瓦普思瑞元宇宙(08093) - 2020 - 中期财报

Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended December 31, 2019, the company turned from loss to profit, driven by revenue growth and impairment loss reversal, despite a gross margin decline Overview of Profit or Loss and Other Comprehensive Income (For the six months ended December 31) | Indicator | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 274,149 | 189,366 | +44.89% | | Cost of Sales | (265,432) | (158,901) | +67.04% | | Gross Profit | 8,717 | 30,465 | -71.38% | | Operating Profit/(Loss) | 28,343 | (3,696) | N/A (Turned from loss to profit) | | Profit/(Loss) Before Tax | 25,434 | (3,822) | N/A (Turned from loss to profit) | | Profit/(Loss) for the Period | 25,332 | (3,885) | N/A (Turned from loss to profit) | | Basic and Diluted Earnings/(Loss) Per Share | HK6.03 cents | HK(0.97) cents | N/A (Turned from loss to profit) | - The company's profit for the period was primarily attributable to the reversal of impairment losses on trade and other receivables, amounting to HK$41,238 thousand[9] Unaudited Condensed Consolidated Statement of Financial Position As of December 31, 2019, the balance sheet shows significant increases in non-current assets and current liabilities, influenced by HKFRS 16 adoption, borrowings, and trade receivables, leading to an increase in net assets Overview of Financial Position (As of December 31) | Indicator | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total Non-Current Assets | 95,182 | 6,209 | +1432.9% | | Total Current Assets | 391,726 | 282,442 | +38.69% | | Total Current Liabilities | 238,255 | 78,616 | +203.06% | | Net Current Assets | 153,471 | 203,826 | -24.70% | | Net Assets | 237,178 | 209,865 | +12.99% | | Total Equity | 237,178 | 209,865 | +12.99% | - The substantial increase in non-current assets was mainly due to the initial application of HKFRS 16, recognizing right-of-use assets of HK$18,712 thousand, new intangible assets of HK$15,515 thousand, and interests in an associate of HK$55,870 thousand[13] - Current liabilities significantly increased, primarily due to borrowings rising from HK$14,522 thousand to HK$120,419 thousand and contract liabilities from HK$9,963 thousand to HK$43,317 thousand[13] Unaudited Condensed Consolidated Statement of Changes in Equity For the six months ended December 31, 2019, total equity increased, primarily due to profit for the period and new share subscriptions, despite a decrease in the exchange fluctuation reserve Overview of Changes in Equity (As of December 31) | Indicator | December 31, 2019 (HK$ Thousand) | July 1, 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Share Capital | 4,200 | 4,000 | +200 | | Share Premium | 44,582 | 39,782 | +4,800 | | Exchange Fluctuation Reserve | (14,324) | (11,305) | -3,019 | | Retained Earnings | 200,914 | 175,582 | +25,332 | | Total Equity | 237,178 | 209,865 | +27,313 | - New share subscriptions during the period generated HK$5,000 thousand in funds, with HK$200 thousand credited to share capital and HK$4,800 thousand to share premium[17] - The exchange fluctuation reserve decreased by HK$3,019 thousand due to exchange differences on the translation of foreign operations[17][20][23] Unaudited Condensed Consolidated Statement of Cash Flow For the six months ended December 31, 2019, net cash and cash equivalents decreased, despite significant cash inflows from financing activities, due to substantial outflows from operating and investing activities Overview of Cash Flows (For the six months ended December 31) | Indicator | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (35,784) | (35,148) | -636 | | Net Cash Used in Investing Activities | (73,534) | (140) | -73,394 | | Net Cash Generated From/(Used In) Financing Activities | 103,172 | (38,513) | +141,685 | | Net Decrease in Cash and Cash Equivalents | (6,146) | (73,801) | +67,655 | | Cash and Cash Equivalents at End of Period | 10,893 | 31,414 | -20,521 | - Net cash outflow from investing activities significantly increased, primarily due to the purchase of intangible assets and interests in an associate[27] - Net cash inflow from financing activities significantly increased, turning from an outflow in 2018 to an inflow in 2019, mainly driven by new borrowings and share subscriptions[27] Notes to The Unaudited Condensed Consolidated Financial Statements This section details the basis of preparation, accounting policy changes, revenue, segment information, expenses, taxation, EPS, dividends, receivables/payables, borrowings, lease commitments, and related party transactions for the six months ended December 31, 2019 - The Group first applied HKFRS 16 'Leases' during this interim period, replacing HKAS 17[36][39] - HKFRS 16 introduces a single on-balance sheet accounting model, requiring lessees to recognize right-of-use assets and lease liabilities[36][39] 1. BASIS OF PREPARATION AND BASIS OF PRESENTATION This interim