中国农产品交易(00149) - 2021 - 中期财报

Corporate Information Corporate Information Details This section details China Agri-Products Exchange Limited's corporate information as of September 30, 2020, covering governance, key personnel, and listing particulars - The Board of Directors comprises three executive directors (including Chairman and CEO Mr. Chan Chun Hong) and three independent non-executive directors[7] - Details on the composition and chairpersons of the Audit Committee, Remuneration Committee, and Nomination Committee[7] - The company's shares and 1% notes due 2024 are listed on The Stock Exchange of Hong Kong Limited, with stock code 0149 and note code 5755[9] Interim Dividend Interim Dividend Declaration The Board resolved not to declare an interim dividend for the six months ended September 30, 2020, consistent with the prior year - The Board resolved not to declare an interim dividend for the six months ended September 30, 2020[10][12] - No interim dividend was declared for the same period in 2019[10][12] Management Discussion and Analysis Summary of Financial Results The Group experienced significant declines in turnover and gross profit for the six months ended September 30, 2020, resulting in a loss attributable to owners, mainly due to reduced property sales Key Financial Performance (For the six months ended September 30) | Indicator | 2020 (HK$ Million) | 2019 (HK$ Million) | Change (%) | | :--- | :--- | :--- | :--- | | Turnover | 292 | 462 | -37% | | Gross Profit | 151 | 219 | -31% | | Segment Results | 93 | 134 | -31% | | General and Administrative Expenses | 79 | 92 | -14% | | Selling Expenses | 15 | 39 | -61.5% | | Finance Costs | 82 | 94 | -12.7% | | Net Fair Value Gain on Investment Properties | 39 | 60 | -35% | | Net Fair Value Loss on Derivative Financial Instruments | 0.308 | -0.069 (Net Gain) | N/A | | (Loss)/Profit Attributable to Owners of the Company | (23) | 8 | N/A | - Turnover decreased by 37% to HK$292 million, primarily due to reduced property sales recognition[11][13] - Gross profit and segment results both decreased by approximately 31%, mainly due to slower property sales activities impacted by the COVID-19 pandemic[16][19] - General and administrative expenses decreased to HK$79 million, primarily benefiting from cost control policies[17][20] - Loss attributable to owners of the Company was approximately HK$23 million, compared to a profit of HK$8 million in the prior period, mainly due to reduced property sales recognition and lower net fair value gain on investment properties[23][25] Review of Operations The Group's core business of managing and selling properties in China's agricultural product markets saw most operations recover satisfactorily despite initial COVID-19 impacts, alongside developing procurement and limited e-commerce - The Group's principal business involves property management and sales for agricultural product trading markets in China[26][27] - The COVID-19 pandemic impacted property sales and the operational performance of agricultural by-product trading markets[26][27] - Wuhan Baishazhou Market's operations were initially restricted by the pandemic but fully recovered, achieving satisfactory results with primary income from property rentals[30][31][33][36] - Huangshi, Suizhou, Luoyang, Puyang, Kaifeng, Yulin, Qinzhou, and Xuzhou markets all resumed normal operations after the pandemic's impact, showing satisfactory or steady performance[34][35][37][38][39][41][42][43][44][46][47][48][49][50][51] - Huai'an Market is involved in a legal dispute with a joint venture partner, with details disclosed in Note 19 to the financial statements[52][53] - Panjin Market primarily focuses on river crab trading, with stable performance expected[55][56] - The food and agricultural by-product procurement business added community delivery services during the pandemic, subsequently achieving stable performance[57][61] - The Group has made limited investments in e-commerce development, carefully controlling costs and exploring cooperation opportunities with other partners[58][62] Risk Management The Group manages cybersecurity and climate risks, while COVID-19's temporary impact on market trading has largely recovered due to effective containment and business resilience - The Group has appointed professionals to monitor and assess potential cyber risks, establishing policies and procedures for internet usage, physical system power maintenance, and regular updates of network security systems and firewalls[59][63] - The Group faces moderate environmental risks, as severe and permanent climate change in China could adversely affect agricultural production and the Group's turnover[60] - The COVID-19 pandemic led to slower market trading activities and reduced commission income, but due to the nature of the business and rapid containment, the impact was temporary, with market trading volumes and revenues gradually returning to normal levels[65][67] Liquidity and Financial Resources As of September 30, 2020, the Group improved its liquidity and financial position with increased cash, total assets, and net assets, alongside reduced capital commitments and contingent liabilities Overview of Liquidity and Financial Resources | Indicator | 2020-09-30 (HK$ Million) | 2020-03-31 (HK$ Million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Cash and Cash Equivalents | 449 | 340 | +32.1% | | Total Assets | 5,508 | 5,139 | +7.2% | | Net Assets | 1,562 | 1,485 | +5.2% | | Gearing Ratio | 0.9 | 1.0 | -10% | | Total Interest-Bearing Debt | 1,829 | 1,811 | +1.0% | | Interest-Bearing Debt to Total Assets Ratio | 33% | 35% | -2% | | Capital Commitments (Unprovided) | 377 | 398 | -5.3% | | Contingent Liabilities | 0.2 | 0.6 | -66.7% | - The Group holds no outstanding foreign exchange contracts, interest rate or currency swaps, or other financial derivative instruments[77][78] - The Group's revenue, operating costs, and bank deposits are primarily denominated in RMB and HKD, exposing it to foreign exchange risk from RMB to HKD fluctuations, with no current hedging policy[77][78] Debt Profiles and Financial Planning As of September 30, 2020, the Group's total interest-bearing debt was HK$1.829 billion, with a financial policy focused on diversified funding and strategic financing options Analysis of Interest-Bearing