中国文旅农业(00542) - 2020 - 年度财报

Company Information Letter to Shareholders This letter reviews the Group's 2020 performance, business segment overview, and future outlook, noting a narrowed pre-tax loss despite a revenue decline and overall loss 2020 Annual Key Financial Performance | Indicator | 2020 (HKD) | 2019 (HKD) | | :--- | :--- | :--- | | Revenue | 22,400,000 | 34,500,000 | | Loss before tax | 216,600,000 | 233,800,000 | | Loss attributable to owners of the Company | 217,700,000 | 202,400,000 | - Pre-tax loss narrowed mainly due to: (1) interest income from termination of land grant contract; (2) fair value gain on investment properties; and (3) reduced impairment loss on property, plant and equipment[6] Presale Status of Major Properties Under Development (as at December 31, 2020) | Project Name | Location | Contracted Sales as % of Saleable Units | | :--- | :--- | :--- | | German Town Project | Hengqin | 29.0% | | Fuyuan Juntin Project | Chengdu | 49.8% | | Fuyuan Plaza Project | Doumen | 39.9% | - The Board does not recommend the payment of any dividend for the financial year ended December 31, 2020[11] - Looking ahead to 2021, the Group believes the COVID-19 pandemic in mainland China is largely under control, but the global economy still faces profound impacts from the pandemic and geopolitical risks, with the Group continuing to monitor developments and adjust strategies[12] Management Discussion and Analysis Business Review This section details the Group's 2020 overall and segment business performance, highlighting losses in property development and hotel segments despite pre-sale progress and strategic acquisitions Segment Results Summary (For the year ended December 31, 2020) | Business Segment | Revenue (HKD) | Segment Loss (HKD) | | :--- | :--- | :--- | | Property Development | 5,100,000 | 54,600,000 | | Hotel Business | 13,500,000 | 61,000,000 | - During the year, the Group completed the acquisition of a subsidiary holding the "Fuyuan Plaza" project, bringing the total number of projects under development to three: Hengqin German Town, Chengdu Fuyuan Juntin, and Doumen Fuyuan Plaza[17][18] Details of Projects Under Development and Presale Progress | Project Name | Location | Saleable Area (sq.m.) | Presale Ratio | Estimated Completion Time | | :--- | :--- | :--- | :--- | :--- | | German Town | Zhuhai Hengqin | 49,999 | 29% | Q4 2021 | | Fuyuan Juntin | Chengdu Pidu | 85,102 | 49.8% | Phase I: Q4 2021, Phase II: 2023 | | Fuyuan Plaza | Zhuhai Doumen | 61,654 | 39.9% | H2 2022 | Major Acquisitions and Disposals The only significant transaction this year was the acquisition of Yiwei International Investment Limited and its subsidiaries, aimed at expanding the Group's revenue streams and profitability - On June 29, 2020, the Company entered into an agreement with Director Mr. Yang Lijun to acquire his indirectly held Yiwei International for a consideration of HKD 108.6 million, with the acquisition completed on September 15, 2020[25] - The Target Group's primary asset is a piece of land located in Doumen District, Zhuhai City, China, planned for development into a commercial complex including office buildings, a five-star hotel, and a shopping center[25] Key Risks and Uncertainties The Group identified five major risks: business, policy, third-party, COVID-19 pandemic, and foreign exchange, outlining corresponding monitoring and response strategies - Business Risk: Core business performance is affected by economic conditions and the property market[31] - Policy Risk: Business operations must comply with government policies and regulations, and violations may lead to penalties[32] - COVID-19 Risk: The pandemic has caused a short-term psychological impact on the property market, with revenue expected to be affected in the first half of 2021, and the Group will closely monitor and continuously assess its financial and operational impacts[34] - Foreign Exchange Risk: Major business is conducted in RMB, while the reporting currency is HKD, with RMB borrowings accounting for approximately 65.1% of total borrowings as of year-end, and no foreign exchange hedging transactions entered into by the Group[35] Review of Financial Position This section reviews the Group's financial position, highlighting a significant increase in total assets and liabilities, which caused the gearing ratio to surge from 230% to 930% due to substantial borrowings for acquisitions and property development projects Financial Position Overview (as at December 31) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Non-current assets | 1,851,200 | 862,000 | | Current assets | 2,159,700 | 914,000 | | Current liabilities | 2,101,800 | 788,200 | | Non-current liabilities | 1,701,700 | 593,500 | | Total equity | 207,500 | 394,300 | - The gearing ratio (total interest-bearing borrowings/total equity) significantly increased from approximately 230% at the end of 2019 to approximately 930% at the end of 2020, mainly due to substantial interest-bearing borrowings for acquisitions and property development projects[39] - Contingent liabilities amounted to HKD 130.6 million (2019: HKD 77 thousand), primarily related to repurchase guarantees