LUKS GROUP (VIETNAM HOLDINGS) COMPANY LIMITED Contents
Pages | |
MANAGEMENT DISCUSSION AND ANALYSIS | |
Business Review and Outlook | 2 |
Financial Review | 6 |
INTERIM FINANCIAL STATEMENTS | |
Consolidated Statement of Profit or Loss | 7 |
Consolidated Statement of Comprehensive Income | 8 |
Consolidated Statement of Financial Position | 9 |
Consolidated Statement of Changes in Equity | 11 |
Condensed Consolidated Statement of Cash Flows | 12 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 13 |
OTHER INFORMATION | 24 |
Luks Group (Vietnam Holdings) Company Limited | 1 |
Interim Report 2020
Management Discussion and Analysis
Business review and outlook
In the first half of 2020, the world was devastated by the Covid-19 pandemic and economic activities were severely hindered. The main businesses of the Group are located in Vietnam and Hong Kong, which have been affected to varying degrees, resulting in a decrease in overall operating income and profit compared with the same period last year. Among them, the Group's hotel business in Hong Kong was the hardest hit. The profit before depreciation turned from a profit as recorded last year to a loss this year. The business of the Group's cement plant in central Vietnam was also severely affected. Due to the shrinking economic activities in Vietnam, the sales revenue of the cement plant decreased, resulting in a significant decline in the profit for the period. Fortunately, the Group's Saigon Trade Centre in Ho Chi Minh City, Vietnam had a stable rental performance and recorded a growth during the period. Besides, other rental income from properties located in Hong Kong and China also remained stable. Apart from the normal operating results, in last year, the Group had recorded a one-off profit of approximately HK$15.6 million from the recovery of land deposits, which also attributed to a drop of 46.9% of the net profit attributable to the owners of the parent for the first half of 2020, as compared with the same period last year. Whereas if excluding the special income from the recovery of land deposits of the previous year, the drop was approximately 26.5% compared with the same period last year.
In the first half of 2020, although Vietnam was also affected by the Covid-19 pandemic, no large-scale outbreak was recorded, due to the good performance of the Vietnamese government in controlling the epidemic, and as a result, the economy was relatively stable compared to other countries. Vietnam recorded a GDP growth rate of 1.81% for the first six months of 2020, which was the lowest level in 12 years. However, compared with most countries around the world that recorded a shrinking GDP in the first half of 2020, Vietnam's economic performance was not too bad at all. Looking forward, as the global epidemic is still out of control and the economic environment is still severe, it is estimated that the Group's businesses will still be under pressed and not likely to see a reversing trend in the second half of 2020.
For the six months ended 30 June 2020, the Group's turnover amounted to HK$281,440,000, representing a decrease of approximately 14.9% compared with HK$330,624,000 recorded in the same period last year. The Group's turnover mainly came from its cement business, property investment business and hotel business. The cement business recorded a turnover of HK$187,563,000, representing a decrease of 14.5% compared with the same period last year. The property investment business recorded a turnover of HK$74,724,000, representing an increase of 5% compared with the same period last year. And the hotel business recorded a turnover of HK$13,599,000, representing a decrease of 59.4% compared with the same period last year.
The Group recorded an unaudited consolidated net profit from ordinary activities attributable to the owners of the parent of HK$29,939,000 for the first half of 2020, representing a decrease of 46.9% as compared to HK$56,339,000 of the same period last year. The basic earnings per share for the first six months of 2020 were HK5.9 cents per share (corresponding period for first six months of 2019: HK11.1 cents).
Cement business
In the first half of 2020, the cement industry in Vietnam was hit by the Covid-19 pandemic in Vietnam and around the world. The pandemic led to a slowdown in the real estate market and delays in transportation and infrastructure projects in Vietnam. The volume of construction works decreased and the demand for cement fell as a result. During the period, Vietnam implemented various levels of isolation and quarantine measures, especially the 14-day social quarantine that was implemented from April 1, which brought construction activities to a halt and thus severely impacted the cement sales in Vietnam.
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Interim Report 2020
On the other hand, the demand for cement of Vietnam's major export markets, such as China, Bangladesh, and Philippines dropped significantly. Both the price and quantity of cement exports recorded substantial declines during the period. Even worse, Philippines imposed additional taxes on Vietnamese cement and clinkers in order to protect the local market, putting extra pressure on the Vietnamese cement export. Faced with export difficulties, cement inventories increased and resulted in fiercer competition in Vietnam's domestic cement market.
Under this circumstance, the sales and profit of the Group's cement plant located in Hue Province in central Vietnam were therefore inevitably being affected in the first half of 2020. For the six months ended June 30, 2020, the cement and clinker sales volume of the cement plant was 550,000 tons, a decrease of approximately 16.5% from 659,000 tons in the same period last year. The after-tax profit of the cement business for the first six months was HK$5,314,000, a decrease of approximately 58.7% from HK$12,879,000 in the same period last year.
Production costs rose slightly during the period. Mainly affected by the epidemic, transportation costs increased considerably, which also resulted in driving up costs of various raw materials. In addition, the government imposed additional environmental tax on the cement industry at the beginning of the year, increasing the burden on the Group's cement production costs. Fortunately, the government lowered the electricity tariff during the period to ease the economic pressure on local enterprises, and the Group's cement plant was thus benefited and able to partly offset the costs increase during the period.
