中国星集团(00326) - 2019 - 中期财报

Financial Summary Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2019, the Group recorded a loss of HKD 16.94 million, a shift from a profit of HKD 1.075 billion in the prior period, primarily due to a one-off gain from discontinued operations in the previous year Key Financial Indicators for H1 2019 | Indicator | For the six months ended June 30, 2019 (HKD '000) | For the six months ended June 30, 2018 (HKD '000) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue from continuing operations | 1,528 | 2,966 | -48.5% | | Operating loss | (16,442) | (380,751) | Loss narrowed 95.7% | | Loss for the period from continuing operations | (16,943) | (383,840) | Loss narrowed 95.6% | | Profit for the period from discontinued operations | – | 1,458,855 | -100% | | (Loss) / Profit for the period | (16,943) | 1,075,015 | Shift from profit to loss | | (Loss) / Profit attributable to owners of the Company | (16,888) | 1,075,025 | Shift from profit to loss | | Basic (loss) / earnings per share (HK cents) | (0.60) | 112.95 | Shift from profit to loss | - The period's results shifted from a significant profit in the prior year to a loss, primarily due to a one-off gain of HKD 1.459 billion recognized from the disposal of hotel and gaming services (discontinued operations) in the prior period[1][101] - Loss from continuing operations significantly narrowed, mainly due to a reduction in fair value changes of financial assets at fair value through profit or loss from HKD 362 million in the prior period to HKD 28.76 million this year[1][101] Condensed Consolidated Statement of Financial Position As of June 30, 2019, total assets increased to HKD 5.803 billion, total liabilities rose to HKD 1.458 billion mainly due to new bank borrowings, while total equity slightly decreased to HKD 4.345 billion, and net current assets significantly increased to HKD 4.590 billion Summary of Financial Position | Indicator | As of June 30, 2019 (HKD '000) | As of December 31, 2018 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Total assets | 5,803,149 | 5,483,222 | +5.8% | | Non-current assets | 523,184 | 470,190 | +11.3% | | Current assets | 5,279,965 | 5,013,032 | +5.3% | | Total liabilities | 1,458,252 | 1,051,385 | +38.7% | | Non-current liabilities | 767,803 | – | N/A | | Current liabilities | 690,449 | 1,051,385 | -34.3% | | Total equity | 4,344,897 | 4,431,837 | -2.0% | | Net current assets | 4,589,516 | 3,961,647 | +15.9% | - The increase in total liabilities primarily stemmed from new secured bank borrowings of HKD 758 million to finance a property development project in Macau[7][79][113] - Key assets include property inventories of HKD 2.825 billion, cash and bank balances of HKD 864 million, and financial assets at fair value through profit or loss of HKD 392 million[6] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2019, cash and cash equivalents decreased by HKD 292 million, with net cash outflow from operating activities expanding to HKD 991 million, while financing activities generated HKD 676 million net cash inflow, partially offset by share repurchases Summary of Cash Flows | Item | For the six months ended June 30, 2019 (HKD '000) | For the six months ended June 30, 2018 (HKD '000) | | :--- | :--- | :--- | | Net cash used in operating activities | (991,119) | (216,980) | | Net cash generated from investing activities | 23,111 | 1,778,637 | | Net cash generated from / (used in) financing activities | 676,023 | (875,418) | | (Decrease) / Increase in cash and cash equivalents | (291,985) | 686,239 | | Cash and cash equivalents at end of period | 864,468 | 1,151,790 | - Net cash inflow from financing activities primarily resulted from HKD 758 million in bank borrowings, while approximately HKD 70 million was spent on share repurchases[9][77] - Cash inflow from investing activities sharply decreased, as the prior period included HKD 1.759 billion in cash proceeds from the disposal of a subsidiary (Lan Kwai Fong Hotel)[9][55] Notes to the Financial Statements Application of New and Revised Hong Kong Financial Reporting Standards Effective January 1, 2019, the Group first adopted HKFRS 16 Leases, recognizing HKD 18.717 million in right-of-use assets and HKD 18.341 million in lease liabilities, impacting the statement of financial position without restating comparative figures - The Group first adopted Hong Kong Financial Reporting Standard 16 Leases during this period, replacing the previous Hong Kong Accounting Standard 17[15] - Upon adopting the new standard, the Group recognized lease liabilities of HKD 18.341 million and right-of-use assets of HKD 18.717 million as of January 1, 