中国唐商(00674) - 2021 - 年度财报

Five-Year Financial Summary The company's losses fluctuated over five years; FY2021 saw significant increases in total assets, liabilities, and equity from new property development Five-Year Financial Summary The company's losses fluctuated over five years; FY2021 saw significant increases in total assets, liabilities, and equity from new property development Five-Year Performance Summary (As of March 31) | Metric | 2021 (HKD Thousands) | 2020 (HKD Thousands) | 2019 (HKD Thousands) | 2018 (HKD Thousands) | 2017 (HKD Thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Loss Attributable to Owners of the Company | (13,347) | (37,309) | (18,871) | (11,058) | (89,855) | Five-Year Assets and Liabilities Summary (As of March 31) | Metric | 2021 (HKD Thousands) | 2020 (HKD Thousands) | 2019 (HKD Thousands) | 2018 (HKD Thousands) | 2017 (HKD Thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 1,896,678 | 559,255 | 337,114 | 314,233 | 408,093 | | Total Liabilities | (1,334,566) | (430,493) | (245,158) | (212,913) | (273,709) | | Total Equity | 562,113 | 128,762 | 91,956 | 101,320 | 134,384 | Management Discussion and Analysis Financial Review FY2021 revenue fell 27.7% to HKD 56.7 million; annual loss expanded 41% to HKD 47.6 million, mainly from fair value losses and financial guarantee provisions FY2021 Consolidated Results | Metric | FY2021 (HKD Millions) | FY2020 (HKD Millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 56.7 | 78.4 | -27.7% | | Loss for the Year | 47.6 | 33.7 | +41.0% | - Key reasons for the significant increase in loss include: - Fair value loss on investment properties of approximately HKD 56 million[17][19] - Provision for financial guarantees of approximately HKD 22.9 million[17][19] Business Review Group business segments showed mixed performance; exhibition business was sold, property sub-leasing turned to loss, property development was acquired, and financial services scaled back Exhibition-related Business COVID-19 severely impacted exhibition business, with revenue plummeting 95.9% to HKD 0.5 million, leading to its disposal to mitigate losses Exhibition-related Business Performance | Metric | FY2021 (HKD Millions) | FY2020 (HKD Millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 0.5 | 12.3 | -95.9% | | Segment Loss | 0.7 | 2.9 | -75.9% | Property Sub-leasing and Investment Business Revenue for this segment decreased 14.2% to HKD 56.2 million, turning from profit to a HKD 0.3 million loss, mainly due to fair value losses on investment properties Property Sub-leasing and Investment Business Performance | Metric | FY2021 (HKD Millions) | FY2020 (HKD Millions) | Change | | :--- | :--- | :--- | :--- | | Revenue | 56.2 | 65.5 | -14.2% | | Segment (Loss)/Profit | (0.3) | 11.0 | Turned from Profit to Loss | Property Development Business The company entered property development via Peak Wisdom acquisition; this segment recorded a HKD 11 million loss with no revenue, as management plans further China investments - Entry into property development business was achieved through the acquisition of Peak Wisdom Investment Limited for a total consideration of HKD 36.7 million in cash and 800 million company shares[23][25] - This business segment recorded a loss of HKD 11 million for the year, with no revenue recognized[23][25] Financial Services Business Financial services performed weakly with no money lending interest income; the Group surrendered licenses in November 2020 to focus on core businesses - The money lending business recognized no interest income this year, compared to HKD 0.6 million in the prior year[27][28] - The Group surrendered Type 1, 2, 4, and 9 licenses to the SFC in November 2020, exiting the securities, futures, and asset management businesses[31][34] Outlook Despite COVID-19, management is cautiously optimistic about China's economy, focusing on property development, sub-leasing, and investment for sustainable growth - The Group remains cautious about business prospects, seeking potential investment opportunities under China's pandemic prevention policies to enhance profitability[32][35] - The company expects to leverage its experienced management team and resource network in China's real estate development sector to drive future growth in property development, sub-leasing, and investment projects in China[33][36] - The Group will continue to consolidate and adjust