朸浚国际(01355) - 2021 - 中期财报

CORPORATE INFORMATION Board of Directors and Committee Composition The company's board comprises executive, non-executive, and independent non-executive directors, supported by audit, nomination, and remuneration committees to ensure robust corporate governance - The Board of Directors includes executive directors Chen Wu (CEO) and Zhong Tianxin, non-executive directors Yuan Fui (Chairman) and Hu Xinglong, and independent non-executive directors Wu Jilin, Du Hongwei, and Li Zhou[4] - The Audit Committee is chaired by Wu Jilin, the Nomination Committee by Li Zhou, and the Remuneration Committee by Du Hongwei[4][6] Key Advisors and Offices The company collaborates with major banks, auditors, and legal advisors, maintaining registered offices in the Cayman Islands and headquarters in Hong Kong, along with share registrars in both locations - Key banking partners include Industrial Bank Co., Ltd. (China), Hang Seng Bank Limited (Hong Kong), and Bank of China (Hong Kong) Limited[6] - The auditor is BDO Limited, and the Hong Kong legal advisor is Messrs. Chiu & Partners[6] - The company's stock code is 1355, and its website is www.legend-strategy.com[9](index=9&type=chunk) MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS REVIEW The group primarily engages in accommodation operations, consulting, and facility management services, alongside a money lending business, achieving significant performance growth in H1 2021 through strategic adjustments and cost control amid tourism recovery - The group's main businesses are accommodation operations, accommodation consulting, and accommodation facility management services, in addition to a money lending business[11][13] - As of June 30, 2021, the group operated 5 leased accommodation projects[11][13] - The group adjusted its business strategy to develop serviced apartment projects like youth hostels and elderly apartments, upgrading brands and products, optimizing member benefits, and enhancing customer experience and efficiency[12][13] Accommodation Operations Business Accommodation operations business achieved significant growth in H1 2021, with revenue increasing by 146.1% year-on-year, driven by domestic pandemic control, tourism recovery, and the full opening of Chengdu and Wuhan stores Accommodation Operations Business Revenue | Indicator | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | Year-on-Year Growth Rate | | :--- | :--- | :--- | :--- | | Revenue | 28,706 | 11,666 | 146.1% | - The increase in revenue is primarily attributed to favorable domestic pandemic control and policies, accelerated tourism market recovery, and the full opening of Chengdu and Wuhan stores at the beginning of the year, which increased the number of available rooms[16][17][18] - The group continues to invest in accommodation projects, providing differentiated rental services and enhancing product and service quality through refined operations to maximize revenue[17][18] Accommodation Projects Under Operations The group's Huizhou, Nanshan, Bao'an, Chengdu, and Wuhan stores all showed positive operating trends in H1 2021, benefiting from tourism market recovery and new store openings, leading to improved occupancy rates and revenue - Despite a reduction in room count, the Huizhou store achieved an average occupancy rate of 80%, a 29% year-on-year increase, with room revenue largely consistent with the prior period[26][27] - The Nanshan store's operating performance continuously improved, with a significant year-on-year revenue increase, benefiting from the recovery of the domestic tourism market and increased business travel demand[29][30] - The Chengdu and Wuhan stores, opened in early 2021, achieved expected results and stable operations through enhanced marketing and management efforts[32][34][35] Accommodation Facility Management and Accommodation Consulting Services To mitigate uncertainties in accommodation operations revenue due to the pandemic, the group strengthened its facility management and consulting services, offering professional cleaning, disinfection, material management, quality control, and project development services, which are expected to continuously improve group performance - The group provides outsourced accommodation facility management services, including professional cleaning, disinfection, material management, and quality control[36][38] - Accommodation consulting services cover market research, investment feasibility analysis, architectural design consulting, and project planning, opening, and construction management[37][38] - These services are considered less affected by the pandemic and are expected to continuously improve the group's business performance in the foreseeable future[36][38] OUTLOOK Despite recurring pandemic outbreaks in H2 2021, the group will strengthen its core business, expand operations in Chengdu and Wuhan, and continue to refine accommodation projects and consulting management services, offering diversified and quality products to expand market share and achieve comprehensive full-year growth - The group will continue to