financial information is prepared under HKAS 34 and GEM Listing Rules, using a historical cost basis, reviewed by the audit committee but unaudited by external auditors, with consistent accounting policies except for HKFRS 16 - Financial information is prepared in accordance with HKAS 34 'Interim Financial Reporting' and the GEM Listing Rules[28][31] - The statements are prepared on a historical cost basis, reviewed by the audit committee, but not audited by external auditors[29][32] - Accounting policies remain consistent with the previous financial year, except for the adoption of HKFRS 16 'Leases'[30][32][34] 2. CHANGES IN ACCOUNTING POLICIES The Group's first-time application of HKFRS 16 'Leases' significantly changed lease accounting, recognizing right-of-use assets and lease liabilities, impacting financial statements 2. (a) Definition of a lease Under the new HKFRS 16 definition, a contract is a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration; the Group applied a simplified transition approach - HKFRS 16 defines a contract as a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration[40][42] - The Group adopted a simplified transition approach, applying HKFRS 16 only to contracts previously identified as leases, without reassessing contracts not identified as leases under HKAS 17[41][42] 2. (b) As a lessee As a lessee, the Group recognized right-of-use assets and lease liabilities for office and equipment leases under HKFRS 16, with assets measured at cost and depreciated, and liabilities at the present value of unpaid lease payments - The Group leases offices and equipment, recognizing right-of-use assets and lease liabilities under HKFRS 16[44][46] Total Right-of-Use Assets (As of December 31, 2019) | Category | Amount (HK$ Thousand) | | :--- | :--- | | Property | 18,666 | | Equipment | 46 | | Total | 18,712 | - Right-of-use assets are initially measured at cost, subsequently at cost less accumulated depreciation and impairment losses, and depreciated on a straight-line basis over the asset's useful life or lease term, whichever is shorter[49][52] - Lease liabilities are initially measured at the present value of unpaid lease payments at the commencement date, using the Group's incremental borrowing rate as the discount rate[50][52] 2. (c) Impacts of financial statements The initial application of HKFRS 16 led to the recognition of additional right-of-use assets and lease liabilities, reclassifying operating lease expenses to depreciation and finance costs, impacting the statement of financial position and profit or loss - Upon transition to HKFRS 16, the Group recognized additional right-of-use assets of HK$22,725 thousand and additional lease liabilities of HK$22,725 thousand[65][66][67] - For the six months ended December 31, 2019, the Group recognized depreciation expense of HK$3,941 thousand and finance costs of HK$529 thousand, replacing operating lease expenses[74][75] Lease Liability Recognition (As of July 1, 2019) | Item | Amount (HK$ Thousand) | | :--- | :--- | | Operating lease commitments disclosed at June 30, 2019 | 6,279 | | Lease liabilities discounted at incremental borrowing rate | 23,216 | | Less: Short-term leases recognized as expense on a straight-line basis | (491) | | Lease liabilities recognized at July 1, 2019 | 22,725 | | Of which: Current lease liabilities | 6,559 | | Non-current lease liabilities | 16,166 | 3. REVENUE AND OPERATING SEGMENT INFORMATION The Group's revenue primarily derives from internet advertising agency services, which saw significant growth in the second half of 2019; the Group has three operating segments and discloses major customer and geographical revenue sources - The Group's revenue primarily derives from providing internet advertising agency services, mobile payment technical support services, and selling leather products (which have been discontinued)[77][78] Revenue Source Analysis (For the six months ended December 31) | Revenue Source | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Internet Advertising Agency Services | 274,149 | 159,456 | +71.93% | | Mobile Payment Technical Support Services | – | 99 | -100% | | Sale of Leather Products | – | 29,811 | -100% | | Total Revenue | 274,149 | 189,366 | +44.89% | - The Group has three operating segments: internet advertising agency services, mobile payment technical support services, and leather business (which has been discontinued)[82] Segment revenue and results In 2019, the internet advertising agency services segment experienced substantial revenue growth, becoming the Group's primary revenue source and achieving positive segment results, while mobile payment and leather businesses were discontinued or contributed minimally Segment Revenue and Results (For the six months ended December 31) | Segment | 2019 Revenue (HK$ Thousand) | 2019 Segment Results (HK$ Thousand) | | :--- | :--- | :--- | | Internet Advertising