its businesses, striving for sustainable growth and exploring diversified investment opportunities to enhance overall profitability potential[38][39] Directors' Report Principal Activities and Business Review As an investment holding company, the Group's principal activities include exhibition, property sub-leasing, property development, and money lending, aiming for sustainable growth via China investments and cost control - The Group's principal activities include: (i) exhibition-related business; (ii) property sub-leasing and investment business; (iii) property development; and (iv) money lending business[43][49] - The Group's growth strategies are: (i) investing in more property sub-leasing and investment projects in China; (ii) venturing into property development business for diversification; and (iii) closely monitoring and reducing costs[45][51] Principal Risks and Uncertainties The Group faces business risks from changing consumer preferences, market risks tied to China's economy, operational risks from internal/external events, and financial/legal risks - Business risks: Exhibition, property sub-leasing and investment, and property development businesses are affected by changes in consumer perceptions, preferences, and tastes in China and Hong Kong[55][59] - Market risks: Property sub-leasing, investment, and development businesses are primarily conducted in China and are significantly influenced by China's economy and government measures[56][60] - Operational risks: Risks of losses due to inadequate internal processes, people, systems, or external events are managed by the Group through operating procedures and reporting frameworks[57][61][62] Results and Appropriations The Board does not recommend any dividend for FY2021, aiming to retain capital for business expansion and future investment opportunities - The Directors do not recommend the payment of any dividend for the year ended March 31, 2021 (2020: nil)[65] Share Option Scheme The 2012 share option scheme, designed to incentivize talent, had 27,942,462 outstanding options (1.2% of shares) as of March 31, 2021, and expires in August 2022 - As of March 31, 2021, the maximum number of shares issuable under all outstanding share options was 27,942,462, representing approximately 1.2% of the issued shares on the reporting date[77][80] - The share option scheme became effective on August 30, 2012, for a period of 10 years[85] Directors, Senior Management, and Interests The report details director and senior management biographies; Chairman Mr. Chan Wai Mo is the controlling shareholder, holding approximately 59.76% of company shares as of March 31, 2021 Directors' Long Positions in the Company's Shares (As of March 31, 2021) | Name of Director | Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Chan Wai Mo | Beneficial Owner | 800,000,000 | 34.65% | | | Interest in Controlled Corporation | 579,806,977 | 25.11% | | Total | | 1,379,806,977 | 59.76% | Substantial Shareholders Aside from Director Mr. Chan Wai Mo, his wholly-owned Grand Nice International Limited is the only other substantial shareholder, holding 25.11% of company shares Substantial Shareholders' Shareholding (As of March 31, 2021) | Name of Shareholder | Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Grand Nice International Limited | Beneficial Owner | 579,806,977 | 25.11% | Connected Transactions The Group engaged in significant connected transactions, including property leases with BTIT (controlled by Chairman Chan) and acquiring Peak Wisdom from Mr. Chan, entering China's property development market - The Group, as lessee, entered into multiple lease agreements with Beijing Tianan Kexin Property Co., Ltd. (BTIT), indirectly wholly owned by Chairman Mr. Chan Wai Mo, with lease terms ranging from 10 to 16 years[185][191][193] - For the year ended March 31, 2021, the total rent paid or payable by the Group under these lease agreements was RMB 13,791,000[196] - The Group entered into an agreement with Director Mr. Chan Wai Mo to acquire the entire share capital of Peak Wisdom Investment Limited and its subsidiaries for approximately HKD 36.72 million in cash and the issuance of 800 million consideration shares, thereby entering the property development business in China[196] Financial Review (Directors' Report) This fiscal year saw significant changes: total assets increased substantially from property development