HC GROUP INC. 1
MESSAGE FROM THE CHAIRMAN
The board (the "Board") of directors (the "Directors") of HC Group Inc. (the "Company") hereby announces the unaudited financial results of the Company and all its subsidiaries (collectively, the "Group") for the six months ended 30 June 2020 (the "Period"), together with the comparative figures for the corresponding periods ended 30 June 2019 to the shareholders of the Company (the "Shareholders").
Financial Highlights | ||||
Unaudited | ||||
Six months ended | ||||
30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
Revenue | 5,062,620 | 6,963,900 | ||
EBITDA* | (91,947) | 84,771 | ||
Loss attributable to equity holders | (248,564) | (163,964) | ||
Diluted EPS | (0.2132) | (0.1463) | ||
Key Financial Figures for the six months ended 30 June 2020
- Revenue was approximately RMB5,062.6 million, decreased by approximately RMB1,901.3 million, or decreased 27.3%, when compared to approximately RMB6,963.9 million recorded for the corresponding period in 2019.
- The Group's EBITDA(note) was approximately RMB(91.9) million, decreased by approximately RMB176.7 million from RMB84.8 million in the first half year of 2019.
- Loss attributable to Equity Holders of the Company was approximately RMB248.6 million during the first half of 2020, while a loss attributable to equity holders of the Company of approximately RMB164.0 million was recorded for the corresponding period in 2019.
- The Diluted EPS was RMB(0.2132), when compared to RMB(0.1463) of last year, on a period-on-period basis.
Note: Profit before interest, income tax, depreciation and amortisations, and share-based compensation
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FINANCIAL REVIEW | |||||
Technology- | Platform and | O2O | |||
Driven | Smart | Corporate | Business | ||
New Retail | Industries | Services | Exhibition | ||
Revenue | Segment | Segment | Segment | Centre | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
First half of 2020 | 382,773 | 4,520,412 | 152,283 | 7,152 | 5,062,620 |
First half of 2019 | 400,882 | 6,110,523 | 442,087 | 10,408 | 6,963,900 |
Variance | -4.5% | -26.0% | -65.6% | -31.3% | -27.3% |
During the Period, the Group recorded a revenue of approximately RMB5,062.6 million (2019: RMB6,963.9 million), representing a decrease of approximately 27.3% as compared the same period of 2019. The decline of revenue was mainly from the segment of smart industries. The Coronavirus Disease ("COVID-19") pandemic (the "Pandemic") has resulted in extensive nationwide obstructions on factory productions and business operations, many business exhibitions and meetings have been delayed or canceled, leading to the declines of our orders and revenue.
The above table shows the revenue breakdown of the Group.
The Group's operating expenses decreased from approximately RMB532.1 million for the six months ended 30 June 2019 to approximately RMB371.7 million in the Period. The decrease was mainly due to the tightened controls on expenditures related to marketing and staff cost.
The Group's loss attributable to equity holders was approximately RMB248.6 million for the six months ended 30 June 2020, as compared to a loss of RMB164.0 million in the corresponding period of last year, representing an increase of 152%. The loss is mainly attributable to, among other things: (i) impairment of intangible assets to be recognised by the Company for those business units which failed to achieve the expected results; (ii) further impairment provisions for the financial assets to be made by the Company in light of the adverse impact of the Pandemic and economic environment; (iii) the increase in loss shared from associates; (iv) substantial decrease in other gains from fair value change of financial assets; and (v) the Group further contributing its resources to continue promoting the strategic iteration of industrial internet and the construction of transaction scenarios.
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BUSINESS REVIEW
Being adversely affected by the Pandemic, the Group's trading business customers reduced their orders in the first half of the year and the trading revenue dropped significantly. In addition, the Group continued to promote the repeated operations of the industrial internet strategy by focusing on "hc360.com (慧聰網)+zol.com.cn (中關村在線)" as its principal business, and actively constructing transaction layout for vertical runways, supporting and incubating runway companies. Although the profits from certain business units were unsatisfactory, the vertical runways were rapidly growing and developing.
As always, the Group has been moving towards its vision of becoming a leading group for "industrial internet" in China and the mission of empowering traditional industries with the Internet and data through focusing on and integrating advantageous resources. The Group's businesses are divided into the platform and corporate services segment, the technology-driven new retail segment, and the smart industries segment.
Platform and corporate services segment
The platform and corporate services segment is committed to developing industrial internet business platform instruments that can help small and medium-sized enterprises ("SMEs") to "improve industrial efficiency" and "create value for customers". This segment also aims at constructing industrial data chains and business layouts to empower SMEs by providing them with more value- added services such as financial services, data marketing and SaaS, promoting the transformation and upgrade of SMEs, and facilitating the economic development of the People's Republic of China (the "PRC").
"hc360.com", being the core operation entity of the platform and corporate services segment, has its strategy to become the "operating service platform of SMEs", with a core value of "managing and operating the infrastructures for multi-stores" for corporate customers.
In February 2020, taking into account the actual difficulties of SMEs affected by the Pandemic, hc360.com responded quickly by taking actions to support the commercial sector. Nine major measures were introduced to facilitate the business expansion of enterprises, helping them to resume production and operation by means of online matching, manual roster, etc. During the Pandemic in the first half of the year, hc360.com has helped tens of thousands of enterprises open online channels for operation and sale, providing more than 40,000 precise inquiries and clues.
Meanwhile, hc360.com launched a new product, namely "Huishengyi" (慧生意), which is a one- stop multi-contact platform, and was positioned as a "salesman in pocket" to assist consumers to automatically seize the business opportunities. Capitalising on buyers' clue lobby and manual matching services, users' demands are satisfied, so as to better improve the connection between enterprises and customers, helping them to solve the operating difficulties such as seeking customers and online operation, as well as to reduce the manual communication cost of the enterprises.
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Technology-driven new retail segment
The technology-driven new retail segment is reorganised based on the Group's original "zol.com.cn" ("ZOL") as the principal entity.
The strategic objectives of the technology-driven new retail segment are to connect retailers (small
- through guiding C-end consumers, SaaS tools, reversed customisation, and supply chain services, as well as to enhance their ability to secure customers, profitability and operational efficiency. Meanwhile, with the channel data collected from small b and data analysis, we are able to provide comprehensive "online + offline" marketing solutions to corporate customers (big B) as well as the solutions to core requirements of various parties along the 3C and home appliances industrial chain, forming a B2b2C business model.
In 2020, adjustment and optimisation were made to the corporate organisation structure of the technology-driven new retail segment, establishing five segments, namely "wise marketing", "smart retail", "intelligent platform", "smart enterprise procurement segment" and "self-owned brand segment".
In "wise marketing segment", the wise marketing segment underwent strategic upgrade during the first half of the year to combine the content matrix of new media and Baidu Mini Program organically, which provided the services from Baidu search coverage, transmission of new media content and short video to the construction of retail channels for brands, merchant agent operation, information services for obtaining customers through retail channels + comprehensive agent operation for retail services. With Baidu's accessibility to users and closed-loop service experiences of smart mini programs, wise marketing segment provides users with better experience and customers with marketing services which integrates branding and effectiveness by leveraging ZOL's operating capabilities in the technology industry and media resource and reserves.
In "smart retail segment", ZOL cloud store 3.0 is a joint-brand manufacturer based on the retail matrix created by SaaS cloud store tools. Among which, the selection of products is completed by ZOL's joint manufactures via the central live broadcast rooms of the platform to gather tens of thousands of small b of distributed 2c traffic in private sector, forming a B2b2C industrial router. The products provide b-end users with fast and accurate integrated sinking retail channel. In the first half of 2020, a total of 14 to b live shows have been held successfully by smart retail segment with top-tier brands such as Midea, Little Swan, Meling, TCL, Skyworth, Robam and Fotile, with over 10,000 retailers participating in the live shows, over 300,000 orders were received and over 1 million units of products were sold. Among which, the "618 Big Promotion" activity had a transaction volume of over 200 million, representing a year-on-year increase of 272%, with 4,500 participating retailers.
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In "smart enterprise procurement segment", ZOL business (http://www.zol.com/) has created six functional platforms with the core components of supply chain financing, media information flow services, supply chain output and product customisation, procurement platform solutions, value- added after-sales service, and the digital logistics platforms, providing efficient one-stop, customised and intelligent cloud procurement solutions as well as precise quotations for government and corporate customers, allowing such government and corporate customers to achieve sunshine procurement and audit compliance.
In "self-owned brand segment", the HC & RHT air purification is a national brand independently developed and patented in China. It has been designated as the supplier of air purifier system and fresh air system by fortune 500 enterprises. With the globally patented core technology, NCCO is the first air purifier brand in Mainland China to obtain the German TUV Rheinland certification. Currently, it is providing services to nearly 100 hospitals in over 10 countries around the world. In the first half of 2020, HC & RHT has fully prepared for entering into the Mainland China.
In "intelligent platform segment",it is responsible for the realisation of technical needs and technological innovation of all businesses, protecting and safeguarding each business, and at the same time carrying out the functions of innovation and incubation of new products.
Smart industries segment
The smart industries segment, which mainly comprises of four key runways: four vertical service platforms for industrial internet ("Union Cotton", "ibuychem.com" and "nahuomall.com") and PanPass, an IoT solutions provider for digital transformation. "Focus" and "significant verticality" are the Group's important strategies for the smart industries segment.
Positioned as an excellent e-commerce integrated service platform for cotton, "Union Cotton" designs a diversified trading pattern for spot commodity mall and enterprise stores, with an aim at achieving cost reduction, convenient procurement, quick financing and efficiency enhancement. It provides one-stop services, including data inquiry, online transaction, supply chain services, warehousing delivery, and settlement for cotton, by deeply integrating the upstream and downstream resources along cotton textile industrial chain through a platform-based pattern. Leveraging on a technical supporting system of the Internet, artificial intelligence and big data, it can fully create synergy effect in the supply chain of cotton textile industry, and develop an e-commerce integrated service platform of cotton with openness, intelligence, high efficiency and convenience, so as to help create value for customers by reducing cost and increasing efficiency, and implement the upgrading and transformation of the cotton textile industry in the digital era.
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By sticking to the B2B3.0 strategic focus of "transactions + services" and the strategy of "promotion of the overall development by breakthrough in key points" (重點突破、以點帶面), and relying on the innovation and vitality of industrial internet application in Shanghai, Union Cotton established six regional operation centers in eastern China, central China, northern China, Shandong and Xinjiang with the headquarter in Shanghai, its business presence covers the whole country. In the first half of 2020, despite the negative impacts of the U.S.- China trade war and the global outbreak of COVID-19, it achieved a sales income from transactions of RMB2 billion, with an aggregate sales income via the platform surpassing RMB10 billion, achieving a profit for nine quarters in a row since April 2018, thus gaining extensive market influence and good business reputation in domestic cotton textile chain industry.
In April 2020, the "Union Cotton's Sales Income Ranking in the Cotton Textile Industry in 2019" ("棉 聯"2019年棉紡織行業營業收入排名) was officially released by China Cotton Textile Association. In June 2020, Union Cotton was awarded the title of Industrial E-Commerce "Double Push" Engineering Service Platform in Shanghai in 2020 (2020年度上海市產業電商「雙推」工程服務平台).
Positioned to provide a centralised purchasing and integrated e-business service for chemicals and plastics,"ibuychem.com"(買化塑) was internally incubated by the Group as a non-wholly-owned subsidiary in March 2015, and was originated from the chemical e-business platform established by the Group over 20 years ago. It has developed into a leading B2B platform in the domestic chemical industry. Its services cover chemical, rubber and plastics and new materials industry chain in China. Focusing on procurement and sales in the chemical industry, the platform provides digital services for marketing and trading to 100,000 suppliers and downstream buyer factories through industrial internet technology. In the first half of 2020, the ibuychem.com platform had about 6,500 trading customers, including well-known domestic and overseas enterprises such as PetroChina, Sinopec, DuPont, Akzo Nobel, 3trees and Zhanchen with a trading size of approximately RMB2 billion for the first half of the year. Based on the trading data of buyers and vendors, ibuychem.com has also actively carried out the businesses of supply chain financing and logistic distribution.
Founded in 2016, "nahuomall.com" (拿貨商城) is positioned as a social e-commerce service platform in the area of home appliance 3C. As a bridge between supply chain and terminal consumers, nahuomall.com provides its members with services including supply chain, finance, logistics and after-sales services by constructing a multi-community ecology based on "member- storeowners and KOL" to enhance the trading efficiency and profitability of its member-stores and KOL, thereby building a new retail platform for startup.
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Nahuomall.com formed strategic cooperative relationship with many top-notch brands. It serves 580,000 home appliance retailers and venturers across the country and has conducted transactions with tens of thousands of distributors with a high purchase rate from repeating customers. By integration of "Ant Order" in retail stores with quality supply chain and reversed factory customisation, Nahuomall.com has achieved a positive cycle in business, driven the integration between the channels of opinion leaders and maintenance workers, making the channels of Nahuomall.com more diversified.
In January 2020, nahuomall.com launched the strategic initiatives of "Three Networks in One" (三 網合一) by combining the resources in media broadcast, upstream and downstream industries and trading and finance accumulated in the operation of HC home appliance network for two decades. As a result, clients and information resources of HC home appliance are rejuvenated, along with the continued growth in brand influences and operating data.
In March 2020, nahuomall.com introduced a series of business operation tools including "Cloud Store", empowering the retailers to operate the C-end community in an intelligent way, in order to maximise the social tools to transform economies of acquaintances and has reached tens of millions of users. The grow-up plan of "Super Group Owner" (超級群主) under nahuomall.com helps retailers become "small stores with strong background" (小店面、大後台).
In the first half of 2020, nahuomall.com had 100,000 registered members, with more than 20,000 active members, over 500 service outlets, and 225 WeChat service accounts, serving more than 250,000 targeted home appliance buyers nationwide. As of the first half of 2020, nahuomall.com realise a sales of over RMB160 million by retail transformation.
Beijing PanPass Information Technology Co., Ltd. (北京兆信信息技術股份有限公司) ("PanPass") (NEEQ Stock Code: 430073) is a platform with Z-SCM, a proprietary intellectual right supply chain management system, as its core, and is based on the technologies such as IoT, big data, artificial intelligence (AI) and computation, as well as the markers of digital code, QR code, RFID, etc. as carriers, providing a lifetime traceability and management service for brand customers.
The announcement regarding the Decision on the First Batch of Periodical Adjustment of Market Tiers in 2020 (2020年第一批市場層級定期調整決定的公告) was issued by National Equities Exchange And Quotations Co., Ltd. on 22 May 2020. As the most powerful listed company in respect of anti-counterfeiting in China, PanPass has successfully entered Innovation Tier, thus embracing greater opportunities from capital market development.
