Shenzhen China Bicycle Company(Holdings)Limited
Summary of Annual Report 2019I. Important Notice
The summary is abstract from full-text of annual report, for more details of operating results, financial condition and futuredevelopment plan of the Company; investors should found in the full-text of annual report that published on media appointed byCSRC.Objection statement of directors, supervisors and senior executives
| Name | Position | Content and reason |
StatementOther directors attending the Meeting for annual report deliberation except for the followed
| Name of director absent | Title for absent director | Reasons for absent | Attorney |
Prompt of non-standard audit opinion
√Applicable □ Not applicable
The 2019 annual financial report of the Company was audited by Baker Tilly China CPA (LLP), and an unqualified audit report withsignificant uncertainty of going concern was issued. The board of directors and the board of supervisors of the Company have detailedexplanations on related matters. Investors should read carefully.Since the audited net profit is negative for two consecutive fiscal years in 2018 and 2019, according to the relevant regulation of Article
13.2.1 of Rules Governing the Listing of Stocks on Shenzhen Stock Exchange, Shenzhen Stock Exchange will implement delisting riskwarning for the stock trading of the Company.Profit distribution pre-plan of common stock or capitalizing of common reserves pre-plan deliberated by the Board in the reportingperiod
□ Applicable √ Not applicable
The Company has no plan of cash bonus, dividends and capitalizing of reserves either.Profit distribution pre-plan of preferred stock deliberated and approved by the Board in the reporting period
□ Applicable √ Not applicable
II. Company information
1. Company profile
| Short form of the stock | Zhonghua – A, Zhonghua -B | Stock code | 000017, 200017 |
| Stock exchange for listing | Shenzhen Stock Exchange | ||
| Person/Way to contact | Secretary of the Board | Rep. of security affairs |
| Name | Sun Longlong | Cui Hongxia, Zhong Xiaojin |
| Office add. | Room 1201, Wantong Building, No.3002, Sungang East Road, Shenzhen | Room 1201, Wantong Building, No.3002, Sungang East Road, Shenzhen |
| Fax. | 0755-28181009 | 0755-28181009 |
| Tel. | 0755-25516998,28181666 | 0755-25516998,28181666 |
| dmc@szcbc.com | dmc@szcbc.com |
2. Main business or product introduction in the reporting period
During the reporting period, the Company is engaged in the main business of bicycle business, lithium battery material business andjewelry and gold business. Bicycle business including the production, assembly, purchase and sales of bicycles and electric bicyclesetc.
3. Main accounting data and financial indexes
(1) Main accounting data and financial indexes for recently three years
Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accountingerror correction or not
□Yes √ No
In RMB
| 2019 | 2018 | Changes over last year | 2017 | |
| Operating income (RMB) | 76,022,687.75 | 119,906,950.34 | -36.60% | 137,490,597.69 |
| Net profit attributable to shareholders of the listed company (RMB) | -7,186,905.64 | -1,591,968.91 | 351.45% | 1,529,587.27 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses (RMB) | -7,370,499.83 | -1,837,914.46 | 301.03% | 1,189,700.50 |
| Net cash flow arising from operating activities (RMB) | -13,791,941.34 | -9,479,474.16 | 45.49% | -3,431,578.40 |
| Basic earnings per share (RMB/Share) | -0.0130 | -0.0029 | 348.28% | 0.0028 |
| Diluted earnings per share (RMB/Share) | -0.0130 | -0.0029 | 348.28% | 0.0028 |
| Weighted average ROE | -53.69% | -10.54% | -43.15% | 10.11% |
