Perennial International : INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2020

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

PERENNIAL INTERNATIONAL LIMITED

恒 都 集 團 有 限 公 司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 00725)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30TH JUNE 2020

INTERIM RESULTS

The board (the "Board") of directors (the "Director(s)") of Perennial International Limited (the "Company") hereby presents the interim report and the unaudited condensed consolidated interim financial information of the Company and its subsidiaries (collectively the "Group") for the six months ended 30th June 2020 together with comparative figures as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

for the six months ended 30th June 2020

		Six months ended 30th June
		2020			2019
	Notes	HK$'000	HK$'000
Revenue	5	124,402			165,623
Cost of sales		(103,685)	(131,868)
Gross profit		20,717		33,755
Other income	6	1,438	3,953
Distribution expenses		(3,634)	(3,208)
Administrative expenses		(25,365)	(26,590)
Other operating income/(expenses), net		145	(1,723)
Impairment loss on financial assets	16	(4,465)	-
Operating (loss)/profit	7	(11,164)	6,187
Finance costs	8	(1,102)	(1,032)
(Loss)/profit before taxation		(12,266)	5,155
Income tax credit/(charge)	9	2,120	(935)
(Loss)/profit for the period attributable to
	(10,146)
shareholders of the Company		4,220
Basic and diluted (loss)/ earnings per share
	(5.1)
(cents)	11	2.1

*  For identification purposes only

- 1 -

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the six months ended 30th June 2020

		Six months ended 30th June
		2020	2019
		HK$'000	HK$'000
(Loss)/profit for the period	(10,146)	4,220
Other comprehensive (loss)/income:
Items that may be subsequently reclassified to
profit or loss
Exchange difference arising from translation of
financial information of subsidiaries	(7,232)	3,800
Other comprehensive (loss)/income
for the period, net of tax	(7,232)	3,800
Total comprehensive (loss)/income for the period
attributable to shareholders of the Company	(17,378)	8,020

- 2 -

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

as at 30th June 2020

		30th June	31st December
		2020		2019
	Notes	HK$'000	HK$'000
ASSETS
Non-current assets
Right-of-use assets	12(a)	25,637		26,496
Property, plant and equipment	13	384,476		395,075
Investment properties	14	47,200		47,200
Non-current deposits		195		430
Deferred tax assets		7,778		6,296
		465,286		475,497
Current assets
Inventories	15	103,923		110,061
Trade and bill receivables	16	64,739		81,163
Derivative financial Instruments	17	-	495
Other receivables, deposits and prepayments		10,405		10,404
Taxation recoverable		751		711
Cash and cash equivalents		38,708		36,548
		218,526		239,382
Total assets		683,812		714,879
EQUITY AND LIABILITIES
Equity attributable to shareholders of
the Company
Share capital	18	19,896		19,896
Other reserves	19	252,386		259,618
Retained earnings		272,864		283,010
Total equity		545,146		562,524

- 3 -

		30th June	31st December
		2020		2019
	Notes	HK$'000	HK$'000
LIABILITIES
Non-current liabilities
Lease liabilities	12(b)	-	77
Deferred tax liabilities		42,652		43,835
		42,652		43,912
Current liabilities
Trade and bill payables	20	14,073		17,749
Other payables and accruals		16,643		18,971
Derivative financial instruments	17	162		-
Lease liabilities	12(b)	305		451
Taxation payable		2,437		2,837
Bank loans	21	44,600		37,000
Trust receipt loans	21	17,794		31,435
		96,014		108,443
Total liabilities		138,666		152,355
Total equity and liabilities		683,812		714,879

- 4 -

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the six months ended 30th June 2020

	Share	Other	Retained	Total
	capital	reserves	earnings	equity
	HK$'000	HK$'000	HK$'000	HK$'000
At 1st January 2020	19,896		259,618	283,010	562,524
Total comprehensive loss
for the period	-	(7,232)	(10,146)	(17,378)
At 30th June 2020	19,896		252,386	272,864	545,146
	Share	Other	Retained	Total
	capital	reserves	earnings	equity
	HK$'000	HK$'000	HK$'000	HK$'000
At 1st January 2019	19,896	261,981		296,208		578,085
Total comprehensive income
for the period	-	3,800		4,220		8,020
At 30th June 2019	19,896		265,781		300,428		586,105

