TAN CHONG INTERNATIONAL LIMITED INTERIM REPORT 2020
TAN CHONG INTERNATIONAL LIMITED
陳唱國際有限公司
(Incorporated in Bermuda with limited liability) Stock code: 693
Contents
02 Management Review
04 Consolidated Statement of Profit or Loss (Unaudited)
05 Consolidated Statement of Profit or Loss and Other Comprehensive Income (Unaudited)
06 Consolidated Statement of Financial Position (Unaudited)
08 Consolidated Statement of Changes in Equity (Unaudited)
10 Condensed Consolidated Cash Flow Statement (Unaudited)
11 Notes to the Unaudited Consolidated Financial Statements
23 Other Information
Management Review
RESULTS
The outbreak of the coronavirus disease (the "COVID-19") in the beginning of 2020 triggered sudden introductions of many extraordinary measures, including anti-pandemic lockdown of social and economic activities by governments of 11 countries in the Asia Pacific region where the Group operates. These measures curbed and, in some instances, caused almost total suspension of the Group's business activities and operations. Coupled with geopolitical factors playing out to its extremity, the business environment was tremendously challenging. The austere measures by the governments resulted in weak economic outcomes and poor consumers sentiment across the region, severely impacting the Group's business and performance for the Period. Although the Group's transportation logistics operations by ZERO CO. LTD in Japan ("ZERO") registered a slight decline in revenue, the Group's overall revenue and vehicle sale units decline by 16% and 29% respectively.
The Group's revenue in the first half of 2020 was HK$5.784 billion; a 16% decrease as compared to HK$6.911 billion for the first half of 2019.
EBITDA declined 38% to HK$315.2 million and after tax loss of HK$46.1 million as compared to HK$511.3 million and after tax profit of HK$143.2 million respectively for the corresponding period of 2019.
The Group's net gearing ratio computed by dividing the net debt with the total equity was 9.8% as compared to 6.1% for the period ending 31st December 2019.
ROCE, computed by dividing earnings before interest and taxes (EBIT) with total equity plus non- current liabilities, was reduced to 0.4% as compared to 1.7% for the first half of 2019.
Net Asset Per Share at 30th June 2020 was HK$5.81, a decrease from the HK$6.23 as recorded at the end of December 2019.
The directors have declared an interim dividend of HK$0.01 per share for the half year of 2020.
SIGNIFICANT INVESTMENTS
As at 30 June 2020, the Group had investments designated as at fair value through other comprehensive income of HK$1.88 billion. The investments consist of both listed and unlisted equity securities. The vast majority of these investments are equity securities listed on the Tokyo Stock Exchange that were accumulated over the years as strategic long-term investments. The Group recorded an unrealized loss on its investments designated as at fair value through other comprehensive income of HK$398 million as compared to the unrealized gain of HK$255 million for the corresponding period in 2019. The loss is due to share price changes of its listed investments, which are marked to market and is reported in other comprehensive income statement for the period. It is not expected that such unrealized fair value loss on its investments will be reclassified to the Group's consolidated statement of profit or loss.
SINGAPORE AND CHINA
In Singapore, the automotive industry was affected by both a decrease in the COE quota and negative impact of COVID-19 pandemic and Circuit Breaker measures. The Group recorded a double- digit decline in sales volume. The Group expects the 2nd half of 2020 to be equally challenging, but with gradual intermittent pace of recovery.
The Hong Kong business experienced a slight downturn in sales volume in the 1st half of 2020. Retail sales fell drastically in June in Hong Kong. With the impact of second wave of COVID-19, the 2nd half of the year looks equally challenging amidst the current tightening of COVID-19 measures and resultant economic impact.
Mainland China automotive market experienced negative growth in the 1st half of the year. The Group's production capacities in automotive manufacturing in Nanjing and Xiamen were also affected by COVID-19 pandemic in 1st half of 2020. The respective divisions will continue their efforts to broaden their customer base and upgrading of their products line-up.
As the first market that was impacted by COVID-19 pandemic, China's economy is showing signs of gradual recovery. The Group believes that it is unwise not to be engaged in this large and prospective automotive market. Thus, we will continue to persevere for the long-term benefits that this market of great potential may offer.
02 | Tan Chong International Limited Interim Report 2020 |
Management Review (continued)
TAIWAN AND PHILIPPINES
New vehicle sales in Taiwan experienced negative growth in the 1st half of 2020. The Group registered a double-digit sales decline. The 2nd half of the year looks more promising as Taiwan seems to have controlled COVID-19 situation very well, barring unforeseen domestic situation.
Philippines recorded more than 50% sales decline in the 1st half of 2020 due to COVID-19 pandemic and lockdown along with strict restrictive measures being implemented. As for the 2nd half of 2020, sales is forecasted to be worse as Philippines appears to be the new epicentre for the pandemic in Southeast Asia and the economy has plunged into recession.
CKD MARKETS OF MALAYSIA, THAILAND, VIETNAM AND CAMBODIA
It is the second year since the Group's joint venture plant started production of Subaru cars. These vehicles are sold through the Group's networks and dealers in Malaysia, Thailand and Vietnam. Shipments to Cambodia will commence in the 2nd half of 2020. As the above Asean countries adopt vehicle taxation methodologies based on CKD regimes, businesses in these countries are feasible and competitive only if production complies with local CKD production format.