Debt (As of September 30) | Debt Type | 2020 (HK$ Million) | 2020 Approx. Effective Interest Rate (per annum) | 2019 (HK$ Million) | 2019 Approx. Effective Interest Rate (per annum) | | :--- | :--- | :--- | :--- | :--- | | Bond Issues | 186 | 12% | 177 | 12% | | Convertible Notes | 252 | 12% | 247 | 12% | | Borrowings from Financial Institutions | 415 | 6% | 411 | 6% | | Borrowings from Non-Financial Institutions | 600 | 10% | 600 | 10% | | Acceptance Bills | 376 | 5% | 376 | 5% | | Total | 1,829 | | 1,811 | | - Outstanding principal of convertible notes is HK$264.8 million, due in October 2021, with no conversions into shares during the period[70][71] - Outstanding principal of listed notes due 2024 is HK$290 million[72][75] - The Group's financial policy includes diversifying funding sources, regularly reviewing its financial position, and considering various financing options such as share placements, rights issues, borrowings, and bond issuances[84][85] Material Valuation Method of Investment Properties and Review of Audit Committee Investment properties are fair valued by independent valuers using income capitalization and market comparables, with property inventories using direct comparison, all reviewed by the Audit Committee and Board - Investment properties are stated at fair value, valued by independent professional valuers based on net rental income capitalization and market comparable transaction prices[86][87] - Property inventories are valued using the direct comparison method, referencing actual sales prices and asking prices of comparable properties[86][87] - The Audit Committee and the Board have reviewed the material valuation methods for investment properties[88] Significant Investments Held, Material Acquisitions and Disposals of Subsidiaries, and Future Plans for Material Investments or Capital Assets As of September 30, 2020, the Group held no significant investments or conducted material acquisitions/disposals of subsidiaries, nor does it have specific future plans for such activities - During the period, the Group held no significant investments apart from subsidiaries, nor were there any material acquisitions or disposals of subsidiaries[89][90] - As of September 30, 2020, the Group had no specific plans for significant investments, capital assets, or acquisitions or disposals of subsidiaries[89][90] Risk Factors Relating to Our Industry and Business Operations The Group faces various operational risks in its China agricultural markets, including currency fluctuations, financing, competition, and regulatory changes, with ongoing monitoring and mitigation strategies - The Group faces RMB to HKD exchange rate fluctuation risk, regularly monitoring and preparing hedging mechanisms[92][93] - Capital-intensive agricultural product trading markets face financing difficulties, with the Group regularly reviewing liquidity levels and preparing for future funding needs[92][93] - The Group needs to maintain or enhance its competitive position and market occupancy rates through monitoring competitor activities and launching marketing campaigns[92][93] - Obtaining necessary licenses and permits for developing, constructing, operating, and acquiring agricultural product trading markets, the Group employs local professionals to ensure compliance[92][93] - Risk of regulatory changes related to agricultural product trading markets, the Group maintains a flat organizational structure for rapid response[92][93] - A resurgence of the COVID-19 pandemic would adversely affect market operations, with markets continuously implementing contingency health and hygiene measures[92][93] Litigation The Group is engaged in ongoing litigation regarding the validity of the Baishazhou Agricultural equity acquisition, where despite a court ruling, MOFCOM confirmed the Company's legal ownership - Civil litigation initiated by Ms. Wang Xiu Qun and Wuhan Tian Jiu Industrial and Commercial Development Co., Ltd. (plaintiffs) against the Company (defendant) and Wuhan Baishazhou Agricultural By-product Grand Market Co., Ltd. (third party)[94][97] - The Supreme People's Court ruled the disputed agreement invalid on January 13, 2015, but did not rule on the acquisition itself or MOFCOM's approval[96][98] - MOFCOM decided on May 19, 2016, that its November 2007 approval for the disputed agreement would not be revoked and remained valid[101][102] - The Supreme People's Court rejected Ms. Wang and Tian Jiu's retrial application on December 31, 2019, confirming MOFCOM's approval would not be revoked, and the Company remains the legal and beneficial owner of Baishazhou Agricultural[109][110] - Ms. Wang and Tian Jiu previously applied to freeze the Company's 70% interest in Baishazhou Agricultural and filed a counterclaim, which was dismissed by the Hubei court[112][113][115] - The Company's PRC legal counsel believes the Beijing judgment will not directly lead to an immediate change in Baishazhou Agricultural's ownership, and the Company remains the legal owner[116][119] - Further details regarding the litigation cases are provided in Note 19 to the condensed consolidated financial statements in this interim report[117][120] Employees and Remuneration Policies As of September 30, 2020, the Group employed 1,193 staff, primarily in China, with remuneration policies and a share option scheme designed to attract and retain talent based on performance and market terms - As of September 30, 2020, the Group had a total of 1,193 employees, with approximately 98% located in China[118][121] - Remuneration policies are regularly reviewed by the Remuneration Committee and determined with reference to market terms, company performance, and individual qualifications and performance[118][121] - The Company has adopted a share option scheme aimed at incentivizing eligible individuals who contribute to the Group[118][121] Prospects The Group plans to expand its national agricultural market network in China using an asset-light strategy, leveraging its industry position and government support for agricultural development despite global economic slowdowns - The US-China trade disputes had a temporary impact on the Group's business operations, which are primarily focused on the domestic market[122][123] - The Group will continue to leverage its industry-leading