中国北大荒(00039) - 2023 - 中期业绩

Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2023, revenue decreased by 3.27% to HKD 404,966 thousand, gross profit slightly declined, and loss for the period significantly narrowed to HKD 38,624 thousand, primarily due to reduced administrative expenses and finance costs Revenue and Loss Overview (For the six months ended June 30) | Metric | 2023 (HKD thousands) | 2022 (HKD thousands) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 404,966 | 418,706 | -3.27% | | Cost of Sales | (352,322) | (365,594) | -3.63% | | Gross Profit | 52,644 | 53,112 | -0.88% | | Loss for the Period | (38,624) | (48,234) | -19.92% | | Loss Attributable to Owners of the Parent | (42,207) | (40,203) | +4.98% | | Basic and Diluted Loss Per Share (HK cents) | (0.67) | (0.65) | +3.08% | Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2023, the company reported a total comprehensive expense of HKD 103,838 thousand, a reduction from HKD 143,616 thousand in the prior year, primarily due to a significant narrowing of exchange differences from foreign operations and associates Total Comprehensive Expense (For the six months ended June 30) | Metric | 2023 (HKD thousands) | 2022 (HKD thousands) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Loss for the Period | (38,624) | (48,234) | -19.92% | | Exchange Differences from Translation of Foreign Operations and Associates | (65,214) | (95,382) | -31.64% | | Total Comprehensive Expense for the Period | (103,838) | (143,616) | -27.69% | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2023, total assets less current liabilities decreased to HKD 796,753 thousand from HKD 922,517 thousand, with net current assets significantly declining to HKD 57,701 thousand, indicating increased liquidity pressure, while total non-current liabilities and lease liabilities decreased, and share capital slightly increased Key Balance Sheet Metrics (As of June 30) | Metric | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Property, Plant and Equipment | 37,434 | 44,004 | -14.93% | | Investment Properties | 399,563 | 412,381 | -3.09% | | Inventories | 149,905 | 149,351 | +0.37% | | Properties Held for Sale | 392,419 | 383,980 | +2.20% | | Cash and Cash Equivalents | 17,652 | 14,880 | +18.63% | | Net Current Assets | 57,701 | 161,197 | -64.19% | | Total Assets Less Current Liabilities | 796,753 | 922,517 | -13.63% | | Total Non-current Liabilities | 114,957 | 136,883 | -16.02% | | Share Capital | 633,231 | 631,337 | +0.30% | | Total Equity | 681,796 | 785,634 | -13.22% | Notes to the Interim Condensed Consolidated Financial Statements This section details the basis of financial statement preparation, significant uncertainties regarding the going concern assumption, and measures taken to address liquidity challenges, while also disclosing segment revenue, costs, and performance, and analyzing key financial items such as revenue, finance costs, receivables, payables, and bank borrowings, revealing the company's debt defaults - The company faces significant going concern uncertainties due to defaulting on multiple debts, including secured and unsecured bonds, other loans, and construction payables, totaling approximately HKD 450 million, with insufficient cash to repay them[29][30] - To address the liquidity crisis, management is implementing cost controls, seeking shareholder financial support, negotiating new financing (such as equity financing, bank loans, convertible bonds), and appointing financial advisors to assist with debt restructuring[15][30][31][32] - Amendments to Hong Kong Financial Reporting Standards were first applied this period, but had no significant impact on financial performance or position[18][35] 4.1 Basis of Preparation The interim condensed consolidated financial statements are prepared in accordance with HKAS 34 'Interim Financial Reporting' and the Listing Rules, using the historical cost convention and presented in HKD - The financial statements are prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting' issued by the HKICPA and the Listing Rules of the Stock Exchange of Hong Kong[28] - Financial information is prepared using the historical cost convention, presented in HKD, with all figures rounded to the nearest thousand[29] 4.2 Going Concern The company faces severe going concern uncertainties due to defaulting on multiple debts, including secured and unsecured bonds, other loans, and construction payables, totaling approximately HKD 450 million, with insufficient cash to repay, prompting management to implement plans such as cost control, shareholder financial support, new financing, and debt restructuring with professional advisors Debt Default