- 5 -

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

for the six months ended 30th June 2020

	Six months ended 30th June
	2020			2019
				(restated)
	HK$'000	HK$'000
Cash flows from operating activities
Net cash generated from operations	14,526			1,109
Hong Kong profits and overseas tax paid, net	(418)	(367)
Interest paid	(1,102)	(1,032)
Net cash generated from/(used in) operating activities	13,006			(290)
Cash flows from investing activities
Purchases of property, plant and equipment	(4,124)	(10,888)
Decrease in deposits paid for additions of property, plant
and equipment	235		919
Interest received	16		94
Proceeds from sale of property, plant and equipment	9		241
Net cash used in investing activities	(3,864)	(9,634)
Cash flows from financing activities
Net additions of bank loans	7,600			17,600
Net (repayment)/additions of trust receipt loans	(13,641)	1,228
Payments for principal portion of the lease liability	(231)	(144)
Net cash (used in)/generated from financing activities	(6,272)	18,684
Net increase in cash and cash equivalents	2,870			8,760
Cash and cash equivalents at the beginning of the period	36,548		49,996
Exchange difference on cash and cash equivalents	(710)	735
Cash and cash equivalents at the end of the period	38,708			59,491

- 6 -

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1. GENERAL INFORMATION
   The Company is an investment holding company. The Group is principally engaged in the manufacturing and trading of electric cable and wire products.
   The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
   This unaudited condensed consolidated interim financial information is presented in Hong Kong dollars ("HK$") unless otherwise stated.
2. BASIS OF PREPARATION
   The unaudited condensed consolidated interim financial information has been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants.
3. ACCOUNTING POLICIES
   The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax and the adoption of new and amended standards as set out below.
   Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
4. 1. New and amended standards adopted by the Group

The following new and amendments to Hong Kong Financial Reporting Standards ("HKFRS") are mandatory for the financial year beginning 1st January 2020:

Amendments to HKFRS 3	Definition of Business
Amendments to HKAS 1 and HKAS 8	Definition of Material
Conceptual Framework for Financial	Revised Conceptual Framework for Financial Reporting
Reporting 2018
Amendments to HKAS 39, HKFRS 7	Hedge Accounting
and HKFRS 9

The adoption of the new and amended standards listed above did not have material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future period.

- 7 -

1. New and amended standards have been issued but are not effective for the financial year beginning 1st January 2020 and have not been early adopted:

		Effective for annual
		periods beginning
		on or after
HKFRS 17	Insurance Contracts	1st January 2021
Amendments to HKFRS 10	Sale or Contribution of Assets between an	To be determined
and HKAS 28	Investor and its Associate or Joint Venture

The Group will adopt the new and amended standards when they become effective. The Group has already commenced an assessment of the related impact of adopting the above new and amended standards, none of which is expected to have a significant effect on the consolidated financial statements of the Group.

1. ESTIMATES
   The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
   In preparing this unaudited condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31st December 2019.
   Fair value estimation
   The carrying amounts of the Group's financial assets and liabilities including cash and cash equivalents, trade and bill receivables, other receivables and deposits, derivative financial instruments, trade payables, other payables and accruals and short-term borrowings approximate to their fair values due to their short- term maturities. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments, unless the discounting effect is insignificant.
2. REVENUE AND SEGMENT INFORMATION
   The Group is principally engaged in the manufacturing and trading of electric cable and wire products business.
   Revenue recognised during the period is as follows:

Six months ended 30th June

20202019

HK$'000 HK$'000

Sale of goods - at a point in time	124,402	165,623

The Chief Executive Officer (the chief operation decision maker) has reviewed the Group's internal reporting and determines that there are five reportable segments, based on location of customers under electric cable and wire products business, including Hong Kong, the Mainland China, America, Europe and Other Countries. These segments are managed separately as each segment is subject to risks and returns that are different from the others.

