YANGTZE OPTICAL FIBRE AND CABLELIMITED COMPANY Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
ڗ࠭ΈᜄΈٰ΅Ϟࠢʮ̡
Yangtze Optical Fibre and Cable Joint Stock Limited Company*
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 6869)
ANNOUNCEMENT OF AUDITED ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The board of directors (the "Board") of Yangtze Optical Fibre and Cable Joint Stock Limited Company*ڗ࠭ΈᜄΈٰ΅Ϟࠢʮ̡(the "Company") is pleased to announce that the Company's auditor, KPMG Huazhen LLP, has completed its auditing process of the annual results for the year ended 31 December 2020 of the Company and its subsidiaries (the "Group") (the "2020 Annual Results") in accordance with China Standards on Auditing for Certified Public Accountants.
FINANCIAL HIGHLIGHTS
• Operating income was RMB8,221.5 million (2019: RMB7,769.2 million), increased by approximately 5.8% (2019: decreased by 31.6%).
• Gross profit and gross profit margin were RMB1,787.6 million (2019: RMB1,833.5 million) and 21.7% (2019: 23.6%), respectively.
• Net profit for the year attributable to equity shareholders of the Company was RMB543.7 million (2019: RMB801.2 million), decreased by approximately 32.1% (2019: decreased by 46.2%).
• The Group's revenue from domestic business increased by approximately 0.2% (2019: decreased by 35.5%), when compared with the prior year. The Group's overseas revenue increased by approximately 26.6% (2019: decreased by 11.9%), when compared with the prior year.
• The Board recommended the payment of a final dividend of RMB0.216 per share (before tax) for the year ended 31 December 2020 (2019: RMB0.318).
* For identification purposes only
The Company is pleased to announce the audited consolidated results of the Group for the year ended 31 December 2020 as follows:
Consolidated Income Statement For the year ended 31 December 2020 (Expressed in Renminbi "RMB")
Notes
2020 (Audited)
2019 (Audited)
I. Operating income
II. Less: Operating costs
Taxes and surcharges
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Financial expenses
Including: Interest expenses
Interest revenue
Add: Other income
Investment income
Including: Income from investment in
associates and joint ventures
Gains from changes in fair value
Credit losses
Impairment losses
Gains from asset disposals
4 4
8,221,542,967 7,769,175,495
6,433,899,209 5,935,648,889
22,279,411 26,708,981
370,922,594 347,325,663
476,220,543 428,531,381
414,571,192 413,538,214
5
60,876,636 6,223,776
49,943,119 61,161,985
15,644,437 43,159,364
6
127,390,031 203,936,325
36,505,003 121,786,023
27,068,532 109,848,127
94,152,688
238,970
(76,837,297) (33,407,343)
(45,091,143) (33,325,145)
1,758,577 7,367,173
III. Operating profit
Add: Non-operating income Less: Non-operating expenses
580,651,241 877,794,594
4,441,780 6,520,253
5,852,078
805,799
IV. Profit before income tax Less: Income tax expenses
579,240,943 883,509,048
7
35,040,964 99,224,076
V. Net profit for the year
544,199,979 784,284,972
Net profit for the year attributable to equity shareholders of the Company Non-controlling interests
543,677,809 801,225,042
522,170
(16,940,070)
Notes
2020 (Audited)
2019 (Audited)
VI. Other comprehensive income, net of tax
Other comprehensive income (net of tax)
attributable to shareholders of the Company
(1) Items that cannot be reclassified subsequently to profit or loss Changes in fair value of investments in other equity instruments
(2) Items that may be reclassified subsequently to profit or loss Translation differences arising from translation of foreign currency financial statements
Other comprehensive income (net of tax)
attributable to non-controlling interests
(43,692,418) 11,599,640
(13,414,036) (6,508,537)
(30,278,382) 18,108,177
(2,293,135) 1,513,031
VII. Total comprehensive income for the year
498,214,426 797,397,643
Total comprehensive income attributable to equity shareholders of the Company Total comprehensive income attributable to non-controlling interests
VIII. Earnings per share:
(1) Basic earnings per share
(2) Diluted earnings per share
499,985,391 812,824,682
(1,770,965)
(15,427,039)
8 8
0.72 1.06
0.72 1.06
Consolidated Balance Sheet At 31 December 2020 (Expressed in Renminbi "RMB")
31 December | 31 December | ||
Notes | 2020 | 2019 | |
(Audited) | (Audited) | ||
ASSETS: | |||
Current assets: | |||
Cash at bank and on hand | 1,444,270,151 | 2,123,861,315 | |
Financial assets held for trading | 891,831,588 | 9,902,598 | |
Bills receivable | 10 | 274,422,718 | 232,508,205 |
Accounts receivable | 11 | 3,776,762,957 | 3,123,505,778 |
Receivables under financing | 12 | 138,133,247 | 95,235,940 |
Prepayments | 199,027,986 | 120,994,458 | |
Other receivables | 143,998,093 | 109,599,839 | |
Inventories | 2,337,549,891 | 1,779,342,250 | |
Other current assets | 244,226,485 | 256,866,780 | |
Total current assets | 9,450,223,116 | 7,851,817,163 | |
Non-current assets: | |||
Long-term receivables | - | 16,000,000 | |
Long-term equity investments | 1,636,031,916 | 1,495,444,610 | |
Investments in other equity instruments | 41,378,280 | 57,172,099 | |
Other non-current financial assets | 45,378,370 | - | |
Fixed assets | 3,694,140,835 | 3,650,781,975 | |
Construction in progress | 258,911,145 | 104,852,760 | |
Right-of-use assets | 76,251,881 | 64,400,158 | |
Intangible assets | 342,005,409 | 307,136,373 | |
Goodwill | 20,027,705 | - | |
Long-term deferred expenses | 9,129,148 | 5,046,886 | |
Deferred tax assets | 138,033,575 | 97,148,174 | |
Other non-current assets | 144,086,014 | 126,099,397 | |
Total non-current assets | 6,405,374,278 | 5,924,082,432 | |
Total assets | 15,855,597,394 | 13,775,899,595 |
31 December | 31 December | ||
Notes | 2020 | 2019 | |
(Audited) | (Audited) | ||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||
Current liabilities: | |||
Short-term loans | 13 | 1,033,657,703 | 895,576,208 |
Bills payable | 14 | 659,423,906 | 574,793,263 |
Accounts payable | 15 | 1,539,623,899 | 1,261,607,902 |
Contract liabilities | 360,704,641 | 262,900,550 | |
Employee benefits payable | 252,632,361 | 219,940,848 | |
Taxes payable | 93,383,446 | 103,566,255 | |
Other payables | 372,357,376 | 410,686,340 | |
Non-current liabilities due within one year | 39,960,759 | 40,179,239 | |
Current liabilities | 24,605,476 | - | |
Total current liabilities | 4,376,349,567 | 3,769,250,605 | |
Non-current liabilities: | |||
Long-term bank loans | 16 | 524,700,000 | 42,000,000 |
Debenture payable | 487,575,358 | - | |
Lease liabilities | 58,456,419 | 48,585,433 | |
Deferred income | 260,265,226 | 166,769,940 | |
Deferred tax liabilities | 11,448,729 | - | |
Other non-current liabilities | 751,278,679 | 807,160,850 | |
Total non-current liabilities | 2,093,724,411 | 1,064,516,223 | |
Total liabilities | 6,470,073,978 | 4,833,766,828 | |
SHAREHOLDERS' EQUITY: | |||
Share capital | 757,905,108 | 757,905,108 | |
Capital reserve | 3,364,333,115 | 3,364,035,212 | |
Less: Treasury stock | 33,653,461 | 33,653,461 | |
Other comprehensive income | (5,912,422) | 37,779,996 | |
Surplus reserve | 636,629,870 | 612,010,760 | |
Retained earnings | 4,328,187,622 | 4,050,142,747 | |
Total equity attributable to shareholders of | |||
the Company | 9,047,489,832 | 8,788,220,362 | |
Non-controlling interests | 338,033,584 | 153,912,405 | |
Total shareholders' equity | 9,385,523,416 | 8,942,132,767 | |
Total liabilities and shareholders' equity | 15,855,597,394 | 13,775,899,595 |
Notes:
1. CORPORATE INFORMATION
Yangtze Optical Fibre and Cable Company Ltd. ڗ࠭ΈᜄΈϞࠢʮ̡ was established in the People's Republic of China (the "PRC" or "China") on 31 May 1988 as a sino-foreign equity joint venture. On 27 December 2013, it was renamed as Yangtze Optical Fibre and Cable Joint Stock Limited Company* ڗ࠭Έᜄ Έٰ΅Ϟࠢʮ̡ and was converted into a foreign invested joint stock limited liability company in the PRC. On the same date, the Company's equity was converted into 479,592,598 ordinary shares with a par value of RMB1.00 each.
The Company's H shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") on 10 December 2014. On the same date, the Company issued a total number of 159,870,000 H shares with a par value of RMB1.00 each at a price of HK$7.39 per H share by way of public offering of the Company's H shares to Hong Kong and overseas investors.
On 18 December 2015, the Company completed the issuance of domestic shares and H shares to certain directors and selected employees and the private placement of H shares to four independent professional institutional investors. A total number of 42,652,000 shares (including H shares and domestic shares) with a par value of RMB1.00 each were issued at a subscription price of HK$7.15 per share.
The China Securities Regulatory Commission has approved the initial public offering of A shares by the Company and the A shares of the Company were listed on the Shanghai Stock Exchange on 20 July 2018. The Company issued 75,790,510 A shares to the public at the issue price of RMB26.71 per A share and 330,547,804 domestic shares were converted into A shares. Upon the issue of A shares, the total number of issued shares of the Company became 757,905,108 shares (comprising 351,566,794 H shares and 406,338,314 A shares). The total proceeds from the issue of the A shares amounted to RMB2,024,364,522 and the net proceeds (after deducting issue expenses) amounted to RMB1,894,337,174.
The Group is principally engaged in the research, development, production and sale of optical fibre preforms, optical fibres, optical fibre cables and related products.