Status (As of June 30, 2023) | Debt Type | Principal Amount (HKD) | Interest (HKD) | | :--- | :--- | :--- | | Secured Bonds | 109,000,000 | 95,319,000 | | Unsecured Bonds | 248,414,000 | 65,981,000 | | Other Loans | 17,331,000 | 1,708,000 | | Overdue Construction Payables | 95,493,000 | - | - As of June 30, 2023, cash and cash equivalents were approximately HKD 17,652,000, insufficient to repay maturing debts[30] - The company has implemented multiple measures, including management's commitment to improving operating performance and cash flow, a shareholder's agreement to provide ongoing financial support, negotiations with investors for further financing (such as equity financing, bank loans, new convertible bonds), and the appointment of independent professional advisors to assist with debt restructuring[15][30][31][32] - The company has entered into a legally binding letter of intent with an independent third-party investor for the proposed restructuring, including debt restructuring through a scheme of arrangement with creditors[16][57] 4.3 Application of Amendments to HKFRSs During this interim period, the company first applied amendments to HKFRS 17, HKAS 8, and HKAS 12, issued by the HKICPA, but these amendments had no significant impact on the financial performance or position for the current and prior periods - During this interim period, the company first applied amendments to HKFRS 17 'Insurance Contracts', HKAS 8 'Definition of Accounting Estimates', and HKAS 12 'Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction'[18][59] - These amendments had no significant impact on the Group's financial performance and position and/or the disclosures in the condensed consolidated financial statements for the current and prior periods[35] 4.4 Segment Information The company's operations are divided into six reportable segments: liquor, food trading, construction and development, mining, leasing, and finance leasing, with management independently monitoring segment performance based on profit before tax, excluding interest income, finance costs, and head office corporate expenses - Key operating segments include liquor, food trading, construction and development, mining, leasing, and finance leasing[19][36][60] - Segment performance is assessed based on profit before tax for reportable segments, excluding interest income, finance costs, and head office corporate expenses[60] Segment Revenue and Performance (For the six months ended June 30) | Segment | 2023 Revenue (HKD thousands) | 2022 Revenue (HKD thousands) | 2023 Segment Performance (HKD thousands) | 2022 Segment Performance (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | Liquor | – | – | – | – | | Food Trading | 205,491 | 181,431 | 1,429 | 932 | | Construction and Development | – | – | (2,097) | (2,816) | | Mining | 101,340 | 105,345 | 4,037 | 2,554 | | Leasing | 87,847 | 119,124 | 5,501 | 8,402 | | Finance Leasing | 10,288 | 12,806 | 3,792 | 4,904 | | Total | 404,966 | 418,706 | 12,662 | 13,976 | 4.5 Revenue and Other Income, Gains or (Losses) For the six months ended June 30, 2023, total revenue was HKD 404,966 thousand, a 3.27% year-on-year decrease, with food trading revenue growing by 13.27%, while leasing and finance leasing revenues declined, and other income, gains or (losses) slightly increased Revenue Source Analysis (For the six months ended June 30) | Revenue Source | 2023 (HKD thousands) | 2022 (HKD thousands) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue from Contracts with Customers - Food Trading | 205,491 | 181,431 | +13.27% | | Revenue from Contracts with Customers - Mining | 101,340 | 105,345 | -3.79% | | Revenue from Other Sources - Leasing | 87,847 | 119,124 | -26.26% | | Revenue from Other Sources - Finance Leasing | 10,288 | 12,806 | -19.66% | | Total Revenue | 404,966 | 418,706 | -3.27% | | Other Income, Gains or (Losses) | 2,183 | 2,065 | +5.71% | - Government grants primarily consist of non-recurring subsidies supporting the operations of Chinese subsidiaries, with no specific conditions[40] 4.6 Finance Costs For the six months ended June 30, 2023, finance costs were HKD 36,844 thousand, a significant 16.30% reduction from HKD 44,018 thousand in the prior year, primarily due to a substantial decrease in interest on lease liabilities Composition of Finance Costs (For the six months ended June 30) | Finance Cost Item | 2023 (HKD thousands) | 2022 (HKD thousands) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Interest on Bank and Other Borrowings | 32,075 | 22,119 | +44.98% | | Interest on Lease Liabilities | 4,769 | 21,899 | -78.22% | | Total Finance Costs | 36,844 | 44,018 | -16.30% | 4.7 Loss Before Tax For the