中华国际(01064) - 2024 - 年度财报

Company Information This report provides core company information for China International Holdings Limited, including key contact details for board members, company secretary, registered office, principal place of business, auditor (Ernst & Young), legal advisors, and principal bankers - The report provides core company information for China International Holdings Limited, including details on board members, company secretary, registered office, principal place of business, auditor (Ernst & Young), legal advisors, and principal bankers[3][639] Management Discussion and Analysis Financial Review The Group turned from profit to loss this year, primarily due to a HKD 1.71 billion non-cash loss from the derecognition of former subsidiary Guangzhou Zhengda, despite positive adjusted EBITDA of HKD 6.06 million indicating core operational cash generation Key Financial Performance for FY2023 | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Revenue | 28,363 | 30,283 | | Loss/Profit Before Tax | (1,739,488) | 54,950 | | Loss/Profit for the Year | (1,849,358) | 34,050 | | Net Loss/Profit Attributable to Ordinary Equity Holders of the Company | (482,140) | 3,273 | | Adjusted EBITDA | 6,060 | 7,447 | - The primary reasons for the year's shift from profit to loss include the recognition of a HKD 1.708 billion derecognition loss from a former subsidiary and a change in investment property fair value from a HKD 50.69 million gain last year to a HKD 52.30 million loss this year[619][643] Assets and Liquidity Position (as at December 31, 2023) | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Net Current Assets | 29,785 | 1,034 | | Net Assets | 1,063,099 | 3,021,523 | | Total Assets | 1,496,606 | 4,415,959 | - The Group's operations primarily rely on cash flow from business operations and debt financing, with net cash flow from operating activities amounting to HKD 24.26 million for the year[622] Business Review The Group's core business is property development, investment, and management in mainland China, with Chongqing Gangyu Plaza providing stable income, while the Guangzhou redevelopment project remains stalled due to legal disputes involving former subsidiary Guangzhou Zhengda - Gangyu Plaza in Chongqing is the Group's main income source, with a total gross floor area of approximately 24,400 square meters, almost fully leased, providing stable cash flow[630][684] - The redevelopment project in Guangzhou's Yuexiu District, intended for a multi-functional commercial complex with a total gross floor area of approximately 234,000 square meters, is currently stalled due to incomplete demolition and legal issues[654][19] - Former subsidiary Guangzhou Zhengda holds approximately 190 residential units with a total gross floor area of about 11,000 square meters, currently vacant or available for spot sale[632] Legal Proceedings and Significant Matters This section details complex legal disputes surrounding former subsidiary Guangzhou Zhengda, where a 2023 court order for liquidation led to the Group losing control and derecognizing the entity, a key factor in the auditor's qualified opinion - In May 2023, the Guangdong High People's Court ruled to revoke the previous dismissal of the liquidation application against Guangzhou Zhengda, instructing the Guangzhou Intermediate People's Court to hear the case, leading to the resumption of liquidation proceedings[28][57][663] - Due to the court's liquidation ruling, the Board determined the Group lost control over Guangzhou Zhengda, ceasing its consolidation from May 15, 2023, with its interest reclassified as a financial asset measured at fair value through profit or loss[537][666] - The Group has filed a retrial application with the Supreme People's Court and initiated new litigation with the Guangzhou Intermediate People's Court, aiming to challenge the legality of the liquidation decision and confirm its 100% interest in Guangzhou Zhengda's remaining assets[63][31][665] - Due to significant uncertainties surrounding the Guangzhou Zhengda liquidation case, the Company's auditor issued a qualified audit opinion on the consolidated financial statements for the year ended December 31, 2023[71] Outlook The Board anticipates a multi-year consolidation for mainland China's property market and improved Hong Kong economic conditions post-US interest rate cuts, while actively seeking investment opportunities aligned with 'new quality productive forces' - Mainland China's property market is expected to take several years to recover from the bear market, while Hong Kong's economy is anticipated to improve after US interest rate