development and Reorganisation" of the prospectus of the Company dated 20 May 2020 (the "Prospectus") issued in connection with the initial listing of the Company's shares on the Main Board of the Stock Exchange, the Company became the holding company of the entities now comprising the Group.

2. BASIS OF PREPARATION

The Group resulting from the Reorganisation is regarded as a continuing entity under the common control of the Controlling Shareholders prior to and after the Reorganisation, and that control is not transitory. Accordingly, the unaudited condensed consolidated financial statements for the six months ended 30 June 2020 and the comparative information, as applicable, have been prepared using the principles of merger accounting in accordance with Accounting Guideline 5 "Merger Accounting under Common Control Combination" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").

The unaudited condensed consolidated statement of profit or loss and other comprehensive income, the unaudited condensed consolidated statement of changes in equity and the unaudited condensed consolidated statement of cash flows for the six months ended 30 June 2020 and 2019, respectively have been prepared on the basis as if the current group structure has been in existence throughout the relevant periods, or since the respective dates of incorporation or establishment, where there is a shorter period. The unaudited condensed consolidated statement of financial position of the Group as at 30 June 2020 and 31 December 2019 has been prepared to present the assets and liabilities of the companies now comprising the Group as if the group structure has been in existence as at that date.

The unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2020 (the "Interim Financial Statements") have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the HKICPA and the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").

The Interim Financial Statements are presented in Renminbi ("RMB") and all amounts are rounded to the nearest thousand ("RMB'000") except when otherwise indicated.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

21

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PREPARATION (continued)

The preparation of the Interim Financial Statements in conformity with HKAS 34 requires the management of the Group to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a period to date basis. Actual results may differ from these estimates.

The Interim Financial Statements include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since 31 December 2019, and therefore, do not include all of the information required for full set of financial statements prepared in accordance with the Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual HKFRSs, HKASs and Interpretations issued by the HKICPA. They shall be read in conjunction with the Group's audited financial information for the year ended 31 December 2019 as included in the Accountants' Report as set out in Appendix I of the Prospectus (the "2019 Financial Information").

The accounting policies and methods of computation applied in the preparation of the Interim Financial Statements are consistent with those applied in preparing the 2019 Financial Information.

3. PRINCIPAL ACCOUNTING POLICIES

The Interim Financial Statements have been prepared on the historical cost basis.

In the current interim period, the Group has adopted for the first time the following new/revised HKFRSs issued by the HKICPA, which are effective for the financial period beginning on 1 January 2020.

Amendments to HKFRS 3	Definition of a Business
Amendments to HKAS 39, HKFRSs 7 and 9	Interest Rate Benchmark Reform
Amendments to HKASs 1 and 8	Definition of Material

The adoption of the new/revised HKFRSs in the current period has no material impact on the Group's financial position and performance for the current and prior periods and/or on the disclosures set out in the Interim Financial Statement.

At the date of authorisation of the Interim Financial Statements, the HKICPA has issued a number of new/ revised HKFRSs that are not yet effective for the current period, which the Group has not early adopted. The Directors do not anticipate that the adoption of the new/revised HKFRSs in future periods will have any material impact on the consolidated financial statements of the Group.

22 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT INFORMATION

The Directors have determined that the Group has a single operating and reportable segment for the six months ended 30 June 2020 and 2019, as the Group manages its business as a whole as the design and production of automated machines for disposable hygiene products and the executive directors of the Company, being the chief operating decision makers of the Group, regularly review the internal financial reports on the same basis for the purposes of allocating resources and assessing performance of the Group. Segment information is not presented accordingly.

Information about geographical areas

The following table sets out information about the geographical location of the Group's revenue from external customers. The geographical location of the revenue is presented based on the location of customers. The Group's all non-current assets are located in the PRC.