PanPass's anti-counterfeiting traceability solutions has been serving more than 40,000 enterprises, covering the world's top 500 enterprises, domestic leading enterprises in the industry, and the construction projects from national key platforms such as MOFCOM, MOA, MIIT. PanPass owns over 20 national invention patents, including anti-counterfeiting patent for codes, and invention patent for product logistics anti-channel conflict management system. During the first half of 2020, PanPass continued to make technological breakthroughs and innovations. PanPass has obtained 1 invention patent certificate, 2 utility model patent certificates and 2 certificates of computer software copyright.
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During the first half of this year, PanPass actively participated in China's anti-pandemic works and provided public welfare product support for enterprises, practicing corporate social responsibility by concrete actions. PanPass provided 50,000 to 100,000 anti-counterfeit labels free of charge for every qualified brand enterprise recognised by China that produce social emergency supplies to protect and safeguard the enterprises and brands. They also helped the public check the authenticity and eliminate the falsehood from the truth amidst the Pandemic and shortage of supplies.
In May 2020, the western operation center of PanPass was set up in Chengdu, Sichuan province. The service scope has extended to the surrounding provinces and cities, including Sichuan (where Chengdu is located), Chongqing, Guizhou, Yunnan, Shaanxi, Gansu, and Qinghai, to promote the localisation service strategy. In June 2020, PanPass deepened the strategic cooperation with leading customers such as Langjiu (郎酒) and Luzhoulaojiao (瀘州老窖) and upgraded digital operation and construction projects. With the product digital management platform, PanPass will assist its customers in liquor industry to complete the construction of seven sub-modules including digital coding, digital production, digital logistics, digital marketing, digital internal control, big data application support, and security standard system, in order to practically achieve the digital management of closed-loop supply chain compassing "product research and development - coding production - transportation and logistics - distributors - consumption terminals - consumers - big data analysis - product research and development".
Prospect
The Group was founded in 1992. During the start-up phase from 1992 to 2003, the core product of the Group was HC Trade (慧聰商情), which is a classified advertising service based on paper media. From 2003 to 2017, the Group transformed from paper media to PC and built hc360.com, helping SMEs open stores and provide traffic referral services. In October 2017, the Group achieved a full strategic transformation and committed to becoming a leading industrial internet company in China.
In 2018, the technology-driven new retail segment, with ZOL as the principal entity, transformed from a media company into a new retail company. Through ZOL's influence on upstream and downstream manufacturers along the industry chain and 70 million technological C-end consumers, technology-driven new retail segment had connected 15,000 retailers "small B" and at the same time, helped those "small B" with the selection of products with low price, so as to help them sell their products and provide them with one-stop solutions from online shop opening, media selection for promotion and supply chain management.
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Industrial internet is the process of restoring users' behavior, understanding their pain points and reviewing industries across multiple industries. Based on such consideration, among the many vertical runways of the Group, we operate the Company in a cooperative model of "joint investment + incubation" with industrial people. In addition, the Group assisted vertical runway companies to strengthen technology, update and upgrade products, and connect investment financing and traffic resources. The smart industries segment is designed based on the industrial business logic, gradually observing the business behavior of customers, disassembling the behaviours of customers in a transaction, identify the pain points of customers, and turn these pain points into solutions through the Internet, and then provides customers with one-stop solutions based on the entire industry chain. The commercial value of vertical runway company is to endow the Internet and data capabilities in vertical subdivision fields and assist the upstream and downstream customers to reduce costs and enhance efficiency.
In addition to the continuous development of the smart industries segment, the Group will mainly spend our efforts on platform and corporate services segment primarily based on hc360.com. Currently, hc360.com has a huge amount of inquiries and clues every year, proving that B-end buyers are still in rigid demand to buy goods at the right price. hc360.com has abundant resources on buyers accumulated over the past 20 years, and it also has the resources on inquiries and sellers. In the future, hc360.com will match buyers and sellers through AI algorithm to assist customers in seeking business and doing business, being the bottom clue. In addition, we will also construct the middle-level worktable of hc360.com with an open and cooperative mind. At the contact end, hc360.com actively cooperates with Internet traffic giants such as Baidu, Tencent, Sogou and Toutiao. At present, leading companies have strong demand in the TO B field, while the Group has just accumulated a large number of users and, at the same time, has a huge sales system and the competency of reaching customers. The Group and its cooperative partners will develop products collectively, hoping to construct a top-level tool for managing multiple stores and operating multiple stores.
From January 2018 to present, the Group has empowered traditional industries with technological innovation to reconstruct value chain to improve efficiency, load services, help customers in their business, and provide customers with comprehensive Internet solutions based on the pain points of the industry. Amid the weak economy due to the Pandemic, the Group will continue to encounter challenges in the second half of 2020. The Group will further strengthen its market position to overcome the present difficult business environment and challenges. In the three years ahead, while incubating the vertical runway, the Group will committed to cultivating a dual - wheel driving model of "hc360.com + zol.com.cn", meeting the rigid demands of the SMEs through platform- based companies and serving the entire industry chain of the technology industry.
On behalf of the Board, I would like to take this opportunity to thank the management team and every staff member of the Group for their on-going dedication and hard work.
Liu Jun
Chairman
Hong Kong, 25 August 2020
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MANAGEMENT DISCUSSION AND ANALYSIS
Liquidity and financial resources
As at 30 June 2020, the Group had cash and bank balance of approximately RMB385.9 million (31 December 2019: 331.9 million), which were mainly denominated in Renminbi ("RMB"), and net current assets of approximately RMB746.6 million (31 December 2019: 716.9 million). The Group maintained a strong working capital position during the Period.
As at 30 June 2020, the Group had a total borrowings of RMB2,239,480,000 (as at 31 December 2019: RMB2,304,401,000), of which (i) RMB1,497,016,000 (31 December 2019: RMB1,591,089,000) were bank borrowings; and (ii) RMB742,464,000 (31 December 2019: RMB713,312,000) were other borrowings. The Group's borrowings were mainly denominated in RMB. The bank borrowings bear an average interest rate of 6.26% per annum (31 December 2019: 6.69% per annum) and mature ranging from 2020 to 2022.
Other borrowings with a total principal amount of RMB230,000,000 (31 December 2019: RMB200,000,000) were provided by an independent third party with maturity dates on July 2020, November 2020 and May 2021. These borrowings are interest-free and secured by certain equity shares of a subsidiary. Other borrowings of RMB27,816,000 (31 December 2019: RMB27,816,000) were provided by a non-controlling shareholder of a subsidiary in which 25% of its equity interest is effectively held by Mr. Liu Jun, an executive Director of the Company. The borrowings are unsecured, mature ranging from 2020 to 2022 and bear average interest rate of 6.34% per annum (31 December 2019: 6.34% per annum). The remaining other borrowings are provided by independent third parties and bear an interest rate ranging from 4.4% to 14.3% per annum (31 December 2019: 4.4% to 14.3% per annum). Details of the Group's borrowings including the maturity profile and interest rate are set out in note 20 to the condensed consolidated interim financial information in this report. As at 30 June 2020, the Group's gearing ratio is 25% (31 December 2019: 28%), which is calculated as net debt divided by total capital.
The capital and reserves attributable to equity holders of the Company decreased by approximately RMB13.7 million from approximately RMB4,023.2 million as at 31 December 2019 to approximately RMB4,009.5 million as at 30 June 2020.
Treasury Policy
To manage liquidity risk, the Board closely monitors the Group's liquidity position to ensure that the liquidity structure of the Group's assets, liabilities and other commitments can meet its funding requirements from time to time.
Significant investments, Material Acquisitions and Disposal
Save as disclosed in this report, the Group had no significant investments held, nor material acquisitions and disposal of subsidiaries, associates or joint ventures during the Period.
Future plans for material investments
Save as disclosed in this report, the Group had no future plans for material investments or capital assets during the Period.
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Staff
The business development and results of the Group relies on the skills, motivation and commitment of its staff. As at 30 June 2020, the Group had 2,007 employees (31 December 2019: 2,043).
Remuneration of employees is generally in line with the market trend and commensurate with the rate in the industry. Share options and share awards are granted to employees based on individual performance. Other benefits to the Group's employees include medical insurance, retirement schemes, training programs and educational subsidies. Total staff costs including director's emoluments for the Period amounted to approximately RMB179,438,000 (for the six months ended 30 June 2019: RMB261,487,000).
Capital structure
During the Period, 288,000 shares of the Company ("Shares") were issued under the share option scheme.
The total number of issued Shares was 1,320,840,210 as at 30 June 2020.
As at 30 June 2020, 73,393,500 options under the share option scheme (if exercised, 73,393,500 shares may be issued) remain outstanding.
Charges on Group assets
As at 30 June 2020, the Group's bank borrowings amounting to RMB554,000,000 (31 December 2019: RMB730,000,000) are secured by properties, investment properties and right of use assets with a total carrying value amounting to RMB779,087,000 (31 December 2019: RMB979,310,000). Other bank borrowings amounting to RMB358,500,000 (31 December 2019: RMB248,500,000) are secured by restricted bank deposits with carrying amount of RMB407,833,000 (31 December 2019: RMB282,171,000).
Other borrowings amounting to RMB230,000,000 (31 December 2019: RMB200,000,000) are secured by certain equity shares of a subsidiary of the Company. Other borrowings amounting to RMB419,327,000 (31 December 2019: RMB442,218,000) are either guaranteed by the executive directors or non-executive director of the Group and secured by certain inventories, right-of-use assets, listed equity shares held by the Group and the equity shares of certain subsidiaries (31 December 2019: same).
For details, please refer to note 20 to the condensed consolidated interim financial information in this report.
Exchange risk
As the Group's operations are principally in the PRC, and majority of the Group's assets and liabilities are denominated in RMB, the Directors believe that the operations of the Group are not subject to significant exchange risk.
During the Period, the Group did not employ any significant financial instruments for foreign exchange hedging purposes, nor did it employ any major financial instruments for hedging purposes.
Contingent liabilities
The Group had no material contingent liabilities as at 30 June 2020.
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SIGNIFICANT EVENTS
Huijia Performance Target for the year 2019
According to the audited consolidated financial statement of 北京慧嘉元天文化傳媒有限公司 (Beijing Huijiayuantian Cultural Media Company Limited*, "Beijing Huijia") for the year ended 31 December 2019 dated 27 March 2020, the audited consolidated distributable profit attributable to equity holders of Beijing Huijia for the year ended 31 December 2019 is less than RMB23,660,000, being the minimum level of the performance target for the year ended 31 December 2019 set under the subscription agreement dated 5 January 2018 (the "Subscription Agreement") entered into between Mu Hao Holdings Limited, Hong Rui Technology Holdings Limited, Chance Technology Co. Ltd and Vanguard Technology Holdings Limited (together, the "Huijia Vendors") and the Company. Pursuant to the Subscription Agreement, no Shares were released to Huijia Vendors, and the Company bought back the 10,909,091 Shares on 20 July 2020 at a total consideration of HK$1.00, all of which were cancelled on 23 July 2020.
For further details, please refer to the announcements of the Company dated 13 January 2017, 3 February 2017, 5 January 2018 and 27 March 2020.
Placing of new shares under general mandate
On 29 April 2020, the Company entered into a placing agreement (the "Placing Agreement") with Hao Tian International Securities Limited (the "Placing Agent") pursuant to which the Company conditionally agreed to place, through the Placing Agent on a best effort basis, an aggregate of up to 200,000,000 Shares (the "Placing Shares") with a total nominal value of HK$20,000,000 to placees who and whose ultimate beneficial owners are third parties independent of the Company and its connected persons (the "Placing"). The Placing Shares were allotted and issued pursuant to the general mandate granted to the Directors by resolution of the shareholders of the Company at the annual general meeting of the Company held on 24 May 2019. The Directors are of the view that the Placing will expand the Company's shareholders and capital base, and optimise the capital structure, which is conducive for lowering its indebtedness and reducing its financial burden.
The Placing was completed on 20 May 2020. An aggregate of 200,000,000 Placing Shares have been successfully placed by the Placing Agent to two Placees, namely Ideal South Limited and Fortune Value Investment Holdings Limited (the "Placees"), at the placing price of HK$1.20 per Placing Share (the "Placing Price").
To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Placees and their respective ultimate beneficial owners are third party independent of and not connected with the Company and its connected persons. None of the Placees have become a substantial shareholder of the Company immediately upon the completion of the Placing.
The 200,000,000 Placing Shares represents approximately 15.14% of the issued share capital of the Company as at the date of completion of the Placing.
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The Placing Price of HK$1.20 represents (i) a discount of approximately 9.09% to the closing price of HK$1.32 per Share as quoted on The Stock Exchange of Hong Kong Limited on the date of the Placing Agreement; and (ii) a discount of approximately 7.41% to the average closing price of HK$1.296 per Share for the last five consecutive trading days immediately prior to the date of the Placing Agreement.
For further details, please refer to the announcements of the Company dated 29 April 2020 and 20 May 2020.
Use of Proceeds
The gross proceeds from the Placing was approximately HK$240,000,000. The net proceeds from the Placing, after deduction of the commission for the Placing and other related expenses, amounted to approximately HK$238,500,000.
The maximum net price raised per Share upon the completion of the Placing was approximately HK$1.1925 per Share.
The net proceeds from the Placing are prepared to be used in accordance with the intended use as set out in the announcements of the Company dated 29 April 2020 and 20 May 2020. Set out below is the details of the use of proceeds from the Placing during the six months ended 30 June 2020:
Proceeds | Expected | |||
utilised | timeframe | |||
during the | for utilising | |||
Percentage | six months | Unutilised | the remaining | |
Intended use of | of total | ended | proceeds as at | unutilised net |
net proceeds | net proceeds | 30 June 2020 | 30 June 2020 | proceeds |
(HK$) | (HK$) | (Note) | ||
Repayment of part of the | 80% | 38,279,000 | 152,521,000 | August |
current debt of the Group | of 2020 | |||
For the Group's research | 20% | 4,778,000 | 42,922,000 | December |
and development and | of 2020 | |||
general working capital | ||||
Total | 100% | 43,057,000 | 195,443,000 | - |
Note:
The expected timeline for utilising the remaining proceeds is based on the best estimation of the future market conditions made by the Group. It will be subject to change based on the current and future development of market conditions.
For further details, please refer to the announcements of the Company dated 29 April 2020 and 20 May 2020.
