中国金融发展(03623) - 2020 - 中期财报

Financial and Operational Summary Financial Highlights For H1 2020, the company's revenue increased by 158.5% year-on-year, with loss before tax significantly narrowing by 86.4%, yet a net loss of RMB 17.464 million was recorded, while total assets decreased by 20.6% and total equity remained stable as of period-end Financial Performance Summary | Metric | For the six months ended June 30, 2020 (RMB thousands) | For the six months ended June 30, 2019 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 75,434 | 29,176 | 158.5% | | Loss before tax | (2,713) | (19,922) | -86.4% | | Loss for the period | (17,464) | (20,812) | -16.1% | | Loss per share (RMB) | (0.03) | (0.04) | -25.0% | | Metric | As of June 30, 2020 (RMB thousands) | As of December 31, 2019 (RMB thousands) | Change | | Total Assets | 1,708,471 | 2,151,341 | -20.6% | | Total Equity | 533,163 | 546,949 | -2.5% | Chairman's Statement The Chairman's Statement highlights the group's commitment to business development despite severe challenges in H1 2020, with guarantee business revenue significantly increasing due to supportive policies and FinTech investment, yet a net loss was recorded due to impairment losses, associate losses, and increased operating expenses, while future plans include stable traditional business growth, FinTech promotion, and new agricultural investment opportunities - Macroeconomic Environment: In H1 2020, the COVID-19 pandemic, China-US trade friction, and geopolitical instability created unprecedented global economic shocks, leading to a persistently weak business environment[12] - Business Performance: Guarantee business revenue significantly increased, benefiting from supportive policies for SMEs and FinTech investment, while finance lease, commercial factoring, and asset management businesses adopted a cautious approach[14][17] - Loss Drivers: Despite a substantial increase in principal business revenue, the group recorded a net loss due to impairment provisions, net losses from investments in associates, and increased operating expenses[17] - Future Outlook: The group will continue to steadily develop traditional businesses, advance FinTech, and seek new agricultural-related investment opportunities through investment, equity participation, or acquisition to provide integrated financial services across the industry chain and create new profit growth points[18] Management Discussion & Analysis Business Review and Strategy The group adopted a prudent and stable strategy amidst the complex pandemic environment, enhancing market competitiveness in core guarantee business through FinTech and policy opportunities, while actively exploring integrated financial services in the Greater Bay Area, fostering diverse collaborations with financial and technology institutions, and advancing investment projects like Jicheng Sci-Tech Park - Guarantee Business: Continued investment in FinTech and development of traditional business, leveraging national support policies for SMEs and the establishment of Foshan Financing Guarantee Fund, with subsidiary Jicheng Guarantee obtaining a new operating license, enhancing market competitiveness[25] - Strategic Focus: Seizing opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area to actively seek integrated financial service opportunities, while consistently deploying FinTech and exploring diversified cooperation models with various parties[26][27] - Investment Projects: The Jicheng Sci-Tech Park project, a benchmark for Shunde's "three old" transformation, is progressing as planned[28] Financial Review In H1 2020, total revenue surged 111.3% to RMB 82.6 million, driven by a 168.5% increase in net income from financing guarantee services due to deferred revenue recognition from 2019 platform business growth; however, expanded losses from associates and increased operating expenses (due to share option costs) resulted in a pre-tax loss of RMB 2.7 million (86.4% narrower year-on-year) and a net loss of RMB 17.5 million, while the gearing ratio significantly improved from 293.3% to 220.4% due to reduced total liabilities Revenue Analysis Total revenue increased by 111.3% year-on-year to RMB 82.6 million, with core financing guarantee service net income growing 168.5% to RMB 91.3 million, primarily due to deferred revenue recognition from significant platform business growth in 2019, while non-financing guarantee service revenue halved and finance lease and factoring services recorded no income due to business maturity and cautious strategy Revenue by Business Segment | Business Segment | H1 2020 Revenue (RMB millions) | H1 2019 Revenue (RMB millions) | Y-o-Y Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Financing