Agency Services | 274,149 | 21,872 | | Mobile Payment Technical Support Services | – | N/A | | Leather Business | – | N/A | Segment Revenue and Results (For the six months ended December 31) | Segment | 2018 Revenue (HK$ Thousand) | 2018 Segment Results (HK$ Thousand) | | :--- | :--- | :--- | | Internet Advertising Agency Services | 159,456 | 7,816 | | Mobile Payment Technical Support Services | 99 | (1,533) | | Leather Business | 29,811 | (2,161) | 3. (a) Information about major customers For the six months ended December 31, 2019, Customer A and Customer C became the Group's major revenue contributors, while Customer B was the primary customer in the corresponding period of 2018 Major Customer Revenue Contribution (For the six months ended December 31) | Customer | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Customer A | 106,332 | * | | Customer B | * | 90,696 | | Customer C | 35,463 | * | - Asterisks indicate that the customer's revenue contribution did not exceed 10% of the Group's total revenue in the respective period[93][95] 3. (b) Geographical information The Group's revenue primarily originates from Mainland China, where non-current assets are also mainly concentrated, with revenue from the United States, Hong Kong, and Canada decreasing in 2019 Revenue from External Customers (For the six months ended December 31) | Region | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | China (excluding Hong Kong) | 267,775 | 137,228 | | United States of America | 3,899 | 34,430 | | Hong Kong | 1,650 | 2,966 | | Canada | 825 | 6,260 | | Australia | – | 3,137 | | Malaysia | – | 1,426 | | Taiwan | – | 1,377 | | Switzerland | – | 956 | | Japan | – | 862 | | Netherlands | – | 665 | | South Africa | – | 51 | | Other | – | 8 | | Total | 274,149 | 189,366 | Geographical Distribution of Non-Current Assets (As of December 31) | Region | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | China | 92,827 | 5,937 | | Hong Kong | 2,333 | 239 | | United States of America | 22 | 33 | | Total | 95,182 | 6,209 | 4. OTHER INCOME, GAINS/(LOSSES) For the six months ended December 31, 2019, the Group's other income, gains/(losses) turned from a net gain in the prior year to a net loss, primarily due to losses on disposal of property, plant and equipment and reduced government grants Other Income, Gains/(Losses) (For the six months ended December 31) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Exchange gains, net | 1 | 427 | | Interest income | 34 | 51 | | Loss on disposal of property, plant and equipment | (653) | – | | Government grants | 6 | 517 | | Others | 29 | 4 | | Total | (583) | 999 | - Government grants represent one-off subsidies received for participating in design activities, which significantly decreased in 2019[106][107] 5. FINANCE COSTS For the six months ended December 31, 2019, the Group's finance costs significantly increased, mainly due to new interest on other borrowings and lease liabilities Finance Costs (For the six months ended June 30) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Interest on bank borrowings | 398 | 126 | | Interest on other borrowings | 1,977 | – | | Interest on lease liabilities | 529 | – | | Total | 2,904 | 126 | - Interest on lease liabilities of HK$529 thousand is a result of the initial application of HKFRS 16[109] 6. PROFIT/(LOSS) BEFORE TAX For the six months ended December 31, 2019, the Group's profit before tax was influenced by factors such as staff costs, depreciation expenses, and cost of inventories sold; staff costs significantly decreased, while depreciation of right-of-use assets was a new item Composition of Profit/(Loss) Before Tax (For the six months ended December 31) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Total staff costs | 10,833 | 23,144 | | Cost of inventories sold | – | 15,063 | | Depreciation of right-of-use assets | 3,941 | – | | Depreciation of property, plant and equipment | 739 | 905 | - Total staff costs decreased by approximately 53.2% year-on-year, primarily due to reduced salaries and bonuses[110] - Cost of inventories sold was zero in 2019, indicating the discontinuation of the leather business[110] 7. INCOME TAX EXPENSE The Group's income tax expense primarily consists of PRC Enterprise Income Tax, with Hong Kong profits tax levied under a two-tiered system, and certain PRC subsidiaries enjoying enterprise income tax exemptions in specific economic development zones - Hong Kong profits tax is provided at a rate of 16.5%, with a two-tiered system introduced, taxing the first HK$2 million of assessable profits at 8.25%[112][113] - PRC Enterprise Income Tax is provided at a rate of 25%[114] - Subsidiaries including Horgos Sifan, Horgos Xiangjiao, and Horgos Dongrun are exempt from income tax from 2017 to 2020 due to their location in a special economic development zone in Xinjiang and compliance with preferential policies[115][116] Income Tax Expense (For