actively strengthen its core business foundation, forming brand synergy, and expects a significant boost in accommodation business as customer bases for Chengdu and Wuhan stores expand and operational scale increases[40][44] - The group will strategically offer diversified and quality product services, such as youth hostels, elderly apartments, and elderly resorts, to expand market share and achieve comprehensive full-year performance growth[40][44] FINANCIAL REVIEW For the six months ended June 30, 2021, the group's revenue increased by 146.1% year-on-year to HK$28,706 thousand, with total comprehensive loss decreasing by 17.2% to HK$9,295 thousand, driven by increased total available room nights, average occupancy, and RevPAR, despite higher operating and finance costs due to new store openings H1 2021 Key Financial Indicators | Indicator | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | Change Rate | | :--- | :--- | :--- | :--- | | Revenue | 28,706 | 11,666 | +146.1% | | Total Comprehensive Loss | (9,295) | (11,231) | -17.2% | Accommodation Operations Key Data | Indicator | H1 2021 | H1 2020 | Change | | :--- | :--- | :--- | :--- | | Total Available Room Nights | 98,150 | 94,547 | +3.8% | | Average Occupancy Rate | 71.1% | 45.6% | +25.5% | | Average Room Rate (RMB) | 267.4 | 255.8 | +RMB11.6 | | RevPAR (RMB) | 190.2 | 116.5 | +RMB73.7 (+63.3%) | Operating Costs For the six months ended June 30, 2021, total operating costs increased by 55.3% year-on-year to HK$33,546 thousand, primarily due to increased depreciation of right-of-use assets, property, plant and equipment, employee benefit expenses, and utility costs from the opening of Chengdu and Wuhan stores Total Operating Costs Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | Change (HK$ thousand) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Depreciation of right-of-use assets | 10,960 | 7,262 | +3,698 | +50.9% | | Depreciation of property, plant and equipment | 3,145 | 1,516 | +1,629 | +107.5% | | Employee benefit expenses | 11,214 | 6,748 | +4,466 | +66.2% | | Utilities | 1,244 | 599 | +645 | +107.7% | | Other operating expenses | 6,983 | 5,470 | +1,513 | +27.7% | | Total | 33,546 | 21,595 | +11,951 | +55.3% | - Employee benefit expenses increased mainly due to an increase in the number of employees following the commencement of operations at Chengdu and Wuhan stores[50] - Other operating expenses increased due to higher operating costs associated with improved average occupancy rates and one-off expenses incurred from the opening of Chengdu and Wuhan stores[50] Finance Costs Finance costs increased by HK$2,387 thousand year-on-year to HK$4,143 thousand, primarily due to increased interest on lease liabilities from new lease agreements for Chengdu and Wuhan stores in H2 2020 Finance Costs | Indicator | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | Change (HK$ thousand) | | :--- | :--- | :--- | :--- | | Finance Costs | 4,143 | 1,756 | +2,387 | - The increase in finance costs was mainly due to increased interest on lease liabilities from new lease agreements entered into for Chengdu and Wuhan stores in H2 2020[54][57] Liquidity and Financial Resources As of June 30, 2021, the group's bank and cash balances significantly decreased to HK$7,364 thousand from year-end 2020, with total liabilities exceeding total assets by HK$7,241 thousand, though the controlling shareholder pledged continuous financial support to ensure going concern Liquidity Position | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Bank and cash balances | 7,364 | 19,969 | | Total liabilities exceeding total assets | 7,241 | (2,054) (Net Assets) | - The group primarily funds its operations and expansion through internal working capital and interest-free, unsecured, and on-demand loans from the controlling shareholder[55][58] - The controlling shareholder has agreed to provide continuous financial support, including not demanding repayment of approximately HK$27,574 thousand in loans and providing an unutilized credit facility of approximately HK$172,426 thousand, to ensure the group's continued operation[60][115][177] Foreign Exchange Risk For the six months ended June 30, 2021, the group's assets, liabilities, income, and expenses were primarily denominated in RMB and HKD, thus not exposing it to significant foreign exchange rate fluctuation risks - The group's majority financial activities are denominated in RMB and HKD[60] - The group is not exposed to significant exchange rate fluctuation risks from foreign exchange contracts, interest rates, currency swaps, or other financial derivative instruments[60] Capital Structure For the six months ended June 30, 2021, the group's capital structure remained unchanged, with a total of 448,363,708 issued shares - As of June 30, 2021, the total number of issued shares of the company was 448,363,708, which remained unchanged from December 31, 2020[60] Dividends The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The directors do not recommend the payment of an interim dividend for the six months ended June 30, 2021 (H1 2020: nil)[60] Sufficiency