Revenue from external customers
	Six months ended 30 June
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
The PRC (place of domicile)	182,005	85,158
Indonesia	9,813	26,911
Dubai	9,126	-
Bangladesh	4,637	-
Korea	1,682	-
Angola	571	-
Pakistan	39	7,121
Vietnam	-	27,340
The Philippines	-	8,775
Hong Kong	-	8,407
Nigeria	-	7,851
Cambodia	-	4,874
	207,873	176,437
Information about major customers

Details of the customers (including entities under common control) individually accounting for 10% or more of aggregate revenue of the Group during the period are as follows:

Six months ended 30 June

20202019

RMB'000 RMB'000

(Unaudited) (Unaudited)

Customer A

26,632

Note

Note: The customer contributed less than 10% of the total revenue of the Group for six months ended 30 June 2019.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

23

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5.	REVENUE
		Six months ended 30 June
		2020	2019
		RMB'000	RMB'000
		(Unaudited)	(Unaudited)
	Revenue from contracts with customers within HKFRS 15 - at a
	point in time
	Sales of machines of
	- baby diaper	44,832	104,136
	- adult diaper	11,212	63,710
	- lady sanitary napkin	-	4,874
	- medical disposable face mask	144,734	-
	Sales of components and parts	7,095	3,717
		207,873	176,437

The amounts of revenue recognised for the six months ended 30 June 2020 and 2019 that were included in the contract liabilities at the beginning of each of the reporting periods are approximately RMB15.1 million and RMB37.0 million, respectively.

6. OTHER INCOME

	Six months ended 30 June
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
Bank interest income	488	191
Exchange gain, net	37	129
Government grants (Note)	4,613	4,736
Sales of scrap materials	20	77
Gain on disposal of plant and equipment	40	108
Others	36	38
	5,234	5,279

Note: In the opinion of the management of the Group, there was no unfulfilled condition or contingency relating to the government grants.

24 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. PROFIT BEFORE TAX

This is stated after charging (crediting):

		Six months ended 30 June
		2020	2019
		RMB'000	RMB'000
		(Unaudited)	(Unaudited)
(a)	Finance costs	580
	Finance charges on lease liabilities	392
	Interest on bank borrowings	90	-
		670	392
(b)	Staff costs, including directors' remuneration	16,494
	Salaries, allowances, discretionary bonus and other benefits in kind	14,076
	Contributions to defined contribution plans	1,687	1,706
		18,181	15,782
	Less: capitalised as "intangible assets"	-	(333)
		18,181	15,449
(c)	Other items	129,053	132,690
	Cost of inventories (Note (i))
	Auditor's remuneration	181	50
	Amortisation of intangible assets	1,996
	(included in "administrative and other operating expenses")	1,454
	Depreciation of plant and equipment (included in "cost of sales",
	"selling and distribution costs" and "administrative and other	5,629
	operating expenses", as appropriate)	6,119
	Less: capitalised as "intangible assets"	-	(52)
		5,629	6,067
	Exchange gain, net	(37)	(129)
	Gain on disposal of plant and equipment	(40)	(108)
	Research and development expenses	9,382	10,780
	Less: capitalised as "intangible assets" (Note (ii))	-	(979)
		9,382	9,801

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

25

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. PROFIT BEFORE TAX (continued)

Notes:

1. During the six months ended 30 June 2020 and 2019, cost of inventories included approximately RMB12.4 million and RMB12.0 million respectively, relating to the aggregate amount of certain staff costs, depreciation and operating lease payments, which were included in the respective amounts as disclosed above.
2. During the six months ended 30 June 2020 and 2019, capitalised intangible assets included approximately Nil and RMB0.3 million respectively, relating to the staff costs which were included in the amounts as disclosed above.

8. INCOME TAX EXPENSES

	Six months ended 30 June
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
Current tax
PRC Enterprise Income Tax - current period	9,240	2,639
Withholding tax
Withholding tax on dividend income from a PRC subsidiary	399	-
Deferred tax
Origination and reversal of temporary differences	(464)	(343)
Income tax expenses for the period	9,175	2,296

The Group's entities established in the PRC are subject to PRC Enterprise Income Tax at a statutory rate of 25% except for 晉江海納機械有限公司 (Jinjiang Haina Machinery Co. Ltd.*), which is recognised as a High and New-technology Enterprise and is entitled to a preferential tax rate of 15% for 3 years from 2019.

The group entities established in the Cayman Islands and the BVI are exempted from income tax, respectively.

Hong Kong Profits Tax has not been provided as the Group had no assessable profit arising from Hong Kong for the six months ended 30 June 2020 and 2019.