the six months ended December 31) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Hong Kong profits tax | – | – | | PRC Enterprise Income Tax | 102 | 63 | | Income Tax Expense for the Period | 102 | 63 | 8. EARNING PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY For the six months ended December 31, 2019, basic earnings per share attributable to owners of the company was HK6.03 cents, a significant improvement from a loss in the prior year, with diluted EPS being the same due to no dilutive potential ordinary shares - Basic earnings per share attributable to owners of the company was HK6.03 cents (2018: HK(0.97) cents)[10] - Basic earnings per share is calculated based on profit attributable to owners for the period and 420,000,000 issued shares (2018: 400,000,000 shares)[121] - Diluted earnings per share is the same as basic earnings per share as there were no dilutive potential ordinary shares outstanding during the period[122][123] 9. DIVIDENDS For the period ended December 31, 2019, the company neither declared nor paid any dividends - For the periods ended December 31, 2019 and 2018, the company neither declared nor paid any dividends[125][127] 10. TRADE RECEIVABLES As of December 31, 2019, the Group's total trade receivables increased, but the provision for doubtful debts significantly decreased, leading to a higher net amount, with a notable increase in receivables within 30 days Overview of Trade Receivables (As of December 31) | Item | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Trade receivables | 154,075 | 141,481 | | Provision for doubtful debts | (2,179) | (27,973) | | Net Amount | 151,896 | 113,508 | - The provision for doubtful debts significantly decreased from HK$27,973 thousand to HK$2,179 thousand[129] Ageing Analysis of Trade Receivables (As of December 31) | Ageing | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Within 30 days | 88,715 | 14,131 | | 31 to 60 days | 20,195 | 7,974 | | 61 to 90 days | 5,676 | 5,166 | | 91 to 180 days | 19,461 | 12,831 | | 181 to 365 days | 3,341 | 14,648 | | Over 365 days | 14,508 | 58,758 | | Total | 151,896 | 113,508 | 11. TRADE PAYABLES As of December 31, 2019, the Group's total trade payables increased, with a significant rise in amounts due within 30 days and a reduction in amounts over 90 days Ageing Analysis of Trade Payables (As of December 31) | Ageing | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Within 30 days | 19,908 | 9,001 | | 31 to 60 days | 2,799 | 1,457 | | 61 to 90 days | 848 | 1,326 | | Over 90 days | 20,111 | 26,619 | | Total | 43,666 | 38,403 | - Trade payables within 30 days increased from HK$9,001 thousand to HK$19,908 thousand, more than doubling[135] - Trade payables over 90 days decreased from HK$26,619 thousand to HK$20,111 thousand[135] 12. INTEREST-BEARING BORROWINGS As of December 31, 2019, the Group's total interest-bearing borrowings significantly increased, primarily from unsecured third-party loans, with most borrowings due within one year Overview of Interest-Bearing Borrowings (As of December 31) | Item | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Bank loans — secured | 28,519 | 8,122 | | Third-party loans — unsecured | 91,900 | 6,570 | | Total | 120,419 | 14,692 | - Total interest-bearing borrowings significantly increased from HK$14,692 thousand to HK$120,419 thousand, an increase of approximately 719.6%[138] - As of December 31, 2019, all interest-bearing borrowings (HK$120,419 thousand) are repayable within one year[141] - The Group borrowed unsecured loans of HK$91,900 thousand from third parties, bearing fixed annual interest rates of 3%-6%[142] 13. LEASE COMMITMENTS As of December 31, 2019, due to the adoption of HKFRS 16, the Group recognized operating lease commitments as lease liabilities and no longer discloses future minimum lease payments under irrevocable operating leases Lease Commitments (As of December 31) | Item | 2019 (HK$ Thousand) | June 30, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Within one year | – | 4,959 | | In the second to fifth year inclusive | – | 1,320 | | Total | – | 6,279 | - As of December 31, 2019, the Group no longer has future minimum lease payment commitments under irrevocable operating leases, which is related to the adoption of HKFRS 16[144][145] 14. RELATED PARTY TRANSACTIONS This section discloses the Group's related party transactions, primarily directors' remuneration, which significantly decreased for the six months ended December 31, 2019 Directors' Remuneration (For the six months ended December 31) | Item | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Salaries, allowances and benefits in kind | 420 | 2,160 | | Contributions to pension schemes | 2 | 9 | | Total | 422 | 2,169 | - Total directors' remuneration decreased from HK$2,169 thousand in 2018 to HK$422 thousand in 2019, a decrease of approximately 80.5%[149] Management Discussion and Analysis This