- 8 -

The unaudited segment information for the reportable segments and unaudited segment assets for the six months ended 30th June 2020 are as follows:

			Six months ended 30th June 2020
	Revenue			Total
	(external	Segment	segment	Capital
	sales)	results	assets	expenditure	Depreciation
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Hong Kong	34,186	(5,205)	159,627	349	2,836
Mainland China	19,782	(4,200)	299,085	184	6,374
America	68,772	(327)	79,294	-	-
Europe	189	(24)	79	-	-
Other Countries	1,473	(80)	90,749	3,591	1,507
Reportable segment	124,402		(9,836)	628,834	4,124	10,717
Unallocated costs, net
of income			(1,328)
Operating loss			(11,164)

Unallocated costs, net of income mainly represent corporate expenses and income from investment properties.

The unaudited segment information for the reportable segments and unaudited segment assets for the six months ended 30th June 2019 are as follows:

			Six months ended 30th June 2019
	Revenue			Total
	(external	Segment	segment	Capital
	sales)	results	assets	expenditure	Depreciation
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Hong Kong	45,286	3,810	217,250	1,870	3,031
Mainland China	25,168	3,057	311,143	330	5,700
America	93,641	136	87,045	-	-
Europe	198	1	24	-	-
Other Countries	1,330	108	77,296	9,580	838
Reportable segment	165,623		7,112	692,758	11,780	9,569
Unallocated costs, net
of income			(925)
Operating profit			6,187

- 9 -

A reconciliation of total segment assets to the Group's total assets:
	30th June		30th June
	2020	2019
	HK$'000		HK$'000
Total segment assets	628,834	692,758
Investment properties	47,200	55,290
Deferred tax assets	7,778	3,583
Total assets	683,812	751,631

Revenue of approximately HK$64,935,000 (six months ended 30th June 2019: HK$82,223,000) are

derived from two (six months ended 30th June 2019: two) major customers contributing 10% or more of the total revenue as below:

Six months ended 30th June

20202019

HK$'000 HK$'000

	Customer A1	34,562		41,415
	Customer B1	30,373		40,808
			64,935		82,223
	1	Revenue from the America segment.
6	OTHER INCOME
			Six months ended 30th June
			2020	2019
			HK$'000	HK$'000
	Scrap sales	4	1,712
	Interest income	16	94
	Government subsidy	112	186
	Rental income from investment properties	406	423
	Other income from customers	900	1,538
			1,438		3,953

- 10 -

7 OPERATING (LOSS)/PROFIT

Operating (loss)/profit is stated after charging/ (crediting) the following:

		Six months ended 30th June
		2020	2019
		HK$'000	HK$'000
	Depreciation of right-of-use assets	562	463
	Depreciation of property, plant and equipment	10,155	9,106
	Auditor's remuneration	800	880
	Cost of inventories	66,889	86,779
	Net loss on derivative financial instruments	801	-
	Net exchange (gain)/loss	(1,604)	697
	Operating lease rentals in respect of land and buildings	-	73
	Direct expenses for investment properties	76	38
	(Gain)/loss on disposal of property, plant and equipment	(1)	93
	Provision for slow-moving inventories	183	1,289
	Staff costs (including directors' emoluments) (note 10)	37,470	44,489
8	FINANCE COSTS
		Six months ended 30th June
		2020	2019
		HK$'000	HK$'000
	Interest expenses on bank borrowings	1,095	1,022
	Interest expenses on lease liabilities	7	10
		1,102		1,032

9 INCOME TAX

Hong Kong profits tax is provided at the two-tiered rate of 8.25% for the first HK$2 million of the estimated assessable profits for one of the Group's Hong Kong subsidiaries for the year and 16.5% on the remaining estimated assessable profits for the year (2019: 16.5%).

Income tax on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates.