six months ended June 30, 2023, the company's loss before tax narrowed by 19.79% to HKD 38,621 thousand from HKD 48,174 thousand in the prior year, primarily due to reduced administrative expenses and finance costs - Loss before tax decreased from HKD 48,174 thousand in 2022 to HKD 38,621 thousand in 2023[21] - The reduction in loss for the period was primarily influenced by a combined decrease in administrative expenses and finance costs[96] - Cost of inventories recognized was HKD 206,734 thousand, depreciation of property, plant and equipment was HKD 5,845 thousand, and depreciation of right-of-use assets was HKD 15,791 thousand[42] 4.8 Income Tax Expense For the six months ended June 30, 2023, income tax expense significantly decreased to HKD 3 thousand from HKD 60 thousand in the prior year, with no Hong Kong profits tax provision due to no assessable profits, and other regional taxes calculated at prevailing Chinese rates Income Tax Expense (For the six months ended June 30) | Tax Type | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Current | (3) | (51) | | Deferred | – | (9) | | Total Tax Expense for the Period | (3) | (60) | - No Hong Kong profits tax provision was made for the period due to no assessable profits; assessable profits in mainland China are taxed at the prevailing local rates[42] 4.9 Dividends The Board does not recommend the payment of any dividend for the six months ended June 30, 2023, consistent with the prior year - The Directors do not recommend the payment of any dividend for the six months ended June 30, 2023 (2022: nil)[44] 4.10 Loss Per Share Attributable to Ordinary Equity Holders of the Parent For the six months ended June 30, 2023, basic and diluted loss per share attributable to ordinary equity holders of the parent was 0.67 HK cents, slightly higher than 0.65 HK cents in the prior year Loss Per Share (For the six months ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Loss Attributable to Equity Holders of the Parent (HKD thousands) | (42,207) | (40,203) | | Weighted Average Number of Ordinary Shares in Issue (thousands) | 6,316,544 | 6,225,126 | | Basic and Diluted Loss Per Share (HK cents) | (0.67) | (0.65) | - Basic and diluted loss per share are identical due to the anti-dilutive effect of share options[45] 4.11 Interests in Associates As of June 30, 2023, the company's total interests in associates increased to HKD 217,781 thousand from HKD 204,738 thousand as of December 31, 2022, primarily due to increased advances to associates Interests in Associates (As of June 30) | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Share of Net Assets | 112,984 | 126,929 | -10.99% | | Advances to Associates (net of allowance for expected credit losses) | 104,797 | 77,809 | +34.68% | | Total Interests | 217,781 | 204,738 | +6.37% | 4.12 Trade Receivables As of June 30, 2023, net trade receivables decreased to HKD 128,299 thousand from HKD 145,567 thousand as of December 31, 2022, with receivables over three months primarily related to mining sales customers, which directors believe are fully recoverable with no impairment provision made Trade Receivables Ageing Analysis (As of June 30) | Ageing | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Within 1 month | 59,977 | 47,402 | | 1 to 2 months | 34,867 | 30,965 | | 2 to 3 months | 23,540 | 42,357 | | Over 3 months | 28,791 | 43,719 | | Total | 147,175 | 164,443 | | Less: Allowance for expected credit losses | (18,876) | (18,876) | | Net Amount | 128,299 | 145,567 | - Credit terms are generally one month, extendable to three months for major customers[69] - Receivables over three months are primarily related to mining sales customers, which directors believe are fully recoverable, with no impairment provision made[47] 4.13 Prepayments, Deposits and Other Receivables As of June 30, 2023, net prepayments, deposits, and other receivables slightly decreased to HKD 280,009 thousand from HKD 290,518 thousand as of December 31, 2022, primarily comprising trade deposits and prepayments for food trading and mining, and rental deposits for leasing operations Prepayments, Deposits and Other Receivables (As of June 30) | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Prepayments | 127,981 | 152,370 | -16.01% | | Deposits and Other Receivables | 211,743 | 197,863 | +7.01% | | Total | 339,724 | 350,233 | -3.00% | | Less: Allowance for expected credit losses | (59,715) | (59,715) | 0.00% | | Net Amount | 280,009 | 290,518 | -3.62% | - Approximately HKD 242,879 thousand was paid as trade deposits and prepayments for food trading and mining[71] - Warehouse rental deposits and construction deposits for the warehousing and logistics business