section provides a detailed analysis of business and financial performance for the six months ended December 31, 2019, highlighting significant revenue growth in internet advertising agency services, a decline in gross margin, a turnaround to profit, and capital raising through new share issuance INTERIM DIVIDEND The Board does not recommend the payment of any interim dividend for the six months ended December 31, 2019 - The Board does not recommend the payment of any interim dividend for the six months ended December 31, 2019 (2018: nil)[150][154] INTRODUCTION Man Shing Holdings Limited is an integrated group specializing in internet advertising agency services - The Group is an integrated group specializing in internet advertising agency services[151][155] BUSINESS REVIEW The Group's internet advertising agency services grew in Mainland China and overseas markets, expanding its customer base and sales through promotional measures despite macroeconomic challenges and increased industry competition - The Group primarily provides internet advertising placement services to various clients in Mainland China, with sales increasing by approximately 44.8% compared to the same period last year[152][156] - Dongrun Network (a wholly-owned subsidiary) provides information flow, search engine, application marketing, and navigation advertising agency services, primarily serving customers in e-commerce, online travel, and gaming industries, achieving revenue of approximately HK$266 million during the period[153][156] - Man Shing Network (a wholly-owned subsidiary) develops overseas internet advertising markets through Facebook, providing global advertising placement services, and recorded revenue of approximately HK$6 million during the period[158][162] OUTLOOK The Group plans to capitalize on the rapid development of the internet advertising industry by increasing investment, expanding new customers, businesses, and revenue sources to deliver higher returns to shareholders - The Group will seize opportunities in the rapidly developing internet advertising industry and increase investment in the internet advertising market[159][163] - The Group will strive to expand new customers, businesses, and revenue sources to bring higher returns to shareholders[159][163] FINANCIAL REVIEW This section provides a comprehensive review of the Group's financial performance, including revenue, costs, profits, financial position, and liquidity, noting significant growth in revenue and net profit, but a decline in gross margin, alongside increased borrowings and liabilities Overview For the six months ended December 31, 2019, the Group's revenue significantly increased by 45%, but gross profit decreased by 71%, while profit attributable to owners of the company substantially increased by 752%, turning from loss to profit - The Group's revenue for the six months ended December 31, 2019, was approximately HK$274 million, a significant increase of approximately 45% compared to the same period in the previous financial year[160][164] - The Group's gross profit for the six months ended December 31, 2019, was approximately HK$9 million, a decrease of approximately 71% compared to the same period last year[160][165] - Profit attributable to owners of the company for the six months ended December 31, 2019, was approximately HK$25 million, a significant increase of approximately 752% compared to the same period last year[161][165] Revenue The Group's revenue primarily derives from internet advertising agency services, with a year-on-year increase of approximately 45% for the six months ended December 31, 2019 - The Group's revenue primarily refers to income from providing internet advertising agency services[166][169] - For the six months ended December 31, 2019, the Group's revenue was approximately HK$274 million, an increase of approximately 45% compared to approximately HK$189 million in the same period last year[166][169] Cost of Sales and Gross Profit For the six months ended December 31, 2019, cost of sales increased by 67% due to higher internet advertising agency service costs, leading to a decline in gross margin from 16% to 3% - Cost of sales primarily refers to costs incurred from providing internet advertising agency services and labor costs[167][170] - For the six months ended December 31, 2019, cost of sales was approximately HK$265 million, an increase of approximately 67% compared to the same period last year[167][170] - Gross margin decreased from approximately 16% in the same period of 2018 to approximately 3% in the same period of 2019, mainly due to lower profit margins for internet advertising agency services[168][170] Other Income, Gains/(Losses) For the six months ended December 31, 2019, other income, gains/(losses) turned from a net gain to a net loss, primarily due to reduced government grants and losses from the disposal of property, plant and equipment - For the