恒昌集团国际(01421) - 2021 - 中期财报

Company Information This section provides fundamental corporate information for Cover-Tech Holdings Limited and its subsidiaries, covering key administrative and governance details like board members, committees, auditors, and principal bankers - The Board of Directors comprises executive directors Mr. Lau Yim Shing (Chairman) and Mr. Yiu Yun Hung, non-executive director Mr. Tam Tak Wah, and independent non-executive directors Mr. Leung Po Hon, Mr. Li Jin, and Dr. Lo Hiu Tung[5] - Mr. Leung Po Hon chairs the Audit Committee, Mr. Lau Yim Shing chairs the Nomination Committee, and Mr. Leung Po Hon chairs the Remuneration Committee[5] - The company's auditor is BDO Limited, with principal bankers including The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank (Singapore) Limited[5] Management Discussion and Analysis This section elaborates on Cover-Tech Holdings Limited's business performance, financial position, capital structure, investment activities, and future outlook during the review period, showing stable solar power business, significant growth in power distribution systems, and improved gross profit despite pandemic challenges Business Review The Group's business performance during the six months ended December 31, 2020, was affected by the pandemic, but the China photovoltaic market and solar power business remained relatively stable, with the Group flexibly adjusting strategy to significantly grow its power distribution system business - The COVID-19 pandemic had widespread negative economic impacts, but China's photovoltaic market and the Group's solar power business remained relatively stable and resilient from the second half of 2020[7] - The Group adopted a flexible business strategy in the first half of 2020, increasing its involvement in providing power distribution systems[7] Solar Power Business The solar power business, primarily supplying and installing solar photovoltaic components and equipment, saw a slight increase in revenue and maintained a stable contract volume during the review period Solar Power Business Revenue (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Change | | :--- | :--- | :--- | :--- | | Revenue | 98,800,000 | 95,100,000 | Slightly increased | - The Group continued to secure and deliver a stable volume of contracts during the period[8] Power Distribution Systems Revenue from power distribution systems significantly increased, mainly due to the Group commencing this service in November 2019, resulting in a lower comparative base in the prior period Power Distribution Systems Revenue (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Growth | | :--- | :--- | :--- | :--- | | Revenue | 68,300,000 | 18,500,000 | 269.2% | - The increase was due to the Group commencing power distribution systems services in November 2019, meaning the prior period's comparison was not based on full-period figures[9] Electrical Engineering Services Electrical engineering services in Singapore generated the lowest revenue, and despite some growth, no new projects were secured and no uncompleted contracts remained due to intense market competition and a conservative bidding strategy Electrical Engineering Services Revenue (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Growth | | :--- | :--- | :--- | :--- | | Revenue | 1,600,000 | 593,000 | 169.8% | - Due to intense competition in Singapore's public housing development projects and the Group's conservative bidding strategy for new projects, no new projects were secured and no uncompleted contracts remained for the six months ended December 31, 2020[10] Financial Review The Group achieved significant revenue growth, doubled gross profit, and substantially narrowed losses during the review period, primarily driven by increased contributions from the power distribution system business and improved profitability in both solar power and power distribution segments Revenue The majority of the Group's revenue, totaling 99.1%, was derived from its solar power business and power distribution system business in China Revenue Composition (For the six months ended December 31, 2020) | Business | Revenue (HKD) | % of Total Revenue | | :--- | :--- | :--- | | China Solar Power Business | 98,800,000 | 58.6% | | China Power Distribution Systems Business | 68,300,000 | 40.5% | - For the six months ended December 31, 2020, the majority of the Group's revenue was derived from its solar power business and power distribution systems business in the People's Republic of China ("China")[11] Operating Results The Group's gross profit increased by 103% year-on-year, with the gross margin rising to 12.6%, primarily due to increased contributions from the higher-margin power distribution system business, leading to a significant reduction in loss attributable to owners and a decrease in basic loss per share Operating Results Overview (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Change | | :--- | :--- | :--- | :--- | | Gross Profit | 21,300,000 | 10,500,000 | 103% Growth | | Gross Margin | 12.6% | 9.18% | 3.42 percentage points increase | | Loss Attributable to Owners of the Company | (7,500,000) | (18,400,000) | 59.2% Loss narrowed | | Basic Loss Per Share | (0.54) HK cents | (1.32) HK cents | 59.1% Loss narrowed | - The increase in gross margin was primarily attributable to the increased contribution from the power distribution systems business, which has a relatively higher gross margin[12] - The change was mainly due to the combined effect of an improvement in the solar power business segment profit to approximately HKD 11,600,000 and an increase in the power distribution systems segment profit to approximately HKD 7,400,000[12] Other Income and (Losses) Net other income and losses significantly decreased, primarily due to a narrower fair value loss on financial assets at fair value through profit or loss Net Other Income and Losses (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Change | | :--- | :--- | :--- | :--- | | Net Loss | (6,700,000) | (13,900,000) | 51.8% Loss narrowed | | Fair Value Loss on Financial Assets at Fair Value Through Profit or Loss | (8,200,000) | (10,900,000) | 24.8% Loss