Looking forward to the second half of the year, due to another outbreak of the epidemic in Da Nang in central Vietnam since July, the Vietnamese government has implemented control and quarantine measures again, which has seriously affected the construction activities in the central region and impacted on the sales of the Group's cement plant to a certain extent. However, the Vietnamese government has also promised to increase public investments and speed up the approval of residential and infrastructure development projects to support the economy in the second half of the year. On the other hand, as a result of the electricity tariff being adjusted back to normal level from the second half of the year, the production cost of cement is estimated to increase compared with the first half of the year.
Property investment
In the first half of 2020, affected by the epidemic in Vietnam, the Vietnamese government adopted tough border control measures. All foreigners were not allowed to enter Vietnam or required to be quarantined in places designated by the Vietnamese government for 14 days. This has severely affected Vietnam's external economic activities and commercial activities of Ho Chi Minh City. Newly registered foreign direct investments shrank 15% during the period, compared with the same period last year. In addition, due to the impact of the epidemic, a large number of local companies temporarily closed their business, reducing market demand of office spaces as a result. In terms of market supply of office spaces, three new Grade B office buildings were completed during the period, having increased the market supply and dragged down the overall occupancy rate of office buildings in the market. However, as the supply of office buildings in Ho Chi Minh City was still limited and in face of the persistently increasing market demand, the average market rental rate still recorded an annual increase of 2% in the first half of 2020.
The Group's Saigon Trade Centre, located in the CBD of Ho Chi Minh City, performed well during the period. As at June 30, 2020, the occupancy rate of Saigon Trade Centre was approximately 81%, slightly dropped from the 82% as at December 31, 2019. Compared with the same period last year, overall rental income recorded an increase of approximately 7%.
Luks Group (Vietnam Holdings) Company Limited | 3 |
Interim Report 2020
Management Discussion and Analysis
Looking forward to the second half of the year, the rental performance of the Saigon Trade Centre shall depend upon the Covid-19 pandemic's development in Vietnam and around the world. If the epidemic continues, more companies are estimated to have to suspend business or withdraw their leases in the next coming months. In addition, the Group is also required to provide certain rental relieves and concessions to tenants if epidemic persists, and as a result, both the occupancy rate and rental income of the Saigon Trade Centre shall be expected to decrease. However, in the long run, as the economic momentum of Ho Chi Minh City is still very strong, it is believed that after the epidemic being brought under control, economic activities will rebound rapidly. On the other hand, affected by the intensified conflict between China and the United States, Vietnam has also attracted many foreign factories and companies to invest and open offices in Vietnam, which helps supporting the demand for the office market in Ho Chi Minh City.
The overall rental income of the Group's rental properties in Hong Kong and China was stable during the period. The Group provided certain rental concessions to some commercial tenants in Hong Kong, which was on the other hand, offset by an increase in the rental income of the Baoan factory in Shenzhen, China during the period.
Hotel business
The global tourism industry, and thus the Group's hotel business, was among the hardest hit business by the outbreak of the Covid-19 pandemic in the first half of 2020. Since March this year, the Hong Kong government closed most of the borders connecting to mainland China, as well as imposed travel restrictions and quarantine policy to travellers from many countries, resulting in a sharp drop in visitors to Hong Kong. According to statistics from the HK Tourism Development Bureau, the number of visitors to Hong Kong in the first half of 2020 dropped by approximately 90% compared to the same period last year, with visitors from mainland China accounting for the majority of the drop. The magnitude of impact to the Hong Kong hotel industry was thus imaginable accordingly.
In the absence of visitors to Hong Kong, the Group's hotel, "Pentahotel Hong Kong, Tuen Mun", changed its strategy by attracting the Hong Kong local residents to our hotel for vacation or short stay purpose. In addition, with the support of the New Territories Western Hospital Authority, the hotel committed to provide accommodations in both short and medium terms, for the frontline medical personnel in fighting the Covid-19 coronavirus. Not only it could contribute and provide support to the local community in fighting the epidemic, but also helped our hotel to make up part of the vacancy due to the drop of tourists. In terms of cost control, the Group's hotel treasured maintaining staff morale and stability as a priority and therefore did not adopt any layoff plan during the period. The hotel adopted measures, such as staff taking several days of unpaid leave per month helping to reduce staff cost, and also cut some unnecessary expenses. In addition, the Group's hotel also received government subsidies for the catering industry and under the employment support programs, which eased part of the cost burden during the period.
The average occupancy rate of the Group's hotel in the first six months of 2020 was 53.5%, a decrease of approximately 40% compared with 89.4% in the same period last year. The average room rate dropped by about 25% compared with the same period last year.
For the six months ended June 30, 2020, the hotel business contributed HK$13,599,000 to the Group's operating income, a decrease of 59.4% compared to the same period last year. Before deducting depreciation, a loss of HK$1,881,000 was recorded, as compared with a profit recorded of HK$7,919,000 in the same period last year. After deducting depreciation, the hotel business recorded a loss of HK$15,714,000, whereas a loss of HK$4,933,000 was recorded in the same period last year.