six months ended December 31, 2019, other income, gains/(losses) was a net loss of approximately HK$1 million, compared to a net gain of approximately HK$1 million in the same period last year[173][177] - The main reasons were reduced government grants and losses from the disposal of property, plant and equipment[173][177] Selling and Distribution Expenses For the six months ended December 31, 2019, selling and distribution expenses slightly decreased, primarily due to strict cost control implemented in the internet advertising agency business - Selling and distribution expenses decreased from approximately HK$5 million in the same period of 2018 to approximately HK$3 million in the same period of 2019[174][178] - The decrease was mainly due to strict cost control implemented for the internet advertising agency business[174][178] Administrative Expenses For the six months ended December 31, 2019, administrative expenses significantly decreased by 41%, primarily due to the disposal of a subsidiary that contributed approximately HK$11 million in administrative expenses in the prior year - Administrative expenses decreased from approximately HK$32 million in the same period of 2018 to approximately HK$19 million in the same period of 2019, a decrease of approximately 41%[175][179] - The decrease in administrative expenses was mainly due to the disposal of a subsidiary, which had approximately HK$11 million in administrative expenses in the same period of 2018[176][179] Taxation The Group's tax policy includes Hong Kong profits tax and PRC Enterprise Income Tax, with certain PRC subsidiaries enjoying a five-year exemption from enterprise income tax due to their location in the Horgos Economic Development Zone - Hong Kong subsidiaries pay Hong Kong profits tax at a rate of 16.5%, while PRC Foshan subsidiaries pay PRC Enterprise Income Tax at a rate of 25%[180][184] - Certain subsidiaries registered in the Horgos Economic Development Zone enjoy a five-year exemption from enterprise income tax[180][184] Profit/(Loss) for the Period For the six months ended December 31, 2019, the Group achieved a profit for the period of approximately HK$25 million, a significant improvement from a loss in the prior year, primarily attributable to the reversal of impairment losses on trade and other receivables - The Group recorded a profit for the period of approximately HK$25 million for the six months ended December 31, 2019, compared to a loss of approximately HK$4 million in the same period last year[181][185] - The profit for the period was primarily due to the reversal of impairment losses on trade and other receivables[181][185] Financial Position, Liquidity and Financial Resources The Group maintains prudent cash and financial management policies, with stable funding during the period; as of December 31, 2019, cash and bank balances decreased, while total borrowings and the gearing ratio significantly increased - The Group adopts prudent cash and financial management policies, with centralized treasury activities and cash generally held in banks in Hong Kong and China[182][186] - As of December 31, 2019, total cash and bank balances were approximately HK$17 million (June 30, 2019: HK$23 million), primarily decreasing due to purchases of intangible assets, increased trade and other receivables, increased contract liabilities, and increased borrowings[183][186] - As of December 31, 2019, the Group's outstanding borrowings were HK$120 million (June 30, 2019: HK$15 million), with a gearing ratio of approximately 51% (June 30, 2019: 7%)[188][193] Charge Over Assets of the Group As of December 31, 2019, the Group's bank facilities were secured by pledged bank deposits of approximately HK$6 million - As of December 31, 2019, the Group's bank facilities were secured by the Group's pledged bank deposits of approximately HK$6 million (June 30, 2019: HK$4 million)[190][194] Financial Management Policies The Group's cash is primarily denominated in HKD, USD, and RMB, with no hedging undertaken, and foreign exchange risk is minimal due to stable major transaction currencies - Cash is generally held in banks in Hong Kong and Mainland China, mostly denominated in HKD, USD, and RMB, with no hedging undertaken during the period[191][195] - Foreign exchange risk has minimal impact on the Group as most transactions are denominated in USD, RMB, and HKD[192][195] Capital Commitments and Contingent Liabilities As of December 31, 2019, the Group had no significant capital commitments or contingent liabilities - As of December 31, 2019, the Group had no significant capital commitments (June 30, 2019: nil)[196][201] - As of December 31, 2019, the Group had no significant contingent liabilities (June 30, 2019: nil)[196][201] MATERIAL ACQUISITIONS AND DISPOSALS For the six months ended December 31, 2019, the Group had no material acquisitions or disposals - For the six months ended December 