provided to banks for mortgage loans obtained by property buyers[42] - As of year-end, the Group had a total of 126 employees, a decrease from 135 employees in 2019[46] Outlook The Group is confident in China's long-term economic development, believing the acquisition of the Zhuhai Doumen land plot will expand revenue sources and enhance competitiveness, while continuing to monitor the pandemic and adjust strategies for stable growth - The Group is confident in the Chinese economy and believes the acquisition of Dewei International (holding the Zhuhai Doumen land plot) will expand the Group's revenue sources, strengthen profitability, and enhance competitiveness[48] - The Group will continue to achieve stable growth by enhancing internal management capabilities, optimizing operational management models, and continuously upgrading products[48] Biographies of Directors and Senior Management This section provides detailed personal biographies of the company's executive directors, non-executive directors, independent non-executive directors, and senior management team members, including their age, educational background, professional experience, and appointments within the Group and other companies Report of the Directors Business Review (Analysis of Key Performance Indicators) This section analyzes the Group's business performance through key financial indicators, noting a deterioration in profitability and liquidity and a significant increase in the gearing ratio in 2020 Key Performance Indicators | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Profitability | | | | Net loss margin | (969.39)% | (642.20)% | | Return on equity | (72.04)% | (43.40)% | | Shareholder Return | | | | Loss per share (basic) | (3.13) HK cents | (2.91) HK cents | | Liquidity and Debt | | | | Current ratio | 1.03 | 1.16 | | Gearing ratio | 930.3% | 233.3% | Environmental, Social and Governance This section outlines the Group's policies and practices regarding Environmental, Social, and Governance (ESG), confirming its commitment to sustainable operations, compliance with environmental regulations, and good stakeholder relationships, with no significant violations reported during the year - The Board is fully responsible for formulating ESG strategies, with the senior management team responsible for management, delegated to various departments for execution[76] - The Group strictly complies with relevant laws on environmental protection, solid waste disposal, noise, air, and water pollution, with no significant violations during the year[78] - The Group clarifies anti-corruption policies through employee handbooks and ensures high standards in food safety, customer privacy protection, and supplier management for its hotel business[83][84][85] Major Customers and Suppliers This year, the Group's revenue and procurement concentration were high, with the top five customers contributing over 78.7% of revenue and the top five suppliers accounting for over 39.9% of total purchases - Revenue from the top five customers accounted for over 78.7% of total revenue, with the largest customer accounting for over 62.3%[100] - Purchases from the top five suppliers accounted for over 39.9% of total purchases, with the largest supplier accounting for over 19.8%[100] Directors' Interests in Competing Businesses The report discloses the interests held by Directors Mr. Yang Lijun and Mr. Wang Juicheng in other companies that may compete with the Group's business, explaining that these businesses are managed by independent teams and the Group operates independently of these private companies - Mr. Yang Lijun holds interests in Yang's Development Limited and Fuhua Investment Holdings Limited, both engaged in property investment and development in China[107] - Mr. Wang Juicheng serves as a director or senior executive in Liancheng Finance Company Limited (Hong Kong money lending business) and Gaomen Group Company Limited (Hong Kong club, entertainment, and restaurant business)[107] Public Float The report confirms that as of March 18, 2021, the company's issued shares maintained a public float of not less than 25%, complying with listing rule requirements - Based on public information and the directors' knowledge, as of March 18, 2021, the Company met the Listing Rules requirement of a public float of not less than 25%[127] Corporate Governance Report Compliance with Corporate Governance Code The report states that for the year ended December 31, 2020, the company applied and complied with the principles and provisions of the Corporate Governance Code, with three deviations primarily concerning the Chairman and Chief Executive roles being held by the same person, and some directors being unable to attend general meetings due to the pandemic - Deviation from Code Provision A.2.1: The roles of Chairman and Chief Executive are not separated, with Mr. Yang Lijun appointed as Chief Executive on February 5, 2021, which the Board believes provides strong leadership and efficient decision-making[136] - Deviations from Code Provisions A.6.7 and E.1.2: Some executive and non-executive directors were unable to attend the general meetings in May and September 