2019, applying a modified retrospective approach with cumulative effects recognized at the beginning of the period and no restatement of comparative information[31][32] Impact of HKFRS 16 Adoption on Statement of Financial Position (as of January 1, 2019) | Item | Impact Amount (HKD '000) | | :--- | :--- | | Non-current assets | | | Property, plant and equipment | +18,717 | | Current assets | | | Deposits, prepayments and other receivables | -376 | | Current liabilities | | | Lease liabilities | +5,847 | | Non-current liabilities | | | Lease liabilities | +12,494 | Segment Information The Group's continuing operations are divided into film-related business and property development and investment, with all revenue derived from film-related activities, while property development and investment accounts for the majority of segment assets and liabilities despite generating no revenue Revenue and Results by Operating Segment (For the six months ended June 30, 2019) | Operating Segment | Segment Revenue (HKD '000) | Segment Loss (HKD '000) | | :--- | :--- | :--- | | Film-related business operations | 1,528 | (2,656) | | Property development and investment operations | – | (3,405) | | Total | 1,528 | (6,061) | Assets and Liabilities by Operating Segment (As of June 30, 2019) | Operating Segment | Segment Assets (HKD '000) | Segment Liabilities (HKD '000) | | :--- | :--- | :--- | | Film-related business operations | 885,968 | 86,305 | | Property development and investment operations | 3,150,985 | 1,359,340 | | Total Segment | 4,036,953 | 1,445,645 | - Geographically, the Group's continuing operations revenue primarily originated from Mainland China (HKD 1.367 million, accounting for 89%) and Hong Kong (HKD 0.161 million, accounting for 11%)[49][111] Discontinued Operations On January 3, 2018, the Group completed the disposal of its hotel and gaming services subsidiary for approximately HKD 2 billion, which generated a HKD 1.459 billion profit in H1 2018, significantly impacting the year-on-year performance as no such results were recorded in H1 2019 - On January 3, 2018, the Group completed the disposal of the disposal group engaged in hotel and gaming services in Macau for a total consideration of HKD 2 billion (subject to adjustment)[55][81] - This disposal recognized a gain of HKD 1.465 billion in the prior period (for the six months ended June 30, 2018), recorded as profit from discontinued operations[55][57][83] - In H1 2019, there was no revenue or profit from discontinued operations, whereas the prior period recorded a profit of HKD 1.459 billion from this segment[1][55] Property Inventories and Development Risks The Group's property inventories, primarily development properties in Macau, amounted to HKD 2.825 billion, with a significant risk stemming from the Macau government's repossession of the 'Lot 6B' land, for which the Group's appeal was dismissed, and civil claims are now being considered - As of June 30, 2019, the carrying value of properties under development held for sale (property inventories) was HKD 2.825 billion, an increase from HKD 2.509 billion at the end of 2018[69] - Due to failure to complete development on time, the Macau government initiated administrative procedures to repossess the 'Lot 6B' land, and the Group's final appeal was dismissed by the Court of Final Appeal[72] - The Group is considering civil claims against the Macau government for damages incurred due to the land repossession, but the assessment of losses and outcome remain uncertain[72] Share Capital For the six months ended June 30, 2019, the company repurchased 90.11 million ordinary shares on the Stock Exchange for approximately HKD 69.69 million, which were subsequently cancelled, with directors believing this enhances net asset value per share H1 2019 Share Repurchase Details | Month of Repurchase | Number of Ordinary Shares (Thousands) | Total Consideration Paid (HKD '000) | | :--- | :--- | :--- | | May 2019 | 74,280 | 57,796 | | June 2019 | 15,830 | 11,892 | | Total | 90,110 | 69,688 | - The aforementioned 90.11 million ordinary shares repurchased were cancelled on June 19, 2019[77] Management Discussion and Analysis Financial Review In H1 2019, the Group shifted from profit to a loss of HKD 16.94 million, primarily due to a one-off gain from hotel and gaming business disposal in the prior year, while loss from continuing operations significantly narrowed from HKD 384 million to HKD 16.94 million due to reduced fair value losses on financial assets - Total revenue for the period was HKD 1.528 million, representing a 48% year-on-year decrease[101] - The shift from profit to loss was primarily due to (i) a HKD 1.459 