大同集团(00544) - 2020 - 中期财报

Company Information This chapter provides essential company information for Datong Group Limited (Stock Code: 00544), detailing its board, committees, secretary, offices, auditors, bankers, and share registrar - The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with established audit, nomination, and remuneration committees[3] - Company Secretary Mr. Cheung Hoi Kin was appointed on June 5, 2020, succeeding Mr. Choi Kai Sing who resigned on the same day[3] - The company's auditor is Deloitte Touche Tohmatsu, with principal bankers including Bank of China (Hong Kong), Bank of Communications, and HSBC[3] Management Discussion and Analysis This chapter details the Group's overall performance, operating segment review, future outlook, and comprehensive financial analysis for the six months ended June 30, 2020 Overall Performance For H1 2020, the Group's total revenue decreased by 9.3% to HK$135 million, with a loss of HK$26.4 million, despite steady core business growth from efficiency gains | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 135,000 | 149,000 | -9.3% | | Loss for the Period | (26,400) | (25,600) | 3.1% (Loss Widened) | - The Group's overall and core businesses achieved steady growth, primarily due to improved operational efficiency across all business units and management's efforts to identify new clients and business opportunities to enhance profit margins[5] - Despite persistently high operating costs, particularly for summer warehouse refrigeration, the Group has implemented effective cost control mechanisms[5] Operating Segment Review The Group's businesses include cold storage and related services in Hong Kong, food and beverage product trading in mainland China, loan services in Hong Kong, and investment holding Cold Storage and Logistics Cold storage remains the Group's core segment and primary revenue source, providing temperature-controlled warehousing and logistics services, with stable performance despite economic uncertainties and the pandemic - Cold storage business is the Group's core segment and primary revenue source, offering temperature-controlled warehousing, logistics, delivery, container handling, and packaging services[7] - Despite Hong Kong's economic uncertainty, social unrest, and the COVID-19 pandemic, the existing Kwai Hei Street warehouse facilities maintained stable performance, largely consistent with the prior year[7] - The Tsing Yi joint venture warehouse performed satisfactorily, while the Tsuen Wan bonded warehouse saw reduced profitability due to declining sales of tobacco and alcohol products and slower inventory turnover caused by the pandemic[9] Loan Business The Group's loan business, which provides credit support to cold storage and logistics clients, will no longer receive new capital investment, with resources redirected to more promising segments - The loan business provides credit support to cold storage and logistics clients[11] - This segment will not receive new capital investment, with resources reallocated to more promising segments like cold storage and logistics, and food and beverage product trading[11] Food and Beverage Product Trading The Group's food and beverage product distribution business in mainland China performed better during the review period, driven by improved distribution network efficiency, diversified product portfolio, and recovering consumer demand - The food and beverage product distribution business in mainland China performed better than last year, primarily due to improved distribution network operational efficiency and a diversified product portfolio, including new Australian fresh dairy products and local brand fresh juices[12] - Despite initial business weakness caused by the COVID-19 pandemic, consumer demand has rebounded since Q1 2020[12] Outlook The Group maintains a cautious outlook on the economy, focusing resources on resilient businesses like cold storage and food and beverage trading, while planning capacity expansion and network optimization Macroeconomic Environment Hong Kong's economy experienced an 8.9% decline in Q1 2020, the largest since 1974, due to protests, trade disputes, and the pandemic, leading to rising unemployment and plummeting retail sales - Hong Kong's economy declined by 8.9% in Q1 2020 compared to the prior year, marking the largest drop since 1974[14] - Months of street protests, the US-China trade dispute, and the COVID-19 pandemic have pressured Hong Kong's economy, with unemployment rising to its highest level since September 2005 and retail sales plummeting by over one-third[14] - The forecast for overall real GDP growth in 2020 has been revised downwards from -4% to -7%, indicating a bleak macroeconomic outlook[14] Cold Storage and Logistics (Outlook) Despite the severe impact on Hong Kong's catering industry, the