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Adjustment to the Conversion Price of the Convertible Bonds
The Company issued the 2.85% plus HIBOR guaranteed and secured convertible bonds due 2020 to the bondholder (the "Convertible Bonds") on 3 December 2018. As at the date of completion of the Placing, the Company has outstanding Convertible Bonds in an aggregate principal amount of HK$100,000,000. Pursuant to the terms and conditions of the Convertible Bonds, as a result of the Placing, the conversion price of the Convertible Bonds was adjusted from HK$4.50 to approximately HK$4.445 with effect from 20 May 2020. After the adjustment, the maximum number of Shares issuable by the Company upon full conversion of the Convertible Bonds is 22,499,122 (the "Conversion Shares").
For the six months ended 30 June 2020 and up to the date of this report, no Conversion Shares have been issued pursuant to the Convertible Bonds, and there are no proceeds from the Convertible Bonds brought forward from the year ended 31 December 2019.
For further details, please refer to the announcements of the Company dated 16 November 2018, 4 December 2018, 31 December 2019, 29 April 2020 and 20 May 2020.
Change of Chief Financial Officer
Mr. Lee Wee Ong ("Mr. Lee") resigned as the chief financial officer of the Company for other personal commitments with effect from 31 May 2020 but remained at service to the Company as a senior consultant.
Following Mr. Lee's resignation, Ms. Zhao Hong has been appointed as the chief financial officer of the Company with effect from 31 May 2020.
For further details, please refer to the announcement of the Company dated 4 May 2020.
IMPORTANT EVENT(S) AFTER THE PERIOD
Change of Non-executive Director and Members of the Audit Committee
Mr. Li Jianguang resigned as a non-executive Director and a member of the audit committee of the Company (the "Audit Committee"), with effect from 1 July 2020 due to other businesses and personal commitments.
Following his resignation, with effect from 1 July 2020,
- Mr. Lin Dewei was appointed as a non-executive Director; and
- Mr. Guo Fansheng, an existing non-executive Director, was appointed as a member of the Audit Committee.
For further details, please refer to the announcement of the Company dated 19 June 2020.
Save as disclosed in this report, there were no other important events affecting the Group from 30 June 2020 to the date of this report.
HC GROUP INC. Interim Report 2020
15
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF HC GROUP INC.
(incorporated in the Cayman Islands with limited liability)
Introduction
We have reviewed the interim financial information set out on pages 17 to 58, which comprises the condensed consolidated interim statement of financial position of HC Group Inc. (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim statement of changes in equity and the condensed consolidated interim statement of cash flows for the six- month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
HC GROUP INC. Interim Report 2020
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Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 25 August 2020
HC GROUP INC. Interim Report 2020
17
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Unaudited | |||||
six months ended 30 June | |||||
Note | 2019 | ||||
2020 | |||||
RMB'000 | RMB'000 | ||||
Revenue | 6 | 4,994,332 | 6,908,267 | ||
Interest income from financing services | 6 | 68,288 | 55,633 | ||
5,062,620 | 6,963,900 | ||||
Cost of revenue | (4,715,198) | (6,456,938) | |||
Other income | 15,154 | 15,440 | |||
Other gains, net | 7 | 4,770 | 30,180 | ||
Selling and marketing expenses | (236,764) | (340,253) | |||
Administrative expenses | (134,941) | (191,892) | |||
Impairment loss on goodwill and intangible assets | 13 | (84,830) | (76,202) | ||
Net impairment losses of financial assets | (78,237) | (30,258) | |||
Operating loss | (167,426) | (86,023) | |||
Finance cost, net | 9 | (82,180) | (75,611) | ||
Share of post-tax (losses)/profits of associates | 16 | (30,758) | 1,533 | ||
Share of post-tax loss of a joint venture | 16 | (967) | - | ||
Loss before income tax | (281,331) | (160,101) | |||
Income tax credit/(expense) | 10 | 14,342 | (9,094) | ||
Loss for the period | (266,989) | (169,195) | |||
Other comprehensive income/(loss): | |||||
Items that may be reclassified to profit or loss | |||||
Currency translation differences | 24 | (3,854) | (4,995) | ||
Items that will not be reclassified to profit or loss | |||||
Fair value gain on financial assets at fair value | |||||
through other comprehensive income | |||||
- Group | 24 | 6,096 | 1,822 | ||
- Associate | 16 | 12,319 | - | ||
Currency translation differences for financial assets at | |||||
fair value through other comprehensive income | 24 | 1,129 | 338 | ||
Total comprehensive loss for the period, net of tax | (251,299) | (172,030) | |||
HC GROUP INC. Interim Report 2020
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Unaudited | ||||
six months ended 30 June | ||||
Note | 2019 | |||
2020 | ||||
RMB'000 | RMB'000 | |||
Loss attributable to: | ||||
Equity holders of the Company | (248,564) | (163,964) | ||
Non-controlling interests | (18,425) | (5,231) | ||
(266,989) | (169,195) | |||
Total comprehensive loss attributable to: | ||||
Equity holders of the Company | (232,874) | (166,799) | ||
Non-controlling interests | (18,425) | (5,231) | ||
(251,299) | (172,030) | |||
Loss per share attributable to the | ||||
equity holders of the Company | ||||
(expressed in RMB per share) | ||||
Basic loss per share | 11 | (0.2132) | (0.1463) | |
Diluted loss per share | 11 | (0.2132) | (0.1463) | |
The above unaudited condensed consolidated interim statement of comprehensive income should be read in conjunction with the accompanying notes.
The notes on pages 24 to 58 form an integral part of this unaudited condensed consolidated interim financial information.
HC GROUP INC. Interim Report 2020
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UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Unaudited | Audited | ||
Note | 30 June | 31 December | |
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Assets | |||
Non-current assets | 13 | 770,831 | |
Investment properties | 708,998 | ||
Property, plant and equipment | 13 | 60,216 | 64,139 |
Right-of-use assets | 13 | 192,718 | 214,305 |
Intangible assets | 13 | 2,422,394 | 2,552,626 |
Long-term deposits and prepayments | 14 | 23,216 | 3,568 |
Loans and interest receivables | 15 | 47,525 | 42,257 |
Deferred income tax assets | 16 | 52,485 | 46,969 |
Investments accounted for using equity method | 936,960 | 969,248 | |
Finance lease receivables | 226,070 | 176,266 | |
Financial assets at fair value through other | 17 | 65,387 | |
comprehensive income | 74,040 | ||
Financial assets at fair value through profit or loss | 17 | 20,415 | 20,592 |
Total non-current assets | 4,765,037 | 4,926,188 | |
Current assets | 47,324 | ||
Completed properties held for sale | 45,420 | ||
Finance lease receivables | 15 | 151,649 | 153,481 |
Loans and interest receivables | 1,553,015 | 1,591,722 | |
Deposits, prepayments and other receivables | 14 | 773,345 | 487,412 |
Trade receivables | 14 | 320,167 | 413,698 |
Contract related assets | 14 | 33,634 | 22,390 |
Inventories | 17 | 129,653 | 147,523 |
Financial assets at fair value through profit or loss | 14,549 | 22,671 | |
Restricted bank deposit | 407,833 | 282,171 | |
Bank deposits with maturity over three months | 69,000 | - | |
Cash and cash equivalents | 385,931 | 331,893 | |
Total current assets | 3,884,196 | 3,500,285 | |
Total assets | 8,649,233 | 8,426,473 | |
Equity | |||
Equity attributable to the Company's equity holders | 22 | 103,638 | |
Share capital | 121,974 | ||
Other reserves | 24 | 3,369,494 | 3,152,947 |
Retained earnings | 518,022 | 766,586 | |
Non-controlling interests | 4,009,490 | 4,023,171 | |
683,127 | 706,541 | ||
Total equity | 4,692,617 | 4,729,712 |
HC GROUP INC. Interim Report 2020
20
Unaudited | Audited | ||
Note | 30 June | 31 December | |
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Liabilities | |||
Non-current liabilities | 20 | 480,000 | |
Non-current portion of bank borrowings | 426,250 | ||
Non-current portion of other borrowings | 20 | 24,090 | 23,539 |
Lease liabilities | 5,082 | 17,397 | |
Deferred government grants | 151,033 | 155,958 | |
Deferred income tax liabilities | 212,604 | 236,517 | |
Total non-current liabilities | 819,059 | 913,411 | |
Current liabilities | 19 | 128,209 | |
Trade payables | 238,686 | ||
Accrued expenses and other payables | 19 | 154,842 | 130,551 |
Contract liabilities | 18 | 658,497 | 410,987 |
Current portion of bank borrowings | 20 | 1,070,766 | 1,111,089 |
Current portion of other borrowings | 20 | 718,374 | 689,773 |
Lease liabilities | 49,446 | 74,598 | |
Deferred government grants | 11,450 | 11,450 | |
Convertible bonds - liabilities portion | 94,963 | 90,670 | |
Other taxes payables | 95,869 | 90,488 | |
Income tax payables | 44,664 | 45,535 | |
Total current liabilities | 3,137,557 | 2,783,350 | |
Total liabilities | 3,956,616 | 3,696,761 | |
Total equity and liabilities | 8,649,233 | 8,426,473 |
The above unaudited condensed consolidated interim statement of financial position should be read in conjunction with the accompanying notes.
The notes on pages 24 to 58 form an integral part of this unaudited condensed consolidated interim financial information.
HC GROUP INC. Interim Report 2020
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UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Attributable to the Company's equity holders | Non- | |||||||
Note | Share | Other | Retained | controlling | Total | |||
Capital | reserves | earnings | Total | interests | equity | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
Balance at 1 January 2020 | 103,638 | 3,152,947 | 766,586 | 4,023,171 | 706,541 | 4,729,712 | ||
Loss for the period | - | - | (248,564) | (248,564) | (18,425) | (266,989) | ||
Other comprehensive loss: | ||||||||
Fair value gain on financial assets at | ||||||||
fair value through other comprehensive | ||||||||
income, net of deferred tax | 24 | - | 18,415 | - | 18,415 | - | 18,415 | |
Currency translation differences | - | (2,725) | - | (2,725) | - | (2,725) | ||
Total comprehensive loss for the | ||||||||
period ended 30 June 2020 | - | 15,690 | (248,564) | (232,874) | (18,425) | (251,299) | ||
Transactions with owners | ||||||||
Issuance of new shares in relation | 22,24 | |||||||
to the placement | 18,310 | 200,116 | - | 218,426 | - | 218,426 | ||
Exercise of share options | 22,24 | 26 | 214 | - | 240 | - | 240 | |
Share-based compensation | 24 | - | 17,339 | - | 17,339 | - | 17,339 | |
Share purchased under share award scheme | - | (8,301) | - | (8,301) | - | (8,301) | ||
Transactions with non-controlling interests | - | (8,511) | - | (8,511) | (4,356) | (12,867) | ||
Disposal of subsidiaries | - | - | - | - | (633) | (633) | ||
Balance at 30 June 2020 | 121,974 | 3,369,494 | 518,022 | 4,009,490 | 683,127 | 4,692,617 | ||
HC GROUP INC. Interim Report 2020
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Attributable to the Company's equity holders | Non- | |||||||
Note | Share | Other | Retained | controlling | Total | |||
Capital | reserves | earnings | Total | interests | equity | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
Balance at 1 January 2019 | 103,625 | 3,092,149 | 1,141,955 | 4,337,729 | 883,895 | 5,221,624 | ||
Effect on adoption of HKFRS 16 | - | - | (2,146) | (2,146) | (4,589) | (6,735) | ||
Loss for the period | - | - | (163,964) | (163,964) | (5,231) | (169,195) | ||
Other comprehensive loss: | ||||||||
Fair value gain on financial assets at | ||||||||
fair value through other comprehensive | - | 1,822 | - | 1,822 | - | 1,822 | ||
income, net of deferred tax | 24 | |||||||
Currency translation differences | - | (4,657) | - | (4,657) | - | (4,657) | ||
Total comprehensive loss for the | - | (2,835) | (163,964) | (166,799) | (5,231) | (172,030) | ||
period ended 30 June 2019 | ||||||||
Transactions with owners | 22,24 | 39 | 279 | - | 318 | - | 318 | |
Exercise of share options | ||||||||
Buy-back of shares | 24 | - | (3,034) | - | (3,034) | - | (3,034) | |
Share-based compensation | 24 | - | 36,545 | - | 36,545 | - | 36,545 | |
Contribution from non-controlling | - | - | - | - | 4,236 | 4,236 | ||
shareholders of subsidiaries | ||||||||
Transactions with non-controlling interests | - | 7,350 | - | 7,350 | (3,020) | 4,330 | ||
Dividend paid to non-controlling interests of | - | - | - | - | (1,608) | (1,608) | ||
subsidiaries | ||||||||
Balance at 30 June 2019 | 103,664 | 3,130,454 | 975,845 | 4,209,963 | 873,683 | 5,083,646 |
In accordance with the Law of the People's Republic of China (the "PRC") on Enterprises with Foreign Investments, appropriation from net profit (after offsetting accumulated losses brought forward from prior years) should be made by the foreign investment enterprises to the statutory reserves. The percentage of net profit to be appropriated to the statutory reserve is not less than 10% of the net profit. When the balance of the statutory reserve reaches 50% of the registered capital, such transfer needs not be made.
During the six months ended 30 June 2020, retained earnings amounted to approximately RMB4,361,000 (30 June 2019: RMB7,437,000) had been transferred to the statutory reserves. As at 30 June 2020, retained earnings comprise statutory reserves amounting to RMB117,082,000 (31 December 2019: RMB112,721,000).
The above unaudited condensed consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes.
The notes on pages 24 to 58 form an integral part of this unaudited condensed consolidated interim financial information.