| End of 2019 | End of 2018 | Changes over end of last year | End of 2017 | |
| Total assets (RMB) | 62,733,602.58 | 73,242,960.17 | -14.35% | 73,559,961.28 |
| Net assets attributable to shareholder of listed company (RMB) | 7,119,396.30 | 14,306,301.94 | -50.24% | 15,898,270.85 |
(2) Quarterly main financial index
In RMB
| First quarter | Second quarter | Third quarter | Fourth quarter | |
| Operating income | 21,954,108.28 | 16,320,324.74 | 24,574,484.81 | 13,173,769.92 |
| Net profit attributable to shareholders of the listed company | -366,774.37 | -432,171.80 | 1,040,149.76 | -7,428,109.23 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses | -410,571.37 | -499,818.80 | 1,040,149.76 | -7,500,259.42 |
| Net cash flow arising from operating activities | -6,105,394.21 | -2,795,862.53 | 1,583,584.06 | -6,474,268.66 |
Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financialindex disclosed in the company’s quarterly report and semi-annual report
□Yes √ No
4. Shares and shareholders
(1) Particulars about common stock shareholders, preference shareholders with voting rights recoveredand top ten shareholders
In Share
| Total common stock shareholders in reporting period-end | 50,884 | Total common stock shareholders at end of last month before annual report disclosed | 49,779 | Total preference shareholders with voting rights recovered at end of reporting period | 0 | Total preference shareholders with voting rights recovered at end of last month before annual report disclosed | 0 | |||||
| Top ten shareholders | ||||||||||||
| Full name of Shareholders | Nature of shareholder | Proportion of shares held | Amount of shares held | Amount of restricted shares held | Number of shares pledged/frozen | |||||||
| State of share | Amount | |||||||||||
| Shenzhen Guosheng Energy Investment Development Co., Ltd. | Domestic non-State-owned legal person | 11.52% | 63,508,747 | 0 | - | - | ||||||
| UOB Koy Hian (Hong Kong) Co., Ltd. | Foreign legal person | 2.89% | 15,907,850 | 0 | - | - | ||||||
| Guosen Securities (Hong Kong) brokerage Co., Ltd. | Foreign legal person | 2.52% | 13,909,425 | 0 | - | - | ||||||
| Shenwan Hongyuan Securities (Hong Kong) Co., Ltd. | Foreign legal person | 1.20% | 6,626,116 | 0 | - | - | ||||||
| Li Huili | Domestic | 0.71% | 3,891,124 | 0 | - | - | ||||||
| nature person | ||||||
| Xu Hongbo | Domestic nature person | 0.58% | 3,187,419 | 0 | - | - |
| CMS Hong Kong Co., Ltd | State-owned legal person | 0.54% | 2,958,688 | 0 | - | - |
| Ge Zhiqiong | Domestic nature person | 0.52% | 2,861,552 | 0 | - | - |
| Special Account for Property Disposal of Bankrupt Enterprise of CBC | Domestic non-State-owned legal person | 0.47% | 2,602,402 | 0 | - | - |
| Zhuorun Technology Co., Ltd. | Foreign legal person | 0.36% | 2,000,000 | 0 | - | - |
| Explanation on associated relationship among the aforesaid shareholders | Li Huili, spouse of the Ji Hanfei, the actual controller of he Company- Shenzhen Guosheng Energy Investment Development Co., Ltd., holding B-share of the Company on behalf of Shenzhen Guosheng Energy Investment Development Co., Ltd., beyond that, the Company has no idea of whether other circulated shareholders belong to concerted action persons ruled in the Administration Norms for Information Disclosure of Change on Shareholding of Shareholders of Listed Companies. | |||||
| Explanation on involving margin business (if applicable) | N/A | |||||
(2) Total preferred stock shareholders of the Company and shares held by top ten shareholders withpreferred stock held
□ Applicable √ Not applicable
The Company had no shareholders with preferred stock held in the reporting.
