INTERIM REPORT 2020 Contents

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INTERIM REPORT 2020 Contents 紅星美凱龍家居集團股份有限公司 Red Star Macalline Group Corporation Ltd. (A SINO-FOREIGN JOINT STOCK COMPANY INCORPORATED IN THE PEOPLE'S REPUBLIC OF CHINA WITH LIMITED LIABILITY) STOCK CODE: 1528 INTERIM REPORT 2020 Contents Corporate Information 2 Financial and Operational Highlights 4 Management Discussion and Analysis 6 Corporate Governance and Other Information 57 Consolidated Balance Sheet 69 Consolidated Income Statement 72 Consolidated Cash Flow Statement 74 Consolidated Statement of Changes in Equity 76 Company’s Balance Sheet 78 Company’s Income Statement 80 Company’s Cash Flow Statement 81 Company’s Statement of Changes in Equity 83 Notes to the Financial Statements 85 Corporate Information BOARD OF DIRECTORS REMUNERATION AND Executive Directors EVALUATION COMMITTEE Mr. CHE Jianxing (Chairman) Mr. QIAN Shizheng (Chairman) Mr. GUO Binghe (Vice Chairman) Mr. CHE Jianxing Ms. CHE Jianfang Mr. WANG Xiao Mr. JIANG Xiaozhong NOMINATION COMMITTEE Non-executive Directors Mr. LEE Kwan Hung, Eddie (Chairman) Ms. CHEN Shuhong Mr. CHE Jianxing Mr. XU Guofeng Ms. ZHAO Chongyi Mr. XU Hong Mr. JING Jie STRATEGY AND INVESTMENT COMMITTEE Independent Non-executive Directors Mr. CHE Jianxing (Chairman) Mr. QIAN Shizheng Mr. GUO Binghe Mr. LEE Kwan Hung, Eddie Mr. JIANG Xiaozhong Mr. WANG Xiao Ms. ZHAO Chongyi Ms. ZHAO Chongyi Mr. XU Hong SUPERVISORS COMPANY SECRETARY Mr. PAN Ning (Chairman) Mr. GUO Binghe Ms. CHAO Yanpin Mr. CHEN Gang Mr. ZHENG Hongtao AUTHORIZED REPRESENTATIVES AUDIT COMMITTEE Mr. CHE Jianxing Mr. GUO Binghe Mr. QIAN Shizheng (Chairman) Mr. LEE Kwan Hung, Eddie Mr. WANG Xiao REGISTERED OFFICE Suite F801, 6/F No. 518, Linyu Road Pudong New District Shanghai the PRC 2 Interim Report 2020 Corporate Information HEADQUARTERS IN THE PRC AUDITOR Red Star Macalline Headquarter Ernst & Young Hua Ming LLP No. 2/5, Lane 1466, Shenchang Road Level 16, Ernst & Young Tower, Oriental Plaza Minhang District No.1 East Changan Ave., Dongcheng District Shanghai Beijing the PRC the PRC PRINCIPAL PLACE OF PRINCIPAL BANKS BUSINESS IN HONG KONG Industrial and Commercial Bank of China Shanghai Branch Banking Department 31/F, Tower 2 No. 24 Zhongshan Dongyi Road Times Square Shanghai 1 Matheson Street the PRC Causeway Bay, Hong Kong Minsheng Bank H SHARE REGISTRAR Shanghai Xuhui Branch Computershare Hong Kong Investor Services Limited No. 1033 Zhaojiabang Road, Xujiahui Shops 1712–1716, 17th Floor Shanghai Hopewell Centre the PRC 183 Queen’s Road East Wan Chai, Hong Kong Bank of Communications Shanghai Putuo Branch LEGAL ADVISORS No. 2000 Zhongshan North Road As to Hong Kong and United States law Shanghai Davis Polk & Wardwell the PRC Hong Kong Solicitors The Hong Kong Club Building STOCK CODE 3A Chater Road, Hong Kong Hong Kong Stock Exchange: 1528 Shanghai Stock Exchange: 601828 As to the PRC law Llinks Law Offices 19/F One Lujiazui COMPANY’S WEBSITE www.chinaredstar.com 68 Yin Cheng Road Middle Shanghai 200120 the PRC Red Star Macalline Group Corporation Ltd. 3 Financial and Operational Highlights FINANCIAL HIGHLIGHTS Six months ended 30 June 2020 2019 (RMB’000, except otherwise stated) (Unaudited) (Unaudited) Revenue 6,024,441 7,757,114 Gross profit 4,029,841 5,194,654 Gross profit margin 66.9% 67.0% Net profit 1,154,254 2,861,354 Net profit attributable to owners of the Company 1,101,316 2,705,544 Net profit margin attributable to owners of the Company 18.3% 34.9% Net profit attributable to owners of the Company after deducting non-recurring profit or loss 700,784 1,713,037 Net profit margin attributable to owners of the Company after deducting non-recurring profit or loss 11.6% 22.1% Earnings per share RMB0.28 RMB0.69 Key Financial Performance Indicators RMB million 8,000 7,757 6,024 4,000 2,706 1,713 1,101 701 0 Revenue Net profit attributable to Net profit attributable to owners of the Company owners of the Company after deducting non-recurring profit or loss First half of 2019 First half of 2020 4 Interim Report 2020 Financial and Operational Highlights OPERATIONAL HIGHLIGHTS The following table sets forth certain operation data of Portfolio Shopping Malls(1) and Managed Shopping Malls(1) in operation as of the dates indicated: As at As at 30 June 31 December 2020 2019 Number of shopping malls 334 337 Operating area of shopping malls (sq.m.) 20,953,810 20,986,950 Number of cities covered 209 212 Number of Portfolio Shopping Malls 87 87 Operating area of Portfolio Shopping Malls (sq.m.) 7,698,002 7,736,844 Average occupancy rate of Portfolio Shopping Malls 90.2% 93.4% Number of Managed Shopping Malls 247 250 Operating area of Managed Shopping Malls (sq.m.) 13,255,808 13,250,106 Average occupancy rate of Managed Shopping Malls 90.1% 93.5% Note: (1) See definitions in the 2019 annual report of the Company. Red