HC GROUP INC. Interim Report 2020
23
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2020
Unaudited | |||
six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Cash flows from operating activities | 223,584 | (60,747) | |
Cash generated from/(used in) operations | |||
Interest received | 8,890 | 6,571 | |
Interest paid | (71,003) | (67,910) | |
The People's Republic of China income tax paid | (16,789) | (28,170) | |
Net cash generated from/(used in) operating activities | 144,682 | (150,256) | |
Cash flows from investing activities | - | (35,742) | |
Acquisition of a subsidiary, net of cash acquired | |||
Disposal of subsidiaries, net of cash disposed | 43,501 | - | |
Additions of property, plant and equipment | (3,386) | (107,455) | |
Additions of intangible assets | (18) | - | |
Additions of investment in a joint venture | (1,840) | - | |
Proceeds from disposal of property, plant and equipment | 325 | 669 | |
Loans to associates | (8,964) | - | |
Transaction with non-controlling interests | - | 4,330 | |
Advance payment for acquiring intangible assets | (16,113) | - | |
Advance payment for acquiring a financial asset | (5,500) | - | |
Proceeds from disposal of financial assets at fair value through | 5,000 | 5,000 | |
other comprehensive income | |||
Dividend received | 18,440 | 21,815 | |
Net cash generated from/(used in) investing activities | 31,445 | (111,383) | |
Cash flows from financing activities | 218,426 | - | |
Issuance of new shares in relation to the placement | |||
Buy-back of shares | - | (3,034) | |
Proceeds from bank borrowings | 420,000 | 428,800 | |
Proceeds from other borrowings | 74,748 | 249,263 | |
Purchase of shares under share reward scheme | (8,301) | - | |
Repayment of bank borrowings | (514,000) | (46,656) | |
Repayment of other borrowings | (74,888) | (377,113) | |
Repayment of lease liabilities | (37,322) | (33,863) | |
Transactions with non-controlling interests | (12,867) | - | |
Capital contribution from non-controlling interests | - | 4,236 | |
Dividend paid to non-controlling interests | - | (1,608) | |
Increase in restricted bank deposit | (119,165) | - | |
Increase in bank deposits with maturity over three months | (69,000) | - | |
Exercise of share options | 240 | 318 | |
Net cash (used in)/generated from financing activities | (122,129) | 220,343 | |
Net increase/(decrease) in cash and cash equivalents | 53,998 | (41,296) | |
Cash and cash equivalents at beginning of the period | 331,893 | 471,672 | |
Exchange gain on cash and cash equivalents | 40 | 47 | |
Cash and cash equivalents at end of the period | 385,931 | 430,423 |
The above unaudited condensed consolidated interim statement of cash flows should be read in conjunction with the accompanying notes.
The notes on pages 24 to 58 form an integral part of this unaudited condensed consolidated interim financial information.
HC GROUP INC. Interim Report 2020
24
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
-
General information
HC Group Inc. (the "Company") is a limited liability company incorporated in the Cayman Islands. The address of its registered office is 4th Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands, British West Indies. The Company has its primary listing on the Main Board of the Stock Exchange of Hong Kong Limited.
The Company is an investment holding company. The Company and its subsidiaries (collectively, the "Group") are principally engaged in the following activities in the PRC: - providing industrial internet trading platform and advertising services through its B2B website "hc360. com" and offering comprehensive IT-related products information via "zol.com.cn";
- selling of goods through its B2B trading platforms;
- providing SaaS (Software as a Service) services in 3C industrial internet and new technology retail solutions in PRC;
- providing cross-industrial integrated marketing and advertising services;
- providing anti-counterfeiting products and services and supply chain management to enterprises;
- engaging in finance business, including micro-credit financing, lease financing and factoring services;
- selling of properties and providing property rental and management services via its O2O business exhibition centre; and
- hosting exhibitions and seminars.
The condensed consolidated interim financial information is presented in Renminbi ("RMB") and all values are rounded to the nearest thousand (RMB'000) unless otherwise stated. The condensed consolidated interim financial information has been approved for issue by the Board on 25 August 2020.
This condensed consolidated interim financial information has not been audited, but has been reviewed by the external auditor of the Group.
HC GROUP INC. Interim Report 2020
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-
Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 June 2020 has been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34, "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").
The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2019 and any public announcements made by HC Group Inc. during the interim reporting period.
-
Accounting policies
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax and the adoption of amended standards and framework as set out below. - Amended standards and framework adopted by the Group
A number of amended standards and framework became applicable for the current reporting period:
- Amended standards and framework adopted by the Group
Conceptual Framework for Financial | Revised Conceptual Framework for Financial Reporting |
Reporting 2018 | |
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
Amendments to HKAS 39, HKFRS 7 | Hedge Accounting |
and HKFRS 9 | |
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS 16 | COVID-19-related Rental Concession |
The amended standards and framework listed above did not have any impact on the amounts recognised in prior period and are not expected to significantly affect the current or future period.
-
New and amended standards issued by not yet effective
Certain new and amended standards have been published that are not mandatory for the financial year beginning on 1 January 2020 and have not been early adopted by the Group:
Amendments to HKAS 1 | Classification of Liabilities as Current or Non-current(1) |
Amendments to HKAS 16 | Proceeds before Intended Use(1) |
Amendments to HKAS 37 | Onerous Contracts - Cost of Fulfilling a Contract(1) |
Amendments to HKFRS 3 | Update Reference to the Conceptual Framework(1) |
Amendments to annual improvements | Annual Improvements to HKFRS 2018-2020 cycle(1) |
project | |
HKFRS 17 | Insurance Contracts(2) |
Amendments to HKFRS 10 and HKAS 28 | Sale or Contribution of Assets between an Investor |
and its Associate or Joint Venture(3) |
- Effective for the Group for annual period beginning on 1 January 2022
- Effective for the Group for annual period beginning on 1 January 2023
- Effective date to be determined
Taxes on income for the interim period are accrued using the estimated tax rates that would be applicable to expected total annual assessable profit.
HC GROUP INC. Interim Report 2020
26
-
Estimates and judgement
The preparation of condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2019.
- Financial risk management
-
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk, and price risk), credit risk and liquidity risk.
The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2019.
There are no changes in the risk management policies since year end. - Liquidity risk
Compared to year end, there was no material change in the contractual undiscounted cash out flows for financial liabilities. - Fair value estimation
The table below analyses the Group's financial instruments carried at fair value as at 30 June 2020 and 31 December 2019 by level of inputs to valuation techniques used to measure the fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
-
Financial risk factors
HC GROUP INC. Interim Report 2020
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The following table presents the Group's financial assets carried at fair value as at 30 June 2020 and
31 December 2019:
At 30 June 2020 | ||||
Level 1 | Level 2 | Level 3 | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Assets | ||||
Financial assets at fair value | ||||
through other comprehensive | ||||
income | 74,040 | - | - | 74,040 |
Financial assets at fair value | ||||
through profit or loss | - | - | 34,964 | 34,964 |
74,040 | - | 34,964 | 109,004 | |
At 31 December 2019 | ||||
Level 1 | Level 2 | Level 3 | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Assets | ||||
Financial assets at fair value | ||||
through other comprehensive | ||||
income | 65,387 | - | - | 65,387 |
Financial assets at fair value | ||||
through profit or loss | - | - | 43,263 | 43,263 |
65,387 | - | 43,263 | 108,650 |
HC GROUP INC. Interim Report 2020
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There were no transfers between Level 1 and 3 during the period.
-
Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market prices as at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, price services or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. - Financial instruments in level 3
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include the use of quoted market prices and adjusted price-to-book ratio of similar instruments.
The following table represents the changes in level 3 instruments for the periods ended 30 Jun 2020 and 2019:
Financial assets at fair value | |||||
Financial assets at fair value | through other | ||||
through profit or loss | comprehensive income | ||||
2020 | 2019 | 2020 | 2019 | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
At 1 January | 43,263 | 17,498 | - | 32,600 | |
Disposals | - | - | - | (32,600) | |
Fair value changes | |||||
(charged)/credited to | |||||
profit or loss | (8,299) | 30,002 | - | - | |
At 30 June | 34,964 | 47,500 | - | - |
The Group's finance department includes a team that performs and monitors the valuation of financial assets required for financial reporting purposes, including level 3 fair values with assistance of external valuers. This team reports directly to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussion of valuation processes and results are held between the CFO, AC and the valuation team at leave once every half year, in line with the Group's half-yearly reporting dates.
HC GROUP INC. Interim Report 2020
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-
Segment information
The chief operating decision-maker ("CODM") has been identified as the executive directors. The executive directors review the Group's internal report in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The executive directors assess the performance of the operating segments based on a measure of profit/ (loss) before income tax. This measurement basis excludes the effects of non-recurring expenditure from the operating segments.
The Group is organised into the following business segments: - Technology-drivennew retail segment, which mainly includes provision of online advertising services through "zol.com.cn" as well as B2B2C retail business of electronics products by leveraging big data and internet technology through the Group's websites and trading platform.
- Smart industries segment, which mainly includes B2B trading platforms, provision of anti- counterfeiting products and services, and supply chain management service as well as sales and leases of construction equipment.
Since Hunan Zhongmoyun Construction Science and Technology Co., Limited ("Zhongmo") and its subsidiaries (collectively, "Zhongmo Group"), which engages in sales and leases of construction equipment, ceased to be subsidiaries of the Group but accounted as associate using equity method upon its share placement on 26 December 2019. Zhongmo Group's revenue is no longer consolidated as the Group's segment revenue in the 2020 reporting period. - Platform and corporate services segment, which mainly includes the online services provided through "hc360.com", advance marketing services utilising the digital big data and tools, and provision of financing and other services.
- O2O business exhibition centre segment, which mainly includes sales of properties, and provision of properties rental and management services.
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The table below shows the segment information of revenue and results, and there were no sales or other transactions between the business segments for the periods ended 30 June 2020 and 2019.
Unaudited | |||||
six months ended 30 June 2020 | |||||
Platform | O2O | ||||
Technology- | and | Business | |||
driven | Smart | Corporate | Exhibition | ||
New Retail | industries | services | Centre | ||
Segment | Segment | Segment | Segment | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Revenue | 382,773 | 4,520,412 | 83,995 | 7,152 | 4,994,332 |
Interest income from | |||||
financing services | - | - | 68,288 | - | 68,288 |
Total revenue and income (note) | 382,773 | 4,520,412 | 152,283 | 7,152 | 5,062,620 |
Impairment loss on intangible | - | (37,645) | (47,185) | - | (84,830) |
assets | |||||
Segment results | (16,447) | (59,086) | (82,097) | (29,720) | (187,350) |
Other income | 15,154 | ||||
Other gains, net | 4,770 | ||||
Share of post-tax losses of | |||||
associates | (30,758) | ||||
Share of post-tax loss of | |||||
a joint venture | (967) | ||||
Finance income | 11,212 | ||||
Finance cost | (93,392) | ||||
Loss before income tax | (281,331) | ||||
Other information: | |||||
Depreciation and amortisation | 89,865 | ||||
Share-based compensation | 17,339 |
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Unaudited | ||||||
six months ended 30 June 2019 | ||||||
Platform | O2O | |||||
Technology- | and | Business | ||||
driven | Smart | Corporate | Exhibition | |||
New Retail | industries | services | Centre | |||
Segment | Segment | Segment | Segment | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Revenue | 400,882 | 6,110,523 | 386,454 | 10,408 | 6,908,267 | |
Interest income from | ||||||
financing services | - | - | 55,633 | - | 55,633 | |
Total revenue and income (note) | 400,882 | 6,110,523 | 442,087 | 10,408 | 6,963,900 | |
Impairment loss on goodwill | - | (38,426) | (37,776) | - | (76,202) | |
Segment results | (25,749) | (18,005) | (48,755) | (39,134) | (131,643) | |
Other income | 15,440 | |||||
Other gains, net | 30,180 | |||||
Share of post-tax profits of associates | 1,533 | |||||
Finance income | 8,288 | |||||
Finance cost | (83,899) | |||||
Loss before income tax | (160,101) | |||||
Other information: | ||||||
Depreciation and amortisation | 132,716 | |||||
Share-based compensation | 36,545 |
The Group is domiciled in the PRC. For the six months ended 30 June 2020, all revenue is derived from the operation in the PRC from external customers, except for the related party transactions disclosed in note 25 (30 June 2019: same).
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Note: | |||
Disaggregation of revenue | |||
Unaudited | |||
six months ended 30 June | |||
2019 | |||
2020 | |||
RMB'000 | RMB'000 | ||
Timing of revenue recognition | |||
- At a point in time | 4,788,521 | 6,451,912 | |
- Overtime | 191,551 | 316,635 | |
4,980,072 | 6,768,547 | ||
Unaudited | |||
six months ended 30 June | |||
2019 | |||
2020 | |||
RMB'000 | RMB'000 | ||
Revenue from contract with customers: | |||
Sales of goods through B2B trading platform | 4,697,961 | 6,300,823 | |
Online services and advertisement | 169,462 | 273,360 | |
Anti-counterfeiting products and services | 57,946 | 80,705 | |
Marketing events, exhibition, seminars and other services | 51,075 | 108,526 | |
Sales of properties and properties management services | 3,135 | 2,121 | |
Sales of construction equipment | - | 1,356 | |
Others | 493 | 1,656 | |
4,980,072 | 6,768,547 | ||
Income from other sources: | |||
Interest income from financing services | 68,288 | 55,633 | |
Rental income from investment properties | 14,260 | 4,638 | |
Rental income from leasing of construction equipment | - | 135,082 | |
Total revenue and income | 5,062,620 | 6,963,900 |
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-
Other gains, net
Other gains, net, mainly consist of the following:
Unaudited | |||
six months ended 30 June | |||
2019 | |||
2020 | |||
RMB'000 | RMB'000 | ||
Change in fair value on financial assets at | |||
fair value through profit or loss | (8,299) | 30,002 | |
Gains on disposal of subsidiaries (note) | 12,664 | - |
Note:
The amount mainly represents gain on disposal of a wholly-owned subsidiary, Shanghai HuiFa Information Technology Company Limited* (上海慧發信息技術有限公司) ("Huifa"), which is a properties holding company. On 12 May 2020, the Group entered into share purchase agreement with an independent third party, in respect of the disposal of entire interest in Huifa for a cash consideration of RMB50,000,000. The book value of the net assets of Huifa disposed amounted to RMB37,989,000 and resulted in a gain of disposal of a subsidiary amounted RMB12,011,000.
- English name is for translation purpose only.