of Public Float As of the reporting date, at least 25% of the company's total issued share capital is held by the public, complying with listing rule requirements - As of the reporting date, at least 25% of the company's total issued share capital is held by the public[60] Employee and Remuneration Policies As of June 30, 2021, the group had 123 employees, with remuneration determined based on market terms, individual performance, qualifications, and experience, including discretionary bonuses and retirement scheme contributions Number of Employees | Date | Number of Employees | | :--- | :--- | | June 30, 2021 | 123 | | December 31, 2020 | 124 | - Remuneration is determined with reference to market terms and each employee's performance, qualifications, and experience[60] - Other benefits include contributions to retirement schemes, and discretionary bonuses are paid based on individual performance[60] Charges on Assets As of June 30, 2021, the group had no charges on any assets - As of June 30, 2021, the group had no charges on any assets (December 31, 2020: nil)[62] Capital Commitments and Contingent Liabilities As of June 30, 2021, the group had capital commitments of HK$7,497 thousand but no significant contingent liabilities Capital Commitments | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Contracted capital commitments | 7,497 | 12,002 | - As of June 30, 2021, the group had no significant contingent liabilities[62] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2021, neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities, nor issued or exercised any convertible securities, options, warrants, or similar rights - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the six months ended June 30, 2021[62] - Neither the company nor any of its subsidiaries issued or granted any convertible securities, options, warrants, or similar rights, nor exercised any conversion or subscription rights[62] Corporate Governance Practices The company is committed to maintaining high standards of corporate governance and complied with the Corporate Governance Code set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2021 - The company has complied with the code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules[62] - The Board will continue to review and update its corporate governance practices from time to time to ensure compliance with legal and commercial standards[62] Changes in Directors' Information As of the reporting date, there were no changes in directors' information requiring disclosure under Rule 13.51B(1) of the Listing Rules - No changes in directors' information are required to be disclosed under Rule 13.51B(1) of the Listing Rules[64][67] Model Code for Securities Transactions The group has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors and relevant employees confirmed compliance during January 1 to June 30, 2021, with no non-compliance issues found - The group has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[65][68] - All directors and relevant employees confirmed compliance with the Model Code during the period from January 1 to June 30, 2021, with no non-compliance issues identified[65][68] Audit Committee Review The Audit Committee, comprising three independent non-executive directors, reviewed the group's accounting principles, policies, internal controls, and financial reporting matters, including the unaudited condensed interim results, and had no disagreements on the accounting treatments adopted - The Audit Committee comprises three independent non-executive directors, with Mr. Wu Jilin as chairman[66][69] - The committee reviewed the group's accounting principles and policies, and discussed and reviewed internal controls and financial reporting matters, including the unaudited condensed interim results for the six months ended June 30, 2021[66][69] - The Audit Committee had no disagreements on the accounting treatments adopted[66][69] Review of Interim Results The unaudited condensed consolidated interim financial information for the six months ended June 30, 2021, has been reviewed by the company's auditor, BDO Limited - The group's unaudited condensed consolidated interim financial information for the six months ended June 30, 2021, has been reviewed by the company's auditor, BDO Limited[71] Share Option Scheme The company's share option scheme expired on June 21, 2021, with no share options granted during its validity period, resulting in no outstanding unexercised options at expiry - The company's share option scheme became effective on June 22, 2011, and expired on June 21, 2021[71] - No share options were granted by the company during the validity period of the scheme[71] - Consequently, there were no outstanding unexercised share options under the scheme at its expiry date[71] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2021, Director Mr. Yuan Fui held a 71.72% share interest in the company through his controlling company, Hehui International Development Limited, with no other directors or chief executives holding other interests or short positions