billion profit from the disposal of hotel and gaming business in the prior period, which was absent this period; and (ii) a significant reduction in fair value losses on financial assets from HKD 362 million in the prior period to HKD 28.76 million this year[101] Business Review The Group's continuing operations encompass film-related and property development and investment businesses, with film revenue declining due to no new releases, while the Macau 'Tiffany House' property project, expected to complete in Q3 2019 and commence sales next year, is a key future revenue driver Film-Related Business Film-related business generated HKD 1.528 million in revenue and a segment loss of HKD 2.656 million in H1, with no new film releases but a new movie 'Chasing Dreamers' expected this year, alongside evaluations of TV series projects and joint venture investments - In H1 2019, film-related business revenue was HKD 1.528 million, with a segment loss of HKD 2.656 million[104] - No new films were released during the period, but a new movie titled 'Chasing Dreamers' is expected to be released this year[104] Property Development and Investment Business Property development business recorded no revenue and a segment loss of HKD 3.405 million in H1, with the core Macau 'Tiffany House' project expected to complete construction in Q3 2019 and commence sales next year, followed by development of the 'C7 Property' project - The core 'Tiffany House' project, with a substantial gross floor area including residential, clubhouse, commercial, and parking facilities, is expected to complete in Q3 2019 and commence sales next year[107] - Another key project, C7 Property, with a site area of 4,669 square meters, is preliminarily planned for residential and parking development, with work to commence after the Tiffany House project[108] Liquidity and Financial Position As of June 30, 2019, the Group held HKD 865 million in cash and deposits, with total borrowings of HKD 758 million (all secured bank term loans for the Tiffany House project), resulting in a low debt-to-equity ratio of 17% and a strong current ratio of 7.6, indicating robust short-term solvency Capital Structure Summary (As of June 30, 2019) | Indicator | Amount (HKD '000) | | :--- | :--- | | Cash and bank balances and time deposits | 864,739 | | Total borrowings | 758,010 | | Equity attributable to owners of the Company | 4,345,077 | | Debt-to-equity ratio | 17% | - The Group's bank credit facilities amounted to HKD 1.6 billion, with HKD 758 million utilized, secured by the land and properties of the Tiffany House project[113][116] Outlook The Group maintains an optimistic outlook, anticipating a 'harvest year' next year driven by the 'Tiffany House' project launch and continued confidence in the Macau property market for higher shareholder returns, while also expanding film and television businesses and venturing into catering with a new coffee shop - Management anticipates next year to be a 'harvest year' for the Group with the launch of the 'Tiffany House' project[119] - The Group will continue to develop its film and television series production and distribution businesses, seeking collaborations with renowned production companies[120] - The Group has expanded into catering services, opening a new coffee shop named 'Gor Gor's Home' in Sheung Wan, Hong Kong, during Q3 2019[120] Other Information Major Shareholders and Directors' Interests As of June 30, 2019, Executive Directors Mr. Charles Heung Wah Keung and Ms. Tiffany Chan Ming Yin, through their controlled entity Heung Wah Keung Family Endowment Limited (HWKFE), collectively held approximately 58.90% of the company's shares, making them controlling shareholders Major Shareholder Holdings | Shareholder Name/Director Name | Capacity | Number of Shares Held | Approximate Percentage of Interest Held | | :--- | :--- | :--- | :--- | | Mr. Charles Heung Wah Keung | Interest in controlled corporation | 1,597,015,595 | 58.90% | | Ms. Tiffany Chan Ming Yin | Interest in controlled corporation | 1,597,015,595 | 58.90% | | HWKFE | Beneficial owner | 1,597,013,951 | 58.90% | Share Repurchases In H1 2019, the company repurchased 90.11 million ordinary shares on the Stock Exchange for HKD 69.6879 million, all cancelled by June 19, 2019, a move the Board believes enhances net asset value per share - The company repurchased a total of 90.11 million ordinary shares in May and June 2019 for approximately HKD 69.69 million[127] - The Directors believe that, as the trading price of the shares was at a discount to the net asset value per share, the share repurchases will increase the net asset value per share of the company[128]