position, replicable business model, robust management systems, and information technology infrastructure to build a national network of agricultural product trading markets[122][123] - The COVID-19 pandemic caused short-term adverse effects on market operations, but is expected to return to normal levels after the pandemic subsides[124][127] - The Chinese central government prioritizes agricultural development, issuing "Central Document No. 1 of 2020" to promote investment and infrastructure construction in agricultural product markets[125][127] - The Group will adopt an "asset-light" strategy, collaborating with various partners to expand its operations in China, seizing new business opportunities and delivering long-term benefits to shareholders[126][127] Corporate Governance and Other Information Corporate Governance Practices The Company largely complied with the Corporate Governance Code, with the combined Chairman and CEO roles justified by Mr. Chan's experience and the Board's balanced composition - The Company complied with most provisions of the Corporate Governance Code, but deviated from Code Provision A.2.1 (roles of Chairman and Chief Executive Officer should be separate)[128][129][130] - Mr. Chan Chun Hong holds both the Chairman and Chief Executive Officer roles, with the Board believing his extensive experience and the Board's balanced composition ensure a balance of power[129][130] Changes in Information of Directors Director information changes during the period primarily involve the delisting of Easy One Financial Group Limited on October 21, 2020, where Mr. Chan Chun Hong served as an executive director - Easy One Financial Group Limited, where Mr. Chan Chun Hong served as an executive director, was delisted on October 21, 2020, as its privatization became effective on October 16, 2020[132][134] Purchase, Sale or Redemption of Listed Securities of the Company Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the period - During the period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[133][135] Model Code for Securities Transactions by Directors The Company adopted the Model Code for Securities Transactions by Directors, with all directors confirming compliance during the period - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers[136][139] - All Directors confirmed compliance with the Model Code during the period[136][139] Audit Committee The Audit Committee, composed of independent non-executive directors and chaired by Mr. Wong Bing Yuen, reviewed the unaudited interim results, accounting principles, and financial matters with management and auditors - The Audit Committee comprises three independent non-executive directors: Mr. Wong Bing Yuen (Chairman), Mr. Ng Yat Cheung, and Mr. Lau King Lung[137][140] - The Committee has reviewed and discussed the unaudited condensed consolidated interim results, accounting principles and practices, and financial-related matters for the period with management and external auditors[137][140] Disclosure of Interests As of September 30, 2020, no directors held interests in Company securities, while major shareholders, including Easy One Financial Group and Wang On Group, held significant long positions - As of September 30, 2020, no directors or chief executives held any interests and/or short positions in the shares, underlying shares, or debentures of the Company or any of its associated corporations[138][141] Major Shareholders' Long Positions in the Company's Shares and Underlying Shares (As of September 30, 2020) | Shareholder Name | Capacity | Total Number of Shares and Underlying Shares | Approx. Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Easy One Financial Group Limited | Interest of controlled corporation | 2,265,200,062 | 22.75% | | Goal Success Investments Limited | Beneficial owner | 5,312,395,685 | 53.37% | | Biomore Investments Limited | Interest of controlled corporation | 5,312,395,685 | 53.37% | | Total Smart Investments Limited | Interest of controlled corporation | 5,312,395,685 | 53.37% | | Wai Yuen Tong Medicine Holdings Limited | Interest of controlled corporation | 5,312,395,685 | 53.37% | | Wang On Group Limited | Interest of controlled corporation | 5,312,395,685 | 53.37% | | Mr. Tang Ching Ho | Interest of controlled corporation | 5,312,395,685 | 53.37% | | Ms. Yau Yuk Yin | Family interest | 5,312,395,685 | 53.37% | - Mr. Tang Ching Ho and his associates indirectly hold 53.37% of the Company's shares and underlying shares through their control of Wang On Group Limited[148][149] Share Option Scheme The Company adopted a share option scheme on May 3, 2012, to incentivize eligible individuals, with no options granted as of September 30, 2020 - The Company adopted a share option scheme on May 3, 2012, aimed at incentivizing eligible individuals who contribute to the Group[150][151] - No share options have been granted under the scheme since its adoption up to September 30, 2020[150][151] Appreciation Chairman and CEO Mr. Chan Chun Hong expressed gratitude to all stakeholders for their continuous support and contributions to the Group - Mr. Chan Chun Hong, Chairman and Chief Executive Officer, expressed gratitude to clients, business partners, shareholders, Board members, and all staff for their support and contributions[152][153][154] Independent Review Report Introduction Independent auditors reviewed the interim financial information for the six months ended September 30, 2020, prepared under Listing Rules and HKAS 34, to provide a conclusion - The auditors have reviewed the interim financial information for the six months ended September 30, 2020[156][157] - The interim financial information was prepared in accordance with the Main Board Listing Rules and Hong Kong Accounting Standard 34 "Interim Financial Reporting"[156][157] - Directors are responsible for the preparation and presentation of the interim financial information, and the auditors' responsibility is to conclude based on their review[156][157] Scope of Review The review, conducted under HK Standard on Review Engagements 2410, involved inquiries and analytical procedures, but its scope is less than an audit, so no audit opinion is expressed - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity"[158][159] - The scope of a review is substantially less than