With the negative impact of COVID-19 in Malaysia, the Group recorded there a decline in sales in the 1st half of 2020 as compared to previous year. This was due to the response measures against COVID-19 implemented. Both Malaysia and Thailand are gradually recovering from the impact of COVID-19 in the 2nd half of 2020.
In Vietnam, after the start of Thailand produced cars, sales increased more than 5 times, admittedly starting from a low base, in the 1st half of 2020. For the 2nd half of the year, the growth is expected to be slower as the second wave of COVID-19 has impacted Vietnam.
In Cambodia, the sale of Thailand produced cars will start in the 2nd half of 2020. The Group expects good sales volume based on initial sales responses.
The Truck and Industrial machinery operations are continually being scaled down and streamlined to reduce cost and waste.
JAPAN
The revenue and net profit for 1st half of 2020 of the Group's transportation logistics operations represented by ZERO decreased by 8% and 38% respectively, as compared to the corresponding period in 2019. The decrease was due to the effect of COVID-19 pandemic which softened both the domestic new automobile sales and used car export markets in the first half of 2020 and affected ZERO's human resource business resulting from customers and clients terminating their temporary staffing contracts in 2nd quarter of 2020.
With the effect of COVID-19 which is predicted to remain prevalent in 2nd half of 2020, ZERO expects that its sales revenue will drop for its next financial year. ZERO will continue to expand its core customer base in both its logistics and human resource businesses, despite many challenges of driver shortages, government labour reform policies and higher compliance costs associated with vehicle restriction laws.
PROSPECTS
The Group envisages increased risks enveloping the geopolitical and global trade environment, coupled with rapidly changing automotive industry safety and vehicle emissions policies. Another threat that will impact vehicle sales negatively in the near future is the global trend of customers meeting their transportation needs via services provided by ride hailing companies rather than purchasing or owning their own vehicles.
Due to the unprecedented fluidity of the current moment, the Group is hesitant to determine the duration and severity of COVID-19 crisis. It is therefore unable to assess the full financial impact for year ending 2020. The Group wishes to highlight that a prolonged COVID-19 crisis will have a material effect on the Group's year end results.
Despite the above risks, the Group firmly believes that focusing on developing a culture of resilience and cost competitiveness continuously is not only the backbone of its operations but central to the management of its retail/distribution and logistics networks. It is also the Group's overall investment philosophy. The Group is optimistic that this will ensure a sustainable long-term growth of our businesses in the Asian markets, an area that holds vast opportunities and a region that offers great promises.
Tan Chong International Limited Interim Report 2020 | 03 |
Consolidated Statement of Profit or Loss for the six months ended 30 June 2020 (Unaudited)
Note | Six months ended 30 June | ||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Unaudited) | ||
Revenue | 3 | 5,784,063 | 6,911,487 |
Cost of sales | (4,718,359) | (5,543,194) | |
Gross profit | 1,065,704 | 1,368,293 | |
Other net income | 83,914 | 84,154 | |
Distribution costs | (580,171) | (640,432) | |
Administrative expenses | (512,706) | (568,870) | |
Other operating expenses | (28,283) | (15,361) | |
Profit from operations | 28,458 | 227,784 | |
Finance costs | (44,951) | (51,205) | |
Share of profits less losses of associates | 35,458 | 36,100 | |
Profit before taxation | 4 | 18,965 | 212,679 |
Income tax expense | 5 | (65,082) | (69,499) |
(Loss)/profit for the period | (46,117) | 143,180 | |
Attributable to: | |||
Equity shareholders of the Company | (75,285) | 97,137 | |
Non-controlling interests | 29,168 | 46,043 | |
(Loss)/profit for the period | (46,117) | 143,180 | |
(Loss)/earnings per share | 7 | ||
Basic and diluted | (HK$0.04) | HK$0.05 | |
The notes on pages 11 to 22 form part of these financial statements. Details of dividends payable to equity shareholders of the Company are set out in note 6.
04 | Tan Chong International Limited Interim Report 2020 |
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the six months ended 30 June 2020 (Unaudited)
Six months ended 30 June | |||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Unaudited) | ||
(Loss)/profit for the period | (46,117) | 143,180 | |
Other comprehensive income for the | |||
period (after tax and reclassification adjustments) | |||
Items that will not be reclassified to profit or loss: | |||
Remeasurement of net defined benefit liability | 5,441 | (9,767) | |
Investments designated as at fair value through | |||
other comprehensive income: | |||
- changes in fair value recognised | |||
during the period | (398,162) | 255,023 | |
(392,721) | 245,256 | ||
Items that may be reclassified to profit or loss: | |||
Exchange differences on translation of | |||
financial statements of: | |||
- subsidiaries outside Hong Kong | (211,765) | 21,961 | |
- associates outside Hong Kong | (18,954) | 2,263 | |
(230,719) | 24,224 | ||
Other comprehensive income for the period | (623,440) | 269,480 | |
Total comprehensive income for the period | (669,557) | 412,660 | |
Attributable to: | |||
Equity shareholders of the Company | (689,007) | 317,818 | |
Non-controlling interests | 19,450 | 94,842 | |
Total comprehensive income for the period | (669,557) | 412,660 | |
The notes on pages 11 to 22 form part of these financial statements.
