Ruifeng Power : 2020 INTERIM REPORT

2020INTERIM REPORT

Ruifeng Power Group Company Limited

瑞 豐 動 力 集 團 有 限 公 司

(Incorporated in Cayman Islands with limited liability)

Stock code : 2025

CONTENTS
	Page
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Company Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Management Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Consolidated Statements of
Profit or Loss and Other Comprehensive Income. . . . . . . . . . . . . . . . . . . . . .	23
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . .	25
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . .	27
Condensed Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . .	29
Notes to the Unaudited Interim Financial Report . . . . . . . . . . . . . . . . . . . . . . .	31

2020 Interim Report 1

CORPORATE INFORMATION DIRECTORS

Executive Directors

Mr. Meng Lianzhou

(Chairman and Chief Executive Officer)

Mr. Liu Zhanwen

Mr. Liu Enwang

Mr. Zhang Yuexuan

Independent Non-Executive Directors

Mr. Wei Anli

Mr. Ren Keqiang

Mr. Yu Chun Kau

AUDIT COMMITTEE

Mr. Yu Chun Kau (Chairman)

Mr. Wei Anli

Mr. Ren Keqiang

NOMINATION COMMITTEE

Mr. Wei Anli (Chairman)

Mr. Meng Lianzhou

Mr. Yu Chun Kau

REMUNERATION COMMITTEE

Mr. Ren Keqiang (Chairman)

Mr. Meng Lianzhou

Mr. Yu Chun Kau

COMPANY SECRETARY

Mr. Wong Ka Wai

AUTHORISED REPRESENTATIVES

(for the purpose of the Listing Rules) Mr. Meng Lianzhou

Mr. Wong Ka Wai

LEGAL ADVISORS

As to Hong Kong Law: Chiu & Partners 40/F, Jardine House 1 Connaught Place Central

Hong Kong

AUDITOR

KPMG

PRINCIPAL BANKERS

China Construction Bank Shenzhou Branch

Industrial Commercial Bank of China

Shenzhou Branch

REGISTERED OFFICE

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

HEADQUARTER AND PRINCIPAL PLACE OF BUSINESS IN PRC

Middle of East Taishan Road

Shenzhou

Hebei Province

PRC

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Room 619A, 6/F, Block B New Mandarin Plaza

14 Science Museum Road Tsim Sha Tsui

Hong Kong

2 Ruifeng Power Group Company Limited

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Conyers Trust Company (Cayman) Limited

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

HONG KONG SHARE REGISTRAR BRANCH

Tricor Investor Services Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

STOCK CODE

2025

WEBSITE

www.hbsgt.com

2020 Interim Report 3

COMPANY OVERVIEW

Ruifeng Power Group Company Limited (the "Company" and, together with its subsidiaries, the "Group") is a specialized manufacturer of cylinder blocks, a major structure in automobile engines, based in Shenzhou, Hebei Province, the PRC.

Production of cylinder blocks in China has historically been split between internal production by manufacturers of automobiles and automobile engines and external outsourcing to specialized producers of automobile engine spare parts. The large-scale of our operations and significant production capacity allow us to secure the use of our products by some of the leading automobile manufacturers in China such as Jiangling Motors, Beiqi Foton Motor, Jiangxi Isuzu, JAC Motors and Great Wall Motors. During the six months ended 30 June 2020, we owned and operated a total of 3 precision casting lines and 20 mechanical processing lines (including 14 for cylinder blocks, 4 for cylinder heads and 2 for other ancillary cylinder block components).

THE MAIN PRODUCTS ARE:

Cylinder Block - A main structure of the automobile engine in which combustion of fuel takes place. It provides space for the required number of cylinders along with the associated surrounding structures, including coolant passages, intake and exhaust passages and crankcases. As a central component of an automobile engine, defect acceptance levels for cylinder blocks need to be very low as it directly affects the engine performance, life and other important indicators.

Cylinder Head - A major component of the engine which sits on top of the cylinder block and provides space for passages that feed air and fuel into a cylinder and allow the exhaust to escape. A cylinder head has to withstand high pressure and high temperatures while retaining its shape and form to seal the cylinder block via the head gasket.

Ancillary Cylinder Block Components - including main bearing cap and flywheel. Main bearing caps are used in piston engines to secure the crankshaft against the cylinder block. Our main bearing caps help prevent the forces created by the piston and transmitted to the crankshaft by forcing the crank to convert the reciprocating movement into rotation. A flywheel is designed to keep the crankshaft in the cylinder block turning smoothly during the periods when no power is being applied. Our flywheels are easy to install and highly resistant to rust and corrosion.

We believes that the following competitive strengths of the Group can bring our customers the most economical and reliable products:

• The specialized manufacturer of cylinder blocks and an established producer of cylinder heads in China
• A high level of flexibility in production facilities and process to meet the specific needs of different customers
• Continuous optimization and innovation of production process and technologies
• Strong design and research and development capabilities

4 Ruifeng Power Group Company Limited

FINANCIAL SUMMARY

										For six months ended 30 June
										2020	2019
										(Unaudited)	(Unaudited)
Major Items of Consolidated Statements of
Profit or Loss and Other Comprehensive
Income
Revenue (RMB'000)						165,972	187,121
Gross profit (RMB'000)						35,676	43,486
Gross profit margin						21.5%	23.2%
Profit for the period (RMB'000)			15,262	19,304
Net profit margin						9.2%	10.3%
Basic and diluted earnings per share			1.91
(RMB cent)						2.41
			Volume of Cylinder Blocks sold			Revenue
Volume				RMB'000
200,000		149,053		136,979			300,000
							200,000	187,121	165,972
100,000
								100,000
0								0
		30 June 2019	30 June 2020	30 June 2019	30 June 2020

Cylinder Block

Profit for the period

RMB'000

20,0002019,304

15,262

10,00010

0

30 June 2019

30 June 2020

2020 Interim Report 5

	As at	As at
	30 June	31 December
	2020	2019
	(Unaudited)	(Audited)
Major Items of Consolidated Statement of
Financial Position
Non-current assets (RMB'000)	812,494	797,345
Current assets (RMB'000)	515,327	522,000
Current liabilities (RMB'000)	313,748	317,225
Net current assets (RMB'000)	201,579	204,775
Non-current liabilities (RMB'000)	57,878	61,802
Net assets (RMB'000)	956,245	940,318
Gearing ratio (Note 1)	14.6%	12.9%

Notes

1. Gearing ratio equals total debt divided by total equity as at the end of the year or period. Total debt includes all interest-bearing bank and other loans.

6 Ruifeng Power Group Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY REVIEW

In the first half of 2020, the world has been hit by the COVID-19 pandemic, economies across the globe were severely hampered. For the first time since 1994, China has not set an official economic growth target for 2020, which bespeaks an acute challenge for the economy. Amid continued impact of the pandemic, China's Gross Domestic Product (GDP) in the second quarter grew by 3.2% year-on-year, comparing favorably with the 6.8% year-on-year decline in the first quarter GDP, during which production and consumption have also been recovering.

China's economy was essentially suspended in the first quarter, which has also wrought considerable damage to China's automobile industry. In the first half of 2020, 10.1 million and 10.3 million vehicles were produced and sold respectively, representing an overall decline in production and sales volume of 16.8% and 16.9% respectively over the same period of the previous year. However, the automobile market in the PRC began to display rapid recovery from April 2020 onwards, which was mainly due to gradual improvement in the control of COVID-19 pandemic and preventive measures imposed by the government, a series of favourable policies launched by the central and local governments, as well as gradual recovery of production and operation of automobile enterprises, all of which propelled production back to the level of the same period of the previous year. In June 2020, 2.3 million and 2.3 million vehicles were produced and sold in China respectively, representing a year-on-year increase of 22.5% and 11.6% respectively in overall production and sales volume.

The automobile industry has always been an integral part of economic growth in Mainland China, it is believed that the Mainland government will introduce policies which are beneficial to the industry to stimulate purchases of automobiles, promote industry development and maintain economic growth.

