新华汇富金融(00188) - 2020 - 中期财报

Company Information This chapter outlines the basic information of Sunwah Kingsway Capital Holdings Limited, including board members, legal advisors, principal bankers, auditors, registered office, head office and principal place of business, and members of various board committees - The company's core beliefs are integrity, teamwork, respect, responsibility, perseverance, and striving for excellence[4] - The Chairman of the Board is Dr. Jonathan Choi, and the Chief Executive Officer is Mr. Michael Choi[7] - Principal bankers include Standard Chartered Bank (Hong Kong), Bank of China (Hong Kong), The Hongkong and Shanghai Banking Corporation, and Industrial and Commercial Bank of China (Asia)[7] Condensed Consolidated Income Statement The company turned from profit to loss during the reporting period, mainly due to changes in fair value of financial assets and liabilities, with a significant decrease in commission and fee income but an increase in interest income, leading to a substantial narrowing of the loss for the period - Loss for the period: HKD 13,252 thousand for the six months ended December 31, 2019, a significant narrowing from HKD 41,749 thousand in the same period of 2018[9] Condensed Consolidated Income Statement Key Data Comparison | Indicator | Six Months Ended December 31, 2019 (HKD thousands) | Six Months Ended December 31, 2018 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Commission and fee income | 29,315 | 51,897 | (22,582) | | Interest income from financial assets at amortized cost | 14,817 | 13,628 | 1,189 | | Net gain/(loss) from financial assets and liabilities at fair value through profit or loss | 8,201 | (37,971) | 46,172 | | General and administrative expenses | (58,346) | (64,266) | 5,920 | | Loss before tax | (12,278) | (39,925) | 27,647 | | Loss for the period | (13,252) | (41,749) | 28,497 | | Basic loss per share | (0.19) HK cents | (0.61) HK cents | 0.42 HK cents | Condensed Consolidated Statement of Comprehensive Income Total comprehensive expense for the period increased, primarily due to revaluation loss on land and buildings held for own use, offsetting the positive impact of a narrower loss for the period - Total comprehensive expense for the period: HKD 33,747 thousand for the six months ended December 31, 2019, an increase from HKD 30,759 thousand in the same period of 2018[12] Condensed Consolidated Statement of Comprehensive Income Key Data Comparison | Indicator | Six Months Ended December 31, 2019 (HKD thousands) | Six Months Ended December 31, 2018 (HKD thousands) | | :--- | :--- | :--- | | Loss for the period | (13,252) | (41,749) | | Revaluation (loss)/surplus on land and buildings held for own use (net of tax) | (19,657) | 10,796 | | Exchange differences arising from translation of financial statements of overseas subsidiaries | (838) | (440) | | Total comprehensive expense for the period | (33,747) | (30,759) | Condensed Consolidated Statement of Financial Position As of December 31, 2019, the company's total assets and net current assets both decreased, mainly due to a significant reduction in bank balances and cash in trust accounts, though trade receivables increased - Total assets: Decreased from HKD 1,988,465 thousand as of June 30, 2019, to HKD 1,678,036 thousand as of December 31, 2019[50] - Net current assets: Decreased from HKD 484,912 thousand as of June 30, 2019, to HKD 471,559 thousand as of December 31, 2019[14] Condensed Consolidated Statement of Financial Position Key Data Comparison | Indicator | December 31, 2019 (HKD thousands) | June 30, 2019 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Non-current assets | 595,961 | 637,084 | (41,123) | | Current assets | 1,082,075 | 1,351,381 | (269,306) | | Current liabilities | 610,516 | 866,469 | (255,953) | | Net assets | 1,031,558 | 1,082,841 | (51,283) | | Bank balances and cash - trust accounts | 351,561 | 667,609 | (316,048) | | Trade receivables, loans and other receivables | 320,324 | 287,979 | 32,345 | | Accounts payable to customers | 415,972 | 712,589 | (296,617) | Condensed Consolidated Statement of Changes in Equity During the reporting period, the company's total equity and equity attributable to owners of the Company both decreased, primarily due to the loss for the period and property revaluation loss - Total equity: Decreased from HKD 1,082,841 thousand as of July 1, 2019, to HKD 1,031,558 thousand as of December 31, 2019[16] - Equity attributable to owners of the Company: Decreased from HKD 1,082,776 thousand as of July 1, 2019, to HKD 1,031,492 thousand as of December 31, 2019[16] Condensed Consolidated Statement of Changes in Equity Major Changes | Indicator | July 1, 2019 (HKD thousands) | December 31, 2019 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Retained profits/(accumulated losses) | 319,381 | 288,592 | (30,789) | | Property revaluation reserve | 232,684 | 213,027 | (19,657) | | Exchange reserve | (1,701) | (2,539) | (838) | Condensed Consolidated Statement of Cash Flows During the reporting period, the company experienced a net decrease in cash and cash equivalents, with increased cash outflows from operating and investing activities, but a significant increase in cash inflows from financing activities, mainly due to bank loan drawdowns - Net decrease in cash and cash equivalents: HKD 40,294 