	Six months ended 30th June
	2020	2019
	HK$'000	HK$'000
Hong Kong profits tax	22	124
Overseas taxation	486	474
Deferred tax relating to the origination and reversal of temporary
differences	(2,628)	337
	(2,120)	935

- 11 -

10 STAFF COSTS (INCLUDING DIRECTORS' EMOLUMENTS)
	Six months ended 30th June
	2020	2019
	HK$'000	HK$'000
Wages, salaries and fringe benefits	34,765	40,702
Social security costs	2,130	3,153
Pension costs
- contributions to MPF scheme	217	192
Others	358	442
	37,470		44,489

1. Directors' Emoluments
   Included in the staff costs are remuneration paid to the directors set out as below:

	Six months ended 30th June
	2020	2019
	HK$'000	HK$'000
Basic salaries, housing allowances, other allowances
and benefits in kind	4,608	4,287
Pension costs
- contributions to MPF scheme	27	27
	4,635		4,314

1. Key Management Compensation
   The compensation paid or payable to key management including all directors and three (six months ended 30th June 2019: four) senior management for employee services is shown below:

	Six months ended 30th June
	2020	2019
	HK$'000	HK$'000
Basic salaries, housing allowances, other allowances
and benefits in kind	5,920	6,164
Pension costs
- contributions to MPF scheme	54	61
	5,974		6,225

11 (LOSS)/EARNINGS PER SHARE

The calculation of basic loss per share is based on the Group's unaudited loss for the six months ended 30th June 2020 of HK$ 10,146,000 (earnings per share for the six months ended 30th June 2019: profit of HK$4,220,000) divided by the number of 198,958,000 (30th June 2019: 198,958,000) ordinary shares in issue during the period.

For the six months ended 30th June 2020 and 2019, diluted (loss)/earnings per share is the same as basic (loss)/earnings per share due to the absence of dilutive potential ordinary shares at the end of the reporting period.

- 12 -

12 LEASE

1. Right-of-useassets
   The Group recognised right-of-use assets relating to the following types of assets:

	Land
	use rights
	outside HK	Property	Total
	HK$'000	HK$'000	HK$'000
Net book value at 1st January 2020	25,938		558	26,496
Depreciation	(339)	(223)	(562)
Exchange adjustment	(297)	-	(297)
Net book value at 30th June 2020	25,302		335	25,637

1. Lease liabilities

	30th June	31st December
	2020	2019
	HK$'000	HK$'000
Current	305	451
Non-current	-	77
	305		528

1. Amounts recognised in the condensed consolidated income statement

	Six months ended 30th June
	2020	2019
	HK$'000		HK$'000
Depreciation charge of right-of-use assets
- Land use rights outside Hong Kong	339	351
- Property	223	112
Interest expense	7	10
Expenses relating to short-term leases and low-value leases	81	73
Rental income from investment properties	406	423

The total cash outflows for leases for the six months ended 30th June 2020 was HK$312,000.