BUSINESS REVIEW

The Group is principally engaged in the design, development, production and sales of cylinder blocks, as well as cylinder heads and certain cylinder block components, to automobile manufacturers and engine manufacturers in China. The Group works closely with its customers to provide a set of high-quality and customized products. The Group conducts manufacturing operations for the major products through a closely-integrated cycle.

In the first half of 2020, the Group was affected by the pandemic and faced unprecedented difficulties in its operations, including responding to the government's anti-pandemic requirements for enterprises to resume production and the suspension of production of its customers and suppliers. At present, having found its way out of the predicament, the Group's production and sales have already returned to normal. As a result of the economic downturn and the decrease in customer orders, a number of small and medium-sized cylinder blocks manufacturers are on the verge of bankruptcy, thereby driving consolidation within the industry to phase out weaker participants. At the same time, large automobile manufacturers are also trying to save costs, reduce capital expenditures, and are willing to cooperate with established cylinder blocks

2020 Interim Report 7

manufacturers. The Group is one of the few listed companies in the cylinder blocks manufacturing industry, with a debt ratio that has always been at a relatively low level, coupled with its leading position amongst professional cylinder manufacturers in the PRC as well as cooperation with several foreign companies since last year, all of which has contributed to the continuous expansion of new businesses of the Group during the period.

The Group primarily manufacture cylinder blocks used for a wide variety of vehicles, including passenger vehicles, commercial vehicles and industrial vehicles. The Group also manufactures cylinder heads as well as certain other structural components of cylinder blocks, primarily including main bearing caps and flywheels. The following table sets forth the revenue and sales volume by segment and major product type for the six months ended 30 June 2020 and 2019:

		For the six months ended 30 June
		As a	2020			2019
				As a
		percentage			percentage
		of total	Sales		of total	Sales
	Revenue	revenue	volume	Revenue	revenue	volume
	RMB'000	%	units	RMB'000	%	units
Cylinder blocks	18,272	11.0	22,532
- Passenger vehicles	36,579	19.5	46,037
- Commercial vehicles	85,123	51.3	85,297	83,100	44.4	79,716
- Industrial vehicles	31,330	18.9	29,150	25,226	13.5	23,300
Subtotal	134,725	81.2	136,979	144,905	77.4	149,053
Cylinder heads	28,157	17.0	50,456	30,056	16.1	52,941
Ancillary cylinder block components	3,090	1.8	91,726	12,160	6.5	608,350
Total	165,972	100.0		187,121	100.0

For the six months ended 30 June 2020, the automobile manufacturers were significantly affected by the COVID-19 pandemic, most of them have not yet recovered to their normal operation until late of May 2020. As a result, the sale and business performance of the Group were affected. For the six months ended 30 June 2020, the demands of the cylinder blocks, cylinder heads and ancillary cylinder block components of the Group from the customers decreased, as a result, the revenue and the profit of the Group decreased by 11.3% and 20.9%, respectively to RMB166.0 million and RMB15.3 million.

8 Ruifeng Power Group Company Limited

Cylinder blocks for passenger vehicles

The cylinder blocks for passenger vehicles are normally used in light-weight engines of 1.0-1.6 liters. These cylinder blocks for passenger vehicles are produced either from grey cast iron alloy which provides high strength and wear resistance or from aluminum alloy which is lighter in weight and can be used in more fuel-efficient engines. Revenue from sales of cylinder blocks for passenger vehicles decreased from approximately 19.5% of our total revenue for the six months ended 30 June 2019 to approximately 11.0% for the six months ended 30 June 2020, such decrease was due to an decrease in revenue contributed from sales of cylinder blocks for passenger vehicles. Sales volume of cylinder blocks for passenger vehicles decreased approximately 51.1% from approximately 46,000 units for the six months ended 30 June 2019 to approximately 22,500 units for the six months ended 30 June 2020. The decrease was mainly due to the impact of the COVID-19 pandemic, demands from the existing customers were decreased, which offsetting the Group in offering a new cylinder block product of approximately 10,000 units to a new customer during the six months ended 30 June 2020.

Cylinder Blocks for Commercial Vehicles

The cylinder blocks for commercial vehicles are normally used in engines of 1.5 liters or above. The cylinder blocks for commercial vehicles are made from grey cast iron alloy. Revenue from sales of cylinder blocks for commercial vehicles increased from approximately 44.4% of total revenue for the six months ended 30 June 2019 to approximately 51.3% for the six months ended 30 June 2020, such increase was due to a decrease in revenue contributed by sales of cylinder blocks for passenger vehicles. Sales volume of cylinder blocks for commercial vehicles increased approximately 7.0% from approximately 80,000 units for the six months ended 30 June 2019 to approximately 85,000 units for the six months ended 30 June 2020. The increase was primarily due to the slowdown in demands from 493 series, meanwhile, demands of VM2.5 model and of a new product called M9T were increased by approximately 7,700 units and 8,200 units, respectively, for the periods.

Cylinder Blocks for Industrial Vehicles

The cylinder blocks for industrial vehicles are designed for use in a variety of industries, such as farming, urban construction and landscape engineering. The cylinder blocks for industrial vehicles are made from grey cast iron alloy and are normally used in engines of 2.1 liters or above. Revenue from sales of cylinder blocks for industrial vehicles increased from approximately 13.5% of total revenue for the six months ended 30 June 2019 to approximately 18.9% for the six months ended 30 June 2020, such increase was mainly due to increase in revenue contributed by sales of cylinder blocks for industrial vehicles. Sales volume of cylinder blocks for industrial vehicles increased approximately 25.1% from approximately 23,000 units for the six months ended 30 June 2019 to approximately 29,000 units for the six months ended 30 June 2020. The increase was primarily due to the increase in demand from a customer in our products.

2020 Interim Report 9

Cylinder Heads

The cylinder heads are primarily used in commercial vehicles and often sold, together with cylinder blocks, to automobile manufacturers and engine manufacturers in China. Sales volume of cylinder heads decreased approximately 4.7% from approximately 53,000 units for the six months ended 30 June 2019 to approximately 50,000 units for the six months ended 30 June 2020. Such decrease was as a result of decrease in demand on 493 series of cylinder heads.

Production Facilities and New Products and Research and Development

All production facilities of the Group are located in Shenzhou City, Hebei Province, the PRC. As at 30 June 2020, the Group owned and operated a total of 3 precision casting lines and 20 mechanical processing lines (including 14 for cylinder blocks, 4 for cylinder heads and 2 for other ancillary cylinder block components).

During the six months ended 30 June 2020, the Group was building 9 new mechanical processing lines and a precision casting lines by using the renovation of the existing production line or investing a new production line. The construction for the majority of the new production lines is expected to be completed before end of 2020. After completion of the 9 processing lines, the Group will be able to enhance its production efficiency and it expected that the Group can offer 7 additional new products, especially for cylinder blocks for industrial and passenger vehicles.

PROSPECTS

On 28 April 2020, 11 ministries and commissions including National Development and Reform Commission, Ministry of Science and Technology, Ministry of Industry and Information Technology and Ministry of Ecology and Environment jointly issued the "Notice on Measures to Stabilize and Expand the Consumption of Automobiles", in which five major measures were proposed, including the adjustment of the implementation requirements of the China VI standards, optimization of the relevant fiscal and taxation support policies for the purchase of new energy vehicles, acceleration of the scrapping of obsolete diesel trucks, unblocking of the circulation and trading of second-hand cars and utilization of automobile consumption finance, all of which are important issues to the development of the automobile industry at present. If these issues are effectively resolved, the negative impact of the pandemic on the automobile industry can be largely mitigated. The solutions may also prove vital to the stable and healthy development, as well as the promotion of consumption of the automobile industry in the future. With the improvement of consumers' standard of living and their pursuit of higher taste, a major consolidation is expected to make its foray into the domestic automobile market this year and there will be a round of knockouts to eliminate weaker players in the industry. The Group will maintain its existing advantages, strengthen internal management, further optimize costs and actively seek new cooperation opportunities with automobile manufacturers.