thousand for the six months ended December 31, 2019, an increase from HKD 36,585 thousand in the same period of 2018[18] - Net cash used in operating activities: HKD 54,227 thousand for the six months ended December 31, 2019, an increase from HKD 44,832 thousand in the same period of 2018[18] Condensed Consolidated Statement of Cash Flows Key Data Comparison | Indicator | Six Months Ended December 31, 2019 (HKD thousands) | Six Months Ended December 31, 2018 (HKD thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (54,227) | (44,832) | | Net cash (used in)/generated from investing activities | (315) | 6,089 | | Net cash generated from financing activities | 14,248 | 2,158 | | Net decrease in cash and cash equivalents | (40,294) | (36,585) | | Cash and cash equivalents at end of period | 169,485 | 194,078 | Notes to the Condensed Consolidated Financial Statements This chapter details the basis of preparation, significant accounting policies, segment information, specific components and changes in financial accounts, financial risk management, and valuation methods, providing crucial supplementary information for understanding the financial statements - Accounting policies: Prepared under the historical cost convention, except for investment properties, land and buildings held for own use, and financial assets/liabilities at fair value through profit or loss, which are measured at revalued amounts or fair value[22] - New standards adoption: The company first adopted HKFRS 16 "Leases" and other new and revised standards during this interim period[23][24] 1 Basis of Preparation This interim condensed consolidated financial information is prepared in accordance with the disclosure requirements of Appendix 16 to the Listing Rules of the Stock Exchange of Hong Kong and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the HKICPA - Basis of preparation: Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[21] 2 Significant Accounting Policies This section outlines the significant accounting policies adopted in preparing the interim financial statements, including historical cost convention, revaluation or fair value measurement, and the adoption and impact of new and revised HKFRSs, particularly HKFRS 16 "Leases" which significantly impacted the statement of financial position Adoption of New and Revised Hong Kong Financial Reporting Standards This section details the adoption of new and revised Hong Kong Financial Reporting Standards, including HKFRS 16 "Leases," and assesses their impact on the financial statements - Standards adopted: Including HKFRS 16 "Leases", HK(IFRIC)-Int 23 "Uncertainty over Income Tax Treatments", etc[24] - Impact: Except for HKFRS 16, other new and revised standards had no significant impact on financial performance and position[25] HKFRS 16 "Leases" This section details the adoption of HKFRS 16 "Leases" using a modified retrospective approach, outlining its impact on the financial statements and the new accounting policies for right-of-use assets and lease liabilities - Adoption method: Modified retrospective approach, with the cumulative effect recognized as an adjustment to the opening balance of retained profits on July 1, 2019[28] Impact of Adopting HKFRS 16 | Indicator | Increase (HKD thousands) | | :--- | :--- | | Right-of-use assets | 4,258 | | Lease liabilities | 4,370 | | Corresponding decrease in accruals, trade payables and other payables | (112) | - New accounting policies: Right-of-use assets are measured at cost less accumulated depreciation and impairment losses; lease liabilities are recognized at the present value of lease payments to be made over the lease term[37][38] Changes in Right-of-Use Assets and Lease Liabilities During the Period | Indicator | Right-of-use assets (HKD thousands) | Lease liabilities (HKD thousands) | | :--- | :--- | :--- | | July 1, 2019 | 4,258 | 4,370 | | Depreciation expense | (766) | – | | Interest expense | – | 78 | | Payments | – | (830) | | December 31, 2019 | 3,492 | 3,618 | Amendments to HKAS 28 Long-term Interests in Associates and Joint Ventures This section explains the amendments to HKAS 28 regarding long-term interests in associates and joint ventures, requiring the application of HKFRS 9, and confirms no significant impact on the Group's financial statements - Amendment content: Long-term interests (not applying the equity method) should be accounted for under HKFRS 9, including impairment provisions[41] - Impact: The amendment had no significant impact on the Group's interim condensed consolidated financial statements[41] HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments This section addresses the interpretation of uncertain tax treatments, including whether to consider uncertain tax treatments separately and assumptions about tax authority examinations, confirming no significant impact on the Group's financial statements - Matters addressed: Involves whether an entity considers uncertain tax treatments separately, assumptions about tax authority examinations, and how to determine taxable profit, etc[42] - Impact: The interpretation had no significant impact on the Group's interim condensed consolidated financial statements[42] 3 Segment Information This section presents the Group's revenue, results, and asset analysis by operating segment (proprietary investments, property investments, brokerage