Group believes its cold storage and logistics business is more resilient, with plans for Tsing Yi warehouse expansion and Kwai Hei Street renovation - Hong Kong's catering industry saw a 31.2% drop in profits, negatively impacting the warehouse sector by slowing the Group's inventory turnover and reducing H1 profitability[15] - The Kwai Hei Street warehouse is scheduled for major renovation, which may lead to extended downtime and fluctuations in overall revenue[17] - Construction to expand the storage area at the Tsing Yi cold storage facility is underway, which will increase storage capacity upon completion, reinforcing the Group's belief in the resilience of its cold storage and logistics business compared to other sectors[17] Food and Beverage Product Trading (Outlook) The Group is committed to expanding its trading business through product diversification and network expansion in mainland China, while strategically optimizing its retail network and exploring e-commerce solutions - The Group is committed to developing its trading business through a diversified food and beverage product portfolio and expanding its distribution network across supermarkets and convenience stores in mainland China[18] - Recent initiatives include strategically evaluating the retail network to identify geographical areas for revenue optimization and expanding e-commerce solutions to reach a broader consumer base[18] - Facing intense price competition from retail chains in mainland China, the Group has taken actions to ensure the profitability of its products is maintained[18] Financial Review This section reviews the Group's financial position, including liquidity, financial resources, treasury policy, exchange rate risk, share capital structure, significant acquisitions/disposals, asset pledges, and contingent liabilities Liquidity and Financial Resources As of June 30, 2020, the Group's cash and bank balances decreased to HK$59 million, primarily due to bank loan repayments and net cash used in operations, leading to an increased gearing ratio | Metric | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | Change | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 59,000 | 118,000 | 50% Decrease | | Gearing Ratio | 114.0% | 88.1% | 25.9 percentage points Increase | | Bank Borrowings | 35,000 | 65,000 | 46.2% Decrease | | Total Bonds | 100,000 | 100,000 | No Change | - The decrease in cash and bank balances was primarily due to repayment of bank loans, placement of pledged bank deposits, and net cash used in operating activities[19] - The gearing ratio increased due to a decrease in equity attributable to owners of the Company[19] Treasury Policy The Group adopts a conservative treasury policy, strictly monitoring cash management, with most cash and bank balances denominated in Hong Kong Dollars - The Group adopts a conservative treasury policy, strictly monitoring its cash management[23] - The Group's cash and bank balances are primarily denominated in Hong Kong Dollars[23] Exchange Rate Fluctuation Risk and Hedging The Group's monetary assets and liabilities are primarily denominated in HKD, resulting in minimal exchange rate risk, which will be regularly reviewed if mainland China trading business increases - The Group's monetary assets and liabilities are primarily denominated in Hong Kong Dollars, and the Directors consider the exchange rate risk to be minimal[24] - The Group may be exposed to relatively higher exchange rate risk if more food and beverage trading business operates in mainland China, which the Directors will review regularly[24] - During the interim period, the Group did not undertake any significant foreign exchange risk nor use any financial instruments for hedging purposes[25] Share Capital Structure As of June 30, 2020, the Company's total issued share capital was HK$24.323 million, comprising 2.4323 billion ordinary shares of HK$0.01 each, remaining unchanged from December 31, 2019 | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Issued Share Capital | HK$24,323,040 | HK$24,323,040 | | Number of Ordinary Shares | 2,432,304,000 shares | 2,432,304,000 shares | | Par Value Per Share | HK$0.01 | HK$0.01 | Significant Acquisitions and Disposals of Subsidiaries, Associates, and Joint Ventures During the interim period, the Group did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures - During the interim period, the Group did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures[28] Pledge of Assets As of June 30, 2020, the Group had HK$3.5 million in bank facilities pledged by equivalent bank deposits, with approximately HK$1.4 million utilized, and HK$64.3 million in bank deposits pledged for lease agreement guarantees | Pledge Type | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Bank Facilities Pledged by Bank Deposits | 3,500 | 3,500 | | Utilized