amounted to HKD 27,953 thousand[48] 4.14 Trade and Bills Payables As of June 30, 2023, total trade and bills payables slightly increased to HKD 161,497 thousand from HKD 157,291 thousand as of December 31, 2022, including approximately HKD 71,861 thousand in construction payables, of which HKD 66,600 thousand is in default, and bills payables are secured by investment properties and personal guarantees from shareholders Trade and Bills Payables Ageing Analysis (As of June 30) | Ageing | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Trade Payables (Within 1 month) | 5,750 | 5,579 | | Trade Payables (1 to 2 months) | 3,286 | 4,583 | | Trade Payables (2 to 3 months) | 2,253 | 2,761 | | Trade Payables (Over 3 months) | 72,692 | 72,417 | | Total Trade Payables | 83,981 | 85,340 | | Bills Payables | 77,516 | 71,951 | | Total | 161,497 | 157,291 | - Trade payables include construction payables of HKD 71,861 thousand, of which approximately HKD 66,600 thousand is in default[72] - Bills payables of approximately HKD 77,516 thousand are secured by investment properties with a fair value of approximately HKD 290,857 thousand, and personally guaranteed by company shareholders and related parties[50] - Trade payables are interest-free, generally settled within 30 days, and denominated in RMB[90][91] 4.15 Other Payables and Accrued Charges As of June 30, 2023, total other payables and accrued charges increased to HKD 291,957 thousand from HKD 247,566 thousand as of December 31, 2022, primarily including default interest and penalties for overdue construction payables, as well as rental deposits from logistics warehousing and office tenants Other Payables and Accrued Charges (As of June 30) | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Other Payables | 56,999 | 45,442 | +25.44% | | Accrued Charges | 234,958 | 202,124 | +16.25% | | Total | 291,957 | 247,566 | +17.91% | - Accrued charges include default interest of approximately HKD 151,181 thousand and penalties for overdue construction payables of approximately HKD 28,893 thousand[93] - Among other payables, HKD 23,387 thousand represents rental deposits collected from logistics warehousing and office tenants in China[52] - Other payables are non-interest bearing and have an average term of three months[74] 4.16 Bank and Other Borrowings As of June 30, 2023, total bank and other borrowings slightly increased to HKD 454,212 thousand from HKD 440,044 thousand as of December 31, 2022, primarily comprising secured bank loans, unsecured other loans, secured bonds, and unsecured bonds Bank and Other Borrowings (As of June 30) | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Secured Bank Loans | 12,492 | 20,944 | -40.36% | | Unsecured Other Loans | 83,306 | 58,686 | +41.96% | | Secured Bonds | 109,000 | 109,000 | 0.00% | | Unsecured Bonds | 249,414 | 251,414 | -0.80% | | Total | 454,212 | 440,044 | +3.22% | - All bank and other borrowings bear interest at fixed rates and are denominated in RMB and HKD[117] Management Discussion and Analysis This section outlines the company's financial performance for H1 2023, noting a slight revenue decrease but narrowed loss, details the operating status and future strategies of each business segment, and discloses capital structure, liquidity, asset pledges, employee policies, major litigation updates, and ongoing debt restructuring plans, highlighting efforts to address financial challenges and optimize the business portfolio - Revenue for the period was approximately HKD 404,970 thousand, a 3.27% year-on-year decrease; gross profit was approximately HKD 52,640 thousand; and loss after tax was approximately HKD 38,624 thousand, a 19.92% year-on-year decrease[88][96] - The reduction in loss was primarily due to the combined effect of decreased administrative expenses (down 4.23% to HKD 46,536 thousand) and finance costs (down 16.30% to HKD 36,844 thousand), mainly attributed to reduced interest on lease liabilities following the disposal of a subsidiary in the previous fiscal year[96][112][113] - The company will continue to control costs, concentrate existing resources, and strengthen and develop its business through organic growth and timely acquisitions, focusing on existing operations while seeking diversification[97][108] 5.1 Overview For the six months ended June 30, 2023, loss attributable to owners of the parent was HKD 42,207 thousand, with a loss per share of 0.67 HK cents; revenue decreased by 3.27% year-on-year, but loss after tax narrowed by 19.92%, primarily due to reduced administrative expenses and finance costs - Loss attributable to owners of the parent was approximately HKD 42,207 thousand (2022: HKD 40,203 thousand)[78] - Loss