2020 due to the COVID-19 pandemic[137][147] Board Committees The Board has four committees: Remuneration, Audit, Nomination, and Executive, with each committee chaired by an independent non-executive director to ensure independence and effective oversight, and this section details their composition, terms of reference, and key work in 2020 Directors' Meeting Attendance Record for 2020 | Director Name | Board | Remuneration Committee | Audit Committee | Nomination Committee | AGM | EGM | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Yang Lijun (Chairman) | 8/10 | - | - | - | 0/1 | 0/1 | | Yu Shunhui (Non-executive) | 6/10 | - | - | - | 0/1 | 0/1 | | Wang Juicheng (Non-executive) | 10/10 | - | - | - | 1/1 | 1/1 | | Chan Hoi Ning (Independent Non-executive) | 10/10 | 2/2 | 3/3 | 2/2 | 1/1 | 0/1 | | So Wai Lam (Independent Non-executive) | 9/10 | 2/2 | 3/3 | 2/2 | 1/1 | 0/1 | | Sung Yat Chun (Independent Non-executive) | 8/10 | 2/2 | 3/3 | 2/2 | 0/1 | 1/1 | - The Remuneration Committee, comprising three independent non-executive directors, held two meetings during the year, primarily evaluating executive directors' performance and reviewing remuneration policies and benefits[171][172] - The Audit Committee, comprising three independent non-executive directors, held three meetings during the year, primarily reviewing annual and interim results, accounting policies, considering auditor's remuneration, and reviewing risk management and internal control systems[175][176] - The Nomination Committee, comprising three independent non-executive directors, held two meetings during the year, primarily reviewing Board structure and diversity policy, assessing independent directors' independence, and making recommendations on director appointments[179][185] Risk Management and Internal Control The Board confirms its responsibility to ensure the establishment and maintenance of effective risk management and internal control systems, with external audit professionals performing reviews that found no material deficiencies in 2020 - The Board is responsible for ensuring the establishment and maintenance of appropriate risk management and internal control systems, which are designed to manage rather than eliminate risks[197] - The Company has not established an internal audit department, as the Board believes there is no immediate need given the Group's business scale and nature, with risk management and internal control reviews performed by external professionals[199] - The 2020 review report on risk management and internal control systems was submitted to the Audit Committee and the Board, finding no material deficiencies, and the Board considers the existing systems effective and adequate[200] External Auditor's Remuneration This section discloses the service fees paid to the external auditor for the year ended December 31, 2020 External Auditor's Remuneration for 2020 | Service Type | Fees (thousand HKD) | | :--- | :--- | | Audit fees for the Group's auditor | 923 | | Tax services and others | – | | Total | 923 | Independent Auditor's Report The auditor, Zhongzheng Tianheng Certified Public Accountants Limited, issued an unqualified opinion on the Group's consolidated financial statements for the year ended December 31, 2020, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows, while highlighting seven key audit matters Key Audit Matters The auditor identified seven matters that were most significant in the audit, involving significant management judgments and estimates, including impairment assessments of various assets, fair value measurements, and accounting for business combinations - Impairment assessment of trade receivables: Involves assessing impairment for total trade receivables of HKD 92.61 million, with an impairment loss of HKD 91.87 million recognized[234] - Impairment assessment of property, plant and equipment, right-of-use assets, and licenses: Impairment assessment performed on assets primarily derived from the hotel business[238][240] - Impairment assessment of properties under development: Impairment assessment performed on properties under construction with a carrying amount of approximately HKD 1.499 billion[243][244] - Impairment of properties under development for sale: Assessment of net realizable value for properties under development for sale with a carrying amount of HKD 1.683 billion[248][250] - Valuation of investment properties: Fair value valuation performed on investment properties with a carrying amount of HKD 24.13 million[253][255] - Business combination: Review of accounting treatment for the acquisition of Yiwei International Investment Limited during the year[267] - Impairment assessment of goodwill: Impairment test performed on goodwill of approximately HKD 50.29 million arising from the acquisition[271][272] Audited Consolidated Financial Statements Consolidated Statement of Profit or Loss This statement presents the Group's operating results for the 2020 fiscal year, showing total revenue of HKD 22.36 million and an annual loss of HKD 216.8 million, with HKD 217.7 million attributable to owners of the Company Consolidated Statement of Profit or Loss Summary (For the