- 13 -

13	PROPERTY, PLANT AND EQUIPMENT
									Leasehold
		Land and buildings					improve-	Plant and	Furniture				Office	Motor	Pleasure	Construction
		In HK	Outside HK					ments	machinery	and fixtures	equipment	vehicles	boats	in progress	Total
		HK$'000				HK$'000					HK$'000				HK$'000				HK$'000				HK$'000	HK$'000	HK$'000				HK$'000	HK$'000
	Net book value
	at 1st January 2020	117,430	249,579	4,312	12,382	678	4,138	2,687	3,871				-	395,077
	Additions	-				-					-	283				-	362	-	-	3,479	4,124
	Disposals	-				-					-	(9)				-				-	-	-				-	(9)
	Depreciation	(2,135)	(4,227)	(553)	(1,047)	(339)	(1,382)	(279)	(193)				-	(10,155)
	Exchange adjustment	-	(4,291)	(35)	(198)				-	(20)	(17)	-				-	(4,561)
	Net book value
	at 30th June 2020	115,295		241,061		3,724		11,411	339	3,098	2,391	3,678	3,479	384,476
	At 30th June 2020
	At cost	-				-	15,044		90,836	4,985	14,882	6,889	14,421	3,479	150,536
	At valuation	117,430	245,262					-				-				-				-	-	-				-	362,692
	Accumulated depreciation	(2,135)	(4,201)	(11,320)	(79,425)	(4,646)	(11,784)	(4,498)	(10,743)				-	(128,752)
	Net book value	115,295		241,061		3,724		11,411	339	3,098	2,391	3,678	3,479	384,476
									Leasehold
		Land and buildings					improve-				Plant and				Furniture				Office	Motor	Pleasure	Construction
		In HK	Outside HK					ments	machinery	and fixtures	equipment	vehicles	boats				in progress	Total
		HK$'000				HK$'000					HK$'000				HK$'000				HK$'000				HK$'000	HK$'000	HK$'000				HK$'000	HK$'000
	Net book value
	at 1st January 2019	139,070	197,183	2,193	12,446	708	4,285	3,094	4,279	38,809	402,067
	Additions	-				-					-	3,314				-	574	409	-	6,591	10,888
	Disposals	-				-					-	(165)				-				-	(169)	-				-	(334)
	Depreciation	(2,440)	(3,749)	(476)	(1,674)				-	(255)	(303)	(209)				-	(9,106)
	Transfer	-	41,499	2,894				-				-				-	-	-	(44,393)	-
	Exchange adjustment	-	2,140	348	116	7	39	10	-	232	2,892
	Net book value
	at 30th June 2019	136,630		237,073		4,959	14,037	715	4,643	3,041	4,070	1,239	406,407
	At 30th June 2019
	At cost	-	41,499		15,316	92,454	5,128	14,862	7,258	14,421	1,239	192,177
	At valuation	139,070	199,305					-				-				-				-	-	-				-	338,375
	Accumulated depreciation	(2,440)	(3,731)	(10,357)	(78,417)	(4,413)	(10,219)	(4,217)	(10,351)				-	(124,145)
	Net book value	136,630		237,073		4,959	14,037	715	4,643	3,041	4,070	1,239	406,407

At 30th June 2020, the net book value of land and buildings pledged as security for the Group's bank loans amounted to HK$115,295,000 (31st December 2019: HK$117,430,000).

- 14 -

14 INVESTMENT PROPERTIES

30th June 2020 and 31st December 2019 HK$'000

At fair value	47,200

1. Investment properties were revalued on the basis of open market valued by direct comparison approach by Centaline Surveyors Limited, an independent firm of chartered surveyors, as at 31st December 2019.
2. As at 30th June 2020, the fair value of the investment properties, as determined by the directors, approximates to the fair value as at 31st December 2019.
3. At 30th June 2020 and 31st December 2019, the net book value of investment properties pledged as security for the Group's bank borrowings amounts to HK$27,100,000.

15	INVENTORIES
		30th June	31st December
		2020	2019
		HK$'000	HK$'000
	Raw materials	36,453	31,235
	Work in progress	16,605	16,720
	Finished goods	56,950	68,008
		110,008		115,963
	Provision for slow-moving inventories	(6,085)	(5,902)
	At 30th June	103,923		110,061

- 15 -

16 TRADE AND BILL RECEIVABLES

At 30th June 2020 and 31st December 2019, the ageing analysis of trade and bill receivables based on invoice date were as follows:

	30th June	31st December
	2020		2019
	HK$'000	HK$'000
Current - 3 months	50,826		57,501
4-6 months	8,449		16,068
Over 6 months	10,684		8,348
	69,959		81,917
Provision for impairment loss	(5,220)	(754)
	64,739		81,163

The Group applies the HKFRS 9 simplified approach to measure expected credit losses using a lifetime expected loss allowance for all trade receivables. There were no historical credit losses incurred over existing customers and the overall default rate of corporate remained relatively stable and low. However, as at 30th June 2020, the Directors were of the opinion that a provision for impairment loss of HK$5,220,000 (31st December 2019: HK$754,000) was necessary for a particular customer.

