新华汇富金融(00188) - 2021 - 中期财报

Company Information Company Information Overview This section outlines the basic information of Sunwah Kingsway Financial Holdings Limited, including board members, legal advisors, auditors, registered and principal offices, and principal bankers - The company's Chairman is Dr. Jonathan Choi Koon Shum, and the Chief Executive Officer is Mr. Choi Koon Ming[8] - The auditor is Ernst & Young[8] - The Hong Kong share registrar is Hong Kong Central Share Registrar Limited[8] Condensed Consolidated Statement of Profit or Loss Financial Performance Overview During the reporting period, the company turned a loss of HKD 13,252 thousand in the prior year to a profit of HKD 1,597 thousand, primarily due to a significant increase in net gains from financial assets and liabilities at fair value through profit or loss Profit / (Loss) for the Period | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Profit / (Loss) for the period | 1,597 | (13,252) | Turned loss to profit | | Attributable to owners of the Company | 1,959 | (13,253) | Turned loss to profit | | Non-controlling interests | (362) | 1 | Decreased | Major Revenue and Gains Changes | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Total revenue | 41,730 | 48,206 | Decreased 13.3% | | Commission and fee income | 28,054 | 29,315 | Decreased 4.3% | | Interest income from financial assets at amortized cost | 10,438 | 14,817 | Decreased 29.5% | | Net gains from financial assets and liabilities at fair value through profit or loss | 27,169 | 8,201 | Increased 231.3% | Major Expense Changes | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | General and administrative expenses | (51,166) | (58,346) | Decreased 12.3% | | Net impairment losses on financial instruments | (11,248) | (6,229) | Increased 80.6% | - Basic and diluted earnings / (loss) per share changed from (1.9) HK cents in 2019 to 0.3 HK cents in 2020[10] Condensed Consolidated Statement of Comprehensive Income Comprehensive Income Overview During the reporting period, the company's total comprehensive expense significantly decreased, mainly due to a lower revaluation deficit on land and buildings held for own use and a reversal from loss to gain in exchange differences arising from translation of financial statements of overseas subsidiaries Total Comprehensive Expense for the Period | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Total comprehensive expense for the period | (15,110) | (33,747) | Decreased 55.2% | | Attributable to owners of the Company | (14,748) | (33,748) | Decreased 56.3% | - Revaluation deficit on land and buildings held for own use (net of income tax effect) decreased from (HKD 19,657 thousand) in 2019 to (HKD 20,390 thousand) in 2020[13] - Exchange differences arising from translation of financial statements of overseas subsidiaries changed from a (HKD 838 thousand) loss in 2019 to a HKD 3,683 thousand gain in 2020[13] Condensed Consolidated Statement of Financial Position Assets and Liabilities Overview As of December 31, 2020, the company's total assets and total equity slightly decreased, but net current assets increased, with reductions in property and equipment and loans receivable, and a significant decrease in trade and other payables Assets and Liabilities Overview | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Total assets | 1,882,285 | 1,996,113 | Decreased 5.7% | | Net assets | 961,274 | 981,236 | Decreased 2.0% | | Net current assets | 462,099 | 457,067 | Increased 1.1% | Non-Current Assets Changes | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Property and equipment | 337,281 | 367,765 | Decreased 8.3% | | Loans receivable | 12,410 | 14,989 | Decreased 17.2% | Current Liabilities Changes | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Accruals, trade and other payables | 741,831 | 883,615 | Decreased 16.0% | | Bank loans | 110,000 | 60,000 | Increased 83.3% | Condensed Consolidated Statement of Changes in Equity Equity Changes Overview During the reporting period, the company's total equity slightly decreased, mainly affected by property revaluation deficit and dividends payable, while retained profits slightly reduced, and non-controlling interests turned from negative to positive Total Equity Changes | Indicator | December 31, 2020 (HKD '000) | July 1, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Total equity | 961,274 | 981,236 | Decreased 2.0% | | Equity attributable to owners of the Company | 959,563 | 981,439 | Decreased 2.2% | | Non-controlling interests | 1,711 | (203) | Turned from negative to positive | - Retained profits decreased from HKD 246,656 thousand on July 1, 2020, to HKD 241,487 thousand on December 31, 2020, primarily due to dividends payable[18] - Property revaluation reserve decreased by HKD 20,390 thousand due to revaluation deficit[18] - Exchange reserve increased by HKD 3,683 thousand due to exchange differences arising from translation of financial statements of overseas subsidiaries[18] Condensed Consolidated Statement of Cash Flows Cash Flow Overview During the reporting period, net cash used in operating activities increased, cash outflow from investing activities remained stable, while net cash inflow from financing activities significantly grew, mainly due to the drawdown of bank loans Cash Flow Overview | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (69,090) | (54,227) | Outflow increased 27.4% | | Net cash used in investing activities | (131) | (315) | Outflow decreased 58.5% | | Net cash generated from financing activities | 51,494 | 14,248 | Inflow increased 261.4% | | Net decrease in cash and cash equivalents | (17,727) | (40,294) | Decrease narrowed | - In operating activities, bank balances and cash - trust accounts decreased by HKD 72,448 thousand, compared to a decrease of HKD 316,070 thousand in the prior period[21] - In financing activities, proceeds from bank loans drawn significantly increased from HKD 50,000 thousand in 2019 to HKD 3,111,973 thousand in 2020[21] - Repayment of bank loans significantly increased from HKD 35,000 thousand in 2019 to HKD 3,061,973 thousand in 2020[21] Notes to the Condensed Consolidated Financial Statements Basis of Preparation The condensed consolidated financial statements are prepared in accordance with the applicable disclosure provisions of 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 - Prepared in accordance with the Listing Rules of the Stock Exchange of Hong Kong and Hong Kong Accounting Standard 34 issued by the HKICPA[23] Significant Accounting Policies The financial statements are primarily prepared under the historical cost convention, with certain financial assets/liabilities measured at revalued amounts or fair value; the current period saw the first-time adoption of the "Conceptual Framework for Financial Reporting 2018" and revised HKFRSs, but with no significant impact on financial position and performance - Preparation convention: historical cost convention, with certain assets/liabilities measured at revalued amounts or fair value[24] - First-time adoption of the "Conceptual Framework for Financial Reporting 2018" and revised HKFRS 3, 9, 39, 7, 1, and 8 in the current period[25][26] - New standards have no significant impact on the Group's financial position and performance[27][29][30] Revenue The Group's main revenue sources include commission and fee income, interest income from financial assets, interest income from debt securities, dividend income, and rental income; commission and fee income slightly decreased this period, but brokerage income from stocks, options, funds, futures, and commodity futures significantly increased - The Group is primarily engaged in securities investment, securities brokerage and margin financing, provision of financial advisory services, money lending, other securities-related financial services, and investment property rental[33] Revenue Sources | Revenue Type | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Commission and fee income | 28,054 | 29,315 | Decreased 4.3% | | Interest income from financial assets at amortized cost | 10,438 | 14,817 | Decreased 29.5% | | Interest income from debt securities | 869 | 1,944 | Decreased 55.3% | | Dividend income | 881 | 768 | Increased 14.7% | | Rental income | 1,488 | 1,362 | Increased 9.2% | Commission and Fee Income Details | Commission and Fee Type | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Brokerage for stocks, options, funds, futures and commodity futures | 14,595 | 8,928 | Increased 63.5% | | Corporate finance | 9,327 | 15,747 | Decreased 40.8% | Geographical Market Revenue (2020) | Region | Revenue (HKD '000) | | :--- | :--- | | Hong Kong | 26,849 | | China | 1 | | Other countries | 1,204 | Net Gains or Losses from Financial Assets and Liabilities at Fair Value Through Profit or Loss During the reporting period, net gains from financial assets and liabilities at fair value through profit or loss significantly increased, primarily driven by substantial gains from listed equity securities and unlisted investment loans Net Gains Composition | Category | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Listed equity securities | 20,407 | 6,262 | Increased 225.9% | | Listed debt securities | 445 | (1,935) | Turned loss to gain | | Unlisted investment loans | 5,282 | 1,238 | Increased 326.6% | | Unlisted investment funds | 3,430 | 2,188 | Increased 56.8% | | Total net gains | 27,169 | 8,201 | Increased 231.3% | Segment Information The Group's business is divided into six segments: proprietary investments, property investment, brokerage and lending, corporate finance and capital markets, asset management, and others; the proprietary investments segment showed significant performance improvement, while brokerage and lending, and corporate finance and capital markets segments recorded losses Segment Results (2020) | Segment | Segment Revenue (HKD '000) | Segment Results (HKD '000) | | :--- | :--- | :--- | | Proprietary investments | 1,768 | 18,476 | | Property investment | 1,812 | 341 | | Brokerage and lending | 27,547 | (6,637) | | Corporate finance and capital markets | 10,812 | (6,101) | | Asset management | 455 | (1,309) | | Others | 11,842 | (45) | - Net gains from financial assets and liabilities at fair value through profit or loss for the proprietary investments segment amounted to HKD 27,138 thousand, which was the main contributor to its performance[42] - The brokerage and lending segment's commission and fee income was HKD 16,632 thousand, and interest income from financial assets at amortized cost was HKD 10,080 thousand[42] Total Assets by Segment (December 31, 