10 Ruifeng Power Group Company Limited

FINANCIAL REVIEW

Revenue

Revenue decreased by 11.3% from RMB187.1 million for the six months ended 30 June 2019 to RMB166.0 million for the six months ended 30 June 2020. This decrease was primarily attributable to a decrease in revenue from sales of cylinder blocks, cylinder heads and ancillary cylinder block components. Such decrease was mainly affected by the outbreak of COVID-19 pandemic in early 2020 which resulted in the decrease in market demand for the products of the Group.

Sales of Cylinder Blocks

Segment revenue from cylinder block sales decreased by 7.0% from RMB144.9 million for the six months ended 30 June 2019 to RMB134.7 million for the six months ended 30 June 2020, primarily attributable to a decrease in sales volume from approximately 149,000 units for the six months ended 30 June 2019 to approximately 137,000 units for the six months ended 30 June 2020 driven by decrease in revenue from sales of cylinder block for passenger vehicles by approximately RMB18.3 million, which was offset by the increase in revenue from sales of cylinder block for commercial vehicles and industrial vehicles by approximately RMB2.0 million and RMB6.1 million, respectively, for the six months ended 30 June 2020 as compared with the corresponding period in last year.

Sales of Cylinder Heads

Segment revenue from cylinder head sales decreased by 6.3% from RMB30.1 million for the six months ended 30 June 2019 to RMB28.2 million for the six months ended 30 June 2020. This decrease was primarily due to decrease in demand from our customers. The sales volume of cylinder heads decreased from approximately 53,000 units for the six months ended 30 June 2019 to approximately 50,000 units for the six months ended 30 June 2020, primarily related to decreased sales of the 493 series of cylinder heads, which was consistent with the decreased sales of the same series of cylinder blocks over the period.

Sales of Ancillary Cylinder Block Components

Segment revenue from ancillary cylinder block components sales decreased by 74.6% from RMB12.2 million for the six months ended 30 June 2019 to RMB3.1 million for the six months ended 30 June 2020. This decrease was primarily attributable to a significant decrease in demand from our customers.

Gross Profit and Gross Profit Margin

Gross profit decreased by 18.0% from RMB43.5 million for the six months ended 30 June 2019 to RMB35.7 million for the six months ended 30 June 2020. This decrease was in line with decrease in revenue of the Group. The gross profit margin decreased from 23.2% for the six months ended 30 June 2019 to 21.5% for the six months ended 30 June 2020, such decrease in gross profit margin was primarily due to an increase in usage of roughcast products which were provided by our customers for processing, especially for the new model namely M9T.

2020 Interim Report 11

Other Income

Other income decreased by 18.9% from RMB21.9 million for the six months ended 30 June 2019 to RMB17.8 million for the six months ended 30 June 2020. This decrease was primarily due to a decrease in government grants received. During the six months ended 30 June 2020, the Group recognised government grants of RMB13.6 million, as compared with government grants of RMB17.0 million for the six months ended 30 June 2019, in relation to the contribution of the Group in technological innovation. The government grants related to the expansion of the production facilities and purchase of new production equipment which are recorded as deferred income and amortised over the periods.

Selling Expenses

Selling expenses decreased by 8.1% from RMB5.4 million for the six months ended 30 June 2019 to RMB5.0 million for the six months ended 30 June 2020. The decrease was primarily due to (i) a decrease in salaries and staff benefits in relation to sales personnel and (ii) decrease in sales activities due to the travel restriction implemented by the government during the first half of 2020 as a result of the COVID-19 pandemic.

Administrative Expenses

Administrative expenses decreased by 18.7% from RMB31.1 million for the six months ended 30 June 2019 to RMB25.3 million for the six months ended 30 June 2020, primarily due to cost control measures adopted by the Group under the impact of the COVID-19 pandemic. The decrease in administrative expenses were attributing to (i) a decrease in research and development costs of RMB1.6 million to RMB5.7 million for the six months ended 30 June 2020; (ii) a decrease in salaries and staff benefits of RMB2.1 million to RMB6.4 million and (iii) a decrease in professional fee of RMB2.7 million to RMB2.7 million, which offset by an increase in provision of accounts receivables of RMB2.3 million to RMB2.4 million, for the six months ended 30 June 2020 as compared with the corresponding period in last year.

Finance Costs

Finance costs decreased by 24.0% from RMB6.4 million for the six months ended 30 June 2019 to RMB4.9 million for the six months ended 30 June 2020, primarily due to the decreased discounting bills and accounts receivable factoring being utilized by the Group.

Income Tax Expenses

Income tax expenses decreased by 3.7% from RMB3.1 million for the six months ended 30 June 2019 to RMB3.0 million for the six months ended 30 June 2020 primarily due to a decrease in our taxable profits. The effective tax rate increased from 14.0% for the six months ended 30 June 2019 to 16.5% for the six months ended 30 June 2020, such decrease was primarily due to decrease in research and development costs. As a result, the amount of additional tax deductible allowance which of the Group can claim has decreased accordingly.

12 Ruifeng Power Group Company Limited

Profit for the Period

As a result of the foregoing, the profit for the period decreased significantly by 20.9% from RMB19.3 million for the six months ended 30 June 2019 to RMB15.3 million for the six months ended 30 June 2020. The net profit margin decreased from 10.3% for the six months ended 30 June 2019 to 9.2% for six months ended 30 June 2020, which was mainly attributable to a decrease in gross profit margin which offset by a decrease in finance costs.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The operation of the Group is primarily financed by cash generated from operating activities, net proceeds received from the global offering of the Company (the "Global Offering") completed in January 2018 and bank and other borrowings. As of 30 June 2020 and 31 December 2019, the Group had cash and cash equivalents of RMB33.5 million and RMB49.3 million, respectively.

The Group monitors its cash flows and cash balance on a regular basis and seek to maintain optimal level of liquidity that can meet the working capital needs while supporting a healthy level of business and its various growth strategies. In the future, the Group intends to finance its operations through cash generated from operating activities, as well as bank and other borrowings. Other than normal bank borrowings that the Group obtains from commercial banks and potential debt financing plans, the Group does not expect to have any material external debt financing plan in the near future.

Trade and Bills Receivables

The trade and bills receivables decreased by 3.9% from RMB253.0 million as at 31 December 2019 to RMB243.0 million as at 30 June 2020, primarily due to decrease in revenue. The trade and bills receivables turnover days increased from 277 days as at 31 December 2019 to 281 days as at 30 June 2020. Such increase was resulted from the impact of the COVID-19 pandemic and certain customers delayed to settle the bills. The Group will strengthen customer credit risk management to guard against the increase in impairment loss on trade receivables. The impairment losses on trade receivables was slightly increased from RMB12.7 million as at 31 December 2019 to RMB15.1 million as at 30 June 2020.

Trade Payables

The trade payables decreased by 8.1% from RMB102.4 million as at 31 December 2019 to RMB94.0 million as at 30 June 2020 primarily due to decrease in purchase of raw materials for production. The trade payables turnover days as at 31 December 2019 and 30 June 2020 were almost stable at 138 days.

Bank and Other Loans

The bank and other loans slightly increased from RMB120.9 million as at 31 December 2019 to RMB140.0 million as at 30 June 2020, primarily due to increase in the general working capital. As at 30 June 2020, bank and other loans in the amounts of RMB140.0 million (2019: RMB120.9 million) were pledged by property, plant and equipment, right-of-use assets and trade receivables of the Group, the aggregate carrying amount of which such assets was RMB82.6 million (31 December 2019: RMB179.7 million).

2020 Interim Report 13

All bank and other loans as at 30 June 2020 and 31 December 2019 were denominated in RMB at fixed or floating interest rate. The following table sets forth the amount of indebtedness of the Group as at the date indicated:

As at 31

As at 30 June December

20202019

RMB'000 RMB'000

Repayment Schedule
Bank loans	140,000
Within 1 year	120,920

Gearing Ratio

The gearing ratio increased slightly from 12.9% as at 31 December 2019 to 14.6% as at 30 June 2020, such increase was a result of an increase of bank loans and other borrowings of RMB19.1 million.