year ended December 31) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 22,360 | 34,466 | | Gross profit | 15,168 | 23,360 | | Loss before tax | (216,593) | (233,773) | | Loss for the year | (216,755) | (221,339) | | Loss attributable to owners of the Company | (217,714) | (202,376) | | Basic loss per share | (3.13) HK cents | (2.91) HK cents | Consolidated Statement of Financial Position This statement reflects the Group's financial position as of December 31, 2020, with total assets increasing to HKD 4.011 billion and total liabilities to HKD 3.803 billion, resulting in a decrease in net assets (total equity) from HKD 394 million to HKD 207 million Consolidated Statement of Financial Position Summary (as at December 31) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Assets | | | | Total non-current assets | 1,851,243 | 862,032 | | Total current assets | 2,159,710 | 914,024 | | Total assets | 4,010,953 | 1,776,056 | | Liabilities and Equity | | | | Total current liabilities | 2,101,821 | 788,194 | | Total non-current liabilities | 1,701,665 | 593,544 | | Total liabilities | 3,803,486 | 1,381,738 | | Net assets | 207,467 | 394,318 | | Equity attributable to owners of the Company | 152,739 | 342,423 | | Non-controlling interests | 54,728 | 51,895 | Consolidated Statement of Cash Flows This statement summarizes the annual cash inflows and outflows, showing net cash generated from operating activities of HKD 314 million, net cash used in investing activities of HKD 249 million, and net cash used in financing activities of HKD 41.47 million, resulting in a net increase in cash and cash equivalents of HKD 22.67 million Consolidated Statement of Cash Flows Summary (For the year ended December 31) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Net cash generated from/(used in) operating activities | 313,540 | (108,635) | | Net cash used in investing activities | (249,401) | (156,272) | | Net cash (used in)/generated from financing activities | (41,465) | 266,367 | | Net increase in cash and cash equivalents | 22,674 | 1,456 | | Cash and cash equivalents at beginning of year | 56,129 | 54,273 | | Cash and cash equivalents at end of year | 82,839 | 56,129 | Notes to the Consolidated Financial Statements (Selected) The notes to the financial statements provide detailed explanations and supplementary information for items in the financial statements, including accounting policies, segment information, details of various assets and liabilities, related party transactions, and risk management Segment Revenue and Loss (2020) | Business Segment | Revenue (thousand HKD) | Segment Loss (thousand HKD) | | :--- | :--- | :--- | | Property Development | 5,136 | (54,550) | | Hotel Business | 13,465 | (60,995) | | Other Businesses | 3,759 | (1,831) | | Total | 22,360 | (117,376) | - On June 29, 2020, the Group agreed to acquire Yiwei International, indirectly held by Director Mr. Yang Lijun, for a consideration of HKD 108.6 million, paid by issuing promissory notes, with the acquisition completed on September 15, resulting in HKD 50.29 million of goodwill[633][642] - As of year-end, the Group's contingent liabilities amounted to HKD 130.6 million, primarily related to repurchase guarantees provided to banks for mortgage loans to property buyers[658] - As of year-end, the Group had contracted but unprovided property development expenditures and land acquisition commitments of approximately HKD 390 million[659] Schedule of Major Properties This list details specific information on completed properties held for sale and properties under development by the Group as of December 31, 2020, including location, use, site area, saleable gross floor area, and the Group's ownership interest Schedule of Major Properties Under Development (as at December 31, 2020) | Name/Location | Use | Site Area (sq.m.) | Saleable GFA (sq.m.) | Ownership Interest (%) | | :--- | :--- | :--- | :--- | :--- | | Star City Garden | Residential/Commercial | 151,675 | - | 55 | | German Town (Zhuhai Hengqin) | Research/Development | 60,340 | 49,999 | 70 | | Fuyuan Juntin (Chengdu) | Residential/Commercial | 56,707 | 85,102 | 100 | | Fuyuan Plaza (Zhuhai Doumen) | Commercial | 48,653 | 61,654 | 100 | Five-Year Financial Summary This section provides a summary of the Group's key financial data for five fiscal years from 2016 to 2020, including performance (revenue, loss) and financial position (assets, liabilities, equity), illustrating the Group's financial performance trends in recent years Five-Year Performance Summary (For the year ended December 31) | (thousand HKD) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 22,360 | 34,466 | 18,086 | 30,785 | 88,535 | | Loss before tax | (216,593) | (233,773) | (133,846) | (35,766) | (464,917) | | Loss for the year | (216,755) | (221,339) | (136,180) | (19,757) | (400,405) | Five-Year Assets, Liabilities and Equity Summary (as at December 31) | (thousand HKD) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | 4,010,953 | 1,776,056 | 1,521,264 | 864,664 | 710,301 | | Total liabilities | 3,803,486 | 1,381,738 | 895,550 | 147,436 | 171,136 | | Net assets | 207,467 | 394,318 | 625,714 | 717,228 | 539,165 |