The net increase in provision for impairment loss for the period was HK$4,465,000 (2019: Nil).

17 DERIVATIVE FINANCIAL INSTRUMENTS
	30th June	31st December
	2020		2019
	HK$'000	HK$'000
Financial assets at fair value through profit or loss and included
in the unaudited condensed consolidated statement of financial
position as current (liabilities)/assets
- Foreign exchange forward contracts	(162)	495

The Group has certain outstanding foreign exchange forward contracts with an external reputable bank with long positions in RMB for hedging its purchase transactions denominated in RMB.

The notional principal amounts of the outstanding foreign exchange forward contracts at 30th June 2020 were approximately US$3,000,000 (31st December 2019: US$4,000,000).

18	SHARE CAPITAL
		Number of
		shares	HK$'000
	Authorised:
	At 30th June 2020 and 31st December 2019, ordinary shares of
	HK$0.10 each	500,000,000		50,000
	Issued and fully paid:
	At 30th June 2020 and 31st December 2019, ordinary shares of
	HK$0.10 each	198,958,000		19,896

- 16 -

19

OTHER RESERVES

Land and

Exchange

building

Capital

Share

fluctuation

revaluation

redemption

Total other

premium

reserve

reserve

reserve

reserves

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

At 1st January 2020

15,886

(786)

244,414

104

259,618

Exchange difference

arising from translation

of financial information

of subsidiaries

-

(7,232)

-

-

(7,232)

At 30th June 2020

15,886

(8,018)

244,414

104

252,386

Land and

Exchange

building

Capital

Share

fluctuation

revaluation

redemption

Total other

premium

reserve

reserve

reserve

reserves

HK$'000

HK$'000

HK$'000

HK$'000

HK$'000

At 1st January 2019

15,885

1,418

244,574

104

261,981

Exchange difference

arising from translation

of financial information

of subsidiaries

-

3,800

-

-

3,800

At 30th June 2019

15,885

5,218

244,574

104

265,781

20 TRADE AND BILL PAYABLES

At 30th June 2020 and 31st December 2019, the ageing analysis of trade and bill payables based on invoice date were as follows:

	30th June		31st December
	2020	2019
	HK$'000		HK$'000
Current - 3 months	13,792	15,709
4-6 months	215	1,907
Over 6 months	66	133
	14,073	17,749

- 17 -

21	BORROWINGS
		30th June		31st December
		2020	2019
		HK$'000		HK$'000
	Current liabilities
	Trust receipt loans	17,794	31,435
	Bank loans	44,600	37,000
	Total borrowings	62,394	68,435
	Movements in borrowings are analysed as follows:
				HK$'000
	Six months ended 30th June 2020
	Opening amount as at 1st January 2020		68,435
	Proceeds from borrowings		39,059
	Repayments of borrowings		(45,100)
	Closing amount as at 30th June 2020		62,394

Total borrowings included secured liabilities of HK$52,794,000 (31st December 2019: HK$56,435,000), which are secured by certain land and buildings and investment properties of the Group.

The borrowings are supported by guarantees given by the Company and its certain subsidiaries.

The maturity of borrowings in accordance with the repayment schedule (without taking into account the repayment on-demand clause) is as follows:

	Bank loans	Trust receipt loans
	30th June	31st December	30th June	31st December
	2020	2019	2020	2019
	HK$'000	HK$'000	HK$'000	HK$'000
Within 1 year	44,600	29,800	17,794	31,435
Between 1 and 2 years	-	7,200	-	-
	44,600		37,000		17,794		31,435

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22 FINANCIAL GUARANTEES AND PLEDGE

At 30th June 2020, the Group has the following banking facilities, of which HK$193,040,000 (31st December 2019: HK$173,040,000) were secured by the legal charges over certain land and buildings and investment properties of the Group with a total net book value of HK$142,395,000 (31st December 2019: HK$144,530,000).