Gearing ratio equals total debt divided by total equity as at the end of the period/year. Total debt includes all interest-bearing bank and other loans.

Capital Expenditure

For the six months ended 30 June 2020, the capital expenditure of the Group was RMB40.0 million (31 December 2019: RMB92.6 million). The capital expenditure incurred for the six months ended 30 June 2020 primarily related to the construction of new mechanical processing lines for the new products and new precision casting lines for the aluminum alloy rough cast products, purchases of additional equipment and machinery used for improvement of the existing production lines.

Capital Commitments

As at 30 June 2020, the capital commitments of the Group in respect of property, plant and equipment and land use rights contracted amounted for RMB52.9 million (31 December 2019: RMB37.8 million).

Contingent liabilities

As at 30 June 2020, the Group did not have any material contingent liabilities or guarantees (31 December 2019: Nil).

14 Ruifeng Power Group Company Limited

Fluctuation of RMB Exchange Rate and Foreign Exchange Risks

The majority of the Group's business and all bank borrowings are denominated and accounted for in RMB, except for certain payables to professional parties and administrative expenses in Hong Kong office that are denominated in Hong Kong dollars. Therefore, the Group does not have significant exposure to foreign exchange fluctuation. The Board does not expect the fluctuation of RMB exchange rate and other foreign exchange fluctuations will have material impact on the business operations or financial results of the Group. The Group currently has no hedging policy with respect to the foreign exchange risks, therefore, the Group has not entered into any hedging transactions to manage the potential fluctuation in foreign currencies.

SIGNIFICANT INVESTMENTS HELD, AND MATERIAL ACQUISITIONS AND DISPOSALS

The Group had no significant investments held or material acquisitions and disposals of subsidiaries and associated companies during the six months ended 30 June 2020.

EMPLOYEE AND REMUNERATION POLICIES

As at 30 June 2020, the Group had a total of 705 employees (31 December 2019: 747 employees). For the six months ended 30 June 2020, the Group has incurred a total staff costs of approximately RMB26.7 million (six months ended 30 June 2019: RMB31.1 million), representing a decrease of approximately 13.9% as compared with those for six months ended 30 June 2019, which was a result of decrease in our production due to the impact of the COVID-19 pandemic.

The Group believes its success depends on its employees' provision of consistent, high-quality and reliable services. In order to attract, retain and develop the knowledge and skill level of its employees, the Group places a strong emphasis on training for employees. In addition, the Group offers a competitive remuneration package to retain elite employees, including basic salary and performance-based monthly and annual bonuses, and reviews the remuneration package annually according to industry benchmark, financial results of the Group as well as the individual performance of employees.

Waiver of directors' remuneration

Due to the impact of the COVID-19 pandemic, the executive Directors agreed to waive part of director's salary for the year ending 31 December 2020 and agreed to receive the director's salary of RMB40,000 per annum with effect from 1 January 2020.

2020 Interim Report 15

USE OF NET PROCEEDS FROM THE GLOBAL OFFERING

The Company was listed on the Stock Exchange on 5 January 2018. The net proceeds from the Company's issue of new shares in the Global Offering amounted to approximately RMB264.7 million. On 24 November 2019, the Company has resolved to change the use of net proceeds from the Global Offering. Details of the revised allocation of the change in use of net proceeds are set out as follows:

		Original
		amount	Reallocation
		of net	of unutilized	Revised
		proceeds	net	use of net	Actual	Unutilised
Designated use set forth in the		from the	proceeds	proceeds	use of net	net
	Global	as at 24	from the	proceeds as	proceeds as
prospectus of the Company dated 19		Offering	November	Global	at 30 June	at 30 June
December 2017	%	allocated	2019	Offering	2020	2020
		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Optimisation of the smart
manufacturing process	43.3	114,600	(67,144)	47,456	27,456	20,000*
Purchase of equipment and other
enhancements to strengthen
collaboration with third-party
industry partners	8.5	22,497	(22,497)	-	-	-
Repayment of short-term borrowings	16.3	43,141	40,000	83,141	83,141	-
Construction of new mechanical
processing lines and purchase
of additional machinery and
equipment	15.1	39,964	-	39,964	39,964	-
Enhancement of research and
development capabilities	12.0	31,760	-	31,760	31,760	-
Working capital and general corporate
use	4.8	12,704	11,641	24,345	24,345	-
Settlement of the consideration
under the cooperation agreement
dated 22 November 2019 for
the acquisition of 10.7% equity
interest in Saint Jean Automotive
System (Changshu) Co., Ltd
by the Company ("Cooperation
Agreement")	-	-	38,000	38,000	38,000	-
	100.0	264,666	-	264,666	244,666	20,000

• The Group expected to fully use the proceeds on or before end of 2020.

For more details on change in use of unutilised net proceeds and the details of the Cooperation Agreement, please refer to the related announcements of the Company dated 24 November 2019.

As at 30 June 2020, the unused balance of the proceeds from the Global Offering of approximately RMB20.0 million was placed into short-term demand deposits or time deposits.

As of the date of this report, the Company does not anticipate any change to its plan on the use of proceeds.

16 Ruifeng Power Group Company Limited

MAJOR SUBSEQUENT EVENTS

Save as disclosed in this report, there are no major subsequent events to 30 June 2020 which would materially affect the Group's operating and financial performance as of the date of this report.

INTERIM DIVIDEND

The board of directors of the Company resolved to declare an interim dividend of HK2.0 cents per share for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil). It is expected that the interim dividend will be paid on or around 23 October 2020 to those shareholders whose names are on the register of members of the Company on 25 September 2020.

In order to reward the shareholders for their support and trust in the Company, the Board will consider to declare HK$3 cents per share in the form of a year-end dividend or special dividend when the financial and operating conditions of the Company are suitable for dividend payment along with economic development and market conditions in the second half of the year.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed during the following periods: from 23 September 2020 (Wednesday) to 25 September 2020 (Friday), both days inclusive, for the purpose of ascertaining shareholders' entitlement to the interim dividend. In order to establish entitlements to the interim dividend, the shareholders must ensure that all transfer documents accompanied by the relevant share certificates are lodged for registration with the Company's branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p.m. on 22 September 2020 (Tuesday). During the period mentioned above, no transfers of shares will be registered.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

For the six months ended 30 June 2020 and up to the date of this report, there was no purchase, sale or redemption by the Company or any of its subsidiaries of any listed securities of the Company.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company is committed to maintaining high standards of corporate governance and protecting the interests of its Shareholders in an open manner.

The Board comprises four executive Directors and three independent non-executive Directors. The Board has adopted the code provisions (the "Code Provisions") of the Corporate Governance Code ("CG Code") set out in Appendix 14 to the Listing Rules. Throughout the six months ended 30 June 2020, the Company has fully complied with the Code Provisions, except for the following deviations.

2020 Interim Report 17

Pursuant to code provision A.2.1 of the CG code, the roles of the chairman and the chief executive should be separated and should not be performed by the same individual. However, Mr. Meng Lianzhou currently performs the roles of chairman and chief executive officer of the Company. The Board believes that vesting the roles of both chairman and chief executive officer in the same person has the benefit of ensuring consistent leadership within the Group and enables more effective and efficient overall strategic planning for the Group. The Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively. The Board regularly reviews the need to appoint different individuals to perform the roles of chairman and chief executive officer separately.

Save as disclosed above, the Company has strictly complied with the CG Code. The Directors will review the Group's corporate governance policies and compliance with the CG Code each financial year.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") as set out in Appendix 10 to the Listing Rules as the Company's code of conduct regarding Directors' securities transactions. Upon specific enquiries, all Directors confirmed that they have complied with the relevant provisions of the Model Code throughout the six months ended 30 June 2020.