Guarantee Services | 91.3 | 34.0 | +168.5% | Deferred revenue from 2019 platform business growth recognized in current period | | Non-Financing Guarantee Services | 0.4 | 0.8 | -50.0% | Group adjusted product structure, focusing on new business areas | | Financial Advisory Services | 1.4 | 0.3 | +366.7% | Increased financing demand from SMEs | | Finance Lease and Factoring | 0 | 5.2 | -100% | Existing businesses matured and adopted a prudent development strategy | Profitability Analysis Despite significant revenue growth, the company's profitability remains under pressure, with pre-tax loss narrowing substantially from RMB 19.9 million to RMB 2.7 million, primarily due to increased impairment provisions for associate Jicheng Loan leading to expanded share of loss to RMB 26.6 million, a 48.8% year-on-year increase in operating expenses mainly from share option grants, and substantial impairment and provision deductions - Share of loss from associates expanded from RMB 4.6 million to RMB 26.6 million year-on-year, primarily due to increased impairment provisions for associate Jicheng Loan[49] - Operating expenses increased by 48.8% year-on-year to RMB 37.2 million, mainly due to share option expenses granted in May 2020, leading to a 50.5% rise in salaries and wages[48] - Income tax expense significantly increased from RMB 0.9 million to RMB 14.8 million, primarily due to a decrease in deferred tax assets resulting from reduced deferred revenue from platform business[52] Financial Position and Liquidity As of June 30, 2020, the group's gearing ratio (total liabilities/total equity) significantly decreased from 293.3% at end-2019 to 220.4%, primarily due to reductions in guarantee liabilities, guarantee deposits payable to cooperating companies, and other payables; cash and bank balances were approximately RMB 640 million, a decrease of RMB 428 million from the beginning of the year, mainly due to reduced third-party guarantee deposits - Gearing ratio decreased from 293.3% (end-2019) to 220.4% (end-June 2020), primarily due to a reduction in total liabilities[59] - Cash and bank balances decreased from RMB 1.067 billion (end-2019) to RMB 640 million (end-June 2020), mainly due to a reduction in guarantee deposits from third parties[55] Prospects and Outlook For H2 2020, management anticipates a challenging global economic recovery but strong resilience in mainland China's economy; the group will maintain a prudent and stable development strategy, strengthening capabilities through opportune investments and M&A while developing traditional businesses, specifically leveraging policy tailwinds for guarantee business, enhancing collaborations with financial and technology institutions, cautiously expanding finance lease and factoring, seizing Greater Bay Area opportunities, and seeking new agricultural investment projects to offer integrated financial services and boost competitiveness - Macroeconomic Outlook: Global economic downward pressure is expected to intensify, but mainland China's economy will maintain a recovery growth trend, with the central government continuing to implement loose monetary policies and expand domestic demand[62] - Business Strategy: The group will continue to steadily develop traditional guarantee businesses, advance FinTech exploration, strengthen cooperation with financial institutions and technology companies, and create distinctive integrated financial service products[63] - New Growth Points: Plans include seeking new agricultural-related commercial investment opportunities through investment, equity participation, or acquisition, using these as entry points to provide integrated financial services to upstream and downstream clients in the industry chain, creating new profit growth points[67] - Asset Allocation: To meet future business development needs, office properties in Foshan New City have been purchased for self-use[68] Interim Financial Statements Overview of Financial Statements This section presents the unaudited consolidated statement of profit or loss, consolidated statement of financial position, consolidated statement of changes in equity, and condensed consolidated statement of cash flows for the six months ended June 30, 2020, showing a net loss of RMB 17.464 million for the period, with KPMG having reviewed the interim financial report and issued an unmodified conclusion, indicating no material non-compliance with HKAS 34 Financial Statement Summary | Financial Statement Item (RMB thousands) | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Consolidated Statement of Profit or Loss | | | | Revenue | 75,434 | 29,176 | | Loss before tax | (2,713) | (19,922) | | Loss for the period | (17,464) | (20,812) | | Consolidated Statement of Financial Position | As of June 30, 2020 | As of December 31, 2019 | | Total Assets | 1,708,471 | 2,151,341 | | Total Liabilities | 1,175,308 | 1,604,392 | | Total Equity | 533,163 | 546,949 | - KPMG reviewed the interim financial report and concluded that nothing came to their attention to suggest the interim financial report was not prepared in all material respects in accordance with HKAS 34[72] Selected Notes to Financial Statements The notes to the financial statements disclose key accounting estimates and judgments, including significant impairment provisions for receivables (guarantee payments, factoring, and finance leases), reflecting high credit risk; a critical risk is the group's breach of convertible bond financial covenants due to net asset value below requirements and gearing ratio exceeding limits, though the company is negotiating waivers and updated terms with bondholders; additionally, substantial share options were granted during the period, incurring related expenses Key Risks and Judgements The group faces significant credit and liquidity risks; as of June 30, 2020, substantial impairment provisions were made for various receivables, including RMB 187 million for defaulted guarantee payments, RMB 33.66 million for factoring receivables, and RMB 147 million for finance lease receivables; critically, the group breached convertible bond financial covenants (net asset value below RMB 800 million and gearing ratio above 40%), creating significant uncertainty despite no immediate repayment demand, with management negotiating updated terms and having made partial repayments - As of June 30, 2020, the group made bad debt provisions of RMB 187 million for receivables from defaulted guarantee payments[126][136] - For finance lease receivables, overdue amounts reached RMB 145 million, with impairment provisions of RMB 147 million made[156][158][161] - The group breached convertible bond financial covenants (net asset value below RMB 800 million, gearing ratio above 40%), granting bondholders the right to demand immediate repayment; the group is negotiating updated terms with bondholders to manage liquidity risk[218][219] Equity and Financing Activities In H1 2020, the group secured new bank borrowings totaling RMB 50 million; regarding equity incentives, 31,755,400 share options were granted on May 18, 2020, under the post-IPO share option scheme, with an exercise price of HKD 0.84 per share, to directors and key employees, resulting in RMB 3.338 million in equity-settled share-based payment expenses for the period, and no dividends were declared - On May 18, 2020, the group granted 31,755,400 share options with an exercise price of HKD 0.84 per share to directors, key employees, and employees with specific performance targets[225] - The group obtained two new bank borrowings totaling RMB 50 million in H1 2020, with an interest rate of 4.4%[212] - The Board did not recommend the payment of any dividend for the six months ended June 30, 2020[241][253] Other Information Shareholding and Corporate Governance The report discloses that Chairman Mr. Zhang Tiewei and several other shareholders are concert parties, collectively controlling 48.23% of the company's equity; the company complied with listing rule corporate governance codes and maintained the required public float during the reporting period; the Board resolved not to declare an interim dividend, and details of pre-IPO and post-IPO share option schemes, including the significant new grant in May 2020, were disclosed - Chairman Mr. Zhang Tiewei, Mr. Xu Kaiying, Mr. Pang Haoquan, and Mr. Chen Guoxian are concert parties, collectively holding approximately 48.23% of the company's equity[277][283][294] - The Board resolved not to declare an interim dividend for the six months ended June 30, 2020[275] - On May 18, 2020, the company granted 31,755,400 share options under the "Post-IPO Share Option Scheme" with an exercise price of HKD 0.84 per share[304] - As of the end of the reporting period, the company had redeemed all principal (HKD 60,000,000) and corresponding interest of the notes attached to the convertible bonds[331] Post-Reporting Period Events Subsequent to the reporting period, on July 16, 2020, the group's subsidiary Jicheng Guarantee signed an agreement to acquire a new office property in Foshan New City, Shunde District, Guangdong Province, for self-use, at a total consideration not exceeding RMB 32,966,880 - On July 16, 2020, the group agreed to acquire an office property in Foshan New City for self-use, with a total consideration not exceeding RMB 32.97 million[338]