SOUNDWILL HOLDINGS LIMITED INTERIM REPORT
中 期 報 告
於百慕達註冊成立之有限公司
Incorporated in Bermuda with limited liability
股份代號 Stock Code : 0878
*僅供識別 / for identification only
CONTENTS
- Corporate Information
- Financial Highlights
- Management Discussion and Analysis
17 Consolidated Statement of Profit or Loss and Other Comprehensive Income
20 Consolidated Statement of Financial Position
22 Consolidated Statement of Changes in Equity
- Condensed Consolidated Cash Flow Statement
- Notes to the Condensed Consolidated Interim Financial Statements
02 SOUNDWILL HOLDINGS LIMITED
CORPORATE INFORMATION
DIRECTORS
EXECUTIVE DIRECTORS:
FOO Kam Chu Grace (Chairman)
CHAN Wai Ling
TSE Wai Hang
INDEPENDENT NON-EXECUTIVE DIRECTORS:
CHAN Kai Nang
PAO Ping Wing
NG Chi Keung
COMPANY SECRETARY
TSE Wai Hang
EXTERNAL AUDITOR
Deloitte Touche Tohmatsu
Registered Public Interest Entity Auditor
INTERNAL AUDITOR
Crowe (HK) Risk Advisory Limited
LEGAL ADVISORS
Lo, Wong & Tsui
Conyers Dill & Pearman
HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG
21/F, Soundwill Plaza
No. 38 Russell Street
Causeway Bay, Hong Kong
REGISTERED OFFICE
Clarendon House
2 Church Street
Hamilton HM 11, Bermuda
PRINCIPAL BANKS
The Hongkong and Shanghai Banking
Corporation Limited
Bank of China (Hong Kong) Limited
Hang Seng Bank Limited
DBS Bank (Hong Kong) Limited
Industrial and Commercial Bank of China
(Asia) Limited
PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE
MUFG Fund Services (Bermuda) Limited 4th floor North Cedar House
41 Cedar Avenue Hamilton HM 12 Bermuda
BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG
Tricor Standard Limited
Level 54, Hopewell Centre
183 Queen's Road East
Hong Kong
SHARE INFORMATION
PLACE OF LISTING
The Main Board of The Stock Exchange of Hong Kong Limited
STOCK CODE 878
BOARD LOT
500 shares
WEBSITE
www.soundwill.com.hk
INVESTOR RELATIONS
E-mail: sw.ir@soundwill.com.hk
INTERIM REPORT 2020 | 03 |
FINANCIAL HIGHLIGHTS
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$ million | HK$ million | |
Revenue | 366.4 | 360.6 |
Net fair value (loss)/gain on investment | ||
properties | (122.2) | 809.4 |
Profit attributable to owners of the Company | 72.8 | 1,004.9 |
Basic earnings per share (dollars) | HK$0.26 | HK$3.55 |
At | At | |
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$ million | HK$ million | |
Total assets | 23,417 | 23,617 |
Net assets | 20,612 | 20,606 |
Total borrowings | 1,885 | 1,944 |
Gearing ratio | 9% | 9% |
Net asset value per share (dollars) | HK$72.7 | HK$72.7 |
04 SOUNDWILL HOLDINGS LIMITED
FINANCIAL HIGHLIGHTS (CONTINUED)
GROUP'S TOTAL REVENUE
HK$ million
980 | ||
734 | ||
399 | 361 | 366 |
2018 | 2019 | 1H2020 |
First half of the year (1H)
Full Year
GROUP'S REVENUE MIX FOR
THE SIX MONTHS ENDED 30 JUNE 2020
29%
3%
Building Management and Other Services
Property Development
68%
Property Leasing
GROUP'S NET ASSET VALUE
HK$ million
20,456 | 20,606 | 20,612 |
At 31 Dec 2018 | At 31 Dec 2019 | At 30 Jun 2020 |
INTERIM REPORT 2020 | 05 |
MANAGEMENT DISCUSSION AND ANALYSIS
MANAGEMENT DISCUSSION AND ANALYSIS
Overview
In the first half of 2020, the global economy faced a series of formidable challenges. These included the escalating political and trade tensions between the US and China, followed by the outbreak of the novel coronavirus pandemic throughout the world, which weakened investment and caused many businesses to shut down. As of this writing, an economic recovery in Hong Kong may take longer than expected.
During the period under review, the local economy and property leasing market suffered another downturn as a result of various unfavourable factors, with severe consequences for every business sector of the Group. Among the first to be affected were our leasing business segment and valuation of our investment properties, which experienced a significant decrease in rental income. Despite the unfavourable and unpredictable business environment, our professional team has been taking a prudent and robust approach. It will continue to consolidate the Group's market position through flexible and innovative strategies, asset enhancement initiatives, tenant mix optimisation and close communication with tenants. All of these strategies are aimed at overcoming the current difficulties and their negative impacts.
In order to maintain our market competitiveness and maximise profitability, the Group acquired older buildings and undertook urban renewal projects, although cautiously, in order to create favourable conditions for future development. In addition, we continued to grow our mini-storage business by opening new stores in prime locations to support our existing investment in industrial projects and to improve our property portfolio, with the aim of increasing revenue.
Aside from taking a cautious approach to the challenges we face, the Group will identify new opportunities, keep pace with the changing environment, and strengthen our commitment to corporate social responsibility as a means of creating greater value for our shareholders and society.
Property Leasing
For the six months ended 30 June 2020, the Group's property leasing segment recognised revenue of approximately HK$249,299,000, representing approximately 68% of the Group's total revenue for the period.
The Group's major investment properties include Soundwill Plaza, Soundwill Plaza II
- Midtown, 10 Knutsford Terrace and Kai Kwong Commercial Building, all of which are in core areas and prime locations of Hong Kong and have high-quality tenants. During the period, however, there was a decrease in the Group's rental income, which was mainly attributable to the volatility brought about by the novel coronavirus pandemic and the anti-pandemic measures taken by Government, and these had drastic effects on both our tenants' businesses and the performance of our leasing
06 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
business. In response to appeals by Government, and as a responsible corporate citizen, we provided rental reductions and adjustments for our tenants in need. We also launched joint promotional offers and expanded our use of digital technology in order to accommodate changes in consumption patterns and mitigate external impacts in the hope of overcoming the difficult times we face together with our tenants.
One Storage Management Company Limited
One Storage, a subsidiary of the Group, offers high-quality storage services to customers through branches in Wong Chuk Hang, Chai Wan, San Po Kong, Fo Tan, Tuen Mun, Tsing Yi, Kwai Chung and Tsuen Wan. Each branch maintains a high standard of excellence and offers first-rate customer service in a secure and comfortable environment. One Storage will continue to expand its branch network and make further improvements in the professional support services it provides so as to meet the needs of an evolving market.
Property Development
For the six months ended 30 June 2020, the Group's property development business segment recognised revenue of approximately HK$105,026,000, representing approximately 29% of the Group's total revenue for the period.
During the period under review, policies designed to accelerate urbanisation were enacted for individual cities in the Mainland China real estate market. Since the implementation of stringent measures by the PRC government at the beginning of the year, the COVID-19 pandemic has been brought under control and regulations have loosened, opening the way to a recovery in the property market.