	30th June		31st December
	2020	2019
	HK$'000		HK$'000
Trade and loan finance facilities	193,040	185,040
Forward exchange contract line	62,000	62,312

In addition, the Company and its certain subsidiaries also provided guarantees in favour of the banks to secure these banking facilities granted to the Group.

23 COMMITMENTS

1. Capital commitments
   At 30 the June 2020 and 31st December 2019, the Group had the following capital commitments for buildings, plant and equipment:

	30th June		31st December
	2020	2019
	HK$'000		HK$'000
Contracted for but not provided for	12,255		-

1. Commitments under operating lease as lessor
   At 30th June 2020 and 31st December 2019, the Group had future aggregate minimum rental receivables under non-cancellable operating leases as follows:

	Land and buildings
	30th June	31st December
	2020	2019
	HK$'000	HK$'000
Not later than one year	1,027	920
Later than one year and not later than five years	1,284	1,797
	2,311		2,717

1. DIVIDEND
   The Board did not recommend the payment of final dividend for the year ended 31st December 2019.
   The Board does not recommend the payment of an interim dividend for the six months ended 30th June 2020 (2019: Nil).
2. APPROVAL OF THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
   The unaudited condensed consolidated interim financial information was approved by the Board on 18th August 2020.

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FINANCIAL REVIEW

Results

The Group's revenue for the six months ended 30th June 2020 was approximately HK$124,402,000 (2019: approximately HK$165,623,000). Unaudited consolidated loss attributable to shareholders was approximately HK$10,146,000 (2019: unaudited consolidated profit attributable to shareholders: approximately HK$4,220,000). Loss per share was HK5.1 cents (2019: Profit per share HK2.1 cents).

The Board does not recommend the payment of interim dividend (2019: Nil).

Liquidity and Financial Resources

As at 30th June 2020, the Group's bank balances and cash was approximately HK$38,708,000 (31st December 2019: HK$36,548,000). The consolidated indebtedness of the Group was approximately HK$62,699,000 which included short-term borrowings and lease liabilities. The borrowings were denominated in Hong Kong dollars and US dollars and bore interest at floating rates.

The amount of the Group's current working capital was approximately HK$122,512,000 (31st December 2019: approximately HK$130,939,000). The current ratio was 2.28. The Group's trade and bill receivables were approximately HK$64,739,000 (31st December 2019: HK$81,163,000), representing approximately 52.0% of the period's revenue of approximately HK$124,402,000.

Capital Structure

The equity of the Group was approximately HK$545,146,000 (2019: HK$586,105,000), representing a decrease of approximately 7.0% as compared with the last corresponding period. The gearing ratio, which is calculated by dividing total borrowings by total equity, was approximately 11.4%.

Pledge of Assets

As at 30th June 2020, the Group's utilised banking facilities amounting to approximately HK$62,394,000 (31st December 2019: approximately HK$68,435,000) were secured by legal charges over certain land and buildings and investment properties of the Group with a total net book value of approximately HK$162,495,000 (31st December 2019: approximately HK$168,130,000), and corporate guarantee given by the Company and its certain subsidiaries.

Foreign Exchange Exposure

All foreseeable foreign exchange risks of the Company are appropriately managed or hedged.

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Contingent liabilities

As at 30th June 2020, the Group did not have any material contingent liabilities (2019: nil).

BUSINESS REVIEW

The Group's revenue decreased by approximately 24.9% from approximately HK$165,623,000 during the six months ended 30th June 2019 to approximately HK$124,402,000 during the six months ended 30th June 2020. The drop in sales was mainly due to the outbreak of the coronavirus disease pandemic (the "COVID-19 Pandemic") which has an adverse effect to global economy including our customers.

Sales in power cords and plastic resins accounted for approximately 61% of the Group's revenue, and cables, wires and wire harness accounted for approximately 39% of the Group's revenue.

The gross profit margin decreased from approximately 20.4% for the six months ended 30th June 2019 to approximately 16.7% for the six months ended 30th June 2020. The decrease in gross profit margin was mainly due to higher depreciation charge as a result of the first and second phases of the factory constructions in Quang Ngai, Vietnam which commenced full operations in the second half of 2019.