narrowed | - This was mainly due to a fair value loss of approximately HKD 8,200,000 on financial assets at fair value through profit or loss for the six months ended December 31, 2020, compared to a loss of HKD 10,900,000 for the six months ended December 31, 2019[13] Administrative Expenses Administrative expenses remained largely stable during the review period Administrative Expenses (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | | :--- | :--- | :--- | | Administrative Expenses | 11,200,000 | 11,400,000 | - Administrative expenses for the six months ended December 31, 2020, remained largely stable at approximately HKD 11,200,000[14] Taxation Net income tax expense significantly increased, primarily due to higher profits from the solar power business and power distribution systems in China Net Income Tax Expense (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Growth | | :--- | :--- | :--- | :--- | | Net Income Tax Expense | 4,800,000 | 400,000 | 1100% | - The main reason was the increase in profits from the solar power business and power distribution systems in China[15] Liquidity, Financial Resources, and Capital Gearing The Group's net current assets increased, while cash and cash equivalents slightly decreased, and the gearing ratio was not applicable due to trade and other payables being less than cash and cash equivalents, indicating a sound financial position Liquidity Overview (As at December 31) | Indicator | 2020 (HKD) | June 30, 2020 (HKD) | Change | | :--- | :--- | :--- | :--- | | Net Current Assets | 357,100,000 | 335,600,000 | 6.4% Growth | | Cash and Cash Equivalents | 74,000,000 | 86,700,000 | 14.7% Decrease | - As trade and other payables were less than cash and cash equivalents, the Group's gearing ratio was not applicable, indicating a sound financial position[16] Capital Structure This section reviews the 2019 placing, which raised additional funds for the Group's business operations, strengthened its financial position, and whose proceeds were fully utilized for general working capital 2019 Placing The 2019 placing successfully allotted 204,680,000 new shares, generating net proceeds of approximately HKD 36.9 million, which were fully used for the Group's general working capital, including human resources, office utility expenses, other general expenses, and solar power business working capital - The 2019 placing involved 204,680,000 new shares at a placing price of HKD 0.183 per share, representing a discount of approximately 8.5% to the then closing price[18] 2019 Placing Proceeds Utilization (As at December 31, 2020) | Purpose | Amount Utilized (HKD Million) | | :--- | :--- | | Human Resources | 8.2 | | Office Utility Expenses | 2.5 | | Other General Expenses | 6.2 | | General Working Capital for Solar Power Business | 20.0 | | Total | 36.9 | - The net proceeds of approximately HKD 36,900,000 from the 2019 placing were used as general working capital for the Group[19] Capital Structure, Exchange Rate Fluctuation Risk, and Related Hedging The Group primarily funds its operations through internal cash flow, internal resources, and shareholders' equity, and despite operating in multiple currencies, faced no significant exchange rate fluctuation difficulties or hedging activities during the review period, but will closely monitor future risks - The Group primarily funds its operations through internally generated cash flow, its internal resources, and shareholders' equity[22] - For the six months ended December 31, 2020, the Group's operations or liquidity did not face any significant difficulties or impacts due to currency exchange rate fluctuations, and no financial instruments were used for hedging purposes[22] Capital Management The Group's capital management objectives are to maintain a good credit rating and sound capital ratios to support business development and maximize shareholder value, with capital structure comprising equity and reserves monitored by the gearing ratio - The Group's primary objectives of capital management are to ensure it maintains a good credit rating and sound capital ratios to support its business and maximize shareholder value[23] - The Group monitors its capital using a gearing ratio, which is net debt/cash divided by equity attributable to owners of the Company, and seeks to maintain a stable gearing ratio[24] Pledged Assets The Group had no pledged assets as of December 31, 2020, and June 30, 2020 - As of December 31, 2020, and June 30, 2020, the Group had no pledged assets[25] Capital Expenditure and Commitments The Group incurred no significant capital expenditure or material contracted but unprovided capital commitments during the review period - For the six months ended December 31, 2020, and December 31, 2019, the Group incurred no significant capital expenditure[26] - As of December 31, 2020, and June 30, 2020, the Group had no material contracted but unprovided capital commitments in the condensed consolidated financial statements[26] Significant Investments Held, Material Acquisitions and Disposals of Subsidiaries and Associates The Group holds certain listed securities as financial assets at fair value through profit or loss, recording a fair value loss of HKD 8.2 million during the review period, mainly due to share price declines in Cornerstone Technologies and Zhihao Development, offset by an increase in Star Asia Holdings, while remaining cautiously optimistic about the long-term prospects of the Hong Kong securities industry Fair Value Loss on Financial Assets at Fair Value Through Profit or Loss (For the six months ended December 31) | Indicator | 2020 (HKD) | 2019 (HKD) | Change | | :--- | :--- | :--- | :--- | | Fair Value Loss | (8,200,000) | (10,900,000) | 24.8% Loss narrowed | - The fair value loss primarily resulted from a 35.1% decrease in the share price of Zhihao Development Holdings Limited and an 86.4% decrease in the share price of Cornerstone Technologies Holdings Limited, partially offset by a 183.3% increase in the share price of Star Asia Holdings Limited[27] - The Company is optimistic about the performance of the Hong Kong securities industry and thus positive about the prospects of these Hong Kong