恒泰裕集团(08081) - 2019 - 中期财报

Part I Company Information and Declarations This section provides an overview of the company's information and declarations Characteristics of GEM Market and Disclaimer This section outlines the characteristics of the Hong Kong Stock Exchange's GEM market, highlighting its platform for SMEs, higher investment risks, and lack of liquidity guarantee, alongside the Exchange's disclaimer of responsibility - The GEM market targets small and medium-sized enterprises, carrying higher investment risks and no guarantee of high liquidity[3] - Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report[3] Directors' Responsibility Statement The Board of Directors collectively and individually assumes full responsibility for the accuracy, completeness, and non-misleading nature of this report, confirming all reasonable inquiries have been made - The Board of Directors jointly and individually assumes full responsibility for this report[3] - Directors confirm the report's content is accurate, complete, and free from misleading or fraudulent elements in all material aspects[3] Part II Interim Financial Results This section presents the interim financial results, including the condensed consolidated statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, and cash flow statement Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2019, revenue increased by 36% to HK$302,385 thousand, but loss for the period significantly widened to HK$29,335 thousand, mainly due to rising costs and the absence of gain on disposal of a subsidiary, while total comprehensive loss narrowed significantly due to fair value gains on financial assets Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Six Months Ended June 30, 2019 | Metric (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :------------ | :---------------- | :---------------- | :--- | | Revenue | 302,385 | 222,327 | +36% | | Cost of inventories sold/services rendered | (234,770) | (147,920) | +59% | | Other gains and losses | 139 | 20,431 | -99% | | Employee benefit expenses | (58,779) | (53,225) | +10% | | (Loss)/Profit before income tax | (29,335) | (919) | Loss widened | | (Loss)/Profit for the period | (29,335) | (2,028) | Loss widened | | Total comprehensive loss for the period | (7,809) | (42,602) | Loss narrowed | - Net loss attributable to owners of the Company for the six months ended June 30, 2019, was HK$27,259 thousand, a significant increase from HK$727 thousand in the same period of 2018[9] - Total comprehensive loss narrowed from HK$42,602 thousand in the same period of 2018 to HK$7,809 thousand in 2019, primarily due to a fair value gain of HK$23,202 thousand on financial assets at fair value through other comprehensive income[9][138] Condensed Consolidated Statement of Financial Position As of June 30, 2019, the Group's total assets increased to HK$912,428 thousand, with growth in both non-current and current assets, while current liabilities slightly decreased, leading to an improvement in net current assets and net assets Condensed Consolidated Statement of Financial Position as of June 30, 2019 | Metric (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | Change | | :------------ | :----------------------- | :----------------------- | :--- | | Non-current assets | 441,039 | 400,565 | +10% | | Current assets | 471,389 | 443,785 | +6% | | Current liabilities | (376,564) | (388,666) | -3% | | Non-current liabilities | (103,491) | (37,502) | +176%| | Net assets | 432,373 | 418,182 | +3% | | Net current assets | 94,825 | 55,119 | +72% | - Right-of-use assets increased by HK$18,011 thousand, reflecting the initial application of HKFRS 16 "Leases"[12][26] - Trade and other payables and provisions increased from HK$156,966 thousand to HK$217,715 thousand, while borrowings decreased from HK$164,812 thousand to HK$81,296 thousand[12] Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2019, the company's share capital remained unchanged, but reserves varied due to the loss for the period and transactions with non-controlling interests, with total equity attributable to owners of the Company increasing from HK$418,182 thousand at the beginning of the period to HK$432,027 thousand at the end Condensed Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2019 | Metric (HK$ thousand) | June 30, 2019 (Unaudited) | January 1, 2018 (Restated) | | :------------ | :----------------------- | :------------------ | | Share capital | 53,362 | 53,362 | | Share premium | 510,233 | 510,233 | | Contributed surplus | 693,308 | 693,308 | | Share option reserve | - | 25,462 | | Exchange fluctuation reserve | (7,057) | 3,939 | | Other reserves | 16,680 | (2,419) | | Investment revaluation reserve | (245,742) | (192,064) | | Accumulated losses | (588,757) | (441,287) | | Total equity attributable to owners of the Company | 432,027 | 609,062 | | Non-controlling interests | 346 | 1,476 | | Total equity | 432,373 | 610,538 | - For the six months ended June 30, 2019, the loss for the period attributable to owners of the Company was HK$27,259 thousand, and the loss attributable to non-controlling interests was HK$2,076 thousand[9] - Following the subscription completion on May 27, 2019, the target company is held 51% by the Company and 49% by the subscriber, resulting in a change in non-controlling interests[131] Condensed Consolidated Cash Flow Statement For the six months ended June 30, 2019, cash flow from