(3) Property right and controlling relationships between the actual controllers of the Company and theCompany is as follows:
5. Corporate bonds
Whether the company has corporate bonds that have been publicly issued and listed on the stock exchange, and not yet due or due butnot fully cashed on the approval date of annual reportNo
III. Discussion and analysis of business
1. Introduction of operation in the reporting period
In 2019, the international political and economic situation is complex and severe, domestic developmentimbalance and inadequate problems are still prominent, and the economy is facing a new downward pressure.Under the leadership of central government and governments at all levels, the whole nation strengthened their
confidence, overcame difficulties, and forged ahead, and achieved steady progress in economic and socialdevelopment, and the economic fundamentals were continuously consolidated and developed. As a sector in thetraditional manufacturing field, the bicycle industry continued the dilemma of rise in labor cost, manufacturingcosts, cost of capital, and material costs. In 2018, the relevant state ministry issued a new national standard forelectric bicycle safety technical specifications which was implemented on April 15, 2019. The implementation ofthe new national standard has accelerated the industry’s reshuffle and formed industry shocks beforeimplementation. In addition, in the past two years, the bike sharing has been violently oscillating the bicycleindustry and the upstream supply chain operations with capital advantages, due to the lack of profit model andcapital chain problems, and it continued to have a big impact on the whole industry in 2019. At the same time, asa traditional manufacturing industry, the bicycle industry also ushered in the “Made in China 2025” strategy,under the guidance of the basic principles of “Innovation Driven, Quality First, Green Development, StructureOptimization, and Talent Based”, took the important opportunity to speed up the transformation and upgrading,ushered in the development opportunity of the implementation of the new national standards for electric bicycles,and also faced with the important challenges of e-commerce development impacts on channels, channelintegration and Internet+.China has the world’s largest production and marketing of electric bicycles, after years of development, electricbicycles have gradually become an important means of transportation for consumers on everyday short-distancetrips, at present, there are about 200 million bicycles in the entire society. Structural body, motor, power battery,and control system are the core components of electric bicycles, Shenzhen China Bicycle has been closelyfollowing up the research on their technological development, application development, and commercial value fora long period of time, and has determined the qualified suppliers for core components year by year. Thenon-public offering of shares for fund-raising investment project of Shenzhen China Bicycle being planned andprepared at present also covers the application researches on switched reluctance motors, super-capacitor batteries,new materials, electric car bus control systems, wearable devices, intelligent positioning lock systems, etc. As oneof the core components, electric bicycle power batteries have been mainly lead-acid batteries in the past decade ortwo, with the development and popularization of new energy technologies and new energy materials, it isexpected to be replaced by the lithium batteries in the future. According to the strategy guidelines of “Made inChina 2025” by the State Council and the spirit of standardization reform, the Ministry of Industry andInformation Technology, the Ministry of Public Security, the State Administration for Industry and Commerce,and the General Administration of Quality Supervision, Inspection and Quarantine have introduced a new nationalstandard for electric bicycles to comprehensively improve the safety performance of electric bicycles, adjust andimprove the speed limit, vehicle quality, pedaling and riding ability and other technical indicators. New standardsnot only are close to people’s livelihood, but also improve the application space for lithium battery energy storage,and lithium battery electric bicycles usher in a new stage of development.In this context, in 2019, due to the actual situation of having a weak economic foundation after reforming, on theone hand, the company adhered to taking the development of traditional business model as the principle,combined with the new national standard of electric bicycle safety technical specifications, carried out researchand development on new products, optimized and adjusted product structure and sales model transformation,