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

As at the date of this report, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of the Securities and Futures Ordinance ("SFO")) as recorded in the register of directors' and chief executive's interests and short positions required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules were as follows:

				Approximate
	Name of Group	Capacity/Nature	Number and class	percentage of
Name of Director	member	of interest	of securities	shareholding
			(Note 1)
Meng Lianzhou	The Company	Interest of	411,042,000	51.38%
("Mr. LZ		controlled	Shares (L)
Meng") (Note		corporation
2)
	Dragon Rise	Beneficial owner	5,044 shares of	50.46%
			US$1.00 each (L)

18 Ruifeng Power Group Company Limited

				Approximate
	Name of Group	Capacity/Nature	Number and class	percentage of
Name of Director	member	of interest	of securities	shareholding
			(Note 1)
Liu Zhanwen ("Mr.	The Company	Interest of	411,042,000	51.38%
ZW Liu")		controlled	Shares (L)
(Note 2)		corporation
	Dragon Rise	Beneficial owner	1,432 shares of	14.32%
			US$1.00 each (L)
Zhang Yuexuan	The Company	Interest of	411,042,000	51.38%
("Mr. YX		controlled	Shares (L)
Zhang") (Note		corporation
2)
	Dragon Rise	Beneficial owner	2,235 shares of	22.36%
			US$1.00 each (L)
Liu Enwang ("Mr.	The Company	Interest of	411,042,000	51.38%
EW Liu") (Note		controlled	Shares (L)
2)		corporation
	Dragon Rise	Beneficial owner	1,286 shares of	12.86%
			US$1.00 each (L)

Notes:

1. The letter "L" denotes a person's long position (as defined under Part XV of the SFO) in the Shares.
2. These 411,042,000 Shares are held by Dragon Rise, the issued shares of which are owned as to approximately 50.46% by Mr. Meng Lianzhou, approximately 14.32% by Mr. ZW Liu, approximately 22.36% by Mr. YX Zhang and approximately 12.86% by Mr. EW Liu respectively. On 28 August 2017, Mr. Meng Lianzhou, Mr. YX Zhang, Mr. EW Liu and Mr. ZW Liu entered into a concert party agreement to, among others, confirm their acting-in-concert agreement. Under the SFO, each of Mr. Meng Lianzhou, Mr. YX Zhang, Mr. EW Liu and Mr. ZW Liu is taken to be interested in the Shares beneficially owned by Dragon Rise.

DIRECTORS' REPORT

Save as disclosed above, as at the date of this report, none of the Directors or the chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO), as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

2020 Interim Report 19

I N T E R E S T S A N D S H O R T P O S I T I O N S O F T H E S U B S TA N T I A L SHAREHOLDERS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at the date of this report, the interests and short positions of the persons (other than a Director or chief executive of the Company) in the Shares and underlying Shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of SFO and based on the information available were as follows:

	Capacity/Nature	Number and class	Approximate
Name of Shareholders	percentage of
of interest	of securities	shareholding
		(Note 1)
Dragon Rise	Beneficial owner	411,042,000	51.38%
		Shares (L)
Ms. Zhao Jingmei	Interest of spouse	411,042,000	51.38%
("Ms. Zhao") (Note 2)		Shares (L)
Ms. Meng Dongdong	Interest of spouse	411,042,000	51.38%
(孟冬冬) (Note 3)		Shares (L)
Ms. Xiao Zhiru (肖智茹)	Interest of spouse	411,042,000	51.38%
(Note 4)		Shares (L)
Ms. Wang Sujuan (王素娟)	Interest of spouse	411,042,000	51.38%
(Note 5)		Shares (L)
Radiant Path Holding	Beneficial owner	67,868,000	8.48%
Limited ("Radiant Path")		Shares (L)
Mr. Wang Shiying ("Mr.	Interest of	67,868,000	8.48%
Wang") (Note 6)	controlled	Shares (L)
	corporation
Ms. Yin Shujuan ("Ms.	Interest of spouse	67,868,000	8.48%
Yin") (Note 7)		Shares (L)
Great Ally Enterprises	Beneficial owner	46,864,000	5.86%
Limited ("Great Ally")		Shares (L)
Mr. Zhang Zhanbiao ("Mr.	Interest of	46,864,000	5.86%
ZB Zhang") (Note 8)	controlled	Shares (L)
	corporation
Ms. Zhu Yunchuan (朱雲川)	Interest of spouse	46,864,000	5.86%
(Note 9)		Shares (L)
Rosy Raise Limited ("Rosy	Beneficial owner	46,864,000	5.86%
Raise")		Shares (L)
Ms. Liu Meiling ("Ms. ML	Interest of	46,864,000	5.86%
Liu") (Note 10)	controlled	Shares (L)
	corporation
Mr. Li Xunye (李訓業)	Interest of spouse	46,864,000	5.86%
(Note 11)		Shares (L)

20 Ruifeng Power Group Company Limited

Notes:

1. The letter "L" denotes a long position in the Shares.
2. Ms. Zhao is the spouse of Mr. Meng Lianzhou. Under the SFO, she is taken to be interested in the Shares in which Mr. Meng Lianzhou is interested.
3. Ms. Meng Dongdong (孟冬冬) is the spouse of Mr. ZW Liu. Under the SFO, she is taken to be interested in the Shares in which Mr. ZW Liu is interested.
4. Ms. Xiao Zhiru (肖智茹) is the spouse of Mr. YX Zhang. Under the SFO, she is taken to be interested in the Shares in which Mr. YX Zhang is interested.
5. Ms. Wang Sujuan (王素娟) is the spouse of Mr. EW Liu. Under the SFO, she is taken to be interested in the Shares in which Mr. EW Liu is interested.
6. These 67,868,000 Shares are beneficially owned by Radiant Path, which is wholly owned by Mr. Wang. Under the SFO, he is taken to be interested in the Shares beneficially owned by Radiant Path.
7. Ms. Yin is the spouse of Mr. Wang. Under the SFO, she is taken to be interested in the Shares in which Mr. Wang is interested.
8. These 46,864,000 Shares are beneficially owned by Great Ally, which is wholly owned by Mr. ZB Zhang. Under the SFO, he is taken to be interested in the Shares beneficially owned by Great Ally.
9. Ms. Zhu Yunchuan (朱雲川) is the spouse of Mr. ZB Zhang. Under the SFO, she is taken to be interested in the Shares in which Mr. ZB Zhang is interested.
10. These 46,864,000 Shares are beneficially owned by Rosy Raise, which is wholly owned by Ms. ML Liu. Under the SFO, she is taken to be interested in the Shares beneficially owned by Rosy Raise.
11. Mr. Li Xunye (李訓業) is the spouse of Ms. ML Liu. Under the SFO, he is taken to be interested in the Shares in which Ms. ML Liu is interested.

Save as disclosed above, as at the date of this report, other than the Directors and the chief executive of the Company whose interests are set out in the paragraph headed "Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures" above, no person had interest or short position in the Shares or underlying Shares of the Company which were required to be recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

SHARE OPTION SCHEME

During the period under review, no option has been granted, exercised or cancelled and there has been no movement of any options granted (if any) under the share option scheme adopted by the Company on 11 December 2017.

2020 Interim Report 21

AUDIT COMMITTEE

The Company has established an audit committee ("Audit Committee") which comprises three independent non-executive Directors.

The Audit Committee, together with the management have reviewed the accounting principles and policies adopted by the Group and discussed the internal control and financial reporting matters including a review of the interim results of the Group for the six months ended 30 June 2020.

On behalf of the Board

Ruifeng Power Group Company Limited

Meng Lianzhou

Chairman

Shenzhou, the PRC, 24 August 2020

22 Ruifeng Power Group Company Limited

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the six months ended 30 June 2020 - unaudited (Expressed in Renminbi ("RMB"))

		Six months ended 30 June
		2020	2019
	Note	RMB'000	RMB'000
Revenue	4	165,972	187,121
Cost of sales		(130,296)	(143,635)
Gross profit	4(b)	35,676	43,486
Other income	5	17,753	21,882
Selling expenses		(4,978)	(5,414)
Administrative expenses		(25,291)	(31,097)
Profit from operations		23,160	28,857
Finance costs	6(a)	(4,872)	(6,412)
Profit before taxation	6	18,288	22,445
Income tax	7	(3,026)	(3,141)
Profit attributable to equity shareholders
of the Company for the period		15,262	19,304
Earnings per share		1.91
Basic and diluted (RMB cent)	8	2.41

The notes on pages 31 to 42 form part of this interim financial report.