an audit conducted in accordance with Hong Kong Standards on Auditing, and therefore no audit opinion is expressed[158][159] Conclusion Based on the review, auditors found no material issues indicating the interim financial information was not prepared in accordance with HKAS 34 - Nothing has come to the auditors' attention that causes them to believe the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34[161] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Profit or Loss and Other Comprehensive Income Summary For the six months ended September 30, 2020, the Group reported a 37% decrease in turnover and a HK$22.6 million loss attributable to owners, despite significant foreign exchange gains in other comprehensive income Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended September 30) | Indicator | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Turnover | 292,413 | 462,473 | | Gross Profit | 150,633 | 219,259 | | Operating Profit before Fair Value Changes and Impairment | 67,191 | 97,983 | | Net Fair Value Gain on Investment Properties | 39,473 | 60,242 | | Fair Value Changes of Derivative Financial Instruments | (308) | 69 | | Write-down of Property Inventories | (1,689) | – | | Operating Profit | 104,667 | 158,294 | | Finance Costs | (82,487) | (93,800) | | Profit Before Taxation | 22,180 | 64,494 | | Income Tax | (40,772) | (49,673) | | (Loss)/Profit for the Period | (18,592) | 14,821 | | Exchange Differences Arising from Translation of Foreign Operations | 130,655 | (4,214) | | Total Comprehensive Income for the Period | 112,063 | 10,607 | | (Loss)/Profit Attributable to Owners of the Company | (22,567) | 8,194 | | (Loss)/Profit Attributable to Non-Controlling Interests | 3,975 | 6,627 | | Basic (Loss)/Earnings Per Share (HK Cents) | (0.23) | 0.08 | | Diluted (Loss)/Earnings Per Share (HK Cents) | (0.23) | 0.08 | - Profit/(loss) for the period changed from a profit of HK$14,821 thousand in 2019 to a loss of HK$18,592 thousand in 2020[165] - Profit/(loss) attributable to owners of the Company changed from a profit of HK$8,194 thousand in 2019 to a loss of HK$22,567 thousand in 2020[167] - Exchange differences arising from translation of foreign operations changed from a loss of HK$4,214 thousand in 2019 to a gain of HK$130,655 thousand in 2020, significantly boosting total comprehensive income[167] Condensed Consolidated Statement of Financial Position Financial Position Summary As of September 30, 2020, the Group's total assets grew to HK$5.508 billion, driven by investment properties and property inventories, with an increase in net assets despite a decrease in net current assets Condensed Consolidated Statement of Financial Position (As of September 30) | Indicator | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Non-Current Assets | | | | Property, Plant and Equipment | 52,776 | 45,759 | | Right-of-Use Assets | 21,306 | 18,802 | | Investment Properties | 3,000,246 | 2,839,091 | | Current Assets | | | | Property Inventories | 1,650,538 | 1,611,442 | | Trade and Other Receivables | 291,422 | 233,817 | | Bank and Cash Balances | 448,796 | 339,599 | | Current Liabilities | | | | Deposits and Other Payables | 772,592 | 683,044 | | Contract Liabilities | 560,232 | 464,983 | | Bank and Other Borrowings (within one year) | 270,809 | 231,820 | | Acceptance Bills | 376,000 | 376,000 | | Non-Current Liabilities | | | | Bonds | 186,080 | 176,998 | | Bank and Other Borrowings (after one year) | 744,193 | 779,669 | | Convertible Bonds | 252,315 | 246,894 | | Deferred Tax Liabilities | 519,752 | 483,521 | | Net Assets | 1,562,325 | 1,485,365 | | Total Equity Attributable to Owners of the Company | 1,185,327 | 1,091,640 | | Non-Controlling Interests | 376,998 | 393,725 | - Investment properties increased from HK$2,839,091 thousand as of March 31, 2020, to HK$3,000,246 thousand as of September 30, 2020[168] - Bank and cash balances increased from HK$339,599 thousand as of March 31, 2020, to HK$448,796 thousand as of September 30, 2020[168] - Total current liabilities increased from HK$1,945,573 thousand as of March 31, 2020, to HK$2,221,054 thousand as of September 30, 2020[168] - Net assets increased from HK$1,485,365 thousand as of March 31, 2020, to HK$1,562,325 thousand as of September 30, 2020[170] Condensed Consolidated Statement of Changes in Equity Changes in Equity Summary Total equity attributable to owners increased to HK$1,185,327 thousand, primarily due to a significant foreign exchange gain, despite a period loss Condensed Consolidated Statement of Changes in Equity (For the six months ended September 30) | Indicator | 2020-09-30 (HK$ Thousand) | 2020-04-01 (HK$ Thousand) | | :--- | :--- | :--- | | Share Capital | 99,531 | 99,531 | | Share Premium | 3,923,147 | 3,923,147 | | Capital Redemption Reserve | 945 | 945 | | Contributed Surplus | 2,215,409 | 2,215,409 | | Shareholders' Contribution | 664 | 664 | | Other Reserves | (15,021) | (15,021) | | Exchange Reserve | (206,780) | (323,034) | | Convertible Bond Reserve | 79,547 | 79,547 | | Statutory Reserve | 15,580 | 15,094 | | Accumulated Losses | (4,927,695) | (4,904,642) | | Total Equity Attributable to Owners of the Company | 1,185,327 | 1,091,640 | | Non-Controlling Interests | 376,998 | 393,725 | | Total Equity | 1,562,325 | 1,485,365 | - Total equity attributable to owners of the Company increased from HK$1,091,640 thousand as of April 1, 2020, to HK$1,185,327 thousand as of September 30, 2020[172][173] - Exchange differences (arising from translation of foreign operations) generated a gain of HK$116,254 thousand during the period, significantly impacting the change in equity[173] - Loss attributable to owners of the Company for the period was HK$22,567 thousand[173] Condensed Consolidated Statement of Cash Flows Cash Flows Summary For the six months ended September 30, 2020, the Group generated HK$202.7 million net cash from operations, leading to an increase in cash and cash equivalents to HK$448.8 million at period-end Condensed Consolidated Statement of Cash Flows (For the six months ended September 30) | Indicator | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 202,737 | 137,116 | | Net Cash Used in Investing Activities | (13,290) | (2,309) | | Net Cash Used in Financing Activities | (105,582) | (228,889) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 