financial service providers[29] - China Baoli Technologies Holdings Limited's shares have been suspended from trading, and the Group assessed its fair value as minimal by reference to its adjusted net asset value, closely monitoring progress towards resumption of trading[31] Contingent Liabilities The Group had no other contingent liabilities as of December 31, 2020, except as disclosed in note 26 to the condensed consolidated financial statements - As of December 31, 2020, the Group had no other contingent liabilities except as disclosed in note 26 to the condensed consolidated financial statements[33] Employees and Remuneration Policy As of December 31, 2020, the Group had 14 employees, with employee costs slightly decreasing, and remuneration policy based on Group performance and individual performance, offering medical and retirement benefits Employees and Remuneration Overview (For the six months ended December 31) | Indicator | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total Employees | 14 | 14 | Stable | | Employee Costs (HKD) | 5,300,000 | 5,400,000 | 1.9% Decrease | - Employee remuneration, including salaries and discretionary bonuses, is determined based on the Group's performance and individual performance, with medical and retirement benefit schemes provided for eligible personnel[34] Prospects The Group anticipates accelerated transformation and consolidation in China's photovoltaic industry, benefiting industry leaders, and will continue to expand its power distribution system business and solar power plant operation management, while actively seeking new business opportunities with return potential to enhance shareholder value - The transformation and consolidation of China's photovoltaic industry are expected to benefit leading industry players, and the Group has successfully launched its power distribution systems business and will continue to seek further expansion[35][36] - The Group also continues to seek opportunities for further expansion in its power distribution systems business and the operation and management of solar power plants to strengthen its core businesses[36] - Looking ahead, the Group will continue to identify business opportunities with return potential to enhance shareholder value[37] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the Group's financial performance for the six months ended December 31, 2020, showing significant revenue growth, doubled gross profit, a substantial narrowing of loss for the period, and a swing from total comprehensive expense to income Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Overview (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Revenue | 168,688 | 114,218 | 47.7% Growth | | Gross Profit | 21,279 | 10,482 | 103.0% Growth | | Loss for the Period | (1,809) | (16,408) | 89.0% Loss narrowed | | Loss Attributable to Owners of the Company | (7,505) | (18,374) | 59.2% Loss narrowed | | Total Comprehensive Income (Expense) for the Period | 21,915 | (24,437) | Swung from expense to income | | Basic and Diluted Loss Per Share | (0.54) HK cents | (1.32) HK cents | 59.1% Loss narrowed | Condensed Consolidated Statement of Financial Position This statement presents the Group's financial position as of December 31, 2020, showing increases in total assets and net assets, stable net current assets, and a decrease in total liabilities Condensed Consolidated Statement of Financial Position Overview (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 12,657 | 13,001 | 2.6% Decrease | | Total Current Assets | 404,348 | 403,228 | 0.3% Growth | | Total Current Liabilities | 47,219 | 67,593 | 30.1% Decrease | | Net Current Assets | 357,129 | 335,635 | 6.4% Growth | | Net Assets | 369,525 | 347,610 | 6.3% Growth | | Total Equity | 369,525 | 347,610 | 6.3% Growth | Condensed Consolidated Statement of Changes in Equity This statement outlines the Group's equity movements for the six months ended December 31, 2020, indicating an increase in total equity attributable to owners of the Company and non-controlling interests, primarily driven by the positive swing in total comprehensive income for the period Condensed Consolidated Statement of Changes in Equity Overview (As at December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Total Equity Attributable to Owners of the Company | 304,430 | 343,418 | 11.4% Decrease | | Non-controlling Interests | 65,095 | 62,679 | 3.9% Growth | | Total Equity | 369,525 | 406,097 | 9.0% Decrease | | Total Comprehensive Income (Expense) for the Period | 21,915 | (24,437) | Swung from expense to income | - The exchange fluctuation reserve changed from (HKD 19,534) thousand as of December 31, 2019, to HKD 5,498 thousand as of December 31, 2020, reflecting a positive impact from exchange differences on translation of overseas operations[43] Condensed Consolidated Statement of Cash Flows This statement summarizes the Group's cash flow for the six months ended December 31, 2020, showing reduced cash outflow from operating activities, a significant decrease in cash outflow from investing activities, cash outflow from financing activities primarily for lease liability repayment, and a decrease in cash and cash equivalents at period-end Condensed Consolidated Statement of Cash Flows Overview (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Net Cash Flows Used in Operating Activities | (18,332) | (23,935) | 23.4% Decrease in outflow | | Net Cash Flows From Investing Activities | 192 | 3,267 | 94.1% Decrease | | Net Cash Flows Used in Financing Activities | (709) | – | From none to outflow | | Net Decrease in Cash and Cash Equivalents | (18,849) | (20,688) | 9.0% Decrease | | Cash and Cash Equivalents at End of Period | 73,993 | 77,056 | 4.0% Decrease | Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering company and group information, accounting policies, segment information, revenue, various expenses, financial instruments, related party transactions, and contingent liabilities, offering essential context and details for understanding the financial statements 1. Company and Group Information This note introduces Cover-Tech Holdings Limited's registration information, principal business