operating activities turned positive with a net inflow of HK$29,940 thousand, while cash flow from investing activities shifted from a net inflow to a net outflow of HK$3,349 thousand, with financing activities maintaining a net inflow, and cash and cash equivalents at period-end increasing to HK$203,634 thousand Condensed Consolidated Cash Flow Statement for the Six Months Ended June 30, 2019 | Metric (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :------------ | :---------------- | :---------------- | :--- | | Net cash generated from/(used in) operating activities | 29,940 | (39,062) | Significant improvement | | Net cash (used in)/generated from investing activities | (3,349) | 102,396 | Significant decrease | | Net cash generated from/(used in) financing activities | 234 | (34,643) | Significant improvement | | Net increase in cash and cash equivalents | 26,825 | 28,691 | -7% | | Cash and cash equivalents at end of period | 203,634 | 197,629 | +3% | - Net cash generated from operating activities improved from a net outflow of HK$39,062 thousand in the same period of 2018 to a net inflow of HK$29,940 thousand in 2019, indicating improved operating efficiency[22] - Net cash from investing activities shifted from a net inflow of HK$102,396 thousand in the same period of 2018 to a net outflow of HK$3,349 thousand in 2019, primarily due to reduced investment activities[22] Part III Notes to the Financial Statements This section provides detailed notes to the financial statements, covering basis of preparation, segment information, revenue, other gains and losses, income tax, dividends, earnings per share, and changes in assets and liabilities Basis of Preparation The unaudited condensed consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, and the GEM Listing Rules, using the historical cost convention, with the initial application of HKFRS 16 "Leases" significantly impacting lease recognition and measurement - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, and the GEM Listing Rules[23] - HKFRS 16 "Leases" was first applied, recognizing leases as right-of-use assets and corresponding liabilities[26][27] - The implementation of HKFRS 16 resulted in lease liabilities of HK$23,391 thousand as of January 1, 2019, with a weighted average incremental borrowing rate of 5%[36] Segment Information The Group's operating segments include mobile internet culture business and IT services, Australia hotel and related services, lending business, and asset investment business; for the six months ended June 30, 2019, mobile internet culture business and IT services revenue grew significantly, while Australia hotel business revenue decreased - The Group's principal operating segments include mobile internet culture business and IT services, Australia hotel and related services, lending business, and asset investment business[39] Segment Revenue and Results for the Six Months Ended June 30, 2019 | Segment (HK$ thousand) | 2019 Revenue | 2019 Segment (Loss)/Profit | 2018 Revenue | 2018 Segment (Loss)/Profit | | :------------ | :--------- | :-------------------- | :--------- | :-------------------- | | Mobile Internet Culture Business and IT Services | 253,150 | (20,079) | 164,195 | (11,127) | | Australia Hotel and Related Services | 48,342 | (3,427) | 56,150 | 1,427 | | Lending Business | 893 | (134) | 151 | (323) | | Asset Investment Business | – | 4,291 | 1,831 | 18,827 | | Total | 302,385| (19,349) | 222,327| 8,804 | - Mobile internet culture business and IT services revenue increased by 54% year-on-year, but segment loss widened[39][139] - Australia hotel and related services revenue decreased by 14% year-on-year, with the segment shifting from profit to loss[39][154] Revenue For the six months ended June 30, 2019, the Group's total revenue was HK$302,385 thousand, a 36% year-on-year increase, primarily driven by mobile internet culture business and IT services, while Australia hotel and related services revenue decreased, and other income sources significantly reduced Revenue Analysis for the Six Months Ended June 30, 2019 | Revenue Source (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :---------------- | :---------------- | :---------------- | :--- | | Mobile Internet Culture Business and IT Services | 253,150 | 164,195 | +54% | | Australia Hotel and Related Services | 48,342 | 56,150 | -14% | | Total revenue from contracts with customers within HKFRS 15 scope | 301,492 | 220,345 | +37% | | Loan interest income | 893 | 151 | +491%| | Rental income | – | 1,211 | -100%| | Dividend income | – | 620 | -100%| | Total revenue from other sources | 893 | 1,982 | -55% | | Total Revenue | 302,385 | 222,327 | +36% | - Mobile internet culture business and IT services revenue was the primary growth driver, increasing by 54% year-on-year[50] - Rental income and dividend income both decreased to zero in the first half of 2019[50] Other Gains and Losses For the six months ended June 30, 2019, other gains and losses significantly decreased to HK$139 thousand (2018: HK$20,431 thousand), mainly due to the absence of gain on disposal of a subsidiary in the first half of 2019, compared to HK$17,795 thousand in the same period of 2018 Other Gains and Losses for the Six Months Ended June 30, 2019 | Item (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :------------ | :---------------- | :---------------- | :--- | | Gain on disposal of a subsidiary | – | 17,795 | -100%| | Unrealized gain/(loss) on financial assets at fair value through profit or loss | 178 | 3,353 | -95% | | Loss on disposal/write-off of property, plant and equipment | (39) | (717) | +95% | | Total | 139 | 20,431 | -99% | - The absence of gain on disposal of a subsidiary in the first half of 2019, compared to HK$17,795 thousand in the same period of 2018, was the main reason for the significant decrease in other gains and losses[53][138] (Loss)/Profit Before Income Tax For the six months ended June 30, 2019, loss before income tax widened from HK$919 thousand in the same period of 2018 to HK$29,335 thousand, primarily due to increased cost of inventories expensed, staff costs, depreciation and amortization, and interest expenses (Loss)/Profit Before Income Tax Composition for the Six Months Ended June 30, 2019 | Item (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :------------ | :---------------- | :---------------- | :--- | | Cost of inventories expensed | 11,199 | 5,386 | +108%| | Staff costs (salaries and benefits) | 253,257 | 126,805 | +100%| | Staff costs (retirement scheme contributions) | 21,930 | 11,661 | +88% | | Depreciation of property, plant and equipment | 6,105 | 2,769 | +120%| | Depreciation of right-of-use assets | 5,685 | – | New | | Amortization of intangible assets | 252 | 248 | +2% | | Interest on borrowings | 5,528 | 2,399 | +130%| - Salaries and benefits for technical staff significantly increased to HK$198,722 thousand (2018: HK$92,456 thousand), mainly due to an increase in staff numbers from IT business expansion[56] - New depreciation of right-of-use assets of HK$5,685 thousand resulted from the initial application of HKFRS 16 "Leases"[55] Income Tax Expense For the six months ended June 30, 2019, the Group's income tax expense was zero (2018: HK$1,109 thousand), primarily due to the loss for the period resulting in no current tax payable and no change in deferred tax Income Tax Expense for the Six Months Ended June 30, 2019 | Item (HK$ thousand) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :------------ | :---------------- | :---------------- | :--- | | Current tax | – | 1,512 | -100%| | Deferred tax | – | (403) | -100%| | Total | – | 1,109 | -100%| - Hong Kong profits tax is calculated at 16.5%, while subsidiaries in China and Australia are taxed at 25% and 30% respectively[60] Interim Dividend The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2019 (2018: nil) - The Board of Directors does not recommend an interim dividend for the first half of 2019[62] (Loss)/Earnings Per Share For the six months ended June 30, 2019, basic and diluted loss per share was HK$0.51 cents (2018: HK$0.01 cents), indicating a significant widening of loss, and diluted loss per share calculation did not assume conversion of share options as all share options were cancelled (Loss)/Earnings Per Share for the Six Months Ended June 30, 2019 | Metric (HK cents) | 2019 (Unaudited) | 2018 (Unaudited) | Change | | :---------- | :---------------- | :---------------- | :--- | | Basic and diluted (loss)/earnings per share | (0.51) | (0.01) | Loss widened | - For the six months ended June 30, 2019, the loss for the period attributable to owners of the Company was HK$27,259 thousand[65] - The weighted average number of ordinary shares outstanding was 5,336,235,108 shares[65] - As all share options were cancelled in 2018, the calculation of diluted loss per share did not assume conversion of share options[67] Movements in Property, Plant and Equipment For the six months ended June 30, 2019, additions to property, plant and equipment amounted to approximately HK$4,651 thousand (2018: HK$5,383 thousand) - Additions to property, plant and equipment in the first half of 2019 amounted to HK$4,651 thousand, a slight decrease from HK$5,383 thousand in the same period of 2018[69] Other Equity Investments As of June 30, 2019, the Group's financial assets at fair value through other comprehensive income increased to HK$120,001 thousand (December 31, 2018: HK$97,712 thousand), primarily comprising China-listed equity securities, while financial assets at fair value through profit or loss amounted to HK$42,110 thousand Other Equity Investments as of June 30, 2019 | Item (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | | :------------ | :----------------------- | :----------------------- | | Financial assets at fair value through other comprehensive income | 120,001 | 97,712 | | - Hong Kong listed equity securities | 12,626 | 13,105 | | - China listed equity securities | 99,452 | 76,615 | | - Unlisted equity securities | 7,923 | 7,992 | | Financial assets at fair value through profit or loss | 42,110 | 41,932 | - In the first half of 2019, no dividend income was recognized for financial assets at fair value through other comprehensive income (2018: HK$620 thousand)[73] - As of June 30, 2019, the investment in Leo Group Co., Ltd. accounted for 10.9% of the Group's total assets[164] Contract Assets and Contract Liabilities As of June 30, 2019, contract assets increased to HK$140,535 thousand (December 31, 2018: HK$132,455 thousand), primarily from contract performance, while contract liabilities slightly decreased to HK$7,377 thousand Contract Assets and Contract Liabilities as of June 30, 2019 | Item (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | | :------------ | :----------------------- | :----------------------- | | Contract assets | 