INTERIM REPORT STOCK CODE : 00194

Transcription

1 STOCK CODE : INTERIM REPORT

2 CORPORATE INFORMATION BOARD OF DIRECTORS EXECUTIVE DIRECTORS Mr. Liu Lit Chi (Chairman, Managing Director and Chief Executive Officer) Mr. Liu Kam Fai, Winston (Deputy Managing Director) Mr. Liu Kwun Shing, Christopher (also alternate director to Dr. Liu Lit Chung) Mr. Lee Wai Hung NON-EXECUTIVE DIRECTORS Dr. Liu Lit Chung MBBS (Lon), MRCP(UK), F.R.C.P. (Lon) Mr. Kho Eng Tjoan, Christopher BES. M. Arch, HKIA, RIBA, ARAIA, MRAIC, Assoc. AIA, Registered Architect, A.P. (Architect), MHKIoD INDEPENDENT NON-EXECUTIVE DIRECTORS Dr. Cheng Mo Chi, Moses GBM, GBS, OBE, LLB (HK), J.P. Mr. Au Kam Yuen, Arthur Dr. Ma Hung Ming, John, PhD, BBS, J.P. Mr. Cheng Yuk Wo Msc (Econ), BA (Hons), CPA (Canada), CA, FCA, FCPA, CPA (Practising) Mr. Tong Tsun Sum, Eric CA(Aust), CPA (Practising), CFE COMPANY SECRETARY Mr. Lee Wai Hung AUDIT COMMITTEE Mr. Cheng Yuk Wo (Chairman) Dr. Cheng Mo Chi, Moses Mr. Au Kam Yuen, Arthur Mr. Tong Tsun Sum, Eric Mr. Lee Wai Hung (Secretary) NOMINATION COMMITTEE Mr. Liu Lit Chi (Chairman) Mr. Kho Eng Tjoan, Christopher Mr. Cheng Yuk Wo Mr. Au Kam Yuen, Arthur Dr. Ma Hung Ming, John Mr. Tong Tsun Sum, Eric Mr. Lee Wai Hung (Secretary) REMUNERATION COMMITTEE Dr. Cheng Mo Chi, Moses (Chairman) Mr. Kho Eng Tjoan, Christopher Dr. Ma Hung Ming, John Mr. Cheng Yuk Wo Ms. Cavior Liu (Secretary) CORPORATE GOVERNANCE COMMITTEE Mr. Liu Kwun Shing, Christopher (Chairman) Mr. Au Kam Yuen, Authur Dr. Ma Hung Ming, John Mr. Liu Kam Fai, Winston Mr. Lee Wai Hung EXECUTIVE MANAGEMENT COMMITTEE Mr. Liu Lit Chi (Chairman) Mr. Liu Kam Fai, Winston Mr. Liu Kwun Shing, Christopher Mr. Lee Wai Hung 1

3 SOLICITORS Deacons Gallant Solicitors & Notaries P.C. Woo & Co. Kwan & Chow Solicitors AUDITOR Deloitte Touche Tohmatsu Certified Public Accountants BANKERS Australia and New Zealand Banking Group Limited China CITIC Bank International Limited Chong Hing Bank Limited Credit Suisse AG Hong Kong Branch DBS Bank (Hong Kong) Limited Fubon Bank (Hong Kong) Limited Hang Seng Bank Limited Nanyang Commercial Bank, Limited OCBC Wing Hang Bank Limited Standard Chartered Bank (Hong Kong) Limited MUFG Bank, Limited The Hongkong and Shanghai Banking Corporation Limited United Overseas Bank Limited Wing Lung Bank Limited REGISTERED OFFICE 23rd Floor Chong Hing Bank Centre 24 Des Voeux Road Central Hong Kong Tel: (852) Fax: (852) GUANGZHOU OFFICE 18A Office Tower A 339 Huan Shi Dong Road Yue Xiu District Guangzhou, PRC Tel: (8620) Fax: (8620) guangzhou@lchi.com.cn SHANGHAI OFFICE Room 3105, Chong Hing Finance Center 288 Nanjing Road West Shanghai, PRC Tel: (8621) Fax: (8621) shanghai@lchi.com.cn FOSHAN OFFICE First Phase, The Grand Riviera 1 Guilong Road Luocun Social Management Office, Shishan Town Nanhai District, Foshan Guangdong Province, PRC Tel: (86757) Fax: (86757) foshan@lchi.com.cn 2