actively expanded the e-commerce business model and realized the steady development of e-commerce retailbusiness; at the same time, correspondingly carried out the tracking study on industrial projects and technologyapplications of upstream and downstream of industrial chain in the long-term process of electric bicycle business,started getting involved in the lithium battery materials business based on the extensive business consultation andbusiness opportunity sifting, continues to expanding the business of Lithium battery materials and rich the mainbusiness; During the reporting period, the Company newly develops jewelry and god supply chain business andexpands the business dimensions. In August 2019, the Company and Shenzhen Zuankinson Jewelry Co., Ltdjointly established a Shenzhen Xinsen Jewelry and Gold Supply Chain Co., ltd with contribution of 6.5 millionyuan. Of which, the Company holds 65% equity, and is the controlling shareholder of Shenzhen Xinsen Jewelryand Gold Supply Chain Co., ltd, while 35% equity held by Zuankinson Jewelry. According to actual operationdevelopment, in February 2020, the two parties are decided to increase the capital of Shenzhen Xinsen Jewelryand Gold Supply Chain Co., ltd to 20 million yuan in the same proportion. on the other hand, strive to promote theselection work of the company's restructuring, planned the non-public offering of shares, expecting to improve thebusiness strength and development potential.In preparation for non-public offering of shares, in July 2016, the company initiated the planning and preparationfor non-public offering of shares and engaged securities companies, lawyers, accountants, and other intermediaryagencies to carry out various tasks. Since then, the nineteenth (temporary) meeting, the twenty-second (temporary)meeting, and the twenty-sixth (temporary) meeting of the ninth session of board of directors of the company, andthe second extraordinary shareholders’ meeting in 2017 reviewed and approved the relevant proposals onnon-public offering of shares. Combining the capital market with the actual situation of the company, fromJanuary to February, 2018, the fourth (temporary) meeting of the 10
th
session of board of directors and the firstextraordinary shareholders’ meeting of the company in 2018 reviewed and approved the Proposal on Adjustingthe Plan for the Company’s Non-Public Offering of A-Shares, and the Proposal on the Plan for the Company’sNon-Public Offering of A-Shares (three revised versions) and other relevant proposals. According to the aboveproposals, the total amount of funds raised in this non-public offering of shares did not exceed 750 million Yuan,and planned to invest 680 million Yuan for the “online and offline marketing network platform construction andupgrade project” and planned to invest 70 million Yuan for the “R&D center construction project after deductingthe issuance costs. On April 21, 2020, the company convened the 19
th(provisional) board meeting of the tenthsession of the board of directors, and reviewed and approved the “Proposal on the Termination of Agreement forSigning a Conditional Share Subscription Agreement (Second Revision) with the Original Subscription Object”and the “Proposal on the Plan for Non-public Issuance of A Shares of Shenzhen China Bicycle Company(Holdings) Limited”, etc. The company terminated the non-public offering of shares of 2016 and launched theplan for non-public issuance of A shares in 2020, and planned to raise funds with total amount not exceedingRMB 450 million by non-public offering of shares to 5 specific investors, i.e. Wansheng Industrial Holdings(Shenzhen) Co., Ltd., Fuzhou Zuankinson Jewelry Co., Ltd., Shenzhen Yilian Jinchuang Technology Co., Ltd.,Shenzhen Hualinglong Jewelry Co., Ltd., and Shenzhen Jindaogu Jewelry Co., Ltd., all raised funds will be usedto supplement working capital after deducting the issuance expenses. The non-public offering plan still needs tobe approved by the company’s shareholders’ meeting and the China Securities Regulatory Commission. Relevant
work is in progress.Under the background that the traditional manufacturing industry at home was still sluggish, in accordance withthe guidelines of “Made in China 2025”, the company insisted on accelerating its professional transformation ande-commercial transformation, striving to expand business dimension, rich the main business and strengthening thestructural adjustment, intensifying the quality management, strengthening cost control, overcoming the industryshocks and industry punches of share-bicycle’s fluctuation on the eve of the implementation of new nationalstandards, strive to improving the ability of traditional enterprises to adapt to economy new normal and participatein market competition. Through various efforts, the company achieved operating revenue of 76,022,700 Yuan andnet profit of -7,813,900 Yuan in 2019, of which, the net profit attributable to shareholders of listed companieswas-7,186,900 Yuan.
| Item | Period-end or current period | Period-begin or last period | Y-o-Y changes (+,-) | Cause of changes |
| Operation revenue | 76,022,687.75 | 119,906,950.34 | -36.60% | Revenue from bicycle and lithium battery material business declined |
| Operation cost | 68,681,471.12 | 108,071,430.05 | -36.45% | Cost of bicycle and lithium battery material business declined |
| Sales expenses | 3,178,476.39 | 5,933,231.41 | -46.43% | Decline of sales resulted in a decreases in operation expenses |