Tan Chong International Limited Interim Report 2020 | 05 |
Consolidated Statement of Financial Position
at 30 June 2020 (Unaudited)
Note | At 30 June | At 31 December | |
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Audited) | ||
Non-current assets | |||
Investment properties | 3,507,227 | 3,628,592 | |
Other property, plant and equipment | 4,916,376 | 5,150,565 | |
Intangible assets | 97,902 | 106,057 | |
Goodwill | 39,698 | 39,168 | |
Interest in associates | 900,332 | 883,828 | |
Other financial assets | 47,188 | 65,441 | |
Hire purchase debtors and instalments receivable | 158,263 | 206,429 | |
Non-current prepayments | 123,558 | 131,390 | |
Deferred tax assets | 63,977 | 53,280 | |
9,854,521 | 10,264,750 | ||
Current assets | |||
Investments designated as at fair value through | |||
other comprehensive income | 8 | 1,833,431 | 2,211,149 |
Inventories | 2,518,371 | 2,634,350 | |
Properties held for sale | 8,912 | 16,774 | |
Trade debtors | 9 | 1,236,804 | 1,319,206 |
Hire purchase debtors and instalments receivable | 92,210 | 112,785 | |
Other debtors, deposits and prepayments | 510,170 | 515,544 | |
Amounts due from related companies | 157 | 171 | |
Cash and bank balances | 10 | 2,053,603 | 2,450,254 |
8,253,658 | 9,260,233 | ||
Current liabilities | |||
Unsecured bank overdrafts | 10 | 133,090 | 75,780 |
Bank loans | 2,759,072 | 2,825,895 | |
Trade creditors | 11 | 747,865 | 1,122,535 |
Other creditors and accruals | 1,321,229 | 1,390,460 | |
Amounts due to related companies | 21,142 | 14,502 | |
Lease liabilities | 251,123 | 277,832 | |
Current taxation | 120,151 | 94,895 | |
Provisions | 53,924 | 48,831 | |
5,407,596 | 5,850,730 | ||
Net current assets | 2,846,062 | 3,409,503 | |
Total assets less current liabilities | 12,700,583 | 13,674,253 |
The notes on pages 11 to 22 form part of these financial statements.
06 | Tan Chong International Limited Interim Report 2020 |
Consolidated Statement of Financial Position (continued)
at 30 June 2020 (Unaudited)
Note | At 30 June | At 31 December | |
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Audited) | ||
Non-current liabilities | |||
Bank loans | 305,040 | 319,975 | |
Lease liabilities | 464,959 | 552,707 | |
Net defined benefit retirement obligations | 89,831 | 109,115 | |
Deferred tax liabilities | 94,220 | 93,315 | |
Provisions | 53,873 | 48,264 | |
1,007,923 | 1,123,376 | ||
NET ASSETS | 11,692,660 | 12,550,877 | |
Capital and reserves | |||
Share capital | 12 | 1,006,655 | 1,006,655 |
Reserves | 9,440,118 | 10,309,852 | |
Total equity attributable to equity | |||
shareholders of the Company | 10,446,773 | 11,316,507 | |
Non-controlling interests | 1,245,887 | 1,234,370 | |
TOTAL EQUITY | 11,692,660 | 12,550,877 | |
The notes on pages 11 to 22 form part of these financial statements.
Tan Chong International Limited Interim Report 2020 | 07 |
Consolidated Statement of Changes in Equity for the six months ended 30 June 2020 (Unaudited)
Attributable to equity shareholders of the Company | ||||||
Stock | ||||||
Share | Share | Capital | compensation | Translation | Contributed | |
capital | premium | reserve | reserve | reserve | surplus | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
Balance at 1 January | ||||||
2019 (Audited) | 1,006,655 | 550,547 | 9,549 | 6,532 | 580,578 | 377,690 |
Changes in equity for the six months ended 30 June 2019
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Equity settled share based transactions
Dividends declared and approved during the period
Dividends paid by non-wholly owned subsidiaries to non- controlling interests
Balance at 30 June 2019
(Unaudited)
Balance at 1 January
2020 (Audited)
− | − | − | − | − | − | |||||||
− | − | − | − | (28,520) | − | |||||||
− | − | − | − | (28,520) | − | |||||||
− | − | 1,023 | − | − | ||||||||
− | − | − | − | − | − | |||||||
− | − | − | − | − | − | |||||||
1,006,655 | 550,547 | 9,549 | 7,555 | 552,058 | 377,690 | |||||||
1,006,655 | 550,547 | 9,549 | 8,551 | 601,011 | 377,690 |
Changes in equity for the six months ended 30 June 2020
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Equity settled share based transactions
Dividends declared and approved during the period
Dividends paid by non-wholly owned subsidiaries to non- controlling interests
Balance at 30 June 2020
(Unaudited)
− | − | − | − | − | − | |||||
− | − | − | − | (224,073) | − | |||||
− | − | − | − | (224,073) | − | |||||
− | − | − | 471 | − | − | |||||
− | − | − | − | − | − | |||||
− | − | − | − | − | − | |||||
1,006,655 | 550,547 | 9,549 | 9,022 | 376,938 | 377,690 | |||||
The notes on pages 11 to 22 form part of these financial statements.