31, 2019, the Group had no material acquisitions or disposals[197][202] EMPLOYEES AND REMUNERATION POLICY As of December 31, 2019, the Group's employee count remained stable, with total staff costs significantly decreasing; the remuneration policy is set by the Remuneration Committee, offering training and share options, maintaining good employee relations - As of December 31, 2019, the Group had 109 employees (June 30, 2019: 109 employees)[198][203] - Total staff costs for the six months ended December 31, 2019, were approximately HK$11 million, a decrease of approximately HK$12 million compared to the same period last year[198][203] - The Group's remuneration policy is determined by the Remuneration Committee, referencing employee duties, experience, and capabilities, offering provident fund scheme contributions and share options as incentives[199][200][203][204] ISSUE OF SHARES On December 9, 2019, the company completed the issuance of 20,000,000 new shares to an independent third-party subscriber, raising approximately HK$5 million for general working capital and future business development - On November 22, 2019, the company entered into a subscription agreement with Zhong Baomei, an independent third party, for the issuance of 20,000,000 ordinary shares[209][210] - The subscription was completed on December 9, 2019, for a total subscription price of HK$5,000,000[209][210] Subscription Price The subscription price per share was HK$0.25, representing a discount of approximately 18.03% to the closing price and the average closing price for five trading days prior to the subscription agreement date - The subscription price of HK$0.25 per share represents a discount of approximately 18.03% to the closing price of HK$0.305 per share reported on the Stock Exchange on the date of the subscription agreement[212][218] - This price was determined after fair negotiation between the company and the subscriber, considering current market conditions and the recent performance and liquidity of the shares[212][215] Reasons for and Benefit of the Subscription The subscription provided an opportunity to raise additional funds for the Group's business operations, enhancing its capital base and financial position for future development, and broadening the company's shareholder base, aligning with the overall interests of the company and its shareholders - The subscription provided an opportunity to raise additional funds for the Group's business operations[213][216] - The subscription will enhance the Group's capital base and financial position for future business development and broaden the company's shareholder base[213][216] - The Directors believe that the terms of the subscription agreement are fair and reasonable and in the overall interests of the company and its shareholders[214][217] Use of Proceeds The net proceeds from the share issuance, approximately HK$4,990,000, were fully utilized for the Group's general working capital and future business development - The estimated gross and net proceeds from the share issuance were approximately HK$5,000,000 and HK$4,990,000, respectively[219][221] - The company intends to use the net proceeds for the Group's general working capital and future business development[219][221] Details of Use of Proceeds (As of December 31, 2019) | Net Proceeds Allocation | Amount Utilized (HK$ Thousand) | Net Proceeds Balance as of December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | General working capital and future business development | 4,990 | NIL | Other Information This section discloses directors' and chief executive's, and substantial shareholders' interests in shares, confirms no competing businesses or listed securities transactions, reports compliance with the Model Code for Securities Transactions and Corporate Governance Code, and details changes in directors' information and audit committee review DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES As of December 31, 2019, Mr. Zhu Yongjun and Ms. Wang Fei held company shares as beneficial owners, representing 9.14% and 9.52% of the issued share capital, respectively Directors' Interests in the Company's Shares (As of December 31, 2019) | Director Name | Capacity | Interest in Shares | Approximate Percentage of the Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Zhu Yongjun | Beneficial owner | 38,398,786 (L) | 9.14% | | Ms. Wang Fei | Beneficial owner | 40,000,000 (L) | 9.52% | - As of December 31, 2019, the company had 420,000,000 issued shares[230][232] INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS As of December 31, 2019, several entities were listed as substantial shareholders, with Shanghai Angell, Zhongtian Partnership, Shanghai Tiger Platinum, Guiyang, Zhongtian Group, and Jinshiqi deemed to hold the same shares, totaling 33.24% of the issued share capital Substantial Shareholders' Interests in the Company's Shares (As of December 