信保环球控股(00723) - 2021 - 中期财报

Company Information This section provides details on the company's board, committees, banks, registered office, share registrar, auditor, stock trading information, and website Company Basic Information and Governance Structure The report details the board members, committee composition, principal bankers, Hong Kong head office, share registrar, auditor, share trading information, and company website for China Universal Holdings Limited - Board members include executive directors (Ms. Wang Jingyu, Mr. Li Mingwei, Ms. Chan Yuk Yee) and independent non-executive directors (Mr. Ren Guangzhen, Mr. Jiang Bin, Mr. Chai Zhiqiang)[7] - The company has an Executive Committee, Audit Committee, Remuneration Committee, and Nomination Committee[7] - Principal bankers include Bank of Communications Co., Ltd. Hong Kong Branch, Bank of Communications (Hong Kong) Limited, and Dah Sing Bank, Limited[7] - The company's shares are listed on the Hong Kong Stock Exchange, stock code 723[7] Management Discussion and Analysis This section details the Group's business performance, financial position, risk management, human resources, and future outlook for the interim period of 2020 Overall Business Performance Despite challenges from COVID-19 and the US-China trade war, the Group achieved significant growth in revenue and net profit, primarily driven by strong performance in timber supply chain and money lending businesses - The Group recorded excellent financial performance in an adverse business environment, with revenue increasing by 130% to HKD 477,277,000 and net profit by 64% to HKD 22,425,000[10] - Timber supply chain and money lending businesses were the main profit contributors, generating profits of HKD 15,758,000 and HKD 14,900,000 respectively[10] - The Group continues to operate four business segments: forest-related businesses (timber supply chain and sustainable forest management), money lending, and property leasing[10] Forest-Related Businesses Forest-related businesses include timber supply chain and sustainable forest management, with the former seeing significant growth in revenue and profit due to European expansion, while the latter's revenue declined due to Brazilian Real depreciation and contract completion - Timber supply chain business revenue increased by 141% to HKD 459,108,000, and profit increased by 220% to HKD 15,758,000[11] - Timber and wood product transaction volume increased by 152% to over 255,000 cubic meters, mostly on a CFR (Cost and Freight) basis[11] - Sustainable forest management business revenue decreased by 53% to HKD 447,000, resulting in a loss of HKD 347,000[19] - The decline in sustainable forest management revenue was mainly due to the depreciation of the Brazilian Real and the completion of licensing contracts[19] Timber Supply Chain The timber supply chain business, serving China and Asian clients through a global network (Europe, Oceania, Africa), saw substantial growth in revenue and profit, driven by increased transaction volumes and the expansion of an optimized business model in Europe - Business revenue and profit grew significantly, partly due to new timber transaction volumes in the European timber supply chain business and natural growth in existing operations[11] - Established a solid base of over 40 active customers and more than 60 suppliers, offering a wide range of timber and wood products[12] - Traditional business model revenue was HKD 366,902,000, while the optimized business model (European distribution centers and timber processing enterprises) contributed HKD 92,206,000 in revenue[14][15] - Established distribution centers in Slovenia, Romania, and Croatia, and a timber processing enterprise in Romania, enhancing competitive advantage and expanding customer base, revenue sources, and product variety[16] Sustainable Forest Management Since suspending logging in 2012, the Group manages its Brazilian forest assets by granting logging rights licenses, with over 50% of the forest area licensed; however, revenue declined significantly this period due to Brazilian Real depreciation and contract completion, leading to a loss - The Group has granted logging rights licenses for over 50% of its 44,500 hectares of forest area[19] - This business generated revenue of HKD 447,000 (a 53% year-on-year decrease) and incurred a loss of HKD 347,000[19] - Revenue reduction was mainly due to the depreciation of the Brazilian Real and the completion of licensing contracts[19] Money Lending Business Despite social unrest in Hong Kong and the COVID-19 pandemic, the money lending business achieved encouraging results with increased revenue and operating profit, having granted new loans totaling HKD 64,000,000 and maintaining a healthy loan portfolio, 88% of which is secured - Money lending business revenue increased by 10% to HKD 17,722,000, and operating profit increased by 11% to HKD 14,900,000[20] - New loans with a total principal of HKD 64,000,000 were granted during the period, with annual interest rates ranging from 10% to 13% and terms of 6 to 24 months[20] - The carrying value of the loan and finance lease portfolio totaled HKD 297,461,000, comprising 33 loans and finance leases[20] - 88% of the loan portfolio is secured, with a weighted average interest rate of approximately 11%, indicating healthy credit quality[25] - The Group has issued HKD 50,000,000 in interest-bearing notes to fund the development of its money lending business and pave the way for future fundraising from the Hong Kong capital market[29] Loan Portfolio Analysis The Group's loan portfolio primarily consists of first mortgage