2. PREPARATION BASIS OF THE FINANCIAL STATEMENTS
The financial statements are prepared in accordance with the Accounting Standards for Business Enterprises - Basic Standards issued by the Ministry of Finance of the People's Republic of China and the specific accounting standards and application guidelines, interpretations and other relevant regulations promulgated and subsequently promulgated by the Ministry of Finance of the People's Republic of China and "Regulation on the Preparation of Information Disclosures by Companies Issuing Securities, No. 15: General Requirements for Financial Reports" as revised by the China Securities Regulatory Commission.
The Company prepares the financial statements based on the going-concern basis.
3. REVENUE
The Group is principally engaged in the manufacturing and sales of optical fibre preforms, optical fibres, optical fibre cables and other related products and services. Revenue represents the sales value of goods supplied to customers, net of value added tax.
4.
Operating income and costs
5.
Cost | ||
7,490,584,171 | 5,677,206,635 | |
278,591,324 | 258,442,254 | |
7,769,175,495 | 5,935,648,889 | |
7,769,175,495 | 5,935,648,889 | |
2020 | 2019 | |
(Audited) | (Audited) | |
- Optical fibres and optical fibre preforms | 2,952,996,546 | 2,508,413,385 |
- Optical fibre cables | 3,287,516,698 | 4,002,028,543 |
- Other sales | 1,794,897,795 | 980,142,243 |
Sub-total | 8,035,411,039 | 7,490,584,171 |
Revenue from other operating activities | ||
- Materials | 151,413,071 | 268,790,217 |
- Others | 34,718,857 | 9,801,107 |
Total | 8,221,542,967 | 7,769,175,495 |
Financial expenses | ||
Item | 2020 | 2019 |
(Audited) | (Audited) | |
Interest expenses on loans and payables | 47,415,313 | 62,148,499 |
Interest on lease liabilities | 4,217,521 | 3,913,486 |
Less: Borrowing costs capitalised* | 1,689,715 | 4,900,000 |
Interest income from deposits | (15,644,437) | (43,159,364) |
Net exchange losses/(gains) | 19,050,478 | (19,649,707) |
Other financial expenses | 7,527,476 | 7,870,862 |
Total | 60,876,636 | 6,223,776 |
2019 (Audited) Income
Item
Principal activities
Other operating activities
2020 (Audited)Income 8,035,411,039 186,131,928
Cost 6,272,506,588 161,392,621
Total 8,221,542,967 6,433,899,209
Including: Operating income
generated from contract 8,221,542,967 6,433,899,209
Details of operating income:
Revenue from principal activities
*The interest rate per annum, at which the borrowing costs were capitalized for the 2020 and 2019 by the Group was 0.17% and 4.24% respectively.
6. Other income
7. Income tax expenses
2020 | 2019 | |
(Audited) | (Audited) | |
27,965,271 | 18,274,111 | |
99,424,760 | 185,662,214 | |
127,390,031 | 203,936,325 | |
2020 | 2019 | |
(Audited) | (Audited) | |
69,418,491 | 107,021,724 | |
(35,368,279) | (11,334,623) | |
990,752 | 3,536,975 | |
35,040,964 | 99,224,076 | |
(1) | The analysis of changes in deferred income tax is as follows: | |
Item | 2020 | 2019 |
(Audited) | (Audited) | |
Originations and reversals of temporary differences | (35,368,279) | (11,334,623) |
Total | (35,368,279) | (11,334,623) |
(2) | Reconciliation between income tax and accounting profit is as follows: | |
Item | 2020 | 2019 |
(Audited) | (Audited) | |
Profit before income tax | 579,240,943 | 883,509,048 |
Income tax expenses calculated at tax rate of 25% | 144,810,236 | 220,877,262 |
Effect of tax rate differences | (16,774,318) | (67,922,214) |
Effect of tax filling difference | 990,752 | 3,536,975 |
Effect of non-taxable income | (5,131,493) | (14,513,501) |
Effect of non-deductible cost, expense and loss | 5,368,386 | 3,215,382 |
Effect of temporary differences from using the former | ||
unrecognised deferred tax assets | (44,903,475) | - |
Additional qualified tax deduction | ||
relating to research and development costs | (56,775,855) | (63,928,391) |
Effect of deductible temporary | ||
differences or deductible tax losses for which no deferred | ||
tax asset was recognized this year | 7,456,731 | 17,958,563 |
Income tax expenses for the year | 35,040,964 | 99,224,076 |
Total
Item
Government grants related to assets Government grants related to incomeIncome tax expenses for the year based on tax laws and regulations Changes in deferred income tax
Tax filling differences
TotalThe Company and its subsidiaries in the PRC are subject to PRC enterprise income tax at the statutory tax rate of 25%.
According to the High-tech Enterprise Certificate No. GR201742002234 issued by Hubei Provincial Department of Science and Technology, Hubei Provincial Department of Finance, Hubei Provincial State Revenue and Hubei Provincial Local Taxation Bureau, from 30 November 2017 to 30 November 2020, the Company would be entitled to High Tech Enterprise qualification, and enjoyed a preferential tax rate of 15% with preferential tax treatments in deductions from research and development costs; According to the newly issued High-tech Enterprise Certificate No. GR202042002069, from 1 December 2020 to 1 December 2023, the Company would continue to be entitled to High Tech Enterprise qualification, and enjoyed a preferential tax rate of 15% with preferential tax treatments in deductions from research and development costs.Therefore, the Company was entitled to a preferential tax rate of 15% in 2020.
According to the High-tech Enterprise Certificate No. GR201842002475 issued by Hubei Provincial Department of Science and Technology, Hubei Provincial Department of Finance, and Hubei Provincial Tax Service, State Taxation Administration, EverPro Technologies Company Limited, a subsidiary of the Company, was entitled to High Tech Enterprise qualification and enjoyed a preferential tax rate of 15% from 30 November 2018 to 30 November 2021.
According to the High-tech Enterprise Certificate No. GR201862000033 issued by Gansu Provincial Department of Science and Technology, Gansu Provincial Department of Finance, and Gansu Provincial Tax Service, State Taxation Administration, Yangtze Optical Fibre and Cable Lanzhou Co., Ltd., a subsidiary of the Company, was entitled to High Tech Enterprise qualification and enjoyed a preferential tax rate of 15% from 23 July 2018 to 23 July 2021.
According to the High-tech Enterprise Certificate No. GR201744200547 issued by Shenzhen Science and Technology Innovation Committee, Shenzhen Finance Committee, Shenzhen State Administration of Taxation and Shenzhen Local Taxation Bureau, Everpro Connectivity (Shenzhen) Technology Company Limited (Formerly name as "Shenzhen YOFC Connectivity Technologies Co.,Ltd")., a subsidiary of the Company, was entitled to High Tech Enterprise qualification, and enjoyed the preferential tax rate of 15% from 17 August 2017 to 17 August 2020; According to the newly issued High-tech Enterprise Certificate No. GR202044206282, Everpro Connectivity (Shenzhen) Technology Company Limited ("Everpro Connectivity"), a subsidiary of the Company, would continue to be entitled to High Tech Enterprise qualification, and enjoyed a preferential tax rate of 15% with preferential tax treatments from 11 December 2020 to 11 December 2023.
According to the High-tech Enterprise Certificate No. GR201742000482 issued by Hubei Provincial Department of Science and Technology, Hubei Provincial Department of Finance, Hubei Provincial State Revenue and Hubei Provincial Local Taxation Bureau, Yangtze Optical Fibre (Qianjiang) Co., Ltd., a subsidiary of the Company, was entitled to High Tech Enterprise qualification, and enjoyed the preferential tax rate of 15% from 28 November 2017 to 28 November 2020; According to the newly issued High-tech Enterprise Certificate No. GR202042000356, Yangtze Optical Fibre (Qianjiang) Co., Ltd., a subsidiary of the Company, would continue to be entitled to High Tech Enterprise qualification, and enjoyed a preferential tax rate of 15% with preferential tax treatments from 1 December 2020 to 1 December 2023.
According to the High-tech Enterprise Certificate No. GR202042001383 issued by Hubei Provincial Department of Science and Technology, Hubei Provincial Department of Finance, and Hubei Provincial Tax Service, State Taxation Administration, Hubei Flying Optical Fibre Material Co., Ltd., a subsidiary of the Company, was entitled to High Tech Enterprise qualification and enjoyed a preferential tax rate of 15% from 1 December 2020 to 1 December 2023.
According to the High-tech Enterprise Certificate No. GR201833000494 issued by Zhejiang Science and Technology Department, Zhejiang Provincial Department of Finance, Zhejiang Provincial Tax Service and State Taxation Administration, Ally First Optical Fibre and Cable Co., Ltd., a subsidiary of the Company, was entitled to High Tech Enterprise qualification, and enjoyed the preferential tax rate of 15% from 30 November 2018 to 30 November 2021.
According to the High-tech Enterprise Certificate No. GR202051001520 issued by Sichuan Science and Technology Department, Sichuan Provincial Department of Finance, Sichuan Provincial Tax Service,State Taxation Administration, Sunstar Communication Technology Company Limited ("Sunstar Communication"), a subsidiary of the Company, was entitled to High Tech Enterprise qualification, and enjoyed the preferential tax rate of 15% from 11 September 2020 to 11 September 2023.
According to the High-tech Enterprise Certificate No. GR201951000140 issued by Sichuan Science and Technology Department, Sichuan Provincial Department of Finance, Sichuan Provincial Tax Service,State Taxation Administration, Finetop Science & Technology Company Limited, a subsidiary of the Company, was entitled to High Tech Enterprise qualification, and enjoyed the preferential tax rate of 15% from 14 October 2019 to 14 October 2022.
Taxes on overseas subsidiaries were calculated according to the prevailing appropriate tax rates in the relevant countries and regions.