| R&D expenses | 2,753,277.72 | 0.00 | More investment in R&D of bicycle business and lithium battery material |
| Net profit | -7,813,881.65 | -1,880,505.78 | 315.52% | Loss from the declined in revenue and soaring expenses |
| Net profit attributable to shareholders of parent company | -7,186,905.64 | -1,591,968.91 | 315.52% | Loss of profits results in a deficit of profit attributable to owners of parent company |
| Net cash flow from operation activity | -13,791,941.34 | -9,479,474.16 | 45.49% | Tax of previous year paid in the current period and choice of the settlement method |
| Net cash flow from investment activity | -897,577.01 | -17,293.82 | 5,090.16% | Purchasing fixed assets in the period |
| Net cash flow from financing activity | 4,275,000.00 | 6,808,378.06 | -37.21% | The bank acceptance issue upon receipt of the pledged bank certificate of deposit decreased in the period |
| Monetary fund | 6,074,367.91 | 18,488,886.26 | -67.15% | Pay last year’s taxes and payment of bills payable on due |
| Account receivable | 38,616,523.93 | 29,007,509.02 | 33.13% | Receivable from customers increased |
| Account paid in advance | 938,425.99 | 13,799,753.60 | -93.20% | The account paid in advance for materials (for the business of lithium battery material business) are delivery basically in the period |
| Inventory | 6,078,330.30 | 2,386,603.94 | 154.69% | The jewelry gold and bicycles in stock from the subsidiary |
| Other current assets | 3,318,514.25 | 2,266,241.66 | 46.43% | Input tax to be deducted increased |
| Note payable | 0.00 | 2,000,000.00 | -100.00% | Bank acceptance bill are due for payment |
| Account received in advance | 1,739,953.80 | 405,779.88 | 328.79% | Account received by subsidiary in advance for goods from clients increased in the period |
| Taxes payable | 585,062.75 | 6,297,096.28 | -90.71% | Taxes of lat year are paid in the period |
| Minority’s interest | 4,322,186.79 | 2674162.80 | 61.63% | Share holding of the minority shareholder of the subsidiary newly established was 35% |
2. Whether the main business had major change in the reporting period
□ Yes √ No
3. About the industries, products, or regions accounting for over 10% of the company’s operating incomeor operating profit
√Applicable □ Not applicable
In RMB
| Name | Operating revenue | Operating profit | Gross profit ratio | Increase/decrease of operating revenue y-o-y | Increase/decrease of operating profit y-o-y | Increase/decrease of gross profit ratio y-o-y |
| Sales of bicycles and spare parts | 46,942,798.66 | 5,345,176.98 | 11.39% | -44.58% | -39.72% | 0.92% |
| Lithium battery material | 24,460,850.63 | 1,632,080.31 | 6.67% | -30.52% | -45.02% | -1.76% |
| Jewelry gold | 4,619,038.46 | 363,959.34 | 7.88% | 100.00% | 100.00% | 100.00% |
4. Whether the characteristics of management seasonal or cyclical need special attention
□ Yes √ No
5. In the reporting period, note of major changes in operating income, operating cost, total net profitattributable to common stock shareholders of listed company or composing the previous reporting period
√Applicable □ Not applicable
During the reporting period, after the implementation of the new national standard, the detailed implementingrules of the 3C standard for bicycle were delayed. The consumer market, upstream supply chain, and downstreamdistribution channels were on the sidelines, leading to a significant decline in market demand orders. In this period,the company invested in the establishment of a holding subsidiary to develop the jewelry gold supply chainbusiness, and increased the operating income of the jewelry gold supply chain business.
6. Particular about suspended and delisting
□ Applicable √ Not applicable
7. Relevant items involving financial report
(1) Particulars about the changes in aspect of accounting policy, estimates and calculation methodcompared with the financial report of last year
√Applicable □Not applicable
1.Change of accounting policy
(1) On 30 April 2019, the Ministry of Finance issued the Notice on Revision and Issuance of 2019 FinancialStatement Format for General Corporate (Cai Kuai [2019] No.6), format of the financial statement has been
revised. The Revision and Issued of 2018 Financial Statement Format for General Corporate (Cai Kuai [2018]No.15) repeal at the same time. Main impact are as:
| Content and reasons for accounting policy changes | Item and amount impacted |
| ”Note receivable and account receivable” is divide into Account receivable and Note receivable for presentation | In consolidate balance sheet, the note receivable at end of 2019 recorded as 580,000.00 yuan, account receivable recorded as 38,616,523.93 yuan; note receivable at end of 2018 recorded as 0.00 yuan and account receivable recorded as 29,007,509.02 yuan. In balance sheet of parent company, the note receivable at end of 2019 recorded as 580,000.00 yuan, account receivable recorded as 32,843,536.70 yuan; note receivable at end of 2018 recorded as 0.00 yuan and account receivable recorded as 12,827,954.16 yuan |