loans (83%), corporate loans (12%), second mortgage loans (3%), and finance leases (2%), mostly secured by Hong Kong properties or vehicles, with an average loan amount of approximately HKD 9,000,000 Loan/Finance Lease Categories and Proportions | Loan╱Finance Lease Category | Approximate Proportion of the Group's Loan and Finance Lease Portfolio Carrying Value | Annual Interest Rate | Original Maturity Date | Remarks | | :-------------------------- | :-------------------------------------------------------------------- | :------------------- | :------------------- | :------ | | First Mortgage Loans | 83% | 8.75%–14.5% | Within three years | Loans secured by properties located in Hong Kong | | Second Mortgage Loans | 3% | 13.5%–18% | Within two years | Loans secured by properties located in Hong Kong | | Corporate Loans | 12% | 9%–12.5% | Within one year | Loans primarily granted to companies listed in Hong Kong | | Finance Leases | 2% | 11% | Within three years | Finance leases secured by vehicles | - Average loan amount is approximately HKD 9,000,000, with 88% secured and a weighted average interest rate of approximately 11%[25] Risk Management and Credit Assessment The Group has established clear credit policies, guidelines, monitoring, and procedures covering the entire loan processing cycle from information verification, credit assessment, loan approval, monitoring, to collection, to effectively manage money lending business risks - Clear credit policies, guidelines, monitoring, and procedures are in place, covering all aspects of loan application processing[25] - A credit assessment mechanism is used to evaluate the credit quality of potential borrowers and define credit limits, reviewed regularly by management[25] - A provision of HKD 2,734,000 (March 31, 2020: HKD 1,980,000) has been made for expected credit losses on loans receivable[29] Property Leasing The Group held no investment properties during the interim period and is cautiously evaluating potential acquisition opportunities due to Hong Kong's volatile real estate market, prioritizing allocation of financial resources to higher-return money lending and forest-related businesses - The Group held no investment properties during the period[31] - Management is cautiously evaluating potential acquisition opportunities due to the volatile Hong Kong real estate market[31] - The current strategy is to prioritize allocating financial resources to money lending and forest-related businesses[31] Financial Review The Group recorded profit growth and increased basic earnings per share during the interim period, with administrative expenses rising primarily due to increased staff costs in the European timber supply chain business, and financing through shareholder loans, bank trade financing, and issued notes to support expansion and working capital - Profit attributable to owners of the Company increased by 55% to HKD 21,085,000, and basic earnings per share increased by 55% to HKD 0.232 cents[32] - Administrative expenses increased by 39% to HKD 11,367,000, mainly due to increased staff costs and administrative expenses in the European timber supply chain business[32] - Major shareholder Champion Alliance provided HKD 200,000,000 in loan financing, with an outstanding amount of HKD 190,000,000[33] - Secured HKD 314,000,000 in general trade financing and USD 150,000,000 and HKD 50,000,000 in bill discounting financing from reputable Hong Kong banks[33] - Issued the first tranche of HKD 50,000,000 three-year notes at an annual interest rate of 7.125%, secured by assets of the money lending subsidiary[34] Liquidity and Financial Resources The Group's current assets and cash and cash equivalents increased, resulting in a strong current ratio and a slight decrease in the gearing ratio; management believes existing financing arrangements provide sufficient working capital and financial resources - Current assets increased to HKD 534,380,000 (March 31, 2020: HKD 474,175,000), and cash and cash equivalents increased to HKD 122,591,000 (March 31, 2020: HKD 96,981,000)[36] - The current ratio was approximately 1.9 (March 31, 2020: 1.5), primarily due to increased loans receivable, higher cash levels, and reduced trade payables[36] - The gearing ratio slightly decreased to 55% (March 31, 2020: 59%), mainly due to increased profit during the period[37] - Equity attributable to owners of the Company increased by 11% to HKD 219,061,000, primarily from profits in the timber supply chain and money lending businesses[38] Pledged Assets The Group has pledged all business, property, and assets of its money lending subsidiary as a first floating charge to secure the three-year notes, and bills receivable are also pledged to banks as collateral for advances - A debenture has been issued, creating a first floating charge over all business, property, and assets of the money lending subsidiary as collateral for the three-year notes[40] - HKD 69,655,000 in bills receivable has been pledged to banks as collateral for advances against bills receivable[40] Contingent Liabilities Apart from the litigation disclosed in note 21 to the condensed consolidated interim financial statements, the Group had no other significant contingent liabilities at the end of the reporting period - The Group had no other significant contingent liabilities as of September 30, 2020, except for litigation disclosed in note 21[41] Litigation The Group faces a claim of approximately HKD 1,776,000 related to a contract dispute between a wholly-owned Brazilian subsidiary and a service provider; the case has been appealed to the Supreme Court, with the outcome