activities, details the accounting treatment for the change in functional and presentation currency from SGD to HKD, and provides information on major subsidiaries - The Company is incorporated in the Cayman Islands and primarily engaged in electrical engineering services in Singapore, supply and installation of solar photovoltaic components and equipment in China, and power distribution systems business[46] - Effective June 30, 2020, the Company's functional currency changed from Singapore Dollars to Hong Kong Dollars, and the presentation currency also changed to Hong Kong Dollars, with comparative figures restated to reflect this change in the Group's presentation currency[47] Functional and Presentation Currency Change The Company's functional and presentation currency changed from SGD to HKD effective June 30, 2020, to reflect the primary operating environment and convenience for shareholders, with comparative figures restated according to IAS 21 - The Company's functional currency changed from Singapore Dollars to Hong Kong Dollars, and the presentation currency also changed to Hong Kong Dollars, effective June 30, 2020[47] - Comparative figures have been restated, with assets and liabilities translated at the closing rate at the reporting date, income and expenses at the average exchange rate for the period, and share capital, share premium, and reserves at historical exchange rates[47] Information on Principal Subsidiaries This note lists the principal subsidiaries' places of incorporation and business, issued share capital, percentage of equity interest held by the Company, and principal activities, including investment holding, financing, solar power business, power distribution systems, and electrical engineering services companies in Hong Kong, BVI, China, and Singapore - Principal subsidiaries include Crown Asia Investment Limited (Hong Kong, investment holding), Kaihe New Energy (Xuyi) Co Ltd (China, supply and installation of solar photovoltaic components and equipment), and Strike Electrical Engineering Pte Ltd (Singapore, electrical engineering services)[49] 2. Basis of Preparation This interim financial statement has been prepared in accordance with IAS 34 and should be read in conjunction with the Group's annual financial statements - The Group's unaudited condensed consolidated financial statements for the six months ended December 31, 2020, have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting[51] Basis of Consolidation The interim financial statements include the financial statements of the Company and its subsidiaries for the reporting period, with all intra-group transactions fully eliminated, and investments in associates and joint ventures accounted for using the equity method - The interim financial statements include the financial statements of the Company and its subsidiaries for the six months ended December 31, 2020, with all intra-group balances, income, and expenses fully eliminated[52][53] 3. Principal Accounting Policies This interim financial statement is prepared under the historical cost convention and presented in HKD, with accounting policies consistent with the prior year's financial statements, except for the application of new and revised IFRSs - The interim financial statements are prepared under the historical cost convention, except for financial assets at fair value through profit or loss, and are presented in Hong Kong Dollars, with all values rounded to the nearest thousand[54] Application of New and Revised IFRSs and Interpretations The Group has first applied several new and revised IFRSs effective on or after July 1, 2020, but directors do not expect them to have a significant impact on the consolidated financial statements - The Group has first applied amendments to IAS 1 and IAS 8, amendments to IFRS 3, amendments to IFRS 9, amendments to IAS 39 and IFRS 7, and amendments to IFRS 16[56] - The directors of the Company do not expect the adoption of the above new IFRSs, IFRS amendments, and IFRS interpretations to have any significant impact on the consolidated financial statements in the foreseeable future[56] Impact of Issued but Not Yet Effective IFRSs The Group has not yet applied several IFRSs that have been issued but are not yet effective, which will become effective in future annual periods - The Group has not yet applied several issued but not yet effective IFRSs for the six months ended December 31, 2020, including amendments to IAS 1, amendments to IAS 16, amendments to IAS 37, amendments to IFRS 3, amendments to IFRS 10 and IAS 28, and IFRS 17[57] 4. Critical Accounting Judgments and Estimates The preparation of interim financial statements requires management to make judgments, estimates, and assumptions affecting the reported amounts of revenue, expenses, assets, and liabilities, and these uncertainties may lead to significant adjustments to carrying amounts in future accounting periods - The preparation of interim financial statements requires management to make judgments, estimates, and assumptions that affect the reported amounts of revenue, expenses, assets, and liabilities, and the accompanying disclosures[60] 5. Segment Information The Group is organized into three reportable operating segments based on products and services: electrical engineering services, solar power business, and power distribution systems, with management independently monitoring each segment's performance for resource allocation and performance assessment - The Group's business units are organized based on their products and services, comprising three reportable operating segments: providing electrical engineering services, supplying and installing solar photovoltaic components and equipment, and providing power distribution systems[61][63] - Management separately monitors the performance of the electrical engineering services, solar power business, and power distribution systems segments to make decisions on resource allocation and performance assessment[61] For the Six Months Ended December 31, 2020 For the six months ended December 31, 2020, the solar power business and power distribution systems were the primary sources of revenue and profit, while