08 | Tan Chong International Limited Interim Report 2020 |
Attributable to equity shareholders of the Company | |||||
Fair value | Property | ||||
reserve | revaluation | Retained | Non-controlling | ||
(non-recycling) | reserve | profits | Total | interests | Total equity |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
1,448,689 | 331,167 | 6,694,334 | 11,005,741 | 1,142,694 | 12,148,435 |
− | − | 97,137 | 97,137 | 46,043 | 143,180 |
254,397 | − | (5,196) | 220,681 | 48,799 | 269,480 |
254,397 | − | 91,941 | 317,818 | 94,842 | 412,660 |
− | − | − | 1,023 | 900 | 1,923 |
− | − | (191,264) | (191,264) | − | (191,264) |
− | − | − | − | (2,212) | (2,212) |
1,703,086 | 331,167 | 6,595,011 | 11,133,318 | 1,236,224 | 12,369,542 |
1,755,902 | 332,988 | 6,673,614 | 11,316,507 | 1,234,370 | 12,550,877 |
− | − | (75,285) | (75,285) | 29,168 | (46,117) |
(392,543) | − | 2,894 | (613,722) | (9,718) | (623,440) |
(392,543) | − | (72,391) | (689,007) | 19,450 | (669,557) |
− | − | − | 471 | 414 | 885 |
− | − | (181,198) | (181,198) | − | (181,198) |
− | − | − | − | (8,347) | (8,347) |
1,363,359 | 332,988 | 6,420,025 | 10,446,773 | 1,245,887 | 11,692,660 |
Tan Chong International Limited Interim Report 2020 | 09 |
Condensed Consolidated Cash Flow Statement for the six months ended 30 June 2020 (Unaudited)
Six months ended 30 June | ||
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Unaudited) | |
Net cash generated from/(used in) operating activities | 39,630 | (157,254) |
Net cash used in investing activities | (144,485) | (109,353) |
Net cash used in financing activities | (306,760) | (609,054) |
Net decrease in cash and cash equivalents | (411,615) | (875,661) |
Cash and cash equivalents at 1 January | 2,363,597 | 2,992,070 |
Effect of exchange differences | (32,343) | 40,836 |
Cash and cash equivalents at 30 June | 1,919,639 | 2,157,245 |
The notes on pages 11 to 22 form part of these financial statements.
10 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements
-
Basis of preparation
The unaudited consolidated interim financial statements have been prepared in accordance with the requirements of the Listing Rules of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"), including compliance with International Accounting Standard 34, Interim Financial Reporting, issued by the International Accounting Standards Board.
The unaudited consolidated interim financial statements have been prepared in accordance with the same accounting policies adopted in the 2019 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2020 annual financial statements. - Changes in accounting policies
The International Accounting Standards Board ("IASB") has issued a number of amendments to IFRSs that are first effective for the current accounting period of the Group. Of these, Amendments to IFRS 16, Covid-19Related Rent Concessions is relevant to the Group's financial statements.
The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.
Amendments to IFRS 16 which provides relief to lessees from having to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. The practical expedient applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: (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; (iii) there is no substantive change to other terms and conditions of the lease.
Tan Chong International Limited Interim Report 2020 | 11 |
Notes to the Unaudited Consolidated Financial Statements (continued)
3 Revenue and Segment Reporting
Revenue represents the sales value of goods sold, services provided to customers, hire purchase financing income, rental income, income from sale of properties, management service fees, agency commission and handling fees and warranty income, net of goods and services taxes where applicable, is analysed as follows:
-
Disaggregation of revenue
Disaggregation of revenue from contracts with customers by major products or services lines and geographical location of customers is as follows:
Six months ended 30 June
2020 2019
HK$'000 HK$'000 (Unaudited) (Unaudited)
Revenue from contracts with customers within the scope of IFRS 15
Disaggregated by major products or services
lines | |||
- | Sale of goods | 2,394,880 | 3,211,910 |
- | Rendering of services | 3,282,713 | 3,584,607 |
- Gross proceeds from properties sold | 18,789 | − | |
- Agency commission and handling fees | 26,402 | 37,429 | |
- | Warranty income | 4,149 | 4,331 |
Revenue from other sources | |||
- Gross rentals from investment properties | 40,201 | 50,823 | |
- Hire purchase financing income | 16,929 | 22,387 | |
5,784,063 | 6,911,487 | ||
12 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements (continued)
3 Revenue and Segment Reporting (continued)
- Disaggregation of revenue (continued)
Revenue
Six months ended 30 June
2020 2019
HK$'000 HK$'000
(Unaudited) (Unaudited)
Disaggregated by geographical location of customers
- | Singapore | 650,354 | 1,101,488 |
- | PRC | 268,113 | 395,999 |
- | Thailand | 445,278 | 428,124 |
- | Japan | 3,087,509 | 3,340,224 |
- | Taiwan | 686,386 | 830,158 |
- | Others | 646,423 | 815,494 |
5,784,063 | 6,911,487 | ||
Tan Chong International Limited Interim Report 2020 | 13 |
Notes to the Unaudited Consolidated Financial Statements (continued)
3 Revenue and Segment Reporting (continued)
- Segment results
Disaggregation of revenue from contracts with customers by timing of revenue recognition, as well as information regarding the Group's reportable segments as provided to the Group's most senior executive management for the purposes of resource allocation and assessment of segment performance for the periods ended 30 June 2020 and 2019 is set out below.