Directors' Interests in Shares | Director | Capacity/Nature of Interest | Number of Shares | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Yuan Fui | Interest of a controlled corporation | 321,580,510 | 71.72% | - Mr. Yuan Fui wholly owns Hehui International Development Limited and is therefore deemed to have an interest in the 321,580,510 shares held by Hehui[78] - Save for Mr. Yuan Fui, as of June 30, 2021, no other directors or chief executives had any interests or short positions in the company's shares, underlying shares, or debentures[79][80] Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company As of June 30, 2021, excluding directors, substantial shareholder Hehui International Development Limited held 71.72% of the company's shares, and Mr. Chen Hui held 7.97% through his controlled companies Substantial Shareholders' Interests in Shares | Name/Company Name | Capacity | Number of Shares | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Hehui International Development Limited | Beneficial owner | 321,580,510 | 71.72% | | Chen Hui | Interest of a controlled corporation | 35,740,071 | 7.97% | - Mr. Chen Hui indirectly held 35,740,071 shares in the company through Smart Gathering Cayman and its wholly-owned CHINA DRAGON ASIA CHAMPION FUND SERIES SPC[85][86] - Save for the aforementioned disclosures, as of June 30, 2021, no other persons had any interests or short positions in the shares or underlying shares[88] REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INTRODUCTION The auditor has reviewed the condensed consolidated financial statements of Legend Strategy International Holdings Limited and its subsidiaries for the six months ended June 30, 2021, prepared in accordance with Hong Kong Accounting Standard 34 - The auditor has reviewed the group's condensed consolidated financial statements for the six months ended June 30, 2021[92][93] - These financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[92][93] SCOPE OF REVIEW The auditor conducted the review in accordance with Hong Kong Standard on Review Engagements 2410, which is significantly less in scope than an audit, thus no audit opinion is expressed - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[95] - The scope of a review is substantially less than an audit, and therefore the auditor does not express an audit opinion[95] CONCLUSION The auditor found no matters that cause them to believe the condensed consolidated financial statements are not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 - The auditor has not found any matters that cause them to believe the condensed consolidated financial statements are not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34[95] MATERIAL UNCERTAINTY RELATED TO GOING CONCERN The group recorded a loss of HK$9,599 thousand for the six months ended June 30, 2021, and its total liabilities exceeded total assets by HK$7,241 thousand, indicating a material uncertainty regarding going concern, though the auditor expresses no reservation in this regard - The group recorded a loss of HK$9,599 thousand for the six months ended June 30, 2021[95] - As of that date, the group's total liabilities exceeded its total assets by HK$7,241 thousand[95] - These conditions indicate the existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern, but the auditor has no reservation in this respect[95] CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2021, the group's revenue was HK$28,706 thousand, with a loss for the period of HK$9,599 thousand and total comprehensive loss of HK$9,295 thousand, showing an improvement compared to the prior period Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary | Indicator | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 28,706 | 11,666 | | Operating loss | (4,044) | (8,314) | | Finance costs | (4,143) | (1,756) | | Loss before tax | (8,187) | (10,070) | | Loss for the period | (9,599) | (11,004) | | Total comprehensive loss for the period | (9,295) | (11,231) | Loss Per Share | Indicator | H1 2021 (HK cents) | H1 2020 (HK cents) | | :--- | :--- | :--- | | Basic and diluted loss per share | (1.78) | (2.25) | - Loss for the period attributable to owners of the company was HK$7,994 thousand, and to non-controlling interests was HK$1,605 thousand[99] CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Financial Position Overview As of June 30, 2021, the group's total assets were HK$227,999 thousand and total liabilities were HK$235,240 thousand, resulting in net liabilities of HK$7,241 thousand, a shift from net assets of HK$2,054 thousand at year-end 2020 Condensed Consolidated Statement of Financial Position Summary | Indicator | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Non-current assets | 208,217 | 207,029 | | Current assets | 19,782 | 24,499 | | Total Assets | 227,999 | 231,528 | | Current liabilities | 91,065 | 81,636 | | Non-current liabilities | 144,175 | 147,838 | | Net (Liabilities) Assets | (7,241) | 2,054 | | Total Equity | (7,241) | 2,054 | - Property, plant and equipment increased from HK$36,332 thousand at year-end 2020 to HK$47,629 thousand