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8 | Loss before income tax | ||||
The loss before income tax is arrived at after charging: | |||||
Unaudited | |||||
six months ended 30 June | |||||
2019 | |||||
2020 | |||||
RMB'000 | RMB'000 | ||||
Direct expenses of B2B trading platform | 4,660,751 | 6,266,508 | |||
Cost of goods sold for anti-counterfeiting products and services | 29,357 | 42,279 | |||
Cost of properties sold | 1,904 | - | |||
Interest cost for financing services | 3,698 | 7,564 | |||
Agency costs | 4,374 | 18,988 | |||
Amortisation of investment properties (note 13) | 15,476 | 9,129 | |||
Amortisation of intangible assets (note 13) | 46,008 | 50,583 | |||
Depreciation of property, plant and equipment (note 13) | 6,794 | 50,752 | |||
Depreciation of right-of-use assets (note 13) | 21,587 | 22,252 | |||
Employee benefits expenses, including directors' emoluments | 164,028 | 242,319 | |||
Impairment loss on goodwill and intangible assets (note 13) | 84,830 | 76,202 | |||
Marketing and consultancy expenses | 40,157 | 82,465 | |||
Provision for impairment of trade receivables (note 14) | 33,971 | 8,210 | |||
Provision for impairment of loans | 21,085 | ||||
to customers of financing service business | 23,338 | ||||
Provision for impairment of other loans and interest receivables | 5,041 | 13 | |||
Provision for impairment of other financial assets | 15,887 | 950 | |||
Repair and maintenance expense for construction equipment | - | 20,910 | |||
Staff commission | 15,410 | 19,168 | |||
Subcontracting labour fee | - | 78,316 | |||
Transportation expense | 5,810 | 14,335 | |||
Expenses relating to short term leases | 2,231 | ||||
- Short term leases | 2,795 | ||||
- Rental of construction equipment | - | 3,714 | |||
9 | Finance cost, net | ||||
Unaudited | |||||
six months ended 30 June | |||||
2019 | |||||
2020 | |||||
RMB'000 | RMB'000 | ||||
Interest expense: | (44,157) | ||||
- Bank borrowings | (49,422) | ||||
- Other borrowings | (35,304) | (26,275) | |||
- Convertible bonds | (5,976) | (7,386) | |||
- Lease liabilities | (2,430) | (4,746) | |||
- Others | (260) | (2,101) | |||
Finance cost | (93,392) | (84,665) | |||
Amount capitalised on qualifying assets (note) | - | 766 | |||
Finance income | 11,212 | 8,288 | |||
Finance cost, net | (82,180) | (75,611) | |||
Note: No borrowing costs were capitalised during the six months ended 30 June 2020 (30 June 2019: capitalisation rate used to determine the amount of borrowing costs to be capitalised was the weighted average interest rate applicable to the Group's general borrowings during the period was around 6.85%).
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10 | Income tax credit/(expense) | ||||
Unaudited | |||||
six months ended 30 June | |||||
2019 | |||||
2020 | |||||
RMB'000 | RMB'000 | ||||
Current income tax expense | |||||
- Hong Kong profits tax (note i) | - | - | |||
- The PRC corporate income tax ("CIT") (note ii) | (15,918) | (30,988) | |||
- The PRC land appreciation tax (note iii) | (598) | - | |||
Deferred income tax credit | |||||
- The PRC corporate income tax | 30,858 | 21,894 | |||
Income tax credit/(expense) | 14,342 | (9,094) | |||
Income tax expense is recognised based on management's best knowledge of the income tax rates expected for the reporting period.
Note:
- No Hong Kong profits tax has been provided as there is no assessable profits arising in Hong Kong for the period ended 30 June 2020 (30 June 2019: Nil).
-
The PRC CIT represents taxation charged on assessable profits for the period at the rates of taxation prevailing in the cities in the PRC in which the Group operates.
The tax rate applicable to the subsidiaries in the PRC is 25%, except for certain subsidiaries of the Group in the PRC which were approved as High and New Technology Enterprises that subject to a reduced preferential CIT rate of 15% for a 3-year period. Moreover, certain subsidiaries of the Group were subjected to a reduced Preferential CIT rate ranging from 5% to 10% for Small Low- profit Enterprises. - The PRC land appreciation tax is levied at progressive rates of 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures, including land use right and all property development expenditures.
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11 Loss per share | |||||
Unaudited | |||||
six months ended 30 June | |||||
2019 | |||||
2020 | |||||
RMB'000 | RMB'000 | ||||
Loss attributable to equity holders of the Company | (248,564) | (163,964) | |||
Unaudited | |||||
six months ended 30 June | |||||
2019 | |||||
2020 | |||||
Number of | Number of | ||||
shares | shares | ||||
'000 | '000 | ||||
Weighted average number of shares for the purpose of basic and | |||||
diluted loss per share | 1,165,745 | 1,120,562 | |||
Unaudited | |||||
six months ended 30 June | |||||
2020 | 2019 | ||||
Basic loss per share (in RMB) | (0.2132) | (0.1463) | |||
Diluted loss per share (in RMB) | (0.2132) | (0.1463) | |||
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period excluding ordinary shares repurchased by the Company.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertible debt and share options. The convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For the share options, the number of shares that would have been issued assuming the exercise of the share options less the number of shares that could have been issued at fair value (determined as the average market price per share for the period) for the same total proceeds is the number of shares issued for no consideration.
During the period ended 30 June 2020, all of these convertible debt and the share options had anti-dilutive effect to the Company and therefore diluted loss per share is the same as basic loss per share (30 June 2019: same).
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-
Dividends
No dividend was paid or declared by the Company during the period (30 June 2019: Nil). - Property, plant and equipment, investment properties, right-of-use assets and intangible assets
Property, | ||||||
plant and | Investment | Right-of-use | Intangible | |||
equipment | properties | assets | assets | Goodwill | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Opening net book amount | ||||||
as at 1 January 2020 | 64,139 | 770,831 | 214,305 | 1,010,218 | 1,542,408 | |
Additions | 3,386 | - | - | 18 | - | |
Disposals | (420) | (8,761) | - | - | - | |
Disposal of subsidiaries | (95) | (37,596) | - | - | - | |
Impairment (note i) | - | - | - | (84,830) | - | |
Depreciation and | ||||||
amortisation | (6,794) | (15,476) | (21,587) | (46,008) | - | |
Exchange difference | - | - | - | 588 | - | |
Closing net book amount | ||||||
as at 30 June 2020 | 60,216 | 708,998 | 192,718 | 879,986 | 1,542,408 | |
Opening net book amount | ||||||
as at 1 January 2019 | 533,787 | 623,829 | - | 1,148,267 | 1,843,785 | |
Effect on adoption of HKFRS16 | - | - | 259,118 | - | - | |
Additions | 108,221 | - | 5,554 | 291 | - | |
Disposals | (450) | - | - | - | - | |
Impairment | - | - | - | - | (76,202) | |
Depreciation and amortisation | (50,752) | (9,129) | (22,252) | (50,583) | - | |
Exchange difference | - | - | - | 112 | 321 | |
Closing net book amount | ||||||
as at 30 June 2019 | 590,806 | 614,700 | 242,420 | 1,098,087 | 1,767,904 |
As at 30 June 2020, the Group held three properties as investment properties, which are measured at cost.
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The fair value of the investment property of Shunde Household Electrical Appliances Centre was determined by an independent valuer, Vigers Appraisal and Consulting Limited at RMB727,000,000 as at 30 June 2020 (31 December 2019: RMB778,000,000). The fair value of the investment property is derived using the market comparison approach. This valuation method is essentially a mean of valuing the investment properties by assuming sale of each of these properties in its existing state with the benefit of vacant possession. By making reference to sales transactions as available in the relevant market, comparable properties in close proximity have been selected and with adjustments to valuer's interpretation on the difference in factors such as location and property size.
The fair value of other investment properties were determined by another independent valuer, Shenzhen Guoce Real Estate Land Appraisal Co., Ltd., at RMB246,207,000 as at 30 June 2020 (31 December 2019: RMB297,394,000). The fair value of investment properties are derived using the income approach. This valuation method is essentially a mean of valuing the investment properties by discounting cash flow projections based on reliable estimates of future cash flows.
The fair value is valued by independent professionally qualified valuers who hold recognised relevant professional qualifications and have recent experience in the location of the investment property valued.
The Group's finance department includes a team that reviews the valuation performed by the independent valuers for financial reporting purpose. This team reports directly to the Chief Financial Officer (CFO) and the Audit Committee (AC).
At the end of the reporting period, finance department:
- verifies all major inputs to the independent valuation reports;
- assesses property valuations movements when compared to the prior year valuation report; and
- holds discussion with the independent valuers.
The investment properties are leased to tenants under operating leases with rentals payable monthly with no variable lease payments.
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Impairment test for goodwill and other intangible assets
Management monitors and reviews the business performance at the operating segment level. Goodwill are allocated to following cash-generating units ("CGUs") identified.
Unaudited | Audited | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Technology-driven new retail segment | ||
Online services - B2B2C business | 980,247 | 980,247 |
New technology retails solution | 454,720 | 454,720 |
Smart industries segment | ||
Anti-counterfeiting products and services | 50,314 | 50,314 |
Trading services - cotton industry | 21,544 | 21,544 |
Platform and corporate services segment | ||
Financing services | 19,626 | 19,626 |
Electronic appliance e-business | 15,957 | 15,957 |
1,542,408 | 1,542,408 |
The recoverable amounts of the CGUs are determined based on a value-in-use calculation. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering five or ten year periods depending on individual CGU circumstances. Cash flows beyond the five or ten year periods are extrapolated using the estimated terminal growth rate of the CGU. Management estimates the pre-tax discount rate that reflects market assessment of the time value of money and specific risk relating to the industry.
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Note (i) Impairment of intangible assets related to "online services - garment industry" and "integrated marketing and advertising services" CGU.
Management has been reviewing the business development and operations of ZhongFu Holdings Limited ("Zhongfu") and Huijia Yuantian Limited ("Huijia") where the operating environment continued to be very challenging. Due to fierce competition in the e-commerce industry and the outbreak of Coronavirus disease ("COVID-19"), the business transformation plans in these two CGUs cannot be implemented successfully as expected. These factors lead to a substantial decline in revenue of Zhongfu and Huijia during the six months ended 30 June 2020 as compared to the prior financial budget.
As a result, the recoverable amount of these CGUs determined based on the value-in-use calculations was lower than the carrying amount of these CGUs, and resulting in a provision for impairment loss on intangible assets for the online services-garment industry CGU and integrated marketing and advertising services CGU amounting to RMB37,645,000 and RMB47,185,000, respectively.
Note (ii) Impairment test for remaining CGUs
As at 30 June 2020, the directors assessed and reviewed the business performance of the remaining CGUs and considered there were no impairment indicators in relation to their goodwill, intangible assets and other non-financial assets.
14 Trade receivables, contract related assets, deposits, prepayments and other receivables
Unaudited | Audited | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Trade receivables (note a) | 384,151 | 477,227 | |
Less: impairment allowance | (63,984) | (63,529) | |
Trade receivables, net | 320,167 | 413,698 | |
Deposits, prepayments and other receivables (note b) | 796,561 | 490,980 | |
Contract related assets, net (note c) | 33,634 | 22,390 | |
Less: Non-current deposits and prepayments (note b) | 1,150,362 | 927,068 | |
(23,216) | (3,568) | ||
Current portion | 1,127,146 | 923,500 |
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-
Trade receivables
The Group generally grants a credit period ranging from 90 days to 270 days to customers depending on business segment. The aging analysis of the gross trade receivables based on invoice date is as follows:
Unaudited | Audited | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Current to 90 days | 293,196 | 301,627 |
91 to 180 days | 24,503 | 47,678 |
181 to 270 days | 13,095 | 42,664 |
271 to 365 days | 1,851 | 26,999 |
Over 1 year | 51,506 | 58,259 |
384,151 | 477,227 | |
Note: |
Movements in the provision for impairment of trade receivables are as follows:
Unaudited | ||||
six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
At 1 January | 63,529 | 32,427 | ||
Provision for impairment of trade receivables | 33,971 | 8,210 | ||
Write off for impaired trade receivables | (33,516) | (600) | ||
At 30 June | 63,984 | 40,037 |
The carrying amounts of trade receivables approximate their fair values.
Balances are denominated in RMB and there is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers nationally dispersed.
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(b) Deposits, prepayments and other receivables | |||
Audited | |||
Unaudited | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Non-current portion: | |||
- Deposits | 1,603 | 3,568 | |
- Prepayment for acquiring intangible assets | 16,113 | - | |
- Prepayment for acquiring a financial asset | 5,500 | - | |
23,216 | 3,568 | ||
Current portion: | |||
- Deposits | 11,131 | 5,986 | |
- Prepayments | 698,380 | 343,315 | |
- Amount due from an associate | - | 67,120 | |
- Refund receivables from a supplier | 33,752 | 33,752 | |
- Other receivables for disposal of a financial asset at | |||
fair value through other comprehensive income | 12,600 | 17,600 | |
- Other receivables | 17,482 | 19,639 | |
773,345 | 487,412 | ||
796,561 | 490,980 | ||
The fair values are as follows: | |||
Deposits | 12,734 | 9,554 | |
Prepayments | 719,993 | 343,315 | |
Other receivables | 63,834 | 138,111 | |
796,561 | 490,980 | ||
Denominated in: | |||
Hong Kong dollars ("HK$") | 1,219 | 1,862 | |
RMB | 795,342 | 489,118 | |
796,561 | 490,980 |
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(c) | Contract related assets | |||
Audited | ||||
Unaudited | ||||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
Contract assets related to online services and advertisement | 21,259 | 7,428 | ||
Less: impairment allowance | (1,633) | (218) | ||
Contract assets related to online services | ||||
and advertisement, net | 19,626 | 7,210 | ||
Contract assets recognised for costs incurred | ||||
to obtain contract | 14,008 | 15,180 | ||
Contract related assets, net | 33,634 | 22,390 | ||
Note: |
Contract related assets mainly represent revenue arising from online services and advertisement recognised prior to the agreed payment schedule date. Sales commissions and agency fees paid in respect of obtaining subscription revenue has also been capitalised and amortised when the related revenue is recognised.
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15 Loans and interest receivables
Loans and interest receivables represent the outstanding balance of loans granted to customers, employees, associates and joint venture.