and lending, corporate finance and capital markets, asset management, and others), showing the contribution and scale of each business segment Segment Revenue for the Six Months Ended December 31, 2019 | Segment | Segment Revenue (HKD thousands) | | :--- | :--- | | Proprietary investments | 3,199 | | Property investments | 1,514 | | Brokerage and lending | 24,889 | | Corporate finance and capital markets | 18,199 | | Asset management | 846 | | Others | 14,963 | | Consolidated | 63,610 | Segment Assets as of December 31, 2019 | Segment | Total Assets (HKD thousands) | | :--- | :--- | | Proprietary investments | 327,325 | | Property investments | 111,677 | | Brokerage and lending | 803,097 | | Corporate finance and capital markets | 53,747 | | Asset management | 5,241 | | Others | 376,949 | | Total Assets | 1,678,036 | - Commission and fee income recognition timing: For the six months ended December 31, 2019, revenue from services transferred at a point in time was HKD 21,828 thousand, and revenue from services transferred over time was HKD 7,487 thousand[50] 4 Loss Before Tax This section details the income and expenses included in the loss before tax, showing that the net gain from financial assets and liabilities at fair value through profit or loss significantly contributed to the narrowing of the loss, while staff costs and depreciation were major expenses - Loss before tax: HKD (12,278) thousand for the six months ended December 31, 2019, a significant narrowing from HKD (39,925) thousand in the same period of 2018[52] Major Items Affecting Loss Before Tax | Item | Six Months Ended December 31, 2019 (HKD thousands) | Six Months Ended December 31, 2018 (HKD thousands) | | :--- | :--- | :--- | | Net gain/(loss) from financial assets and liabilities at fair value through profit or loss | 8,201 | (37,971) | | Staff costs | (37,038) | (43,352) | | Depreciation | (6,131) | (5,747) | | Amortisation of right-of-use assets | (766) | – | | Total interest income | 14,817 | 13,628 | 5 Income Tax in the Condensed Consolidated Income Statement This section discloses the income tax expense for the period, primarily comprising Hong Kong profits tax and China corporate income tax, explaining the tax rates and deductions, and showing a decrease in total income tax expense - Income tax expense: HKD 974 thousand for the six months ended December 31, 2019, a decrease from HKD 1,824 thousand in the same period of 2018[54] Income Tax Components | Item | Six Months Ended December 31, 2019 (HKD thousands) | Six Months Ended December 31, 2018 (HKD thousands) | | :--- | :--- | :--- | | Current tax – Hong Kong | 844 | 1,120 | | Current tax – China | 383 | 228 | | Deferred tax | (253) | 476 | | Total income tax expense | 974 | 1,824 | - Hong Kong profits tax rate is 16.5%, and China corporate income tax rate is 25%[54] 6 Dividends The Board declared an interim dividend and confirmed the payment of final dividends for prior years, demonstrating the company's consistent dividend distribution to shareholders - Dividends declared and payable: HKD 17,536 thousand for the final dividend of 0.25 HK cents per share for the prior year (2018: HKD 20,705 thousand paid for 0.3 HK cents per share)[55] - Interim dividend: The Board declared an interim dividend of 0.2 HK cents per share (2018: 0.2 HK cents per share), totaling HKD 14,255 thousand[55] 7 Loss Per Share This section presents the calculation and results of the company's basic and diluted loss per share, reflecting the narrowing of the company's loss - Basic and diluted loss per share: (0.19) HK cents for the six months ended December 31, 2019, a significant narrowing from (0.61) HK cents in the same period of 2018[57] - Number of shares used for calculation: 7,014,469,674 shares as of December 31, 2019, and 6,901,631,102 shares as of December 31, 2018[57] 8 Property and Equipment This section discloses the revaluation loss and additions to the company's property and equipment for the period, along with the valuation basis, reflecting changes in property values - Revaluation loss: Net revaluation loss of HKD 19,657 thousand (2018: surplus of HKD 10,796 thousand) as of December 31, 2019, net of related deferred tax, has been debited to the property revaluation reserve[58] - Valuation basis: Fair value of land and buildings was assessed by an independent qualified chartered surveyor, Norton Appraisals Limited[58] - Additions for the period: Property and equipment increased by HKD 315 thousand as of December 31, 2019 (2018: HKD 112 thousand)[59] 9 Financial Assets at Fair Value Through Profit or Loss This section details the composition of the company's financial assets at fair value through profit or loss, including listed and unlisted securities, investment loans, and investment funds, showing an increase in their total amount - Total amount: HKD 280,289 thousand as of December 31, 2019, an increase from HKD 233,023 thousand as of June 30, 2019[62] Major Components of Financial Assets at Fair Value Through Profit or Loss | Item | December 31, 2019 (HKD thousands) | June 30, 2019 (HKD thousands) | | :--- | :--- | :--- | | Listed equity securities | 127,088 | 77,680 | | Listed debt securities | 63,404 | 69,006 | | Unlisted investment funds | 68,522 | 66,334 | | Unlisted investment loans | 9,690 | 8,452 | - Fair value of unlisted investment loans is determined