2020) | Segment | Total Assets (HKD '000) | | :--- | :--- | | Brokerage and lending | 1,082,670 | | Proprietary investments | 332,273 | | Others | 319,354 | Profit / (Loss) Before Tax During the reporting period, the company's profit before tax was HKD 3,545 thousand, a significant improvement from a loss of HKD 12,278 thousand in the prior year, mainly due to exchange gains and reduced staff costs and depreciation Profit / (Loss) Before Tax | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Profit / (Loss) before tax | 3,545 | (12,278) | Turned loss to profit | Major Cost and Income Items | Item | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Staff costs | (28,262) | (37,038) | Decreased 23.7% | | Depreciation | (6,419) | (6,897) | Decreased 6.9% | | Exchange gains / (losses) (net) | 3,325 | (679) | Turned loss to gain | Income Tax in Condensed Consolidated Statement of Profit or Loss During the reporting period, income tax expense increased, mainly due to higher current period tax, but some Hong Kong subsidiaries were exempt from profits tax due to offsetting prior year tax losses Income Tax Expense | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Income tax expense | 1,948 | 974 | Increased 100.0% | - Hong Kong profits tax rate is 16.5%, and China corporate income tax rate is 25%[48] - Some Hong Kong subsidiaries were not subject to Hong Kong profits tax on an estimated assessable profit of HKD 13.8 million due to offsetting prior year tax losses[48] Dividends The Board declared an interim dividend of 1.5 HK cents per share, lower than 2 HK cents per share in the prior year Dividends Declared and Paid | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Final dividend for prior year of 1 HK cent per share (after share consolidation) declared and payable during the period | 7,128 | 17,536 | Decreased 59.3% | - After the interim reporting date, the directors declared an interim dividend of 1.5 HK cents per share (2019: 2 HK cents), totaling HKD 10,792 thousand (2019: HKD 14,255 thousand)[50] Earnings / (Loss) Per Share Basic and diluted earnings per share attributable to owners of the Company turned from a loss of 1.9 HK cents in the prior year to a profit of 0.3 HK cents, mainly due to the period's profit turning positive Basic and Diluted Earnings / (Loss) Per Share | Indicator | 2020 (HK cents) | 2019 (HK cents) | Change | | :--- | :--- | :--- | :--- | | Basic and diluted earnings / (loss) per share | 0.3 | (1.9) | Turned loss to profit | - Profit / (loss) for the period attributable to owners of the Company used for calculation was HKD 1,959 thousand (2019: (HKD 13,253) thousand)[51] - The weighted average number of ordinary shares outstanding used for calculating basic and diluted loss per share has been retrospectively adjusted after the share consolidation[51] Property and Equipment During the reporting period, the net revaluation deficit on property and equipment was HKD 20,390 thousand, which has been deducted from the property revaluation reserve; property and equipment increased by HKD 131 thousand at period-end - Net revaluation deficit: HKD 20,390 thousand (2019: HKD 19,657 thousand), deducted from property revaluation reserve[53] - Fair value of land and buildings was determined by an independent qualified chartered surveyor, Winnie Lee & Partners Valuation Advisory Limited[53] - Property and equipment increased by HKD 131 thousand at period-end (2019: HKD 315 thousand)[54] Financial Assets at Fair Value Through Profit or Loss As of December 31, 2020, total financial assets at fair value through profit or loss increased to HKD 288,632 thousand, primarily comprising listed equity securities and unlisted investment funds Financial Assets Composition | Category | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Listed equity securities | 145,882 | 128,175 | Increased 13.8% | | Listed debt securities | 35,006 | 48,371 | Decreased 27.6% | | Unlisted investment funds | 74,432 | 65,068 | Increased 14.4% | | Total | 288,632 | 268,826 | Increased 7.4% | - Listed debt securities are scheduled to mature sequentially from 2021 to 2027[57] - Fair values of unlisted equity securities and unlisted investment loans are determined by independent valuers or fund managers based on net asset value statements[57][58][59] Trade and Other Receivables, Loans and Other Receivables As of December 31, 2020, total trade and other receivables, loans and other receivables amounted to HKD 397,949 thousand, a decrease from mid-year; impairment provisions significantly increased, mainly due to higher expected credit loss provisions for margin clients and loans receivable Total Trade and Other Receivables and Loans | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Trade and other receivables, loans and other receivables (net of impairment provision) | 397,949 | 411,692 | Decreased 3.3% | | Total impairment provision | 35,254 | 24,267 | Increased 45.3% | - Impairment losses of HKD 5,280 thousand were recognized for margin clients' receivables, and HKD 4,420 thousand for loans receivable[67] - Margin clients' receivables are secured by approximately HKD 47 million in securities collateral[62] - Loans receivable are primarily secured by personal/corporate guarantees and trade receivables, with contracts maturing within one year[65] Bank Balances