Unaudited | Audited | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Loans to customers of financing services business (note) | 1,668,685 | 1,684,983 | |
Loans to employees | 3,885 | 3,885 | |
Loans to associates and a joint venture | 69,831 | 60,867 | |
Interest receivables | 27,717 | 25,443 | |
Loans and interest receivables, gross | 1,770,118 | 1,775,178 | |
Less: impairment allowance | |||
- loans to customers of financing service business (note) | (163,352) | (140,014) | |
- loans to employees | (99) | (31) | |
- loans to associates and a joint venture | (5,417) | (1,006) | |
- interest receivables | (710) | (148) | |
Loans and interest receivables, net | 1,600,540 | 1,633,979 | |
Less: Non-current portion | (47,525) | (42,257) | |
Current portion | 1,553,015 | 1,591,722 |
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Note:
The following analysis only comprises loans granted in financing services business:
(a) | Analysed by nature | |||
Audited | ||||
Unaudited | ||||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
Loans to customers of financing services business | 1,668,685 | 1,684,983 | ||
Less: impairment allowance | (163,352) | (140,014) | ||
1,505,333 | 1,544,969 | |||
(b) | Analysed by type of collateral | |||
Audited | ||||
Unaudited | ||||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
Unsecured loans | 1,159,130 | 1,169,729 | ||
Guaranteed loans | 190,111 | 190,684 | ||
Collateralised loans | 319,444 | 324,570 | ||
Loans to customers of financing service business | 1,668,685 | 1,684,983 | ||
Less: impairment allowance | (163,352) | (140,014) | ||
1,505,333 | 1,544,969 |
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16 | Investments accounted for using equity method | |||
Audited | ||||
Unaudited | ||||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
Associates | 936,087 | 969,248 | ||
Joint venture | 873 | - | ||
936,960 | 969,248 | |||
Movements in the investments in associates are as follows: | ||||
Unaudited | ||||
six months ended 30 June | ||||
2019 | ||||
2020 | ||||
RMB'000 | RMB'000 | |||
At 1 January | 969,248 | 677,808 | ||
Addition | 2,730 | - | ||
Dividends received from an associate | (17,452) | (21,815) | ||
Share of post-tax (losses)/profits of associates | (30,758) | 1,533 | ||
Share of other comprehensive income of an associate | 12,319 | - | ||
At 30 June | 936,087 | 657,526 | ||
Movements in the investment in a joint venture are as follows: | ||||
Unaudited | ||||
six months ended 30 June | ||||
2019 | ||||
2020 | ||||
RMB'000 | RMB'000 | |||
At 1 January | - | - | ||
Addition | 1,840 | - | ||
Share of post-tax loss of a joint venture | (967) | - | ||
At 30 June | 873 | - |
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Set out below are the summarised financial information of the associates and joint venture which, in the opinion of directors, are material to the Group and are accounted for using equity method. The associates and joint venture as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group; the country of establishment or registration are also their principal place of business.
% of | ||||||
effective | ||||||
interest | Carrying amount | |||||
30 June 2020 | ||||||
Place of | Unaudited | Audited | ||||
and | Nature | |||||
Name of entity | business/country31 December | of the | Measurement | 30 June | 31 December | |
of establishment | 2019 | relationship method | 2020 | 2019 | ||
Hui De Jia Mei Technology | PRC | 12.0 | Associate | Equity method | 16,227 | 18,122 |
Co., Ltd.* | (note i) | |||||
("慧德嘉美科技有限公司") | ||||||
Zhejiang Huicong Investment | PRC | 29.6 | Associate | Equity method | 35,813 | 35,740 |
Co., Ltd* | (note ii) | |||||
("浙江慧聰投資有限公司") | ||||||
Inner Mongolia Hohhot Jingu | PRC | 9.8 | Associate | Equity method | 553,076 | 573,908 |
Rural Commercial Bank | (note iii) | |||||
Company Limited* | ||||||
("內蒙古呼和浩特金谷農村 | ||||||
商業銀行有限公司") | ||||||
Hunan Zhongmoyun | PRC | 36.1 | Associate | Equity method | 284,143 | 296,371 |
Construction Science and | (note iv) | |||||
Technology Co., Limited* | ||||||
("湖南中模雲建築科技有限 | ||||||
公司") |
- English names are translated for identification purpose only
Note i Hui De Jia Mei Technology Co., Ltd* ("Hui De") provides investment management and project investments in the PRC. The Group holds 60% equity interest of Huicong (Tianjin) E-commerce Investment Company Limited* ("慧聰（天津）電子商務產業投資有限公司"), a subsidiary of the Group, which in turn holds 20% equity interest in Hui De.
Note ii Zhejiang Huicong Investment Co., Limited* ("Zhejiang HC") engages in investment in real estate construction and management. The Group directly holds 20% equity interest of Zhejiang HC and indirectly holds 9.6% equity interest through Hui De. Hence, the Group effectively holds 29.6% equity interest in Zhejiang HC.
Note iii The Group directly holds 9.8% equity interest of Inner Mongolia Hohhot Jingu Rural Commercial Bank Company Limited ("Jingu"), which provides products and services on bank deposits, loans and advances in PRC and other business approved by the China Banking Regulatory Commission. During the six months ended 30 June 2020, the Group received dividends from Jingu amounting to RMB17,452,000.
Note iv Zhongmo engages in sales and leases of construction equipment. On 26 December 2019, Zhongmo completed its share placement to an independent third party in which the Group's equity interest in Zhongmo was diluted from 36.8% to 36.1%, and no longer be able to control but continue to exercise significant influence over Zhongmo. Upon completion, Zhongmo Group has then been accounted for as investment in associates using the equity method of accounting.
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17 Financial assets at fair value through profit or loss and other comprehensive income
Financial assets at fair value | |||||
Fair value through | through other | ||||
profit or loss | comprehensive income | ||||
Unaudited | Audited | Unaudited | Audited | ||
30 June | 31 December | 30 June | 31 December | ||
2020 | 2019 | 2020 | 2019 | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Contingent shares in relation to | |||||
acquisition of Huijia | 14,549 | 22,671 | - | - | |
Trading securities - listed securities | - | - | 74,040 | 65,387 | |
Equity investment - unlisted securities | 20,415 | 20,592 | - | - | |
Less: Non-current portion | 34,964 | 43,263 | 74,040 | 65,387 | |
(20,415) | (20,592) | (74,040) | (65,387) | ||
Current portion | 14,549 | 22,671 | - | - |
As at 30 June 2020, the fair value of the contingent consideration was RMB14,549,000 (31 December 2019: RMB22,671,000). The change in the fair value of RMB8,122,000 for the period was charged to "other gains, net" in the condensed consolidated statement of comprehensive income.
For the fair value estimation of the financial assets at fair value, please refer to note 5.3.
18 | Contract liabilities | ||
Audited | |||
Unaudited | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Contract liabilities related to online services and advertisement | 121,880 | 125,371 | |
Contract liabilities related to sales of goods on B2B trading platform | 451,807 | 215,993 | |
Contract liabilities related to sales of properties and | |||
properties management services | 84,810 | 69,623 | |
658,497 | 410,987 | ||
Note: |
Contract liabilities mainly represent advance payments received from customers related to online services and advertisement, B2B trading platform, sales of properties and properties management services.
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19 | Trade payables, accrued expenses and other payables | ||
Audited | |||
Unaudited | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Trade payables (note a) | 238,686 | 128,209 | |
Accrued salaries and staff benefits | 24,949 | 32,518 | |
Accrued agency commission | 12,361 | 15,432 | |
Accrued expenses | 61,020 | 38,101 | |
Deposits from customers | 34,503 | 37,485 | |
Other payables | 22,009 | 7,015 | |
393,528 | 258,760 |
- Trade payables
The aging analysis of the trade payables based on invoice date is as follows:
Unaudited | Audited | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Current to 90 days | 230,269 | 115,752 |
91 to 180 days | 4,120 | 9,984 |
181 to 365 days | 2,011 | 2,473 |
Over 1 year | 2,286 | - |
238,686 | 128,209 |
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20 | Borrowings | ||
Audited | |||
Unaudited | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Non-current portion: | |||
Bank borrowings | 426,250 | 480,000 | |
Other borrowings | 24,090 | 23,539 | |
450,340 | 503,539 | ||
Current portion: | |||
Bank borrowings | 1,070,766 | 1,111,089 | |
Other borrowings | 718,374 | 689,773 | |
1,789,140 | 1,800,862 | ||
Total borrowings | 2,239,480 | 2,304,401 |
Bank borrowings bear average interest rate of 6.26% per annum (31 December 2019: 6.69% per annum), mature ranging from 2020 to 2022 part of which amounting to RMB554,000,000 (31 December 2019: RMB730,000,000) are secured by properties, investment properties and right-of-use assets, with a total carrying value amounting to RMB779,087,000 (31 December 2019: RMB979,310,000). Other bank borrowings amounting to RMB358,500,000 (31 December 2019: RMB248,500,000) are secured by restricted bank deposits with carrying amount of RMB407,833,000 (31 December 2019: RMB282,171,000).
Other borrowings with a total principal amount of RMB27,816,000 (31 December 2019: RMB27,816,000) were provided by a non-controlling shareholder of a subsidiary, in which 25% of its equity interest is effectively held by Mr. Liu Jun, an executive director of the Company. These borrowings are unsecured, mature ranging from 2020 to 2023 and bear average interest rate of 6.34% per annum (31 December 2019: 6.34% per annum). During the period ended 30 June 2020, the corresponding interest expenses was approximately RMB882,000 (30 June 2019: RMB882,000).
Other borrowings with a total principal amount of RMB230,000,000 (31 December 2019: RMB200,000,000) were provided by an independent third party with maturity dates on July 2020, November 2020 and May 2021. These borrowings are interest-free and secured by certain equity shares of a subsidiary.
The remaining other borrowings are provided by independent third parties and bear interest rate ranging from 4.4% to 14.3% per annum (31 December 2019: 4.4% to 14.3% per annum). Out of these other borrowings, RMB419,327,000 (31 December 2019: RMB442,218,000) are either guaranteed by the executive directors or non-executive director of the Group and secured by certain inventories, right-of-use assets, listed equity shares held by the Group and the equity shares of certain subsidiaries (31 December 2019: same).
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The table below summarises the maturity analysis of bank and other borrowings based on agreed scheduled repayments set out in the loan agreements:
Bank borrowings | Other borrowings | |||
Unaudited | Audited | Unaudited | Audited | |
30 June | 31 December | 30 June | 31 December | |
2020 | 2019 | 2020 | 2019 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Within 1 year | 1,070,766 | 1,111,089 | 718,374 | 689,773 |
Between 1 and 2 years | 392,500 | 400,000 | - | - |
Between 2 and 4 years | 33,750 | 80,000 | 24,090 | 23,539 |
1,497,016 | 1,591,089 | 742,464 | 713,312 |
As at 30 June 2020, the Group has no undrawn banking facilities (31 December 2019: Nil).
21 Convertible bond
The Company issued the convertible bond at a coupon rate of 2.85% plus HIBOR to Chance Talent Management Limited (the "bondholder"), an independent third party, on 3 December 2018.
On 31 December 2019, the Group had entered in an amendment agreement with the bondholder to adjust the conversion price from HK$6.00 to HK$4.50, subject to the completion of the conditions precedent under the amendment agreement, which had been completed on 23 April 2020, and hence effective.
On 20 May 2020, the Company issued new shares through share placement. Pursuant to the terms and conditions of the original agreement, as a result of the placement, the conversion price of the convertible bond was then adjusted from HK$4.50 to approximately HK$4.445 with effect on the same date.
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22 | Share capital | ||
Number of | |||
ordinary | |||
shares | Par value | ||
RMB'000 | |||
At 1 January 2020 | 1,120,552,210 | 103,638 | |
Insurance of new shares in relation to the placement (note i) | 200,000,000 | 18,310 | |
Exercise of share options (note ii) | 288,000 | 26 | |
At 30 June 2020 | 1,320,840,210 | 121,974 | |
At 1 January 2019 | 1,120,402,210 | 103,625 | |
Exercise of share options | 450,000 | 39 | |
At 30 June 2019 | 1,120,852,210 | 103,664 |
The total authorised number of ordinary shares is 2,000,000,000 shares (31 December 2019: 2,000,000,000
shares) with a par value of HK$0.1 per share (31 December 2019: HK$0.1 per share). All issued shares are fully paid.
The total number of issued shares of the Company were 1,320,840,210 shares as at 30 June 2020 (31 December 2019: 1,120,552,210 shares).
Note i On 20 May 2020, the Company issued 200,000,000 shares by placing to two independent third parties, Ideal South Limited and Fortune Value Investment Holdings Limited, at a price of HK$1.2 per share. The proceeds net of transaction costs, amounted to approximately HK$238,500,000 (equivalent to RMB218,426,000). The placement resulted in an increase of share capital and share premium by approximately RMB18,310,000 and RMB200,116,000, respectively.
Note ii During the six months ended 30 June 2020, 288,000 shares of the Company were issued upon exercise of share options under the share option scheme of the Company at exercise price ranging from HK$0.82 to HK$1.108, and resulted in approximately RMB26,000 increase in share capital and RMB214,000 increase in share premium.
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-
Share options
During the period ended 30 June 2020, 288,000 share options were exercised (30 June 2019: 450,000 share options).
Movements in the number of share options outstanding and their exercise prices are as follows:
2020 | 2019 | ||||
Exercise | Exercise | ||||
price in HK$ | Share | price in HK$ | Share | ||
per share | options | per share | options | ||
At 1 January | 0.82 | 188,000 | 0.82 | 1,438,000 | |
1.108 | 200,000 | 1.108 | 200,000 | ||
4.402 | 1,500,000 | 4.402 | 1,500,000 | ||
9.84 | 3,380,000 | 9.84 | 9,972,000 | ||
6.476 | 29,930,000 | 6.476 | 29,930,000 | ||
4.6 | 40,150,000 | 4.6 | 36,000,000 | ||
Granted | 0.82 | - | 0.82 | - | |
1.108 | - | 1.108 | - | ||
4.402 | - | 4.402 | - | ||
9.84 | - | 9.84 | - | ||
6.476 | - | 6.476 | - | ||
4.6 | - | 4.6 | 10,000,000 | ||
Lapsed, forfeited or exercised | 0.82 | (188,000) | 0.82 | (1,250,000) | |
1.108 | (100,000) | 1.108 | - | ||
4.402 | - | 4.402 | - | ||
9.84 | - | 9.84 | (6,592,000) | ||
6.476 | - | 6.476 | - | ||
4.6 | (1,666,500) | 4.6 | (5,850,000) | ||
At 30 June 2020 and 31 | |||||
December 2019 | 0.82 | - | 0.82 | 188,000 | |
1.108 | 100,000 | 1.108 | 200,000 | ||
4.402 | 1,500,000 | 4.402 | 1,500,000 | ||
9.84 | 3,380,000 | 9.84 | 3,380,000 | ||
6.476 | 29,930,000 | 6.476 | 29,930,000 | ||
4.6 | 38,483,500 | 4.6 | 40,150,000 |
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Share options | |||||
Exercise | Unaudited | Exercise | Audited | ||
price in HK$ | 30 June | price in HK$ | 31 December | ||
Expiry date | per share | 2020 | per share | 2019 | |
7 April 2020 | 0.82 | - | 0.82 | 188,000 | |
27 | March 2021 | 1.108 | 100,000 | 1.108 | 200,000 |
3 April 2023 | 4.402 | 1,500,000 | 4.402 | 1,500,000 | |
18 | November 2023 | 9.84 | 3,380,000 | 9.84 | 3,380,000 |
13 | October 2027 | 6.476 | 29,930,000 | 6.476 | 29,930,000 |
19 | July 2028 | 4.6 | 28,650,000 | 4.6 | 30,150,000 |
20 | June 2029 | 4.6 | 9,833,500 | 4.6 | 10,000,000 |
- Share Award Scheme
The following table represents the movements for number of unvested shares under the Share Award Scheme for the periods ended 30 June 2020 and 2019.