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Interim Report 2020
Since there is still no sign that the Covid-19 pandemic can be under control in short term, it is estimated that full lifting of travel restrictions in Hong Kong is unlikely to happen in the second half of the year. As such, the hotel industry in Hong Kong shall still have a distance to go before recovery. The operating environment of the Group's hotel in the second half of the year is therefore, expected to remain difficult.
Property development
The architectural design drawings of the Group's "Hue Plaza" in Hue Province, Vietnam were completed and approved by the Hue Provincial government in the first half of 2020. Currently, the Group is preparing for the tendering of contractors for the project. Affected by the epidemic, the borders in Vietnam have been closed, and Hong Kong employees and engineering and technical personnel of the Group have not been able to arrive at the scene. In addition, restrictions and isolation measures implemented by the Vietnamese government also have a certain impact on the proceedings of the project development. The development of "Hue Plaza" is thus expected to delay accordingly.
Dividend
The Board of Directors resolved to distribute an interim dividend of HK2 cents per share to shareholders.
Luks Group (Vietnam Holdings) Company Limited | 5 |
Interim Report 2020
Management Discussion and Analysis
Financial Review
Liquidity and Financial Resources
The Group's cash, bank balances and time deposits as at 30 June 2020 amounted to HK$414,630,000 (31 December 2019: HK$381,055,000). The Group's total bank and other borrowings amounted to HK$12,500,000 (31 December 2019: HK$16,250,000), of which all (31 December 2019: all) was repayable within 1 year or on demand clause.
All of the Group's borrowings were denominated in HK$. Of the total borrowings, there was no amount at fixed interest rates.
Significant investments held
As at 30 June 2020, the Group has no significant investment held.
Details of charges
As at 30 June 2020, a hotel property situated in Hong Kong including the related land and building with a net carrying amount of HK$549,021,000 and certain investment properties with fair value of HK$152,000,000 were pledged to secure the above bank loans and general banking facilities granted to the Group.
Exposure to fluctuations in exchange rates and related hedges
The Group's investments in Vietnam are subject to the foreign exchange fluctuation, and especially that from the risk of devaluation of VND. As VND is a restricted currency, hedging instruments are limited in the market or the hedging is not cost efficient to do so. The relatively high interest deviation between VND and HKD is also a barrier for setting up an effective hedging for the VND devaluation. The exchange rate of VND to HKD recorded a depreciation of 0.65% as at 30 June 2020 when compared to the rate as at 31 December 2019. The Group recorded an exchange loss of HK$2,404,000 during the period. There was no significant change in the strategies used to reduce foreign exchange risk as described in the annual report of the Group as at 31 December 2019.
Details of capital commitments
The Group had the capital commitments in relation the property, plant and equipment amounted to HK$3,603,000 (31 December 2019: HK$7,372,000).
Details of contingent liabilities
As at 30 June 2020, the Group had no significant contingent liabilities (31 December 2019: Nil).
Employees and Remuneration Policy
As at 30 June 2020, the Group had approximately 1,150 employees. The percentage of staff working in Hong Kong and Vietnam is roughly 10% and 90% respectively. The total staff cost (including directors' remuneration) was approximately HK$29,455,000 for the period. There was no significant change on the Group's remuneration policy as compared to that disclosed on the Group's annual report for the year ended 31 December 2019.
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Interim Report 2020
Interim Financial Statements
Interim Results
The board of directors (the "Board") of Luks Group (Vietnam Holdings) Company Limited (the "Company") is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (collectively the "Group") for the six months ended 30 June 2020, together with the comparative figures for the corresponding period in 2019. These interim condensed consolidated financial statements have not been audited, but have been reviewed by the Company's audit committee.
Consolidated Statement of Profit or Loss
For the six months ended 30 June 2020
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
Notes | HK$'000 | HK$'000 | |
REVENUE | 4 | 281,440 | 330,624 |
Cost of sales | (203,501) | (232,412) | |
Gross profit | 77,939 | 98,212 | |
Other income and gains, net | 4 | 3,884 | 19,537 |
Selling and distribution expenses | (6,514) | (7,883) | |
Administrative expenses | (30,255) | (36,693) | |
Other expenses | (2,469) | (518) | |
Finance costs | 5 | (831) | (1,301) |
PROFIT BEFORE TAX | 6 | 41,754 | 71,354 |
Income tax expense | 7 | (12,715) | (15,146) |
PROFIT FOR THE PERIOD | 29,039 | 56,208 | |
ATTRIBUTABLE TO: | |||
Owners of the parent | 29,939 | 56,339 | |
Non-controlling interests | (900) | (131) | |
29,039 | 56,208 | ||
EARNINGS PER SHARE ATTRIBUTABLE TO | |||
ORDINARY EQUITY HOLDERS OF THE PARENT | |||
Basic and diluted | 8 | HK5.9 cents | HK11.1 cents |
Luks Group (Vietnam Holdings) Company Limited | 7 |
Interim Report 2020
Interim Financial Statements