Heavy commercial vehicle, | |||||
industrial equipment | |||||
Motor vehicle distribution | distribution and | Property rentals | |||
and dealership business | dealership business | and development | |||
Six months ended 30 June | Six months ended 30 June | Six months ended 30 June | |||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) | |||||
Disaggregated | |||||
by timing of | |||||
revenue | |||||
recognition |
Point in time | 2,232,619 | 2,993,309 | 58,934 | 69,466 | 18,789 | − |
Over time | 159,753 | 204,035 | 31,775 | 38,691 | 38,219 | 48,956 |
Revenue from | ||||||
external | 2,392,372 | 3,197,344 | 90,709 | 108,157 | 57,008 | 48,956 |
customers | ||||||
EBITDA | (697) | 71,943 | (14,731) | 16,427 | 37,780 | 72,325 |
- Reconciliation of reportable segment profit or loss
Six months ended 30 June | ||
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Unaudited) | |
Total segment EBITDA | 315,185 | 511,301 |
Depreciation and amortisation | (295,782) | (298,185) |
Interest income | 9,055 | 14,668 |
Finance costs | (44,951) | (51,205) |
Share of profits less losses of associates | 35,458 | 36,100 |
Consolidated profit before taxation | 18,965 | 212,679 |
14 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements (continued)
Transportation | Other operations | Consolidated | |||
Six months ended 30 June | Six months ended 30 June | Six months ended 30 June | |||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
− | − | 103,328 | 149,134 | 2,413,670 | 3,211,909 |
3,087,509 | 3,340,224 | 53,137 | 67,672 | 3,370,393 | 3,699,578 |
3,087,509 | 3,340,224 | 156,465 | 216,806 | 5,784,063 | 6,911,487 |
259,735 | 333,286 | 33,098 | 17,320 | 315,185 | 511,301 |
Tan Chong International Limited Interim Report 2020 | 15 |
Notes to the Unaudited Consolidated Financial Statements (continued)
4 Profit before taxation
Profit before taxation is arrived at after charging/(crediting):
Six months ended 30 June | |||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Unaudited) | ||
Finance costs | 44,951 | 51,205 | |
Depreciation | |||
- owned property, plant and equipment | 160,434 | 172,343 | |
- right-of-use assets | 135,348 | 125,842 | |
Dividend income | (20,979) | (54,032) | |
Loss/(gain) on disposal of property, plant and equipment | 1,051 | (2,597) | |
5 | Income tax expense | ||
The analysis of income tax expense is as follows: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Unaudited) | ||
Hong Kong | 440 | 325 | |
Singapore | 12,007 | 14,844 | |
Others | 52,635 | 54,330 | |
65,082 | 69,499 | ||
The Group's applicable tax rate represents the weighted average of the statutory corporate income tax rates, which mainly range between 16.5% (2019: 16.5%) and 30.62% (2019: 30.62%), in the tax jurisdictions in which the Group operates.
6 Dividends
Six months ended 30 June
2020 2019
HK$'000 HK$'000
(Unaudited) (Unaudited)
- Dividends attributable to the period: Interim dividend declared of HK$0.01
(2019: HK$0.02) per ordinary share | 20,133 | 40,266 |
The interim dividend has not been recognised as a liability as of the end of the reporting period.
(ii) Dividends paid during the period: | ||
Final dividend approved in respect of | ||
prior year of HK$0.09 (2019: HK$0.095) | ||
per ordinary share | 181,198 | 191,264 |
16 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements (continued)
-
(Loss)/earnings per share
The calculation of basic loss per share for the six months ended 30 June 2020 is based on net loss attributable to equity shareholders of the Company of HK$75,285,000 (2019: profit of HK$97,137,000) and the weighted average number of shares of 2,013,309,000 (2019: 2,013,309,000) in issue during the period.
Diluted (loss)/earnings per share for the periods ended 30 June 2020 and 2019 is the same as the basic (loss)/earnings per share as there were no dilutive securities outstanding during the periods presented. - Investments designated as at fair value through other comprehensive income
At 30 | At 31 | |
June | December | |
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Audited) | |
Equity securities | ||
Listed outside Hong Kong, designated as at fair value | ||
through other comprehensive income | 1,833,431 | 2,211,149 |
Financial assets at fair value through other comprehensive income
The Group designated all of its investments in equity securities as at fair value through other comprehensive income under IFRS 9 as listed below. This designation was chosen as the investments are held for strategic purposes.
Fair value | Dividend income recognised | |||
At 30 | At 31 | |||
June | December | Six months ended 30 June | ||
2020 | 2019 | 2020 | 2019 | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
(Unaudited) | (Audited) | (Unaudited) | (Unaudited) | |
Investments in Subaru | ||||
Corporation | 1,831,059 | 2,207,942 | 20,586 | 53,134 |
Others | 49,560 | 68,648 | 393 | 898 |
1,880,619 | 2,276,590 | 20,979 | 54,032 | |
Fair value loss for the six months ended 30 June 2020 is mainly contributed by the HK$385,272,000 decrease in fair value of the Group's equity investment in Subaru Corporation ("Subaru"). There was no significant addition nor disposal for this equity security during the period ended 30 June 2020.
Subaru is listed on the Tokyo Stock Exchange, it is mainly operating in two businesses, the Automotive business and the Aerospace business. In the area of Automotive, it is in the business of manufacture, repair and sales of passenger cars and their components. In the area of Aerospace, it is in the manufacture, repair and sales of airplanes aerospace-related machinery and their components. The number of shares and percentage held of this investment are 11,355,000 shares and 1.5% of Subaru's issued shares respectively. The investment cost is JPY7.5 billion. This investment represents 10.1% of the Groups' total assets.
There were no transfers of any cumulative gain or loss within equity during the period.