The Group currently owns a number of real estate projects in the Mainland China. The Lakeview Bay • VOGUE is an integrated project wholly owned by the Group, comprising villas and high-rise residences located in Gaoyao District, Zhaoqing. During the review period, the villa units of Phase I and high-rise townhouse units of Phase II were nearly sold out and gradually occupied. The multi-level residential and shop units of Phase III were launched at the end of 2019. They are now being sold, with all handover conditions having been fulfilled. Grand Capital (Shan Shui Xiang Ri Hao Ting) is a project located in Doumen District, Zhuhai. Confirmation of rights took place in 2020 for the units of the project, and these units are now being offered for sale as completed units.
INTERIM REPORT 2020 | 07 |
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
Building Management and Other Services
For the six months ended 30 June 2020, the Group's building management and other services segment recognised revenue of approximately HK$12,093,000, representing approximately 3% of the Group's total revenue for the period.
The Group's building management and maintenance subsidiaries are committed to providing high-quality property and facility management services. The properties under its management include large-scale commercial buildings and small and medium size estates. Drawing on the extensive experience of our professional team, we deliver high-quality property management, customer services and maintenance services to owners and tenants. By constantly refining the services we offer, these businesses have successfully raised overall service standards at our properties.
Communication with Shareholders and Investors/Investor Relations
The Group recognises that effective communication with shareholders is the key to improving investor relations and will ultimately assist the investment community in understanding the Group's business performance and strategies.
In order to establish trusting and productive relationships with shareholders and investors, the Group communicates with them through channels that include in- person meetings, overseas roadshows and project site visits. Owing to the worldwide persistence of COVID-19 in the first half of the year, the Group resorted to other forms of communication, including telecommunications. The annual general meeting of the Group this year was held in May 2020. In addition to briefings on the results announcements, we maintain regular contact with the media through press releases, announcements and other promotional materials.
The Group also committed to transparency through the timely disclosure of information on the Group's business developments so that shareholders and investors can make informed investment decisions. In order to achieve a balance between compliance with corporate governance requirements and business growth, the Group makes continuous efforts to improve its management practices. The Board further believes that sound corporate governance is essential to the success of the Group and enhances shareholder value.
Corporate Citizenship
In addition to generating better returns for its stakeholders, the Group constantly enhances its quality standards and promotes social responsibility in every segment of its business, with the objective of creating long-term benefit for society. In response to the pandemic, we distributed literature on containing the novel coronavirus and supported fundraising activities, reading programmes and educational events. Through our Soundwill Volunteer Team, we also provided caring programmes for the underprivileged in the community. In addition to these ongoing efforts, we publish an annual Environmental, Social and Governance Report with key performance indicators, in order to enhance transparency.
08 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
In recognition of our contributions to the community, we have been honoured as a Caring Company by The Hong Kong Council of Social Service for nine consecutive years. The Group, in conjunction with its member companies and property projects, has also received numerous commendations. During the review period, the Group received a Hong Kong Outstanding Corporate Citizenship award and Living Business Award and was recognised as a Happy Company and Heart-to-Heart Company, acknowledging our commitment to corporate social responsibility over the years.
Prospects
Looking ahead to the second half of 2020, we expect that the unstable international situation will persist and that some global economic activities will cease, owing to continuing Sino-US tensions and the ongoing novel coronavirus pandemic. As concerns intensify over prospects about the economy, we expect further mass closures and an increasing unemployment rate, which in turn will have an adverse effect on the economy's revival. Fast-changing local and international conditions coupled with bleak investment sentiment will further add fuel to market uncertainty.
In this macro environment, the real economy of Hong Kong faces enormous challenges. As there is currently little sign of a recovery in the local economy and property leasing market, the Group's business and operating results will inevitably be affected in the short term. We will thus maintain a cautious approach by closely monitoring market developments and government policies and measures. We will also consider making timely adjustments or reforms, including the application of digital technologies, to improve our operational efficiency, overcome the current difficulties and achieve further growth at the right time.
Nevertheless, with our solid foundation in corporate governance and the extensive experience and professional expertise of our management team, we believe we are capable of responding to these challenges. While continuing to promote business development, we will also protect the environment and show our care for the communities in which we operate by leveraging our digital technologies and talent to ensure our operations continue to contribute to the local economy, preserve the environment and benefit all of Hong Kong.
What is more, we will continue to champion the long-term interests of shareholders and operate our business in a prudent manner, in order to retain our competitive strengths. Beyond this, we will embrace innovative solutions to overcome new challenges with a view to diversifying our operations.
INTERIM REPORT 2020 | 09 |
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
INTERIM DIVIDEND
The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2020 (30 June 2019: Nil).
FINANCIAL REVIEW
For the six months ended 30 June 2020, the Group has recorded a revenue of HK$366,418,000 (30 June 2019: HK$360,634,000), representing an increase of HK$5,784,000 as compared with the same period last year. The increase in revenue was mainly attributable to the increase in revenue from property sales in Hong Kong.
Profit attributable to owners of the Company for the six months ended 30 June 2020 was HK$72,764,000 (30 June 2019: HK$1,004,937,000), representing a decrease of 93% as compared with the corresponding period in 2019. The decrease is mainly due to valuation loss of HK$122,150,000 was recorded as of 30 June 2020.
The total interest expenses for the six months ended 30 June 2020 amounted to HK$24,269,000 (30 June 2019: HK$29,103,000).
The Company's basic earnings per share was HK$0.26 as compared with the same period of last year of HK$3.55.
FINANCIAL RESOURCES AND LIQUIDITY
As at 30 June 2020, the Group cash and bank balances (including short-term bank deposits and cash and cash equivalents) amounted to HK$779,892,000 (31 December 2019: HK$557,211,000). The Group's total borrowings as at 30 June 2020 were HK$1,884,830,000 (31 December 2019: HK$1,944,063,000). The Group's gearing ratio (which was expressed as a percentage of total borrowings over total equity) was 9% as at 30 June 2020 (31 December 2019: 9%).
As at 30 June 2020, the Group's net assets amounted to HK$20,611,821,000 (31 December 2019: HK$20,605,536,000).
10 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
The Group's exposure to foreign currency risk mainly arises from the exchange rate movement between Hong Kong Dollar and Renminbi in relation to its Mainland China operations. Given there would have immaterial impact on the Group's assets in the Mainland China which generated income from as well as expense incurred in Mainland China, the Group had not implemented any hedging measures during the period under review.
During the period under review, the Group did not commit to any financial instruments to hedge its balance sheet exposures.
Acquisition and development of properties are financed partly by internal resources and partly by bank borrowings. Repayment of bank loans are scheduled to match asset lives and project completion dates. Borrowings are denominated in Hong Kong Dollars and bear interest at floating rates.
SIGNIFICANT INVESTMENTS HELD
During the six months ended 30 June 2020, the Group had no significant investments.
MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
On 19 July 2018, the Group entered into a sale and purchase agreement with an independent third party to dispose the entire issued share capital of Lucky Way Holdings Investment Limited and its subsidiaries (collectively the "Lucky Way Group") and the assignment of the loans repayable by the Lucky Way Group to the Group at an aggregate consideration of HK$467,635,000. The disposal of Lucky Way Group was completed on 5 February 2020. Please refer to the announcements issued by the Company on 19 July 2018 and supplemental announcements issued afterward on 28 September 2018, 27 November 2018, 31 January 2019, 28 February 2019, 31 May 2019 and 5 February 2020 for more details.(Note I)
Save as disclosed above, there was no material acquisition or disposal of subsidiaries, associates and joint ventures by the Group for the six months ended 30 June 2020.