4 SHAREHOLDERS INFORMATION FINANCIAL CALENDAR As at 8 August 2018 Annual General Meeting : Held on 15 May 2018 Interim Results for six-month ended 30 June 2018 : Announced on 8 August 2018 Dividends Interim cash dividend : HK$0.22 per share Payable on : 14 September 2018 Ex-dividend date of interim dividend : 31 August 2018 Latest time to lodge transfer forms : 4:30 p.m. on 3 September 2018 Closure of Register of Members : From 4 September 2018 to 6 September 2018 (both days inclusive) Share Registrars and transfer office : Computershare Hong Kong Investor Services Limited Rooms , 17th Floor Hopewell Centre, 183 Queen s Road East Wanchai, Hong Kong Share listing : The Company s shares are listed on The Stock Exchange of Hong Kong Limited Stock Code : Board lot : 2,000 shares No. of issued ordinary share : 378,583,440 shares Company s address : info@lchi.com.hk Investors and Shareholders contact : Attention: Mr. Lee Wai Hung/Ms. Hilda Chan 23rd Floor, Chong Hing Bank Centre 24 Des Voeux Road Central Hong Kong Tel: (852) Fax: (852) Website: 3

5 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE SIX MONTHS ENDED 30 JUNE 2018 Six months ended 30 June NOTES (unaudited) (unaudited) Revenue 3A 461, ,199 Direct costs (167,642) (222,610) 293, ,589 Other income 7,949 3,170 Administrative and operating expenses (91,081) (91,424) Other gains and losses 4 201, ,647 Finance costs (11,839) (10,708) Share of results of a joint venture 38,614 Profit before tax 439, ,274 Income tax expense 5 (29,675) (27,407) Profit for the period 6 409, ,867 Profit for the period attributable to: Owners of the Company 403, ,726 Non-controlling interests 5,911 9, , ,867 Basic earnings per share 7 HK$1.07 HK$0.84 4

6 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2018 Six months ended 30 June (unaudited) (unaudited) Profit for the period 409, ,867 Other comprehensive (expense) income Item that will not be reclassified to profit or loss: Fair value losses on investments in equity instruments at fair value through other comprehensive income ( FVTOCI ) (24,526) Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation (36,021) 113,955 Fair value gains on available-for-sale investments 27,725 Investment revaluation reserve reclassified to profit or loss in relation to impairment loss on available-for-sale investments 30,579 Other comprehensive (expense) income for the period (net of tax) (60,547) 172,259 Total comprehensive income for the period 349, ,126 Total comprehensive income attributable to: Owners of the Company 344, ,802 Non-controlling interests 4,355 14, , ,126 5

7 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE June December 2017 NOTES (unaudited) (audited) Non-current assets Investment properties 9 8,580,423 8,392,900 Property, plant and equipment 123, ,804 Properties under development 1,243,192 1,207,006 Interest in a joint venture 227, ,210 Investments in securities , ,486 Long term loan receivables 1,126 4,763 Deferred tax assets 3,850 3,850 10,835,491 10,617,019 Current assets Properties under development for sale 782, ,998 Properties held for sale 444, ,975 Inventories 28,275 26,949 Trade and other receivables , ,285 Investments in securities 10 24,398 16,793 Derivative financial instruments 26 Taxation recoverable 49,951 20,706 Fixed bank deposits with more than three months to maturity when raised 564, ,796 Other bank balances and cash 2,001,411 2,162,588 4,076,236 3,918,116 Current liabilities Trade and other payables ,474 1,001,766 Taxation payable 47, ,005 Borrowings due within one year , ,655 Contract liabilities 990,831 Derivative financial instruments 400 1,739,049 1,485,426 Net current assets 2,337,187 2,432,690 Total assets less current liabilities 13,172,678 13,049,709 6