| ”Note payable and account payable” is divide into Account payable and Note payable for presentation | In consolidate balance sheet, the note payable at end of 2019 recorded as 0.00 yuan, account payable recorded as 10,191,385.23 yuan; note payable at end of 2018 recorded as 2,000,000.00 yuan and account payable recorded as 9,979,010.69 yuan In balance sheet of parent company, the note payable at end of 2019 recorded as 0.00 yuan, account payable recorded as 9,002,524.60 yuan; note payable at end of 2018 recorded as 0.00 yuan and account payable recorded as 0.00 yuan |
| ”Less: Loss of assets impairment” adjusted to “Add: Loss of assets impairment (Loss is listed with “-”)” | In consolidate profit statement, the loss of assets impairment for 2019 recorded as -499,175.17 yuan while recorded as -1,200,526.41 yuan for year of 2018. In profit statement of the parent company, the loss of assets impairment for 2019 recorded as 0.00 yuan while recorded as 14,209.76 yuan for year of 2018. |
| The government grants actually received by the enterprise, are listed under the item of “Cash received from other operating activities” whether it is related to assets or income. | In consolidate cash flow statement, the government grants reckoned in “Cash received from other operating activities” for year of 2019 recorded as 0.00 yuan while recorded as 0.00 yuan for year of 2018. In cash flow statement of parent company, the government grants reckoned in “Cash received from other operating activities” for year of 2019 recorded as 0.00 yuan while recorded as 0.00 yuan for year of 2018. |
(2) Change of classification and measurement of financial instrument
In 2017, the Ministry of Finance revised the Accounting Standards for Business Enterprise No. 22- Recognitionand Measurement of Financial Instruments, Accounting Standards for Business Enterprise No. 23- Transfer ofFinancial Assets, Accounting Standards for Business Enterprise No. 24- Hedge Accounting and AccountingStandards for Business Enterprise No. 37- Presentation of Financial Instruments. The above mentioned standardsare implemented since 1 Jan. 2019. according to the standards, for financial instruments that have not been
recognized as of the date of implementation, if the previous recognition and measurement are inconsistent withthe requirements of the revised standards, the amount of retained earnings at the beginning of the year and otherrelevant items in the financial statements shall be adjusted according to the cumulative impact number, and theinformation of the comparable period shall not be adjusted. Main impacts are as:
| Content and reasons for accounting policy changes | Item and amount impacted |
| When implemented the new financial instrument standard, the financial assets debt instrument measured by fair value and with variation reckoned into current gains/losses will listed under the item of “Trading financial assets” | No impact on the financial statement while implemented the new standards |
| When implemented the new financial instrument standard, the bad debt loss accrual from account receivable and other account receivable will listed under the item of “Credit impairment loss (loss is listed with”-”)” | Credit impairment loss in consolidate profit statement for year of 2019 recorded as -2,533,065.87 yuan. Credit impairment loss in profit statement of the parent company for year of 2019 recorded as -2,150,073.55 yuan. |
(3) On 7 December 2018, the Ministry of Finance issued the Notice on Revised Accounting Standards forBusiness Enterprise No.21- Lease (Cai Kuai [2018]No.35). according to the cumulative impact, the retainedearnings at beginning of the year and other relevant items in the financial statement of the lease liability of theright to use assets shall be adjusted, and the information of the comparable period shall not be adjusted. No impacton the financial statement while implemented the new standards.
(4) On 9 May 2019, the Ministry of Finance issued the Notice on Revised Accounting Standards for BusinessEnterprise No.7- Non-monetary assets exchange (Cai Kuai [2019]No.8), the exchange of non-monetary assetsbetween the implementation date of this standard on 1 Jan. 2019 (solstice) shall be adjusted according to thestandard. The exchange of non-monetary assets incurred before 1 Jan. 2019 shall not be adjusted retroactively. Noimpact on the financial statement while implemented the new standards.
(2) Major accounting errors within reporting period that needs retrospective restatement
□ Applicable √ Not applicable
No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.
(3) Compare with last year’s financial report; explain changes in consolidation statement’s scope
√ Applicable □ Not applicable
In August 2019, the Company and Shenzhen Zuankinson Jewelry Co., Ltd jointly established a Shenzhen XinsenJewelry and Gold Supply Chain Co., ltd. Of which, the Company holds 65% equity, while 35% equity held byShenzhen Zuankinson Jewelry Co., Ltd, the enterprise was included in the consolidate scope since establishment.
Board of Directors ofShenzhen China Bicycle Company (Holdings) Limited
26 April 2020