140,535 | 132,455 | | - Arising from contract performance | 141,241 | 133,121 | | - Less: Loss allowance | (706) | (666) | | Contract liabilities | 7,377 | 7,427 | | - Deposits received and deferred income | 7,377 | 7,427 | - The expected recovery period for contract assets is all within one year[79] - The loss allowance for contract assets increased from HK$666 thousand to HK$706 thousand during the reporting period[79] Trade and Other Receivables As of June 30, 2019, total trade and other receivables amounted to HK$62,105 thousand, a decrease from HK$68,791 thousand as of December 31, 2018, with trade receivables increasing and loan receivables significantly decreasing Trade and Other Receivables as of June 30, 2019 | Item (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | Change | | :------------ | :----------------------- | :----------------------- | :--- | | Trade receivables | 33,037 | 27,471 | +20% | | Loan receivables | 13,900 | 27,400 | -49% | | Loan interest receivables | 5 | 81 | -94% | | Deposits | 1,467 | 3,966 | -63% | | Other receivables and prepayments | 13,696 | 9,873 | +39% | | Total | 62,105 | 68,791 | -10% | - As of June 30, 2019, the aging of trade receivables was primarily within one month (HK$28,025 thousand)[88] - As of June 30, 2019, loan receivables were unsecured, with an average annual interest rate of approximately 10%-11%, and none were overdue or impaired[94][97] Trade and Other Payables and Provisions As of June 30, 2019, total trade and other payables and provisions significantly increased to HK$217,715 thousand from HK$156,966 thousand as of December 31, 2018, with trade payables decreasing and accrued expenses and other payables substantially increasing Trade and Other Payables and Provisions as of June 30, 2019 | Item (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | Change | | :------------ | :----------------------- | :----------------------- | :--- | | Trade payables | 9,586 | 13,211 | -27% | | Accrued expenses and other payables | 229,278 | 173,540 | +32% | | Provisions | 7,200 | 7,200 | 0% | | Total | 246,064 | 193,951 | +27% | | Less: Amounts due after one year | (28,349) | (36,985) | -23% | | Current portion | 217,715 | 156,966 | +39% | - Other payables include HK$57,475 thousand (approximately RMB48,088 thousand) in compensation payable to Huawei Technologies Co., Ltd. due to bribery by a former employee[105] - The Huawei compensation will be offset against Yibao's receivables from Huawei in 36 equal monthly installments starting from April 1, 2019[106] Borrowings As of June 30, 2019, the Group's total borrowings amounted to HK$148,104 thousand, a decrease from HK$164,812 thousand as of December 31, 2018, with borrowings repayable within one year or on demand significantly decreasing, and new borrowings of HK$66,808 thousand repayable between one and two years Borrowings as of June 30, 2019 | Item (HK$ thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | Change | | :------------ | :----------------------- | :----------------------- | :--- | | Fixed-rate borrowings | 80,836 | 80,913 | -0.1%| | Floating-rate borrowings | 67,268 | 83,899 | -20% | | Total Borrowings | 148,104 | 164,812 | -10% | | Secured borrowings | 147,644 | 161,359 | -9% | | Unsecured borrowings | 460 | 3,453 | -87% | | Repayable within one year or on demand | 81,296 | 164,812 | -51% | | Repayable between one and two years | 66,808 | – | New | - Borrowing interest rates range from 4.5% to 6% per annum, with approximately 55% at fixed rates[113] - A Group subsidiary breached a loan covenant by failing to maintain sufficient collateral, but no repayment demand has been received as of the reporting date[117] Share Capital As of June 30, 2019, the company's authorized share capital was HK$200,000 thousand (20,000,000,000 ordinary shares of HK$0.01 each), and issued and fully paid share capital was HK$53,362 thousand (5,336,235,108 ordinary shares of HK$0.01 each), consistent with December 31, 2018 Share Capital as of June 30, 2019 | Item | Number of Shares | Amount (HK$ thousand) | | :------------ | :--------------- | :------------ | | Authorized share capital | 20,000,000,000 | 200,000 | | Issued and fully paid share capital | 5,336,235,108 | 53,362 | Share-based Payments As of June 30, 2019, there were no outstanding share options under the company's share option scheme, and no share options were granted, exercised, cancelled, or lapsed during the first half of 2019 - As of June 30, 2019, there were no outstanding share options under the share option scheme[122][122] - In 2018, 82,025,748 share options were cancelled due to the resignation of grantees[122] Related Party Transactions For the six months ended June 30, 2019, the company paid HK$720 thousand in consultancy fees to a substantial shareholder, and the Group received HK$22,000 thousand in subscription price from a director of a subsidiary Related Party Transactions for the Six Months Ended June 30, 2019 | Transacting Party | Nature of Transaction | 2019 (HK$ thousand) | 2018 (HK$ thousand) | | :------------ | :---------------- | :-------------- | :-------------- | | Substantial shareholder of the Company | Consultancy fees paid or payable | 720 | – | | A director of a subsidiary of the Company | Subscription price received by the Group | 22,000 | – | - Total directors' remuneration was HK$683 thousand (2018: HK$1,286 thousand), including salaries, other short-term benefits, and