Bank Facilities Amount | 1,400 | 3,500 | | Bank Guarantees for Lease Agreements Pledged by Bank Deposits | 64,300 | 62,100 | | Lease Liabilities Pledged by Right-of-Use Assets | 9 | 80 | Future Plans for Material Investments or Capital Assets During the interim period, the Group had no specific future plans for material investments or capital assets, other than those related to joint ventures - During the interim period, the Group had no specific future plans for material investments or capital assets, other than those related to joint ventures[30] Contingent Liabilities As of June 30, 2020, the Group had no contingent liabilities - As of June 30, 2020, the Group had no contingent liabilities[31] Employment and Remuneration Policies As of June 30, 2020, the Group employed approximately 240 full-time staff in Hong Kong and 90 in mainland China, offering competitive remuneration packages and benefits | Region | Number of Employees as of June 30, 2020 | Number of Employees as of December 31, 2019 | | :--- | :--- | :--- | | Hong Kong | Approx. 240 | Approx. 220 | | Mainland China | Approx. 90 | Approx. 120 | - The Group reviews remuneration annually and provides various benefits, including discretionary bonuses, Mandatory Provident Fund, lunch allowances, and professional guidance/training allowances[32] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2020, the Group's total revenue was HK$135.075 million, a 9.3% decrease year-on-year, with loss for the period widening to HK$26.43 million and basic loss per share at 1.09 HK Cents | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 135,075 | 148,910 | -9.3% | | Revenue from Cold Storage and Related Services | 83,885 | 104,339 | -19.6% | | Revenue from Food and Beverage Trading | 51,000 | 42,238 | 20.7% | | Interest Income from Loan Services | 190 | 2,333 | -91.9% | | Gross Profit | 14,918 | 28,917 | -48.4% | | Loss Before Tax | (26,430) | (25,593) | 3.3% (Loss Widened) | | Loss for the Period | (26,430) | (25,593) | 3.3% (Loss Widened) | | Basic Loss Per Share | (1.09 HK Cents) | (1.05 HK Cents) | 3.8% (Loss Widened) | - This interim financial performance has been reviewed by the Company's Audit Committee but not audited by the Company's auditor[34] - Total comprehensive expense for the period was HK$25.803 million, a slight increase from HK$25.476 million in the prior year[36] Condensed Consolidated Statement of Financial Position As of June 30, 2020, the Group's total assets decreased to HK$503 million, with significant reductions in cash and bank balances, and equity attributable to owners of the Company falling to HK$87.756 million | Metric | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Non-current Assets | 363,346 | 399,253 | -9.0% | | Current Assets | 139,742 | 186,207 | -25.0% | | Bank Balances and Cash | 59,013 | 117,966 | -50.0% | | Current Liabilities | 133,458 | 156,578 | -14.7% | | Net Current Assets | 6,284 | 29,629 | -78.8% | | Equity Attributable to Owners of the Company | 87,756 | 113,559 | -22.7% | | Total Consolidated Assets | 503,088 | 585,460 | -14.0% | | Total Consolidated Liabilities | 412,169 | 468,738 | -12.1% | - Interests in an associate decreased from HK$4.072 million to zero, while loans to an associate increased from HK$39.255 million to HK$40.621 million[39] - Trade and other receivables, deposits, and prepayments increased from HK$55.474 million to HK$64.979 million[39] Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2020, equity attributable to owners of the Company decreased from HK$113.5 million to HK$87.76 million, primarily due to the HK$26.43 million loss for the period | Metric | January 1, 2020 (HK$ Thousand) | June 30, 2020 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Equity Attributable to Owners of the Company | 113,559 | 87,756 | (25,803) | | Non-controlling Interests | 3,163 | 3,163 | 0 | | Total | 116,722 | 90,919 | (25,803) | | Loss for the Period | - | (26,430) | (26,430) | | Exchange Differences on Translation of Overseas Operations | - | 627 | 627 | - The decrease in equity attributable to owners of the Company was primarily due to the loss for the period[44] - Exchange reserve changed from (HK$1.914 million) at the beginning of the period to (HK$1.287 million) at the end, reflecting exchange gains from translating overseas operations[44] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2020, the Group's cash and cash equivalents saw a net decrease of HK$59.58 million, with the period-end balance at HK$59.01 million, driven by reduced operating cash flow and increased cash used in financing activities | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 15,247 | 82,454 | (67,207) | | Net Cash (Used in) from Investing Activities | (2,983) | 28,778 | (31,761) | | Net Cash Used in Financing Activities | (71,844) | (46,802) | (25,042) | | Net (Decrease) Increase