Note I: As at the reporting date, the Group has not yet received any repayment of the short term loan facilities granted on 5 February 2020, of which a sum of HK$45,000,000 had already past due since 4 May 2020.
INTERIM REPORT 2020 | 11 |
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
EVENT AFTER REPORTING PERIOD
The outbreak of COVID-19 has led to different extents of travel bans and lockdowns imposed by various countries and regions around the world. Increased global travel restrictions amid virus infections locally and overseas have already substantially hindered the manufacturing capability of many countries, which in turn is disrupting global supply chains and international trade, and hence a severe threat to global economy. The Group anticipates both the wider local economy and the property leasing market will remain weak and are unlikely to fully recover in the short term. Given the unpredictable nature of these constantly changing circumstances, the related impact on the consolidated results of operations, cash flows and financial condition of the Group could not be reasonably and tangibly fully evaluated at this stage and will be reflected in the Group's 2020 annual financial statements.
EMPLOYEES AND REMUNERATION POLICY
The Group had 238 and 49 employees in Hong Kong and Mainland China respectively as at 30 June 2020 (31 December 2019: 248 and 70 employees). Employees were remunerated on the basis of their performance, experience and market practice.
Remuneration packages comprise salary, medical insurance, mandatory provident fund and year end discretionary bonus. During the six months ended 30 June 2020, total salaries and wages were approximately HK$49,495,000 (30 June 2019: HK$57,068,000).
PLEDGE OF ASSETS
As at 30 June 2020, certain investment properties and property, plant and equipment of the Group with a total carrying value of approximately HK$14,252,230,000 (31 December 2019: approximately HK$13,935,600,000) were pledged to secure banking facilities for the Group.
12 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS
-
Directors' interests in the Company
As at 30 June 2020, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) which are required to be (i) notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she is taken or deemed to have taken under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) 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 the shares and underlying shares:
Approximate | |||
Percentage of | |||
the Company's | |||
Number of Ordinary | Total Issued | ||
Name of Director | Capacity | Shares Interested | Shares |
Foo Kam Chu Grace | Beneficial owner and | 208,913,130 (Note 1) | 73.74% |
Beneficiary of a trust | |||
Chan Wai Ling | Beneficiary of a trust | 208,816,528 (Note 2) | 73.71% |
Note 1: Madam Foo Kam Chu Grace ("Madam Foo") was deemed to be interested in 208,913,130 shares of the Company in aggregate: (i) 96,602 shares of the Company was personally held by Madam Foo; (ii) 206,430,528 shares of the Company as held by Ko Bee Limited ("Ko Bee"), the entire issued share capital of which was held by a discretionary trust (the "Trust") . Madam Foo is a beneficiary of the Trust; and (iii) 2,386,000 shares of the Company was held by Full Match Limited ("Full Match"), a company wholly-owned by Ko Bee.
Note 2: Ms. Chan Wai Ling ("Ms. Chan") was deemed to be interested in 208,816,528 shares of the Company. Ms. Chan is a beneficiary of the Trust.
INTERIM REPORT 2020 | 13 |
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
- Directors' Interests in Associated Corporations
Name of | |||||
Associated | Number and | Percentage of | |||
Name of Director | Corporation | Capacity | Class of Shares | Shareholding | |
Foo Kam Chu Grace | Ko Bee Limited | Beneficiary of a trust | 1 | ordinary share | 100% (Note 3) |
Chan Wai Ling | Ko Bee Limited | Beneficiary of a trust | 1 | ordinary share | 100% (Note 3) |
Foo Kam Chu Grace | Full Match Limited | Interest in controlled | 1 | ordinary share | 100% (Note 3) |
corporation and | |||||
Beneficiary of a trust | |||||
Chan Wai Ling | Full Match Limited | Interest in controlled | 1 | ordinary share | 100% (Note 3) |
corporation and | |||||
Beneficiary of a trust | |||||
Note 3: The entire issued share capital of Ko Bee is held by the Trust. The entire issued share capital of Full Match is held by Ko Bee. Madam Foo and Ms. Chan are the beneficiaries of the Trust.
Save as disclosed above, as at 30 June 2020, none of the Directors and chief executive of the Company had any interest or short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which are required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/ she is taken or deemed to have taken under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code.
DIRECTORS' RIGHT TO ACQUIRE SHARES AND DEBENTURES
Save as disclosed above, at no time during the six months ended 30 June 2020, were rights to subscribe for equity or debt securities of the Company granted to any Directors or chief executive of the Company or to their spouse or children under 18 years of age as recorded in the register required to be kept under Part XV of the SFO, or were any such rights exercised by them; or was the Company, its holding company, or any of its subsidiaries a party to any arrangement to enable any such persons to acquire any such rights in any other body corporate.
14 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
As at 30 June 2020, the person(s) other than a Director or chief executive of the Company who have interests or short positions of 5% or more in the shares or underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO, was/were as follows:
Long Positions in the Shares
Approximate | ||||
Percentage of | ||||
Name of Shareholder | Capacity | Number of Shares | Shareholding | |
Century Pine (PTC) | Trustee of a trust | 208,816,528 | (Notes 1&4) | 73.71% |
Limited | ||||
Ko Bee Limited | Beneficial owner and Interest of | 208,816,528 | (Notes 1&4) | 73.71% |
controlled corporation | ||||
Note 4: Ko Bee is ultimately held under the Trust with Century Pine (PTC) Limited as trustee for Madam Foo and her family members (including Ms. Chan, executive Director of the Company).
Save as disclosed above, as at 30 June 2020, the Company had not been notified by any person(s) (other than the Directors and chief executive of the Company, whose interests are set out in the section "Directors' and Chief Executive's Interests and Short Positions in Shares and Underlying Shares of the Company and its Associated Corporations" above) who had interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.
CONTINGENT LIABILITIES
As at 30 June 2020, the Group provided guarantees amounted to HK$233,353,000 (31 December 2019: HK$275,589,000) to banks with respect to mortgage loans procured by the purchasers of the Group's properties in the Mainland China. Such guarantees will be released by banks upon delivery of the properties to the purchasers and completion of the registration of the mortgage with the relevant mortgage registration authorities or settlement of the outstanding mortgage loan. In the opinion of the Directors, the fair value of the financial guarantee is not significant.
INTERIM REPORT 2020 | 15 |
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the six months ended 30 June 2020, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities.
AUDIT COMMITTEE
The Audit Committee, comprising three independent non-executive Directors, has reviewed with the management, the accounting principles and practices adopted by the Group and discussed internal controls and risk management, internal audit and financial reporting matters. The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2020 has been reviewed with no disagreement by the Audit Committee.
COMPLIANCE WITH CORPORATE GOVERNANCE CODE
The Company has complied with the applicable code provisions set out in the Corporate Governance Code (the "CG Code") contained in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") during the six months ended 30 June 2020 except for the following deviations:
-
Code Provision A.2.1
Code Provision A.2.1 of the CG Code provides that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual.