electrical engineering services recorded a loss Segment Revenue and Results (For the six months ended December 31, 2020) | Segment | Revenue (HKD Thousand) | Results (HKD Thousand) | | :--- | :--- | :--- | | Engineering Services | 1,647 | (933) | | Solar Power Business | 98,782 | 11,624 | | Power Distribution Systems Business | 68,259 | 7,382 | | Total | 168,688 | 18,073 | As at December 31, 2020 As of December 31, 2020, the solar power business and power distribution systems had higher segment assets, while liabilities were relatively balanced across segments Segment Assets and Liabilities (As at December 31, 2020) | Segment | Assets (HKD Thousand) | Liabilities (HKD Thousand) | | :--- | :--- | :--- | | Engineering Services | 58,166 | 4,761 | | Solar Power Business | 191,707 | 26,468 | | Power Distribution Systems Business | 116,221 | 13,239 | | Total | 366,094 | 44,468 | For the Six Months Ended December 31, 2019 For the six months ended December 31, 2019, the solar power business was the main revenue source, power distribution systems were nascent, and electrical engineering services recorded a loss Segment Revenue and Results (For the six months ended December 31, 2019) | Segment | Revenue (HKD Thousand) | Results (HKD Thousand) | | :--- | :--- | :--- | | Engineering Services | 593 | (2,289) | | Solar Power Business | 95,076 | 3,597 | | Power Distribution Systems Business | 18,549 | 1,744 | | Total | 114,218 | 3,052 | As at June 30, 2020 As of June 30, 2020, the power distribution system business had the highest segment assets, and both solar power and power distribution systems had higher liabilities Segment Assets and Liabilities (As at June 30, 2020) | Segment | Assets (HKD Thousand) | Liabilities (HKD Thousand) | | :--- | :--- | :--- | | Engineering Services | 69,252 | 6,473 | | Solar Power Business | 108,634 | 33,909 | | Power Distribution Systems Business | 181,199 | 23,813 | | Total | 359,085 | 64,195 | Geographical Information The Group's revenue primarily originated from Mainland China, where its non-current assets are also mainly located Revenue from External Customers (For the six months ended December 31) | Region | 2020 (HKD Thousand) | 2019 (HKD Thousand) | | :--- | :--- | :--- | | Singapore | 1,647 | 593 | | Mainland China | 167,041 | 113,625 | | Total | 168,688 | 114,218 | Non-current Assets (As at December 31) | Region | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Hong Kong | 2,088 | 2,952 | | Singapore | 88 | 390 | | China | 10,481 | 9,659 | | Total | 12,657 | 13,001 | 6. Revenue Revenue represents the appropriate portion of contract revenue from construction contracts and the net invoiced value of goods sold and services rendered, after deducting provisions for returns and trade discounts, with the current period's revenue primarily from supplying and installing solar photovoltaic components and equipment and providing power distribution systems Revenue Composition (For the six months ended December 31) | Revenue Source | 2020 (HKD Thousand) | 2019 (HKD Thousand) | | :--- | :--- | :--- | | Providing Electrical Engineering Services | 1,647 | 593 | | Supplying and Installing Solar Photovoltaic Components and Equipment | 98,782 | 95,076 | | Providing Power Distribution Systems | 68,259 | 18,549 | | Total | 168,688 | 114,218 | - Revenue refers to the appropriate portion of contract revenue from construction contracts and the net invoiced value of goods sold and services rendered for each reporting period, after deducting provisions for returns and trade discounts[73] 7. Other Income and (Losses) Net Net other income and losses significantly decreased, primarily due to a narrower fair value loss on financial assets at fair value through profit or loss, alongside an increase in interest income from loan receivables Other Income and Losses Net Breakdown (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Exchange Differences | 388 | (813) | Swung from loss to income | | Bank Interest Income | 26 | 138 | 81.2% Decrease | | Interest on Loan Receivables | 1,679 | 1,201 | 39.8% Growth | | Net Fair Value Loss on Financial Assets at Fair Value Through Profit or Loss | (8,165) | (10,941) | 25.3% Loss narrowed | | Net Provision for Expected Credit Losses on Financial Assets Measured at Amortized Cost | (1,803) | (3,762) | 52.1% Loss narrowed | | Total | (6,713) | (13,914) | 51.8% Loss narrowed | 8. Finance Costs Finance costs primarily include interest on lease liabilities and bank charges, with a significant increase in the current period mainly due to the inception of interest on lease liabilities Finance Costs Breakdown (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Interest on Lease Liabilities | 82 | – | New | | Bank Charges | 12 | 10 | 20.0% Growth | | Total | 94 | 10 | 840.0% Growth | 9. (Profit) / Loss Before Tax The Group's profit before tax swung from a loss to a profit, influenced by factors such as cost of goods and services provided, employee benefits, depreciation expenses, and fair value loss on financial assets at fair value through profit or loss (Profit) / Loss Before Tax Breakdown (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Auditor's Remuneration | 842 | 851 | 1.1% Decrease | | Depreciation Expense (Plant and Equipment) | 181 | 491 | 63.1% Decrease | | Depreciation Expense (Right-of-use Assets) | 737 | – | New | | Cost of Goods and Services Provided | 146,295 | 103,602 | 41.2% Growth | | Employee Benefits | 5,332 | 5,427 | 1.8% Decrease | | Net Fair Value Loss on Financial Assets at Fair Value Through Profit or Loss | 8,165 | 10,941 | 25.3% Decrease | 10. Income Tax Expense The Group's income tax expense significantly increased, primarily from taxable profits in China and Singapore, particularly due to rising profits in the China solar power business and power distribution systems, with this note also explaining Hong Kong's two-tiered profits tax system and China's corporate income tax policies Income Tax Expense (For the six months ended December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Current Period Expense (China and Singapore) | 4,751 | 425 | 1100% Growth | | Total | 4,751 | 425 | 1100% Growth | - The income tax expense was mainly