Pursuant to the PRC Enterprise Income Tax Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in the PRC. A lower withholding tax rate may be applied if there is a tax treaty between the PRC and the jurisdiction of the foreign investors. For the Group, the applicable rate is 5%. The Group is therefore liable for withholding taxes on any dividends distributable by its subsidiaries established in the PRC.

• English name is for identification purpose only.

26 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. DIVIDENDS

No dividend were paid, declared or proposed during both interim periods. The Board has resolved not to declare an interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).

10. EARNINGS PER SHARE

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

	Six months ended 30 June
	2020	2019
	(Unaudited)	(Unaudited)
Profit:
Profit attributable to owners of the Company used for the purpose of basic
earnings per share (RMB'000)	24,603	11,600
Number of shares:
Weighted average number of ordinary shares for the purpose of basic
earnings per share ('000)	365,503	348,000

The weighted average number of ordinary shares used to calculate the basic earnings per share amounts has been determined on the assumption that the Reorganisation and the Capitalisation Issue have been effective on 1 January 2019.

Diluted earnings per share is same as basic earnings per share as there were no potential ordinary shares outstanding during both periods.

11. PLANT AND EQUIPMENT

During the six months ended 30 June 2020, plant and equipment (excluding right-of-use assets) purchased and disposed of by the Group were approximately RMB0.5 million (year ended 31 December 2019: approximately RMB1.3 million) and approximately RMB3.8 million (year ended 31 December 2019: RMB0.03 million), respectively.

During the six months ended 30 June 2020, the Group recognised right-of-use assets (presented in plant and equipment) by incurring lease liabilities of approximately RMB0.2 million (year ended 31 December 2019: RMB16.1 million).

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

27

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. TRADE AND OTHER RECEIVABLES

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
Note	(Unaudited)	(Audited)
Trade receivables from third parties	61,302	76,584
Less: Allowance for expected credit losses ("ECL")	(1,247)	(1,473)
12(a)	60,055	75,111
Bills receivables	-	1,000
Other receivables
Deposits and other receivables	878	1,201
Prepayment to suppliers	9,642	4,843
Prepayment for listing expenses	-	2,836
Other prepaid expenses	1,173	1,129
Value-added tax and other tax recoverable	6,119	10,687
Capital contribution receivable from the non-controlling shareholders
of a subsidiary	1,720	1,720
	19,532	22,416
	79,587	98,527

12(a) Trade receivables

Apart from a portion of the contract sum retained by customers to cover the Group's product quality warranty, the Group does not grant credit terms to customers in the sales contract. However, the Group would normally grant credit terms up to 30 days from the date of issuance of invoices to its customers for their processing of billing settlement as approved by the management on a case by case basis.

Included in trade receivables at 30 June 2020 and 31 December 2019 were retained sums of approximately RMB16,052,000 and RMB37,003,000, respectively. These are due for collection upon the expiry of product quality warranty period (which is usually 12 months from the acceptance by the customer of the machine).

28 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. TRADE AND OTHER RECEIVABLES (continued)

12(a) Trade receivables (continued)

The ageing analysis of trade receivables (net of allowance for ECL) based on revenue recognition date at the end of each reporting period is as follows:

		At	At
		30 June	31 December
		2020	2019
		RMB'000	RMB'000
		(Unaudited)	(Audited)
Within 30 days	16,164	18,640
31	to 60 days	7,931	2,995
61	to 90 days	4,913	14,701
91	to 180 days	4,519	15,063
181 to 365 days	11,211	15,848
Over 365 days	15,317	7,864
		60,055	75,111

At the end of each reporting period, the ageing analysis of the trade receivables (net of allowance for ECL) by due date is as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Audited)
Not yet due	15,337	28,725
Past due:
Within 30 days	8,202	14,348
31 to 60 days	8,947	125
61 to 90 days	5,099	9,663
91 to 180 days	5,347	6,650
181 to 365 days	6,468	10,705
Over 365 days	10,655	4,895
	44,718	46,386
	60,055	75,111

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

29

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. TRADE AND OTHER PAYABLES

		At	At
		30 June	31 December
		2020	2019
		RMB'000	RMB'000
	Note	(Unaudited)	(Audited)
Trade payables	13(a)	51,327	52,939
Bills payables		5,000	10,000
Other payables
Salaries payable		2,533	4,081
Contract liabilities - receipts in advance		114,952	63,169
Accruals and other payables		10,024	11,630
Amount due to a director		-	173
		127,509	79,053
		183,836	141,992

13(a) Trade payables

The trade payables are non-interest bearing and the Group is normally granted with credit term up to 180 days.