Number | ||
of shares | ||
(in thousand | ||
unit) | ||
At 1 January 2020 | 19,195 | |
Shares purchased from the market | 7,184 | |
Share vested during the period | (7,526) | |
At 30 June 2020 | 18,853 | |
At 1 January 2019 | 13,000 | |
Share vested during the period | (1,920) | |
At 30 June 2019 | 11,080 |
23 Deferred income tax
The net movements of the deferred income tax account is as follows:
Unaudited | ||||
six months ended 30 June | ||||
2019 | ||||
2020 | ||||
RMB'000 | RMB'000 | |||
At 1 January | (189,549) | (242,808) | ||
Credited to profit or loss | 18,133 | 21,894 | ||
Reversal of temporary differences upon impairment | 12,725 | - | ||
Charged to other comprehensive income | (1,428) | (377) | ||
At 30 June | (160,119) | (221,291) | ||
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24 | Other reserves | |||||||||||
Financial | ||||||||||||
Share and | assets at | |||||||||||
Share-based | fair value | |||||||||||
Share | Convertible | Others | Merger | capital | Share held | through other | ||||||
compensation | redemption | Exchange | for share | comprehensive | ||||||||
premium | bond reserve | reserve | reserve | reserves | reserve | reserve | award scheme | income reserve | Total | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
At 1 January 2020 | 2,663,038 | 12,359 | 192,832 | 109,817 | 260,598 | 1,689 | 21,672 | (100,018) | (9,040) | 3,152,947 | ||
Insurance of new shares in relation | 200,116 | - | - | - | - | - | - | - | - | 200,116 | ||
to the placement (note 22) | ||||||||||||
Exercise of share options (note 22) | 214 | - | - | - | - | - | - | - | - | 214 | ||
Share-based compensation | - | - | - | - | 17,339 | - | - | - | - | 17,339 | ||
Share purchased under share | - | - | - | - | - | - | - | (8,301) | - | (8,301) | ||
award scheme | ||||||||||||
Vesting of awarded share | (39,883) | - | - | - | (23,369) | - | - | 63,252 | - | - | ||
Fair value gain on financial assets | ||||||||||||
at fair value through other | ||||||||||||
comprehensive income, net of | - | - | - | - | - | - | - | - | 18,415 | 18,415 | ||
deferred tax | ||||||||||||
Transaction with non-controlling | - | - | (8,511) | - | - | - | - | - | - | (8,511) | ||
interests | ||||||||||||
Currency translation differences | - | - | - | - | - | - | (2,725) | - | - | (2,725) | ||
At 30 June 2020 | 2,823,485 | 12,359 | 184,321 | 109,817 | 254,568 | 1,689 | 18,947 | (45,067) | 9,375 | 3,369,494 | ||
Financial | ||||||||||||
Share and | assets at | |||||||||||
Share-based | fair value | |||||||||||
Share | Convertible | Others | Merger | capital | Share held | through other | ||||||
compensation | redemption | Exchange | for share | comprehensive | ||||||||
premium | bond reserve | reserve | reserve | reserves | reserve | reserve | award scheme | income reserve | Total | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
At 1 January 2019 | 2,668,590 | 15,723 | 197,382 | 109,817 | 188,330 | 1,592 | 18,159 | (90,588) | (16,856) | 3,092,149 | ||
Exercise of share options | 279 | - | - | - | - | - | - | - | - | 279 | ||
Buy-back of shares | - | - | - | - | - | (3,034) | - | - | - | (3,034) | ||
Share-based compensation | - | - | - | - | 36,545 | - | - | - | - | 36,545 | ||
Vesting of awarded share | (392) | - | - | - | (8,609) | - | - | 9,001 | - | - | ||
Fair value gain on financial assets | ||||||||||||
at fair value through other | ||||||||||||
comprehensive income, net of | ||||||||||||
deferred tax | - | - | - | - | - | - | - | - | 1,822 | 1,822 | ||
Transaction with non-controlling | ||||||||||||
interests | - | 7,350 | - | - | - | - | - | 7,350 | ||||
Currency translation differences | - | - | - | - | - | - | (4,657) | - | - | (4,657) | ||
At 30 June 2019 | 2,668,477 | 15,723 | 204,732 | 109,817 | 216,266 | (1,442) | 13,502 | (81,587) | (15,034) | 3,130,454 |
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25 Related party transactions
-
Key management compensation
The remuneration of directors and other members of key management during the period were as follows:
Unaudited | |||
six months ended 30 June | |||
2019 | |||
2020 | |||
RMB'000 | RMB'000 | ||
Salaries and other short-term employee benefits | 3,063 | 4,443 | |
Share-based compensation | 20,124 | 29,929 | |
23,187 | 34,372 |
- Related party transaction
Other than those disclosed elsewhere in the condensed consolidated interim financial statements, transactions were carried out with related parties in normal course of Group's business.
Unaudited | ||||
six months ended 30 June | ||||
2019 | ||||
Nature of transactions | 2020 | |||
RMB'000 | RMB'000 | |||
Associates (note i and ii) | Interest expense | 20,705 | 19,145 | |
Interest income | 9,873 | 1,802 |
Note:
- Bank borrowings of RMB552,000,000 were provided by Jingu. These borrowings are charged at terms mutually agreed by the parties concerned or in accordance with the terms of the underlying agreements, where appropriate.
- The Group has granted loans and finance lease receivables to certain associates. These loans and finance lease receivables are charged at terms mutually agreed by the parties concerned or in accordance with the terms of the underlying agreements, where appropriate.
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-
Related party balance
Saved as disclosed in the condensed consolidated interim financial statements, the Group has the following balances with related parties as at 30 June 2020 and 31 December 2019, respectively.
Unaudited | Audited | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Bank borrowings from an associate and | ||
its interest payable (note i) | 553,045 | 564,250 |
Loans and interest receivables from associates and a joint | ||
venture (note ii) | 81,508 | 75,275 |
Deposits received from: | ||
- Associates (note iii) | 607 | 607 |
- Key management personnel (note iii) | 2,440 | 2,440 |
Cash and cash equivalents from an associate (note iv) | 2,036 | 496 |
Finance lease receivables from associates (note v) | 258,383 | 182,600 |
Notes: |
- The balance represents bank borrowings from Jingu. Part of the borrowings with principal amounting to RMB222,000,000 (31 December 2019: RMB228,000,000) will mature on 20 October 2020, and is interest bearing at a rate of 7.1% per annum (31 December 2019: 7.1% per annum). Remaining borrowings with principal amounting to RMB330,000,000 (31 December 2019: RMB335,000,000) will mature on 15 October 2021, and is interest bearing at a rate of 7.4%per annum (31 December 2019: 7.4% per annum). These borrowings are guaranteed by another associate of the Group.
- The Group granted loans with principal amounting to RMB20,800,000, RMB20,800,000 and RMB5,940,000 to Hui De during the years ended 31 December 2014, 2015 and 2016, respectively. The loans will mature during the years ending 31 December 2022, 2020 and 2022 respectively, and are interest bearing at a rate of 7%, 7% and 6% per annum. In addition, the Group also granted loans with principal amounting RMB10,500,000 to Zhongmo Group. The loan will mature in the second half of 2020 and are interest bearing at rate of 10% per annum.
- The balance includes deposits received by a financing services company of the Group from certain associates and key management personnel of the Company as guarantee for the loan granted to their customers.
- The balance represents current bank deposits placed in Jingu.
- The balance represents finance lease receivables of RMB187,000,000 (31 December 2019: RMB139,600,000) from Zhongmo Group, which will mature in 2021 and are interest bearing at rate of 10% per annum. Another finance lease receivable of RMB43,000,000 (31 December 2019: RMB43,000,000) from Zhejiang HC, which will mature in 2022 and are interest bearing at rate of 8% per annum.
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-
Contingent liabilities
As at 30 June 2020, there were no material contingent liabilities to the Group (31 December 2019: Nil). - Commitments under operating lease
-
As a lessor
At 30 June 2020, the Group had future aggregate minimum lease receivables under non-cancellable operating leases in respect of offices and buildings which expire as follows:
-
As a lessor
Unaudited | Audited | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Within one year | 44,000 | 22,171 |
In the second to fifth year inclusive | 174,294 | 142,843 |
Over the fifth year | 306,853 | 348,000 |
525,147 | 513,014 |
28 Financial Guarantee
The Group has arranged bank financing for certain purchasers of the Group's property units and provided guarantees to secure obligations of such purchasers for repayments. Such guarantees terminate upon the earlier of (i) issuance of the real estate ownership certificate which will generally be available within an average period of two to three years upon the completion of guarantee registration; or (ii) the satisfaction of mortgaged loan by the purchasers of properties.
Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and the Group is entitled to take over the legal title and possession of the related properties. The Group's guarantee period starts from the dates of grant of the mortgages. As at 30 June 2020, the amounts of outstanding guarantees for mortgages were approximately RMB13,549,000 (31 December 2019: RMB16,828,000).
The directors consider that the likelihood of default in payments by purchasers is minimal and therefore the financial guarantees measured at fair value is immaterial.
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DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS
As at 30 June 2020, the interests and short positions of the Directors and the chief executive in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the "SFO")) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO) or required to be entered in the register maintained by the Company pursuant to Section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Issuers (the "Model Code") contained in the Listing Rules, were as follows:
- Directors' and chief executive's long positions in the shares of the Company ("Shares")
Total | Percentage of | ||||||||
Name of | Class of | Personal | Family | Corporate | Other | number of | shareholding | ||
Director | Shares | Capacity | interests | interests | interests | interests | Shares | (approximate) | |
Liu Jun | Ordinary | Beneficial owners | 80,150,000 | - | - | - | 80,150,000 | 6.07% | |
(Note 1) | (Note 1) | ||||||||
Zhang Yonghong | Ordinary | Beneficial owners | 13,933,500 | - | - | - | 13,933,500 | 1.05% | |
(Note 2) | (Note 2) | ||||||||
Liu Xiaodong | Ordinary | Beneficial owners and | 6,000,000 | - | 62,273,794 | - | 68,273,794 | 5.17% | |
Interest of controlled | (Note 3) | (Note 3) | (Note 3) | ||||||
corporation | |||||||||
Guo Fansheng | Ordinary | Beneficial owners | 57,749,015 | - | - | - | 57,749,015 | 4.37% | |
(Note 4) | (Note 4) | ||||||||
Li Jianguang | Ordinary | Interest of controlled | - | - | 32,000,384 | - | 32,000,384 | 2.42% | |
corporation | (Note 5) | (Note 5) |
Notes:
- Such interests in the Company comprise: (i) 50,220,000 Shares, of which 44,870,000 Shares have been provided as security to Chance Talent Management Limited for the Notes and the 2018 Convertible Bonds and (ii) 29,930,000 underlying Shares derived from the options held by Mr. Liu Jun.
- Such interests in the Company comprise: (i) 100,000 Shares; (ii) 4,000,000 underlying Shares derived from the awarded shares granted to Mr. Zhang Yonghong under the employees' share awarded scheme adopted on 17 November 2011 and (iii) 9,833,500 underlying Shares derived from the options held by Mr. Zhang Yonghong.
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- Such interests in the Company comprise: (i) 4,000,000 underlying Shares from the options held by Mr. Liu Xiaodong; (ii) 2,000,000 underlying Shares derived from the awarded shares granted to Mr. Liu Xiaodong under the employees' share awarded scheme adopted on 17 November 2011 and
- 62,273,794 Shares held by Wisdom Limited (a company wholly and beneficially owned by Mr. Liu Xiaodong) which have been provided as security to Chance Talent Management Limited for the Notes and the 2018 Convertible Bonds. Mr. Liu Xiaodong is deemed, or taken to have, interested in all the Shares held by Wisdom Limited pursuant to the SFO.
- Such interest in the Company comprises:
- 35,000,000 Shares (long position) held by Mr. Guo Fansheng; and
- 22,749,015 Shares (long position) held by a trustee of a trust of which Mr. Guo Fansheng is a founder of a discretionary trust who can influence how the trustee exercise his discretion.
- The references to 32,000,384 Shares relate to the same block of shares of the Company held by Venture Profits Holdings Limited, the entire share capital of which is held by Malvern PTC Limited, a trustee of a trust of which Mr. Li Jianguang is a founder of a discretionary trust who can influence how the trustee exercise his discretion. Accordingly, Mr. Li Jianguang is deemed, or taken to have, interested in the said 32,000,384 Shares pursuant to the SFO.
Save as disclosed above, none of the Directors and chief executive of the Company has any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provision of the SFO) or required to be entered in the register maintained by the Company pursuant to section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code.
SHARE OPTION SCHEMES
Pursuant to written resolutions of the shareholders of the Company dated 30 November 2003, among others, a share option scheme (the "Share Option Scheme") was adopted by the Company. The principal terms of the Share Option Scheme were summarised in the paragraph headed "Share options" under the section headed "Statutory and General Information" in Appendix V of the prospectus of the Company dated 8 December 2003. Following the listing of the Shares being transferred from the Growth Enterprise Market (now known as GEM) to the Main Board of the Stock Exchange on 10 October 2014, the Share Option Scheme adopted by the Company was terminated on 10 October 2014. Notwithstanding the termination of the Share Option Scheme, the outstanding options under the Share Option Scheme shall continue to be valid and exercisable in accordance with the Share Option Scheme.
On 22 May 2015, a new share option scheme was approved by the shareholders of the Company (the "2015 Share Option Scheme"). The principal terms of the 2015 Share Option Scheme were summarised in the Appendix of the circular of the Company dated 5 May 2015.