8. Earnings per share (1) Basic earnings per share
Basic earnings per share is calculated as dividing consolidated net profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding:
2020 | 2019 | |
(Audited) | (Audited) | |
Consolidated net profit attributable to ordinary shareholders | ||
of the Company | 543,677,809 | 801,225,042 |
LessjForfeitable cash dividends declared to restricted | ||
shareholders in employee share ownership plan | ||
this year whose shares are expected to unlock | ||
in the future | 636,000 | 500,000 |
Adjusted consolidated net profit attributable to | ||
ordinary shareholders of the Company | 543,041,809 | 800,725,042 |
Weighted average number of ordinary shares outstanding | 755,905,108 | 756,250,313 |
Basic earnings per share (RMB/share) | 0.72 | 1.06 |
Weighted average number of ordinary shares is calculated as follows: | ||
2020 | 2019 | |
(Audited) | (Audited) | |
Issued ordinary shares at the beginning of the year | 757,905,108 | 757,905,108 |
Effect from restricted shares in employee share | ||
ownership plan (note) | (2,000,000) | (1,654,795) |
Weighted average number of ordinary shares | ||
at the end of the year | 755,905,108 | 756,250,313 |
Note: The Company has phase I employee share ownership plan following the approval by the 19th
Meeting of the Second Board of Directors, the 12th Meeting of the Second Board of Supervisors and the First Extraordinary General Meeting in 2019. In accordance with the plan, the Company purchased 2,000,000 H shares of issued shares of the Company in the secondary market and granted to 100 employees participating in the plan.
(2) Diluted earnings per share
Diluted earnings per share is calculated as dividing consolidated net profit attributable to ordinary shareholders of the Company (diluted) by the weighted average number of ordinary shares outstanding (diluted):
2020 | 2019 | ||
(Audited) | (Audited) | ||
Consolidated net profit attributable to ordinary shareholders of | |||
the Company (diluted) | (a) | 543,359,809 | 800,850,042 |
Weighted average number of ordinary shares | |||
outstanding (diluted) | (b) | 756,704,890 | 756,512,990 |
Diluted earnings per share (RMB/share) | 0.72 | 1.06 |
(a) Consolidated net profit attributable to ordinary shareholders of the Company (diluted) is calculated as follows:
2020 (Audited)
2019 (Audited)Consolidated net profit attributable to ordinary shareholders (Basic earnings per share)
543,041,809
800,725,042
Diluted adjustments:
Forfeitable cash dividends declared to restricted
H shareholders in employee share ownership plan this year whose shares are expected to unlock in the future (note)
318,000
125,000
Consolidated net profit attributable to ordinary shareholders (diluted)
543,359,809
800,850,042
Note: When calculating diluted earnings per share during the lock-in period of restricted shares, consolidated net profit attributable to ordinary shareholders of the Company (diluted) shall add the cash dividends (with dilution) distributed to the shareholders of the expected unlocking restricted shares in the future that have been deducted when calculating the consolidated net profit (dilution) attributable to ordinary shareholders of the Company.
(b) Weighted average number of the Company's ordinary shares (diluted) is calculated as follows:
2020 2019 (Audited) (Audited)
Weighted average number of ordinary shares at 31 December
755,905,108
756,250,313
Diluted adjustments:
Effect from restricted shares in employee share ownership plan
Weighted average number of ordinary shares (diluted) at
31 December
799,782 756,704,890
262,677 756,512,990
9. SEGMENT REPORTING
The Group determines the two reporting segments, optical fibres and optical fibre preforms segment and optical fibre cables segment, based on the internal organizational structure, management requirements and internal reporting system. Each reporting segment is a separate business segment that provides different products. The management of the Group will regularly review the financial information of different segments to determine the allocation of resources and to evaluate their sales performance.
• Optical fibres and optical fibre preforms segment-mainly responsible for the production and sales of optical fibres and optical fibre preforms.
• Optical fibre cables segment-mainly responsible for the production and sales of optical fibre cables.
(1) Information of profit or loss and assets of reporting segments
In order to evaluate the performance of each segment and allocate resources, the management of the Group will regularly review the assets, income, expenses and operating results attributable to each segment. The preparation of such information is based on the followings:
Segment assets include all tangible assets, other non-current assets and receivables and other current assets attributable to each segment, but exclude deferred income tax assets, long-term equity investments, intangible assets and other unallocated assets.
Segment operating results refer to the revenue from external customers generated by each segment, less the operating costs incurred by each segment. The Group did not allocate other expenses such as selling and management expenses and financial expenses to each segment.
The information disclosed in each of the following reporting segments of the Group is that the management of the Group used the following data in measuring profit/(loss) and assets of the reporting segments, or did not use the following data but provided it regularly to the management of the Group:
2020 (Audited)
Optical fibres
and optical fibre | Optical fibre | Elimination | Unallocated | |||
Item | preforms segment | cables segment | Others | among segments | amount | Total |
Operating income from external transactions | 2,952,996,546 | 3,287,516,698 | 1,981,029,723 | - | - | 8,221,542,967 |
Inter-segment operating income | 591,571,742 | 93,728,011 | 531,400,544 | (1,216,700,297) | - | - |
Segment profit | 1,090,934,062 | 488,794,511 | 354,226,299 | (146,311,114) | - | 1,787,643,758 |
Including: Depreciation and | ||||||
amortisation expenses | (243,276,739) | (47,527,857) | (94,363,734) | 4,283,686 | - | (380,884,644) |
Taxes and surcharges | - | - | - | - | (22,279,411) | (22,279,411) |
Selling and distribution expenses | - | - | - | - | (370,922,594) | (370,922,594) |
General and administration expenses | - | - | - | - | (476,220,543) | (476,220,543) |
Research and development expenses | - | - | - | - | (414,571,192) | (414,571,192) |
Financial expenses | - | - | - | - | (60,876,636) | (60,876,636) |
Other income | - | - | - | - | 127,390,031 | 127,390,031 |
Investment income | - | - | - | - | 36,505,003 | 36,505,003 |
Including: income from investment in | ||||||
associates and joint ventures | - | - | - | - | 27,068,532 | 27,068,532 |
Gains from changes in fair value | - | - | - | - | 94,152,688 | 94,152,688 |
Credit losses | - | - | - | - | (76,837,297) | (76,837,297) |
Impairment losses | - | - | - | - | (45,091,143) | (45,091,143) |
Gains from asset disposals | - | - | - | - | 1,758,577 | 1,758,577 |
Operating profit/(loss) | 1,090,934,062 | 488,794,511 | 354,226,299 | (146,311,114) | (1,206,992,517) | 580,651,241 |
Non-operating income | - | - | - | - | 4,441,780 | 4,441,780 |
Non-operating expenses | - | - | - | - | (5,852,078) | (5,852,078) |
Profit/(loss) before income tax | 1,090,934,062 | 488,794,511 | 354,226,299 | (146,311,114) | (1,208,402,815) | 579,240,943 |
Income tax expenses | - | - | - | - | (35,040,964) | (35,040,964) |
Net profit for the year | 1,090,934,062 | 488,794,511 | 354,226,299 | (146,311,114) | (1,243,443,779) | 544,199,979 |
Total assets | 4,667,960,329 | 3,434,967,505 | 8,125,510,280 | (372,840,720) | - | 15,855,597,394 |
Other items | ||||||
- Long-term equity investment in | ||||||
associates and joint ventures | - | - | 1,636,031,916 | - | - | 1,636,031,916 |
- Increase in other non-current assets | ||||||
other than long-term equity investment | 118,501,143 | 57,384,324 | 522,938,476 | 7,240,805 | - | 706,064,748 |
13 |
2019 (Audited)Optical fibres
and optical fibre | Optical fibre | Elimination | Unallocated | |||
Item | preforms segment | cables segment | Others | among segments | amount | Total |
Operating income from external transactions | 2,508,413,385 | 4,002,028,543 | 1,258,733,567 | - | - | 7,769,175,495 |
Inter-segment revenue | 327,502,804 | 37,831,735 | 737,696,522 | (1,103,031,061) | - | - |
Segment profit | 1,061,268,611 | 689,506,156 | 149,346,366 | (66,594,527) | - | 1,833,526,606 |
Including: Depreciation | ||||||
and amortisation expenses | (149,262,183) | (29,238,536) | (112,202,900) | 3,721,121 | - | (286,982,498) |
Taxes and surcharges | - | - | - | - | (26,708,981) | (26,708,981) |
Selling and distribution expenses | - | - | - | - | (347,325,663) | (347,325,663) |
General and administration expenses | - | - | - | - | (428,531,381) | (428,531,381) |
Research and development expenses | - | - | - | - | (413,538,214) | (413,538,214) |
Financial expenses | - | - | - | - | (6,223,776) | (6,223,776) |
Other income | - | - | - | - | 203,936,325 | 203,936,325 |
Investment income | - | - | - | - | 121,786,023 | 121,786,023 |
Including: income from investment in | ||||||
associates and joint ventures | - | - | - | - | 109,848,127 | 109,848,127 |
Gains from changes in fair value | - | - | - | - | 238,970 | 238,970 |
Credit losses | - | - | - | - | (33,407,343) | (33,407,343) |
Impairment losses | - | - | - | - | (33,325,145) | (33,325,145) |
Gains from asset disposals | - | - | - | - | 7,367,173 | 7,367,173 |
Operating profit/(loss) | 1,061,268,611 | 689,506,156 | 149,346,366 | (66,594,527) | (955,732,012) | 877,794,594 |
Non-operating income | - | - | - | - | 6,520,253 | 6,520,253 |
Non-operating expenses | - | - | - | - | (805,799) | (805,799) |
Profit/(loss) before income tax | 1,061,268,611 | 689,506,156 | 149,346,366 | (66,594,527) | (950,017,558) | 883,509,048 |
Income tax expenses | - | - | - | - | (99,224,076) | (99,224,076) |
Net profit for the year | 1,061,268,611 | 689,506,156 | 149,346,366 | (66,594,527) | (1,049,241,634) | 784,284,972 |
Total assets | 4,106,497,871 | 3,438,873,331 | 6,432,644,814 | (202,116,421) | - | 13,775,899,595 |
Other items | ||||||
- Long-term equity investment in | ||||||
associates and joint ventures | - | - | 1,495,444,610 | - | - | 1,495,444,610 |
- Increase in other non-current assets | ||||||
other than long-term equity investment | 643,384,184 | 189,045,242 | 196,325,876 | (21,844,499) | - | 1,006,910,803 |
14 |
10. Bills receivable
(1) Bills receivable by category
Type
31 December 2020 (Audited)
31 December 2019 (Audited)
Bank acceptance bills Commercial acceptance bills
126,397,295 133,952,096
148,025,423 98,556,109
Total
274,422,718 232,508,205
The aforementioned bills receivable were due within one year.