by reference to loan statements provided by borrowers and net asset value statements provided by relevant investment funds, adjusted for discounts to reflect borrowers' credit risk[63] 10 Trade Receivables, Loans and Other Receivables This section provides a detailed disclosure of the composition, impairment losses, and aging analysis of the company's trade receivables, loans, and other receivables, showing an increase in the total amount and sufficient collateral for margin client loans - Total amount: HKD 320,324 thousand as of December 31, 2019, an increase from HKD 287,979 thousand as of June 30, 2019[66] Major Components of Trade Receivables, Loans and Other Receivables | Item | December 31, 2019 (HKD thousands) | June 30, 2019 (HKD thousands) | | :--- | :--- | :--- | | Amounts due from brokers and clearing houses | 104,347 | 93,169 | | Amounts due from margin clients | 33,541 | 44,003 | | Loans receivable | 191,268 | 141,775 | | Less: Impairment losses | (13,056) | (9,715) | - Trade receivables from margin clients are secured by securities with a total market value of approximately HKD 218 million (June 30, 2019: HKD 174 million), with the market value of securities pledged by most margin clients exceeding their outstanding loan balances[68] - Impairment provision changes: Impairment losses of HKD 6,314 thousand were recognized, and HKD 2,973 thousand of irrecoverable amounts were written off as of December 31, 2019[73] 11 Bank Balances and Cash - Trust Accounts This section explains that client monies deposited in the company's trust accounts are regulated by the Securities and Futures Ordinance, and corresponding accounts payable to clients have been recognized - Client monies: Deposited in segregated client accounts with licensed banks, regulated by the Securities and Futures (Client Money) Rules under the Securities and Futures Ordinance[75] - Related liabilities: The Group has recognized accounts payable to clients for the related client monies[75] 12 Financial Liabilities at Fair Value Through Profit or Loss This section discloses the company's financial liabilities at fair value through profit or loss, primarily arising from short-selling activities, with a significant increase in the amount - Total amount: HKD 24,486 thousand as of December 31, 2019, a significant increase from HKD 6,358 thousand as of June 30, 2019[76] - Source: The balance represents the fair value of listed equity securities arising from short-selling activities[76] 13 Net Assets Attributable to Non-Controlling Interests of Consolidated Investment Funds This section explains why net assets attributable to non-controlling interests of consolidated investment funds are classified as liabilities and highlights the uncertainty in their realization - Nature: Refers to the non-controlling interests' right to receive cash and return the net assets to the Group, thus classified as a liability[77] - Uncertainty in prediction: Its realization cannot be accurately predicted as it is influenced by the actions of non-controlling investors[77] 14 Accruals, Trade Payables and Other Payables This section lists the components of the company's accruals, trade payables, and other payables, with accounts payable to clients forming a significant portion, and shows a decrease in the total amount - Total amount: HKD 501,640 thousand as of December 31, 2019, a decrease from HKD 795,640 thousand as of June 30, 2019[78] Major Components of Accruals, Trade Payables and Other Payables | Item | December 31, 2019 (HKD thousands) | June 30, 2019 (HKD thousands) | | :--- | :--- | :--- | | Accounts payable to customers | 415,972 | 712,589 | | Other trade payables | 51,189 | 42,607 | | Other payables, accruals and other provisions | 34,474 | 40,233 | - Settlement date for accounts payable to clients is one to three days after the transaction date[79] 15 Bank Loans This section discloses the company's bank loan situation, including the amount of secured bank loans, collateral, and interest rates, confirming compliance with loan covenant terms - Secured bank loans: HKD 35,000 thousand as of December 31, 2019, an increase from HKD 20,000 thousand as of June 30, 2019[81] - Collateral: Land and buildings held for own use with a carrying amount of approximately HKD 371 million are pledged to banks as security[81] - Interest rate: Interest is calculated at HIBOR plus 1.3%[81] - Compliance: The Group did not breach any covenant terms related to utilized loan facilities at the end of the reporting period[82] 16 Commitments This section lists the company's operating lease commitments as a lessor and other investment commitments, reflecting future financial obligations - Operating lease commitments as a lessor: Total future minimum lease receivables were HKD 4,151 thousand as of December 31, 2019[83] - Other commitments: Including a commitment to invest in unlisted equity securities of HKD 8,000 thousand[84] 17 Contingent Liabilities This section describes potential legal proceedings and regulatory reviews the company may face in its ordinary course of business, and discloses an indemnity related to short-selling stock deposits, which is not expected to have a material adverse effect on the financial position - Legal risks: May face legal proceedings and regulatory reviews in the ordinary course of business, with management regularly