The roles of the chairman and chief executive officer are neither separated nor performed by two different individuals. Madam Foo Kam Chu Grace is the founder and Chairman of the Group. She is responsible for the Group's overall development direction and strategies. The Chairman ensures the Board functions effectively and discharges its responsibilities. There is no chief executive officer appointed and the daily operations of the Group are delegated to other executive Directors, the management and various department heads with clearly defined authority policy. The Board is of the view that the current management structure can effectively facilitate the Group's operation and business development. - Code Provision A.4.1
Code Provision A.4.1 of the CG Code provides that non-executive Directors should be appointed for a specific term.
The independent non-executive Directors are not appointed for a specific term as they are subject to retirement by rotation at least once every three years and re-election at the annual general meeting of the Company in accordance with the bye-laws of the Company.
16 SOUNDWILL HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
COMPLIANCE WITH MODEL CODE
The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its code of conduct regarding Directors' securities transactions. Having made specific enquiries with all Directors, the Company confirms that all of them have complied with the Model Code during the six months ended 30 June 2020.
The Company has also adopted the written guidelines on no less exacting terms than the Model Code for those relevant employees (as defined in the CG Code) in respect of their dealings in the securities of the Company in compliance with the Code Provision A.6.4 of the CG Code.
CHANGE IN DIRECTORS' INFORMATION
Change in the Directors' information since the disclosures made in the Company's 2019 annual report, which is required to be disclosed pursuant to the requirements of Rule 13.51B(1) of the Listing Rules is set out as below:
Name of Director | Change |
Tse Wai Hang | Mr. Tse, executive Director, is entitled to a monthly |
salary of HK$175,000 with effect from 1 January | |
2020. | |
Save as disclosed above, there is no other change in the Directors' information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules subsequent to the publication of the 2019 annual report of the Company.
APPRECIATION
As a final note, I wish to take this opportunity to thank the Directors and staff for their contributions and good performance during the period.
By Order of the Board
SOUNDWILL HOLDINGS LIMITED
Foo Kam Chu Grace
Chairman
Hong Kong, 26 August 2020
INTERIM REPORT 2020 | 17 |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Six months ended 30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Unaudited) | ||||
Notes | HK$'000 | HK$'000 | |||
Revenue | |||||
Revenue from goods and services | 117,119 | 80,454 | |||
Rental income | 249,299 | 280,180 | |||
Total revenue | 366,418 | 360,634 | |||
Cost of sales | (70,934) | (31,440) | |||
Gross profit | 295,484 | 329,194 | |||
Other income | 4 | 26,341 | 16,861 | ||
Selling expenses | (4,099) | (1,788) | |||
Administrative expenses | (63,584) | (71,826) | |||
Net fair value (loss)/gain on | |||||
investment properties | (122,150) | 809,382 | |||
Gain on disposal of subsidiaries | 17 | 2,040 | - | ||
Finance costs | 5 | (24,269) | (29,103) | ||
Profit before income tax expense | 6 | 109,763 | 1,052,720 | ||
Income tax expense | 7 | (37,013) | (47,873) | ||
Profit for the period | 72,750 | 1,004,847 | |||
18 SOUNDWILL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)
Six months ended 30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Unaudited) | ||||
HK$'000 | HK$'000 | ||||
Other comprehensive expense, | |||||
net of tax | |||||
Item that will not be reclassified to | |||||
profit or loss: | |||||
(Deficit)/surplus on revaluation of | |||||
building, net of deferred tax | (868) | 379 | |||
Item that may be reclassified | |||||
subsequently to profit or loss: | |||||
Exchange loss on translation of | |||||
foreign operations | (8,935) | (6,084) | |||
Other comprehensive expense for | |||||
the period, net of tax | (9,803) | (5,705) | |||
Total comprehensive income for | |||||
the period | 62,947 | 999,142 | |||
Profit/(loss) for the period | |||||
attributable to: | |||||
- Owners of the Company | 72,764 | 1,004,937 | |||
- Non-controlling interests | (14) | (90) | |||
72,750 | 1,004,847 | ||||
Total comprehensive income/ | |||||
(expense) for the period | |||||
attributable to: | |||||
- Owners of the Company | 63,352 | 999,513 | |||
- Non-controlling interests | (405) | (371) | |||
62,947 | 999,142 | ||||
INTERIM REPORT 2020 | 19 |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)
Six months ended 30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Unaudited) | ||||
Note | HK$ | HK$ | |||
Earnings per share for profit | |||||
attributable to owners of the | |||||
Company during the period | 8 | ||||
Basic | 0.26 | 3.55 | |||
20 SOUNDWILL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June | 31 December | ||||
2020 | 2019 | ||||
(Unaudited) | (Audited) | ||||
Notes | HK$'000 | HK$'000 | |||
ASSETS AND LIABILITIES | |||||
Non-current assets | |||||
Investment properties | 9 | 21,063,505 | 21,185,655 | ||
Property, plant and equipment | 10 | 145,801 | 153,712 | ||
Deposits paid for acquisition of | |||||
properties | 9,351 | 9,351 | |||
Loan receivables | 11 | 26,459 | 26,890 | ||
21,245,116 | 21,375,608 | ||||
Current assets | |||||
Properties for sale | 951,685 | 1,025,080 | |||
Trade and other receivables | 11 | 301,876 | 95,583 | ||
Financial assets at fair value through | |||||
profit or loss ("FVTPL") | 95,459 | 99,255 | |||
Restricted bank deposits | 12 | 43,095 | 43,879 | ||
Short-term bank deposits | 12 | 52,049 | 250,000 | ||
Cash and cash equivalents | 12 | 727,843 | 307,211 | ||
2,172,007 | 1,821,008 | ||||
Assets classified as held for sale | - | 420,000 | |||
2,172,007 | 2,241,008 | ||||
INTERIM REPORT 2020 | 21 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
30 June | 31 December | ||||
2020 | 2019 | ||||
(Unaudited) | (Audited) | ||||
Notes | HK$'000 | HK$'000 | |||
Current liabilities | |||||
Trade and other payables | 13 | 645,008 | 709,154 | ||
Contract liabilities | 19,892 | 60,086 | |||
Borrowings | 14 | 183,605 | 213,005 | ||
Lease liabilities | 5,661 | 4,473 | |||
Provision for income tax | 120,984 | 165,647 | |||
975,150 | 1,152,365 | ||||
Net current assets | 1,196,857 | 1,088,643 | |||
Total assets less current liabilities | 22,441,973 | 22,464,251 | |||
Non-current liabilities | |||||
Borrowings | 14 | 1,701,225 | 1,731,058 | ||
Lease liabilities | 5,664 | 6,798 | |||
Deferred tax liabilities | 123,263 | 120,859 | |||
1,830,152 | 1,858,715 | ||||
Net assets | 20,611,821 | 20,605,536 | |||
EQUITY | |||||
Equity attributable to owners of the | |||||
Company | |||||
Share capital | 15 | 28,331 | 28,331 | ||
Reserves | 20,569,234 | 20,562,544 | |||
20,597,565 | 20,590,875 | ||||
Non-controlling interests | 14,256 | 14,661 | |||
Total equity | 20,611,821 | 20,605,536 | |||
22 SOUNDWILL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020 (unaudited) | |||||||||||||
Equity attributable to owners of the Company | |||||||||||||
Proposed | |||||||||||||
Capital | Assets | final and | Non- | ||||||||||
Share | Share | redemption | revaluation | Retained | Exchange | Special | special | controlling | Total | ||||
capital | premium | reserve | reserve | profits | reserve | reserve | dividends | Total | interests | equity | |||
HK$'000 HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
At 1 January 2020 | 28,331 | 690,811 | 295 | 110 | 19,852,538 | (39,720) | 1,848 | 56,662 | 20,590,875 | 14,661 | 20,605,536 | ||