(2) Bills receivable pledged at the end of the year.
The Group had no pledged bills receivable.
(3) Bills receivable endorsed or discounted at the end of the year and undue at the balance sheet date.
Amount
Amount not yet
derecognized
derecognized
at the end of
at the end of
Type
2020
2020
(Audited)
(Audited)
Bank acceptance bills
-
23,702,123
As at 31 December 2020, the Group continued to recognize discounted bills and endorsed bills of RMB2,614,000 and RMB21,088,123 respectively (31 December 2019: RMB39,358,068 and RMB62,994,234). With respect to this portion of discounted bills or endorsed bills, the Board believed that the Group still retains virtually all its risks and rewards, including the risk of default on discounted and endorsed bills. Therefore, the Group continued to fully recognised this portion of the discounted and endorsed instruments. The bills, at the same time, confirmed the related payment due to the bank borrowings generated by discounting and the settlement of the endorsed bills. After discounts and endorsements were transferred, the Group no longer retained any right to use discounted and endorsed bills, including the sale, transfer or pledge of discounted and endorsed bills to the third party. As at 31 December 2020, the carrying amounts of the bills settled by the discounted and endorsed bills that continue to be recognized were RMB2,614,000 and RMB21,088,123 respectively (31 December 2019: RMB39,358,068 and RMB62,994,234). The Board believed that there is no significant difference in the fair value of the transferred assets and related liabilities.
11.
Accounts receivable
(1) Accounts receivable by customer are as follows:
Type
31 December 2020 (Audited)
31 December 2019 (Audited)
Due from related parties Due from third parties
135,247,149
116,060,677
3,826,462,268 3,120,371,775
Sub-total
3,961,709,417 3,236,432,452
Total
Less: allowance for doubtful debts
(2) Ageing analysis of accounts receivable:
Ageing
184,946,460 3,776,762,957
31 December 2020 (Audited)
112,926,674 3,123,505,778
31 December 2019 (Audited)
Within 1 year (1 year inclusive)
1 to 2 years (2 years inclusive)
2 to 3 years (3 years inclusive)
Over 3 years
3,256,130,969
2,845,452,536
534,582,449 309,246,990
102,414,018 20,136,083
68,581,981 61,596,843
Sub-total
3,961,709,417
3,236,432,452
Total
Less: allowance for doubtful debts
184,946,460 3,776,762,957
The ageing of accounts receivable is calculated from the date of recognition.
(3) Analysis of accounts receivable by category:
112,926,674 3,123,505,778
31 December 2020 (Audited)
Allowance forBook value
doubtful debtsCarrying amount
ProportionCategory
Provision proportion
Amount
(%)Amount
(%)
Individually assessed for impairment customers which credit losses incurred
Collectively assessed for impairment by group
Group 1
18,910,452
Group 2
Group 3
Total
135,247,149 1,821,081,616 1,986,470,200 3,961,709,417
0% 18,910,452
4% 46% 50%
658,313 72,234,371 93,143,324
100%
184,946,460
100%
-
0% 134,588,836
4% 1,748,847,245
5% 1,893,326,876
5% 3,776,762,957
31 December 2019 (Audited)
Book value
Allowance for doubtful debts
Carrying amount
ProvisionProportion
proportion
Category | Amount | (%) | Amount | (%) | |
Individually assessed for impairment | |||||
customers which credit losses incurred | 11,443,932 | 0% | 11,443,932 | 100% | - |
Collectively assessed for | |||||
impairment by group | |||||
Group 1 | 116,060,677 | 4% | 4,939,080 | 4% | 111,121,597 |
Group 2 | 1,752,340,403 | 54% | 44,124,069 | 3% | 1,708,216,334 |
Group 3 | 1,356,587,440 | 42% | 52,419,593 | 4% | 1,304,167,847 |
Total | 3,236,432,452 | 100% | 112,926,674 | 3% | 3,123,505,778 |
(a) Reasons for making doubtful debts provisions with single accounts receivable in 2020:
In the event of credit losses incurred by a customer, the Group makes doubtful debts provisions with single accounts receivable in respect of that customer group.
(b) Standard and explanation of making doubtful debts provisions by group in 2020
According to the historical experience of the Group, there are differences in the losses of different segmented customer groups. Therefore, the Group divided our customers into the following groups:
- Group 1: Related parties;
- Group 2: Operators under China Telecom network and other companies with good credit records;
- Group 3: Other customers outside of the above groups.
(c) Expected credit loss assessment for accounts receivable:
The management measures loss allowances for accounts receivable at an amount equal to lifetime expected credit loss, which is calculated using a provision matrix. As the Group's historical credit loss experience indicates different loss patterns for different customer segments, the loss allowance based on past due status is further distinguished between the Group's different customer bases.
2020 (Audited)
Expected loss | |||
Group 1 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 0.32% | 134,402,215 | 427,801 |
1 to 2 years (2 years inclusive) | 22.12% | 777,938 | 172,085 |
2 to 3 years (3 years inclusive) | 87.11% | 66,464 | 57,895 |
Over 3 years | 100.00% | 532 | 532 |
Total | 135,247,149 | 658,313 |
Allowance for
Expected loss | Allowance for | ||
Group 2 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 0.90% | 1,601,340,170 | 14,416,502 |
1 to 2 years (2 years inclusive) | 10.88% | 164,333,243 | 17,881,666 |
2 to 3 years (3 years inclusive) | 43.36% | 27,317,220 | 11,845,220 |
Over 3 years | 100.00% | 28,090,983 | 28,090,983 |
Total | 1,821,081,616 | 72,234,371 | |
Expected loss | Allowance for | ||
Group 3 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 2.44% | 1,828,468,881 | 44,638,576 |
1 to 2 years (2 years inclusive) | 11.57% | 115,676,448 | 13,378,853 |
2 to 3 years (3 years inclusive) | 58.88% | 17,506,472 | 10,307,496 |
Over 3 years | 100.00% | 24,818,399 | 24,818,399 |
Total | 1,986,470,200 | 93,143,324 | |
2019 (Audited) | |||
Expected loss | Allowance for | ||
Group 1 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 0.25% | 105,865,463 | 260,578 |
1 to 2 years (2 years inclusive) | 24.60% | 7,274,758 | 1,789,648 |
2 to 3 years (3 years inclusive) | 88.28% | 269,706 | 238,104 |
Over 3 years | 100.00% | 2,650,750 | 2,650,750 |
Total | 116,060,677 | 4,939,080 | |
Expected loss | Allowance for | ||
Group 2 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 0.44% | 1,658,989,063 | 7,301,821 |
1 to 2 years (2 years inclusive) | 12.04% | 57,112,075 | 6,876,352 |
2 to 3 years (3 years inclusive) | 52.92% | 13,367,477 | 7,074,108 |
Over 3 years | 100.00% | 22,871,788 | 22,871,788 |
Total | 1,752,340,403 | 44,124,069 |
Expected loss | |||
Group 3 | rate | Book value | doubtful debts |
Within 1 year (1 year inclusive) | 2.28% | 1,290,901,697 | 29,389,279 |
1 to 2 years (2 years inclusive) | 11.59% | 41,896,921 | 4,855,614 |
2 to 3 years (3 years inclusive) | 49.14% | 11,037,736 | 5,423,614 |
Over 3 years | 100.00% | 12,751,086 | 12,751,086 |
Total | 1,356,587,440 | 52,419,593 |
Allowance for
Expected loss rates are calculated based on the actual credit loss experiences in the past 5 years and is adjusted based on the differences among the economic conditions of the period of historic data collection, the current economic conditions and the Group's view of economic conditions over the expected lives.
(4) Additions, recoveries or reversals of allowance for doubtful debts during the year:
(5) Five largest accounts receivable by debtors at the end of the year:
31 December
31 December
2020
2019
(Audited)
(Audited)
Balance at the beginning of the year
112,926,674
93,291,698
Addition during the year
79,814,508
35,085,763
Reversal during the year
(2,977,211)
(1,678,420)
Written-off during the year
(7,140,079)
(13,772,367)
Increase by business combination not under common control
2,322,568
-
Balance at the end of the year
184,946,460
112,926,674
During the reporting period, the Group did not have significant recoveries or reversals for accounts receivable that had been fully impaired or provided with a relatively large proportion of allowance for doubtful debts collected or reversed.
As at 31 December 2020 and 31 December 2019, the subtotal of five largest accounts receivable of the Group is RMB1,502,391,507 and RMB1,386,721,108, respectively, representing 38% and 43% of the total balance of accounts receivable respectively. The corresponding allowance for doubtful debts is RMB49,269,723 and RMB32,814,688, respectively.
12.
Receivables under financing | ||
31 December | 31 December | |
Item | 2020 | 2019 |
(Audited) | (Audited) | |
Bills receivable | 138,133,247 | 95,235,940 |
There is no change in fair value of receivables under financing of the Group in 2020. The accumulated impairment losses recognized in other comprehensive income is zero.
Bills receivable endorsed or discounted at the end of the year and undue at the balance sheet date:
Amount | Amount not yet | |
derecongnized | derecognized | |
at the end of | at the end of | |
Type | 2020 | 2020 |
(Audited) | (Audited) | |
Bank acceptance bills | 287,942,545 | - |
In 2020, the Group discounted certain bank bills receivable from certain banks in China or endorsed them to the Group's suppliers ("Derecognized Bills") and derecognized them on 31 December 2020. The carrying amounts of undue bills receivable that have been discounted and derecognized on 31 December 2020 and 31 December 2019 are RMB66,417,852 and RMB138,771,396 respectively. As at 31 December 2020 and 31 December 2019 the carrying amounts of undue bills receivable that have been endorsed and derecognized are RMB221,524,693 and RMB180,409,595 respectively. As at 31 December 2020, the remaining period of the derecognized bills was 1 to 7 months.