and Cash - Trust Accounts The Group maintains segregated client trust accounts with licensed banks for client funds arising from brokerage activities, which are restricted and regulated by the Securities and Futures (Client Money) Rules - Client funds are deposited in segregated client accounts with licensed banks[69] - Subject to restrictions and regulations under the Securities and Futures (Client Money) Rules (Cap. 571I of the Laws of Hong Kong)[69] Financial Liabilities at Fair Value Through Profit or Loss As of December 31, 2020, financial liabilities at fair value through profit or loss amounted to HKD 9,355 thousand, primarily from the fair value of listed equity securities from short selling activities Financial Liabilities | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Financial liabilities at fair value through profit or loss arising from short selling activities | 9,355 | 8,267 | Increased 13.2% | - Liabilities represent the fair value of listed equity securities from short selling activities[70] Net Assets Attributable to Non-Controlling Interests Holders of Consolidated Investment Funds Net assets attributable to non-controlling interests holders of consolidated investment funds (MEC Asian Fund) are classified as liabilities because they are redeemable for cash and returnable at net asset value Net Assets Attributable to Non-Controlling Interests Holders | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Net assets attributable to non-controlling interests holders of consolidated investment funds | 10,200 | 9,164 | Increased 11.3% | - These net assets are presented as liabilities because non-controlling interests holders can redeem for cash and return net assets[71] Accruals, Trade and Other Payables As of December 31, 2020, total accruals, trade and other payables amounted to HKD 741,831 thousand, a decrease from mid-year, primarily due to a reduction in amounts due to clients Trade and Other Payables | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Amounts due to clients | 703,516 | 837,413 | Decreased 16.0% | | Total | 741,831 | 883,615 | Decreased 16.0% | - Settlement dates for amounts due to brokers, clearing houses, and clients are one to two business days after the trade date[72] Bank Loans As of December 31, 2020, secured bank loans increased to HKD 110,000 thousand, used to finance investment portfolios and new share subscriptions for brokerage clients Secured Bank Loans | Indicator | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Secured bank loans | 110,000 | 60,000 | Increased 83.3% | - Loans are secured by land and buildings held for own use with a fair value of approximately HKD 320 million[74] - Interest is calculated at HIBOR plus 1.4%[74] - The Group regularly monitors and complies with covenant terms such as loan-to-value ratios[75] Share Capital As of December 31, 2020, the amount of issued and fully paid share capital remained unchanged, but the number of shares decreased due to a share consolidation Share Capital Information | Indicator | December 31, 2020 (Number of Shares) | June 30, 2020 (Number of Shares) | Change | | :--- | :--- | :--- | :--- | | Issued and fully paid share capital (end of period) | 712,761,496 | 7,127,614,962 | Decreased 90% | | Amount (HKD '000) | 71,276 | 71,276 | No change | - A share consolidation was completed on November 26, 2020, where every 10 existing shares were consolidated into 1 consolidated share[76] - The authorized share capital amount remained unchanged at HKD 1,000,000,000, but the par value per share changed from HKD 0.01 to HKD 0.10[76] Commitments The Group has operating lease commitments as a lessor with minimum lease receivables of HKD 2,826 thousand within one year; additionally, capital commitments for unlisted equity securities amount to HKD 17,891 thousand, most of which were paid in January 2021 Operating Lease Commitments (as Lessor) | Term | December 31, 2020 (HKD '000) | June 30, 2020 (HKD '000) | | :--- | :--- | :--- | | Within one year | 2,826 | 1,903 | | One to two years | 800 | 450 | | Total | 3,626 | 2,353 | - Capital commitments for unlisted equity securities amounted to HKD 17,891 thousand (June 30, 2020: HKD 12,161 thousand)[79] - Of this, HKD 13,730 thousand was paid in January 2021[79] Contingent Liabilities The Group faces potential legal proceedings and regulatory reviews in its ordinary course of business, which management regularly assesses and provisions for, with no significant adverse impact expected this period; the Group previously signed guarantees for clients' short selling stock deposits - Faces potential legal proceedings, regulatory reviews, and enforcement actions[80] - Management regularly assesses and makes provisions, currently expecting no significant adverse impact[80] - Previously signed guarantees for clients' short selling stock deposits held in HKSCC accounts, agreeing to bear potential claims[80] Joint Venture Agreement The Group has entered into an agreement with a joint venture partner to establish a full-license securities company in Chongqing, China, with the Group contributing RMB 330 million for a 22% equity stake; additional information is currently being provided to the China Securities Regulatory Commission for approval - Plans to establish a full-license securities company in Chongqing, China[83] - The