Profit/(loss) for the period | - | - | - | - | 72,764 | - | - | - | 72,764 | (14) | 72,750 | ||
Other comprehensive expense | |||||||||||||
Item that will not be reclassified to profit or loss: | |||||||||||||
Deficit on revaluation of buildings, net of | |||||||||||||
deferred tax | - | - | - | (868) | - | - | - | - | (868) | - | (868) | ||
Item that may be reclassified subsequently | |||||||||||||
to profit or loss: | |||||||||||||
Exchange loss on translation of foreign | |||||||||||||
operations | - | - | - | - | - | (8,544) | - | - | (8,544) | (391) | (8,935) | ||
Total comprehensive income/(expense) for | |||||||||||||
the period | - | - | - | (868) | 72,764 | (8,544) | - | - | 63,352 | (405) | 62,947 | ||
Final dividend paid for 2019 | - | - | - | - | - | - | - | (56,662) | (56,662) | - | (56,662) | ||
At 30 June 2020 | 28,331 | 690,811 | 295 | (758) | 19,925,302 | (48,264) | 1,848 | - | 20,597,565 | 14,256 | 20,611,821 | ||
INTERIM REPORT 2020 | 23 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
For the six months ended 30 June 2019 (unaudited) | |||||||||||||
Equity attributable to owners of the Company | |||||||||||||
Proposed | |||||||||||||
Capital | Assets | final and | Non- | ||||||||||
Share | Share | redemption | revaluation | Retained | Exchange | Special | special | controlling | |||||
capital | premium | reserve | reserve | profits | reserve | reserve | dividends | Total | interests | Total equity | |||
HK$'000 HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
At 1 January 2019 | 28,331 | 690,811 | 295 | 688 | 19,691,418 | (28,889) | 1,848 | 56,662 | 20,441,164 | 15,055 | 20,456,219 | ||
Profit/(loss) for the period | - | - | - | - | 1,004,937 | - | - | - | 1,004,937 | (90) | 1,004,847 | ||
Other comprehensive income/(expense) | |||||||||||||
Item that will not be reclassified to profit or loss: | |||||||||||||
Surplus on revaluation of buildings, net of | |||||||||||||
deferred tax | - | - | - | 379 | - | - | - | - | 379 | - | 379 | ||
Item that may be reclassified subsequently | |||||||||||||
to profit or loss: | |||||||||||||
Exchange loss on translation of foreign | |||||||||||||
operations | - | - | - | - | - | (5,803) | - | - | (5,803) | (281) | (6,084) | ||
Total comprehensive income/(expense) for | |||||||||||||
the period | - | - | - | 379 | 1,004,937 | (5,803) | - | - | 999,513 | (371) | 999,142 | ||
Final dividend paid for 2018 | - | - | - | - | - | - | - | (56,662) | (56,662) | - | (56,662) | ||
At 30 June 2019 | 28,331 | 690,811 | 295 | 1,067 | 20,696,355 | (34,692) | 1,848 | - | 21,384,015 | 14,684 | 21,398,699 | ||
24 SOUNDWILL HOLDINGS LIMITED
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Unaudited) | ||||
Note | HK$'000 | HK$'000 | |||
Net cash inflow from operating | |||||
activities | 86,962 | 354,455 | |||
Net cash inflow/(outflow) from | |||||
investing activities | 475,170 | (291,237) | |||
Net cash (outflow)/inflow from | |||||
financing activities | (142,398) | 670,294 | |||
Increase in cash and cash equivalents | 419,734 | 733,512 | |||
Cash and cash equivalents at | |||||
1 January | 307,211 | 186,238 | |||
Effect of foreign exchange rate | |||||
changes, net | 898 | (5,708) | |||
Cash and cash equivalents at | |||||
30 June | 12 | 727,843 | 914,042 | ||
INTERIM REPORT 2020 | 25 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2020
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial statements of Soundwill Holdings Limited (the "Company") and its subsidiaries (the "Group") for the six months ended 30 June 2020 (the "Unaudited Condensed Consolidated Interim Financial Statements") have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") and with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").
The Unaudited Condensed Consolidated Interim Financial Statements are presented in Hong Kong dollars ("HK$"), which is also the functional currency of the Company.
2. PRINCIPAL ACCOUNTING POLICIES
The Unaudited Condensed Consolidated Interim Financial Statements have been prepared on the historical cost basis, except for investment properties and leasehold building, which are stated at fair values or revalued amounts.
Other than changes in accounting policies resulting from application of new and amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies and methods of computation used in the Unaudited Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.
26 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
2. PRINCIPAL ACCOUNTING POLICIES (Continued)
Application of amendments to HKFRSs
In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatory effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:
Amendments to HKAS 1 and | Definition of Material |
HKAS 8 | |
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS 9, | Interest Rate Benchmark Reform |
HKAS 39 and HKFRS 7 |
Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.
2.1 Impacts of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"
The amendments provide a new definition of material that states "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, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.
The application of the amendments in the current period had no impact on the condensed consolidated financial statements.
INTERIM REPORT 2020 | 27 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
3. SEGMENT INFORMATION
The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors of the Company for their decisions about resources allocation to the Group's business components and for their review of the performance of those components. The business components in the internal financial information reported to the executive directors of the Company are determined following the Group's major business lines.
The Group has identified the following operating and reportable segments:
Property development | : Development of residential, industrial and |
commercial properties | |
Property leasing | : Property rental including signage rental and rental |
under mini-storage operation | |
Building management | : Provision of building management, property |
and other services | repairs and maintenance services |
Each of these operating and reportable segments is managed separately as each of the business lines requires different resources as well as operating approaches.
Also, the Group engaged in properties assembly and sales of properties business. There is no project under property assembly business in both periods. Thus, this is not constitute a reportable segment during both periods.
28 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
3. SEGMENT INFORMATION (Continued)
Segment revenue and results
Six months ended 30 June | ||||||||
Building management | ||||||||
Property development | Property leasing | and other services | Segment total | |||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Revenue | ||||||||
External customers | 105,026 | 70,956 | 249,299 | 280,180 | 12,093 | 9,498 | 366,418 | 360,634 |
Inter-segments(note) | - | - | 108 | 216 | 578 | 2,417 | 686 | 2,633 |
Segment revenue | 105,026 | 70,956 | 249,407 | 280,396 | 12,671 | 11,915 | 367,104 | 363,267 |
Segment profits | 29,485 | 27,046 | 219,365 | 252,257 | 10,284 | 6,578 | 259,134 | 285,881 |
Certain other income, other | ||||||||
gains and losses | 12,908 | 7,795 | ||||||
Gain on disposal of subsidiaries | 2,040 | - | ||||||
Certain administrative expenses | (17,900) | (21,235) | ||||||
Net fair value (loss)/gain on | ||||||||
investment properties | (122,150) | 809,382 | ||||||
Finance costs | (24,269) | (29,103) | ||||||
Profit before income tax | ||||||||
expense | 109,763 | 1,052,720 | ||||||
Note: Inter-segment sales are charged at mutual agreed terms.