due to increased profits from the solar power business and power distribution systems in China[15] - Hong Kong profits tax operates under a two-tiered system, with the first HKD 2,000,000 of assessable profits taxed at 8.25% and profits above this amount at 16.5%; Chinese subsidiaries are subject to corporate income tax at 25%[79] 11. Basic and Diluted Loss Per Share The Group's basic and diluted loss per share significantly narrowed, with no potentially dilutive ordinary shares outstanding during the period Basic and Diluted Loss Per Share (For the six months ended December 31) | Indicator | 2020 (HKD Thousand/Thousand Shares/HK Cents) | 2019 (HKD Thousand/Thousand Shares/HK Cents) | Change | | :--- | :--- | :--- | :--- | | Loss Attributable to Equity Holders of the Company | (7,505) | (18,374) | 59.2% Loss narrowed | | Weighted Average Number of Ordinary Shares in Issue | 1,390,280 | 1,390,280 | Stable | | Basic and Diluted Loss Per Share | (0.54) | (1.32) | 59.1% Loss narrowed | - During the period, the Group had no potentially dilutive ordinary shares in issue[81] 12. Dividends No dividends were declared by the Group for the six months ended December 31, 2020 - No dividends were declared for the six months ended December 31, 2020[83] 13. Goodwill This note details the cost, accumulated impairment losses, and net carrying amount of goodwill, which stood at HKD 10,481 thousand as of December 31, 2020, with no impairment loss recognized after assessment Goodwill Net Carrying Amount (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Net Carrying Amount | 10,481 | 9,659 | - Goodwill is allocated to the solar power cash-generating unit for impairment testing, and its recoverable amount is determined based on value-in-use calculations, using cash flow forecasts from financial budgets approved by senior management for a four-year period[86] - As the recoverable amount of the cash-generating unit attributable to owners of the Company, measured by value-in-use, was higher than its carrying amount as of December 31, 2020, no impairment loss was recognized on the net carrying amount of goodwill as of December 31, 2020[86] 14. Plant and Equipment This note presents the changes in the net carrying amount of plant and equipment, including additions, disposals, depreciation, and exchange adjustments Plant and Equipment Net Carrying Amount (As at December 31) | Indicator | 2020 (HKD Thousand) | 2019 (HKD Thousand) | | :--- | :--- | :--- | | Net Carrying Amount | 334 | 978 | - The net carrying amount of plant and equipment decreased from HKD 668 thousand as of July 1, 2020, to HKD 334 thousand as of December 31, 2020, primarily due to depreciation and disposals[87] 15. Right-of-use Assets This note provides the cost, accumulated depreciation, and net carrying amount of right-of-use assets for leased self-occupied properties Right-of-use Assets Net Carrying Amount (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Net Carrying Amount | 1,842 | 3,579 | - The net carrying amount of right-of-use assets decreased from HKD 3,579 thousand as of June 30, 2020, to HKD 1,842 thousand as of December 31, 2020, mainly due to a depreciation charge of HKD 737 thousand during the period[88] 16. Trade Receivables, Deposits, and Other Receivables This note details the composition and aging analysis of trade receivables, deposits, and other receivables, showing an increase in total trade receivables, with most due within 30 days Total Trade Receivables, Deposits, and Other Receivables (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Total Trade Receivables, Deposits, and Other Receivables | 247,973 | 231,134 | 7.3% Growth | Trade Receivables Aging Analysis (As at December 31) | Aging | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Less than 30 days | 108,645 | 20,790 | | 31 to 60 days | 18,196 | 76,872 | | 61 to 90 days | 49,884 | 19,213 | | 91 to 180 days | 7,843 | 74,301 | | Over 180 days | 54,216 | 37,149 | | Total | 238,784 | 228,325 | - Trade receivables are non-interest bearing and generally have credit terms ranging from 120 to 180 days[89] 17. Contract Assets Contract assets primarily relate to rights to consideration for work completed but not yet billed, with a decrease in contract assets during the period and no expected credit loss provision recognized Contract Assets (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Contract Assets | 6,171 | 10,956 | 43.7% Decrease | - Contract assets primarily relate to the rights of subsidiaries Strike Singapore and Reston New Energy to consideration for work completed but not yet billed as of the reporting date[92] - No provision for expected credit losses was recognized for the period ended December 31, 2020[92] 18. Inventories This note indicates that the Group's inventories primarily consist of raw materials, which are small in amount and slightly increased Inventories (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Raw Materials | 89 | 53 | 67.9% Growth | 19. Prepayments This note presents the Group's prepayments, which have increased in amount Prepayments (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Prepayments | 46,478 | 31,793 | 46.2% Growth | 20. Financial Assets at Fair Value Through Profit or Loss This note details the Group's financial assets at fair value through profit or loss, primarily equity securities listed in Hong Kong, whose market value significantly declined during the period, resulting in fair value losses Financial Assets at Fair Value Through Profit or Loss (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Equity Securities Listed in Hong Kong | 4,924 | 13,089 | 62.4% Decrease | Fair Value Changes of Trading Instruments (For the year ended December 31) | Company Name | 2020 (HKD Thousand) | 2019 (HKD Thousand) | | :--- | :--- | :--- | | Cornerstone Technologies Holdings Limited | (6,333) | 2,609 | | Zhihao Development Holdings Limited | (1,937) | (13,412) | | Star Asia Holdings Limited | 105 | (163) | | Total | (8,165) | (10,941) | - One of the listed equity securities (China Baoli Technologies Holdings Limited) has been suspended from trading on the Stock Exchange since June 28, 2019, and its fair value was zero HKD