in Cash and Cash Equivalents | (59,580) | 64,430 | (124,010) | | Cash and Cash Equivalents at End of Period | 59,013 | 120,445 | (61,432) | - Net cash from operating activities significantly decreased, primarily impacted by lower revenue and reduced gross profit[46] - Net cash used in financing activities increased, mainly due to repayment of bank borrowings of HK$30 million and repayment of lease liabilities of HK$31.045 million[46] Notes to the Condensed Consolidated Financial Statements This chapter provides detailed notes to the condensed consolidated financial statements, covering basis of preparation, significant accounting policies, revenue and segment information, various income and expenses, asset and liability items, share capital, derivative financial instruments, pledge of assets, and related party transactions 1. Basis of Preparation The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of Appendix 16 to the Listing Rules of The Stock Exchange of Hong Kong Limited - The condensed consolidated financial statements are prepared in accordance with HKAS 34 "Interim Financial Reporting" and Appendix 16 of the Listing Rules[47] 2. Significant Accounting Policies The accounting policies and methods of computation used for the condensed consolidated financial statements for the six months ended June 30, 2020, are consistent with those followed in the preparation of the 2019 annual financial statements - The accounting policies and methods of computation used for this interim period are consistent with the 2019 annual financial statements[48] - New and revised Hong Kong Financial Reporting Standards (HKFRS) adopted on January 1, 2020, including amendments to HKFRS 3, HKFRS 9, HKAS 39, HKFRS 7, HKAS 1, and HKAS 8, had no significant impact on the results and financial position for the current and prior periods[49][50] - The Group expects that newly issued and revised HKFRS that are not yet effective will not have a significant impact on the condensed consolidated financial statements[51] 3. Revenue and Segment Information The Group's revenue and results are segmented into cold storage and related services in Hong Kong, food and beverage trading in mainland China, and loan services in Hong Kong, showing varying performance across segments - The Group's operating segments include: cold storage and related services in Hong Kong, food and beverage product trading in mainland China, and loan services in Hong Kong[53][54] | Segment | H1 2020 Revenue (HK$ Thousand) | H1 2019 Revenue (HK$ Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Cold Storage and Related Services | 83,885 | 104,339 | -19.6% | | Food and Beverage Trading | 51,000 | 42,238 | 20.7% | | Loan Services | 190 | 2,333 | -91.9% | | Total | 135,075 | 148,910 | -9.3% | | Segment | June 30, 2020 Assets (HK$ Thousand) | December 31, 2019 Assets (HK$ Thousand) | June 30, 2020 Liabilities (HK$ Thousand) | December 31, 2019 Liabilities (HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | | Cold Storage and Related Services | 344,975 | 366,308 | 292,377 | 348,602 | | Food and Beverage Trading | 25,699 | 28,346 | 14,016 | 13,603 | | Loan Services | 2,097 | 2,056 | 5,230 | 3,138 | | Total Segment Assets | 372,771 | 396,710 | - | - | | Total Segment Liabilities | - | - | 311,623 | 365,343 | 4. Other Income For the six months ended June 30, 2020, the Group's total other income increased to HK$4.386 million from HK$3.151 million in the prior year, primarily driven by HK$1.902 million in government subsidies | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Government Subsidies | 1,902 | – | 1,902 | | Estimated Interest Income from Loan to an Associate | 1,366 | 1,877 | (511) | | Estimated Interest Income from Lease Deposits Paid | 367 | 398 | (31) | | Interest Income from Bank Deposits | 604 | 535 | 69 | | Miscellaneous Income | 147 | 341 | (194) | | Total | 4,386 | 3,151 | 1,235 | - Government subsidies were the primary driver of other income growth in this period[61] 5. Other Gains and Losses For the six months ended June 30, 2020, the Group recorded total other losses of HK$0.537 million, a reduction from HK$0.716 million in the prior year, mainly from fair value changes in derivative financial instruments and financial assets at fair value through profit or loss | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Fair Value Change of Derivative Financial Instruments | (259) | (1,069) | 810 | | Fair Value Change of Financial Assets at Fair Value Through Profit or Loss | (278) | – | (278) | | Loss on Disposal of Property, Plant and Equipment | – | (177) | 177 | | Reversal of Impairment Loss on Loans Receivable | – | 502 | (502) | | Reversal of Impairment Loss on Trade Receivables | – | 28 | (28) | | Total | (537) | (716) | 179 | - The loss from fair value changes in derivative financial instruments