83,865 | (94,082) | | Cash and Cash Equivalents at Beginning of Period | 339,599 | 488,415 | | Effect of Foreign Currency Exchange Rate Changes | 25,332 | 3,107 | | Cash and Cash Equivalents at End of Period | 448,796 | 397,440 | - Net cash generated from operating activities increased from HK$137,116 thousand in 2019 to HK$202,737 thousand in 2020[177] - Net cash used in financing activities significantly decreased from HK$228,889 thousand in 2019 to HK$105,582 thousand in 2020, mainly due to reduced repayment of bank borrowings and no bond redemptions[177] - Net increase in cash and cash equivalents was HK$83,865 thousand, compared to a net decrease of HK$94,082 thousand in the prior period[178] Notes to the Condensed Consolidated Financial Statements 1. Basis of Preparation Interim financial statements are prepared under Listing Rules and HKAS 34, using consistent accounting policies, with the financial year-end changed from December 31 to March 31 - The interim financial statements are prepared in accordance with Appendix 16 of the Listing Rules and Hong Kong Accounting Standard 34 "Interim Financial Reporting"[181][183] - The financial year-end has been changed from December 31 to March 31, with the current period covering April 1 to September 30, 2020[184] 2. Application of Amendments to HKFRSs The Group first applied various HKFRS amendments, including those on materiality and business definitions, which had no material impact on financial position or performance - The Group has for the first time applied several amended Hong Kong Financial Reporting Standards, including revisions concerning the definition of materiality, definition of a business, and interest rate benchmark reform[187][188][189] - These amendments had no material impact on the Group's financial position and performance for the current and prior periods[189][190] 3. Turnover The Group's turnover, primarily from property rentals, services, and sales, decreased by 37% to HK$292 million due to significantly reduced property sales revenue Turnover Analysis (For the six months ended September 30) | Revenue Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue from Property Support Services | 48,919 | 49,004 | | Commission Income from Operating Agricultural Product Trading Markets | 39,286 | 36,879 | | Revenue from Property Sales | 109,008 | 266,222 | | Food and Agricultural By-product Procurement | 10,637 | 14,602 | | Property Rental Income | 84,563 | 95,766 | | Total Turnover | 292,413 | 462,473 | - Revenue from property sales significantly decreased from HK$266 million in 2019 to HK$109 million in 2020[194] - Commission income from agricultural product trading markets slightly increased, while property rental income and food and agricultural by-product procurement income decreased[194] 4. Other Revenue and Other Net Income For the six months ended September 30, 2020, total other revenue and net income slightly increased to HK$10.6 million, primarily driven by a significant rise in government subsidies Other Revenue and Other Net Income (For the six months ended September 30) | Revenue Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Bank and Other Interest Income | 3,777 | 3,648 | | Government Subsidies | 5,701 | 350 | | Others | 1,114 | 5,985 | | Total | 10,592 | 9,983 | - Government subsidies significantly increased, primarily to compensate the Group for expenses incurred from investments in agricultural product trading markets in China[197][198] 5. Segment Reporting The Group's two segments, agricultural product markets and property sales, both saw reduced external sales and segment results, with property sales declining significantly, while the market segment's assets and liabilities grew Segment Revenue and Results (For the six months ended September 30) | Indicator | Operating Agricultural Product Trading Markets (2020 HK$ Thousand) | Property Sales (2020 HK$ Thousand) | Total (2020 HK$ Thousand) | Operating Agricultural Product Trading Markets (2019 HK$ Thousand) | Property Sales (2019 HK$ Thousand) | Total (2019 HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | External Sales | 183,405 | 109,008 | 292,413 | 196,251 | 266,222 | 462,473 | | Segment Results | 72,132 | 20,455 | 92,587 | 90,733 | 43,716 | 134,449 | Segment Assets and Liabilities (As of September 30) | Indicator | Operating Agricultural Product Trading Markets (2020 HK$ Thousand) | Property Sales (2020 HK$ Thousand) | Consolidated (2020 HK$ Thousand) | Operating Agricultural Product Trading Markets (2020-03-31 HK$ Thousand) | Property Sales (2020-03-31 HK$ Thousand) | Consolidated (2020-03-31 HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Segment Assets | 3,511,834 | 1,650,538 | 5,162,372 | 3,334,415 | 1,611,442 | 4,945,857 | | Segment Liabilities | 1,631,180 | 560,137 | 2,191,317 | 1,448,318 | 475,800 | 1,924,118 | - External sales for the property sales segment significantly decreased from HK$266 million in 2019 to HK$109 million in 2020[203] - Both segment assets and liabilities for the operating agricultural product trading markets segment increased[207] 6. Finance Costs For the six months ended September 30, 2020, total finance costs decreased to HK$82.5 million, mainly due to lower bond interest, despite a significant increase in interest on short-term bank and other borrowings Finance Costs Analysis (For the six months ended September 30) | Finance Cost Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Interest on Bank and Other Borrowings Repayable within Five Years | 41,128 | 13,984 | | Interest on Bank and Other Borrowings Repayable after Five Years | 2,523 | 30 | | Interest on Acceptance Bills | 11,750 | 11,750 | | Interest on Convertible Bonds | 15,373 | 14,443 | | Interest on Bonds | 10,525 | 53,070 | | Interest on Lease Liabilities | 1,188 | 523 | | Total | 82,487 | 93,800 | - Interest on bonds significantly decreased from HK$53,070 thousand in 2019 to HK$10,525 thousand in 2020[210] - Interest on bank and other borrowings repayable within five years increased from HK$13,984 thousand in 2019 to HK$41,128 thousand in 2020[210] 7. Profit Before Taxation Profit before taxation significantly decreased to HK$22.18 million, primarily due to increased depreciation of right-of-use assets and a fair value loss on derivative financial