pending, and the claim amount is included in other payables - The Group faces a claim of approximately HKD 1,776,000 (approximately BRL 1,291,000)[42] - The litigation involves a service agreement dispute between wholly-owned subsidiary UTRB and F Um Terraplanagem, with UTRB having appealed to the Supreme Court[42] - The claim amount has been included in other payables[42] Foreign Exchange Risk Operating primarily in Europe, Brazil, and Hong Kong, the Group faces potential foreign exchange risks from the Euro, Brazilian Real, and Renminbi; during the period, Euro appreciation against the HKD resulted in exchange gains, while fluctuations in Romanian Leu, Renminbi, and Brazilian Real were not significant - The Group faces potential foreign exchange risks from the Euro, Brazilian Real, and Renminbi[43] - Benefited from approximately 9% appreciation of the Euro against the HKD during the period, recording exchange gains[44] - Exchange rate fluctuation risks for the Romanian Leu, Renminbi, and Brazilian Real were not significant[44] - No hedging was undertaken for unrealized and non-cash foreign exchange risks[44] Human Resources and Remuneration Policy As of September 30, 2020, the Group had 46 employees, with total remuneration increasing by 47% primarily due to an increase in staff in the European timber supply chain business; the company remunerates employees based on market practice, individual capability, performance, and applicable laws, providing benefits and training - The Group has 46 employees (including directors) across Hong Kong, China, Europe, and Brazil[46] - Total remuneration paid to employees (including directors) increased by 47% to HKD 5,448,000, mainly due to increased staff in the European timber supply chain business[46] - Remuneration policy is based on market practice, individual capability, experience, and performance, offering paid leave, annual bonuses, provident funds, medical insurance, and training programs[46] Prospects Management remains cautiously optimistic about the Group's future financial performance, continuing to pursue internal growth and vertical expansion opportunities, having established new distribution centers in Europe and expanded its supplier and customer base to diversify and strengthen forest-related businesses - Management remains cautiously optimistic about the financial performance for the year ending March 31, 2021[48] - Will continue to explore internal growth and vertical expansion business opportunities to further expand operations and create new value for shareholders[47] - Established a new distribution center in Croatia, signed contracts with over 30 new suppliers in Europe, and successfully recruited over 15 new Chinese customers[47] - Will continue to adopt a prudent approach to managing timber supply chain and money lending businesses, and cautiously identify new business opportunities to mitigate the adverse effects of the COVID-19 pandemic[48] Listing Status The Company's shares have been suspended from trading since October 10, 2018, and have entered the second stage of the Stock Exchange's delisting process, requiring a viable resumption proposal by March 19, 2021, to demonstrate a substantial and sustainable business model - The Company's shares have been suspended from trading since October 10, 2018[76] - The Stock Exchange has placed the Company in the second stage of the delisting process, requiring a viable resumption proposal by March 19, 2021[51] - The Company is preparing a resumption proposal to demonstrate that it has a substantial business and that its business model is viable and sustainable[51] Financial Statements This section presents the Group's condensed consolidated interim financial statements, including the review report, statements of profit or loss and other comprehensive income, financial position, changes in equity, and cash flows Review Report on Condensed Consolidated Interim Financial Statements Grant Thornton Hong Kong Limited, independent auditor, reviewed the Group's condensed consolidated interim financial statements in accordance with Hong Kong Standard on Review Engagements 2410, concluding that they are prepared in all material respects in accordance with International Accounting Standard 34 "Interim Financial Reporting" - Grant Thornton Hong Kong Limited has reviewed the condensed consolidated interim financial statements[53] - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[54] - The conclusion is that the financial statements are prepared in all material respects in accordance with International Accounting Standard 34 "Interim Financial Reporting"[56] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group's condensed consolidated statement of profit or loss and other comprehensive income for the six months ended September 30, 2020, shows significant growth in both revenue and profit for the period, primarily driven by strong performance in the timber supply chain business, with exchange rate changes also contributing positively to comprehensive income Key Financial Performance Data (Six Months Ended September 30) | Indicator | 2020 (HKD thousands) | 2019 (HKD thousands) | Year-on-Year Change | | :-------- | :------------------- | :------------------- | :------------------ | | Revenue | 477,277 | 207,831 | +130% | | Cost of sales | (437,881) | (184,023) | +138% | | Other income | 1,054 | – | N/A | | Administrative expenses | (11,367) | (8,184) | +39% | | Operating profit | 28,329 | 14,488 | +95.5% | | Net finance costs | (2,548) | (227) | +1022% | | Profit before tax | 25,781 | 14,261 | +80.8% | | Income tax expense | (3,356) | (618) | +443% | | Profit for