retirement scheme contributions[127] Transactions with Non-controlling Interests On May 27, 2019, the company completed the subscription of a 49% equity interest in its wholly-owned subsidiary, Concord-Linked Limited, by Mr. Wong Ching Chun for HK$22,000 thousand; this transaction did not result in a loss of control by the company and was therefore accounted for as an equity transaction, with no gain or loss recognized in profit or loss - On May 27, 2019, the Company disposed of a 49% equity interest in Concord-Linked Limited to Mr. Wong Ching Chun for a subscription price of HK$22,000 thousand[131] - This transaction did not result in a loss of control by the Company and was therefore accounted for as an equity transaction, with no gain or loss recognized in profit or loss[131] Impact of Change in Ownership Interest in a Subsidiary on Equity Attributable to Owners of the Company | Item | Amount (HK$ thousand) | | :------------ | :------------ | | Carrying amount of non-controlling interests disposed | (2,707) | | Consideration receivable from non-controlling shareholder | 22,000 | | Change recognized in equity on disposal | 19,293 | Part IV Management Discussion and Analysis This section provides management's discussion and analysis of the Group's business and financial performance, including segment reviews, outlook, financial resources, capital structure, and risk factors Business and Financial Review The Group primarily engages in mobile internet culture business and IT services, Australia hotel and related services, lending business, and asset investment business; in the first half of 2019, revenue increased by 36% year-on-year, but net loss attributable to owners of the Company significantly increased, mainly due to rising costs and the absence of gain on disposal of a subsidiary, while total comprehensive loss narrowed significantly due to fair value gains on financial assets - The Group's principal businesses include mobile internet culture business and IT services, Australia hotel and related services, lending business, and asset investment business[134] Key Financial Metrics Comparison for the First Half of 2019 | Metric (HK$ thousand) | First Half 2019 | First Half 2018 | Change | | :------------ | :----------- | :----------- | :--- | | Revenue | 302,385 | 222,327 | +36% | | Net loss attributable to owners of the Company | (27,259) | (727) | Loss widened | | Cost of inventories sold/services rendered | 234,770 | 147,920 | +59% | | Other gains and losses | 139 | 20,431 | -99% | | Employee benefit expenses | 58,779 | 53,225 | +10% | | Total comprehensive loss | (7,809) | (42,602) | Loss narrowed | - The increased loss was primarily attributable to higher technical staff salaries and benefits due to IT business expansion, and the absence of gain on disposal of a subsidiary in the first half of 2019[135] Overall Performance Overview In the first half of 2019, the Group's revenue increased by 36% year-on-year, but net loss attributable to owners of the Company significantly increased, mainly due to rising costs from IT business expansion and the absence of gain on disposal of a subsidiary, while total comprehensive loss narrowed significantly due to fair value gains on financial assets - Revenue for the first half of 2019 was approximately HK$302,385 thousand, an increase of approximately 36% year-on-year[135] - Net loss attributable to owners of the Company was approximately HK$27,259 thousand, a significant increase from HK$727 thousand in the same period of 2018[135] - Total comprehensive loss was approximately HK$7,809 thousand, a significant narrowing from HK$42,602 thousand in the same period of 2018, primarily due to fair value gains on financial assets[135] Mobile Internet Culture Business and IT Services In the first half of 2019, this segment's revenue increased by 54% to HK$253,150 thousand; however, due to subsidiary Yibao's breach of integrity commitment with Huawei, new business cooperation was suspended, leading to lower-than-expected revenue growth, and the Group's mobile online game business continued to incur losses due to intense market competition and lack of innovative games - Mobile internet culture business and IT services revenue was approximately HK$253,150 thousand, an increase of approximately 54% year-on-year[136][139] - Subsidiary Yibao is required to pay approximately RMB48,088 thousand in compensation to Huawei due to bribery by a former employee, breaching the integrity commitment[141] - Huawei suspended new business cooperation with Yibao since December 2018, resulting in lower-than-expected IT services revenue growth[141] - The Group holds a 28.8% equity interest in Dashishi Technology Holdings Limited, whose mobile online game business incurred a loss of HK$1,466 thousand due to intense market competition and lack of innovative games[145][148] Australia Hotel and Related Services In the first half of 2019, Australia hotel and related services revenue decreased by 14% to HK$48,342 thousand, primarily due to a drop in resort average occupancy rate from 60% to 56%, attributed to slower Australian economic growth and uncertainty from the May 2019 federal election, reducing domestic tourism demand - Australia hotel and related services revenue was approximately HK$48,342 thousand, a year-on-year decrease of 14%[154][157] - The average occupancy rate of resorts decreased from approximately 60% in the first half of 2018 to