instruments Profit Before Taxation Items (For the six months ended September 30) | Item | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Depreciation and Amortization | 5,889 | 9,732 | | Depreciation of Right-of-Use Assets | 2,001 | 989 | | Fair Value Changes of Derivative Financial Instruments | 308 | (69) | | Short-Term Lease Expenses | 146 | 436 | | Expected Credit Loss (Reversal)/Provision for Trade and Other Receivables and Loans Receivable | (269) | 13 | | Loss on Disposal of Property, Plant and Equipment | 147 | 163 | - Depreciation and amortization decreased from HK$9,732 thousand in 2019 to HK$5,889 thousand in 2020[211] - Depreciation of right-of-use assets increased from HK$989 thousand in 2019 to HK$2,001 thousand in 2020[211] - Fair value changes of derivative financial instruments shifted from a gain of HK$69 thousand in 2019 to a loss of HK$308 thousand in 2020[211] 8. Income Tax Income tax decreased to HK$40.77 million, mainly comprising PRC enterprise income tax and deferred tax, with no Hong Kong profits tax provision due to no assessable profits Income Tax Analysis (For the six months ended September 30) | Tax Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | PRC Enterprise Income Tax | 25,033 | 49,346 | | Deferred Tax | 15,739 | 327 | | Total | 40,772 | 49,673 | - PRC enterprise income tax decreased from HK$49,346 thousand in 2019 to HK$25,033 thousand in 2020[213] - Deferred tax significantly increased from HK$327 thousand in 2019 to HK$15,739 thousand in 2020[213] - No provision was made for Hong Kong profits tax as the Company and its subsidiaries had no assessable profits in both periods[214][215] 9. Dividends The Directors do not recommend any interim dividend for the review period ended September 30, 2020, consistent with the prior year - The Directors do not recommend the payment of any interim dividend for the review period[216][217] - No interim dividend was paid for the six months ended June 30, 2019, either[216][217] 10. (Loss)/Earnings Per Share Basic and diluted loss per share were HK 0.23 cents, a shift from prior year's earnings, primarily due to a HK$22.6 million loss attributable to owners, with no dilution effect from convertible bonds (Loss)/Earnings Per Share (For the six months ended September 30) | Indicator | 2020 (HK Cents) | 2019 (HK Cents) | | :--- | :--- | :--- | | Basic (Loss)/Earnings Per Share | (0.23) | 0.08 | | Diluted (Loss)/Earnings Per Share | (0.23) | 0.08 | - Basic (loss)/earnings per share changed from earnings of HK 0.08 cents in 2019 to a loss of HK 0.23 cents in 2020[167][218] - Diluted (loss)/earnings per share was the same as basic (loss)/earnings per share due to the anti-dilutive effect of unconverted convertible bonds[218] 11. Movement in Property, Plant and Equipment During the review period, the Group acquired property, plant, and equipment at a cost of approximately HK$11.1 million, an increase from the prior year - During the review period, the Group acquired property, plant, and equipment at a cost of approximately HK$11,126,000[219] - The cost of property, plant, and equipment acquired in the prior period was approximately HK$4,778,000[219] 12. Investment Properties Investment properties saw additions and exchange adjustments totaling HK$126 million, with HK$1.367 billion pledged as collateral, and were fair valued by valuers with no transfers to property inventories - During the review period, the cost additions and exchange adjustments for the Group's investment properties were approximately HK$6,068,000 and HK$120,092,000, respectively[220] - As of September 30, 2020, investment properties were fair valued by valuers[220] - Approximately HK$1,367,186,000 of investment properties were pledged to banks as collateral for the Group's borrowings[220] - No investment properties were transferred to property inventories during the period, compared to approximately HK$373,580,000 transferred in the prior period[220] - Investment properties are classified as Level 3 under the fair value hierarchy[220] 13. Trade and Other Receivables Net trade and other receivables increased to HK$291.4 million, driven by growth in trade receivables, land acquisition deposits, and prepayments Trade and Other Receivables Analysis (As of September 30) | Item | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Total Trade Receivables | 10,419 | 3,587 | | Land Acquisition Deposits | 55,240 | 53,019 | | Other Deposits | 7,325 | 9,866 | | Prepayments | 147,108 | 101,399 | | Other Receivables | 72,419 | 67,074 | | Less: Provision for Expected Credit Losses | (1,089) | (1,128) | | Trade and Other Receivables, Net | 291,422 | 233,817 | - Total trade receivables increased from HK$3,587 thousand as of March 31, 2020, to HK$10,419 thousand as of September 30, 2020[222] - Prepayments increased from HK$101,399 thousand as of March 31, 2020, to HK$147,108 thousand as of September 30, 2020[222] 14. Deposits and Other Payables Total deposits and other payables increased to HK$772.6 million, driven by increases in accrued expenses, construction payables, interest payables, and other payables Deposits and Other Payables Analysis (As of September 30) | Item | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Accrued Expenses | 27,239 | 21,726 | | Construction Payables | 52,671 | 48,038 | | Deposits Received | 96,558 | 99,902 | | Interest Payables | 311,315 | 298,598 | | Other Tax Payables | 27,432 | 18,463 | | Other Payables | 257,377 | 196,317 | | Total | 772,592 | 683,044 | - Interest payables increased from HK$298,598 thousand as of March 31, 2020, to HK$311,315 thousand as of September 30, 2020[224] - Other payables increased from HK$196,317 thousand as of March 31, 2020, to HK$257,377 thousand as of September 30, 2020[224] 15. Bank and Other Borrowings Total bank and other borrowings reached HK$1.015 billion, with secured bank borrowings and unsecured other borrowings at interest rates ranging from 3.0% to 10.0%, collateralized by investment properties and other assets Bank and Other Borrowings Analysis (As of September 30) | Borrowing Category | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Secured Bank Borrowings | 396,798 | 394,017 | | Unsecured Bank Borrowings | 18,204 | 17,472 | | Unsecured Other Borrowings | 600,000 | 600,000 | | Total | 1,015,002 | 1,011,489 | Bank