The Group recorded a negative net profit margin of approximately 8.2% for the six months ended 30th June 2020 whereas it was a positive net profit margin of approximately 2.5% for the first half of 2019. The negative net profit margin was mainly due to the provision for impairment loss on trade receivables of approximately HK$4.5 million, in addition to the above mentioned effect of the COVID-19 Pandemic.

As to the factory construction in Quang Ngai, Vietnam, the third phase construction of the factory has been ongoing and will be completed and test-run will start in the fourth quarter of 2020. Currently, approximately 50% of production has been shifted to the factory in Quang Ngai, Vietnam.

FUTURE PROSPECTS

The Group has recovered quickly in response to the COVID-19 Pandemic and all operations of factories in Vietnam, Shenzhen City and Heyuan City in The People's Republic of China (the "PRC") have been fully resumed to the normal operation capacities. The global economy is still surrounded by the uncertainties arising from the COVID-19 Pandemic and is still unstable. However, the Group has confidence in its future development.

The Group is still maintaining close and stable business relationship with our renowned customers. The Group will shift our main business focus on high value-added products and under this new business approach, the Group has secured considerable amount of new business orders to strengthen the sales portfolios for 2020 and 2021.

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EMPLOYEES AND REMUNERATION POLICIES

As at 30th June 2020, the Group employed approximately 1,030 (2019: 1,040) full time management, administrative and production staff in Hong Kong, the PRC and Vietnam. The Group follows market practice on remuneration packages. Employees' remuneration is reviewed and determined by senior management annually depending on the employee's performance, experience and industry practice. The Group invests in its human capital. In addition to on-job training, the Group encourages employees to further their studies in extramural courses.

REVIEW BY THE AUDIT COMMITTEE

The audit committee of the Company (the "Audit Committee") has reviewed with the management the accounting principles and practices adopted by the Group and discussed risk management and internal controls and financial reporting matters, including a review of the unaudited condensed consolidated financial information for the six months ended 30th June 2020 with the Directors.

CORPORATE GOVERNANCE

The Group is committed to safeguarding shareholders' rights and enhancing corporate governance standard. As a result, we established the compliance committee, the Audit Committee, the remuneration committee and the nomination committee to adhere to best practices.

SOCIAL RESPONSIBILITY

The Group holds a strong belief in corporate social responsibility. Hence we continue to participate in and support community activities in both Hong Kong and the PRC.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Directors confirm that during the six months ended 30th June 2020, the Company has complied with the code provisions set out in the Corporate Governance Code (the "Code") as set out in Appendix 14 to the Rules (the "Listing Rules") Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"), and adopted recommended best practices as set out in the Code whenever appropriate.

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COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted a code of conduct regarding Directors' and employees' securities transactions on terms no less exacting than the required standards of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules. Having made specific enquiry to all Directors, the Company confirms that all the Directors complied with the required standards of the said code during the six months ended 30th June 2020.

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

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

EVENTS AFTER THE REPORTING PERIOD

No significant events have taken place after the six months ended 30th June 2020 to the date of this announcement.

PUBLICATION OF INFORMATION ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY

This interim results announcement has been published on the websites of the Stock Exchange at http://www.hkexnews.hk and the Company at http://perennial.todayir.com.

VOTE OF THANKS

The Board would like to extend its sincere thanks to loyal shareholders, partners and customers of the Group for their continuous support and to the staff for their dedication.

By order of the Board

Perennial International Limited

KOO Di An, Louise

Chairman

Hong Kong, 18th August 2020

As at the date of this announcement, the executive Directors are Mr. MON Chung Hung, Mr. SIU Yuk Shing, Marco, Ms. MON Wai Ki, Vicky and Ms. MON Tiffany, the non-executive Director is Ms. KOO Di An, Louise and the independent non-executive Directors are Mr. LAU Chun Kay, Mr. LEE Chung Nai, Jones and Ms. CHUNG Kit Ying.

- 23 -