approximately 56% in the first half of 2019[155][157] - The revenue decrease was mainly affected by slower Australian economic growth (Q1 2019 GDP growth of 0.4%) and federal election uncertainty[155][157] - The Group owns three resorts in Australia: Balgownie Estate Vineyard Resort & Spa Yarra Valley, Bellinzona Resort Cellar Door & Dining, and Cleveland Winery Resort & Events, marketed under the "Premier Resort Group" brand[149][156] Lending Business In the first half of 2019, the Group's lending business interest income increased to HK$893 thousand (2018: HK$151 thousand); the Group conducts its lending business in Hong Kong through its wholly-owned subsidiary, Premier Finance Limited, and plans to continue its development under prudent credit procedures - Lending business interest income was approximately HK$893 thousand, a significant increase from HK$151 thousand in the same period of 2018[160][162] - The Group conducts its lending business in Hong Kong through its wholly-owned subsidiary, Premier Finance Limited[160] - The Group will closely monitor market conditions and develop its lending business with prudent credit procedures[160] Asset Investment Business As of June 30, 2019, the Group's asset investment portfolio primarily comprised securities of listed companies; in the first half of 2019, an unrealized fair value gain of HK$178 thousand on financial assets at fair value through profit or loss was recorded, along with a fair value gain of HK$23,255 thousand on financial assets at fair value through other comprehensive income (2018: loss of HK$31,318 thousand), and the investment in Leo Group Co., Ltd. accounted for 10.9% of the Group's total assets - The asset investment portfolio primarily comprises securities of listed companies[161] Asset Investment Business Gains for the First Half of 2019 | Item (HK$ thousand) | First Half 2019 | First Half 2018 | Change | | :------------ | :----------- | :----------- | :--- | | Unrealized fair value gain on financial assets at fair value through profit or loss | 178 | 3,353 | -95% | | Fair value gain/(loss) on financial assets at fair value through other comprehensive income | 23,255 | (31,318) | Significant improvement | - The investment in Leo Group Co., Ltd. accounted for 10.9% of the Group's total assets, with the company primarily engaged in water pump manufacturing and internet services[164][166] - Leo Group's net profit for Q1 2019 increased by 23% year-on-year, mainly due to increased government subsidies, gains on asset disposal, and investment income[166] Disposal of Zhiqu In 2015, the Group disposed of its entire equity interest in Zhiqu to Leo, with the total consideration adjusted by Zhiqu's audited Net Operating Profit (NOP) performance; as Zhiqu's NOP for FY2016 and FY2017 fell short of targets, compensation mechanisms were triggered, with the FY2017 compensation involving 23,477,822 shares of Jixiang, and Leo has initiated arbitration against the Group for the outstanding FY2017 compensation, while the FY2018 adjustment amount remains undetermined - The Group disposed of its entire equity interest in Zhiqu to Leo in 2015, with the total consideration adjusted by Zhiqu's audited Net Operating Profit (NOP) performance[171] Zhiqu Committed Net Operating Profit (NOP) | Fiscal Year | Committed NOP (RMB) | Actual NOP (RMB) | | :--- | :--------------- | :--------------- | | 2016 | 58,000,000 | 32,239,594.87 | | 2017 | 75,400,000 | 36,689,479.02 | | 2018 | 98,020,000 | 12,089,600 (Net Profit) | - The FY2016 compensation amount was RMB83,931,144.53, settled by Jixiang shares, with no payment required from the Group[177] - The FY2017 compensation amount was RMB126,124,504.45, settled by 23,477,822 Jixiang shares, and Leo has initiated arbitration against the Group for the outstanding portion[178][181][183] - The Group's PRC legal counsel initially believes the Group has a strong chance of successfully arguing that Leo's claims should not be supported in arbitration[183] Outlook The Group anticipates continued decline in Australia hotel accommodation demand due to global economic slowdown, will adopt a conservative capital expenditure strategy, and seek partnerships to improve occupancy rates; the IT services business faces high staff costs and cash flow uncertainty from the Huawei compensation settlement, while the Group will continue its diversified business development strategy, prudently selecting investments to navigate market volatility and create shareholder value - Australia hotel accommodation demand is expected to continue to slow due to the impact of the US-China trade conflict on global economic growth[183] - The Group will adopt a conservative capital expenditure strategy for resort facility upgrades and seek cooperation with inbound tour operators to improve occupancy rates[183] - The IT services business faces high staff costs and cash flow uncertainty arising from the Huawei compensation settlement arrangement[185] - The Group will adhere to its diversified business development strategy, prudently selecting investments to navigate market volatility and create shareholder value[186][189] Financial Resources and Liquidity As of June 30, 2019, the Group's financial position was robust, with total assets increasing to HK$912,428 thousand and cash and bank balances to HK$203,634 thousand; net current assets significantly increased to HK$94,825 thousand, and total borrowings decreased, with