the period | 22,425 | 13,643 | +64.4% | | Profit attributable to owners of the Company | 21,085 | 13,643 | +54.5% | | Profit attributable to non-controlling interests | 1,340 | – | N/A | | Basic earnings per share | 0.232 HK cents | 0.150 HK cents | +54.7% | | Diluted earnings per share | 0.229 HK cents | 0.148 HK cents | +54.7% | | Exchange differences arising from translation of overseas operations | 248 | (160) | N/A | | Total comprehensive income for the period | 22,673 | 13,483 | +68.2% | Condensed Consolidated Statement of Financial Position As of September 30, 2020, the Group's condensed consolidated statement of financial position shows a slight decrease in total assets but a significant increase in net current assets, reflecting improved liquidity, with equity attributable to owners of the Company growing due to profit for the period Key Financial Position Data (As of September 30) | Indicator | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | Change | | :-------- | :--------------------------------- | :------------------------------- | :----- | | Non-current assets | 23,030 | 84,897 | -72.8% | | Current assets | 534,380 | 474,175 | +12.7% | | Current liabilities | 283,742 | 306,591 | -7.4% | | Net current assets | 250,638 | 167,584 | +49.6% | | Total assets less current liabilities | 273,668 | 252,481 | +8.4% | | Non-current liabilities | 52,711 | 53,805 | -2.0% | | Net assets | 220,957 | 198,676 | +11.2% | | Total equity attributable to owners of the Company | 219,061 | 197,917 | +10.7% | | Non-controlling interests | 1,896 | 759 | +149.8% | | Total equity | 220,957 | 198,676 | +11.2% | - Current ratio was approximately 1.9 (March 31, 2020: 1.5), indicating enhanced liquidity[36] - Total assets slightly decreased by 0.3% to HKD 557,410,000[38] Condensed Consolidated Statement of Changes in Equity For the six months ended September 30, 2020, the Group's total equity increased from HKD 198,676,000 at the beginning of the period to HKD 220,957,000, primarily due to profit for the period and exchange differences arising from the translation of financial statements of overseas subsidiaries Equity Changes Overview (Six Months Ended September 30) | Indicator | September 30, 2020 (HKD thousands) | April 1, 2020 (HKD thousands) | Change | | :-------- | :--------------------------------- | :------------------------------ | :----- | | Total equity attributable to owners of the Company | 219,061 | 197,917 | +21,144 | | Non-controlling interests | 1,896 | 759 | +1,137 | | Total equity | 220,957 | 198,676 | +22,281 | - Profit for the period contributed HKD 22,425,000, of which HKD 21,085,000 was attributable to owners of the Company[68] - Exchange differences arising from the translation of financial statements of overseas subsidiaries resulted in a gain of HKD 248,000[68] Condensed Consolidated Statement of Cash Flows For the six months ended September 30, 2020, the Group's net cash from operating activities significantly increased, while investing and financing activities resulted in net outflows; cash and cash equivalents at the end of the period increased from the beginning, reflecting an overall improvement in cash position Key Cash Flow Data (Six Months Ended September 30) | Indicator | 2020 (HKD thousands) | 2019 (HKD thousands) | Change | | :-------- | :------------------- | :------------------- | :----- | | Net cash from operating activities | 26,622 | 2,373 | +1022% | | Net cash (used in)/from investing activities | (46) | 21,778 | N/A | | Net cash (used in)/from financing activities | (1,456) | 5,904 | N/A | | Net increase in cash and cash equivalents | 25,120 | 30,055 | -16.4% | | Cash and cash equivalents at beginning of period | 96,981 | 25,433 | +281.3% | | Effect of exchange rate changes | 490 | 111 | +341.4% | | Cash and cash equivalents at end of period | 122,591 | 55,599 | +120.5% | - Net cash from operating activities significantly increased, indicating stronger cash generation from core businesses[73] - Financing activities shifted from net inflow to net outflow, mainly due to repayment of bank advances and payment of dividends to non-controlling shareholders[73] Notes to the Condensed Consolidated Interim Financial Statements This section provides detailed notes to the condensed consolidated interim financial statements, covering company information, basis of preparation, significant accounting policies, segment information, revenue, other income, profit before tax, income tax expense, dividends, earnings per share, property, plant and equipment, trade and other receivables, loans receivable, finance lease receivables, trade and other payables, bank borrowings, bills payable, lease liabilities, amounts due from a shareholder, share capital, litigation, significant related party transactions, approval for issue, and post-reporting period events 1. Company Information The Company is an exempted company incorporated in Bermuda, with shares listed on the Main Board of the Stock Exchange but suspended from trading since October 10, 2018; its principal activities are investment holding and management services, with subsidiaries engaged in money lending, forest-related businesses, and property leasing - The Company is incorporated in Bermuda, with shares listed on the Main Board of the Stock Exchange but suspended from trading since October 10, 2018[76] - Principal activities are investment holding and provision of management services, with subsidiary businesses including money lending, forest-related businesses (sustainable forest management and timber supply chain), and property leasing[76] 2. Basis of Preparation The condensed consolidated