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2020
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
PROFIT FOR THE PERIOD | 29,039 | 56,208 |
OTHER COMPREHENSIVE LOSS: | ||
Other comprehensive loss that may be reclassified to | ||
profit or loss in subsequent periods: | ||
Exchange differences on translation of foreign operations | (10,747) | (9,750) |
OTHER COMPREHENSIVE LOSS FOR THE PERIOD | (10,747) | (9,750) |
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 18,292 | 46,458 |
Attributable to: | ||
Owners of the parent | 18,410 | 46,589 |
Non-controlling interests | (118) | (131) |
18,292 | 46,458 | |
8 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
Consolidated Statement of Financial Position
30 June 2020
30 June | 31 December | ||
2020 | 2019 | ||
Notes | (Unaudited) | (Audited) | |
HK$'000 | HK$'000 | ||
NON-CURRENT ASSETS | |||
Property, plant and equipment | 10 | 1,097,977 | 1,129,021 |
Investment properties | 1,166,614 | 1,172,524 | |
Properties for development | 27,886 | 28,604 | |
Prepayments | 1,046 | 4,248 | |
Total non-current assets | 2,293,523 | 2,334,397 | |
CURRENT ASSETS | |||
Inventories | 80,465 | 68,463 | |
Trade receivables | 11 | 52,869 | 32,630 |
Prepayments, other receivables and other assets | 7,280 | 11,774 | |
Financial assets at fair value through profit or loss | 57 | 57 | |
Cash and cash equivalents | 414,630 | 381,055 | |
Total current assets | 555,301 | 493,979 | |
CURRENT LIABILITIES | |||
Trade payables | 12 | 23,205 | 10,628 |
Other payables and accruals | 120,496 | 110,368 | |
Interest-bearing bank and other borrowings | 12,500 | 16,250 | |
Tax payable | 24,657 | 20,583 | |
Total current liabilities | 180,858 | 157,829 | |
NET CURRENT ASSETS | 374,443 | 336,150 | |
TOTAL ASSETS LESS CURRENT LIABILITIES | 2,667,966 | 2,670,547 | |
Luks Group (Vietnam Holdings) Company Limited | 9 |
Interim Report 2020
Interim Financial Statements
Consolidated Statement of Financial Position (continued)
30 June 2020
30 June | 31 December | ||
2020 | 2019 | ||
Note | (Unaudited) | (Audited) | |
HK$'000 | HK$'000 | ||
TOTAL ASSETS LESS CURRENT LIABILITIES | 2,667,966 | 2,670,547 | |
NON-CURRENT LIABILITIES | |||
Other payables | 39,193 | 44,270 | |
Provisions | 4,523 | 3,618 | |
Deferred tax liabilities | 198,647 | 200,189 | |
Total non-current liabilities | 242,363 | 248,077 | |
Net assets | 2,425,603 | 2,422,470 | |
EQUITY | |||
Equity attributable to owners of the parent | |||
Issued capital | 13 | 5,053 | 5,053 |
Reserves | 2,448,956 | 2,445,705 | |
2,454,009 | 2,450,758 | ||
Non-controlling interests | (28,406) | (28,288) | |
Total equity | 2,425,603 | 2,422,470 | |
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Interim Report 2020
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2020
Attributable to owners of the parent | |||||||||||||
Share | Capital | Property | Exchange | Non- | |||||||||
Issued | premium | Contributed | redemption | revaluation | fluctuation | Retained | controlling | Total | |||||
capital | account | surplus | reserve | reserve | reserve | profits | Total | interests | equity | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
At 1 January 2020 | 5,053 | 738,496 | 175,009 | 703 | 24,173 | (492,137) | 1,999,461 | 2,450,758 | (28,288) | 2,422,470 | |||
Profit/(loss) for the period | - | - | - | - | - | - | 29,939 | 29,939 | (900) | 29,039 | |||
Other comprehensive income/(loss) | |||||||||||||
for the period | - | - | - | - | - | (11,529) | - | (11,529) | 782 | (10,747) | |||
Total comprehensive income/(loss) | |||||||||||||
for the period | - | - | - | - | - | (11,529) | 29,939 | 18,410 | (118) | 18,292 | |||
Share premium reduction (note) | - | (738,496) | 738,496 | - | - | - | - | - | - | - | |||
Final 2019 dividend approved | - | - | - | - | - | - | (15,159) | (15,159) | - | (15,159) | |||
At 30 June 2020 | 5,053 | -* | 913,505* | 703* | 24,173* | (503,666)* | 2,014,241* | 2,454,009 | (28,406) | 2,425,603 | |||
Attributable to owners of the parent | |||||||||||||
Share | Capital | Property | Exchange | Non- | |||||||||
Issued | premium | Contributed | redemption | revaluation | fluctuation | Retained | controlling | Total | |||||
capital | account | surplus | reserve | reserve | reserve | profits | Total | interests | equity | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
At 1 January 2019 | 5,053 | 738,496 | 175,009 | 703 | 24,173 | (488,163) | 1,937,817 | 2,393,088 | (28,309) | 2,364,779 | |||
Profit/(loss) for the period | - | - | - | - | - | - | 56,339 | 56,339 | (131) | 56,208 | |||
Other comprehensive loss | |||||||||||||
for the period | - | - | - | - | - | (9,750) | - | (9,750) | - | (9,750) | |||
Total comprehensive income/(loss) | |||||||||||||
for the period | - | - | - | - | - | (9,750) | 56,339 | 46,589 | (131) | 46,458 | |||
Final 2018 dividend approved | - | - | - | - | - | - | (30,318) | (30,318) | - | (30,318) | |||
At 30 June 2019 | 5,053 | 738,496 | 175,009 | 703 | 24,173 | (497,913) | 1,963,838 | 2,409,359 | (28,440) | 2,380,919 | |||
Note: | Pursuant to a special resolution passed by the shareholders at the annual general meeting of the Company on 10 June 2020, the share premium |
account of the Company in the sum of HK$738,496,000 with the credit arising therefrom was entirely transferred to the contributed surplus account | |
of the Company. |
- These reserve accounts comprise the consolidated reserves of HK$2,448,956,000 (31 December 2019: HK$2,445,705,000) in the consolidated statement of financial position as at 30 June 2020.