a substantial reduction in borrowings repayable within one year Financial Resources Overview as of June 30, 2019 | Metric (HK$ thousand) | June 30, 2019 | December 31, 2018 | Change | | :------------ | :----------- | :------------- | :--- | | Total assets | 912,428 | 844,350 | +8% | | Cash and bank balances | 203,634 | 176,993 | +15% | | Net current assets | 94,825 | 55,119 | +72% | | Total borrowings | 148,104 | 164,812 | -10% | | Borrowings repayable within one year | 81,296 | 164,812 | -51% | | Borrowings repayable between one and two years | 66,808 | – | New | - Cash and bank balances were primarily denominated in HKD (84%), RMB (7%), USD (7%), and AUD (2%)[187] - Borrowing interest rates range from 4.5% to 6% per annum, with approximately 55% at fixed rates[187] Capital Structure As of June 30, 2019, the Group's shareholders' equity was HK$432,027 thousand; the Group manages its capital structure by monitoring current ratio, debt-to-asset ratio, and net debt-to-equity ratio - As of June 30, 2019, shareholders' equity was approximately HK$432,027 thousand[190] Capital Structure Ratios as of June 30, 2019 | Metric | June 30, 2019 | December 31, 2018 | | :------------ | :----------- | :------------- | | Current ratio | 1.25 times | 1.14 times | | Debt-to-asset ratio | 0.53 times | 0.50 times | | Net debt-to-equity ratio | 0.59 times | 0.60 times | Foreign Exchange Risk The Group's revenue and costs are primarily denominated in HKD, RMB, and AUD; no derivative hedging was undertaken during the reporting period, and the Group will continue to monitor foreign exchange risk and consider appropriate hedging instruments when necessary - The Group's revenue and costs are primarily denominated in HKD, RMB, and AUD[190] - No derivative products were invested for hedging during the reporting period[190] - The Group will continue to monitor foreign exchange risk and consider appropriate hedging instruments when exchange rates fluctuate[190] Pledge of Assets As of June 30, 2019, certain of the Group's borrowings were secured by land and buildings (HK$177,164 thousand), financial assets at fair value through other comprehensive income (HK$99,452 thousand), and time deposits (HK$13,000 thousand) Group's Asset Pledge Situation as of June 30, 2019 | Pledged Assets | Amount (HK$ thousand) | December 31, 2018 (HK$ thousand) | | :------------ | :------------ | :----------------------- | | Land and buildings | 177,164 | 173,349 | | Financial assets at fair value through other comprehensive income | 99,452 | 76,615 | | Time deposits | 13,000 | 13,000 | Capital Commitments As of June 30, 2019, the Group had no significant capital expenditure commitments (December 31, 2018: nil) - As of June 30, 2019, the Group had no significant capital expenditure commitments[192] Litigation and Claims The Group is involved in two legal proceedings: the Convoy Litigation and the Chu Litigation; in the Convoy Litigation, the plaintiff seeks to set aside share allotments, rescind financing facilities, and claim damages, with Linker having fully repaid the loans and filed a defense, while the Chu Litigation is stayed pending the outcome of the Convoy Litigation, and the Group's lawyers believe the potential liability and final outcome cannot be reliably assessed at present - The Group is involved in the Convoy Litigation initiated by Convoy Global Holdings Limited, seeking to set aside share allotments, rescind financing facilities, and claim damages[192] - Linker fully repaid the Convoy loan and margin loan on December 19, 2018, no longer holds Convoy shares, and has filed a defense[192][194] - The Group is involved in the Chu Litigation initiated by Chu Xiaoyan, seeking to declare the Convoy share placement invalid and claim damages, with this litigation stayed pending the outcome of the Convoy Litigation[196][199] - The Group's lawyers believe the potential liability amount and final outcome cannot be reliably assessed at present, thus no provision has been made[201] Contingent Liabilities Except for the arbitration proceedings disclosed in the "Disposal of Zhiqu" section of this report, the Group had no other significant contingent liabilities as of June 30, 2019 - Except for the arbitration related to the Zhiqu disposal, the Group had no other significant contingent liabilities[205] Employee Remuneration Policy As of June 30, 2019, the Group had approximately 3,070 employees, with total staff costs amounting to HK$275,187 thousand; the Group enhances employee capabilities through training, with remuneration determined by industry practice, performance, qualifications, and experience, and directors' remuneration decided by the Board based on Remuneration Committee recommendations, including discretionary bonuses, share options, and other benefits - As of June 30, 2019, the Group had approximately 3,070 employees (December 31, 2018: 2,900 employees)[206] - Total staff costs for the first half of 2019 were approximately HK$275,187 thousand (2018: HK$154,535 thousand)[206] - Employee remuneration is determined based on industry practice, individual performance, qualifications, and experience[207] - Directors' remuneration is determined by the Board based on the Remuneration Committee's recommendations, including discretionary bonuses, share options, and other benefits[208] Part V Other Information This section covers other important information, including directors' and substantial