The operating and reportable segment results exclude finance costs, net fair value (loss)/gain on investment properties, certain other income, gain on disposal of subsidiaries, certain administrative expenses and income tax expense.
INTERIM REPORT 2020 | 29 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
3. SEGMENT INFORMATION (Continued)
Segment assets and liabilities
Building management | ||||||||
Property development | Property leasing | and other services | Segment total | |||||
30 June | 31 December | 30 June | 31 December | 30 June | 31 December | 30 June | 31 December | |
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
(Unaudited) | (Audited) | (Unaudited) | (Audited) | (Unaudited) | (Audited) | (Unaudited) | (Audited) | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Segment assets | 1,395,656 | 1,302,330 | 21,302,818 | 21,396,340 | 20,883 | 24,089 | 22,719,357 | 22,722,759 |
Certain property, plant and | ||||||||
equipment | 39 | 1,801 | ||||||
Short-term bank deposits | 52,049 | 250,000 | ||||||
Certain cash and cash equivalents | 645,678 | 222,056 | ||||||
Assets classified as held for sale | - | 420,000 | ||||||
Total assets | ||||||||
23,417,123 | ||||||||
23,616,616 | ||||||||
Segment liabilities | 375,184 | 249,313 | 8,495 | 632,992 | ||||
424,754 | 286,230 | 9,068 | 720,052 | |||||
Certain other payables | 43,233 | |||||||
60,459 | ||||||||
Borrowings | 1,884,830 | 1,944,063 | ||||||
Provision for income tax | 120,984 | 165,647 | ||||||
Deferred tax liabilities | 123,263 | 120,859 | ||||||
Total liabilities | ||||||||
2,805,302 | ||||||||
3,011,080 | ||||||||
Segment assets include all assets other than certain property, plant and equipment, short-term bank deposits, certain cash and cash equivalents and assets classified as held for sale.
Segment liabilities comprise all liabilities other than certain other payables, provision for income tax, deferred tax liabilities and borrowings.
30 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
4. | OTHER INCOME | |||
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | |||
Bank interest income | 15,721 | 12,893 | ||
Interest income from loan receivables | 5,524 | - | ||
Interest income arising from rental deposits paid | - | 12 | ||
Miscellaneous income | 5,096 | 3,956 | ||
26,341 | 16,861 | |||
5. | FINANCE COSTS | |||
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | |||
Interest charged on: | ||||
Bank loans | 23,976 | 26,214 | ||
Lease liabilities and rental deposits received | 293 | 2,889 | ||
24,269 | 29,103 | |||
INTERIM REPORT 2020 | 31 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
6. PROFIT BEFORE INCOME TAX EXPENSE
Profit before income tax expense is arrived at after charging:
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
Cost of completed properties for sale recognised | ||
as expense | 67,261 | 29,081 |
Depreciation of right-of-use assets and other | ||
property, plant and equipment | 9,960 | 4,606 |
Employee compensation expense | ||
(including Directors' remuneration and defined | ||
contribution cost) (note) | 49,495 | 57,068 |
Operating lease charges in respect of premises | 323 | 368 |
Note: During the six months ended 30 June 2020, the Group incurred employee compensation expenses of approximately HK$21,864,000 (2019: HK$21,588,000) included in the above employee benefit expense, which is employed on behalf of the third parties to whom these subsidiaries provided building management services. Such expenses are set-off with other income from building management services received by the Group.
7. INCOME TAX EXPENSE
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
The charge comprises: | ||
Hong Kong Profits Tax | 28,439 | 30,707 |
PRC Enterprise Income Tax ("EIT") | 2,897 | 10,672 |
PRC Land Appreciation Tax | 2,872 | 990 |
Deferred tax charge | 2,805 | 5,504 |
37,013 47,873
32 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
7. INCOME TAX EXPENSE (Continued)
Hong Kong Profits Tax has been provided at the rate of 16.5% on the estimated assessable profit arising in or derived from Hong Kong for both periods.
All of the Group's Mainland China subsidiaries are subject to PRC EIT rate of 25% for both periods.
8. EARNINGS PER SHARE
The calculation of basic earnings per share for profit attributable to the owners of the Company is based on the following data:
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
Earnings | ||
Profit attributable to owners of the Company | ||
(HK$'000) | 72,764 | 1,004,937 |
Number of shares | ||
Number of ordinary shares for the purpose of | ||
basic earnings per share (note) | 283,308,635 | 283,308,635 |
Note:
During the six months ended 30 June 2020 and 2019, neither the Company nor any of its subsidiaries had repurchased any of the Company's shares respectively.
No diluted earnings per share for six months ended 30 June 2020 and 2019 was presented as there were no potential ordinary shares in issue during six months ended 30 June 2020 and 2019.
INTERIM REPORT 2020 | 33 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
9. INVESTMENT PROPERTIES
Changes to the carrying amount presented in the Consolidated Statement of Financial Position can be summarised as follows:
2020
(Unaudited) HK$'000
Carrying amount at 1 January | 21,185,655 |
Net fair value loss on investment properties | (122,150) |
Carrying amount at 30 June | 21,063,505 |
The Group's investment properties were revalued at 31 December 2019 and 30 June 2020 by independent professional valuers, Cushman & Wakefield Limited and Knight Frank Petty Limited respectively, on the following basis:
- The completed investment properties (whole block of commercial building) are revalued by adopting income capitalisation method, which involves certain estimates, including capitalisation rates and reversionary income potential;
- The completed investment properties (individual units (including commercial, industrial and residential properties) or ground floor retail properties) are revalued based on direct comparison method, by reference to market transactions of comparable properties; and
- Investment properties under re-development were revalued on the re- development basis by adopting the residual method. The value is based on the re-development potential of the properties as if these properties will be developed and completed in accordance with the existing redevelopment proposal at the date of valuation and is determined by deducting the estimated total cost of the development, including costs of construction, professional fee, finance cost, associated costs and an allowance of profit that duly reflected developer's risk associated with the development from the gross development value.
34 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
9. INVESTMENT PROPERTIES (Continued)
In determining the fair values of the investment properties, the Group engages an independent qualified professional valuer to perform the valuation. The management works with the independent qualified professional valuer to establish the appropriate valuation techniques and inputs for level 3 fair value measurement. Where there is a material change in the fair value of the investment properties, the causes of the fluctuations will be reported to the Directors.
In relying on these valuations, the management has exercised judgement and are satisfied that the methods of valuation adopted are appropriate and reflective of the current market conditions.
The carrying amount of the Group's investment properties is a level 3 fair value measurement. There were no investment property transfers into or out of level 3 fair value measurement during both periods.
INTERIM REPORT 2020 | 35 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
9. INVESTMENT PROPERTIES (Continued)
The following table gives information about how the fair values of these investment properties are determined (in particular, the valuation techniques and inputs used).