31, 2019) | Shareholder Name | Capacity | Interest in Shares | Approximate Percentage of the Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Jiang Peijie | Beneficial owner | 29,150,000 (L) | 6.94% | | Seventh Avenue Holdings Limited | Beneficial owner | 54,000,000 (L) | 12.86% | | United Conquer Limited ("UCL") | Beneficial owner | 89,597,169 (L) | 21.33% | | Shanghai Hutong Investment Centre (Limited Partnership) ("SHIC") | Beneficial owner | 50,000,000 (L) | 11.90% | | Shanghai Hutong Investment Centre (Limited Partnership) ("SHIC") | Interest in controlled corporation | 89,597,169 (L) | 21.33% | | Harvest Fund Management Co., Ltd. — Bank of China Overseas No. 1 QDII Asset Management Plan ("BOC Account") | Investment manager | 50,000,000 (L) | 11.90% | | Shanghai Angell Asset Management Co., Ltd. ("Shanghai Angell") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | | Zhongtian Urban Investment Group Shanghai Equity Investment Fund Partnership (Limited Partnership) ("Zhongtian Partnership") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | | Shanghai Tiger Platinum Equity Investment Fund Management Partnership (Limited Partnership) ("Shanghai Tiger Platinum") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | | Guiyang Financial Holdings Co., Ltd. ("Guiyang") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | | Zhongtian Financial Group Co., Ltd. ("Zhongtian Group") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | | Jinshiqi International Holdings Co., Ltd. ("Jinshiqi") | Interest in controlled corporation | 139,597,169 (L) | 33.24% | - The 50,000,000 shares held by Shanghai Hutong and BOC Account refer to the same batch of shares[244] - The 89,597,169 shares held by UCL and Shanghai Hutong refer to the same batch of shares[244] - The 139,597,169 shares held by Shanghai Angell, Zhongtian Partnership, Shanghai Tiger Platinum, Guiyang, Zhongtian Group, and Jinshiqi refer to the same batch of shares, being the sum of the aforementioned 50,000,000 and 89,597,169 shares[244] DIRECTORS' AND CONTROLLING SHAREHOLDERS' INTERESTS IN COMPETING BUSINESS For the six months ended December 31, 2019, the Directors were unaware of any business or interest held by Directors or controlling shareholders that competed or might compete with the Group's business - For the six months ended December 31, 2019, the Directors were unaware of any business or interest held by Directors or the company's controlling shareholders that competed or might compete with the Group's business[240][242] [PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES](index=51&type=section&id=PURCHASE,%20SALE%20OR%20REDEMPTION%20OF%20THE%20COMPANY'S%20LISTED%20SECU RITIES) For the six months ended December 31, 2019, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - For the six months ended December 31, 2019, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[241][243] MODEL CODE FOR SECURITIES TRANSACTIONS The company adopted a strict model code for directors' securities transactions, and all directors confirmed compliance with the code for the six months ended December 31, 2019 - The company has adopted a model code for directors' securities transactions and dealings, with terms no less exacting than the required standard set out in the GEM Listing Rules[245][248] - All Directors confirmed their compliance with the required standard set out in the Model Code and the code of conduct for the six months ended December 31, 2019[246][249] REPORT ON COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE For the six months ended December 31, 2019, the Group consistently complied with the Corporate Governance Code as set out in Appendix 15 to the GEM Listing Rules - For the six months ended December 31, 2019, the Group consistently complied with the Corporate Governance Code as set out in Appendix 15 to the GEM Listing Rules[247][250] CHANGE OF DIRECTORS' INFORMATION Since the company's last annual report, Director Ms. Wang Fei's salary changed to HK$1 per annum, effective August 1, 2019 - Director Ms. Wang Fei's salary changed to HK$1 per annum, effective August 1, 2019[253] AUDIT COMMITTEE AND REVIEW OF FINANCIAL RESULTS The Audit Committee, established under GEM Listing Rules and composed of independent non-executive directors, reviewed this interim report and unaudited consolidated results, recommending them for Board approval - The company's Audit Committee was established in accordance with the GEM Listing Rules, comprising Mr. Chan Chak (Chairman), Ms. Ji Fang, and Mr. Gao Shuo, all independent non-executive directors[254][256] - The Audit Committee reviewed this interim report, including the unaudited consolidated results for the six months ended December 31, 2019, with management, and recommended them for Board approval[255][256] - The Group's consolidated results for the six months ended December 31, 2019, have not been audited by the company's auditors[255][256]