as of June 30, 2021[101] - Trade and other payables significantly increased from HK$12,238 thousand at year-end 2020 to HK$34,307 thousand as of June 30, 2021[101] CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity Changes As of June 30, 2021, the group's total equity shifted from net assets of HK$2,054 thousand on January 1, 2021, to net liabilities of HK$7,241 thousand, primarily due to a loss for the period of HK$7,994 thousand attributable to owners and HK$1,605 thousand to non-controlling interests Condensed Consolidated Statement of Changes in Equity Summary | Item | January 1, 2021 (HK$ thousand) | Loss for the Period (HK$ thousand) | Other Comprehensive Income (HK$ thousand) | June 30, 2021 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Equity attributable to owners of the company | 7,073 | (7,994) | 308 | (613) | | Non-controlling interests | (5,019) | (1,605) | (4) | (6,628) | | Total Equity | 2,054 | (9,599) | 304 | (7,241) | - The loss for the period was HK$9,599 thousand, of which HK$7,994 thousand was attributable to owners of the company[106] - Exchange differences arising from the translation of overseas operations resulted in HK$308 thousand in other comprehensive income[106] CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Cash Flow Overview For the six months ended June 30, 2021, the group generated net cash from operating activities of HK$4,602 thousand, but net cash outflows from investing and financing activities led to a net decrease in cash and cash equivalents of HK$12,813 thousand Condensed Consolidated Statement of Cash Flows Summary | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Net cash generated from operating activities | 4,602 | 22 | | Net cash used in investing activities | (14,055) | (763) | | Net cash used in financing activities | (3,360) | (673) | | Net decrease in cash and cash equivalents | (12,813) | (1,414) | | Cash and cash equivalents at end of period | 7,364 | 9,580 | - Net cash outflow from investing activities was primarily due to HK$14,064 thousand spent on purchasing property, plant and equipment[110] - Net cash outflow from financing activities mainly included repayment of borrowings of HK$9,611 thousand, lease interest paid of HK$4,132 thousand, and repayment of lease liabilities of HK$6,607 thousand[110] NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION Legend Strategy International Holdings Limited, incorporated in the Cayman Islands, primarily engages in accommodation operations and related services in China, with its ultimate holding company, Hehui International Development Limited, wholly and beneficially owned by Mr. Yuan Fui - The company is incorporated in the Cayman Islands, and its shares are listed on the Main Board of The Stock Exchange of Hong Kong[112] - The group primarily engages in accommodation operations and provides accommodation consulting and facility management services in China[112] - The ultimate holding company is Hehui International Development Limited, wholly and beneficially owned by Mr. Yuan Fui, a non-executive director[112] 2. GOING CONCERN The group recorded a loss of HK$9,599 thousand and had total liabilities exceeding total assets by HK$7,241 thousand as of June 30, 2021, indicating a material uncertainty regarding going concern; however, the controlling shareholder's commitment to provide sufficient financial support, including not demanding loan repayment and offering unutilized credit facilities, leads the Board to consider the preparation of financial statements on a going concern basis appropriate - As of June 30, 2021, the group recorded a loss of HK$9,599 thousand, and its total liabilities exceeded total assets by HK$7,241 thousand[112][115] - The controlling shareholder has committed not to demand repayment of approximately HK$27,574 thousand owed by the group until the company is able to meet all its other obligations[115] - As of June 30, 2021, the group had an unutilized credit facility of approximately HK$172,426 thousand granted by the controlling shareholder available for use[115] 3. BASIS OF PREPARATION The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited - 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[118][122] 4. PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements are prepared on a historical cost basis, with the first-time application of HKFRS amendments, including Interest Rate Benchmark Reform – Phase 2, and early adoption of HKFRS 16 "Covid-19-Related Rent Concessions beyond 30 June 2021" amendments, none of which had a significant impact on financial position or performance - The condensed consolidated financial statements are prepared on a historical cost basis[119][123] - The group first applied amendments to Hong Kong Financial Reporting Standards, including Interest Rate Benchmark Reform – Phase 2[126] - The group early adopted amendments to HKFRS 16 "Covid-19-Related Rent Concessions beyond 30 June 2021," which had no significant impact on its financial position and performance[126] 5. REVENUE AND SEGMENT INFORMATION The group primarily engages in accommodation