per share for the period was 0.67 HK cents (2022: 0.65 HK cents)[78] - Revenue for the period was approximately HKD 404,970 thousand, a 3.27% decrease from the prior period; gross profit was approximately HKD 52,640 thousand; and loss after tax was approximately HKD 38,624 thousand, a 19.92% decrease from the prior period[96] - The reduction in loss was primarily due to decreased administrative expenses and finance costs, resulting from the disposal of a subsidiary in the previous fiscal year[96] 5.2 Segment Information The company's business segments showed mixed performance, with no liquor revenue due to slow post-pandemic recovery, food trading revenue growing by 13.27% to become the largest contributor, construction and development projects delayed by the pandemic, leasing revenue down 26.26% but remaining a core business, finance leasing revenue down 19.66% with risks managed through strict credit assessment, and mining revenue slightly down 3.79% but gross profit significantly up 57.89%, with positive market outlook - Liquor business: No revenue for the period (2022: nil HKD), as sales points and delivery services have not fully resumed operations following the lifting of COVID-19 restrictions in China[80][98] - Food trading business: Revenue of approximately HKD 205,490 thousand (2022: HKD 181,430 thousand), a 13.27% year-on-year increase, accounting for 50.74% of total revenue; gross profit of approximately HKD 4,610 thousand (2022: HKD 3,470 thousand), a 32.85% year-on-year increase, primarily due to increased trading of staple foods and edible oils[81][99] - Construction and development business: The seafood food city project experienced delays in sales and construction plans due to the pandemic, with the entire project now expected to be completed by the end of 2023[81][100] - Leasing business: Revenue of approximately HKD 87,850 thousand (2022: HKD 119,120 thousand), a 26.26% year-on-year decrease, accounting for 21.69% of total revenue; gross profit of approximately HKD 23,850 thousand (2022: HKD 32,790 thousand), a 27.39% year-on-year decrease; this business has become one of the core operations, and the company will continue to explore and invest in potential leasing facilities[82][101] - Finance leasing business: Revenue of HKD 10,290 thousand (2022: HKD 12,800 thousand), a 19.66% year-on-year decrease, accounting for 2.54% of total revenue; gross profit of approximately HKD 3,070 thousand (2022: HKD 3,480 thousand), an 11.78% year-on-year decrease; the company manages risks through stringent credit risk assessment procedures (including background checks, financial data review, collateral verification) and offers flexible loan terms[83][84][86][103][104][105] - Mining business: Revenue of approximately HKD 101,340 thousand (2022: HKD 105,350 thousand), a 3.79% year-on-year decrease, accounting for 25.03% of total revenue; gross profit of approximately HKD 21,110 thousand (2022: HKD 13,370 thousand), a 57.89% year-on-year increase; the company is optimistic about this market and expects a greater revenue contribution[87][107] 5.3 Financial Review Revenue for the period decreased by 3.27% year-on-year, but selling and distribution expenses, administrative expenses, and finance costs all decreased, primarily due to the disposal of a subsidiary, with selling and distribution expenses down 10.46%, administrative expenses down 4.23%, and finance costs down 16.30% - Revenue: Revenue for the period was approximately HKD 404,970 thousand, a 3.27% decrease from the prior period[109][96] - Selling and distribution expenses: Approximately HKD 9,510 thousand (2022: HKD 10,610 thousand), a 10.46% year-on-year decrease, primarily due to the disposal of Beijing Mumian Shangyuan Investment Management Co Ltd[111] - Administrative expenses: Approximately HKD 46,540 thousand (2022: HKD 48,610 thousand), a 4.23% year-on-year decrease, primarily due to the disposal of Beijing Mumian Shangyuan Investment Management Co Ltd, with the company continuing to control costs through a streamlined structure[112] - Finance costs: Approximately HKD 36,840 thousand (2022: HKD 44,020 thousand), a 16.30% year-on-year decrease, primarily due to the disposal of Beijing Mumian Shangyuan Investment Management Co Ltd, which led to a reduction in interest on lease liabilities from HKD 21,900 thousand to HKD 4,800 thousand[113] 5.4 Prepayments, Deposits and Other Receivables Prepayments, deposits, and other receivables primarily comprise trade deposits and prepayments for food and mining (HKD 242,880 thousand), and paid rental deposits for leasing operations (HKD 27,950 thousand) - Prepayments, deposits, and other receivables include trade