acquisition, total liabilities rose sharply, yet liquidity improved and financial health remains sound Assets Review As of March 31, 2021, current assets grew 320.4% due to HKD 770 million in properties under development; non-current assets also rose from investment properties and finance lease receivables - Current assets increased by HKD 1.01 billion (+320.4%) year-on-year, primarily due to a HKD 770 million increase in properties under development from an acquisition[207] - Non-current assets increased, mainly due to a HKD 101 million (+55.0%) rise in investment properties and a HKD 219 million (+385.8%) increase in finance lease receivables[209][210] Liabilities Review Current liabilities surged 219.9% to HKD 836 million, primarily due to a HKD 434 million increase in contract liabilities and new bank borrowings for Dongguan property development - Current liabilities increased by HKD 575 million (+219.9%) year-on-year, mainly due to a HKD 434 million (+40,890.7%) increase in contract liabilities and an increase in bank borrowings[211] Liquidity, Financial Resources, and Capital Structure As of March 31, 2021, total bank borrowings were HKD 290 million; gearing ratio slightly rose to 31.1%, but current ratio improved to 1.6, and net current assets significantly increased to HKD 493 million Financial Ratios | Metric | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Gearing Ratio | 31.1% | 28.1% | | Current Ratio | 1.6 | 1.2 | | Net Current Assets | HKD 492.8 million | HKD 54.7 million | Maturity Profile of Bank and Other Borrowings | Term | 2021 (HKD Millions) | 2020 (HKD Millions) | | :--- | :--- | :--- | | Within One Year | 289.5 | 67.0 | | Over One Year | — | 25.5 | | Total | 289.5 | 92.5 | Significant Investments, Acquisitions and Disposals The most significant capital activity was acquiring Peak Wisdom Investment Limited from Chairman Chan, marking the Group's entry into China's property development business, alongside disposing of Zonghua Elite Culture Development Co., Ltd. - The Group acquired Peak Wisdom Investment Limited, indirectly holding a 35% equity interest in Dongguan Huachuang Wenzhi Land Co., Ltd., commencing its property development business in China[231] - The Group disposed of Zonghua Elite Culture Development Co., Ltd. and its subsidiaries, which primarily engaged in sub-leasing business in Nanjing, China[234] Corporate Governance Report The Board and Committees The Board, with two executive and three independent non-executive directors, leads and monitors the company, supported by Audit, Remuneration, and Nomination Committees, ensuring effective oversight and compliance with governance codes - The Board comprises five directors, including two executive directors and three independent non-executive directors, meeting the requirement for independent non-executive directors to constitute over one-third of the Board[260] - The company has established Audit, Remuneration, and Nomination Committees, all chaired by independent non-executive directors with clearly defined written terms of reference[300][308][317] - During the reporting period, the company complied with all code provisions of Appendix 14 to the Listing Rules, "Corporate Governance Code"[250] Risk Management and Internal Control The Board is responsible for sound risk management and internal control systems, assessed by independent consultants and deemed effective and adequate after review by the Board and Audit Committee - The Board confirms its overall responsibility for maintaining sound and effective risk management and internal control systems[354][357] - The company engaged independent professional consultants to conduct an independent assessment of the risk management and internal control systems, finding no material deficiencies[367][370] - The Board, with the concurrence of the Audit Committee, considers the Group's risk management and internal control systems to be effective and adequate[370][372] Accountability, Audit, and Shareholder Relations This section clarifies director and auditor responsibilities, emphasizing transparent communication with shareholders; FY2021 audit fees were HKD 1.55 million, non-audit fees HKD 0.7 million FY2021 Auditor's Remuneration | Service Type | Amount (HKD) | | :--- | :--- | | Audit Services | 1,550,000 | | Non-Audit Services | 700,000 | - The company is committed to maintaining high transparency and