interim financial statements are prepared in accordance with Appendix 16 of the Listing Rules, International Financial Reporting Standards, and International Accounting Standard 34 "Interim Financial Reporting," and have been reviewed by independent auditors; the statements are presented in HKD, with all amounts stated in thousands - The statements comply with Appendix 16 of the Listing Rules and International Accounting Standard 34 "Interim Financial Reporting"[77] - Reviewed by Grant Thornton Hong Kong Limited in accordance with Hong Kong Standard on Review Engagements 2410[77] - Statements are presented in HKD, with all amounts stated in thousands[79] 3. Summary of Significant Accounting Policies The condensed consolidated interim financial statements are prepared under the historical cost convention and incorporate new and revised standards, amendments, and interpretations issued by the IASB, which have not had a significant impact on the results and financial position for the current and prior periods - Statements are prepared under the historical cost convention[80] - First-time application of amendments to IFRS 3, IFRS 16, IFRS 9, IAS 39, IAS 7, IAS 1, and IAS 8[83] - These developments have not had a significant impact on the results and financial position for the current and prior periods[83] 4. Segment Information The Group's reportable segments are categorized by business line (money lending, sustainable forest management, timber supply chain, property leasing) and geographical location, with the timber supply chain business contributing the most to revenue and segment results, followed by money lending, and property leasing having no revenue this period - The Group's operating segments include money lending, sustainable forest management, timber supply chain, and property leasing[85][86][87][88] Segment Revenue and Results (Six Months Ended September 30) | Segment | 2020 Revenue (HKD thousands) | 2019 Revenue (HKD thousands) | 2020 Segment Results (HKD thousands) | 2019 Segment Results (HKD thousands) | | :------ | :--------------------------- | :--------------------------- | :----------------------------------- | :----------------------------------- | | Money Lending | 17,722 | 16,171 | 14,900 | 13,416 | | Sustainable Forest Management | 447 | 950 | (347) | (127) | | Timber Supply Chain | 459,108 | 190,615 | 15,758 | 4,920 | | Property Leasing | – | 95 | – | 13 | | Total | 477,277 | 207,831 | 30,311 | 18,222 | - The timber supply chain business is the primary contributor to revenue and segment results, followed by the money lending business[92] - Sustainable forest management business continues to incur losses, and the property leasing business had no revenue this period[92] 5. Revenue The Group's revenue primarily stems from sales in the timber supply chain business, followed by interest income from money lending; this period saw significant growth in timber supply chain sales revenue, while income from granting logging rights and property leasing decreased or was zero Revenue Composition (Six Months Ended September 30) | Revenue Source | 2020 (HKD thousands) | 2019 (HKD thousands) | | :------------- | :------------------- | :------------------- | | Sales from timber supply chain business | 459,108 | 190,615 | | Interest income from money lending business | 17,605 | 15,554 | | Arrangement fee income from money lending business | 117 | 617 | | Income from granting logging rights | 447 | 950 | | Income from property leasing | – | 95 | | Total | 477,277 | 207,831 | - Sales revenue from the timber supply chain business increased by 141% year-on-year (HKD 459,108 thousand vs HKD 190,615 thousand)[108] - Interest income from money lending business increased by 13.2% year-on-year (HKD 17,605 thousand vs HKD 15,554 thousand)[108] 6. Other Income Other income for the period, totaling HKD 1,054,000, primarily comprised government grants and sundry income, with no such income in the prior year; government grants mainly originated from the Hong Kong SAR Government's Anti-epidemic Fund Other Income Composition (Six Months Ended September 30) | Income Source | 2020 (HKD thousands) | 2019 (HKD thousands) | | :------------ | :------------------- | :------------------- | | Government grants | 864 | – | | Sundry income | 190 | – | | Total | 1,054 | – | - Government grants originated from the Hong Kong SAR Government's Anti-epidemic Fund, aimed at alleviating financial burdens on enterprises[109] 7. Profit Before Tax The Group's profit before tax was HKD 25,781,000, primarily impacted by increased net finance costs, higher staff costs, inventory costs, depreciation expenses, and an increase in impairment provisions for loans receivable Profit Before Tax Components (Six Months Ended September 30) | Item | 2020 (HKD thousands) | 2019 (HKD thousands) | | :--- | :------------------- | :------------------- | | Net finance costs | 2,548 | 227 | | Staff costs (including directors' emoluments) | 5,448 | 3,718 | | Cost of inventories | 403,792 | 170,501 | | Depreciation of property, plant and equipment | 105 | 44 | | Depreciation of right-of-use assets | 881 | 762 | | Impairment loss on loans receivable | 863 | 1,054 | | Reversal of impairment loss on loans receivable | (109) | – | - Net finance costs significantly increased to HKD 2,548,000, mainly due to interest on bills payable and discounted bills receivable[113] - Staff costs increased by 47% to HKD 5,448,000[113] - Net impairment loss on loans receivable was HKD 754,000[113] 8. Income Tax Expense The Group's income tax expense was HKD 3,356,000, primarily consisting of Hong Kong profits tax and Romanian corporate income