8 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) AS AT 30 JUNE June December 2017 NOTES (unaudited) (audited) Non-current liabilities Rental deposits from tenants 63,527 98,597 Borrowings due after one year , ,345 Derivative financial instruments 5, Deferred tax liabilities 249, ,102 1,143,730 1,210,834 12,028,948 11,838,875 Equity Share capital 381, ,535 Reserves 11,603,872 11,418,154 Equity attributable to: Owners of the Company 11,985,407 11,799,689 Non-controlling interests 43,541 39,186 Total equity 12,028,948 11,838,875 7

9 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2018 Share capital Special reserve Attributable to owners of the Company Property revaluation reserve FVTOCI reserve/ investment revaluation reserve Exchange reserve Accumulated profits Total Noncontrolling interests (note a) (note b) Total At 1 January ,535 13,915 2,956,817 46, ,919 7,420,590 10,923,910 (974) 10,922,936 Profit for the period 319, ,726 9, ,867 Exchange differences arising on translation 108, ,772 5, ,955 Fair value gains on available-for-sale investments 27,725 27,725 27,725 Investment revaluation reserve reclassified to profit or loss in relation to impairment loss on available-for-sale investments 30,579 30,579 30,579 Other comprehensive income for the period 58, , ,076 5, ,259 Total comprehensive income for the period 58, , , ,802 14, ,126 Dividends recognised as distribution (note 8) (113,575) (113,575) (113,575) At 30 June 2017 (unaudited) 381,535 13,915 2,956, , ,691 7,626,741 11,297,137 13,350 11,310,487 Profit for the period 425, ,162 19, ,949 Exchange differences arising on translation 126, ,040 6, ,089 Fair value gains on available-for-sale investments 10,214 10,214 10,214 Investment revaluation reserve reclassified to profit or loss in relation to impairment loss on available-for-sale investments 9,281 9,281 9,281 Other comprehensive income for the period 19, , ,535 6, ,584 Total comprehensive income for the period 19, , , ,697 25, ,533 Dividends recognised as distribution (note 8) (68,145) (68,145) (68,145) At 31 December 2017 (audited) 381,535 13,915 2,956, , ,731 7,983,758 11,799,689 39,186 11,838,875 8

10 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 Share capital Special reserve Attributable to owners of the Company Property revaluation reserve FVTOCI reserve/ investment revaluation reserve Exchange reserve Accumulated profits Total Noncontrolling interests (note a) (note b) Total Profit for the period 403, ,714 5, ,625 Exchange differences arising on translation (34,465) (34,465) (1,556) (36,021) Fair value losses on investments in equity instruments at FVTOCI (24,526) (24,526) (24,526) Other comprehensive expense for the period (24,526) (34,465) (58,991) (1,556) (60,547) Total comprehensive (expense) income for the period (24,526) (34,465) 403, ,723 4, ,078 FVTOCI reserve reclassified to accumulated profits upon disposal of equity instruments at FVTOCI 1,339 (1,339) Dividends recognised as distribution (note 8) (159,005) (159,005) (159,005) At 30 June 2018 (unaudited) 381,535 13,915 2,956, , ,266 8,227,128 11,985,407 43,541 12,028,948 Notes: (a) (b) The special reserve represents the difference between the consideration paid and the carrying values of the underlying assets and liabilities attributable to the additional interest in a subsidiary acquired during the year ended 31 December 2004 and the year ended 31 December The property revaluation reserve represents the reserve arising from revaluation of properties under property, plant and equipment upon transfer to investment properties. 9