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Interim Report 2020
Interim Financial Statements
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2020
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
Note | HK$'000 | HK$'000 | |
CASH FLOWS FROM OPERATING ACTIVITIES | 57,677 | ||
Cash generated from operations | 155,938 | ||
Interest paid | (831) | (1,301) | |
Taxes paid | (10,144) | (20,534) | |
Net cash flows from operating activities | 46,702 | 134,103 | |
CASH FLOWS FROM INVESTING ACTIVITIES | 3,298 | ||
Interest received | 3,362 | ||
Decrease in time deposits with original maturity | 81,683 | ||
of over three months when acquired | 68,506 | ||
Purchases of items of property, plant and equipment | 10 | (10,545) | (9,010) |
Proceed from disposal of items of property, plant and equipment | 10 | 410 | |
Net cash flows from investing activities | 74,446 | 63,268 | |
CASH FLOWS FROM FINANCING ACTIVITIES | - | ||
New bank loans | 60,000 | ||
Repayment of bank loans | (3,750) | (19,484) | |
Principal portion of lease payments | (742) | (460) | |
Dividends paid | - | (30,318) | |
Net cash flows from/(used in) financing activities | (4,492) | 9,738 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 116,656 | 207,109 | |
Cash and cash equivalents at beginning of period | 258,624 | 176,774 | |
Effect of foreign exchange rate changes, net | (1,398) | (1,937) | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 373,882 | 381,946 | |
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS | 106,435 | ||
Cash and bank balances | 115,709 | ||
Non-pledged time deposits with original maturity | 267,447 | ||
of less than three months when acquired | 266,237 | ||
Non-pledged time deposits with original maturity | 40,748 | ||
of over three months when acquired | 13,423 | ||
Cash and cash equivalents as stated in the statement | 414,630 | ||
of financial position | 395,369 | ||
Less: Non-pledged time deposits with original maturity | (40,748) | ||
of over three months when acquired | (13,423) | ||
Cash and cash equivalents as stated in the statement of cash flows | 373,882 | 381,946 | |
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Interim Report 2020
Notes to Condensed Consolidated Financial Statements
1. Basis of Preparation
The Company is a limited liability company incorporated in Bermuda and whose shares are publicly traded on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The principal activities of the Group are described in note 3 to the unaudited interim condensed consolidated financial statements.
The unaudited interim condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") and the disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
The unaudited interim condensed consolidated financial statements have been prepared under the historical cost convention, except for investment properties and financial assets at fair value through profit or loss, which have been measured at fair value. The unaudited interim condensed consolidated financial statements are presented in Hong Kong dollars ("HK$") and all values are rounded to the nearest thousand except when otherwise indicated.
2. Changes in Accounting Policies and Disclosures
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of the following revised Hong Kong Financial Reporting Standards ("HKFRSs") for the first time for the current period's financial information.
Amendments to HKFRS 3
Amendments to HKFRS 9,
- HKAS 39 and HKFRS 7 Amendments to HKFRS 16 Amendments to HKAS 1 and HKAS 8
Definition of a Business
Interest Rate Benchmark Reform Covid-19-Related Rent Concessions (early adopted) Definition of Material
Other than as explained below regarding the impact of amendments to HKFRS 3 Definition of a Business, HKFRS 16 Covid- 19-RelatedRent Concessions and HKAS 1 and HKAS 8 Definition of Material, the adoption of the above new and revised standards are not relevant to the preparation of the Group's interim condensed consolidated statements. The nature and the impact of the changes are described below:
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Interim Report 2020
Notes to Condensed Consolidated Financial Statements
2. Changes in Accounting Policies and Disclosures (continued)
- Amendments to HKFRS 3 clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Group has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any impact on the financial position and performance of the Group.
- Amendment to HKFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the covid-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the covid-19 pandemic and only if (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective retrospectively for annual periods beginning on or after 1 June 2020 with earlier application permitted. The amendments did not have any impact on the financial position and performance of the Group.
- Amendments to HKAS 1 and HKAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information. The amendments did not have any impact on the Group's unaudited interim condensed consolidated financial information.
14 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
3. Operating Segment Information
The Group's operating business are structured and managed separately according to the nature of their operations and the products they provide. Each of the Group's business segments represents a strategic business unit that offers products which are subject to risks and returns that are different from those of the other business segments. The following table presents revenue and results for the Group's operating segments for the six months ended 30 June 2020 and 2019.