2020 Interim Report 23

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the six months ended 30 June 2020 - unaudited (Expressed in RMB)

	Six months ended 30 June
	2020	2019
	RMB'000	RMB'000
Profit for the period	15,262	19,304
Other comprehensive income for the period
(after tax):
Item that may be reclassified subsequently to
profit or loss
- Exchange differences on translation of
financial statements into presentation	665
currency	462
Total comprehensive income attributable to
equity shareholders of the Company for the
period	15,927	19,766

The notes on pages 31 to 42 form part of this interim financial report.

24 Ruifeng Power Group Company Limited

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 June 2020 - unaudited (Expressed in RMB)

		At 30	At 31
		June	December
	Note	2020	2019
		RMB'000	RMB'000
Non-current assets		687,601
Property, plant and equipment	9	671,419
Right-of-use assets	10	112,946	113,753
Deferred tax assets	16	11,947	12,173
		812,494	797,345
Current assets		154,407
Inventories	11	161,239
Trade and other receivables	12	322,100	304,231
Prepaid income tax		5,344	7,247
Cash and cash equivalents	13	33,476	49,283
		515,327	522,000
Current liabilities		171,414
Trade and other payables	14	194,429
Bank and other loans	15(a)	140,000	120,920
Lease liabilities		488	67
Provision for warranties	17	1,846	1,809
		313,748	317,225
Net current assets		201,579	204,775
Total assets less current liabilities		1,014,073	1,002,120

2020 Interim Report 25

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 June 2020 - unaudited (continued) (Expressed in RMB)

		At 30	At 31
		June	December
	Note	2020	2019
		RMB'000	RMB'000
Non-current liabilities		50,506
Deferred income	18	54,019
Deferred tax liabilities	16	4,857	4,857
Provision for warranties	17	2,465	2,926
		57,828	61,802
NET ASSETS		956,245	940,318
CAPITAL AND RESERVES	19	66,425
Share capital		66,425
Reserves		889,820	873,893
TOTAL EQUITY		956,245	940,318

Approved and authorised for issue by the board of directors on 24 August 2020.

Meng Lianzhou		Liu Enwang
Chairman	Director

The notes on pages 31 to 42 form part of this interim financial report.

26 Ruifeng Power Group Company Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2020 - unaudited (Expressed in RMB)

		Attributable to equity shareholders of the Company
		Share	Statutory	Exchange	Retained
Note	Share capital	premium	reserve	reserve	profits	Total equity
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Balance at 1 January 2019	66,425	149,670	21,384	6,449	662,236	906,164
Changes in equity for the six months
ended 30 June 2019:
Profit for the period	-	-	-	-	19,304	19,304
Other comprehensive income for the
period	-	-	-	462	-	462
Total Comprehensive income	-	-	-	462	19,304	19,766
Balance at 30 June 2019
66,425	149,670	21,384	6,911	681,540	925,930
Changes in equity for the six months
ended 31 December 2019:
Profit for the period	-	-	-	-	10,811	10,811
Other comprehensive income for the
period	-	-	-	3,577	-	3,577
Total comprehensive income	-	-	-	3,577	10,811	14,388
Appropriation to reserves	-	-	3,624	-	(3,624)	-
Balance at 31 December 2019
66,425	149,670	25,008	10,488	688,727	940,318

The notes on pages 31 to 42 form part of this interim financial report.

2020 Interim Report 27

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2020 - unaudited (continued) (Expressed in RMB)

		Attributable to equity shareholders of the Company
		Share	Statutory	Exchange	Retained
Note	Share capital	premium	reserve	reserve	profits	Total equity
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Balance at 1 January 2020	66,425	149,670	25,008	10,488	688,727	940,318
Changes in equity for the six months
ended 30 June 2020:	-	-	-	-	15,262	15,262
Profit for the period
Other comprehensive income for the	-	-	-	665	-	665
period
Total Comprehensive income	-	-	-	665	15,262	15,927
Balance at 30 June 2020	66,425	149,670	25,008	11,153	703,989	956,245

The notes on pages 31 to 42 form part of this interim financial report.

28 Ruifeng Power Group Company Limited

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2020 - unaudited (Expressed in RMB)

		Six months ended 30 June
		2020	2019
	Note	RMB'000	RMB'000
Cash flows from operating activities		34,763
Cash generated from operations		50,881
Income tax paid		(897)	(3,655)
Net cash generated from operating
activities		33,866	47,226
Cash flows from investing activities
Payments for acquisition of property, plant		(58,521)
and equipment and lease prepayments		(49,769)
Deposits paid for potential investments	12(i)	(15,812)	-
Other cash flows arising from investing		692
activities		1,091
Net cash used in investing activities		(73,641)	(48,678)

The notes on pages 31 to 42 form part of this interim financial report.

2020 Interim Report 29

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2020 - unaudited (continued) (Expressed in RMB)

		Six months ended 30 June
		2020	2019
	Note	RMB'000	RMB'000
Cash flows from financing activities		(134)
Capital element of lease rentals paid		(139)
Interest element of lease rentals paid		(7)	(21)
Proceeds from bank and other loans		115,000	170,000
Repayment of bank and other loans		(87,920)	(162,400)
Other cash flows (used in)/arising from		(2,883)
financing activities		15,231
Net cash generated from financing
activities		24,056	22,671
Net (decrease)/increase in cash and cash
equivalents		(15,719)	21,219
Cash and cash equivalents at the
beginning of the period	13	49,283	170,036
Effect of foreign exchange rate changes		(88)	(464)
Cash and cash equivalents at the end of
the period	13	33,476	190,791

The notes on pages 31 to 42 form part of this interim financial report.

30 Ruifeng Power Group Company Limited

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in RMB unless otherwise indicated)

1. CORPORATE INFORMATION
   Ruifeng Power Group Company Limited (the "Company") was incorporated in the Cayman Islands on 2 May 2017 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The Company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 5 January 2018 (the "Listing Date"). The Company and its subsidiaries (collectively referred to as the "Group") are principally engaged in the design, manufacture and sale of cylinder blocks and cylinder heads.
2. BASIS OF PREPARATION
   This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange, including compliance with International Accounting Standard ("IAS") 34, Interim financial reporting , issued by the International Accounting Standards Board (the "IASB"). It was authorised for issue on 24 August 2020.
   The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2019 annual financial statements.
   The preparation of an interim financial report in conformity with IAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.
   This interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2019 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with International Financial Reporting Standards ("IFRSs").
   The financial information relating to the financial year ended 31 December 2019 that is included in the interim financial report as comparative information does not constitute the Company's annual consolidated financial statements for that financial year but is derived from those financial statements. Statutory financial statements for the year ended 31 December 2019 are available from the Company's registered office. The auditors have expressed an unqualified opinion on those financial statements in their report dated 31 March 2020.
3. CHANGES IN ACCOUNTING POLICIES
   The IASB has issued a number of new or revised IFRSs that are first effective for the current accounting period of the Group. Of these, the followings are relevant to the Group.

Amendments to IFRS 3	Definition of a Business
Amendments to IFRS 7, IFRS 9 and IAS 39	Interest Rate Benchmark Reform
Amendments to IAS 1 and IAS 8	Definition of Material
Amendments to IFRS 16	Covid-19-Related Rent Concessions
Conceptual Framework for Financial Reporting
(Revised)

The application of the new or amended IFRSs did not have any significant impact on the Group's accounting policies.

2020 Interim Report 31

4 REVENUE AND SEGMENT REPORTING

The Group is principally engaged in the manufacture and sale of cylinder blocks and cylinder heads.