11 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2018 Six months ended 30 June (unaudited) (unaudited) NET CASH FROM OPERATING ACTIVITIES 622, ,401 INVESTING ACTIVITIES Purchase of equity instruments at FVTOCI (221) available-for-sale investments (258) Purchase of property, plant and equipment (3,940) (3,749) Repayment from a joint venture 3,465 Addition of investment properties (3,767) (18,722) Addition of properties under development (36,186) (105,375) Proceeds from disposal of equity instruments at FVTOCI 2,609 Placement of fixed bank deposits with more than three months to maturity when raised (718,762) (45,501) Release of fixed bank deposits with more than three months to maturity when raised 513, ,021 NET CASH (USED IN) FROM INVESTING ACTIVITIES (242,998) 172,416 FINANCING ACTIVITIES New borrowings raised 382 Repayments of borrowings (274,386) (34,628) Dividend paid (159,005) (113,575) Interest paid on borrowings (19,294) (22,769) NET CASH USED IN FINANCING ACTIVITIES (452,685) (170,590) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (73,465) 480,227 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 1,966,500 1,041,446 EFFECT OF FOREIGN EXCHANGE RATE CHANGES (13,189) 16,942 CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,879,846 1,538,615 Represented by: Other bank balances and cash 2,001,411 1,676,853 Less : restricted bank deposits included in other bank balances (121,565) (138,238) 1,879,846 1,538,615 10

12 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE BASIS OF PREPARATION The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) as well as the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ). The financial information relating to the year ended 31 December 2017 that is included in these condensed consolidated financial statements as comparative information does not constitute the Company s statutory annual consolidated financial statements for that year but is derived from those consolidated financial statements. Further information relating to these statutory financial statements is as follows: The Company has delivered the consolidated financial statements for the year ended 31 December 2017 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (the Companies Ordinance ). The Company s auditor has reported on those consolidated financial statements. The auditor s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Companies Ordinance. 2. PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values, as appropriate. 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 condensed consolidated financial statements for the six months ended 30 June 2018 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31 December Application of new and amendments to HKFRSs In the current interim period, the Group has applied, for the first time, the following new and amendments to HKFRSs and interpretation issued by the HKICPA which are mandatory effective for the annual period beginning on or after 1 January 2018 for the preparation of the Group s condensed consolidated financial statements: HKFRS 9 HKFRS 15 HK(IFRIC)-Int 22 Amendments to HKFRS 2 Amendments to HKFRS 4 Amendments to HKAS 28 Amendments to HKAS 40 Financial Instruments Revenue from Contracts with Customers and the related Amendments Foreign Currency Transactions and Advance Consideration Classification and Measurement of Share-based Payment Transactions Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts As part of the Annual Improvements to HKFRSs Cycle Transfers of Investment Property The new and amendments to HKFRSs and interpretation have been applied in accordance with the relevant transition provisions in the respective standards and amendments which results in changes in accounting policies, amounts reported and/or disclosures as described below. 11

13 2. PRINCIPAL ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers The Group has applied HKFRS 15 for the first time in the current interim period. HKFRS 15 superseded HKAS 18 Revenue, HKAS 11 Construction Contracts and the related interpretations. HKFRS 15 applies to all contracts with customers except for leases within the scope of HKAS 17 Leases Key changes in accounting policies resulting from application of HKFRS 15 HKFRS 15 introduces a 5-step approach when recognising revenue: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the Group satisfies a performance obligation Under HKFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same. Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met: the customer simultaneously receives and consumes the benefits provided by the Group s performance as the Group performs; the Group s performance creates and enhances an asset that the customer controls as the Group performs; or the Group s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service. A contract liability represents the Group s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. 12