assessing and making provisions[86] - Indemnity: The Group has signed an indemnity with Hong Kong Securities Clearing Company Limited on behalf of clients, assuming all potential claims related to shortfalls in delisted shares[86] 18 Joint Venture Agreement This section discloses the company's plan to establish a joint venture in Chongqing, China, with a partner, aiming to become a full-license securities firm, currently awaiting final approval from Chinese authorities - Joint venture plan: To establish a joint venture in Chongqing, China, with a partner, aiming to become a full-license securities firm[87] - Capital contribution: The Group will contribute RMB 330 million, representing a 22% equity interest in the joint venture[87] - Progress: Acknowledgment receipt from the China Securities Regulatory Commission has been received, awaiting final approval[87] 19 Significant Related Party and Connected Transactions This section discloses significant related party transactions between the company and key management personnel and companies controlled by directors, including remuneration, brokerage commissions, advisory and management fees, and loans to associates - Key management personnel remuneration: HKD 4,539 thousand for the six months ended December 31, 2019 (2018: HKD 4,379 thousand)[89] - Transactions with directors and family members: Earned brokerage commissions of HKD 55 thousand (2018: HKD 64 thousand)[92] - Companies controlled by directors: Received advisory and management fees of HKD 620 thousand (2018: HKD 620 thousand)[92] - Loans to associates: Provided two unsecured loans, one at an annual interest rate of 5% due in 2023, and another interest-free loan due in 2024[93] 20 Financial Instruments This section outlines the various financial risks faced by the company's operating activities, noting no changes in risk management policies during the period, and emphasizing the importance of risk monitoring - Financial risks: Credit risk, liquidity risk, equity price risk, foreign currency risk, and interest rate risk[94] - Risk management policies: No changes during this six-month period[95] 21 Fair Value Measurement of Financial Instruments This section provides detailed information on the fair value measurement of the company's financial assets and liabilities, including fair value hierarchy, valuation methods, and key input data, with specific explanations for the valuation of unlisted investments - Fair value hierarchy: Divided into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable input data), and Level 3 (unobservable input data)[97] Financial Instruments with Major Fair Value Measurements | Item | December 31, 2019 Fair Value (HKD thousands) | Fair Value Hierarchy | Valuation Method and Key Inputs | | :--- | :--- | :--- | :--- | | Listed equity securities | 127,088 | Level 1 | Quoted prices in active markets | | Listed debt securities | 63,404 | Level 1 | Quoted prices in active markets | | Unlisted investment funds | 68,522 | Level 2 | Fund transaction prices, net asset value calculated with reference to observable quoted prices of relevant investment portfolios in active markets | | Unlisted investment loans | 9,690 | Level 3 | Adjusted net asset value, credit risk adjustment of 1.48% | | Overseas unlisted equity securities | 11,398 | Level 3 | Market approach/income approach, enterprise value to EBITDA multiple of 7.18x, cost of capital 18%, no marketability discount 22% | - Reconciliation of Level 3 fair value measurements: Unrealized profit of HKD 1,272 thousand on financial assets at fair value through profit or loss was recognized during the period[102] 22 Key Sources of Estimation Uncertainty This section highlights that significant judgments, estimates, and assumptions are involved in applying accounting principles and making estimations when preparing interim financial reports, and actual results may differ from these estimates - Sources of uncertainty: Selection and application of accounting principles, estimations, and assumptions[105] - Management judgment: Based on past experience and relevant factors, actual results may differ from estimated amounts[105] Management Discussion and Analysis This chapter discusses the market environment, the company's financial performance, operational status of each business segment, future outlook, liquidity, financial resources, risk management, employee situation, and dividend policy during the reporting period, providing a comprehensive insight into the company's operations and future strategies Market During the reporting period, global markets were affected by US-China trade talks, Brexit, and social unrest in Hong Kong, leading to Hang Seng Index volatility and subdued market activity, though Alibaba's secondary listing stimulated the IPO market - Market sentiment: Adversely affected by US-China trade negotiations, Brexit uncertainties, and social unrest in Hong Kong[107] - Hang Seng Index: Closed at 28,190 points at the end of December 2019, a slight decrease from 28,543 points at the end of June 2019, but higher than 25,846 points at the end of December 2018[108] - Market turnover: Average monthly turnover for the Main Board and GEM fell to HKD 1,631 billion in the first half of FY2020, a 12% decrease from the first half of FY2019[108] - IPO market: Alibaba Group Holding Limited's secondary listing raised HKD 