Tan Chong International Limited Interim Report 2020 | 17 |
Notes to the Unaudited Consolidated Financial Statements (continued)
9 Trade debtors
As of the end of the reporting period, the ageing analysis of trade debtors, based on invoice date and net of loss allowances, is as follows:
At 30 | At 31 | |
June | December | |
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Audited) | |
0 - 30 days | 642,273 | 949,923 |
31 - 90 days | 316,093 | 320,648 |
Over 90 days | 278,438 | 48,635 |
1,236,804 | 1,319,206 | |
The Group allows credit periods ranging from seven days to six months.
10 | Cash and bank balances | ||
At 30 | At 31 | ||
June | December | ||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Audited) | ||
Bank deposits | 504,652 | 914,568 | |
Cash at bank | 1,545,135 | 1,530,755 | |
Cash in hand | 3,816 | 4,931 | |
Cash and bank balances in the consolidated | |||
statement of financial position | 2,053,603 | 2,450,254 | |
Less: Bank deposits with more than three months | |||
to maturity when placed | (874) | (10,877) | |
Unsecured bank overdrafts | (133,090) | (75,780) | |
Cash and cash equivalents in the condensed | |||
consolidated cash flow statement | 1,919,639 | 2,363,597 | |
11 Trade creditors
As of the end of the reporting period, the ageing analysis of trade creditors, based on the invoice date, is as follows:
At 30 | At 31 | |
June | December | |
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Audited) | |
0 - 30 days | 470,352 | 686,002 |
31 - 90 days | 165,934 | 295,549 |
91 - 180 days | 43,937 | 65,974 |
Over 180 days | 67,642 | 75,010 |
747,865 | 1,122,535 | |
18 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements (continued)
12 | Share capital | ||
At 30 | At 31 | ||
June | December | ||
2020 | 2019 | ||
HK$'000 | HK$'000 | ||
(Unaudited) | (Audited) | ||
Authorised: | |||
3,000,000,000 ordinary shares of HK$0.50 each | 1,500,000 | 1,500,000 | |
Issued and fully paid: | |||
2,013,309,000 ordinary shares of HK$0.50 each | 1,006,655 | 1,006,655 | |
13 Equity settled share based transactions
The Group has a stock compensation program (the "Program") which was adopted on 26 November 2015. The Program is operated through a trustee which is independent of the Group. This is a performance-based scheme whereby on 18 December 2015, shares of a listed subsidiary are acquired by the trustee using money contributed as funds by the subsidiary. The shares are distributed by the trustee in accordance with the Rules on Distributions of Board Benefits of the subsidiary based on points given to each of the entitled employees in view of their positions and performance. Incidentally, the shares of the subsidiary shall be distributed to the entitled employees as a general rule when they leave their positions. Each point granted can be converted into one share of the subsidiary at distribution. No vesting condition is required after the points are granted.
The maximum number of points which may be awarded to selected participants under the Program shall not exceed 500,000. The trust fund shall not have a definite expiration date and continue as long as the Program exist. Maximum amount of money to be contributed by the subsidiary is JPY500,000,000 (equivalent to HK$35,942,500) and further contribution to the trust fund is subject to approval by the board of the subsidiary.
The first grant date is 26 November 2015, in the years after, point is granted to the eligible recipient annually on 30 June. However, if the eligible recipient retires during the fiscal period, the point will be granted on the date of retirement in proportion.
Up to 30 June 2020, a total of 333,120 points were granted to selected participants.
- The terms and conditions of the grants are as follows:
Number of | |
points | |
Points granted to employees: | |
On 26 November 2015 | 71,420 |
On 1 July 2016 | 60,000 |
On 1 July 2017 | 57,500 |
On 1 July 2018 | 63,000 |
On 1 July 2019 | 81,200 |
Tan Chong International Limited Interim Report 2020 | 19 |
Notes to the Unaudited Consolidated Financial Statements (continued)
13 Equity settled share based transactions (continued)
- The movements of number of points granted are as follows:
2020 | 2019 |
Number | Number |
of points | of points |
Outstanding at the beginning of the period Forfeited during the period
Exercised during the period Granted during the period Outstanding at the end of the period Exercisable at the end of the period
- Fair value of points and assumptions
227,200 160,000
(22,200) (4,000)
(1,500) (10,000)
-
81,200
203,500 227,200
203,500 227,200
The fair value of services received in return for points granted is measured by reference to the fair value of points granted. The estimate of the fair value of the points granted is measured based on a Black-Scholes model.
1 July | 1 July | |
2019 | 2018 | |
Fair value of points and assumptions | ||
Fair value at measurement date | JPY654 | JPY954 |
Share price | JPY801 | JPY1,201 |
Expected volatility (expressed as weighted | ||
average volatility used in the modelling | ||
under Black-Scholes model) | 31.8% | 33.9% |
Expected option life (expressed as weighted | ||
average life used in the modelling under | ||
Black-Scholes model) | 6.3 years | 6.8 years |
Expected dividends | 3.2% | 3.4% |
Risk-free interest rate (based on the yield of | ||
Japanese government bonds) | 0.3% | 0.1% |
The expected volatility is based on the historic volatility (calculated based on the historical daily stock price of the period corresponding to the expected remaining period), adjusted for any expected changes to future volatility based on publicly available information. Changes in the subjective input assumptions could materially affect the fair value estimate.