tax; Hong Kong profits tax is accrued at a uniform rate of 16.5%, with qualifying subsidiaries taxed at 8.25% for the first HKD 2,000,000 under the two-tiered tax rate regime Income Tax Expense (Six Months Ended September 30) | Tax Category | 2020 (HKD thousands) | 2019 (HKD thousands) | | :----------- | :------------------- | :------------------- | | Hong Kong profits tax | 3,306 | 618 | | Romanian corporate income tax | 50 | – | | Total | 3,356 | 618 | - Hong Kong profits tax is accrued at a uniform rate of 16.5%, with qualifying subsidiaries taxed at 8.25% for the first HKD 2,000,000 under the two-tiered tax rate regime[116] 9. Dividends The Board of Directors does not recommend the payment or declaration of any interim dividend for the six months ended September 30, 2020 - The Board of Directors does not recommend the payment or declaration of any dividend for the six months ended September 30, 2020[118] 10. Earnings Per Share The Group's basic earnings per share for the six months ended September 30, 2020, was HKD 0.232 cents, and diluted earnings per share was HKD 0.229 cents, both showing an increase compared to the prior year Earnings Per Share (Six Months Ended September 30) | Indicator | 2020 | 2019 | | :-------- | :------------- | :------------- | | Basic earnings per share | 0.232 HK cents | 0.150 HK cents | | Diluted earnings per share | 0.229 HK cents | 0.148 HK cents | - The weighted average number of ordinary shares used for basic earnings per share calculation was 9,105,710 thousand shares[121] - The potential dilutive effect from convertible preference shares was 106,283 thousand shares[121] 11. Property, Plant and Equipment During the six months ended September 30, 2020, the Group acquired property, plant, and equipment totaling HKD 216,000 - The Group acquired property, plant, and equipment totaling HKD 216,000 during the period[122] 12. Trade and Other Receivables The Group's total trade and other receivables amounted to HKD 104,520,000; trade receivables, net of impairment provisions, were HKD 2,499,000, of which HKD 2,294,000 was overdue, and HKD 69,655,000 in bills receivable were discounted with full recourse to banks Trade and Other Receivables (As of September 30) | Item | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | | :--- | :--------------------------------- | :------------------------------- | | Trade receivables (net) | 2,499 | 6,199 | | Bills receivable | 73,849 | 77,628 | | Interest receivable | 10,223 | 6,664 | | Other receivables | 1,115 | 5,805 | | Trade and logging deposits | 15,023 | 7,681 | | Other deposits and prepayments | 1,811 | 2,093 | | Total | 104,520 | 106,220 | - HKD 2,294,000 of trade receivables were overdue and unsecured[128] - HKD 69,655,000 in bills receivable were discounted with full recourse to banks, with maturity dates less than 90 days[129] - Trade and logging deposits increased to HKD 15,023,000, mainly related to prepayments for the timber supply chain business[130] 13. Loans Receivable The Group's total loans receivable amounted to HKD 292,161,000, with HKD 279,017,000 as current portion; all loans are denominated in HKD, with annual interest rates ranging from 8.75% to 18%, 88% of which are secured, and an impairment provision of HKD 2,734,000 has been made Loans Receivable (As of September 30) | Item | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | | :--- | :--------------------------------- | :------------------------------- | | Fixed-rate loans receivable (gross) | 294,895 | 308,870 | | Less: Impairment provision | (2,734) | (1,980) | | Loans receivable (net) | 292,161 | 306,890 | | Current portion | 279,017 | 234,230 | | Non-current portion | 13,144 | 72,660 | | Secured | 256,346 | 276,471 | | Unsecured | 35,815 | 30,419 | - All loans are denominated in HKD, with annual interest rates ranging from 8.75% to 18%[132] - HKD 256,346,000 of loans receivable are secured by borrowers' properties[136] - An impairment provision of HKD 2,734,000 has been made for loans receivable[136] 14. Finance Lease Receivables The Group's total finance lease receivables amounted to HKD 5,300,000, with HKD 4,402,000 as current assets; all finance leases are denominated in HKD, with an effective annual interest rate of 11%, and none were overdue or impaired at the reporting date Finance Lease Receivables (As of September 30) | Item | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | | :--- | :--------------------------------- | :------------------------------- | | Within one year (present value) | 4,402 | 3,347 | | After one year but within five years (present value) | 898 | 2,188 | | Total present value of finance lease receivables | 5,300 | 5,535 | - Finance lease receivables are denominated in HKD, with an effective annual interest rate of 11%[139] - All finance lease receivables were neither overdue nor impaired, and are secured by the leased assets[139] 15. Trade and Other Payables The Group's total trade and other payables amounted to HKD 17,286,000, a significant decrease from the beginning of the period; trade payables and bills payable totaled HKD 8,124,000, with an average credit period of within 30 days Trade and Other Payables (As of September 30) | Item | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | | :--- | :--------------------------------- | :------------------------------- | | Trade payables and bills payable | 8,124 | 34,754 | | Other payables and accrued expenses | 8,121 | 8,881 | | Amounts due to related parties | 899 | 1,493 | | Amounts due to non-controlling interests | 142 | – | | Total | 17,286 | 45,128 | - The aging analysis of trade payables and bills payable shows