According to the Bill Law of the People's Republic of China, if the acceptance bank of bills receivable that is discounted or endorsed by the Group refuses to pay, the holder has recourse to the Group. The Board believed that for the endorsed bills that were derecognized, the Group had substantially transferred almost all the risks and rewards of the bills. Therefore, the Group had derecognized these bills in full.
Due to the recourse rights of the bearer, the Group continued to be involved in the derecognition of the bills and the continued exposure to the maximum risk exposure resulting in the loss of the Group amounted to its full amount.
13. Short-term loans
31 December
31 December
Item
2020
2019
(Audited)
(Audited)
Unsecured loans
1,033,657,703
895,576,208
As at 31 December 2020, the guaranteed loans tendered by the intercompany of the Group included in the above unsecured loans were RMB112,200,000 (2019: RMB90,690,600).
As at 31 December 2020, the Group did not have any overdue loans not yet repaid.
14. Bills payable
31 December
31 December
Item
2020
2019
(Audited)
(Audited)
Commercial acceptance bills
351,632,323
397,733,603
Bank acceptance bills
307,791,583
177,059,660
Total
659,423,906
574,793,263
The Group did not have any bills payable due and unpaid. The above amounts are bills payable due within one year.
16. Long-term loans
15. Accounts payable
31 December
31 December
Item
2020
2019
(Audited)
(Audited)
Due to related parties
134,266,119
251,202,881
Due to third parties
1,405,357,780
1,010,405,021
Total
1,539,623,899
1,261,607,902
The ageing analysis of accounts payable, based on invoice date, is as follows
31 December
31 December
2020
2019
(Audited)
(Audited)
Within 1 year (1 year inclusive)
1,510,602,611
1,224,751,780
1 to 2 years (2 years inclusive)
7,169,532
26,180,928
2 to 3 years (3 years inclusive)
17,031,826
3,048,371
Over 3 years
4,819,930
7,626,823
Total
1,539,623,899
1,261,607,902
Accounts payable over 1 year are paid for goods and spare parts for system integration projects, and the Group continue to trading with the responding parties.
31 December
31 December
Item
2020
2019
(Audited)
(Audited)
Unsecured loans
525,286,302
63,023,100
Less: non-current bank loans due within one year
586,302
21,023,100
Total
524,700,000
42,000,000
As at 31 December 2020, there was no overdue long-term loans. The above bank loans were fixed rate loans of which interest rate was 1.2%-2.7% (2019:1.2%).
The Group's bank loans (including short-term loans and long-term loans) by repayment time were listed as follows:
2020
2019
(Audited)
(Audited)
Within 1 year (1 year inclusive)
1,034,244,005
916,599,308
1 to 2 years (2 years inclusive)
482,700,000
-
2 to 5 years (5 years inclusive)
42,000,000
21,000,000
Over 5 years
-
21,000,000
Total
1,558,944,005
958,599,308
17. Dividends
(i) Dividends payable to equity shareholders of the Company attributable to the year
2020
(Audited)
2019 (Audited)Final dividend proposed after the end of the reporting period of
RMB0.216 per ordinary share (2019: RMB0.318)
163,707,503
241,013,824
(ii) Dividends paid to equity shareholders of the Company attributable to the previous financial year approved during the year
18.
2020
2019
(Audited)
(Audited)
Final dividend paid in respect of the previous financial year
241,013,824
189,496,277
Changes of accounting policies
(1) Description and reasons for changes in accounting policies
The relevant accounting standards for business enterprises effective in 2020 related to the Group are as follows:
- Interpretation No. 13 on Accounting Standards for Business Enterprises (Cai Kuai [2019] No. 21)
("Interpretation No. 13")
- Regulations on Accounting Treatment for Rental Concessions in relation to COVID-19 (Cai Kuai [2020] No. 10)
(a) Interpretation No. 13
Interpretation No. 13 revised the three elements of business composition and refined the judgment conditions of business. When the acquirer of a business combination not under common control determines whether the acquired business activity or asset combination constitutes a business, the option of "concentration test" is introduced.
In addition, Interpretation No. 13 further clarifies the definition of related party, which include joint ventures or joint ventures of other member units (including parent company and subsidiary company) of the enterprise group to which the enterprise belongs, and other joint ventures or associates of investors who jointly control the enterprise.
Interpretation No. 13 has been implemented since 1 January 2020. The Group adopts the prospective application method to account for the abovementioned accounting policy changes. The adoption of this interpretation does not have a material impact on the Group's disclosures on financial position, operating results and related parties.
(b) Cai Kuai [2020] No. 10
Cai Kuai [2020] No. 10 provides a simplified method for rental concessions directly caused by COVID-19 when certain conditions are met. If enterprises choose to adopt the simplified approach, it is not required to assess whether there is a lease change or reassess the lease classification.
Cai Kuai [2020] No. 10 has been implemented since 24 June 2020, and the Group was not subject to Rental Concessions for Epidemic during the current period.
MANAGEMENT DISCUSSION AND ANALYSIS
Overview
During the year, the Group's operating income was approximately RMB8,221.5 million, increased by approximately 5.8% as compared to 2019 of approximately RMB7,769.2 million. The Group reported a gross profit of RMB1,787.6 million, decreased by approximately 2.5% as compared to 2019 of approximately RMB1,833.5 million. The Group's net profit for the year attributable to the equity shareholders of the Company amounted to approximately RMB543.7 million, decreased by approximately 32.1% as compared to 2019 of approximately RMB801.2 million.
Basic earnings per share was RMB0.72 per share (2019: RMB1.06 per share), which was calculated based on the weighted average number of shares issued, further details of which are set out in note 8 to the financial information of this announcement.
Operating income
The Group's operating income for the year ended 31 December 2020 was approximately RMB8,221.5 million, representing an increase of 5.8% as compared to 2019 of approximately RMB7,769.2 million.
By product segment, a total revenue of approximately RMB2,953.0 million was contributed from our optical fibres and optical fibre preforms segment, representing an increase of 17.7% as compared to 2019 of approximately RMB2,508.4 million and accounting for 35.9% (2019: 32.3%) of the Group's revenue; while a total revenue of RMB3,287.5 million was contributed by our optical fibre cables segment, representing a decrease of 17.9% as compared to 2019 of approximately RMB4,002.0 million and accounting for 40.0% (2019: 51.5%) of the Group's revenue.
A total revenue of approximately RMB1,981.0 million was contributed by others, representing an increase of 57.4% as compared to 2019 of approximately RMB1,258.7 million and accounting for 24.1% (2019: 16.2%) of the Group's revenue. The increase was mainly due to the newly acquired entity of Sunstar Communication which contributed revenue of approximately RMB499.9 million.
By geographical segment, a total revenue of approximately RMB6,119.0 million was contributed by domestic customers, representing an increase of 0.2% (2019: decreased by 35.5%) as compared to 2019 of approximately RMB6,107.9 million and accounting for 74.4% of the Group's revenue. For overseas market, a total revenue of approximately RMB2,102.5 million was reported in 2020, representing an increase of 26.6% (2019: decreased by 11.9%) as compared to 2019 of approximately RMB1,661.3 million and accounting for approximately 25.6% of the Group's revenue.
Cost of sales
The Group's cost of sales for the year ended 31 December 2020 was approximately RMB6,433.9 million, representing an increase of 8.4% as compared to 2019 of approximately RMB5,935.6 million and accounting for 78.3% of the Group's revenue. The increase in cost of sales was higher than that of operating revenue which was mainly because the decrease in selling price of optical fibre preforms, optical fibres and optical cables which was affected by the market was higher than the decrease in the cost of major raw materials in 2020.
The Group's cost of sales included (i) raw material costs; (ii) manufacturing overheads (including depreciation on machinery and equipment, consumables, rental expenses, utilities and other manufacturing overheads); and (iii) direct labour costs.
In 2020, the Group's total raw material costs was approximately RMB5,276.0 million, representing an increase of 5.4% as compared to approximately RMB5,003.4 million in 2019.
For the year ended 31 December 2020, the Group's manufacturing overheads and direct labour cost amounted to approximately RMB1,150.8 million, representing an increase of 23.8% as compared to RMB929.6 million in 2019.
Gross profit and gross profit margin
For the year ended 31 December 2020, the Group reported a gross profit of RMB1,787.6 million, representing a decrease of 2.5% as compared to RMB1,833.5 million in 2019 and the gross profit margin decreased to 21.7% in 2020 (2019: 23.6%). The decrease in gross profit was mainly because the market prices following the central bidding by China Mobile imposed pressure on the profitability of the industry.
Selling and distribution expenses
The Group's selling and distribution expenses for the year ended 31 December 2020 were RMB370.9 million, representing an increase of 6.8% as compared to RMB347.3 million in 2019. The increase was mainly due to the significant increase in overseas revenue which resulted in an increase of selling transportation costs as compared with last year.
General and administrative expenses
The Group's general and administrative expenses for the year ended 31 December 2020 were RMB476.2 million, representing an increase of 11.1% as compared to RMB428.5 million in 2019. The increase was mainly due to the increase in salary expenses and to the consolidation of Sunstar Communication.
Research and development expenses
The Group's research and development expenses for the year ended 31 December 2020 were RMB414.6 million, representing an increase of 0.2% as compared to RMB413.5 million in 2019.
Financial expenses
The Group's financial expenses for the year ended 31 December 2020 were RMB60.9 million, representing an increase of RMB54.7 million as compared to RMB6.2 million in 2019, which was mainly because the unfavourable fluctuations in exchange rate movements between RMB and US Dollars, IDR, MXN and ZAR which resulted the exchange losses, while the rate fluctuations resulted exchange gains in the last year.