14 2. PRINCIPAL ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (continued) Summary of effects arising from initial application of HKFRS 15 The following adjustments were made to the amounts recognised in the condensed consolidated statement of financial position at 1 January Line items that were not affected by the changes have not been included. Note Carrying amounts previously reported at 31 December 2017 Reclassification Carrying amounts under HKFRS 15 at 1 January 2018 Current Liabilities Trade and other payables (a) 1,001,766 (475,327) 526,439 Contract liabilities (a) 475, ,327 Note: (a) As at 1 January 2018, deposits received in advance from customers on properties sold of HK$475,327,000 previously included in trade and other payables were reclassified to contract liabilities. The following tables summarise the impacts of applying HKFRS 15 on the Group s condensed consolidated statement of financial position as at 30 June 2018 for each of the line items affected. Line items that were not affected by the changes have not been included. Note As reported Adjustments Amounts without application of HKFRS 15 Current Liabilities Trade and other payables (a) 554, ,831 1,545,305 Contract liabilities (a) 990,831 (990,831) Note: (a) As at 30 June 2018, deposits received in advance from customers on properties sold of HK$990,831,000 included in trade and other payables were classified to contract liabilities. Except as described above, the application of HKFRS 15 has had no material impact on the timing and amounts of revenue recognised in the condensed consolidated financial statements. 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments In the current period, the Group has applied HKFRS 9 and the related consequential amendments to other HKFRSs. HKFRS 9 introduces new requirements for (1) the classification and measurement of financial assets and financial liabilities, (2) expected credit losses ( ECL ) for financial assets and (3) general hedge accounting. The Group has applied HKFRS 9 in accordance with the transition provisions set out in HKFRS 9. i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1 January The difference between carrying amounts as at 31 December 2017 and the carrying amounts as at 1 January 2018 are recognised in the opening accumulated profits and other components of equity, without restating comparative information. Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 39 Financial Instruments: Recognition and Measurement. 13

15 2. PRINCIPAL ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (continued) Key changes in accounting policies resulting from application of HKFRS 9 Classification and measurement of financial assets Trade receivables arising from contracts with customers are initially measured in accordance with HKFRS 15. All recognised financial assets that are within the scope of HKFRS 9 are subsequently measured at amortised cost or fair value, including unquoted equity investments measured at cost less impairment under HKAS 39. Debt instruments that meet the following conditions are subsequently measured at amortised cost: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Equity instruments designated as at fair value through other comprehensive income ( FVTOCI ) At the date of initial application/initial recognition, the Group may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income ( OCI ) and accumulated in the FVTOCI reserve; and are not subject to impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to accumulated profits. Financial assets at fair value through profit or loss ( FVTPL ) Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the other gains and losses line item. The directors of the Company reviewed and assessed the Group s financial assets as at 1 January 2018 based on the facts and circumstances that existed at that date. Changes in classification and measurement on the Group s financial assets and the impacts thereof are detailed in Note Impairment under ECL model The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under HKFRS 9 (including trade receivables). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL ( 12m ECL ) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings. For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. 14

16 2. PRINCIPAL ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Impairment under ECL model (continued) Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In particular, the following information is taken into account when assessing whether credit risk has increased significantly: an actual or expected significant deterioration in the financial instrument s external (if available) or internal credit rating; significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor s ability to meet its debt obligations; an actual or expected significant deterioration in the operating results of the debtor; an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor s ability to meet its debt obligations. Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. The Group considers that default has occurred when the instrument is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. Measurement and recognition of ECL The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset. As at 1 January 2018, the directors of the Company reviewed and assessed the Group s existing financial assets for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of HKFRS 9. Based on the assessment by the directors of the Company, there has had no material impairment was recognised at 1 January