deposits paid for food and mining of HKD 242,880 thousand (December 31, 2022: HKD 244,670 thousand)[114] - HKD 27,950 thousand (December 31, 2022: HKD 28,300 thousand) represents paid rental deposits for leasing operations[114] 5.5 Capital Structure, Liquidity and Financial Resources As of June 30, 2023, total issued shares increased to 6,332,312,083, cash and cash equivalents rose to HKD 17,650 thousand, and total bank and other borrowings were HKD 454,210 thousand; the gearing ratio was 45.20%, deemed adequate by management, yet net current assets and current ratio significantly declined, indicating persistent liquidity pressure - As of June 30, 2023, total issued shares were 6,332,312,083, with 18,946,000 new shares issued during the period due to the exercise of share options[115] - Cash and cash equivalents were approximately HKD 17,650 thousand (December 31, 2022: HKD 14,880 thousand), denominated in HKD and RMB[117] - Total bank and other borrowings were approximately HKD 454,210 thousand (December 31, 2022: HKD 440,040 thousand), bearing interest at fixed rates and denominated in RMB and HKD[117] - The gearing ratio (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was 45.20% (December 31, 2022: 45.31%), considered reasonably adequate[117] - Net assets attributable to owners of the parent were approximately HKD 694,750 thousand (December 31, 2022: HKD 801,810 thousand)[156] - Net current assets were approximately HKD 57,700 thousand (December 31, 2022: HKD 161,200 thousand), and the current ratio (current assets divided by current liabilities) was 1.05 (December 31, 2022: 1.15)[156] - The company will continue to monitor its foreign exchange position and utilize hedging instruments to manage foreign currency risk when necessary[118] 5.6 Pledge of Assets and Contingent Liabilities Shares of two subsidiaries are pledged for secured bonds, granting bondholders the right to take control, but the company is negotiating repayment extensions; investment properties with a fair value of approximately HKD 290,860 thousand are pledged to banks - Shares of two subsidiaries (net assets of HKD 42,540 thousand) are pledged for secured bonds, granting bondholders the right to take control, and the company is currently negotiating repayment extensions[120] - Investment properties with a fair value of approximately HKD 290,860 thousand (December 31, 2022: HKD 300,190 thousand) are pledged to banks for the Group's borrowings[120] 5.7 Employees and Remuneration Policy As of June 30, 2023, the Group had 151 employees with total staff costs of approximately HKD 3,850 thousand; the company maintains a competitive remuneration policy and a share option scheme to incentivize and retain talent - As of June 30, 2023, the Group had approximately 151 employees in Hong Kong and China (June 30, 2022: 167 employees)[121] - Total staff costs were approximately HKD 3,850 thousand (June 30, 2022: HKD 5,660 thousand)[121] - Remuneration is maintained at a competitive level, determined by market conditions and individual qualifications, and a share option scheme is in place to encourage contributions and retain talent[121] 5.8 Litigation The company faces multiple significant litigations, including a claim by former director Mr. Qu Shuncai (company appealed), a stock delivery and damages case by Gemini Funds Limited (company delivered shares and appealed), a loan contract dispute with Lianyungang Huajin Huahong Industrial Co Ltd (involving asset seizure and auction), and several winding-up petitions (Mr. Zhang Zhiguang's petition, Mr. Qu Shuncai's withdrawn petition, Mr. Qiu Zhen's Cayman petition); the company is actively responding and has obtained a validation order from the Grand Court of the Cayman Islands to prevent share transactions from being invalidated during any winding-up order - HCA 1867 of 2015 (Mr. Qu Shuncai's Claim): The court ruled that the company must pay HKD 4,394 thousand in damages and legal costs to the plaintiff, and the company has filed an appeal[122][132] - HCA 1948 of 2019 (Gemini Funds Limited Case): The company was ordered to deliver 5,000,000 bonus shares and damages to be assessed, and the company has delivered the shares and filed a notice of appeal[124] - Lianyungang Huajin Huahong Industrial Co Ltd Loan Contract Dispute: Involving loan disputes with Wang Pengcheng and Sun Jie, the court ruled that Huajin Huahong must repay principal and interest, and has seized and ordered the auction of Huajin Huahong's real estate[125][127][128][130][141] - HCCW 3 of 2023 (Mr. Zhang Zhiguang's Winding-up Petition): Due to failure to repay HKD 7,197,841.10 debt, Mr. Zhang filed a winding-up petition with the High Court, with