that most are due within 30 days[140] - The average credit period is within 30 days[140] 16. Bank Borrowings The Group's bank borrowings totaled HKD 69,655,000, primarily for advances against discounted bills receivable with full recourse, repayable within one year; all bank facilities are subject to covenants, which the Group had not breached at the reporting date - Bank borrowings totaled HKD 69,655,000, primarily for advances against discounted bills receivable with full recourse[143] - These borrowings are repayable within one year and secured by the related bills receivable[143] - The Group had not breached any bank facility covenants as of September 30, 2020[146] 17. Bills Payable The Company has issued the first tranche of HKD 50,000,000 three-year secured notes with an annual interest rate of 7.125%, collateralized by a first floating charge over the assets of its money lending subsidiary; due to the COVID-19 pandemic, the closing date for the placing agreement has been extended to December 31, 2020 - Issued the first tranche of HKD 50,000,000 three-year notes, with an annual interest rate of 7.125%, maturing on January 16, 2023[148] - The notes are secured by a first floating charge over all business, property, and assets of the money lending subsidiary[148] - The closing date for the placing agreement has been extended to December 31, 2020, due to the COVID-19 pandemic[148] 18. Lease Liabilities As of September 30, 2020, the Group's lease liabilities had a present value of HKD 3,037,000, with HKD 1,898,000 repayable within one year; no new capitalized leases were added during the period Lease Liabilities (As of September 30) | Item | September 30, 2020 (HKD thousands) | March 31, 2020 (HKD thousands) | | :--- | :--------------------------------- | :------------------------------- | | Within one year (present value) | 1,898 | 1,864 | | After one year but within two years (present value) | 1,139 | 1,933 | | After two years but within five years (present value) | – | 164 | | Total present value of lease liabilities | 3,037 | 3,961 | - No new capitalized leases were added during the period[151] 19. Amount Due from a Shareholder The Group has received HKD 190,000,000 in unsecured, interest-free loan financing from its major shareholder, Champion Alliance, who has committed not to demand repayment until the Group has sufficient financial resources if Stock Exchange approval is not obtained - Received HKD 190,000,000 in loan financing from major shareholder Champion Alliance, which is unsecured and interest-free[153] - The amount was originally intended for subscription of new shares to expand the capital base, subject to Stock Exchange approval[153] - Champion Alliance committed not to demand repayment if approval is not obtained, until the Group has sufficient financial resources[153] 20. Share Capital As of September 30, 2020, the Company's authorized share capital was HKD 575,340,000, and its issued and fully paid share capital was HKD 125,068,000, comprising ordinary shares and convertible preference shares Share Capital Structure (As of September 30) | Share Capital Type | Authorized Share Capital (thousands of shares) | Authorized Share Capital (HKD thousands) | Issued and Fully Paid Share Capital (thousands of shares) | Issued and Fully Paid Share Capital (HKD thousands) | | :----------------- | :------------------------------------------- | :--------------------------------------- | :-------------------------------------------------------- | :---------------------------------------------------- | | Ordinary Shares | 30,000,000 | 300,000 | 9,105,710 | 91,057 | | Convertible Preference Shares | 27,534,000 | 275,340 | 3,401,055 | 34,011 | | Total | 57,534,000 | 575,340 | 12,506,765 | 125,068 | 21. Litigation The Group faces a claim of approximately HKD 1,776,000 related to a contract dispute between a wholly-owned Brazilian subsidiary and a service provider; the case has been appealed to the Supreme Court, with the outcome pending, and the claim amount is included in other payables - The Group faces a claim of approximately HKD 1,776,000 (approximately BRL 1,291,000)[162] - The litigation involves a service agreement dispute between wholly-owned subsidiary UTRB and F Um Terraplanagem, with UTRB having appealed to the Supreme Court[162] - The claim amount has been included in other payables[162] 22. Significant Related Party Transactions During the period, the Group engaged in transactions with related parties, including paying management fees of HKD 489,000 to a company controlled by a director; amounts due from/to non-controlling interests and amounts due to related parties are unsecured, interest-free, and repayable on demand - Paid management fees of approximately HKD 489,000 to a company controlled by a director of one of the Company's subsidiaries[169] - Amounts due from/to non-controlling interests and amounts due to related parties are unsecured, interest-free, and repayable on demand[167][168] 23. Approval for Issue of Unaudited Condensed Consolidated Interim Financial Statements The unaudited condensed consolidated interim financial statements for the six months ended September 30, 2020, were authorized for issue by the Board of Directors on November 30, 2020 - The unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on November 30, 2020[171] 24. Events After Reporting Period The ongoing global COVID-19 pandemic continues to adversely affect the Group's business, and management deems it difficult to reliably quantify its future impact, continuously monitoring the situation and taking measures to mitigate adverse effects - The COVID-19 pandemic