The closing prices of the subsidiary's shares immediately before the grant of the points on 1 July 2018 and 1 July 2019 were JPY1,201 (equivalent to HK$85) and JPY801 (equivalent to HK$57) per share respectively.
During the period ended 30 June 2020, the Group recognised a net expense of HK$885,000 (2019: HK$1,895,000) as equity settled share based payments in relation to the Program.
20 | Tan Chong International Limited Interim Report 2020 |
Notes to the Unaudited Consolidated Financial Statements (continued)
14 Fair value measurement of financial instruments
-
Financial instruments carried at fair value Fair value hierarchy
The following table presents the fair value of the Group's financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows: - Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date
- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available
- Level 3 valuations: Fair value measured using significant unobservable inputs
Fair value measurement as at | Fair value measurement as at | ||||||
30 June 2020 categorised into | 31 December 2019 categorised into | ||||||
Fair | Fair value | ||||||
value at | at 31 | ||||||
30 June | December | ||||||
2020 | Level 1 | Level 2 | Level 3 | 2019 | Level 1 | Level 2 | Level 3 |
(Unaudited) | (Audited) | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
The Group Recurring fair value
measurements
Assets
Equity securities designated as at fair value through other comprehensive income
- Listed outside Hong
Kong | 1,867,865 | 1,867,865 | − | − 2,261,021 | 2,261,021 | − | − | |
- Unlisted | 12,754 | − | − | 12,754 | 15,569 | − | − | 15,569 |
1,880,619 | 1,867,865 | − | 12,754 | 2,276,590 | 2,261,021 | − | 15,569 | |
During the six months ended 30 June 2020, there was no transfer among Level 1, Level 2 and Level 3. The Group's policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.
-
Fair values of financial instruments carried at other than fair value
The carrying amounts of the Group's financial instruments carried at cost or amortised cost are not materially different from their fair values as at 30 June 2020 and 31 December 2019.
Tan Chong International Limited Interim Report 2020 | 21 |
Notes to the Unaudited Consolidated Financial Statements (continued)
14 Fair value measurement of financial instruments (continued)
-
Information about Level 3 fair value measurements
Cost is used as an approximation of fair value for equity instruments that do not have a quoted market price in an active market.
The movements during the period in the balance of these Level 3 fair value measurements are as follows:
HK$'000 | |
Unlisted equity securities: | |
At 1 January 2019 (audited) | 17,624 |
Net fair value losses recognised in other comprehensive | |
income during the year | (2,311) |
Exchange adjustments | 256 |
At 31 December 2019 and 1 January 2020 (audited) | 15,569 |
Net fair value losses recognised in other comprehensive | |
income during the period | (1,767) |
Net disposal | (633) |
Exchange adjustments | (415) |
At 30 June 2020 (unaudited) | 12,754 |
15 Capital commitments
Capital commitments outstanding at 30 June 2020 not provided for in the financial statements were as follows:
At 30 | At 31 | |
June | December | |
2020 | 2019 | |
HK$'000 | HK$'000 | |
(Unaudited) | (Audited) | |
Authorised and contracted for | 8,765 | 8,257 |
16 Connected transactions
The following is a summary of significant transactions carried out in the normal course of business between the Group and its related companies during the period:
Six months ended 30 June
2020 2019
HK$'000 HK$'000
(Unaudited) | (Unaudited) | |
Sale of goods and services to related companies | 208 | 4 |
Purchase of goods and services from related companies | 18,388 | 31,467 |
All the sales and purchases and services rendered were on normal commercial terms.
17 Comparative figures
Certain comparative figures have been reclassified to conform with current period's presentation.
22 | Tan Chong International Limited Interim Report 2020 |
Other Information
Interim Dividend
The Board is pleased to declare an interim dividend of HK$0.01 (2019: HK$0.02) per ordinary
share on the shares in issue amounting to a total of HK$20,133,000 (2019: HK$40,266,000), which will be payable on 23 September 2020 to shareholders of the Company whose names appear on the Register of Members on 14 September 2020. Dividend warrants will be sent to shareholders on 23 September 2020.
Closure of Register of Members
The Register of Members will be closed from 11 September 2020 to 14 September 2020, both days inclusive. During this period, no transfer of shares will be effected and registered.
In order to qualify for the entitlement of the interim dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the Company's registrar, Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, not later than 4:30 pm on 10 September 2020.
Directors' Interests and Short Positions in Shares
The directors of the Company ("Directors") who held office as at 30 June 2020 had the following interests in the issued share capital of the Company at that date as recorded in the register of directors' interests and short positions required to be kept under section 352 of the Securities and Futures Ordinance ("SFO"):
Ordinary shares of HK$0.50 each | ||||||
Percentage | ||||||
Total | of total | |||||
Personal | Family | Corporate | Joint | number of | issued | |
interests | interests | interests | interests | shares held | shares | |
(Note 1) | (Note 2) | (Note 3) | ||||
Executive Directors: | ||||||
Tan Eng Soon | 152,460,000 | - | 348,544,700 | 85,932,972 | 586,937,672 | 29.15% |
Tan Kheng Leong | 2,205,000 | 210,000 | - | - | 2,415,000 | 0.12% |
Sng Chiew Huat | 900,000 | - | - | - | 900,000 | 0.04% |
Glenn Tan Chun | ||||||
Hong | 99,000 | - | - | - | 99,000 | 0.0049% |
Non-executive | ||||||
Director: | ||||||
Joseph Ong Yong | ||||||
Loke | 684,000 | 795,000 | 940,536 | - | 2,419,536 | 0.12% |
Independent | ||||||
Non-executive | ||||||
Director: | ||||||
Teo Ek Kee | - | 300,000 | - | - | 300,000 | 0.01% |
Tan Chong International Limited Interim Report 2020 | 23 |
Other Information (continued)
Directors' Interests and Short Positions in Shares (continued)
Notes:
- These shares are beneficially owned by the spouses of Tan Kheng Leong, Joseph Ong Yong Loke and Teo Ek Kee, respectively, and hence they are deemed to be interested in these shares respectively.