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OUTSTANDING SHARE OPTIONS
Share Option Scheme
As at 30 June 2020, options to subscribe for an aggregate of 73,393,500 Shares granted pursuant to the Share Option Scheme and the 2015 Share Option Scheme were outstanding, details of which were as follows:
Number of share options | ||||||||
Exercise | As at | Granted | Exercised | Lapsed | As at | |||
price | 1 January | during | during | during | 30 June | |||
Name of grantee | Date of grant | per share | 2020 | the Period | the Period | the Period | 2020 | |
HK$ | (Note 1) | |||||||
Directors | ||||||||
Liu Jun (Note 14) | 13 | October 2017 | 6.476 | 29,930,000 | 29,930,000 | |||
Zhang Yonghong (Note 14) | 20 | June 2019 | 4.6 | 10,000,000 | (166,500) | 9,833,500 | ||
Liu Xiaodong (Note 14) | 19 | July 2018 | 4.6 | 4,000,000 | 4,000,000 | |||
Senior management | ||||||||
Wu Lei (Note 14) | 19 | July 2018 | 4.6 | 3,500,000 | 3,500,000 | |||
Song Bingchern (Note 14) | 19th July 2018 | 4.6 | 3,000,000 | 3,000,000 | ||||
Zhao Hong (Note 14) | 19th July 2018 | 4.6 | 1,550,000 | 1,550,000 | ||||
Other employees | ||||||||
In aggregate (Note 13, 16) | 7 April 2010 | 0.82 | 188,000 | (188,000) | 0 | |||
In aggregate (Note 2, 13, 17) | 28 | March 2011 | 1.108 | 200,000 | (100,000) | 100,000 | ||
In aggregate (Note 13) | 3 April 2013 | 4.402 | 1,500,000 | 1,500,000 | ||||
In aggregate (Note 3, 13) | 18 | November 2013 | 9.84 | 3,380,000 | 3,380,000 | |||
In aggregate (Note 4, 14) | 19 | July 2018 | 4.6 | 18,100,000 | (1,500,000) | 16,600,000 | ||
Total | 75,348,000 | 0 | (288,000) | (1,666,500) | 73,393,500 |
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Notes:
-
Each option has a 10-year exercise period, which may be exercised after the expiry of twelve months from the date of the grant of options.
For the options exercisable at HK$0.82 granted on 7 April 2010, the relevant grantees may exercise options up to 50% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first and second anniversaries of the date of the grant of options.
For the options exercisable at HK$1.108 granted on 28 March 2011, the relevant grantees may exercise options up to 50% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first and second anniversaries of the date of the grant of options.
For the options exercisable at HK$9.84 granted on 18 November 2013, the relevant grantees may exercise options up to 10%, 20%, 40%, 70% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first, second, third, fourth and fifth anniversaries of the date of the grant of options.
For the options exercisable at HK$6.476 granted on 13 October 2017, the relevant grantees may exercise options up to 20%, 40%, 60%, 80% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first, second, third, fourth and fifth anniversaries of the date of the grant of options.
For the options exercisable at HK$4.60 granted on 19 July 2018, the relevant grantees may exercise options up to 33.3%, 66.6% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first, second and third anniversaries of the date of the grant of options.
For the options exercisable at HK$4.60 granted on 20 June 2019, the relevant grantees may exercise options up to 33.3%, 66.6% and 100%, respectively, of the Shares comprised in his option (less any number of shares of the Company in respect of which the option has been previously exercised), commencing from the first, second and third anniversaries of the date of the grant of options. - 1 employee has been granted options under the Share Option Scheme to subscribe an aggregate of 100,000 Shares at HK$1.108 per Share.
- 16 employees have been granted options under the Share Option Scheme to subscribe an aggregate of 3,380,000 Shares at HK$9.84 per Share.
- 11 employees have been granted options under the 2015 Share Option Scheme to subscribe an aggregate of 16,600,000 Shares at HK$4.6 per Share.
- The fair value of options granted under the Share Option Scheme on 7 April 2010, determined using the Binomial Model valuation model, was approximately RMB12,527,000. The significant inputs into the model were exercise price of HK$0.82 standard deviation of expected share price returns of 79.8%, expected life of options ranging from 3.4 to 5.9 years expected dividend paid out rate of 0% and annual risk-free interest rate of 2.865%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
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- The fair value of options granted under the Share Option Scheme on 28 March 2011, determined using the Binomial Model valuation model, was approximately RMB1,377,000. The significant inputs into the model were exercise price of HK$1.108 standard deviation of expected share price returns of 77.4%, expected life of options ranging from 3.8 to 4.9 years expected dividend paid out rate of 0% and annual risk-free interest rate 2.82%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
- The fair value of options granted under the Share Option Scheme on 3 April 2013, determined using the Binomial Model valuation model, was approximately RMB3,754,000. The significant inputs into the model were exercise price of HK$4.402 standard deviation of expected share price returns of 75%, expected life of options ranging from 9.1 to 9.6 years expected dividend paid out rate of 0% and annual risk-free interest rate 1.111%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
- The fair value of options granted under the Share Option Scheme on 18 November 2013, determined using the Binomial Model valuation model, was approximately RMB50,125,000. The significant inputs into the model were exercise price of HK$9.84 standard deviation of expected share price returns of 71.5%, expected life of options ranging from 4.7 to 7.9 years expected dividend paid out rate of 0% and annual risk-free interest rate 1.915%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
- The fair value of options granted under the 2015 Share Option Scheme on 13 October 2017, determined using the Binomial Model valuation model, was approximately RMB100,356,000. The significant inputs into the model were exercise price of HK$6.476 standard deviation of expected share price returns of 62%, expected life of options 4.9 years expected dividend paid out rate of 0.9% and annual risk-free interest rate 1.745%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
- The fair value of options granted under the 2015 Share Option Scheme on 19 July 2018, determined using the Binomial Model valuation model, was approximately RMB70,258,000. The significant inputs into the model were exercise price of HK$4.6 standard deviation of expected share price returns of 70%, expected life of options 10 years expected dividend paid out rate of 0% and annual risk-free interest rate 2.13%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.
- In respect of employees resigned during the Period whose options have not been vested, such options are lapsed, and the share compensation costs recognised previously are credited to condensed consolidated final statement of comprehensive income.
- The values of options recognised in share-based compensation reserves are subject to a number of assumptions and with regard to the limitation of the valuation model.
- The options were granted under the Share Option Scheme.
- The options were granted under the 2015 Share Option Scheme.
- The weighted average closing price of the Shares immediately before the date on which these options were exercised was approximately HK$1.61 per Share.
- The closing price of the securities immediately before the date on which the options were granted as quoted on the Stock Exchange was HK$0.82 per Share.
- The closing price of the securities immediately before the date on which the options were granted as quoted on the Stock Exchange was HK$1.10 per Share.
Save as disclosed, no options were granted, lapsed or cancelled during the Period.
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EMPLOYEES' SHARE AWARD SCHEME
On 17th November 2011, the Board adopted an employees' share award scheme (the "Employees' Share Award Scheme) pursuant to which existing shares of the Company will be acquired by the trustee from the market at the cost of the Company and be held in trust for the selected employees until such shares are vested with the relevant selected employees in accordance with the provision of the Employees' Share Award Scheme. For principal terms of the employees' Employees' Share Award Scheme, please refer to the announcement of the Company dated 17th November 2011.
On 8 July 2019, after the approval of the Renewed Scheme Limit and pursuant to the Scheme, the Board resolved to grant an aggregate of 28,100,000 Shares, representing approximately 2.51% of the total issued share capital of the Company as at the date of the grant, to 26 selected employees, of which 4,000,000 Shares were granted to Mr. Zhang Yonghong, an executive Director and chief executive officer of the Company, and 2,000,000 Shares were granted to Mr. Liu Xiaodong, an executive Director and president of the Company, subject to the vesting periods and conditions of the grant of the Awarded Shares.
Since the adoption date, a total of 74,981,000 shares has been granted up to the date of this report, representing approximately 5.72% of the issued share capital of the Company as at the date of this report. The awarded Shares that remain outstanding as at 30 June 2020 are set out below:
As at | Granted | Vested | As at | ||
1 January | during | during | 30 June | ||
Name of Grantee | Date of grant | 2020 | the period | the period | 2020 |
Director | |||||
Zhang Yonghong | 8 July 2019 | 4,000,000 | 4,000,000 | ||
Liu Xiaodong | 8 July 2019 | 2,000,000 | 2,000,000 | ||
Senior management | |||||
Wu Lei | 8 July 2019 | 1,800,000 | (720,000) | 1,080,000 | |
Song Bingchen | 8 July 2019 | 1,800,000 | 1,800,000 | ||
Zhao Hong | 8 July 2019 | 1,500,000 | (600,000) | 900,000 | |
Other employees | |||||
In aggregate | 23 November 2011 | 2,128,779 | (1,343,335) | 785,444 | |
20 August 2012 | 8,351,000 | 8,351,000 | |||
8 July 2019 | 17,000,000 | (4,862,320) | 12,137,680 | ||
Total | 38,579,779 | (7,525,655) | 31,054,124 |
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SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY
As at 30 June 2020, the interests and short positions of substantial Shareholders (not being Directors and the chief executive of the Company) in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO and required to be entered in the register maintained by the Company pursuant to Section
336 of the SFO were as follows:
Approximate | ||||
percentage of | ||||
shareholding | ||||
as at | ||||
Name of Shareholder | Class of Shares | Long position | Short position Capacity | 30 June 2020 |
Talent Gain Developments | Ordinary | 253,671,964 | Beneficial owner and Interest in | 19.21% |
Limited | (note 1) | controlled corporation | ||
Digital China Holdings Limited | Ordinary | 253,671,964 | Interest in controlled corporation | 19.21% |
(note 1) | ||||
China Construction Bank | Ordinary | 129,642,916 | Interest in controlled corporation | 9.82% |
Corporation | (note 2) | and person having a security | ||
interest in Shares | ||||
Central Huijin Investment Ltd. | Ordinary | 129,642,916 | Interest in controlled corporation | 9.82% |
(note 2) | and person having a security | |||
interest in Shares | ||||
Chance Talent Management | Ordinary | 129,642,916 | Interest in controlled corporation | 9.82% |
Limited | (note 2) | and person having a security | ||
interest in Shares | ||||
Ideal South Limited | Ordinary | 80,000,000 | Beneficial Owner | 6.06% |
(note 3) | ||||
Wong Luen Hei | Ordinary | 129,705,000 | Beneficial owner and Interest in | 9.82% |
(note 3) | controlled corporation | |||
Fortune Value Investment | 120,000,000 | Beneficial Owner | 9.09% | |
Holdings Limited | (note 4) | |||
Zhu Lemin | 120,000,000 | Interest in controlled corporation | 9.09% | |
(note 4) |
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Notes:
- Such interests in the Company comprise: (1) 230,263,964 Shares held by Talent Gain Developments Limited; and (2) 23,408,000 Shares held by and Unique Golden Limited. Unique Golden Limited is wholly and beneficially owned by Talent Gain Developments Limited, which in turn is wholly and beneficially owned by Digital China (BVI) Limited and indirectly wholly and beneficially owned by Digital China Holdings Limited, a company whose shares are listed on the Stock Exchange (stock code: 861). Therefore, Talent Gain Developments Limited is deemed to be interested in the Shares held by Unique Golden Limited, and each of Digital China (BVI) Limited and Digital China Holdings Limited is deemed to be interested in the Shares held by Talent Gain Developments Limited and Unique Golden Limited.
- Such interests in the Company comprise: (1) the convertible bonds (i.e. the 2.85% guaranteed and secured convertible bonds due 2020 issued by the Company) subscribed to by Chance Talent Management Limited on 16 November 2018 which may be fully converted to 22,499,122 Shares; and (2) 107,143,794 Shares held by Chance Talent Management Limited as person having security interest. Chance Talent Management Limited is wholly and beneficially owned by CCBI Investments Limited which in turn is wholly and beneficially owned by CCB International (Holdings) Limited which in turn is wholly and beneficially owned by CCB Financial Holdings Limited which in turn is wholly and beneficially owned by CCB International Group Holdings Limited which in turn is wholly and beneficially owned by China Construction Bank Corporation, a company listed on the main board of the Stock Exchange (Stock Code: 939) and the Shanghai Stock Exchange (Stock Code: 601939). China Construction Bank Corporation is owned as to 57.11% by Central Huijin Investment Ltd. Therefore, all of the abovementioned companies in this note 2 and Central Huijin Investment Ltd. are deemed to be interested in the Shares held by Chance Talent Management Limited pursuant to the SFO.
- Ideal South Limited is wholly and beneficially owned by Mr. Wong Luen Hei.
- Fortune Value Investment Holdings Limited is wholly and beneficially owned by Mr. Zhu Lemin.
Save as disclosed above, as at 30 June 2020, the Company had not been notified of any interests or short positions of substantial Shareholders or other persons in the shares and underlying shares of the Company which are required to be kept under Section 336 of the SFO.
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted written guidelines regarding Directors' securities transactions on terms no less exacting than the required standard of dealings as set out in Appendix 10 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). Having made specific enquiry of all Directors, the Directors confirmed that they have complied with the required standard of dealings and the said guidelines regarding Directors' securities transactions during the Period.
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AUDIT COMMITTEE
The Company established the Audit Committee on 24 July 2003 with written terms of reference based on the guidelines set out in "A Guide for Effective Audit Committees" published by the Hong Kong Institute of Certified Public Accountants.
The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control procedures of the Group. The Audit Committee comprises two independent non-executive Directors Mr. Zhang Ke and Ms. Qiyan and a non-executive Director, Mr. Guo Fansheng. Mr. Zhang Ke is the Chairman of the Audit Committee.
The Audit Committee has reviewed with management of the Company the accounting principles and practices adopted by the Group, and the unaudited interim results of the Group for the Period.
AUDITORS
PricewaterhouseCoopers, the auditor of the Company, has reviewed the unaudited condensed consolidated interim financial information of the Group for the Period in accordance with Hong Kong standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity".
DIRECTORS' AND MANAGEMENT SHAREHOLDERS' INTERESTS IN COMPETING BUSINESS
Each of the Directors or the management shareholders of the Company and their respective associates (as defined in the Listing Rules) has confirmed that none of them had any business or interest in any company that competes or may compete with the business of the Group or any other conflict of interests with the interests of the Group during the Period.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Company's Articles of Association, or the laws of Cayman Islands, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders of the Company.
COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES
The Board had reviewed the Company's corporate governance practices and was satisfied that the Company had been in compliance with the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Listing Rules during the Period.
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PURCHASE, SALE OR REDEMPTION OF SECURITIES
Save as disclosed in this report, during the Period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed shares.
By order of the board
HC Group Inc.
Liu Jun
Chairman
Hong Kong, 25 August 2020
As at the date of this report, the Board comprises:
Mr. Liu Jun (Chairman and Executive Director)
Mr. Zhang Yonghong (Executive Director and Chief Financial Officer)
Mr. Liu Xiaodong (Executive Director and president)
Mr. Guo Fansheng (Non-executive Director)
Mr. Sun Yang (Non-executive Director)
Mr. Lin Dewei (Non-executive Director)
Mr. Zhang Ke (Independent non-executive Director)
Mr. Zhang Tim Tianwei (Independent non-executive Director)
Ms. Qiyan (Independent non-executive Director)
HC GROUP INC. Interim Report 2020
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