Cementproducts | Propertyinvestment | Hoteloperation | Propertydevelopment | Corporateandothers | Consolidated | |||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Segment revenue | ||||||||||||
Sales to external customers | 187,563 | 219,307 | 74,724 | 71,189 | 13,599 | 33,520 | - | - | 5,554 | 6,608 | 281,440 | 330,624 |
Other income and gains, net | 40 | 49 | 80 | 523 | - | - | 466 | 15,603 | - | - | 586 | 16,175 |
187,603 | 219,356 | 74,804 | 71,712 | 13,599 | 33,520 | 466 | 15,603 | 5,554 | 6,608 | 282,026 | 346,799 | |
Segment results | 5,458 | 16,203 | 61,597 | 56,414 | (15,714) | (4,933) | (682) | 14,674 | (12,203) | (14,366) | 38,456 | 67,992 |
Reconciliation: | ||||||||||||
Interest income | 3,298 | 3,362 | ||||||||||
Profit before tax | 41,754 | 71,354 | ||||||||||
Income tax credit/(expense) | (144) | (3,324) | (12,619) | (11,822) | - | - | - | - | 48 | - | (12,715) | (15,146) |
Profit for the period | 29,039 | 56,208 | ||||||||||
Luks Group (Vietnam Holdings) Company Limited | 15 |
Interim Report 2020
Notes to Condensed Consolidated Financial Statements
4. | Revenue, Other Income and Gains | |||
An analysis of the Group's revenue is as follows: | ||||
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | |||
Revenue from contracts with customers | ||||
Sale of cement | 187,563 | 219,307 | ||
Sale of electronic products | 5,554 | 6,608 | ||
Rendering of property management and related services | 17,772 | 17,589 | ||
Hotel operation income | 13,599 | 33,520 | ||
Revenue from other sources | ||||
Gross rental income | 56,952 | 53,600 | ||
281,440 | 330,624 | |||
16 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
4. Revenue, Other Income and Gains (continued)
Disaggregated revenue information for revenue from contracts with customers
For the six months ended 30 June 2020 | |||||
Cement | Property | Hotel | Corporate | ||
Segments | products | investment | operation | and others | Total |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Types of goods or services | |||||
Sale of cement | 187,563 | - | - | - | 187,563 |
Sale of electronic products | - | - | - | 5,554 | 5,554 |
Property management and related services | - | 17,772 | - | - | 17,772 |
Hotel and related services | - | - | 13,599 | - | 13,599 |
Total revenue from contracts with customers | 187,563 | 17,772 | 13,599 | 5,554 | 224,488 |
Geographical markets | |||||
Vietnam | 187,563 | 17,772 | - | - | 205,335 |
Hong Kong | - | - | 13,599 | 5,554 | 19,153 |
Total revenue from contracts with customers | 187,563 | 17,772 | 13,599 | 5,554 | 224,488 |
Timing of revenue recognition | |||||
Goods transferred at a point in time | 187,563 | - | 1,298 | 5,554 | 194,415 |
Services transferred over time | - | 17,772 | 12,301 | - | 30,073 |
Total revenue from contracts with customers | 187,563 | 17,772 | 13,599 | 5,554 | 224,488 |
Luks Group (Vietnam Holdings) Company Limited | 17 |
Interim Report 2020
Notes to Condensed Consolidated Financial Statements
4. Revenue, Other Income and Gains (continued)
Disaggregated revenue information for revenue from contracts with customers (continued)
For the six months ended 30 June 2019 | |||||||
Cement | Property | Hotel | Corporate | ||||
Segments | products | investment | operation | and others | Total | ||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||
Types of goods or services | |||||||
Sale of cement | 219,307 | - | - | - | 219,307 | ||
Sale of electronic products | - | - | - | 6,608 | 6,608 | ||
Property management and related services | - | 17,589 | - | - | 17,589 | ||
Hotel and related services | - | - | 33,520 | - | 33,520 | ||
Total revenue from contracts with customers | 219,307 | 17,589 | 33,520 | 6,608 | 277,024 | ||
Geographical markets | |||||||
Vietnam | 219,307 | 17,589 | - | - | 236,896 | ||
Hong Kong | - | - | 33,520 | 6,608 | 40,128 | ||
Total revenue from contracts with customers | 219,307 | 17,589 | 33,520 | 6,608 | 277,024 | ||
Timing of revenue recognition | |||||||
Goods transferred at a point in time | 219,307 | - | 3,189 | 6,608 | 229,104 | ||
Services transferred over time | - | 17,589 | 30,331 | - | 47,920 | ||
Total revenue from contracts with customers | 219,307 | 17,589 | 33,520 | 6,608 | 277,024 | ||
Other income and gains | |||||||
Six months ended 30 June | |||||||
2020 | 2019 | ||||||
(Unaudited) | (Unaudited) | ||||||
HK$'000 | HK$'000 | ||||||
Interest income | 3,298 | 3,362 | |||||
Gain from recovery of the land deposits | - | 15,603 | |||||
Others | 586 | 572 | |||||
3,884 | 19,537 | ||||||
18 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
5. | Finance Costs | ||
An analysis of finance costs is as follows: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | ||
Interest on bank loans | 245 | 564 | |
Interest on lease liabilities | 586 | 737 | |
831 | 1,301 | ||
6. | Profit Before Tax | ||
The Group's profit before tax is arrived at after charging: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | ||
Cost of inventories sold | 173,048 | 195,726 | |
Cost of services rendered | 30,453 | 36,686 | |
Depreciation of owned assets | 33,114 | 35,478 | |
Depreciation of right-of-use assets | 2,477 | 2,852 | |
Foreign exchange loss | 2,404 | 512 | |
Luks Group (Vietnam Holdings) Company Limited | 19 |
Interim Report 2020
Notes to Condensed Consolidated Financial Statements
7. Income Tax
No provision for Hong Kong profits tax has been made (six months ended 30 June 2019: Nil) on the estimated assessable profits arising in Hong Kong during the period. Taxes on the profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries/jurisdictions in which the Group operates.