- These shares are beneficially owned by corporations controlled by Tan Eng Soon and Joseph Ong Yong Loke, respectively.
- These shares are owned by Tan Eng Soon jointly with another persons.
Save as disclosed above, none of the Directors or chief executives, or any of their spouses or children under eighteen years of age, had any beneficial or non-beneficial interests or short positions in shares of the Company or any of its subsidiaries or associates (within the meaning of the SFO) as at 30 June 2020, and there was no right granted to or exercised by any Directors or chief executives of the Company, or any of their spouses or children under eighteen years of age, during the period to subscribe for shares, as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company pursuant to the Model Code for Securities Transactions by Directors of Listed Companies ("Model Code") as set out in Appendix 10 of the Listing Rules of the Stock Exchange.
At no time during the period was the Company, any of its subsidiaries or any of its fellow subsidiaries a party to any arrangement to enable the Directors or any of their spouses or children under eighteen years of age to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Substantial Interests in the Share Capital of the Company
The Company has been notified of the following interests (other than a Director) in the Company's issued shares as at 30 June 2020 amounting to 5% or more of the ordinary shares in issue:
Percentage | ||||
Long/short | Ordinary | of total | ||
Name | positions | Note | shares held | issued shares |
Tan Chong Consolidated | ||||
Sdn. Bhd. | Long | (1) | 705,819,720 | 35.05% |
Promenade Group Limited | Long | (2) | 212,067,000 | 10.53% |
Tan Kim Hor | Long | (3) | 144,801,495 | 7.19% |
Pang Siew Ha | Long | 134,821,032 | 6.69% | |
Time Strategy Group Limited | Long | (4) | 104,497,700 | 5.19% |
Lee Lang | Long | 103,930,622 | 5.16% |
24 | Tan Chong International Limited Interim Report 2020 |
Other Information (continued)
Substantial Interests in the Share Capital of the Company (continued)
Notes:
- The share capital of Tan Chong Consolidated Sdn. Bhd. is held by Tan Eng Soon as to approximately 22.85% and Tan Kheng Leong as to approximately 15.38%. The remaining shareholding is held by certain members of the Tan family who are not Directors.
- Tan Eng Soon is the controlling shareholder of Promenade Group Limited.
- Tan Kim Hor passed away on 21 March 2016. His interest includes his spouses' interests.
- Tan Eng Soon is the controlling shareholder of Time Strategy Group Limited.
Save as disclosed above, no persons, other than a Director whose interests are set out above, had registered interests in the share capital of the Company that was required to be recorded in the register under section 336 of the SFO.
Purchase, Sale or Redemption of the Company's Listed Securities
There were no purchase, sale or redemption of the Company's shares by the Company or any of its subsidiaries during the period.
Audit Committee
The Audit Committee has reviewed with management the unaudited consolidated interim financial statements of the Group for the period ended 30 June 2020.
Directors' Securities Transactions
Pursuant to the Model Code requirements as set out in Appendix 10 of the Listing Rules of the Stock Exchange, all Directors confirmed that they have complied with the required standard and its code of conduct regarding directors' securities transactions for the accounting period under review.
Tan Chong International Limited Interim Report 2020 | 25 |
Other Information (continued)
Corporate Governance Code
No Director is aware of any information which would reasonably indicate that the Company is not, or was not, at any time during the six months ended 30 June 2020, acting in compliance with the Corporate Governance Code as set out in Appendix 14 of the Listing Rules of the Stock Exchange. The non-executive Director and independent non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the Company's annual general meeting in accordance with the Company's Bye-laws. The Chairman had been instrumental in listing the Group. He has in-depth professional knowledge of, and extensive experience in the automobile industry and full cognizance of the workings of the business operations of the Group. In view of this, the Board would like him to continue with some executive functions. The balance of power and authority is ensured by the participation and input of the other Board members who are highly qualified and experienced professionals. The roles of the respective executive Directors and senior management who are in charge of different disciplinary functions complement the role of the Chairman and Chief Executive Officer. The Board believes that this structure is conducive to strong and consistent leadership enabling the Group to make and implement decisions promptly and efficiently.
The Board is currently carrying out the responsibilities of the nomination committee.
By Order of the Board
Sng Chiew Huat
Finance Director
Hong Kong, 26 August 2020
Website: http://www.tanchong.com
As at the date of this report, the executive Directors are Mr. Tan Eng Soon, Mr. Glenn Tan Chun Hong, Mr. Tan Kheng Leong and Mdm. Sng Chiew Huat. The non-executive Director is Mr. Joseph Ong Yong Loke. The independent non-executive Directors are Mr. Ng Kim Tuck, Mr. Azman Bin Badrillah, Mr. Prechaya Ebrahim and Mr. Teo Ek Kee.
26 | Tan Chong International Limited Interim Report 2020 |
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