cuts[75][104] - The Group will actively explore investment or business projects aligned with the 'new quality productive forces' policy to seize new opportunities[708] Directors' Report - The Board does not recommend the payment of any dividend for the year ended December 31, 2023[16][712] - The Group's principal business is investment holding, with its subsidiaries primarily engaged in property development, investment, and management, and no significant changes in business nature occurred during the year[80][679] - The report discloses connected transactions, primarily including the extension of a major acquisition's completion date and HKD 0.843 million in interest expenses incurred during the year for a loan from Director Mr. Ho Kam Hung[163] - The report details the interests of directors and substantial shareholders in the Company's shares, with Executive Director Mr. Ho Kam Hung and parties acting in concert with him identified as major controlling shareholders[150][171][124] Corporate Governance Report - The Company confirms compliance with the Corporate Governance Code set out in Appendix 14 of the Listing Rules throughout the review period[736] - The Board comprises five members, including one executive director, one non-executive director, and three independent non-executive directors, meeting independence requirements[158][135] - The Company has established an Audit Committee, Remuneration Committee, and Nomination Committee, each chaired by an independent non-executive director, with their composition and key responsibilities disclosed in the report[192][175][196] - The Board is responsible for overseeing the Group's risk management and internal control systems, with their effectiveness regularly reviewed through the Audit Committee[178][199] Environmental, Social and Governance Report - Environmentally, the Group is committed to energy conservation and emission reduction, implementing strict air conditioning temperature control policies at Chongqing Gangyu Plaza and replacing lighting with energy-efficient products[209][231] - Socially, the Group prioritizes employee welfare and safety, offering additional benefits like paid leave and medical insurance, conducting regular fire drills, and emphasizing that it has never employed child or forced labor[215][216][260] - The Group has established strict internal guidelines against corruption and money laundering, with no related cases reported during the review period[241] - As of December 31, 2023, the Group had approximately 20 employees, with most having served for over 20 years, indicating a low turnover rate[228][259] Biographical Details of Directors - The report provides biographical details for executive, non-executive, and independent non-executive directors, showcasing their extensive experience in property investment, law, finance, accounting, and information technology[265] - Mr. Ho Kam Hung, the Managing Director, possesses over 30 years of experience in property investment and development in mainland China and Hong Kong[243] Independent Auditor's Report - Auditor Ernst & Young issued a 'Qualified Opinion' on the consolidated financial statements for the current year[246][267] - The basis for the qualified opinion stems from significant uncertainty regarding the final distribution of remaining assets of former subsidiary Guangzhou Zhengda, which is undergoing liquidation, preventing the auditor from obtaining sufficient audit evidence to assess the fair value of Guangzhou Zhengda's equity, the derecognition loss, and whether related financial impacts require adjustment[269][270] - Key audit matters, in addition to those leading to the qualified opinion, include the assessment of control over Hong Kong Zhengda and the fair value estimation of investment properties[271][299][274] Audited Financial Statements Consolidated Statement of Profit or Loss The Group recorded HKD 28.36 million revenue in 2023, but a HKD 1.708 billion derecognition loss from a former subsidiary resulted in a HKD 1.739 billion loss before tax and a HKD 482.14 million loss attributable to equity holders, a significant reversal from the prior year's profit Summary of Consolidated Statement of Profit or Loss | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Revenue | 28,363 | 30,283 | | Derecognition Loss of a Former Subsidiary | (1,708,355) | - | | Loss/Profit Before Tax | (1,739,488) | 54,950 | | Loss/Profit for the Year | (1,849,358) | 34,050 | | Loss/Profit Attributable to Ordinary Equity Holders of the Company | (482,140) | 3,273 | | Basic Loss/Earnings Per Share | (62.73) HK cents | 0.46 HK cents | Consolidated Statement of Comprehensive