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
Current charge for the period | ||
Elsewhere | 13,140 | 12,431 |
Underprovision in prior years | ||
Elsewhere | 1,186 | 1,042 |
Deferred | (1,611) | 1,673 |
Total tax charge for the period | 12,715 | 15,146 |
8. Earnings Per Share Attributable to Ordinary Equity Holders of the Parent
The calculation of the basic earnings per share amounts is based on profit for the period attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 505,297,418 (six months ended 30 June 2019: 505,297,418) in issue during the period.
No adjustment has been made to the basic earnings per share amounts presented for six months ended 30 June 2020 and 2019 as the Group had no potentially dilutive ordinary shares in issue during those periods.
9. | Dividend | |||
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | |||
Interim - HK2 cents (six months ended 30 June 2019: HK6 cents) | ||||
per ordinary share | 10,106 | 30,318 | ||
20 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
10. Additions to Property, Plant and Equipment
During the six months ended 30 June 2020, the Group incurred approximately HK$10,545,000 (six months ended 30 June 2019: HK$9,010,000) on the acquisition of items of property, plant and equipment.
11. Trade Receivables
The Group's trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The Group allows an average credit period of 30 to 60 days for its trade debtors. The Group seeks to maintain strict control over its outstanding receivables.
Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group's trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.
An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date, and net of loss allowance, is as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
0 to 30 days | 38,198 | 30,491 |
31 to 60 days | 5,140 | 1,235 |
61 to 90 days | 5,357 | 234 |
91 to 120 days | 3,066 | 178 |
Over 120 days | 1,108 | 492 |
52,869 | 32,630 | |
Luks Group (Vietnam Holdings) Company Limited | 21 |
Interim Report 2020
Notes to Condensed Consolidated Financial Statements
12. Trade Payables
An ageing analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
0 to 30 days | 22,894 | 10,150 |
91 to 120 days | - | 151 |
Over 120 days | 311 | 327 |
23,205 | 10,628 | |
The trade payables are non-interest-bearing and are normally settled on terms of 7 to 60 days.
13. Share Capital
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Authorised: | ||
760,000,000 ordinary shares of HK$0.01 each | 7,600 | 7,600 |
Issued and fully paid: | ||
505,297,418 ordinary shares of HK$0.01 each | 5,053 | 5,053 |
22 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
14. Commitments
The Group had the following capital commitments at the end of the reporting period:
30 June | 31 December | ||
2020 | 2019 | ||
(Unaudited) | (Audited) | ||
HK$'000 | HK$'000 | ||
Contracted, but not provided for: | |||
Property, plant and equipment | 2,853 | 5,872 | |
Acquisition of assets | 750 | 1,500 | |
3,603 | 7,372 | ||
15. Related Party Transactions | |||
Compensation of key management personnel of the Group: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | ||
Short-term employee benefits | 4,503 | 5,946 | |
Post-employment benefits | 36 | 36 | |
Total compensation paid to key management personnel | 4,539 | 5,982 | |
In the opinion of the directors, the directors of the Company represent the key management personnel of the Group.
16. Contingent Liabilities
At the end of the reporting period, the Group had no significant contingent liabilities.
17. Approval of the Unaudited Interim Condensed Consoliated Financial Statements
These unaudited interim condensed consolidated financial statements were approved and authorised for issue by the board of directors on 28 August 2020.
Luks Group (Vietnam Holdings) Company Limited | 23 |
Interim Report 2020
Other Information
Interim Dividend
The Board has resolved to declare an interim dividend of HK2 cents (six months ended 30 June 2019: HK6 cents) per ordinary share in issue in respect of the six months ended 30 June 2020.
Closure of Register of Members
The Register of Members will be closed from Monday, 28 September 2020 to Wednesday, 30 September 2020, both dates inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Company's Share Registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:30 p.m. on Friday, 25 September 2020. Cheques for interim dividends will be dispatched to the Shareholders whose names appear on the register of members of the Company on Wednesday, 30 September 2020 on or before Friday, 16 October 2020.