101 billion, stimulating the IPO market[108] Financial Summary The company's loss significantly narrowed in the first half of FY2020, primarily due to improved net gain from financial assets and liabilities at fair value through profit or loss, and a reduction in general and administrative expenses, though revaluation loss negatively impacted total comprehensive expense - Loss after tax: Recorded HKD 13 million in the first half of FY2020, a significant narrowing from HKD 42 million in the first half of FY2019[109] - Total comprehensive expense: HKD 34 million in the first half of FY2020, an increase from HKD 31 million in the first half of FY2019, mainly due to revaluation loss[109] Financial Summary Key Revenue Changes | Indicator | First Half of FY2020 (HKD thousands) | First Half of FY2019 (HKD thousands) | | :--- | :--- | :--- | | Commission and fee income from financial intermediary business | 29,000 | 52,000 | | Interest income | 17,000 | 16,000 | | Dividend and rental income | 2,000 | 3,000 | | Net gain from financial assets and liabilities at fair value through profit or loss | 8,000 | (38,000) | - General and administrative expenses: Decreased from HKD 64 million in the first half of FY2019 to HKD 58 million in the first half of FY2020, primarily due to reduced variable remuneration[110] Brokerage and Lending The brokerage and lending segment maintained stable total revenue, with increased loan financing and interest income, but faced higher impairment losses due to unfavorable economic conditions, leading management to focus on factoring business and prudent risk management - Total revenue: Remained stable at HKD 25 million for both the first half of FY2020 and FY2019[114] - Loan financing: Fixed-rate loans and factoring receivables amounted to HKD 183 million as of December 31, 2019, an increase from HKD 116 million as of December 31, 2018[114] - Interest income: Interest income from loan financing clients increased by HKD 2 million to HKD 10 million in the first half of FY2020[114] - Impairment loss: Net impairment loss of HKD 4 million was recognized in the first half of FY2020, an increase from HKD 1 million in the first half of FY2019[114] - Strategy: Management will focus more on developing factoring business and maintain a prudent risk management strategy[114] Corporate Finance and Capital Markets The corporate finance and capital markets segment experienced a decline in total revenue and reduced underwriting and placement fees, reflecting a lack of momentum in capital markets, despite completing one IPO project and providing corporate finance advisory services during the period - Total revenue: HKD 18 million in the first half of FY2020, a significant decrease from HKD 38 million in the first half of FY2019[115] - Business activities: Completed one initial public offering project and provided corporate finance advisory services to several listed companies during the period[115] - Underwriting and placement fees: Decreased from HKD 3 million in the first half of FY2019 to HKD 2 million in the first half of FY2020[115] Asset Management The asset management segment's total revenue was insignificant, but the company is actively pursuing private equity funds and high-net-worth clients, and plans to acquire a Chinese asset management company to expand its business, aiming for future revenue growth - Total revenue: Insignificant for both the first half of FY2020 and FY2019[116] - Business expansion: Actively engaging with private equity funds and high-net-worth clients to provide asset management services[116] - Acquisition plan: Signed an agreement to acquire a 65% equity interest in a Chinese asset management company for RMB 5 million, pending approval from Chinese authorities[116] Proprietary Investments The proprietary investments segment saw a decrease in total revenue, but a significant improvement in net gain from financial assets and liabilities at fair value through profit or loss, with adjustments to the investment portfolio and one investment manager adopting a long-short strategy to mitigate market risk - Total revenue: HKD 3 million in the first half of FY2020, a decrease from HKD 6 million in the first half of FY2019[118] - Trading gain: Recognized HKD 8 million in trading gain from listed and unlisted investments in the first half of FY2020, compared to a loss of HKD 38 million in the first half of FY2019[118] - Interest and dividend income: HKD 3 million in the first half of FY2020, a decrease from HKD 6 million in the first half of FY2019[118] - Investment portfolio: As of December 31, 2019, the carrying amounts of unlisted investments, listed securities, and listed debt securities were HKD 90 million, HKD 127 million, and HKD 63 million, respectively[119] - Strategy: One investment manager adopted a long-short strategy to mitigate market risk, leading to an HKD 18 million increase in short positions in listed securities[118] Property Investments The property investments segment maintained stable total revenue, with rental income providing a steady cash flow, but social unrest in Hong Kong led to vacancies in some properties, affecting rental income, and the company holds property investments in Hong Kong, China, and Japan - Total revenue: Remained stable at HKD 2 million for both the first half of FY2020 and FY2019[120] - Rental income: Social unrest in