The interest rates of the bank loans in 2020 ranged from 0.095% to 5.00% per annum (2019: 1.20% to 5.00% per annum), while the annual effective interest rate for the borrowings in 2020 was 2.37% (2019: 2.86%).
Other income
The Group's other income for the year ended 31 December 2020 was RMB127.4 million, representing a decrease of approximately RMB76.5 million as compared to RMB203.9 million in 2019, which was mainly because the government grants related to income decreased by approximately RMB86.2 million, which was offset by an increase in government grants related to assets of approximately RMB9.7 million.
Gains from changes in fair value
The Group's gains from changes in fair value for the year ended 31 December 2020 was RMB94.2 million, representing an increase of approximately RMB94.0 million as compared to RMB0.2 million in 2019, which was mainly because the Company invested in Hangzhou Semiconductor Wafer Co., Ltd. (ψʕؚ౺̒ኬٰ΅Ϟࠢʮ̡) and the fair value of these shares increased.
Income tax expenses
The Group's income tax expenses for the year ended 31 December 2020 was RMB35.0 million, representing a decrease of 64.7% as compared to RMB99.2 million in 2019, while the effective tax rate decreased from 11.2% in 2019 to 6.0% in 2020. Details of the preferential tax treatments of the Company and certain subsidiaries were set out in note 7 to the financial information contained in this announcement.
Capital expenditures
During the year, the Group incurred capital expenditures of approximately RMB483.1 million (2019: RMB877.8 million) in total, involving the purchase of fixed assets, construction-in-progress, intangible assets, which were mainly related to the enhanced production efficiency of existing optical fibre preforms and optical fibre equipment.
Use of proceeds from the initial public offering of A shares and issuance of corporate bonds
The A shares of the Company were listed on Shanghai Stock Exchange on 20 July 2018. The net proceeds from the issue of the A shares (after deducting the underwriting fees and A share issue expenses) amounted to approximately RMB1,894.3 million. As at 31 December 2020, the proceeds of approximately RMB1,873.3 million were used in the following items: (1) approximately RMB1,379.0 million was used for the II and III Phase of capacity expansion for self-made optical fibre preform and optical fibre industrialisation in Yangtze Optical Fibre (Qianjiang) Limited Company; (2) approximately RMB300.0 million was used for the repayment of bank loans; (3) approximately RMB194.3 million was used for the replenishment of working capital occupied. The Company has permanently replenished the remaining proceeds of approximately RMB21.0 million into working capital for daily production and operation activities. As at 30 June 2020, the net proceeds from the public offering of A shares had been fully utilized.
On 12 August 2020, the Company completed the registration for issuance of corporate bonds to professional investors in the amount of not exceeding RMB3 billion with the China Securities Regulatory Commission. The corporate bonds will be issued in tranches. On 28 August 2020, the Company completed the issuance of corporate bonds (first phase) ("Corporate Bonds (First Phase)") with a principal amount of RMB500 million to professional investors in the PRC. The Corporate Bonds (First Phase) have a maturity of 3 years and the coupon rate of 3.5%. The Corporate Bonds (First Phase) have been listed on the Shanghai Stock Exchange. The relevant issue fees for the Corporate Bond s(First Phase) was approximately RMB1.5 million, and the net proceeds from the issue of the Corporate Bonds (First Phase) amounted to approximately RMB498.5 million. As at 31 December 2020, all of the net proceeds from the issue of the Corporate Bonds (First Phase) was fully utilized as general working capital.
Gearing ratio
The Group monitors its leverage using gearing ratio, which is net debts divided by total equity. Net debts include all bank loans less cash and cash equivalents. The Group's gearing ratio as at 31 December 2020 was 9.4% (2019: -12.3%).
Cash flow analysis
The following table sets forth the selected cash flow data derived from the consolidated cash flow statement for the year ended 31 December 2020.
2020 | 2019 | |
(Audited) | (Audited) | |
Net cash generated from operating activities | 140,866,409 | 842,663,893 |
Net cash used in investing activities | (1,550,713,839) | (667,072,798) |
Net cash generated from/(used in) financing activities | 719,479,615 | (720,928,044) |
Effect of foreign exchange rate changes on | ||
cash and the equivalents | (31,584,664) | 5,826,828 |
Net decrease in cash and cash equivalents | (721,952,479) | (539,510,121) |
The net cash generated from the Group's operating activities decreased by approximately RMB701.8 million, which was mainly due to the increase of approximately RMB822.4 million in operating receivables, while the increase in operating receivables in 2019 was approximately RMB246.4 million.
The net cash used by the Group's investment activities increased by approximately RMB883.6 million, which was mainly due to the increase of approximately RMB567.3 million in debts instrument investments and RMB275.7 million in equity instruments investments.
Net cash generated from the Group's financing activities increased by approximately RMB1,440.4 million, which was mainly due to the increase of approximately RMB600.3 million in bank loans during the year, while the bank loans decreased approximately RMB412.5 million as at 31 December 2019 as compared with 2018 and the Company issued corporate bonds to professional investors, the net proceeds of which amounted to approximately RMB498.5 million.
Cash and cash equivalents as at 31 December 2020 were cash at banks and in hand, which were mainly in RMB, US Dollars and Euro.
Net current assets
As at 31 December 2020, the Group's net current assets was RMB5,073.9 million, representing an increase of approximately RMB991.3 million as compared to RMB4,082.6 million as at 31 December 2019. The increase in net current assets was mainly due to (1) cash at bank and on hand and financial assets held for trading increased by approximately RMB202.3 million; (2) accounts receivable increased by approximately RMB653.3 million; (3) inventories increased by approximately RMB558.2 million; (4) short-term loans increased by approximately RMB138.1 million; and (5) accounts and bills payable increased by approximately RMB362.6 million.
Bank loans
As at 31 December 2020, the Group's bank loans were RMB1,558.9 million, representing an increase of RMB600.3 million from approximately RMB958.6 million as at 31 December 2019. As at 31 December 2020, 6.7% of the Group's bank loans were floating-rate loans and 93.3% were fixed-rate loans. Among the Group's bank loans, 2.3% were EUR dollar loans, 29.3% were US dollar loans, and the remaining 68.4% were mainly RMB loans.
Commitments and contingencies
As at 31 December 2020, the Group's outstanding capital commitments on fixed assets were approximately RMB1,472.5 million (2019: approximately RMB1,529.3 million), and equity investment was nil (2019: approximately RMB122.7 million). Out of the total amount of unsettled commitments as at 31 December 2020 of approximately RMB1,472.5 million (2019: RMB1,652.0 million), a total amount of approximately RMB789.9 million (2019: approximately RMB886.3 million) were contracted, and the balance of approximately RMB682.6 million (2019: approximately RMB765.7 million) were authorized but not yet contracted by the Board.
As at 31 December 2020, the Group did not have any material contingent liability.
Charge on assets
As at 31 December 2020, Ally First Optical Fibre and Cable Co., Ltd, a subsidiary of the Company, secures properties and buildings with a book value of RMB51.3 million and land use rights with a book value of RMB27.1 million to obtain bank credit.
Funding and treasury policy
The Group adopts a conservative approach on its funding and treasury policy, which aims to maintain an optimal financial position and the most economic finance costs as well as minimise the Group's financial risks. The Group regularly reviews the funding requirements to ensure adequate financial resources to support its business operations and future investments and expansion plans as and when needed.
Exposure to fluctuations in exchange rates
Most of the revenues and expenses are settled in RMB while some of the Group's sales, purchases and financial liabilities are denominated in US Dollars, Euro, AUD, IDR, MXN, NZD, PEN, PHP, SGD, THB and ZAR. Most of the bank deposits are in RMB, US Dollars and Euro.
During the year, the Group mainly suffered from the unfavourable fluctuations in exchange rate movements between RMB and US Dollars, IDR, MXN and ZAR. The amount of net foreign exchange losses were RMB19.1 million.
During the year, the Group entered into several currency structured forward contracts to reduce our foreign currency risks. The Group will closely monitor the ongoing movements on exchange rates and will consider entering into other hedging arrangements.
Employees and remuneration policies
As at 31 December 2020, the Group had approximately 6,769 full-time employees (2019: 4,687 full-time employees). The Group has designed an annual evaluation system to assess the performance of its employees. Such system forms the basis of determining whether an employee should be entitled to salary increments, bonuses or promotions. The salaries and bonuses that the employees received are competitive with market rates. The Company has been in compliance with the relevant national and local labor and social welfare laws and regulations in China.
The Group arranges external training courses, seminars and technical courses for employees to enhance their professional knowledge and skills, their understanding of market development and management and operational skills.
Off-balance sheet arrangements
As at 31 December 2020, the Company discounted and endorsed certain bank bills receivable with a carrying amount of approximately RMB287.9 million (2019: RMB319.2 million) to certain commercial banks in China and its suppliers.
NEW DOMESTIC ACQUISITION AND FORMATION OF NEW DOMESTIC PRESENCES
Sunstar Communication Technology Company Limited
In January 2020, The Company purchased 51% of the equity of Sunstar Communication at the price of RMB151.2 million. The financial results of Sunstar Communication as non-wholly owned subsidiary has been comprised in the consolidated financial statements of the Group since January 2020.
Sunstar Communication was established in 2001. Its scope of business includes development, production, sales of optical fibre equipments and relevant electrical products (radio transmitter not included); development and sales of software and technical consulting services for engineering; import and export of products and technologies (projects that must be approved according to laws shall be approved by the relevant departments before operation).
Yangtze (Hubei) Electrical Power Cable Company Limited
On 21 May 2020, the Company, together with Hubei Chutian Cable Industrial Co., Ltd. (the "Hubei Chutian"), established Yangtze (Hubei) Electrical Power Cable Company Limited (the "YEPC") in Hubei, China. Its scope of business includes development, production and sales of optical cables, power cables and its accessories; development, production and sales of the aluminium conductor steel-reinforced cable, aluminium strand, aluminium wire, steel strand, cable tray, electronic components and communications equipments, etc. The Company holds 51% of the total shares of YEPC and Hubei Chutian holds the remaining 49% of the total shares. Its paid-up share capital is RMB100 million. In 2020, the Company has contributed RMB40.8 million.