shareholders' interests in securities, share option scheme, changes in directors' information, transactions in listed securities, directors' competing interests, code of conduct for securities transactions, corporate governance practices, and the audit committee Directors' and Chief Executive's Interests in Securities As of June 30, 2019, none of the company's directors or chief executive held or were deemed to hold any interests or short positions in the shares, underlying shares, and debentures of the company or its associated corporations - As of June 30, 2019, no directors or chief executive held any interests or short positions in the securities of the Company or its associated corporations[214] Substantial Shareholders' Interests As of June 30, 2019, Mr. Cheng Hei Yu was a substantial shareholder of the company, holding 3,765,987,973 ordinary shares, representing 70.57% of the total issued shares Substantial Shareholders' Shareholding as of June 30, 2019 | Shareholder Name | Capacity | Number of Ordinary Shares | Approximate Percentage | | :------- | :------- | :------------ | :--------- | | Cheng Hei Yu | Beneficial owner | 3,765,987,973 | 70.57% | - As of June 30, 2019, other than Mr. Cheng Hei Yu, no other substantial shareholders held disclosable interests or short positions[216] Share Option Scheme As of June 30, 2019, there were no outstanding share options under the company's share option scheme, and no share options were granted, exercised, cancelled, or lapsed during the reporting period - As of June 30, 2019, there were no outstanding share options under the share option scheme[212][219] - The share option scheme aims to provide incentives, help the Group retain and recruit employees, and align them with the company's long-term business objectives[219] Changes in Directors' Information Independent Non-executive Director Mr. Li Kan Fai was appointed as an independent non-executive director of China Creative Digital Entertainment Limited on July 15, 2019, and of Easy Repay Finance Investment Limited on July 17, 2019 - Independent Non-executive Director Mr. Li Kan Fai was appointed as an independent non-executive director of two GEM-listed companies[219] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2019, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - In the first half of 2019, neither the Company nor its subsidiaries purchased, sold, or redeemed any listed securities[219] Directors' Competing Interests Executive Directors Mr. Hui Chun Sum and Ms. Lam Ka Wai are engaged in lending businesses in Hong Kong through Chinese Financial Credit Limited and Gold Leader Limited, respectively, which compete with the Group's lending business - Executive Directors Mr. Hui Chun Sum and Ms. Lam Ka Wai are engaged in lending businesses in Hong Kong through their respective companies, which compete with the Group's business[221][225][227] Code of Conduct Regarding Securities Transactions by Directors In the first half of 2019, the company adopted a code of conduct for directors' securities transactions no less exacting than required by the GEM Listing Rules, and no non-compliance was found after inquiry with all directors - The Company has adopted a code of conduct for directors' securities transactions that meets the requirements of the GEM Listing Rules[223] - After inquiry with all directors, no non-compliance was found during the reporting period[223] Corporate Governance Code The company is committed to good corporate governance practices and has complied with the Corporate Governance Code in Appendix 15 of the GEM Listing Rules, with one deviation: the roles of Chairman and Chief Executive were previously held by different individuals, but the Chief Executive position was vacant from November 2017 to June 2019, after which Ms. Lam Ching Yee was appointed Chief Executive on June 5, 2019, and the Board believes the current arrangement ensures a balance of power - The Company has complied with the Corporate Governance Code in Appendix 15 of the GEM Listing Rules, with one deviation[224] - Code provision A.2.1 requires separation of Chairman and Chief Executive roles, but the Chief Executive position was vacant from November 2017 to June 2019[224] - Ms. Lam Ching Yee was appointed Chief Executive of the Company on June 5, 2019[224] - The Board believes the current arrangement (half independent non-executive directors) is sufficient to ensure a balance of power[229] Audit Committee The Audit Committee has been established in compliance with GEM Listing Rules, comprising three independent non-executive directors with Mr. Wong Siu Keung as Chairman; its primary responsibilities include reviewing financial information, internal controls, risk management, and audit plans, and the Committee has reviewed the current period's results and report, deeming them compliant with applicable accounting standards and disclosure requirements - The Audit Committee comprises three independent non-executive directors, with Mr. Wong Siu Keung serving as Chairman[230][234] - The Committee's responsibilities include reviewing financial information, internal control and risk management systems, audit plans, and relationships with external auditors[230] - The Audit Committee has reviewed the unaudited condensed consolidated results and report for the current period, deeming them compliant with applicable accounting standards and GEM Listing Rules, and adequately disclosed[231][235]