Hong Kong led to several months of vacancy for a shop in Kwun Tong, resulting in reduced rental income[120] - Investment portfolio: Owns a shop and a car park in Hong Kong, an office property in China, and investments in two associates holding properties in Japan[120] Outlook The company's outlook is affected by the COVID-19 outbreak, anticipating economic disruption, but management is confident in the Group's development after the crisis, leveraging past experience in financial crises and emphasizing prudent management policies - Major challenge: The outbreak of the COVID-19 in China and its global spread, causing severe losses to the retail and hospitality sectors and disrupting economic activities[121] - Management confidence: With experience in handling financial crises over the past two decades, management is confident in the Group's ability to thrive again after the crisis[121] - Management policy: The Group has consistently adopted prudent management policies and maintained a very low capital gearing ratio[121] Liquidity and Financial Resources The company possesses ample liquidity and a low capital gearing ratio, primarily relying on internal resources for working capital, supplemented by some secured bank borrowings, indicating a robust financial position - Total assets and liquidity: Total assets of HKD 1.678 billion at the end of December 2019, with approximately 64% being current assets[123] - Net current assets: HKD 472 million, accounting for approximately 46% of net assets[123] - Cash and cash equivalents: HKD 169 million, primarily denominated in HKD[123] - Capital gearing ratio: Approximately 3%[123] - Contingent liabilities: No other significant contingent liabilities apart from the indemnity signed with Hong Kong Securities Clearing Company Limited[123] Foreign Exchange Risk The company's major assets and liabilities are denominated in HKD, and RMB assets are not currently hedged, but management will closely monitor the situation and take hedging measures as appropriate to address potential exchange rate fluctuation risks - Asset currency: Primarily located in Hong Kong and China, with most monetary assets and liabilities denominated in HKD[124] - RMB assets: Operates factoring business and purchases properties in China, currently deems it unnecessary to hedge RMB-denominated assets[124] - Risk monitoring: Management will closely monitor the situation and take appropriate hedging measures if significant adverse changes occur[124] Risk Management The company has established risk management policies and procedures, regularly reviews and implements internal control measures to effectively address all major risks arising from industry trends, market competition, securities price fluctuations, and regulatory changes - Risk management policies: Policies and procedures have been established and are regularly reviewed by management to ensure all major risks are properly monitored[127] - Major risks: Industry trends (investments, brokerage, corporate finance and capital markets), market competition, decline in securities prices, and introduction of new laws and rules[125] - Internal controls: Legal and compliance department, finance department, and other control committees conduct regular reviews to assist management and departments in complying with policies and procedures[127] Employees The company's employee count decreased, with remuneration and bonuses determined by performance, and comprehensive onboarding and internal training are provided to support employee development and compliance requirements - Employee count: 97 full-time employees as of December 31, 2019 (June 30, 2019: 108 employees)[128] - Remuneration policy: Remuneration and bonuses are determined by performance and reviewed annually based on employee's full-year performance assessment and reference to departmental and Group-wide results[128] - Training: Provides comprehensive induction programs and internal training courses to assist professional staff in meeting continuous professional training requirements[128] Interim Dividend The Board declared an interim dividend of 0.2 HK cents per ordinary share, to be distributed on a specified date, as a return to shareholders - Interim dividend: 0.2 HK cents per ordinary share (2018: 0.2 HK cents per share)[129] - Payment date: Tuesday, March 24, 2020[129] - Record date: Close of business on Friday, March 6, 2020[129] Closure of Register of Members The company will temporarily close its share register to determine eligibility for the interim dividend, with a clear deadline for share transfers - Closure dates: From Wednesday, March 4, 2020, to Friday, March 6, 2020 (both days inclusive)[130] - Transfer deadline: All completed transfer forms, together with the relevant share certificates, must be lodged with the share registrar by 4:30 p.m. on Tuesday, March 3, 2020[130] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or Any Associated Corporation This section discloses the long positions of directors and the chief executive in the company's ordinary shares, highlighting Dr. Jonathan Choi and his associates as significant shareholders, and confirms no other undisclosed interests - Dr. Jonathan Choi: Directly and deemed to own a total of 51.18% of the total issued shares[132] - Mr. Michael Choi: Directly and corporately owns a total of 5.34% of the total