the hearing adjourned to September 13, 2023[131][134] - HCCW 144 of 2023 (Mr. Qu Shuncai's Winding-up Petition): Due to failure to repay HKD 4,291,684.55 debt, Mr. Qu Shuncai filed a winding-up petition, which was withdrawn on June 7, 2023[137] - FSD 146 of 2023 (Mr. Qiu Zhen's Cayman Petition): Due to failure to repay HKD 16,673,418.00 in principal and interest, Mr. Qiu Zhen filed a winding-up petition with the Grand Court of the Cayman Islands, with the hearing adjourned to October 18, 2023[138] - Application for Validation Order: The Grand Court of the Cayman Islands has issued a validation order, stating that if a winding-up order is made pursuant to the Cayman Petition, any dealings in the company's shares, transfers of shares, or alterations in shareholder status during the period from the presentation date of the petition to the date of the winding-up order shall not be invalid[140] 5.9 Possible Debt Restructuring Given current liquidity constraints and financial challenges, the company is actively exploring debt restructuring options with professional advisors, including a scheme of arrangement with creditors in Hong Kong; the High Court has approved the company to convene a creditors' meeting and scheduled a hearing for November 29, 2023, to approve the scheme - The company is collaborating with professional advisors to explore debt restructuring options, including engaging with creditors, stakeholders, and potential investors, and implementing a debt restructuring in Hong Kong through a scheme of arrangement with creditors[143] - The High Court has approved the company to convene a creditors' meeting under the scheme of arrangement and scheduled a hearing for November 29, 2023, to approve the scheme[144] 5.10 Agreement with Investor on Proposed Restructuring On March 29, 2023, the company entered into a legally binding letter of intent with an independent third-party investor regarding the proposed restructuring - On March 29, 2023, the company entered into a legally binding letter of intent with an independent third-party investor for the proposed restructuring[146] 5.11 Interim Dividend The Board resolved not to declare an interim dividend for the period, consistent with the prior year - The Board resolved not to declare an interim dividend for the period (2022: nil)[147] 5.12 Purchase, Sale or Redemption of the Company’s Listed Securities During the period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[148] 5.13 Review of Interim Results The Group's interim results for the period have been reviewed by the company's audit committee, which comprises three independent non-executive directors - The Group's interim results for the period have been reviewed by the company's audit committee, which consists of three independent non-executive directors[149] 5.14 Directors’ Securities Transactions The company has adopted a code of conduct for ethical and securities dealings, which directors and designated employees must comply with; upon inquiry, all directors adhered to the code and the Model Code as set out in the Listing Rules during the period - The company has adopted a code of conduct for ethical and securities dealings, with terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules[150] - Following specific inquiries, all Directors have complied with the standards set out in the code and the Model Code throughout the period[150] 5.15 Compliance with Corporate Governance Code The company complied with all code provisions of the Corporate Governance Code in Appendix 14 Part 2 of the Listing Rules during the period, with a deviation where the roles of Chairman and Chief Executive Officer are not segregated; the Board Chairman leads the Board, and the company will continuously review its structure to assess the need for a CEO appointment - The company complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 Part 2 of the Listing Rules during the period[152] - Deviation: The roles of Chairman and Chief Executive Officer are not segregated, and the company has not had a Chief Executive Officer since June 24, 2016[152] - The Board Chairman leads the Board, and the company will continuously review its structure to assess the need for a Chief Executive Officer appointment[152] 5.16 Events After Reporting Period Except for matters disclosed in the Management Discussion and Analysis section of this announcement, there have been no other significant events after the reporting period up to the date of this announcement - Except as disclosed in the Management Discussion and Analysis section of this announcement, there have been no significant events after the reporting period up to the date of this announcement[153]