and Other Borrowings Repayment Period Analysis (As of September 30) | Repayment Period | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Within One Year | 270,809 | 231,820 | | More Than One Year but Not Exceeding Two Years | 42,933 | 61,733 | | More Than Two Years but Not Exceeding Five Years | 646,648 | 658,968 | | More Than Five Years | 54,612 | 58,968 | - Secured bank borrowings include floating-rate and fixed-rate borrowings, with floating rates ranging from 3.0% to 7.1% and fixed rates from 3.3% to 7.4%[230] - Unsecured other borrowings primarily from Profit Gain Investments Limited and Kai Yu Investments Limited, with a fixed annual interest rate of 10%[231][232] - Secured bank borrowings are collateralized by investment properties, pledged bank deposits, and property inventories with a carrying value of approximately HK$1,713,619,000[235][236] 16. Share Capital As of September 30, 2020, the Company's authorized share capital was HK$300 million, with issued and fully paid share capital of HK$99,531 thousand, remaining unchanged from March 31, 2020 Share Capital Analysis (As of September 30) | Share Capital Category | 2020-09-30 Number of Shares | 2020-09-30 Par Value (HK$ Thousand) | 2020-03-31 Number of Shares | 2020-03-31 Par Value (HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | | Authorized Ordinary Shares (HK$0.01 each) | 30,000,000,000 | 300,000 | 30,000,000,000 | 300,000 | | Issued and Fully Paid Ordinary Shares | 9,953,067,822 | 99,531 | 9,953,067,822 | 99,531 | - Both authorized and issued and fully paid share capital remained unchanged across both reporting periods[238] 17. Fair Value Measurement Financial assets and liabilities at amortized cost approximate fair value, with investment properties and derivative financial instruments classified as Level 3, valued using unobservable inputs like a 12.84% discount rate - Fair values of financial assets and financial liabilities are determined by reference to market quotations or discounted cash flow analysis[241] - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[241][242] Fair Value Measurement of Financial Assets (As of September 30) | Item | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Equity Securities Listed in Hong Kong (Level 1) | 65 | 72 | | Derivative Financial Instruments (Level 3) | 14 | 322 | - Investment properties and derivative financial instruments are classified as Level 3 fair value measurements[220][243] - As of September 30, 2020, the discount rate used to calculate the fair value of derivative financial instruments was 12.84%, with a higher discount rate resulting in a lower fair value[248][249] 18. Commitments Unfulfilled capital commitments, primarily for construction costs, decreased to approximately HK$376.8 million as of September 30, 2020 Capital Commitments (As of September 30) | Item | 2020-09-30 (HK$ Thousand) | 2020-03-31 (HK$ Thousand) | | :--- | :--- | :--- | | Capital Expenditure Authorized and Contracted for Construction Costs | 376,844 | 397,717 | - Capital commitments are primarily related to construction costs and have decreased[252] 19. Litigation This note details the Group's ongoing legal disputes, primarily concerning the Baishazhou Agricultural equity acquisition, where MOFCOM affirmed the Company's ownership despite a court ruling, alongside other related lawsuits - Ms. Wang Xiu Qun and Wuhan Tian Jiu Industrial and Commercial Development Co., Ltd. issued a writ against the Company in China, alleging the share transfer agreement was forged and seeking a court order to declare the disputed agreement invalid[253][257][258] - The Supreme People's Court ruled the disputed agreement invalid on January 13, 2015, but did not rule on the acquisition itself or MOFCOM's approval[260] - MOFCOM decided on May 19, 2016, that its November 2007 approval for the disputed agreement would not be revoked and remained valid[272] - The Supreme People's Court rejected Ms. Wang and Tian Jiu's retrial application on December 31, 2019, confirming MOFCOM's approval would not be revoked, and the Company remains the legal and beneficial owner of Baishazhou Agricultural[276][277][281] - The Company issued a writ against Ms. Wang and Tian Jiu in Hong Kong, seeking damages, with the trial conducted in February, March, and June 2019, and judgment currently awaited[269] - Ms. Wang and Tian Jiu previously applied for a freezing order on the Company's 70% interest in Baishazhou Agricultural and filed a counterclaim, which was dismissed by the Hubei court[287] - Jiangsu Shenglong Zhengtai Trade and Commercial Development Co., Ltd. issued a writ against Huai'an Mingyuan Agricultural Development Company Ltd and Mr. Wang Yong Gang, seeking to terminate a cooperation agreement and claim compensation, with the case remaining ongoing[289] (A) Writ issued in the PRC by Ms. Wang Xiu Qun and Wuhan Tian Jiu Industrial and Commercial Development Co., Ltd. against the Company ("PRC Action No.1") - Ms. Wang and Tian Jiu alleged that the share transfer agreement ("Disputed Agreement") for the Company's acquisition of 90% equity in Baishazhou Agricultural was forged, seeking a court order to declare the Disputed Agreement void ab initio and terminated[253][257][258] - The Hubei court initially dismissed Ms. Wang and Tian Jiu's claims, but the Supreme People's Court overturned the Hubei court's judgment on January 13, 2015, declaring the Disputed Agreement invalid[259][260] - The Company's PRC legal counsel believes the Beijing judgment will not directly lead to an immediate change in Baishazhou Agricultural's ownership, and the Company remains the legal owner until MOFCOM's approval and the Hubei Administration for Industry and Commerce's equity transfer registration are revoked[260] - If Baishazhou Agricultural ceases to be a subsidiary, it could result in a reduction of Group revenue by approximately HK$80 million, profit attributable to owners by approximately HK$43 million, assets by approximately HK$1.901 billion, liabilities by approximately HK$813 million, and total equity attributable to owners by approximately HK$1.088 billion[264] (B) Writ issued in the PRC by the Company and Baisazhou Agricultural against Ms. Wang, Tian Jiu and others - The Company and Baishazhou Agricultural filed a lawsuit with the Hubei court on January 28, 