Group will contribute RMB 330 million for a 22% equity stake in the joint venture company[83] - Shareholder approval has been obtained, and a confirmation receipt from the CSRC has been received; additional information is currently being provided for approval[83] Significant Related Party and Connected Transactions During the reporting period, the Group engaged in several transactions with related parties, including key management personnel compensation, brokerage commissions, advisory and management fees, and amounts due to clients Key Management Personnel Compensation | Indicator | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Directors' fees | 1,100 | 1,200 | Decreased 8.3% | | Salaries, commissions and other allowances | 2,922 | 3,252 | Decreased 10.2% | | Total | 4,109 | 4,539 | Decreased 9.5% | Other Related Party Transactions | Transaction Type | 2020 (HKD '000) | 2019 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Brokerage commissions earned from trading of securities, options, futures and commodity futures (directors and their family members/companies) | 113 | 55 | Increased 105.5% | | Advisory and management fees received (companies controlled by directors) | 620 | 620 | No change | | Amounts due to clients (directors and their family members/companies) | 31,663 | 37,939 | Decreased 16.5% | - Provided shareholder loans to an associate for the purchase of investment properties in Japan, one of which is unsecured, bears 5% annual interest, and matures in January 2023[86] Financial Instruments The Group's operations are exposed to credit risk, liquidity risk, equity price risk, foreign currency risk, and interest rate risk; risk management policies remained unchanged during this six-month period - Financial risks faced: credit risk, liquidity risk, equity price risk, foreign currency risk, and interest rate risk[87] - Risk management policies remained unchanged during this six-month period[88] Fair Value Measurement of Financial Instruments The fair value of the Group's financial assets and liabilities is measured on a recurring basis and categorized into Level 1, Level 2, and Level 3; fair value measurement of unlisted investment loans and overseas unlisted equity securities involves unobservable input data - Fair value measurements are categorized into three levels: Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[90] Fair Value Measurement (December 31, 2020) | Category | Fair Value (HKD '000) | Fair Value Level | Valuation Method and Key Inputs | | :--- | :--- | :--- | :--- | | Listed equity securities | 145,882 | Level 1 | Active market quotes | | Listed debt securities | 35,006 | Level 2 | Market quotes | | Exchange traded funds | 9,983 | Level 1 | Active market quotes | | Unlisted investment funds | 74,432 | Level 2 | Net asset value of investments | | Unlisted investment loans | 14,439 | Level 3 | Adjusted net asset value, credit risk adjustment 3.61% | | Overseas unlisted equity securities | 8,890 | Level 3 | Market approach (enterprise value to EBITDA multiple 6.6x, discount for lack of marketability 22%) or income approach (cost of capital 24%, discount for lack of control 9.8%, discount for lack of marketability 20.6%) | - Unrealized gains / (losses) for Level 3 fair value measurements amounted to HKD 5,565 thousand[97] - Management reviews valuations semi-annually and engages valuers to establish valuation methodologies[99] Key Sources of Estimation Uncertainty Management is required to make significant judgments, estimates, and assumptions in preparing financial reports, which are based on past experience and relevant factors, and actual results may differ - Management is required to make significant judgments, estimates, and assumptions in preparing financial reports[101] - Estimates and assumptions are based on past experience and relevant factors, and actual results may differ from estimated amounts[101] - Revisions to accounting estimates are recognized in the period of revision or future periods[101] Management Discussion and Analysis Market In the first half of 2020, the Hong Kong stock market sharply declined due to the pandemic, but rebounded in the second half, stimulated by global easing policies and the return of Chinese concept stocks to list in Hong Kong, with significantly increased trading volume - The Hang Seng Index fell to a three-year low of 21,139 points in March 2020, closing at 27,231 points at year-end[103] - Average monthly trading volume on the Main Board and GEM increased by 82% year-on-year to HKD 2,962 billion[103] - Funds raised from Main Board IPOs reached HKD 306 billion, an increase of 26%[103] Financial Summary The Group achieved a profit after tax of HKD 2 million in the first half of fiscal year 2021, reversing a loss of HKD 13 million in the prior year, mainly due to financial investment gains from ample capital market liquidity and reduced administrative expenses Financial Performance Overview | Indicator | H1 FY2021 (HKD '000) | H1 FY2020 (HKD '000) | Change | | :--- | :--- | :--- | :--- | | Profit / (Loss) after tax | 2,000 | (13,000) | Turned loss to profit | | Total comprehensive expense | (15,000) | (34,000) | Decreased 55.9% | - Net gains from financial assets and liabilities at fair value through profit or loss were HKD 27 million, compared to HKD 8 