Income Total comprehensive expenses for the year significantly increased to HKD 1.958 billion from HKD 209 million last year, primarily due to the HKD 1.849 billion loss for the year and HKD 129.535 million in foreign exchange differences Summary of Consolidated Statement of Comprehensive Income/Expenses | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Loss/Profit for the Year | (1,849,358) | 34,050 | | Exchange Differences Arising from Translation of Overseas Operations | (129,535) | (242,675) | | Total Comprehensive Expenses for the Year | (1,958,424) | (208,625) | Consolidated Statement of Financial Position As of end-2023, total assets decreased from HKD 4.416 billion to HKD 1.497 billion, and total equity fell from HKD 3.022 billion to HKD 1.063 billion, reflecting a major asset restructuring with a HKD 1.030 billion equity interest in an entity at fair value through profit or loss replacing derecognized investment properties Summary of Consolidated Statement of Financial Position | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Non-current Assets | 1,403,623 | 4,277,572 | | Current Assets | 92,983 | 138,387 | | Total Assets | 1,496,606 | 4,415,959 | | Current Liabilities | (63,198) | (137,353) | | Non-current Liabilities | (370,309) | (1,257,083) | | Total Liabilities | (433,507) | (1,394,436) | | Net Assets | 1,063,099 | 3,021,523 | Consolidated Statement of Changes in Equity Total equity for the year decreased significantly by HKD 1.958 billion from HKD 3.022 billion at the beginning of the year to HKD 1.063 billion at year-end, primarily driven by the substantial total comprehensive expenses for the period - Total comprehensive expenses for the year, amounting to HKD 1.958 billion, were the primary reason for the decrease in total equity from HKD 3.022 billion to HKD 1.063 billion[317] Consolidated Statement of Cash Flows Despite significant accounting losses, the Group maintained robust cash flow, generating HKD 24.26 million net cash inflow from operating activities, with net cash outflow from financing activities at HKD 15.63 million, resulting in an increased year-end cash and cash equivalents balance of HKD 90.76 million Summary of Consolidated Statement of Cash Flows | Metric | 2023 (HKD Thousands) | 2022 (HKD Thousands) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 24,263 | 26,456 | | Net Cash Flow Used in Investing Activities | (575) | - | | Net Cash Flow Used in Financing Activities | (15,634) | (28,537) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 8,054 | (2,081) | | Cash and Cash Equivalents at Year-End | 90,761 | 84,874 | Notes to the Financial Statements The notes provide detailed explanations of significant accounting policies, key judgments, and estimates, with Notes 9, 13, and 32(e) being crucial for understanding the Guangzhou Zhengda derecognition event and its financial impact, while Note 14 details investment property fair value measurement - Note 9 details the calculation of the HKD 1.708 billion loss from the derecognition of Guangzhou Zhengda, attributing it primarily to the difference between the fair value of Guangzhou Zhengda's equity and its original carrying amount of assets and liabilities[517][538][519] - Notes 13 and 14 explain the Group's fair value measurement for financial assets and investment properties, with the retained Guangzhou Zhengda equity (HKD 1.030 billion) and remaining investment properties (HKD 0.370 billion) after derecognition both valued using significant unobservable inputs (Level 3 fair value hierarchy)[527][552][579] - Note 32(e) provides a detailed historical background and latest developments regarding the Guangzhou Zhengda liquidation petition, serving as a core chapter for understanding the entire event's context[780][783][910] Five-Year Group Financial Summary Five-Year Financial Data Summary (for the year ended December 31) | Metric (HKD Thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Results | | | | | | | Revenue | 28,363 | 30,283 | 57,670 | 24,423 | 41,732 | | Profit/(Loss) Before Tax | (1,739,488) | 54,950 | 59,109 | (440) | (78,805) | | Profit/(Loss) Attributable to Ordinary Equity Holders of the Company | (482,140) | 3,273 | 6,811 | (6,576) | (18,505) | | Assets and Liabilities | | | | | | | Total Assets | 1,496,606 | 4,415,959 | 4,727,091 | 4,564,165 | 4,299,524 | | Total Liabilities | (433,507) | (1,394,436) | (1,503,715) | (1,451,973) | (1,384,655) | Schedule of Properties - As of December 31, 2023, the Group's principal investment property comprises certain floors of Gangyu Plaza in Chongqing, China, for commercial use, in which the Group holds a 100% interest[809]