1. Disaggregation of revenue
   Disaggregation of revenue from contracts with customers by major products is as follows:

	Six months ended 30 June
	2020		2019
	RMB'000		RMB'000
Revenue from contracts with customers within
the scope of IFRS 15
Disaggregated by major products:
- Sales of cylinder blocks	134,725		144,905
- Sales of cylinder heads	28,157		30,056
- Sales of ancillary cylinder block components	3,090		12,160
	165,972		187,121

Disaggregation of revenue from contracts with customers by the timing of revenue recognition and by geographical market is disclosed in Notes 4(b)(i) and 4(b)(ii).

1. Segment reporting
   The Group manages its businesses by products. In a manner consistent with the way in which information is reported internally to the Group's most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following three reportable segments. No operating segments have been aggregated to form the following reportable segments.
2. • Cylinder blocks: this segment includes primarily the research, development, manufacture and sale of cylinder blocks.
   • Cylinder heads: this segment includes primarily the research, development, manufacture and sale of cylinder heads.
   • Ancillary cylinder block components: this segment includes primarily the manufacture and sale of ancillary cylinder block components used in cylinder blocks and cylinder heads not covered by the Group's warranty policies.

1. Segment results, assets and liabilities
   For the purposes of assessing segment performance and allocating resources between segments, the Group's most senior executive management monitors the results attributable to each reportable segment on the following bases:
   Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments. The measure used for reporting segment result is gross profit. No inter-segment sales have occurred for the six months ended 30 June 2020 and 2019. Assistance provided by one segment to another, including sharing of assets and technical know-how, is not measured.
   The Group's other operating income and expenses, such as other income and selling and administrative expenses, and assets and liabilities are not measured under individual segments. Accordingly, neither information on segment assets and liabilities nor information concerning capital expenditure, interest income and interest expenses is presented.

32 Ruifeng Power Group Company Limited

4 REVENUE AND SEGMENT REPORTING (continued)

1. Segment reporting (continued)

1. Segment results, assets and liabilities (continued)
   Disaggregation of revenue from contracts with customers by the timing of revenue recognition, as well as information regarding the Group's reportable segments as provided to the Group's most senior executive management for the purposes of resource allocation and assessment of segment performance for the six months ended 30 June 2020 and 2019 is set out below.

		Six months ended 30 June 2020
			Ancillary
	Cylinder		cylinder block
	blocks	Cylinder heads	components	Total
	RMB'000	RMB'000	RMB'000	RMB'000
Revenue from external
customers recognised at a	134,725	28,157	3,090	165,972
point in time
Reportable segment gross	26,735	7,876	1,065	35,676
profit
		Six months ended 30 June 2019
			Ancillary
			cylinder block
	Cylinder blocks	Cylinder heads	components	Total
	RMB'000	RMB'000	RMB'000	RMB'000
Revenue from external
customers recognised at a
point in time	144,905	30,056	12,160	187,121
Reportable segment gross
profit	32,255	10,216	1,015	43,486

1. Geographic information
   The Group's revenue is substantially generated from sales to customers in the PRC. The Group's operating assets are substantially situated in the PRC. Accordingly, no segment analysis based on geographical locations of the customers and assets is provided.

5	OTHER INCOME
		Six months ended 30 June
		2020		2019
		RMB'000		RMB'000
	Government grants (including amortisation of	17,133
	deferred income, see Note 18)		20,212
	Interest income	50		696
	Net (loss)/gain on disposal of property, plant and	(27)
	equipment		3
	Others	597		971
		17,753		21,882

2020 Interim Report 33

6 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging:

(a)	Finance costs
		Six months ended 30 June
		2020		2019
		RMB'000		RMB'000
	Interest on bank and other loans	3,845		5,484
	Bank charges and others	1,020		907
	Interest on lease liabilities	7		21
		4,872		6,412

No borrowing costs have been capitalised for the six months ended 30 June 2020 and 2019.

(b)	Staff costs#
		Six months ended 30 June
		2020		2019
		RMB'000		RMB'000
	Salaries, wages and other benefits	26,392		28,225
	Contributions to defined contribution retirement
	plan	346		2,844
		26,738		31,069

The employees of the subsidiaries of the Group established in the PRC (other than Hong Kong) participate in a defined contribution retirement benefit plan managed by the local government authority. Employees of these subsidiaries are entitled to retirement benefits, calculated based on a percentage of the defined salaries level in the PRC (other than Hong Kong), from the above mentioned retirement plan at their normal retirement age.

The Group also operates a Mandatory Provident Fund Scheme (the "MPF Scheme") under the Hong Kong Mandatory Provident Fund Scheme Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution retirement plan administered by an independent trustee. Under the MPF Scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees' relevant income, subject to a cap of monthly relevant income of Hong Kong Dollar ("HK$") 30,000. Contributions to the MPF Scheme vest immediately.

The Group has no further material obligation for payment of other retirement benefits beyond the above contributions.

34 Ruifeng Power Group Company Limited

6	PROFIT BEFORE TAXATION (continued)
(c)	Other items
		Six months ended 30 June
		2020		2019
		RMB'000		RMB'000
	Depreciation charge
	- owned property, plant and equipment	31,175		31,168
	- right-of-use assets	1,362		1,415
	Impairment losses on trade and other receivables	2,429		135
	Operating lease charges of short-term leases	58		55
	Provision for warranties (Note 17)	52		175
	Research and development costs	5,717		7,353
	Cost of inventories# (Note 11(b))	130,296		143,635

• Cost of inventories for the six months ended 30 June 2020 include RMB44,471,000 (six months ended 30 June 2019: RMB46,956,000) relating to staff costs, and depreciation and amortisation, which amount is also included in the respective total amounts disclosed separately above or in Note 6(b) for each of these types of expenses.

7	INCOME TAX
		Six months ended 30 June
		2020		2019
		RMB'000		RMB'000
	Current taxation - PRC Corporate Income Tax	2,800		2,656
	Deferred taxation (Note 16)	226		485
		3,026		3,141

The Company and a subsidiary of the Group incorporated in the British Virgin Islands are not subject to any income tax pursuant to the rules and regulations of their respective countries of incorporation.

The Company and a subsidiary of the Group incorporated in Hong Kong is subject to Hong Kong Profits Tax rate of 16.5% for the six months ended 30 June 2020 (six months ended 30 June 2019: 16.5%).

The companies of the Group established in the PRC (excluding Hong Kong) are subject to PRC Corporate Income Tax rate of 25% for the six months ended 30 June 2020 (six months ended 30 June 2019: 25%).

In 2018, one of the Group's subsidiaries established in the PRC has obtained approval from the relevant tax bureau to be taxed as an advanced and new technology enterprise for the calendar years from 2015 to 2020. Pursuant to the relevant tax regulations this subsidiary is entitled to a preferential tax rate of 15%. In addition to the preferential PRC Corporate Income Tax rate, this subsidiary is also entitled to an additional tax deductible allowance calculated at 75% of the qualified research and development costs incurred by this subsidiary.

2020 Interim Report 35

8 EARNINGS PER SHARE

1. Basic earnings per share
   The calculation of basic earnings per share is based on the profit attributable to the equity shareholders of the Company of RMB15,262,000 (six months ended 30 June 2019: RMB19,304,000) and the weighted average of 800,000,000 ordinary shares (six months ended 30 June 2019: 800,000,000) in issue during the interim period.
2. Diluted earnings per share
   There was no difference between basic and diluted earnings per share as the Company did not have any dilutive potential shares outstanding during the six months ended 30 June 2020 and 2019.