operations, accommodation consulting, and facility management services in China, generating total revenue of HK$28,706 thousand for the six months ended June 30, 2021, with HK$25,414 thousand from accommodation operations and facility management, and HK$3,292 thousand from accommodation consulting services - The group primarily engages in accommodation operations, providing accommodation consulting and accommodation facility management services[128][131] Revenue Composition | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Accommodation operations and provision of accommodation facility management services | 25,414 | 11,479 | | Provision of accommodation consulting services | 3,292 | 187 | | Revenue from contracts with customers | 28,706 | 11,666 | - Revenue from accommodation operations and facility management services is recognized over time, while revenue from accommodation consulting services is recognized at a point in time when the relevant services are provided[133][134][135][136][137] 6. OTHER INCOME For the six months ended June 30, 2021, the group's other income was HK$796 thousand, a decrease from HK$1,615 thousand in the prior period, primarily derived from government grants, food and beverage sales, and other miscellaneous income Other Income Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Bank interest income | 9 | 11 | | Food and beverage | 49 | 14 | | Covid-19-related rent concessions | – | 727 | | Government grants | 442 | 653 | | Others | 296 | 126 | | Total | 796 | 1,615 | - Government grants primarily relate to VAT exemptions for accommodation operations in China, amounting to HK$442 thousand in H1 2021[139][142] - In H1 2020, HK$216 thousand in grants related to the Hong Kong government's Employment Support Scheme were recognized[140][142] 7. FINANCE COSTS For the six months ended June 30, 2021, the group's finance costs significantly increased to HK$4,143 thousand from HK$1,756 thousand in the prior period, mainly due to higher interest on lease liabilities Finance Costs Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Finance costs on provision for restoration of assets | 11 | 13 | | Interest on lease liabilities | 4,132 | 1,743 | | Total | 4,143 | 1,756 | - The increase in finance costs was mainly attributable to increased interest on lease liabilities from new lease agreements entered into for Chengdu and Wuhan stores in H2 2020[54][57] 8. INCOME TAX EXPENSE For the six months ended June 30, 2021, the group's income tax expense was HK$1,412 thousand, primarily comprising China corporate income tax at a rate of 25%, with Hong Kong profits tax calculated at 16.5% having no significant impact on the condensed consolidated financial statements Income Tax Expense Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Current tax — China corporate income tax | 1,248 | 1,205 | | Deferred tax | 164 | (271) | | Total | 1,412 | 934 | - The tax rate for the group's subsidiaries in China is 25%[149][150] - Hong Kong profits tax is calculated at a rate of 16.5% on estimated assessable profits, but the amount involved in the two-tiered profits tax regime is not material to the condensed consolidated financial statements[148][149][150] 9. LOSS FOR THE PERIOD For the six months ended June 30, 2021, the group's loss for the period was HK$9,599 thousand, primarily impacted by increased employee benefit expenses and other operating expenses Employee Benefit Expenses Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Directors' emoluments | 970 | 1,122 | | Other staff costs | 10,244 | 5,626 | | Total employee benefit expenses | 11,214 | 6,748 | Other Operating Expenses Breakdown | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Legal and professional fees | 1,465 | 2,138 | | Building management fees | 1,440 | 1,011 | | Audit fees | 570 | 597 | | Selling and advertising expenses | 673 | 566 | | Accommodation operating costs | 996 | 457 | | Others | 1,839 | 701 | | Total | 6,983 | 5,470 | - Total employee benefit expenses increased by 66.2%, mainly due to an increase in staff numbers following the opening of Chengdu and Wuhan stores[50][152] 10. DIVIDENDS The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The directors do not recommend the payment of an interim dividend for the six months ended June 30, 2021 (H1 2020: nil)[154][157] 11. LOSS PER SHARE For the six months ended June 30, 2021, both basic and diluted loss per share were 1.78 HK cents, an improvement from 2.25 HK cents in the prior period Loss Per Share | Indicator | H1 2021 (HK cents) | H1 2020 (HK cents) | | :--- | :--- | :--- | | Basic and diluted loss per share | (1.78) | (2.25) | - The calculation of basic loss per share is based on the loss for the period attributable to owners of the company of approximately HK$7,994 thousand and the weighted average number of ordinary shares in issue of 448,363,708 shares[155][158] - Diluted loss per share is the same as basic loss per share as there were no potential dilutive ordinary shares outstanding during the period[156][159] 12. PROPERTY, PLANT AND EQUIPMENT For the six months ended June 30, 2021, the