decreased, but new losses arose from financial assets at fair value through profit or loss[62] 6. Finance Costs For the six months ended June 30, 2020, the Group's total finance costs decreased to HK$10.199 million from HK$11.562 million in the prior year, primarily due to a significant reduction in bank borrowing interest expenses | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Interest Expense on Bank Borrowings | 1,295 | 2,383 | (1,088) | | Interest Expense on Bonds | 3,000 | 3,000 | 0 | | Interest Expense on Lease Liabilities | 5,904 | 6,179 | (275) | | Total | 10,199 | 11,562 | (1,363) | - The reduction in interest expense on bank borrowings was the primary reason for the decrease in total finance costs[64] 7. Taxation For the six months ended June 30, 2020, the Group made no provision for Hong Kong Profits Tax or corporate income tax, as individual companies within the Group incurred losses or had tax losses to offset taxable profits - Hong Kong operates a two-tiered profits tax rate system, with the first HK$2 million of profits taxed at 8.25% and the remainder at 16.5%[65] - Mainland China subsidiaries were taxed at a rate of 25% during both periods[65] - No provision for Hong Kong Profits Tax or corporate income tax was required for the period, as Group companies incurred losses or possessed tax losses[65] 8. Loss for the Period For the six months ended June 30, 2020, the Group's loss for the period widened to HK$26.43 million from HK$25.593 million in the prior year, after deducting depreciation of property, plant and equipment and right-of-use assets | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Loss for the Period | (26,430) | (25,593) | (837) | | Depreciation of Property, Plant and Equipment | 1,717 | 1,581 | 136 | | Depreciation of Right-of-Use Assets | 34,470 | 37,943 | (3,473) | | Net Foreign Exchange Loss (Gain) | 36 | (30) | 66 | - Depreciation expense for right-of-use assets decreased, while depreciation for property, plant and equipment slightly increased[68] 9. Dividends During the interim period, the Group did not pay, declare, or propose any dividends, consistent with the prior year - No dividends were paid, declared, or proposed during the interim period[69] 10. Loss Per Share For the six months ended June 30, 2020, basic loss per share attributable to owners of the Company widened to 1.09 HK Cents from 1.05 HK Cents in the prior year, with no diluted loss per share presented due to the absence of potential ordinary shares | Metric | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Loss for Calculation of Basic Loss Per Share Attributable to Owners of the Company (HK$ Thousand) | (26,430) | (25,593) | | Weighted Average Number of Ordinary Shares for Basic Loss Per Share (Thousands) | 2,432,304 | 2,432,304 | | Basic Loss Per Share | (1.09 HK Cents) | (1.05 HK Cents) | - Diluted loss per share was not presented as there were no potential ordinary shares outstanding during either period[70] 11. Property, Plant and Equipment During the interim period, the Group acquired property, plant and equipment totaling approximately HK$0.909 million, a significant decrease from HK$6.26 million in the prior year, with no disposals | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Additions to Property, Plant and Equipment | 909 | 6,260 | | Disposals of Property, Plant and Equipment | – | 177 (Loss) | - Capital expenditure for additions to property, plant and equipment decreased significantly in this period[71] 12. Right-of-Use Assets As of June 30, 2020, the carrying amount of the Group's right-of-use assets was HK$229.318 million, a decrease from HK$264.329 million at the end of 2019, with depreciation expense of HK$34.47 million for the period | Item | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Carrying Amount of Right-of-Use Assets | 229,318 | 264,329 | | Depreciation Expense (H1 2020) | 34,470 | 37,943 (H1 2019) | | Total Cash Outflow for Leases (H1 2020) | 36,949 | - | | Additions to Right-of-Use Assets (H1 2020) | 264 | - | - Right-of-use assets primarily include cold storage facilities, offices, and motor vehicles[72] - Lease contracts have fixed terms ranging from 24 months to 8 years, with extension and/or termination options[73] 13. Interests in an Associate / Loans to an Associate / Amounts Due from an Associate As of June 30, 2020, the Group's interest in associate Loving Peace International Limited was zero due to accumulated losses and impairment, while loans to and amounts due from the associate increased | Item | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Interests in an Associate | – | 4,072 | | Loans to an Associate | 40,621 | 39,255 | | Amounts Due from an Associate | 12,316 | 8,077 | | Loving Peace Loss and Other Comprehensive Expense for the Period/Year | (26,858) | (73,180) | - The Group holds a 30% equity interest