issued shares[132] - No other interests: Except as disclosed, no other interests or short positions in shares, underlying shares, or debentures were held by directors, the chief executive, or their spouses or minor children[133] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company This section lists the substantial shareholders holding 5% or more of the company's issued share capital and their shareholdings, indicating Dr. Jonathan Choi and his associated parties as the primary controlling shareholders Substantial Shareholders' Shareholding | Shareholder Name | Number of Ordinary Shares of the Company (Deemed Interest) | Percentage of Total Issued Shares | | :--- | :--- | :--- | | Dr. Jonathan Choi | 2,138,735,220 | 51.18% | | World Developments Limited | 1,857,017,425 | 26.47% | | Innovation Assets Limited | 1,857,017,425 | 26.47% | | Sunwah International Limited | 1,857,017,425 | 26.47% | | Sun Wah Capital Limited | 1,857,017,425 | 30.49% | | Mr. Michael Choi | 93,905,931 | 5.34% | | Guangzhou Huiyin Development Investment Partnership (Limited Partnership) | 356,400,000 | 5.08% | - Overlapping interests: Interests of World Developments Limited, Innovation Assets Limited, SIL, Sun Wah Capital Limited, and Dr. Jonathan Choi overlap[137] Corporate Governance Code The company applied and complied with the principles and code provisions of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules of the Stock Exchange of Hong Kong during the reporting period, demonstrating good corporate governance practices - Compliance: The company has applied and complied with the principles and code provisions of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules[139] Share Option Scheme The company adopted a share option scheme on November 10, 2010, to reward and attract talent, but no share options were granted, exercised, cancelled, or lapsed during this period - Adoption date: November 10, 2010[141] - Purpose: To reward or acknowledge participants' contributions to the Group, assist in recruiting and retaining excellent employees, and attract valuable talent[141] - Current period situation: No share options were granted, exercised, cancelled, or lapsed under the share option scheme during this period[142] Purchase, Sale or Redemption of Shares During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any shares, indicating no capital structure adjustments through share buybacks or issuances in this period - Current period situation: Neither the company nor any of its subsidiaries purchased, sold, or redeemed any shares of the company during the six months ended December 31, 2019[143] Directors' Securities Transactions The company has adopted the Model Code as set out in Appendix 10 to the Listing Rules, and all directors confirmed compliance with the code during the review period, ensuring the legality of directors' securities transactions - Compliance with code: The company has adopted the Model Code as set out in Appendix 10 to the Listing Rules, and all directors confirmed compliance with the code during the review period[144] Changes in Directors' Information This section discloses changes in directors' information, specifically Dr. Lam Ka-lai's resignation as an independent non-executive director from two companies, reflecting adjustments to the board composition - Dr. Lam Ka-lai: Resigned as an independent non-executive director of Hsin Chong Group Holdings Limited and Glorious Sun Enterprises Limited[145] Audit Committee The Audit Committee has reviewed accounting principles and financial reporting matters with management and is responsible for reviewing financial controls, risk management, and internal control systems to enhance the Group's risk response capabilities - Responsibilities: Reviewing the accounting principles and practices adopted by the Group, discussing financial reporting matters, and reviewing the interim report and unaudited condensed consolidated financial statements[146] - Additional responsibilities: Responsible for reviewing the Group's financial controls, risk management, and internal control systems, and has commenced performing these duties[146] Independent Review Report Independent auditor Ernst & Young reviewed the interim financial information and concluded that it was prepared in all material respects in accordance with HKAS 34, providing independent assurance on the reliability of the financial reporting - Scope of review: Conducted in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[149] - Conclusion: Nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34[150] - Auditor: Ernst & Young[151] List of Licensed Subsidiaries and Affiliates This section lists Sunwah Kingsway Capital Holdings Limited's licensed subsidiaries, associates, and overseas offices, showcasing its extensive licensing and business presence in financial services, including securities, financing, asset management, and lending in Hong Kong, and investment advisory offices in China - Licensed subsidiaries: Including Sunwah Kingsway Financial Services Limited (holding multiple SFC licenses in Hong Kong and China B-share lead underwriter/broker licenses), Sunwah Kingsway Finance Limited, Sunwah Kingsway Asset Management Limited, and Sunwah Kingsway Credit Limited[153] - Associates and overseas offices: Investment advisory companies in Beijing, Shanghai, and Shenzhen, China[153]