Yangtze Optical Fibre and Cable Shenzhen Company Limited
The Company established Yangtze Optical Fibre and Cable Shenzhen Company Limited (the "YOFC Shenzhen") on 25 May 2020. Its scope of business includes development and sales of optical fibres, optical cables, special wire cables, devices, accessories, components and materials, special equipments and communication products; and provide technical services for design and construction of engineering relating to above products. The Company holds 100% of the total shares of YOFC Shenzhen. Its paid-up share capital is RMB30 million. The Company has contributed RMB30 million in July 2020.
The establishment of all the above subsidiaries did not constitute notifiable transactions or connected transactions of the Company under Chapter 14 and Chapter 14A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Hong Kong Listing
Rules").
OUTLOOK
In early 2020, the production and operation of the Company suffered from a relatively huge impact of the novel coronavirus (COVID-19) outbreak and the optical fibre and cable industry remained challenging in 2020. In response to the challenges of the pandemic, the Company implemented strict prevention and control measures and rapidly resumed work and production. Facing the industrial pressure, the Company consolidated its leading advantages in, among others, research and development, technology, costs and market in principal activities as well as making greater efforts in the exploration of diversification and internationalization. With the recovery of industrial demand and the optimization of supply structure, the Company is expected to achieve long-term sustainable development.
1. Successful Pandemic Prevention and Control and Rapid Resumption of Work and Production
The production and operation of the headquarter and the principal production capacity of preforms of the Company which are located in Hubei Province suffered from a relatively huge impact of the novel coronavirus (COVID-19) outbreak in the first quarter of 2020. The net profit attributable to shareholders of the Company amounted to approximately RMB-7.17 million, representing a loss for a single quarter. In response to the challenges of the pandemic, the Company proactively assumed its social responsibility by implementing strict prevention and control measures. In mid-March 2020, the Company commenced the resumption of work and operation and by early April, major manufacturing facilities in Hubei Province has achieved near full production capacity utilization. However, the pandemic situation overseas remains severe, which has affected the Company's product sales to overseas markets, the normal operation of overseas production capacity and the implementation of communication network projects. The Company will pay close attention to the health and safety of overseas staff and the operation risks of overseas business to ensure smooth implementation of the internationalization strategy.
2. Stabilized Demand on Recovery and Prices under Pressure Continuously
In 2020, the 5G construction in China progressed steadily with the principle of moderate advancement. According to the data from Ministry of Industry and Information Technology ("MIIT") published in January 2021, over 600,000 5G base stations were newly constructed and over 718,000 5G base stations have been opened in China in 2020. Currently, 5G network has covered cities of prefecture level or above as well as key counties and county level cities across China with the number of 5G terminal connections exceeding 200 million. At the same time, the communication network traffic continued to rise as the pandemic has led to the acceleration of shifting the mode of work, consumption, entertainment etc. from offline to online. In 2020, the data flow consumption of the mobile network amounted to 165.6 billion GB, up by 35.7% as compared to last year; the annual average dataflow of usage (DOU) of mobile network amounted to 10.35GB/user/month, up by 32% as compared to last year. The accelerated construction of 5G network and the continuous increase in dataflow have imposed new requirements on the construction of communication network and facilitated the development of the optical fibre and cable industry. In 2020, the length of newly-constructed optical cable throughout China amounted to 4.28 million kilometers, up by approximately 9.0% year-on-year, and the optical cable length in aggregate reached 51.69 million kilometers. In July 2020, China Mobile announced that among its central bidding for the targeted common optical cable products, its total bidding volume was 119 million fibre kilometers, up by approximately 13% as compared with the previous central bidding. The market demand for optical fibre and cable has recovered from the previous low. The Company was the first ranked bidder in the central bidding who was allocated a share percentage of approximately 19.4%, further consolidating its leading position in the industry.
With regard to the industrial supply side, although the near -50% reduction of optical fibre and cable prices in 2019 has exerted a relatively huge profit pressure on enterprises in the industry with no advantages in core technologies or scale, based on the expectation on the future growth cycle, the industrial capacity structure is not able to make substantial adjustment. In the second half of 2020, among the central biddings for the targeted common optical cable products by key domestic operators, the average unit price further decreased by approximately 30%. Such price limit has been applicable in general since the fourth quarter of 2020. Industrial supply is expected to be optimized after taking full consideration of manufacturing technologies and cost control capability of optical fibre and cable companies. With the demand recovery and supply improvement, the pressure on prices may be gradually alleviated in future central biddings by operators.
3. Continuous Development of Diversified Business
2020 witnessed accelerated deployment for construction of new infrastructures and thriving growth of industries such as 5G network, industrial internet, artificial intelligence, big data centers and autonomous driving. According to the mobile communication report issued by Ericsson in November 2020, the average monthly traffic of global mobile and fixed network will record an average growth rate of 28% and 19% per annum from 2020 to 2026, respectively, and the total traffic is expected to increase from 221EB/month in 2020 to 716EB/month in 2026. The rapid growth of data traffic will promote the construction of big data centers, and hence boost the demand for relevant products and services. Currently, internal data transmissions of data centers are mainly conducted through multi-mode optical fibre and cable products. As such, the Company's multi-mode products with global leading edges grew rapidly in 2020 in terms of sales volume and revenue. In respect of optical transceiver and optical sub-assembly, the Company acquired Sunstar Communication in early 2020, and won the bid for the central procurement projects for optical transceiver of major domestic telecommunication operators. The Company strenuously developed the data center market for optical transceiver and optical subassembly. Currently, the production and delivery is underway smoothly.
Regarding the demand for 5G network, the Company leveraged its technological advantages to conduct research and development of the relevant ancillary products and services. Based on the actual circumstances of the construction projects of the operators, the Company integrated a series of new optical fibre products applicable for the construction of 5G network, such as G.654.E optical fibres with ultra-low loss and large effective area, dispersion flattened new optical fibres, bending insensitive single-mode optical fibres with ultra-small outer diameter, with its self-developed products such as optical transceiver and pre-transmission hybrids, so as to provide 5G pre-transmission WDM solutions. These solutions have been used in the trial deployment of major domestic telecommunication operators such as China Mobile and China Telecommunications. Meanwhile, the Company's "5G Pre-transmission Semiactive WDM Solution" received the "2021 Communication Product Technology Industry Leader Award (2021ϋܓஷڦପۜҦஔପุˏჯᆤ) from China Communications Weekly in February 2021.
The self-developed and produced active optical cable products of Everpro Connectivity, a subsidiary of the Company, have been extensively applied to various aspects, including ultrahigh definition videos, virtual reality, high-end medical devices, in 2020. In early 2020, these products have been successfully applied to high-end CT medical devices for brands such as Siemens and General Electric to facilitate the inspection of COVID-19. During the period of epidemic prevention and control in Wuhan, these products have been granted special approval for continuous production to satisfy the needs for epidemic prevention and control. On the other hand, our AOC cables applied to virtual reality scenarios have also received bulk procurement orders from international mainstream VR equipment manufacturers.
4. Further Implementation of Internationalization Strategy
The pandemic continued to spread across the globe in 2020. According to the report issued by Commodity Research Unit (the "CRU") in November 2020, due to the outbreak of a new round of pandemic in the third and fourth quarter in 2020 and the implementation of stringent prevention and control measures, overseas operators were unable to provide the required manpower and resources for network construction, and hence unable to turn around the downward trend of pandemic stricken demand for optical cables in the second quarter. As a result, the global demand for optical cables recorded negative growth for the first time since 2010. On the other hand, the pandemic has expedited the progress of digitalization with growing importance of fast and stable connection to fixed and mobile communication networks and increasing network data traffic. According to the report issued by CRU in February 2021, it is expected that the average growth rate of global demand for optical cables will reach 6.2% and 7% per annum in 2021 and 2022, respectively. With the gradual recovery from the pandemic and the proactive investment in 5G and optical fibres broadband network in major regions such as North America, Europe and Southeast Asia, it is anticipated that the global market demand for optical fibres and cables will be able to maintain sustainable development in the long run, among which, it is expected that the demand for optical cables in the European market will record a growth rate of over 10% in 2021.
Under the pressure in the overseas market, in 2020, while ensuring the health and safety of its employees, the Company stepped up its efforts in developing the overseas market and realised a trend-bucking growth for its overseas businesses. In 2020, the revenue from the Group's overseas businesses amounted to RMB2,102.5 million, representing a growth of approximately 26.6% as compared with that of RMB1,661.3 million in 2019 and accounted for 25.6% of the Group's total revenue. Despite the impact of the pandemic on project progress, the Company's telecom network engineering projects in markets such as Philippines, Peru and Thailand further advanced. In particular, the Company continued to push forward the network construction in collaboration with local operators in Philippines, and successfully won the bid for network construction project of China Telecommunications in the locality. Our local teams managed to overcome challenges brought by the pandemic, earthquakes and flooding and successfully completed the delivery of the project by stages within the timeframe specified by the client, which laid a solid foundation for the development of the Company's communication network engineering business overseas. In 2020, the revenue from overseas communication network engineering projects amounted to RMB242.9 million, representing a growth of approximately 304.9% over the prior year.
PROPOSED FINAL DIVIDEND
The Board proposed the distribution of a final dividend for the year ended 31 December 2020 of RMB0.216 (2019: RMB0.318) per share totaling RMB163,707,503 (2019: RMB241,013,824). The expected payment date is on or before 31 August 2021. The proposed dividend is subject to approval by shareholders of the Company at the forthcoming 2020 annual general meeting ("AGM"). Should the proposal be approved, the dividend for holders of A shares, including holders of A shares through the Northbound Trading Link of the Shanghai-Hong Kong Stock Connect (hereinafter referred to as the "Northbound Shareholders") and holders of H shares through the Southbound Trading Link (including Shanghai and Shenzhen markets, hereinafter referred to as the "Southbound Shareholders") will be declared and paid in RMB.