million in the prior period[105] - General and administrative expenses decreased by HKD 7 million to HKD 51 million, mainly due to reduced staff bonus provisions and government pandemic subsidies[105] - The fair value of the Lippo Centre office decreased by 14% to HKD 320 million, recognizing a revaluation deficit of HKD 20 million[104] Business Development The Group is actively advancing its joint venture project to establish a full-license securities company in Chongqing, China, having received shareholder approval and a confirmation receipt from the China Securities Regulatory Commission, and is currently providing additional information for approval - Signed an agreement with a joint venture partner to establish a full-license securities company in Chongqing, China[107] - The Group will contribute RMB 330 million for a 22% equity stake in the joint venture company[107] - Shareholder approval has been obtained, and a confirmation receipt from the CSRC has been received; additional information is currently being provided for approval[107] - Expects to sell some listed equity and debt securities and recover some loans receivable to fund the joint venture investment cost[107] Brokerage and Lending The brokerage and lending segment's total revenue increased, mainly due to higher brokerage commission income from increased market turnover; however, interest income from loan financing clients decreased, and expected credit loss provisions significantly increased - Total revenue was HKD 28 million, compared to HKD 25 million in the prior period[108] - Brokerage commission income increased by HKD 6 million to HKD 15 million, mainly due to an 82% increase in average daily market turnover[108] - Interest income from loan financing clients decreased by HKD 4 million to HKD 6 million[108] - Total expected credit loss provisions were HKD 10 million, an increase of HKD 6 million from HKD 4 million in the prior period, reflecting a prudent risk strategy[108] - Fixed-rate loans and factoring receivables decreased to HKD 153 million[108] Corporate Finance and Capital Markets The corporate finance and capital markets segment's total revenue decreased, mainly due to the impact of the pandemic on due diligence progress, with the segment focusing on advisory services for listed companies; underwriting and placing income also decreased - Total revenue was HKD 11 million, compared to HKD 18 million in the prior period[109] - The pandemic affected the progress of due diligence for IPO projects, with the department focusing on advisory services for listed companies[109] - Underwriting and placing income was HKD 1 million, compared to HKD 2 million in the prior period[109] Asset Management The asset management segment's total revenue was insignificant, and it is actively engaging with private equity funds and high-net-worth clients to expand its business - Total revenue was insignificant[111] - Actively engaging with private equity funds and high-net-worth clients to generate more revenue[111] Proprietary Investments The proprietary investments segment's total income significantly increased, mainly due to net gains from listed equity securities driven by the rise in the Hang Seng Index; the segment reduced its investment proportion in listed debt securities and exchange-traded funds - Total income was HKD 29 million, compared to HKD 11 million in the prior period[112] - Net gains from listed equity securities were HKD 20 million, compared to HKD 6 million in the prior period, benefiting from an 11% rise in the Hang Seng Index[112] - Bond interest and dividend income was HKD 2 million, compared to HKD 3 million in the prior period[112] - Reduced investment proportion in listed debt securities and exchange-traded funds to address low yield and high default risk environments[112] - Carrying values of unlisted investments, listed securities, and listed debt securities were HKD 98 million, HKD 146 million, and HKD 45 million, respectively[113] Property Investment The property investment segment's total revenue remained stable; Hong Kong shops recognized a revaluation deficit, but this was offset by a revaluation surplus from investment properties in China, resulting in a combined revaluation surplus of HKD 0.2 million - Total revenue was HKD 2 million, consistent with the prior period[114] - Hong Kong shops recognized a revaluation deficit of HKD 2 million[114] - Investment properties in China recorded a revaluation surplus of HKD 2.2 million due to the strong rebound of the RMB[114] - Combined, the segment recognized a revaluation surplus of HKD 0.2 million[114] - Owns Hong Kong shops, car parks, and China office properties, and invests in an associate holding properties in Japan[114] Outlook Looking ahead, market uncertainties persist, including post-vaccination stability, social media-driven market volatility, and the ongoing impact of the Hong Kong pandemic; China's strong economic performance and the listing of large Chinese enterprises in Hong Kong will support capital market development - Market stability has not recovered after vaccinations and the US presidential inauguration, with social media attacks on short sellers causing volatility[115] - Hong Kong remains in its fourth wave of the pandemic, with the retail peak season affected by quarantine measures[115] - China's