Key Financial Highlights

• Return to Profitability: The Group reported a net profit of approximately HK\$10.6 million in 2025, reversing a significant net loss of HK\$103.6 million in 2024. This turnaround marks a major improvement in operational performance.
• Revenue and Expenses:
  • Distribution and selling expenses increased by HK\$29.3 million to HK\$200.3 million (2024: HK\$171.0 million), but as a percentage of revenue, they decreased from 48.4% to 37.2%.
  • Staff costs relating to distribution surged by HK\$20.3 million, reaching HK\$97.8 million.
  • Total administrative expenses decreased by HK\$8.6 million to HK\$71.8 million (2024: HK\$80.4 million), reflecting tighter cost controls.
• Investment and Other Income: Up by 9.8% to HK\$4.6 million, primarily from interest income in revenue contracts (HK\$1.4 million), government grants (HK\$1.0 million), and rental income (HK\$0.9 million).
• Taxation: Increased from a HK\$1.6 million credit in 2024 to an expense of HK\$1.2 million in 2025. The effective tax rate rose to 10.5% from -1.5%.

Financial Position and Liquidity

• Cash Flow: Cash used in operating activities was HK\$15.5 million (2024: HK\$13.7 million).
• Cash and Borrowings:
  • Cash and cash equivalents stood at HK\$104.3 million (2024: HK\$109.0 million).
  • Bank borrowings increased substantially to HK\$294.9 million from HK\$192.2 million, leading to a higher gearing ratio of 62.2% (2024: 43.0%).
• Current Ratio: Declined to 1.11 times (2024: 1.54 times), indicating tighter liquidity.

Shareholder Implications: The significant increase in external bank borrowings and the drop in liquidity metrics could be a point of concern and may impact the company’s financial flexibility and risk perception.

Corporate Governance and Compliance

• The company affirmed full compliance with the Hong Kong Stock Exchange’s Corporate Governance Code throughout 2025, with no reported deviations.
• Enhanced transparency, accountability, and internal controls were highlighted, with annual reviews confirming the effectiveness of risk management and internal control systems.
• The Board and Committees met regulatory standards for meetings, attendance, and training.
• Directors and relevant employees confirmed compliance with securities transaction codes, with no reported incidents of non-compliance.

Dividend Policy and Shareholder Returns

• No Dividend Declared: The company did not declare or pay any interim or final dividend for 2025 or 2024. This decision reflects a cautious approach, possibly retaining cash for operational needs or future investments.

Shareholder Implications: The absence of dividends may disappoint income-focused investors and could impact the share price, especially for those expecting a return to payouts after the company’s return to profitability.

Major Customers and Suppliers

• The largest customer accounted for only 5.5% of total revenue, and the top five accounted for 9.5%, indicating low customer concentration risk.
• However, supplier concentration is high, with the largest supplier representing 37.9% of total procurement and the top five together making up 61.0%.

Shareholder Implications: High supplier concentration may pose some risk if there is disruption with any major supplier.

Investment Properties and Fair Value Movements

• The Group recorded a fair value loss of HK\$6.36 million on investment properties in 2025, mainly due to revaluation of assets in Taiwan.
• All investment properties are valued by independent professional valuers using direct comparison and income capitalisation methods.

Shareholder Implications: Losses on property valuations may affect the book value and could signal challenges in the property market.

Key Audit Matters

• Revenue Recognition (Beauty Apparatus): The auditor scrutinised instalment sales and significant financing components, as some payments are collected beyond 12 months. The company uses discount rates reflecting customer credit assessment, which may affect revenue timing and amounts.
• Impairment Assessments:
  • Trade receivables impairment assessment was highlighted due to the introduction of new instalment arrangements and the lack of historical default data.
  • Impairment tests on cash-generating units in Mainland China for conventional and apparatus sales were also key points, given the high degree of estimation and uncertain market conditions.

Shareholder Implications: Revenue recognition and impairment tests are areas of estimation and judgement—any changes or errors here could impact reported profits and share valuation.

Other Noteworthy Points

• Connected Transactions: Related party transactions in 2025 were limited and not deemed price-sensitive.
• Capital Structure: The company maintained its authorised share capital at 4 billion shares with 2 billion issued. The net debt-to-adjusted capital ratio increased to 0.45, reflecting higher leverage.
• Public Float: The company complies with HKEX’s 25% public float requirement.
• Major Events After Year-End: No significant events requiring disclosure occurred after the reporting period.

Potential Price-Sensitive Issues

• Return to Profitability: The swing from a large loss to a profit is likely to be viewed positively by investors and could drive share price appreciation.
• No Dividend: The continued suspension of dividend payments, despite returning to profitability, may be seen as cautious or disappointing and could limit near-term upside.
• Increased Gearing and Lower Liquidity: The rising debt levels and declining current ratio may raise concerns over leverage and financial risk, potentially acting as a drag on share price if not well-managed.
• Supplier Concentration: High dependence on a few suppliers for procurement could be a risk factor to monitor.
• Impairment and Valuation Risks: Ongoing property valuation losses and potential impairment exposures remain points for close monitoring by shareholders.