and 20% voting rights in Loving Peace International Limited, exercising significant influence[75] - Loans to an associate are unsecured, interest-free, and considered part of the Group's net investment in the associate[77] 14. Trade and Other Receivables, Deposits and Prepayments As of June 30, 2020, trade receivables (net of credit loss provision) increased to HK$59.901 million from HK$50.337 million at the end of 2019, with the Group typically granting 30 to 60 days credit | Ageing | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | 0 to 30 days | 20,829 | 20,897 | | 31 to 60 days | 20,694 | 17,413 | | 61 to 90 days | 6,375 | 6,468 | | 91 to 120 days | 5,071 | 2,477 | | Over 120 days | 6,932 | 3,082 | | Total | 59,901 | 50,337 | - Total trade receivables increased, with a significant rise in receivables over 120 days[83] - The Group does not charge interest on any overdue trade receivables[82] 15. Loans Receivable As of June 30, 2020, net loans receivable slightly increased to HK$2.015 million from HK$1.975 million at the end of 2019, with these loans being unsecured, interest-bearing, and maturing within 3 months to 1 year | Item | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Loans Receivable | 2,880 | 2,840 | | Less: Provision for Credit Losses | (865) | (865) | | Net Amount | 2,015 | 1,975 | - Loans receivable bear fixed annual interest rates ranging from 12% to 24% and have maturity dates between 3 months and 1 year[86] 16. Trade and Other Payables As of June 30, 2020, trade payables increased to HK$12.51 million from HK$10.911 million at the end of 2019, with a notable increase in amounts due within 0 to 30 days | Ageing | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | 0 to 30 days | 5,940 | 2,271 | | 31 to 60 days | 767 | 889 | | 61 to 90 days | 5,798 | 6,953 | | 91 to 120 days | 5 | 470 | | Over 120 days | – | 328 | | Total | 12,510 | 10,911 | - Total trade payables increased, with the most significant growth observed in amounts due within 0 to 30 days[89] 17. Lease Liabilities As of June 30, 2020, the Group's total lease liabilities decreased to HK$237.214 million from HK$268.91 million at the end of 2019, with HK$65.487 million due within one year | Item | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Total Lease Liabilities | 237,214 | 268,910 | | Due within One Year | 65,487 | 63,475 | | Due after One Year but Not More Than Two Years | 65,022 | 67,899 | | Due after Two Years but Not More Than Five Years | 106,705 | 137,536 | | Non-current Liabilities Due after 12 Months | 171,727 | 205,435 | - Total lease liabilities decreased, primarily reflected in the reduction of liabilities due between two and five years[91] 18. Share Capital As of June 30, 2020, the Company's authorized share capital was HK$600 million, divided into 60 billion ordinary shares of HK$0.01 each, with issued and fully paid share capital of HK$24.323 million, remaining unchanged from 2019 | Item | Number of Shares (Thousands) | Amount (HK$ Thousand) | | :--- | :--- | :--- | | Authorized Share Capital (Ordinary Shares of HK$0.01 each) | 60,000,000 | 600,000 | | Issued and Fully Paid Share Capital (Ordinary Shares of HK$0.01 each) | 2,432,304 | 24,323 | - The Company's authorized and issued share capital structure remained stable during the reporting period[92] 19. Derivative Financial Instruments The Group entered into a joint venture agreement with two independent investors, granting two put options to one investor (Investor A) for the purchase of shares and shareholder loans in the associate Loving Peace - The Group granted two put options to Investor A, involving the purchase of its shares and shareholder loans in the associate Loving Peace[93] - The first put option is exercisable within 36 months from the management services agreement date if specific key performance indicators are not met[93] - The second put option will be exercisable upon the expiration of 36 months from the agreement date, irrespective of key performance indicator achievement[95] 20. Bonds Bonds issued by the Group bear an annual interest rate of 6%, payable once a year, with maturity dates on the seventh anniversary of their respective issue dates (between November 2021 and May 2022) - Bonds bear an annual interest rate of 6%, payable once a year[96] - Bond maturity dates are the seventh anniversary of their respective issue dates, falling between November 2021 and May 2022[96] 21. Pledge of Assets As of June 30, 2020, the Group had HK$3.5 million in bank facilities pledged by equivalent bank deposits, with approximately HK$1.41 million utilized, and HK$64.285 million in bank deposits pledged for lease agreement guarantees | Pledge Type | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Bank Facilities Pledged by Bank Deposits | 3,500 | 3,500 | | Utilized Bank Facilities Amount | 1,410 | 3,480 | | Bank Guarantees for Lease Agreements Pledged by Bank Deposits | 64,285 | 62,068 | - The utilized bank facilities amount decreased from HK$3.48 million at the end of 2019 to HK$1.41 million in the current period[97] 22. Fair Value Measurement of Financial Instruments The Group's financial assets and liabilities are measured at fair value, categorized into Level 1, 2, or 3, with listed equity securities in Level 1 and derivative financial liabilities in Level 3 | Item | Fair Value Level | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Financial Assets at Fair Value Through Profit or Loss (Listed Equity Securities) | Level 1 | 408 | 686 | | Derivative Financial Liabilities | Level 3 | 6,984 | 6,725 | - The fair value of derivative financial instruments is calculated using a binomial model, with expected volatility as the key unobservable input (35.66% as of June 30, 2020)[104] - A slight decrease in expected volatility, holding other variables constant, would lead to a decrease in the fair value measurement of derivative instruments, and vice versa[104] 23. Related Party Transactions During the period, the Group engaged in significant related party transactions, including management service income of HK$5.485 million from an associate and total key management personnel remuneration of HK$3.708 million | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Management Fee Income (from an Associate) | 5,485 | 2,254 | | Directors' Fees | 552 | 421 | | Other Emoluments (Salaries and Benefits) | 3,044 | 2,980 | | Other Emoluments (Performance Bonuses) | – | 410 | | Other Emoluments (Contributions to Retirement Benefit Schemes) | 112 | 156 | | Total Key Management Personnel Emoluments | 3,708 | 3,967 | - A subsidiary of the Company entered into a management services agreement with an associate to assist in its cold storage business operations and receive management fees[107] Other Information This chapter discloses other important information, including directors' and major shareholders' interests, share option schemes, directors' interests in competing businesses, connected transactions, and corporate governance practices Disclosure of Interests This section discloses the interests of directors and major shareholders in the Company and its associated corporations as of June 30, 2020 Directors' Interests As of June 30, 2020, Executive Director Mr. Fung Pak Kei held a 10% equity interest in associate Loving Peace International Limited through his controlled corporation GIK Business Consulting Limited - Executive Director Mr. Fung Pak Kei holds a 10% equity interest in Loving Peace International Limited through his controlled corporation GIK Business Consulting Limited[109][110] - Loving Peace International Limited is the sole shareholder of Glory Green Cold Storage Services Limited[111] - Save as disclosed above, no other directors or chief executives had any disclosable interests or short positions in the shares, underlying shares, and debentures of the Company or its associated corporations[108] Major Shareholders' Interests As of June 30, 2020, major shareholders included Ever Achieve Enterprises Limited (holding 8.32%) and its ultimate beneficial owner Mr. Yuen Kin Wing, and Bingo Chance Limited (holding 5.76%) and its ultimate beneficial owner Ms. Wulglar Wai Wan | Shareholder Name/Name | Capacity | Number of Shares Held | Approximate Percentage of Total Issued Share Capital | | :--- | :--- | :--- | :--- | | Ever Achieve Enterprises Limited | Beneficial Owner | 202,323,133 | 8.32% | | Yuen Kin Wing | Interest in Controlled Corporation | 202,323,133 | 8.32% | | Bingo Chance Limited | Beneficial Owner | 140,000,000 | 5.76% | | Elite Plan Investments Limited | Interest in Controlled Corporation | 140,000,000 | 5.76% | | Wulglar Wai Wan | Interest in Controlled Corporation | 140,000,000 | 5.76% | - Ms. Wulglar Wai Wan is the sister of Mr. Ho Hon Chung, an Executive Director of the Company, and the sole ultimate beneficial owner of Elite Plan Investments Limited and Bingo Chance Limited[115] Share Option Scheme The Company adopted a new share option scheme ("2015 Scheme") on May 29, 2015, replacing the 2006 Scheme, effective from June 2, 2015, for a period of ten years - The Company approved the adoption of a new share option scheme on May 29, 2015, and terminated the 2006 scheme[116] - The 2015 Scheme became effective on June 2, 2015, and has a validity period of ten years[116] - As of June 30, 2020, there were no outstanding share options, and no share options had been granted since the adoption of the 2015 Scheme[116] Directors' Interests in Competing Businesses For the six months ended June 30, 2020, no directors, to the best of their knowledge, had any interests in businesses that directly or indirectly compete or are likely to compete with the Group's businesses - For the