Directors' and Chief Executive's Interests and Short Positions in Shares and Underlying Shares
At 30 June 2020, the interests and short positions of the directors and chief executive in the share capital and underlying shares of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") were as follows:
Long positions in ordinary shares of the Company:
Number of shares held, capacity and nature of interest | |||||||
Family | Percentage of | ||||||
Directly | interest | Through | Through | the Company's | |||
Beneficially | held by | controlled | Trustee | issued | |||
Name of director | Notes | owned | spouse | corporation | of a Trust | Total | share capital |
Cheng Cheung | (a) | 21,288,800 | - | 36,912,027 | - | 58,200,827 | 11.52 |
Luk Yan | (b) | 3,070,800 | 174,000 | - | 272,824,862 | 276,069,662 | 54.64 |
Luk Fung | (b) | 3,229,600 | - | - | 272,824,862 | 276,054,462 | 54.63 |
Luk Sze Wan, Monsie | (b) | 1,300,000 | - | - | 272,824,862 | 274,124,862 | 54.25 |
Fan Chiu Tat, Martin | 1,500,000 | - | - | - | 1,500,000 | 0.30 | |
Notes:
- Madam Cheng Cheung had a beneficial interest in CC (Holdings) Limited, which held 36,912,027 shares of the Company at the end of the reporting period.
- The interests disclosed by Mr. Luk Yan, Mr. Luk Fung and Ms. Luk Sze Wan, Monsie under the heading "Through Trustee of a Trust" in the above table refer to the same shares held by Luks Family (PTC) Limited, as trustee of The Luks Family Trust. Each of Mr. Luk Yan, Mr. Luk Ngai, Mr. Luk Fung and Mrs. Luk Sze Wan, Monsie was the beneficiary of The Luks Family Trust. The shareholdings of Mr. Luk Ngai and Luks Family (PTC) Limited were disclosed in the below section referring to Substantial Shareholders' interests in shares.
24 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
In addition to the above, certain directors have non-beneficial personal equity interests in certain subsidiaries held for the benefit of the Company.
Save as disclosed above, as at 30 June 2020, none of the directors or chief executive had registered an interest or short position in the shares or underlying shares of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.
Directors' Rights to Acquire Shares
At no time during the period were rights to acquire benefits by means of the acquisition of shares of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; or was the Company or any of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.
Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares
At 30 June 2020, the following interests of 5% or more of the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:
Long positions: | |||
Percentage of | |||
Number of | the Company's | ||
ordinary | issued | ||
Name | Capacity and nature of interest | shares held | share capital |
CC (Holdings) Limited | Directly beneficially owned | 36,912,027 | 7.31 |
Luks Family (PTC) Limited | Directly beneficially owned | 272,824,862 | 53.99 |
Luk Ngai (Note) | Directly beneficially owned | 276,214,862 | 54.66 |
and through Trustee of a Trust | |||
Note: | Mr. Luk Ngai's interests included a personal interest of 3,390,000 shares of the Company and as one of the beneficiaries together with Mr. Luk Yan, |
Mr. Luk Fung and Ms. Luk Sze Wan, Monsie of the 272,824,862 shares of the Company held by Luks Family (PTC) Limited (being trustee of The Luks | |
Family Trust). |
Save as disclosed above, as at 30 June 2020, no person, other than the directors of the Company, whose interests are set out in the section headed "Directors' and chief executive's interests and short positions in shares and underlying shares" above, had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.
Purchase, Redemption or Sale of Listed Securities of the Company
Neither the Company nor any of its subsidiaries has purchased or sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.
Luks Group (Vietnam Holdings) Company Limited | 25 |
Interim Report 2020
Other Information
Code on Corporate Governance Practices
In the opinion of the directors, the Company complied with the code provisions (the "Code") as set out in Appendix 14 of the Listing Rules throughout the accounting period covered by the unaudited interim condensed consolidated financial statements, except for the following: -
- The Company has not separated the roles of the Chairman of the Board and the Chief Executive Officer of the Group as required under code provision A.2.1 of the Code. During the accounting period of the financial statements, the roles of Chairman and Chief Executive Officer of the Company were performed by Madam Cheng Cheung. The Company considers that the combination of the roles of Chairman and Chief Executive Officer can promote the efficient formulation and implementation of the Company's strategies which will enable the Group to seize business opportunities efficiently and promptly. The Company considers that through the supervision of its Board and its independent non-executive directors, checks and balances exist so that the interests of the shareholders are adequately and fairly represented.
- In respect of code provision A.6.7, Mr. Lam Chi Kuen attended the annual general meeting of the Company held on 10 June 2020 and Mr. Liang Fang and Mr. Liu Li Yuan did not attend the annual general meeting due to their other business commitments.
Model Code for Securities Transactions
The Company has adopted the Model Code as the Company's code of conduct for dealings in securities of the Company by the directors. Based on specific enquiry of the Company's directors, the directors have complied with the required standard set out in the Model Code throughout the accounting period covered by the interim report.
Audit Committee
The Audit Committee comprises three independent non-executive directors of the Company, namely Mr. Liang Fang (Chairman), Mr. Liu Li Yuan and Mr. Lam Chi Kuen. The Audit Committee has reviewed the accounting principles and policies adopted by the Company and discussed with management the internal control and financial reporting matters. The Audit Committee has reviewed and confirmed the unaudited interim condensed consolidated financial statements of the Group for the six months ended 30 June 2020.
By Order of the Board
Luks Group (Vietnam Holdings) Co., Ltd.
Cheng Cheung
Chairman
Hong Kong
28 August 2020
26 Luks Group (Vietnam Holdings) Company Limited
Interim Report 2020
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