Investment | |||||
properties held by | Interrelationship | ||||
the Group in the | between significant | ||||
consolidated | Significant | unobservable | |||
statement of | Fair value as at | Valuation | unobservable | Range of significant | input(s) and fair |
financial position | 30 June 2020 | technique(s) | input(s) | unobservable inputs | value measurement |
HK$'000 | |||||
Completed investment properties | |||||
Completed investment | 16,016,000 | Income capitalisation | Reversionary rental | HK$27 - HK$51 | The higher the |
properties (whole | (31 December | method | value | (31 December 2019: | reversionary rental |
block of | 2019: 16,092,000) | HK$23 - HK$56) per | value, the higher the | ||
commercial | month per square foot | fair value | |||
building) | for upper-level office/ | ||||
restaurants premises; | |||||
HK$88 - HK$897 | |||||
(31 December 2019: | |||||
HK$78 - HK$1,164) | |||||
per month per square | |||||
foot for ground floor | |||||
shops | |||||
Capitalisation rate | 2.25% - 3.50% | The higher the | |||
(31 December 2019: | capitalisation rate, | ||||
2.25% - 3.50%) | the lower the fair | ||||
value | |||||
Completed investment | 2,349,505 | Direct comparison | Adjustment to price per | +/-20% (31 December | The higher the quality |
properties | (31 December | method | square foot in | 2019: +/-20%) | of properties with |
(individual units | 2019: 2,373,655) | relation to quality of | reference to | ||
(including | properties (e.g. | comparables, the | |||
commercial, | location, size, level | higher the fair value | |||
industrial and | and condition with | ||||
residential | reference to | ||||
properties) or | comparables of the | ||||
ground floor retail | properties) | ||||
properties) | |||||
36 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
9. INVESTMENT PROPERTIES (Continued)
Investment | |||||
properties held by | Interrelationship | ||||
the Group in the | between significant | ||||
consolidated | Significant | unobservable | |||
statement of | Fair value as at | Valuation | unobservable | Range of significant | input(s) and fair |
financial position | 30 June 2020 | technique(s) | input(s) | unobservable inputs | value measurement |
HK$'000 | |||||
Investment properties | 2,698,000 | Residual method | Price per square foot | HK$20,700 - HK$21,200 | The higher the price |
under | (31 December | (31 December 2019: | per square foot, the | ||
re-development | 2019: 2,720,000) | HK$22,000 | higher the fair value | ||
- HK$23,300) per | |||||
square foot for office | |||||
premises; | |||||
HK$32,000 - HK$39,400 | |||||
(31 December 2019: | |||||
HK$27,000 - | |||||
HK$33,000) per | |||||
square foot for retail | |||||
properties | |||||
Estimated construction | HK$3,500 - HK$4,100 | The higher the | |||
and other | (31 December 2019: | estimated | |||
professional costs | HK$3,600 | construction and | |||
to completion | - HK$3,900) per | other professional | |||
square foot | costs, the lower the | ||||
fair value | |||||
Estimated profit margin | 15% (31 December | The higher estimated | |||
required to hold and | 2019: 10% - 15%) | profit margin, the | |||
develop the | lower the fair value | ||||
investment | |||||
properties to | |||||
completion | |||||
INTERIM REPORT 2020 | 37 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
During the current interim period, no renovation of office premises had been carried out by the Group (30 June 2019: HK$3,605,000).
The Group's buildings classified as property, plant and equipment were revalued by an independent qualified professional valuer as at the end of the reporting period. The resulting revaluation loss of HK$1,040,000 (revaluation gain in 30 June 2019: HK$454,000) has been debited to the assets revaluation reserve during the six months ended 30 June 2020.
During the current interim period, the Group entered into new lease agreements for the use of industrial premises. The Group is required to make fixed monthly payments on the usage of the asset during the contract period. On lease commencement, the Group recognized approximately HK$2,370,000 (30 June 2019: HK$2,536,000) of right-of-use asset and approximately HK$2,370,000 (30 June 2019: HK$2,509,000) lease liability.
38 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
11. TRADE AND OTHER RECEIVABLES/LOAN RECEIVABLES
As at 30 June 2020, trade receivables included in trade and other receivables were approximately HK$37,798,000 (31 December 2019: HK$21,449,000). The credit terms of the Group ranging from 30 to 90 days. The ageing analysis of trade receivables, presented based on the invoice date, was set out below:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Current assets: | ||
0-30 days | 16,369 | 11,772 |
31-90 days | 9,076 | 6,176 |
91-180 days | 4,676 | 2,976 |
Over 180 days | 7,677 | 525 |
Total trade receivables, net | 37,798 | 21,449 |
Other receivables, utility deposits and | ||
prepayment, net of provision for impairment | 103,744 | 69,215 |
loss | ||
Loan receivables | 160,334 | 4,919 |
264,078 | 74,134 | |
Total trade and other receivables categorised as | 301,876 | 95,583 |
current assets | ||
Non-current assets: | ||
Loan receivables | 26,459 | 26,890 |
328,335 | 122,473 | |
The Directors consider that the fair values of trade and other receivables which are expected to be recovered within one year are not materially different from their carrying amounts due to short maturity periods on their inception.
INTERIM REPORT 2020 | 39 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
12. CASH AND BANK BALANCES/RESTRICTED BANK DEPOSITS/ SHORT-TERM BANK DEPOSITS
The cash and bank balances of the Group was summarised as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
43,095 | 43,879 | |
Restricted bank deposits | ||
Short-term bank deposits with original maturity | 52,049 | 250,000 |
over three months | ||
Cash and cash equivalents | 727,843 | 307,211 |
Total cash and bank balances | 822,987 | 601,090 |
Cash at bank earns interest at floating rates based on the daily bank deposit rates.
The Group's bank balances included restricted bank deposits of approximately HK$43,095,000 (31 December 2019: HK$43,879,000) which was restricted for the purpose of construction related payments.
Included in cash and cash equivalents of the Group is approximately HK$97,854,000 (31 December 2019: HK$94,975,000) of bank balances denominated in Renminbi placed with banks in the Mainland China.
40 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
13. TRADE AND OTHER PAYABLES
As at 30 June 2020, trade payables included in trade and other payables were approximately HK$17,810,000 (31 December 2019: HK$17,358,000). The Group was granted credit periods by its suppliers ranging from 30 to 60 days. The ageing analysis of trade payables, presented based on the invoice date, was set out below:
30 June | 31 December | ||
2020 | 2019 | ||
(Unaudited) | (Audited) | ||
HK$'000 | HK$'000 | ||
0-30 days | 1,631 | 1,519 | |
31-90 days | 309 | 1,263 | |
Over 90 days | 15,870 | 14,576 | |
Total trade payables | 17,810 | 17,358 | |
Other payables | 627,198 | 691,796 | |
645,008 | 709,154 | ||
14. BORROWINGS | |||
30 June | 31 December | ||
2020 | 2019 | ||
(Unaudited) | (Audited) | ||
HK$'000 | HK$'000 | ||
Current liabilities | |||
Bank loans - secured | 183,605 | 213,005 | |
Non-current liabilities | |||
Bank loans - secured | 1,701,225 | 1,731,058 | |
1,884,830 | 1,944,063 | ||
INTERIM REPORT 2020 | 41 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
14. BORROWINGS (Continued)
At the end of the reporting periods, the maturity analysis of the Group's borrowings is stated as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Carrying amount of bank loans repayable based on | ||
the scheduled repayment dates set out in the | ||
loan agreements: | 63,105 | |
Within one year | 63,105 | |
More than one year, but not exceeding two | 1,351,225 | |
years | 59,665 | |
More than two years, but not exceeding five | 350,000 | |
years | 1,671,393 | |
1,764,330 | 1,794,163 | |
Carrying amount of bank loans that contain a | ||
repayable on demand clause (shown under | ||
current liabilities) but repayable based on the | ||
scheduled repayment dates set out in the loan | ||
agreements: | ||
Within one year | 120,500 | 149,900 |
120,500 | 149,900 | |
Total bank loans | 1,884,830 | 1,944,063 |
Carrying amount of bank loans matured within one | ||
year or those contain a repayment on demand | ||
clause (shown under current liabilities) | (183,605) | (213,005) |
Amount shown under non-current liabilities | 1,701,225 | 1,731,058 |
42 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
15. SHARE CAPITAL
There were no movements in the share capital of the Company in the six months ended 30 June 2020.