economy performed best, and the listing of large Chinese enterprises in Hong Kong will support capital market development[115] - Expects a gradual recovery of global business flows[115] Liquidity and Financial Resources As of the end of December 2020, the Group's total assets were HKD 1.882 billion, with 72% being current assets; net current assets were HKD 462 million, accounting for approximately 48% of net assets; total secured borrowings were HKD 110 million, with a gearing ratio of approximately 11% - Total assets of HKD 1.882 billion, with approximately 72% being current assets[117] - Net current assets of HKD 462 million, accounting for approximately 48% of net assets[117] - Cash and cash equivalents of HKD 119 million, primarily denominated in HKD[117] - Total secured borrowings of HKD 110 million, used to finance investment portfolios and new share subscriptions for brokerage clients[117] - Gearing ratio of approximately 11%[117] - Office properties with a fair value of HKD 320 million are pledged to banks as loan collateral[117] - No other significant contingent liabilities except for the indemnity signed with Hong Kong Securities Clearing Company Limited[117] - The company provided corporate guarantees of HKD 210 million for bank facilities granted to its subsidiaries[117] Foreign Exchange Risk The Group's assets are primarily located in Hong Kong and China, with most monetary assets and liabilities denominated in HKD; the Group monitors foreign currency financial asset movements daily and currently deems hedging RMB-denominated assets unnecessary, but will closely monitor and implement hedging measures - Assets are primarily located in Hong Kong and China, with most monetary assets and liabilities denominated in HKD[118] - Foreign currency financial asset movements are monitored daily[118] - Currently deems hedging RMB-denominated assets unnecessary, but will closely monitor and implement hedging measures[118] - Not exposed to other significant exchange rate fluctuation risks and has not adopted any hedging instruments[118] Risk Management The Group has established risk management policies and procedures, regularly reviewed by management, to ensure all major risks are appropriately monitored; the business faces risks such as industry trends, market competition, securities price volatility, and the introduction of new regulations - Risk management policies and procedures have been established and are regularly reviewed by management[121] - The Legal and Compliance Department, together with the Finance Department and other monitoring committees, regularly reviews and assists management in adopting internal control measures[121] - Faces risks such as industry trends (investment, brokerage, corporate finance and capital markets), market competition, securities price declines, and the introduction of new regulations[119] Employees As of December 31, 2020, the Group had 95 full-time employees; remuneration and bonuses are determined based on performance; the Group provides comprehensive induction and internal training, and has implemented various measures to protect employees and clients from the pandemic - 95 full-time employees (June 30, 2020: 103 employees)[122] - Remuneration and bonuses are determined based on performance and reviewed annually[122] - Provides comprehensive induction programs and internal training courses[122] - Implemented various pandemic protection measures, including providing anti-epidemic supplies, flexible work arrangements, office restrictions, video conferencing, cancellation of business trips, and paid self-isolation[122] Interim Dividend The Board declared an interim dividend of 1.5 HK cents per ordinary share for the six months ended December 31, 2020, to be paid on March 24, 2021 - Declared an interim dividend of 1.5 HK cents per ordinary share (2019: 2 HK cents)[123] - Dividends will be paid on March 24, 2021, to shareholders whose names appear on the register of members on March 5, 2021[123] Closure of Register of Members To determine eligibility for the interim dividend, the company will suspend share registration from March 3 to March 5, 2021, and all transfer procedures must be completed by 4:30 p.m. on March 2, 2021 - Share registration suspension dates: March 3 to March 5, 2021[124] - Deadline for transfer procedures: 4:30 p.m. on March 2, 2021[124] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or any Associated Corporation As of December 31, 2020, Dr. Jonathan Choi Koon Shum and Mr. Choi Koon Ming held long positions in the Company's ordinary shares, with Dr. Jonathan Choi Koon Shum deemed to own 30.20% of the Company's shares Directors' Long Positions | Director Name | Type of Interest | Number of Ordinary Shares | Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Dr. Jonathan Choi Koon Shum | Corporate | 215,254,511 | 30.20% | | Dr. Jonathan Choi Koon Shum | Personal | 180,501,212 | 25.32% | | Mr. Choi Koon Ming | Personal | 29,494,804 | 4.14% | | Mr. Choi Koon Ming | Corporate | 9,850,916 | 1.38% | - Dr. Jonathan Choi Koon Shum is deemed to own 215,254,511 ordinary shares[126] - No other directors or chief executive, their spouses, or children held interests or short positions in the Company's or associated corporations' shares, underlying shares, or