1. PROPERTY, PLANT AND EQUIPMENT
   During the six months ended 30 June 2020, the Group acquired items of plant and machinery with a cost of RMB40,020,000 (six months ended 30 June 2019: RMB40,281,000). Items of plant and machinery with a net book value of RMB669,000 were disposed of during the six months ended 30 June 2019 (six months ended 30 June 2019: RMB1,010,000).
2. RIGHT-OF-USEASSETS
   The right-of-use assets represent the land use rights paid by the Group for land situated in the PRC and the leased office premises in Hong Kong. The lease terms of land use right range from 50 to 70 years and leased office premises is 2 years.
3. INVENTORIES

1. Inventories in the consolidated statement of financial position comprise:

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
Raw materials	47,491	45,674
Work in progress	55,945	60,715
Finished goods	60,661	64,540
	164,097	170,929
Less: Write-down of inventories	(9,690)	(9,690)
	154,407	161,239

1. The analysis of the amount of inventories recognised as an expense and included in the consolidated statement of profit or loss is as follows:

	Six months ended 30 June
	2020		2019
	RMB'000		RMB'000
Carrying amount of inventories sold	130,296		143,381
Write-down of inventories	-		254
	130,296		143,635

36 Ruifeng Power Group Company Limited

12	TRADE AND OTHER RECEIVABLES
		At 30 June	At 31 December
		2020	2019
		RMB'000	RMB'000
	Trade receivables	199,531	186,781
	Less: Loss allowance	(15,138)	(12,709)
		184,393	174,072
	Bills receivables (Note (iii))	58,619	78,882
	Financial assets measured at amortised cost	243,012	252,954
	Prepayment for an investment to a target company
	(Note (i))	39,257	23,446
	Prepayments and other deposits	39,831	24,264
	Deductible value-added tax	-	3,567
		332,100	304,231

1. On 22 November 2019, the Company entered into a cooperation agreement, pursuant to which the Company would acquire the 10.7% equity interest of a target company which is mainly engaged in design and manufacturing of power systems, braking systems, vehicle spare parts and components. The consideration for the acquisition was EUR5,000,000 and was settled by two instalments. On 18 December 2019, the first instalment amounting to EUR3,000,000 was paid by the Company and was recognised as a prepayment. The Group paid an further deposits amounting to EUR2,000,000 (equivalent to RMB15,812,000) was settled in January 2020. The Company shall enjoy and assume all rights and obligations in connection with share interests in the target company after completing the registration of industrial and commercial changes and the procedures for business filing for the target company.
2. All of the trade and other receivables are expected to be recovered or recognised as expenses within one year.
3. At 30 June 2020, the aggregate carrying amounts of bills receivable pledged for the Group's loans is Nil (31 December 2019: RMB8,000,000) (see Note 15(b)).

The ageing analysis of trade and bills receivables, included in trade and other receivables, based on the invoice date and net of loss allowance, of the Group is as follows:

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
Less than 1 month	93,654	89,067
1 to 3 months	64,932	70,881
3 to 6 months	50,745	42,087
Over 6 months	33,681	50,919
	243,012	252,954

2020 Interim Report 37

13 CASH AND CASH EQUIVALENTS

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
Cash on hand and at bank	33,476	49,283

The Group's operation in the PRC (excluding Hong Kong) conducted its business in RMB. RMB is not a freely convertible currency and the remittance of funds out of the PRC (excluding Hong Kong) is subject to the exchange restrictions imposed by the PRC government.

14	TRADE AND OTHER PAYABLES
		At 30 June	At 31 December
		2020	2019
		RMB'000	RMB'000
	Trade payables	94,046	102,358
	Payables for construction of property, plant and
	equipment	56,651	66,093
	Payables for staff related costs	5,960	9,159
	Payables for other taxes	1,225	2,490
	Others	13,532	14,329
		77,368	92,701
	Financial liabilities measured at amortised cost	171,414	194,429

All of the trade and other payables are expected to be settled or recognised as income within one year or are repayable on demand.

The ageing analysis of trade payables, which are included in trade and other payables, based on the invoice date, is as follows:

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
Less than 1 month	29,917	34,775
1 to 3 months	29,521	27,402
3 to 6 months	18,401	23,407
Over 6 months	16,207	16,774
	94,046	102,358

38 Ruifeng Power Group Company Limited

15 BANK AND OTHER LOANS

1. The Group's short-term bank and other loans comprise:

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
Short-term bank loans:
- secured by property, plant and equipment and
lease prepayments	140,000	112,920
- secured by bills receivable	-	8,000
	140,000	120,920

1. At 30 June 2020, the aggregate carrying amount of property, plant and equipment, right-of-use assets and trade receivables pledged for the Group's short-term bank loans is RMB82,636,000 (31 December 2019: RMB179,716,000).

16 DEFERRED TAX ASSETS AND LIABILITIES

The components of deferred tax assets and liabilities recognised in the consolidated statement of financial position and the movements during the year/period are as follows:

		Assets			Liabilities
	Government
	grants and					Retained
	subsequent	Provision for	Write-down of	Credit loss	profits to be
	amortisation	warranties	inventories	allowance	distributed	Total
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
At 1 January 2019	8,295	831	992	100	(4,857)	5,361
(Charged)/credited to the
consolidated statement of
profit or loss	(192)	(120)	461	1,806	-	1,955
At 31 December 2019	8,103	711	1,453	1,906	(4,857)	7,316
(Charged)/credited to the
consolidated statement of
profit or loss	(528)	(63)	-	365	-	(226)
At 30 June 2020	7,575	648	1,453	2,271	(4,857)	7,090

2020 Interim Report 39

17 PROVISION FOR WARRANTIES

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
At the beginning of the period	4,735	5,542
Provisions made	52	658
Provisions utilised	(476)	(1,465)
At the end of the period	4,311	4,735
Less: Amount included under "current liabilities"	(1,846)	(1,809)
	2,465	2,926

Under the terms of the Group's sales agreements, the Group will rectify any product defects arising within the warranty period, which primarily ranges from one to three years from the date of customer acceptance. Provision is therefore made for the best estimate of the expected settlement under these agreements in respect of products sold which are still within the warranty period. The amount of provision takes into account the Group's recent claim experience and is only made where a warranty claim is probable.

18 DEFERRED INCOME

	At 30 June	At 31 December
	2020	2019
	RMB'000	RMB'000
At the beginning of the period	54,019	55,301
Additions	-	5,342
Credited to the consolidated statement of profit or
loss	(3,513)	(6,624)
At the end of the period	50,506	54,019

Deferred income represents government grants received to compensate the Group's cost of construction of property, plant and equipment. The grants are amortised over the useful lives of the related property, plant and equipment.

40 Ruifeng Power Group Company Limited

19 CAPITAL, RESERVES AND DIVIDENDS

1. Dividends
2. 1. Dividends payable to equity shareholders of the Company attributable to the interim period
      The Board resolved on 24 August 2020 that an interim dividend of HK$2.0 cents per share for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil) is to be distributed to the equity shareholders of the Company. The interim dividend has not been recognised as a liability at the end of the reporting period.
   2. Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved during the interim period
      The directors of the Company did not recommend the payment of a dividend in respect of year ended 31 December 2019.
3. Share capital
   Movements in the Company's issued share capital are as follows:

	Six months ended	Six months ended
	30 June 2020	30 June 2019
		Nominal value		Nominal value
	Number of	of Ordinary	Number of	of Ordinary
	shares	shares	shares	shares
		RMB'000		RMB'000
Ordinary shares, issued and
fully paid:
At 1 January	800,000,000	66,425	800,000,000	66,425
At 30 June	800,000,000	66,425	800,000,000	66,425

1. Capital management
   The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.
   The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
   The Group monitors its capital structure on the basis of an adjusted net debt-to-capital ratio. For this purpose, adjusted net debt is defined as total debt (which includes interest-bearing loans and borrowings, and lease liabilities but excludes redeemable preference shares) plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity and redeemable preference shares, other than amounts recognised in equity relating to cash flow hedges, less unaccrued proposed dividends.

2020 Interim Report 41

20	COMMITMENTS
(a)	Capital commitments
		At 30 June	At 31 December
		2020	2019
		RMB'000	RMB'000
	Commitments in respect of property, plant and
	equipment and land use rights:
	- Contracted for	52,936	37,777

21 MATERIAL RELATED PARTY TRANSACTIONS

Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company's directors and senior management, is as follows:

	Six months ended 30 June
	2020		2019
	RMB'000		RMB'000
Short-term employee benefits	1,777		1,557
Contributions to defined contribution retirement
plan	11		36
	1,788		1,593

42 Ruifeng Power Group Company Limited