Dividends to holders of H shares, except the Southbound Shareholders, are paid in Hong Kong dollars. The exchange rate will be calculated as per the average exchange rate for converting RMB into Hong Kong dollars published by the People's Bank of China during the five business days prior to the AGM.
With respect to the Southbound Shareholders, according to the relevant requirements of China Securities Depository and Clearing Corporation Limited, China Securities Depository and Clearing Corporation Limited ("CSDC") Shanghai Branch and Shenzhen Branch shall receive cash dividends distributed by the Company as the nominee of the Southbound Shareholders for Shanghai market and Shenzhen market, respectively and distribute such cash dividends to the relevant Southbound Shareholders through its depository and clearing system.
In accordance with the Enterprise Income Tax Law of the People's Republic of China ( ʕശɛ ͏ձΆุהج') and its implementation rules effective on 1 January 2008, where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident enterprise shareholders, it is required to withhold 10% enterprise income tax for such non-resident enterprise shareholders. Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of the final dividend as enterprise income tax, distribute the final dividend to non-resident enterprise shareholders, i.e. any shareholders who hold the Company's shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, other nominees, trustees, or holders of H shares registered in the name of other organizations and groups.
In accordance with the requirements of the Circular on Certain Issues Concerning the Policies of Individual Income Tax (Cai Shui Zi [1994] No. 020) ( ᗫࡈɛה߰ʍ݁ഄਪᕚٙஷٝ' (ৌο[1994]020 )) promulgated by the Ministry of Finance and the State Administration of Taxation on 13 May 1994, overseas individuals are, as an interim measure, exempted from the PRC individual income tax for dividends or bonuses received from foreign-invested enterprises. As the Company is a foreign-invested enterprise, the Company will not withhold and pay the individual income tax on behalf of individual shareholders when the Company distributes the dividends for the year ended 31 December 2020 to overseas individual shareholders whose names appear on the register of members of H shares of the Company.
For Northbound Shareholders, with regard to the dividends obtained by the investors (including enterprises and individuals) from investment in the A shares of the Company listed on Shanghai Stock Exchange through the Hong Kong Stock Exchange, the Company will withhold income tax at the rate of 10%, and file tax withholding returns with the competent tax authority. Where there is any tax resident of a foreign country out of the investors through the Northbound Trading Link and the rate of income tax on dividends is less than 10%, as provided for in the tax treaty between the country and the PRC, the enterprise or individual may personally, or entrust a withholding agent to, file an application for the tax treatment under the tax treaty with the competent tax authority of the Company. Upon review, the competent tax authority will refund tax based on the difference between the amount of tax having been collected and the amount of tax payable calculated at the tax rate as set out in the tax treaty.
For Southbound Shareholders, in accordance with the Notice of Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission on Taxation Policies concerning the Pilot Program of an Interconnection Mechanism for Transactions in the Shanghai and Hong Kong Stock Markets (Cai Shui [2014] No. 81) ( ৌ݁eਕᐼ҅eᗇ္ึᗫ လಥٰୃ̹ఙʹʝᑌʝஷዚՓ༊ᓃϞᗫϗ݁ഄٙஷٝ'(ৌ[2014]81 )), effective from 17 November 2014, and the Notice of the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission on Taxation Policies concerning the Pilot Program of an Interconnection Mechanism for Transactions in the Shenzhen and Hong Kong Stock Markets (Cai Shui [2016] No. 127) ( ৌ݁eਕᐼ҅eᗇ္ึᗫଉಥٰୃ̹ఙʹʝ ᑌʝஷዚՓ༊ᓃϞᗫϗ݁ഄٙஷٝ'(ৌ[2016]127 )), effective from 5 December 2016, with regard to the dividends obtained by individual mainland investors from investment in the H shares of the Company listed on the Hong Kong Stock Exchange through the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, the Company will withhold their individual income tax at the rate of 20% in accordance with the register of individual mainland investors provided by CSDC. As to the withholding tax having been paid abroad, an individual investor may file an application for tax credit with the competent tax authority of CSDC with an effective credit document. With respect to the dividends obtained by mainland securities investment funds from investment in the H shares of the Company listed on the Hong Kong Stock Exchange through the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, the Company will withhold their income tax with reference to the provisions concerning the collection of tax on individual investors. The Company will not withhold income tax on dividends obtained by mainland enterprise investors, and mainland enterprise investors shall file their income tax returns and pay tax themselves instead.
Holders of H shares are advised to consult their own tax advisers about the tax effect in China, Hong Kong and/or other countries (regions) in respect of owning and disposing of H shares if they are in any doubt as to the above arrangements.
ANNUAL GENERAL MEETING
A circular containing among other things, details of the proposed final dividend, together with the notice of AGM, containing details of the AGM as well as the period and arrangement for the closure of register of members will be published on the website of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the website of the Company (www.yofc.com) and despatched to the shareholders of the Company in due course.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY' S LISTED SECURITIES
In 2020, there were no purchase, sales or redemption of the Company's listed securities by the Company or its subsidiaries.
IMPORTANT EVENTS AFTER THE REPORTING PERIOD
On 18 February 2021, the Company and its shareholder, Wuhan Yangtze Communications Industry Group Co.,Ltd.*؛ဏڗϪஷڦପุණྠٰ΅Ϟࠢʮ̡ ("Yangtze Communications") entered into an equity transfer agreement, pursuant to which the Company agreed to purchase 28.42% equity interest in Yangtze (Wuhan) Optical System Co.,Ltd.*ڗϪ€؛ဏΈӻ୕ٰ΅Ϟࠢʮ̡ ("YOSC") held by Yangtze Communications, at a cash consideration of RMB20,553,300 (the "Acquisition"). Upon completion of the Acquisition, YOSC will be held as to 74.74% by the Company and becomes a holding subsidiary to be consolidated into the consolidated statements of the Group. The transaction is completed by the Company through public tender and sale by the Beijing Equity Exchange. Completion for the Acquisition shall take place on the date of the issue of equity rights transfer certificate by the Beijing Equity Exchange. From then on, the rights and risks corresponding to the acquired equity of YOSC shall be transferred to the Company. On 24 February 2021,the Beijing Equity Exchange issued the certificate of equity rights transfer. As at the date of this announcement, the Company has paid the consideration of RMB20,553,300.
AUDIT COMMITTEE
The Company established the audit committee with written terms of reference in compliance with the Corporate Governance Code (the "CG Code") contained in Appendix 14 to the Listing Rules. As at the date of this announcement, the audit committee of the Company comprises three members, namely Mr. Song Wei, Mr. Liu Deming and Dr. Wong Tin Yau, Kelvin, the independent non-executive directors of the Company. Mr. Song Wei is the chairman of the audit committee.
The audit committee has reviewed and discussed the annual results of the Group for the year ended 31 December 2020. The audit committee has also reviewed the accounting principles and practices adopted by the Group with the management and discussed internal control and financial reporting matters including the audit of the consolidated financial statements for the year ended 31 December 2020.
SCOPE OF WORK OF THE AUDITOR
The financial figures in respect of the Group's consolidated balance sheet, consolidated income statement and the related notes thereto for the year ended 31 December 2020 as set out in this annual results announcement have been compared by the Group's auditor, KPMG Huazhen LLP, to the amounts set out in the Group's audited consolidated financial statements for the year ended 31 December 2020 and the amounts were found to be in agreement. The work performed by KPMG Huazhen LLP in this respect did not constitute an audit, review or other assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by the auditor.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
As a company incorporated in the PRC and dual listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, the Company has to comply with the relevant provisions of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange and the Hong Kong Listing Rules and to abide by the PRC Company Law and the applicable laws, regulations and regulatory requirements of Hong Kong and the PRC as the basis for the Company's corporate governance.
The Company has adopted all the code provisions set out in the CG Code and has complied with all the code provisions under the CG Code during the year ended 31 December 2020.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS
The Company has adopted the Company Securities Dealing Regulations on Directors, Supervisors and Related Employees (the "Company's Code") as its own code regarding securities transactions by directors and supervisors on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") contained in Appendix 10 to the Hong Kong Listing Rules. Having made specific enquiries in writing of the directors and supervisors of the Company, all directors and supervisors of the Company have confirmed that they have complied with the required standard set out in the Model Code and the Company's Code regarding securities transactions throughout the year ended 31 December 2020.
ANNUAL REPORT
The auditing process of the 2020 Annual Results has been completed and the annual report of the Company for the year ended 31 December 2020 will be despatched to shareholders and made available on the website of Hong Kong Exchanges and Clearing Limited (www. hkexnews.hk) and the website of the Company (www.yofc.com) before the end of April 2021.
FORWARD-LOOKING STATEMENTS
The Company would also like to caution readers about the forward-looking nature of certain of the above statements. These forward-looking statements are subject to risks and uncertainties and assumptions, some of which are beyond our control. Potential risks and uncertainties include those concerning the continued growth of the telecommunications industry in China, the development of the regulatory environment and our ability to successfully execute our business strategies. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. The Company does not intend to update these forward-looking statements. Actual results may differ materially from the information contained in the forward-looking statements as a result of a number of factors.
By order of the Board
Yangtze Optical Fibre and Cable Joint Stock Limited Company* ڗ࠭ΈᜄΈٰ΅Ϟࠢʮ̡
Ma Jie Chairman
Wuhan, PRC, 26 March 2021
As at the date of this announcement, the Board comprises Mr. Zhuang Dan as executive director; Mr. Ma Jie, Mr. Philippe Claude Vanhille, Mr. Guo Tao, Mr. Pier Francesco Facchini, Mr. Frank Franciscus Dorjee, Mr. Xiong Xiangfeng and Ms. Lai Zhimin, as non-executive directors; Mr. Bingsheng Teng, Mr. Liu Deming, Mr. Song Wei and Dr. Wong Tin Yau, Kelvin, as independent non-executive directors.
* For identification purposes only
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Yangtze Optical Fibre and Cable Joint Stock Ltd. Company published this content on 26 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 March 2021 15:06:05 UTC.