16. RELATED PARTY TRANSACTIONS
The following transactions with related parties were, in the opinion of the Directors, carried out in the ordinary course of business during the periods:
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
Related companies | ||
Operating lease charges and management fee in | ||
respect of office premises situated in | ||
Guangzhou, the PRC | 260 | 271 |
(note (a)) | ||
Rental income in respect of an office premise | 100 | 300 |
(note (b)) | ||
Rental expense for leasing carparking spaces | ||
situated in Guangzhou, the PRC | 13 | 30 |
(note (c)) | ||
INTERIM REPORT 2020 | 43 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
16. RELATED PARTY TRANSACTIONS (Continued)
Notes:
- A subsidiary of the Company entered into a tenancy agreement with a related company, in which the Chairman and an executive director of the Company have interests, for leasing office premises situated at Guangzhou, the PRC for office purpose.
- For the periods ended 30 June 2020 and 2019, a subsidiary of the Company entered into a tenancy agreement with a company, in which the Chairman and her daughters have wholly-owned interest, for leasing an office premise in Soundwill Plaza for the period of three years commencing from 1 September 2018 and expiring on 31 August 2021 at monthly rental of HK$50,000. The tenancy agreement was terminated on 29 February 2020.
- A subsidiary of the Company entered into tenancy agreements with a related company, in which a close family member of the Chairman and an executive Director of the Company have interests, for leasing two (30 June 2019: three) carparking spaces situated in Guangzhou, the PRC.
- For the periods ended 30 June 2020 and 2019, subsidiaries of the Company entered into property management agreements with a related company, in which the Chairman and an executive director of the Company have interests, for managing properties for sale situated in the Mainland China.
44 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
17. DISPOSAL OF SUBSIDIARIES
On 19 July 2018, the Group entered into an agreement to dispose of the entire equity interest in a wholly-owned subsidiary, namely Lucky Way Holdings Investment Limited ("Lucky Way"), to an independent third party at an aggregate consideration of HK$467,635,000. Lucky Way is an investment holding company and holds the entire issued share capital of a subsidiary which in turn holds a property comprising a work site and tenement building located in Hong Kong (collectively known as "Lucky Way Group"). The disposal of Lucky Way Group was completed on 5 February 2020. The net assets of subsidiaries at the date of disposal were as follows:
HK$'000 | |
Net assets disposed of | |
Assets classified as held for sale (note a) | 420,000 |
Deferred tax | (230) |
Amounts due to fellow subsidiaries | (139,447) |
280,323 | |
Loan assignment | 139,447 |
Direct expenses in relation to disposal of subsidiaries | 45,825 |
Gain on disposal of Lucky Way Group | 2,040 |
467,635 | |
Total consideration | |
- satisfied by cash | 312,353 |
- satisfied by repayment of loan (note b) | 155,282 |
467,635 | |
INTERIM REPORT 2020 | 45 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
17. DISPOSAL OF SUBSIDIARIES (Continued)
HK$'000 | |
Net cash inflow arising from disposal of Lucky Way | |
Group up to current interim period: (note c) | |
Consideration received | 312,353 |
Direct expenses | (20,236) |
292,117 | |
Notes:
- Assets classified as held for sale solely comprised investment properties held by Lucky Way Group. The investment properties have a historical cost of HK$139,002,000 and net fair value gain HK$280,998,000 making a total of HK$420,000,000.
-
The Group granted short term loan facilitates of HK$155,282,000 ("Loan") to two of the beneficial owners of the purchaser of Lucky Way ("Borrowers") to enable the completion of the disposal of Lucky Way Group (and details thereof are set out in the Announcement dated 5 February 2020). The loan was included under "Loan receivables" in the consolidated statement of financial position as at 30 June 2020.
As at the reporting date, the Group has not yet received any repayment of the Loan, of which a sum of HK$45,000,000 had already past due since 4 May 2020. - Approximately HK$45,825,000 has been provided as direct expenses in relation to the disposal of Lucky Way Group. As at 30 June 2020, the Group paid approximately HK$20,236,000 and the remaining direct expenses of HK$25,589,000 have been included under "Other payables" in the consolidated statement of financial position.
The net cash inflow arising from disposal of Lucky Way Group will be HK$266,528,000 after deducting the remaining direct expenses and the total net cash inflow, upon receipt of Loan repayment and deducting all direct expenses, will become HK$421,810,000.
46 SOUNDWILL HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 30 June 2020
18. FUTURE OPERATING LEASE ARRANGEMENTS
The Group leases its investment properties (note 9) under operating lease arrangements with average lease terms of one to five years with an option to renew the lease terms at the expiry date or at dates mutually agreed between the Group and the respective tenants. Certain leases include contingent rentals calculated with reference to turnover of the tenants. As at 30 June 2020, the Group had future aggregate minimum lease receipts under non-cancellable operating leases in respect of investment properties are as follows:
30 June 31 December
2020 2019
(Unaudited) (Audited)
HK$'000 HK$'000
426,015 | 452,127 | ||||
Within one year | |||||
More than one year but not exceeding | 377,915 | 516,582 | |||
five years | |||||
More than five years | - | 70 | |||
803,930 | 968,779 | ||||
19. COMMITMENTS | |||||
Capital commitments | |||||
31 December | |||||
30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Audited) | ||||
HK$'000 | HK$'000 | ||||
Contracted but not provided for: | |||||
- Acquisition of investment properties | 17,641 | 17,641 | |||
20. EVENT AFTER REPORTING PERIOD
The outbreak of COVID-19 has led to different extents of travel bans and lockdowns imposed by various countries and regions around the world. Increased global travel restrictions amid virus infections locally and overseas have already substantially hindered the manufacturing capability of many countries, which in turn is disrupting global supply chains and international trade, and hence a severe threat to global economy. The Group anticipates both the wider local economy and the property leasing market will remain weak and are unlikely to fully recover in the short term. Given the unpredictable nature of these constantly changing circumstances, the related impact on the consolidated results of operations, cash flows and financial condition of the Group could not be reasonably and tangibly fully evaluated at this stage and will be reflected in the Group's 2020 annual financial statements.
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Soundwill Holdings Limited published this content on 23 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2020 09:09:06 UTC