as of December 31, 2020, and June 30, 2020[97] 21. Loan Receivables This note lists the Group's unsecured fixed-rate loan receivables provided to independent third parties, showing an increase in total principal but also a significant increase in expected credit loss provisions Loan Receivables (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Fixed-rate Loan Receivables | 32,000 | 29,500 | 8.5% Growth | | Less: Provision for Expected Credit Losses | (2,280) | (27) | 8344.4% Growth | | Net Amount | 29,720 | 29,473 | 0.8% Growth | - As of December 31, 2020, the Group granted six loans to five independent third-party individuals, with principal amounts of HKD 5,000,000, HKD 5,000,000, HKD 6,000,000, HKD 9,000,000, HKD 4,500,000, and HKD 2,500,000, respectively, and annual interest rates of 9.125%, 12%, 9.75%, 10.25%, 11%, and 11%, respectively; all loans are unsecured with terms ranging from eight to ten months[98] 22. Trade and Other Payables This note details the composition and aging analysis of trade and other payables, showing a significant decrease in total trade payables, while other payables remained relatively stable Total Trade and Other Payables (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Trade Payables (Third Parties) | 1,136 | 25,880 | 95.6% Decrease | | Accrued Project Costs | 4,637 | 5,824 | 20.4% Decrease | | Other Payables | 16,022 | 16,927 | 5.4% Decrease | | Total | 21,795 | 48,631 | 55.1% Decrease | - Accrued liabilities primarily refer to accrued professional fees and employee benefits; these trade and other payables are non-interest bearing, with trade payables generally settled within 30 to 90 days, and other payables having an average term of 30 days[100] Trade Payables Aging Analysis (As at December 31) | Aging | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Less than 90 days | 1,136 | 21,315 | | 91 to 180 days | – | 4,565 | | Total | 1,136 | 25,880 | 23. Share Capital and Share Premium This note outlines the Company's share capital and share premium, which remained unchanged in terms of issued ordinary shares and capital amount as of December 31, 2020 Share Capital and Share Premium (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :--- | :--- | :--- | | Issued Share Capital | 13,903 | 13,903 | | Share Premium Account | 563,328 | 563,328 | | Total | 577,231 | 577,231 | - There are 1,390,280,000 ordinary shares issued and fully paid, with a par value of HKD 0.01 per share[102] 24. Fair Value Measurement of Financial Instruments This note explains the Group's fair value measurement methods for financial assets and liabilities, classified into fair value hierarchy levels (Level 1 to Level 3) - Fair value measurements are categorized into three levels: Level 1 (based on quoted prices in active markets for identical assets or liabilities), Level 2 (based on directly or indirectly observable inputs for the asset or liability), and Level 3 (based on valuation techniques including inputs for the asset or liability not based on observable market data)[104] Fair Value Measurement of Financial Assets (As at December 31) | Indicator | Financial Assets at Fair Value Through Profit or Loss (HKD Thousand) | Financial Assets Measured at Amortized Cost (HKD Thousand) | Total (HKD Thousand) | | :--- | :--- | :--- | :--- | | Financial Assets at Fair Value Through Profit or Loss | 4,924 | – | 4,924 | | Loan Receivables | – | 29,720 | 29,720 | | Trade Receivables, Deposits, and Other Receivables | – | 242,973 | 242,973 | | Cash and Cash Equivalents | – | 73,993 | 73,993 | | Total | 4,924 | 346,686 | 351,610 | Fair Value Measurement of Financial Liabilities (As at December 31) | Indicator | Financial Liabilities Measured at Amortized Cost (HKD Thousand) | | :--- | :--- | | Trade and Other Payables (excluding consumption tax payable and accrued liabilities) | 7,760 | | Lease Liabilities | 1,762 | | Total | 9,522 | 25. Related Party Transactions This note discloses the Group's related party transactions during the reporting period, including subcontractor fees, operating expenses, rental expenses, secretarial fees, and raw material sales, and lists key management personnel compensation Related Party Transactions Overview (For the six months ended December 31) | Transaction Type | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Subcontractor Fees Received (Joint Venture) | – | 2,431 | 100% Decrease | | Operating Expenses Recharged (Related Company) | 35 | 38 | 7.9% Decrease | | Rental Expenses Received (Related Company) | 355 | 645 | 45.0% Decrease | | Sale of Raw Materials to Joint Venture | – | 8 | 100% Decrease | | Sale of Plant and Equipment to Joint Venture | – | 6 | 100% Decrease | Key Management Personnel Compensation (For the six months ended December 31) | Compensation Item | 2020 (HKD Thousand) | 2019 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Directors' Fees | 1,134 | 1,145 | 1.0% Decrease | | Salaries and Bonuses | 2,457 | 1,232 | 99.4% Growth | | Pension Scheme Contributions | 53 | 37 | 43.2% Growth | | Total | 3,644 | 2,414 | 50.9% Growth | - The Group conducted related party transactions during the reporting period on terms and conditions agreed upon by the parties[109] 26. Contingent Liabilities This note discloses the Group's contingent liabilities, primarily Singapore government guarantees for foreign workers, which are small in amount and not provided for, as directors believe no relevant regulations were breached Contingent Liabilities (As at December 31) | Indicator | 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | Change | | :--- | :--- | :--- | :--- | | Singapore Government Guarantees for Foreign Workers | 29 | 28 | 3.6% Growth | - The Singapore government requires companies to submit a SGD 5,000 guarantee to the Commissioner for Work Passes for each foreign worker employed; the Group has arranged for an insurance company to provide insurance guarantees, and the directors believe that none of the Group's foreign workers breached relevant regulations during the reporting period[114] 27. Approval of Unaudited Condensed Consolidated Interim Financial Information The unaudited condensed consolidated interim financial information was approved