communicates with shareholders through annual reports, interim reports, and annual general meetings[383][386] Independent Auditor's Report Auditor's Opinion Independent auditor BDO Limited issued an unqualified opinion, affirming the consolidated financial statements fairly present the Group's financial position, performance, and cash flows, complying with Hong Kong Companies Ordinance disclosure - The auditor believes that the consolidated financial statements fairly present the Group's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards[416][417] Key Audit Matters The sole key audit matter is "Assessment of Net Realizable Value of Properties Under Development," critical due to its significant amount (HKD 770 million, 41% of total assets) and reliance on management's estimates - The key audit matter is the assessment of the net realizable value of properties under development[422][423] - The significance of this matter lies in the substantial amount of properties under development, totaling HKD 770,392,961, representing approximately 41% of total assets, with its valuation relying on management's significant estimates of future selling prices and construction costs[425][426] Consolidated Financial Statements Consolidated Statement of Comprehensive Income For FY2021, total loss expanded to HKD 47.6 million, but HKD 53.6 million in other comprehensive income, mainly from exchange differences, significantly narrowed the loss attributable to owners to HKD 13.3 million Summary of Consolidated Statement of Comprehensive Income | Metric (HKD) | 2021 | 2020 (Restated) | | :--- | :--- | :--- | | Revenue | 56,158,591 | 66,081,448 | | Loss for the Year | (47,630,620) | (33,663,399) | | Other Comprehensive Income for the Year | 53,589,371 | (5,943,253) | | Total Comprehensive Income for the Year | 5,958,751 | (39,606,652) | | Loss for the Year Attributable to Owners of the Company | (13,347,485) | (37,308,877) | | Basic Loss Per Share (HK cents) | (0.67) | (3.46) | Consolidated Statement of Financial Position As of March 31, 2021, total assets increased to HKD 1.897 billion due to new properties under development; total liabilities rose to HKD 1.335 billion from increased contract liabilities and bank borrowings, with total equity growing to HKD 562 million Summary of Consolidated Statement of Financial Position | Metric (HKD) | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Total Non-Current Assets | 567,746,632 | 243,147,027 | | Total Current Assets | 1,328,931,707 | 316,107,474 | | Total Assets | 1,896,678,339 | 559,254,501 | | Total Current Liabilities | 836,172,979 | 261,365,793 | | Total Non-Current Liabilities | 498,392,612 | 169,127,174 | | Total Liabilities | 1,334,565,591 | 430,492,967 | | Total Equity | 562,112,748 | 128,761,534 | Consolidated Statement of Cash Flows This fiscal year saw net cash outflows of HKD 31.2 million from operations and HKD 237 million from investing, offset by HKD 175 million net inflow from financing, resulting in a HKD 92.9 million decrease in cash and cash equivalents Summary of Consolidated Statement of Cash Flows | Metric (HKD) | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash (Used in)/Generated from Operating Activities | (31,175,990) | 14,098,377 | | Net Cash Used in Investing Activities | (236,505,733) | (5,412,307) | | Net Cash Generated from Financing Activities | 174,794,008 | 22,092,942 | | (Decrease)/Increase in Cash and Cash Equivalents | (92,887,715) | 30,779,012 | | Cash and Cash Equivalents at End of Year | 61,590,019 | 150,430,813 | Notes to the Consolidated Financial Statements This section provides detailed explanations, accounting policies, key estimates, judgments, and supplementary information crucial for understanding the financial statement data Segment Reporting (Note 6) Continuing operations are segmented into property sub-leasing, property development, and money lending; property sub-leasing contributed most revenue but a slight loss, while new property development recorded a HKD 11 million loss without revenue FY2021 Segment Results of Continuing Operations (Before Income Tax Expense) | Business Segment | External Revenue (HKD) | Segment (Loss)/Profit (HKD) | | :--- | :--- | :--- | | Property Sub-leasing and Investment | 56,158,591 | (330,609) | | Property Development | - | (11,018,074) | | Money Lending Business | - | (239,344) | | Subtotal | 56,158,591 | (11,588,027) |