debentures[127] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company As of December 31, 2020, Dr. Jonathan Choi Koon Shum and his associated companies (World Developments Limited, Innovation Assets Limited, SIL, Sun Wah Capital Limited) and Guangzhou Huiyin Development Investment Partnership were substantial shareholders, holding 5% or more interests in the Company Substantial Shareholders' Long Positions | Shareholder Name | Number of Ordinary Shares (Direct Interest) | Deemed Interest | Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Dr. Jonathan Choi Koon Shum | 180,501,212 | 215,254,511 | 55.52% | | World Developments Limited | 185,701,741 | – | 26.05% | | Innovation Assets Limited | – | 185,701,741 | 26.05% | | Sunwah International Limited | – | 185,701,741 | 26.05% | | Sun Wah Capital Limited | 29,552,749 | 185,701,741 | 30.20% | | Mr. Choi Koon Ming | 29,494,804 | 9,850,916 | 5.52% | | Guangzhou Huiyin Development Investment Partnership | 35,640,000 | – | 5.00% | - The interests of World Developments Limited, Innovation Assets Limited, SIL, Sun Wah Capital Limited, and Dr. Jonathan Choi Koon Shum overlap with each other[131] Corporate Governance Code 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 Hong Kong Listing Rules during the reporting period - 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[133] Share Option Scheme The company adopted a share option scheme on November 24, 2020, to reward and attract outstanding employees; no share options were granted, exercised, cancelled, or lapsed during the reporting period - Adopted a share option scheme on November 24, 2020[135] - Aims to reward or acknowledge employees' contributions and assist in recruiting and retaining talent[135] - No share options were granted, exercised, cancelled, or lapsed during the reporting period[136] Repurchase, Sale or Redemption of Shares During the reporting period, neither the company nor any of its subsidiaries repurchased, sold, or redeemed any of the company's shares - No shares were repurchased, sold, or redeemed during the reporting period[137] Directors' Securities Transactions The company has adopted the Model Code as set out in Appendix 10 to the Listing Rules, and all directors have confirmed compliance with the code during the reporting period - Adopted the Model Code as set out in Appendix 10 to the Listing Rules[138] - All directors have confirmed compliance with the Model Code[138] Changes in Directors' Information Dr. Guan Huanfei resigned as an independent non-executive director of Shougang Fushan Resources Group Limited and was appointed as an independent non-executive director of Shanghai Zendai Property Limited - Dr. Guan Huanfei resigned as an independent non-executive director of Shougang Fushan Resources Group Limited[139] - Dr. Guan Huanfei was appointed as an independent non-executive director of Shanghai Zendai Property Limited, effective January 11, 2021[140] Audit Committee The Audit Committee has reviewed accounting principles and practices with management, discussed financial reporting matters, and reviewed the interim report and financial statements; the committee is also responsible for reviewing the Group's financial controls, risk management, and internal control systems - Reviewed accounting principles, practices, and financial reporting matters[141] - Reviewed the interim report and unaudited condensed consolidated financial statements[141] - Responsible for reviewing the Group's financial controls, risk management, and internal control systems[141] - Has commenced its responsibility to review the company's strategic, operational, and financial risks[141] Independent Review Report Review Conclusion Ernst & Young has reviewed Sunwah Kingsway Financial Holdings Limited's interim financial information in accordance with Hong Kong Standard on Review Engagements 2410 and found no material matters indicating non-preparation in accordance with Hong Kong Accounting Standard 34 - Reviewing firm: Ernst & Young[143] - Scope of review: Interim financial information, including the condensed consolidated statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, and statement of cash flows[143] - Review standard: Hong Kong Standard on Review Engagements 2410[144] - Conclusion: No material matters were found indicating that the interim financial information was not prepared in all material respects in accordance with Hong Kong Accounting Standard 34[145] - No audit opinion was expressed, as the scope of review is less than that of an audit[144] List of Licensed Subsidiaries and Affiliates Subsidiaries and Affiliates This section lists Sunwah Kingsway Financial Holdings Limited's licensed subsidiaries and its affiliates and overseas offices in Hong Kong and China, covering businesses such as securities and futures brokerage, corporate finance, asset management, and money lending - Hong Kong licensed subsidiaries include Sunwah Kingsway Financial Services Limited (securities and futures brokerage), Sunwah Kingsway Capital Limited (corporate finance and sponsor), Sunwah Kingsway Asset Management Limited (asset management), and Sunwah Kingsway Finance Limited (licensed money lender)[148] - China affiliates and overseas offices include Beijing Sunwah Kingsway Investment Advisory Co., Ltd. and Shenzhen Sunwah Kingsway Investment Consulting Co., Ltd.[148]