At the end of each reporting period, the ageing analysis of the trade payables based on goods receipt date is as follows:

		At	At
		30 June	31 December
		2020	2019
		RMB'000	RMB'000
		(Unaudited)	(Audited)
Within 30 days	33,292	32,743
31	to 60 days	7,742	6,869
61	to 90 days	5,895	7,707
91	to 180 days	2,850	2,954
181 to 365 days	567	1,195
Over 365 days	981	1,471
		51,327	52,939

30 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. AMOUNT DUE TO ULTIMATE HOLDING COMPANY

During the six months ended 30 June 2020, the amount due to ultimate holding company amounting to approximately RMB40.0 million was settled and the remaining balance was waived by the ultimate holding company and credited to the capital reserve under the equity.

15. SHARE CAPITAL

			Number of		Equivalent to
Ordinary share of HK$0.01 each	Note	shares	HK$	RMB'000
Authorised:
At 1 January 2019 (audited)		3,800,000	380,000	203
Share subdivision	i	34,200,000	-	-
At 31 December 2019 and 1 January 2020 (audited)		38,000,000	380,000	203
Increase on 8 May 2020	i	1,962,000,000	19,620,000	10,492
At 30 June 2020 (unaudited)		2,000,000,000	20,000,000	10,695
Issued and fully paid:
At 1 January 2019 (audited)		1	0.10	-*
Share subdivision	i	9	-	-
At 31 December 2019 and 1 January 2020 (audited)		10	0.10	-*
Issue of shares under the Capitalisation Issue	ii	347,999,990	3,479,999.90	3,195
Issue of shares under the Share Offer
	(including the partial exercise of
	the over-allotment option)	iii	122,004,000	1,220,040.00	1,120
At 30 June 2020 (unaudited)		470,004,000	4,700,040.00	4,315
*	Represents amounts less than RMB1,000.

Interim Report 2020 ● Haina Intelligent Equipment International Holdings Limited

31

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15. SHARE CAPITAL (continued)

Note:

1. On 18 March 2019, the Company's shares with par value Hong Kong Dollar ("HK$") 0.10 per share were subdivided into 10 shares with par value HK$0.01 per share in the share capital of the Company. Following such share subdivision, the authorised share capital of the Company was HK$380,000 divided into 38,000,000 shares of par value HK$0.01 per share.
   On 8 May 2020, the authorised share capital of the Company was increased from HK$380,000 divided into 38,000,000 shares of par value HK$0.01 each to HK$20,000,000 divided into 2,000,000,000 shares of par value HK$0.01 each, by the creation of additional 1,962,000,000 shares.
2. Pursuant to the resolution in writing of the then sole shareholder of the Company passed on 8 May 2020, subject to the share premium account of the Company being credited as a result of the offering of the Company's shares, the directors of the Company were authorised to allot and issue a total of 347,999,990 shares of HK$0.01 each to the then sole shareholder, credited as fully paid at par by way of capitalisation of the sum of HK$3,479,999.9 (equivalent to approximately RMB3,195,000) standing to be credit of the share premium account of the Company (the "Capitalisation Issue") and the shares allotted and issued pursuant to this resolution shall carry the same rights as all shares in issue (save for the right to participate in the Capitalisation Issue). The Capitalisation Issue was completed on 3 June 2020.
3. On 3 June 2020, 116,000,000 ordinary shares with par value of HK$0.01 each of the Company were issued at a price of HK$1.38 per share by way of share offer (the "Share Offer").
   On 24 June 2020, 6,004,000 ordinary shares with par value of HK$0.01 each of the Company were issued at a price of HK$1.38 per share upon partial exercise of the over-allotment option (the "Over-allotment").
4. The expenses attributable to issue of shares under the Share Offer and the Over-allotment of approximately RMB29,153,000 have recognised in the share premium account of the Company.

32 Haina Intelligent Equipment International Holdings Limited ● Interim Report 2020