2011, demanding Ms. Wang and Tian Jiu return illegally occupied assets and operating profits of Baishazhou Agricultural[267] - The Company withdrew its claims in October 2014, with Baishazhou Agricultural remaining the plaintiff[267] - The lawsuit was previously suspended due to the outcome of Ms. Wang and Tian Jiu's litigation against MOFCOM, then resumed in July 2020; Baishazhou Agricultural withdrew its claims in July 2020, and the case is now closed[267][268] (C) Writ issued by the Company against Ms. Wang and Tian Jiu in Hong Kong - The Company issued a writ of summons against Ms. Wang and Tian Jiu in the Hong Kong Court of First Instance in October 2011, seeking damages for their breach of several provisions of the sale and purchase agreement[269] - Ms. Wang and Tian Jiu have undertaken not to endorse, assign, transfer, or negotiate two instruments (allegedly promissory notes under the sale and purchase agreement), nor to enforce payment until a final court judgment[269] - The trial was conducted over 23 days in February, March, and June 2019, with both parties awaiting the court's judgment[269] (D) Legal proceedings against MOFCOM by Ms. Wang and Tian Jiu - Ms. Wang and Tian Jiu initiated two separate legal proceedings against the Ministry of Commerce of the PRC ("MOFCOM") in May 2015, alleging MOFCOM failed to perform its duties in processing their applications to revoke the approval certificate and reply for the Disputed Agreement[272] - The Beijing court ruled on January 8, 2016, requiring MOFCOM to re-process the application within 30 days[272] - MOFCOM decided on May 19, 2016, to confirm that its November 2007 approval for the Disputed Agreement would not be revoked and remained valid[272] - Ms. Wang and Tian Jiu subsequently requested the Beijing court to revoke MOFCOM's decision, but the Beijing court dismissed their application on March 31, 2017[273] - The Beijing Higher People's Court dismissed Ms. Wang and Tian Jiu's appeal on December 20, 2018, upholding the original judgment of the Beijing court[273] - The Supreme People's Court rejected Ms. Wang and Tian Jiu's retrial application on December 31, 2019, confirming that MOFCOM's November 2007 approval for the Disputed Agreement would not be revoked and remained valid, which is a final judgment[276][277][281] (E) Writ issued by the Company against Ms. Wang and Tian Jiu in Hubei - The Company issued a writ to the Hubei court in May 2015, seeking an order for Ms. Wang and Tian Jiu to assist Baishazhou Agricultural in fulfilling its contractual obligation under the sale and purchase agreement to report and file with MOFCOM for approval[278][282] - Ms. Wang and Tian Jiu raised a jurisdictional objection to the Hubei court, which was dismissed, and their subsequent appeal to the Supreme People's Court was also rejected[283][284][285] - Ms. Wang and Tian Jiu again applied in May 2017 to freeze the Company's 70% interest in Baishazhou Agricultural, and the Hubei court granted the freezing order[287] - Ms. Wang and Tian Jiu applied in May 2017 to add a counterclaim, seeking to recover the Company's 90% interest in Baishazhou Agricultural[287] - The Company withdrew its claims in April 2019, and the Hubei court dismissed Ms. Wang and Tian Jiu's counterclaim on December 23, 2019[287] - Ms. Wang and Tian Jiu appealed the December 23 judgment in January 2020, requesting the Supreme People's Court to revoke the judgment, declare the sale and purchase agreement invalid, and return the Company's 90% interest in Baishazhou Agricultural; the case remains ongoing as of the reporting date[287][288] (F) Writ issued in the PRC by Jiangsu Shenglong Zhengtai Trade and Commercial Development Co., Ltd against Huai'an Mingyuan Agricultural Development Company Ltd and Mr. Wang Yong Gang - Jiangsu Shenglong Zhengtai Trade and Commercial Development Co., Ltd. issued a writ in November 2018 against Huai'an Mingyuan Agricultural Development Company Ltd and Mr. Wang Yong Gang, seeking to terminate the business cooperation agreement and supplementary business cooperation agreement, and demanding total compensation of approximately RMB37.82 million[289] - Huai'an Mingyuan filed a counterclaim in December 2018, seeking a court order to declare Jiangsu Shenglong's notice of termination of cooperative operation invalid and demanding Jiangsu Shenglong bear legal fees[289] - As of the reporting date, the case remains ongoing[289] 20. Material Related Party Transactions The Group conducted material related party transactions, including reduced key management remuneration and various interest and purchase transactions with Easy One Financial Group, Wai Yuen Tong, and Wang On Group Key Management Personnel Remuneration (For the six months ended September 30) | Remuneration Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Short-Term Employee Benefits | 4,162 | 6,652 | | Post-Employment Benefits | 71 | 53 | | Total | 4,233 | 6,705 | Material Related Party Transactions (For the six months ended September 30) | Related Party and Transaction Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Easy One Financial Group Limited and its Subsidiaries – Interest on Convertible Bonds | 5,980 | 5,618 | | Wai Yuen Tong Medicine Holdings Limited and its Subsidiaries – Interest on Other Borrowings | 26,322 | – | | Wai Yuen Tong Medicine Holdings Limited and its Subsidiaries – Interest on Bonds | – | 37,455 | | Wai Yuen Tong Medicine Holdings Limited and its Subsidiaries – Purchase of Goods | 803 | 2,948 | | Wang On Group Limited and its Subsidiaries – Management Fees | 480 | 480 | | Wang On Group Limited and its Subsidiaries – Interest on Other Borrowings | 3,760 | – | | Wang On Group Limited and its Subsidiaries – Interest on Bonds | – | 5,365 | - Key management personnel remuneration decreased from HK$6,705 thousand in 2019 to HK$4,233 thousand in 2020[293] - Wai Yuen Tong Medicine Holdings Limited and its subsidiaries incurred HK$26,322 thousand in other borrowing interest in 2020, compared to HK$37,455 thousand in bond interest in 2019[295] 21. Approval of Interim Financial Statements The Board of Directors approved and authorized the interim financial statements for issue on November 24, 2020 - The interim financial statements were approved and authorized for issue by the Board of Directors on November 24, 2020[296]