and authorized for issue by the Board of Directors on February 23, 2020 - The unaudited condensed consolidated interim financial information was approved and authorized for issue by the Board of Directors on February 23, 2020[115] Corporate Governance and Other Information This section describes the Company's corporate governance practices, including compliance with the Listing Rules' Corporate Governance Code, directors' and chief executives' interests in securities, share option scheme, and interim dividend policy Corporate Governance Practices The Company is committed to maintaining high standards of corporate governance and complies with all applicable code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules, except for code provision A.2.1 (separation of roles of chairman and chief executive) - The Company has complied with all applicable code provisions of the Corporate Governance Code for the six months ended December 31, 2020, except for a deviation from code provision A.2.1 (the roles of chairman and chief executive should be separate)[117][118] - Mr. Lau Yim Shing, the Chairman of the Board, is responsible for the overall operation of the Board and the Group's overall strategy, while Mr. Sum Yau Chuen, the former Managing Director, remains a director of Strike Singapore and continues to be responsible for the overall management, strategic planning, and business development of the Group's operations in Singapore; the Board believes this structure does not affect the balance of power and authority between the Group's directors and management[118] Standard Securities Dealing Code for Directors The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules as its code of conduct for directors' securities transactions and confirms full compliance by all directors during the review period - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules as its code of conduct for directors' securities transactions and confirms that all directors have fully complied with the relevant standards stipulated in the Model Code for the six months ended December 31, 2020[120] Directors' and Chief Executives' Interests and Short Positions in Shares and Underlying Shares of the Company or Any Associated Corporation This note discloses the long positions in the Company's shares held by executive directors Mr. Lau Yim Shing and Mr. Yiu Yun Hung and their spouses as of December 31, 2020 Directors' Long Positions in Shares and Underlying Shares of the Company (As at December 31, 2020) | Director | Capacity/Nature | Number of Shares Held | Percentage of Company's Interest | | :--- | :--- | :--- | :--- | | Mr. Lau Yim Shing | Beneficial Owner | 7,600,000 | 0.55% | | | Spouse's Interest | 5,000,000 | 0.36% | | Mr. Yiu Yun Hung | Beneficial Owner | 12,050,000 | 0.87% | | | Spouse's Interest | 18,630,000 | 1.34% | - Ms. Cheung Kuen Ying, spouse of Mr. Lau Yim Shing, legally and beneficially owns 5,000,000 shares of the Company, and Ms. Chong Yin Chu, spouse of Mr. Yiu Yun Hung, legally and beneficially owns 18,630,000 shares of the Company[122] Share Option Scheme The Company adopted a new share option scheme in 2017 to provide incentives and rewards to eligible participants, but no share options have been granted since its adoption - The Company adopted a new share option scheme after a resolution was passed at the Company's annual general meeting held on October 20, 2017, aiming to provide incentives and rewards to eligible participants[123] - No share options have been granted since the adoption of the scheme[124] Directors' Rights to Acquire Shares or Debentures Save for the share option scheme, no arrangements were entered into by the Company or any of its holding companies, subsidiaries, or fellow subsidiaries during the review period that would enable directors and chief executives to acquire benefits by acquiring shares or debentures of the Company or any other body corporate - Save for what is disclosed under "Share Option Scheme" above, during the six months ended December 31, 2020, neither the Company nor any of its holding companies, subsidiaries, or fellow subsidiaries entered into any arrangements that would enable directors and chief executives of the Company to acquire benefits by acquiring shares or debentures of the Company or any other body corporate[125] Substantial Shareholders' Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company As of December 31, 2020, the Company had not been notified by any person or entity of any interests or short positions in the Company's shares or underlying shares required to be recorded in the register kept under Section 336 of the Securities and Futures Ordinance - As of December 31, 2020, the Company had not been notified by any person or entity of any interests or short positions in the Company's shares or underlying shares that were required to be recorded in the register kept under Section 336 of the Securities and Futures Ordinance[126] Purchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended December 31, 2020 - During the six months ended December 31, 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[127] Interim Dividend The Board of Directors did not declare any interim dividend for the six months ended December 31, 2020 - The Board of Directors did not declare any interim dividend for the six months ended December 31, 2020[128] Audit Committee The Audit Committee reviewed the Group's adopted accounting principles and practices and discussed financial reporting matters, including the review of the Company's unaudited condensed consolidated financial statements for the six months ended December 31, 2020 - The Audit Committee has reviewed the Group's adopted accounting principles and practices with senior management and discussed financial reporting matters, including the review of the Company's unaudited condensed consolidated financial statements for the six months ended December 31, 2020[129] - The Audit Committee comprises four non-executive directors, three of whom are independent non-executive directors: Mr. Leung Po Hon, Mr. Li Jin, Dr. Lo Hiu Tung, and Mr. Tam Tak Wah; Mr. Leung Po Hon serves as the Chairman of the Audit Committee[129]