continues to adversely affect the Group's business[172] - Management considers it difficult to reliably quantify or estimate the extent of the pandemic's impact on future business[172] - Management will continue to closely monitor the situation and take necessary measures to mitigate adverse effects[172] Other Information This section covers additional disclosures including interim dividends, directors' and chief executive's interests in shares and debentures, directors' rights to acquire shares or debentures, shareholders' interests requiring disclosure under the SFO, standard code for securities transactions by directors, corporate governance, review of interim financial statements, and purchase, sale or redemption of listed securities Interim Dividend The Board of Directors resolved not to declare an interim dividend for the six months ended September 30, 2020 - The Board of Directors resolved not to declare an interim dividend for the six months ended September 30, 2020[174] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures As of September 30, 2020, Executive Director Ms. Wang Jingyu held a long position of 26.84% in the Company's shares through controlled corporations; no other directors or chief executives held disclosable interests in shares or debentures Directors' Long Positions in Shares (As of September 30) | Director's Name | Capacity and Nature of Interest | Number of Shares Held | Approximate Percentage of the Company's Issued Shares | | :-------------- | :------------------------------ | :-------------------- | :---------------------------------------------------- | | Ms. Wang Jingyu | Interest in controlled corporation | 2,444,359,944 | 26.84% | - Ms. Wang Jingyu's interests are held through Elite Prosperous Enterprises Limited and its wholly-owned subsidiary Champion Alliance Enterprises Limited, which she wholly owns[176] Directors' Rights to Acquire Shares or Debentures During the six months ended September 30, 2020, neither the Company nor its subsidiaries entered into any arrangements enabling directors to benefit from acquiring shares or debentures of the Company or other corporate bodies - During the period, neither the Company nor its subsidiaries entered into any arrangements enabling directors to benefit from acquiring shares or debentures[178] Shareholders' Interests and Short Positions Disclosable Under the Securities and Futures Ordinance As of September 30, 2020, major shareholders Ms. Wang Jingyu, Elite Prosperous, Champion Alliance, Ms. Lok Ka Yee, Mr. Liu Ka Chun, and Assure Gain International Limited held long positions of 5% or more in the Company's shares, as required by the Securities and Futures Ordinance Major Shareholders' Long Positions in Shares (As of September 30) | Shareholder Name | Capacity and Nature of Interest | Number of Shares Held | Approximate Percentage of Issued Shares | | :--------------- | :------------------------------ | :-------------------- | :-------------------------------------- | | Ms. Wang Jingyu | Interest in controlled corporation | 2,444,359,944 | 26.84% | | Elite Prosperous | Interest in controlled corporation | 2,444,359,944 | 26.84% | | Champion Alliance | Beneficial owner | 2,444,359,944 | 26.84% | | Ms. Lok Ka Yee | Interest in controlled corporation | 1,294,849,338 | 14.22% | | Mr. Liu Ka Chun | Spouse's interest | 1,294,849,338 | 14.22% | | Assure Gain International Limited | Beneficial owner and interest in controlled corporation | 822,176,547 + 434,094,363 | 13.80% (Beneficial) + N/A (Controlled) | - Ms. Lok Ka Yee holds interests in shares through Assure Gain, Winner Global, Splendid Asset, and Corp Insights[182] - Mr. Liu Ka Chun as Ms. Lok Ka Yee's spouse, is deemed to have the same interests in shares[183] Standard Code for Securities Transactions by Directors The Company has adopted the Standard Code as set out in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions, and all directors confirmed compliance with its required standards during the six months ended September 30, 2020 - The Company has adopted the Standard Code as set out in Appendix 10 of the Listing Rules[185] - All directors confirmed compliance with the required standards of the Standard Code during the reporting period[185] Corporate Governance The Company complied with all applicable code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules during the six months ended September 30, 2020, except for the Chairman's absence from the Annual General Meeting - The Company complied with all applicable code provisions of the Corporate Governance Code, except for code provision E.1.2 (Chairman should attend the Annual General Meeting)[186] - Mr. Li Mingwei, CEO and Executive Director, chaired the 2020 Annual General Meeting[186] - Independent Non-Executive Director Mr. Jiang Bin did not renew his Chartered Financial Analyst membership since July 1, 2020[187] Review of Condensed Consolidated Interim Financial Statements The Group's condensed consolidated interim financial statements for the six months ended September 30, 2020, are unaudited but have been reviewed by the Audit Committee and the Company's auditor, Grant Thornton Hong Kong Limited - The condensed consolidated interim financial statements are unaudited but have been reviewed by the Audit Committee and the Company's auditor[188] - The auditor's review report is published on pages 14 to 15 of this interim report[188] Purchase, Sale or Redemption of the Company's Listed Securities During the six months ended September 30, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the period, neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[190]