six months ended June 30, 2020, no directors, to the best of their knowledge, had any interests in businesses that directly or indirectly compete or are likely to compete with the Group's businesses[117] Connected Transactions and Directors' Interests in Contracts Upon the appointment of Executive Director Mr. Fung Pak Kei, his wholly-owned GIK Business Consulting Limited became a connected person of the Company, rendering a prior joint venture agreement a connected transaction - Upon the appointment of Executive Director Mr. Fung Pak Kei, his wholly-owned GIK Business Consulting Limited became a connected person of the Company[118] - Tianqun Development Limited, an indirect wholly-owned subsidiary of the Company, entered into a joint venture agreement with Below Zero (Hong Kong) Limited, GIK, and Loving Peace International Limited to jointly operate and manage a joint venture company primarily engaged in the cold storage business[120] - The Board has reviewed and confirmed that the transaction was entered into in the ordinary and usual course of the Group's business, on normal commercial terms or better, and in the overall interests of the shareholders[120] Purchase, Sale or Redemption of Listed Securities For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[121] Corporate Governance This section outlines the Group's corporate governance practices, including compliance with the Corporate Governance Code, directors' securities dealing policy, Audit Committee responsibilities, and risk management and internal control systems Corporate Governance Code The Company complied with most provisions of the HKEX Corporate Governance Code in H1 2020, with a deviation regarding the vacant Chairman position, which the Board believes has no negative impact - The Company complied with the principles and code provisions of the HKEX Corporate Governance Code in H1 2020, except for the vacant Chairman position[123] - Code Provision A.2.1 stipulates that the roles of Chairman and Chief Executive should be separate and not performed by the same individual, but the Company did not appoint a Chairman during the period[123] - The Board believes that not filling the Chairman vacancy has no negative impact on the Company, as decisions are made collectively by the Board, and the need to appoint a suitable person to perform the Chairman's functions will be continuously reviewed[124] Standard Code for Securities Transactions by Directors The Company has adopted a "Securities Dealing Policy" no less exacting than the Model Code set out in Appendix 10 of the Listing Rules, with all directors confirming compliance during the review period - The Company has adopted a written securities dealing policy whose terms are no less exacting than the required standards set out in the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules[125] - All Directors have confirmed their compliance with the required standards set out in the securities dealing policy during the review period[128] - The Company was not aware of any non-compliance during the review period[128] Audit Committee The Audit Committee reviewed the Group's accounting principles, risk management, internal controls, and financial reporting matters, including the interim results, confirming compliance with applicable standards and regulations - The Audit Committee has reviewed the Group's adopted accounting principles and practices and discussed risk management, internal controls, and financial reporting matters with the Directors[129] - The Committee believes that the Group's unaudited condensed consolidated results for the six months ended June 30, 2020, comply with applicable accounting standards, Listing Rules, and legal requirements, and that sufficient disclosures have been made[129] - The Audit Committee comprises three independent non-executive directors: Mr. Leung Chi Hung (Chairman), Mr. Fung Siu Kit, and Mr. Tse Yuen Ming[129] Risk Management and Internal Control The Board is responsible for maintaining appropriate and effective risk management and internal control systems, reviewed by the Audit Committee, and has found no deficiencies as of June 30, 2020 - The Board is responsible for maintaining appropriate and effective risk management and internal control systems for the Group and reviewing their effectiveness through the Audit Committee[130] - The Group has engaged an independent professional consultant to perform internal audit functions, conducting independent assessments of risk management and internal control systems for certain subsidiaries[132] - As of June 30, 2020, the Board is satisfied that the Group has adequate risk management and internal control procedures in place, and no issues were identified that would lead the Board to believe there were deficiencies in the Group's risk management and internal control systems[133]