group's cost of additions to property, plant and equipment was approximately HK$14,064 thousand, a significant increase from the prior period Property, Plant and Equipment Additions Cost | Period | Additions Cost (HK$ thousand) | | :--- | :--- | | H1 2021 | 14,064 | | H1 2020 | 51 | 13. TRADE RECEIVABLES As of June 30, 2021, the group's total trade receivables amounted to HK$6,648 thousand, with HK$3,215 thousand being neither past due nor impaired, and the group provides a 30-day credit period to corporate clients while strictly controlling overdue amounts Trade Receivables Ageing Analysis | Ageing | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Neither past due nor impaired | 3,215 | 168 | | 1–30 days past due | 942 | 105 | | 31–60 days past due | 1,036 | 113 | | 61–90 days past due | 1,071 | 138 | | Over 90 days past due | 384 | 24 | | Total | 6,648 | 548 | - The group's revenue from accommodation operations and facility management services is primarily settled via credit cards, cash, or payment platforms[161][163] - The group provides a 30-day credit period for room rentals at accommodation projects to corporate clients with appropriate credit records[161][163] 14. TRADE AND OTHER PAYABLES As of June 30, 2021, the group's total trade and other payables significantly increased to HK$34,307 thousand from HK$12,238 thousand at year-end 2020, primarily including amounts payable to non-controlling interests Trade and Other Payables Breakdown | Item | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Trade payables | 1,409 | 108 | | Accruals and other payables | 32,898 | 12,130 | | Total | 34,307 | 12,238 | - Accruals and other payables include amounts due to non-controlling interest partners of Chengdu and Wuhan stores, totaling HK$12,158 thousand and HK$12,195 thousand respectively, which are unsecured, interest-free, and repayable on demand[165] - The average credit period for trade payables is 30 days[166][167] 15. LEASE LIABILITIES As of June 30, 2021, the present value of the group's lease liabilities was HK$171,569 thousand, with HK$27,854 thousand due within one year, and these liabilities are primarily denominated in RMB Present Value of Lease Liabilities | Term | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Within one year | 27,854 | 30,158 | | Second to fifth year | 57,616 | 57,927 | | After five years | 86,099 | 89,467 | | Present value of lease liabilities | 171,569 | 177,552 | - Lease liabilities are primarily denominated in RMB[176] 16. BORROWINGS As of June 30, 2021, the group's unsecured borrowings from the controlling shareholder amounted to HK$27,574 thousand, a decrease from HK$37,026 thousand at year-end 2020, and these borrowings are denominated in HKD, unsecured, interest-free, and repayable on demand Unsecured Borrowings from Controlling Shareholder | Date | Amount (HK$ thousand) | | :--- | :--- | | June 30, 2021 | 27,574 | | December 31, 2020 | 37,026 | - The group's borrowings are denominated in HKD, unsecured, interest-free, and repayable on demand[178] 17. MATERIAL RELATED PARTY TRANSACTION For the six months ended June 30, 2021, the group engaged in several material related party transactions, including accommodation operations and consulting revenue of HK$2,176 thousand from related parties, as well as lease liabilities and payables to related parties Material Related Party Transactions | Item | H1 2021 (HK$ thousand) | H1 2020 (HK$ thousand) | | :--- | :--- | :--- | | Accommodation operations and consulting revenue from related parties | 2,176 | 95 | | Interest expense on lease liabilities received by a related party | 235 | 237 | Related Party Balances | Item | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Lease liabilities with a related party | 9,428 | 9,839 | | Other payables to related parties | 166 | 281 | - These related parties are beneficially owned and controlled by Mr. Yuan Fui. The controlling shareholder provides the group with a credit facility of up to HK$200,000 thousand, with approximately HK$172,426 thousand available as of June 30, 2021[183] 18. CONTINGENT LIABILITIES As of June 30, 2021, and December 31, 2020, the group had no significant contingent liabilities - As of June 30, 2021, and December 31, 2020, the group had no significant contingent liabilities[186][187] 19. CAPITAL COMMITMENTS As of June 30, 2021, the group had contracted capital expenditure for the acquisition of property, plant and equipment amounting to HK$7,497 thousand, which was not provided for in the condensed consolidated financial statements Capital Commitments | Item | June 30, 2021 (HK$ thousand) | December 31, 2020 (HK$ thousand) | | :--- | :--- | :--- | | Contracted capital expenditure for acquisition of property, plant and equipment not provided for | 7,497 | 12,002 | 20. APPROVAL OF THE INTERIM FINANCIAL STATEMENTS The condensed consolidated financial statements were approved and authorized for issue by the Board of Directors on August 31, 2021 - These condensed consolidated financial statements were approved and authorized for issue by the Board of Directors on August 31, 2021[191]