Star Macalline Group Corporation Ltd. 5 Management Discussion and Analysis I. OVERVIEW For the six months ended 30 June 2019 (the “Reporting Period”), Red Star Macalline Group Corporation Ltd. (the “Company” or “Red Star Macalline”) and its subsidiaries (collectively the “Group”) continued to focus on the strategic positioning of growing into an “omni-channel platform service provider for the pan-home improvement and furnishings industry”, actively seized market development opportunities, and formulated the strategy of “enhancing competitiveness of core business through new retail revolution and developing second growth curve through home improvement business”, focusing on the development of new business formats such as Tongcheng Station, home decoration, Shejiyun, etc., aiming to enhance the delivery capabilities of home decoration design and conversion capabilities of online and offline traffic, thereby providing customers with more personalized and high-quality home decoration services and a shopping experience closer to the needs of end consumers by using the original home furnishing shopping malls channel capabilities, strong supply chain integration capabilities and home furnishing industry operating experience accumulated over the years and leveraging its own home decoration business management platform and IMP intelligent marketing platform and Tmall “Home Decoration Tongcheng Station”. Meanwhile, the Group continued to implement the two-pronged business model of Portfolio Shopping Malls and Managed Shopping Malls, with focuses on continuing development of our asset-light business model, and strategically expanded our shopping mall network nationwide in order to further enhance our market share, thereby continuously strengthening our market leadership in China’s home improvement and furnishings industry. As of the end of the Reporting Period, the Company operated 87 Portfolio Shopping Malls, 247 Managed Shopping Malls, and operated 12 home furnishing shopping malls through strategic cooperation(1). In addition, the Company opened 50 franchised home improvement material projects(2) by way of franchising, which included a total of 430 home improvement material stores/industry streets(3). 6 Interim Report 2020 Management Discussion and Analysis I. OVERVIEW (continued) The Portfolio Shopping Malls and Managed Shopping Malls that we operated cover 209 cities in 29 provinces, municipalities and autonomous regions, with a total shopping mall operating area of 20,953,810 sq.m. During the Reporting Period, in order to integrate the Company’s resources from all business lines in a more effective manner, the Company has merged the original tenant sourcing management center, the planning and management center and the operation management and promotion center into a large group operation center which aims to promote system integration and synergy and enhance efficiency. At the same time, the Group has achieved results in the aspects of smart shopping malls, business financial integration, information security and intelligent big data analysis through promoting the comprehensive digital and intelligent works in the information construction. In the future, we will continue to pursue our development goal of becoming the most advanced and professional “omni-channel platform service provider for the pan-home improvement and furnishings industry” in China. During the Reporting Period, the Group achieved a revenue of RMB6,024.4 million, representing a decrease of 22.3% from RMB7,757.1 million for the same period in 2019. Gross profit margin decreased by 0.1 percentage points to 66.9% from 67.0% for the same period of last year. During the Reporting Period, net profit attributable to owners of the Company after deducting non-recurring profit or loss amounted to RMB700.8 million, representing a decrease of 59.1% from RMB1,713.0 million for the same period in 2019. As of the end of the Reporting Period, the Group’s cash and bank balances amounted to RMB9,507.9 million, representing an increase of 31.5% from RMB7,229.2 million as of the end of 2019. As of the end of the Reporting Period, the net gearing ratio(4) of the Group increased from 69.4% as of the end of 2019 to 78.1%. Notes: (1) The Company held 46.5% of equity interests in Shandong Inzone Green Home Co., Ltd. (山東銀座家居有限公司), and became one of its largest shareholders ranked pari passu with Shandong Commercial Group Co., Ltd. (山東省商業集團有限公司). As of 30 June 2020, Shandong Inzone Green Home Co., Ltd. and its controlling subsidiaries operated 12 home furnishing shopping malls in total in the PRC. Strategic cooperative operation shopping malls mean the home furnishing shopping malls which, based on strategic objectives considered by the Company, to be held through joint investment with the partners, to
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