17 2. PRINCIPAL ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (continued) Summary of effects arising from initial application of HKFRS 9 The table below illustrates the classification and measurement (including impairment) of financial assets under HKFRS 9 and HKAS 39 at the date of initial application, 1 January Financial assets at Availablefor-sale Financial assets designated at FVTPL FVTPL required by HKAS 39/ HKFRS 9 Equity instruments at FVTOCI Notes Closing balance at 31 December 2017 HKAS ,849 7,737 Effect arising from initial application of HKFRS 9: Reclassification From available-for-sale (a) (682,849) 682,849 From designated at FVTPL (b) (7,737) 7,737 Opening balance at 1 January , ,849 Notes: (A) (B) AVAILABLE-FOR-SALE INVESTMENTS From available-for-sale equity investments to FVTOCI The Group elected to present in OCI for the fair value changes of all its equity investments previously classified as available-for-sale under HKAS 39. These investments are not held for trading and not expected to be sold in the foreseeable future. At the date of initial application of HKFRS 9, HK$682,849,000 were reclassified from available-for-sale investments to equity instruments at FVTOCI. The fair value gains of HK$123,933,000 relating to those investments previously carried at fair value continued to accumulate in FVTOCI reserve. FINANCIAL ASSETS AT FVTPL AND/OR DESIGNATED AT FVTPL At the date of initial application, the Group no longer applied designation as measured at FVTPL for the portfolio of financial assets which is managed and its performance is evaluated on a fair value basis, as these financial assets are required to be measured at FVTPL under HKFRS 9. As a result, the fair value of these investments of HK$7,737,000 were reclassified from financial assets designated at FVTPL to financial assets at FVTPL. Remaining investments are equity securities held for trading and derivatives which are required to be classified as FVTPL under HKFRS 9. There was no impact on the amounts recognised in relation to these assets from the application of HKFRS 9. Except as described above, the application of other amendments to HKFRSs and interpretation in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements. 16

18 3A. REVENUE An analysis of the Group s revenue is as follows: Six months ended 30 June Property investment 182, ,064 Property development 173, ,436 Property management 10,333 9,634 Treasury investment Interest income 22,139 16,368 Dividend income 24,207 6,940 Trading and manufacturing 42,679 35,365 Hotel operation 5,745 5, , ,199 For the six months ended 30 June 2018 Property investment Property development Property management Treasury investment Trading and manufacturing Hotel operation Geographical markets Hong Kong 106,397 10,333 30,648 The People s Republic of China ( PRC ) 76, ,692 15,698 42,679 5,745 Total 182, ,692 10,333 46,346 42,679 5,745 Timing of revenue recognition A point in time 173,692 24,207 42,679 Over time 182,842 10,333 22,139 5,745 Total 182, ,692 10,333 46,346 42,679 5,745 3B. SEGMENT INFORMATION Information reported to the executive directors of the Company, being the chief operating decision maker ( CODM ), for the purposes of resources allocation or assessment of segment performance focuses on types of goods and services delivered or provided. No operating segment identified by the CODM have been aggregated in arriving at the reportable segment of the Group. Specifically, the Group s operating and reportable segments under HKFRS 8 Operating Segments are as follows: 1. Property investment investment and letting of properties 2. Property development development and sale of properties 3. Property management provision of property management services 4. Treasury investment dealings and investments in securities and other financial instruments 5. Trading and manufacturing manufacture and sale of magnetic products 6. Hotel operation management and operation of hotels 17

19 3B. SEGMENT INFORMATION (continued) Segment revenue and results The following is an analysis of the Group s revenue and results by reportable and operating segment. Property Property Property investment development management For the six months ended 30 June 2018 Segment revenue 184, ,692 16,956 Comprising: revenue from customers 182, ,692 10,333 inter-segment transactions (note) 2,123 6,623 Operating expenses (63,045) (129,375) (9,641) Gain on changes in fair value of investment properties 208,766 Loss on changes in fair value of financial assets at FVTPL Loss on changes in fair value of derivative financial instruments Net exchange gains (losses) 296 (3,566) 41 Loss on disposal of property, plant and equipment (14) Segment profit 330,982 40,737 7,356 Share of results of a joint venture Finance costs Profit before tax Note: Inter-segment transactions are charged at prevailing market prices. 18

20 Treasury Trading and Hotel investment manufacturing operation Total Eliminations Consolidated 46,346 42,679 5, ,383 (8,746) 461,637 46,346 42,679 5,745 (12,040) (39,803) (5,616) (259,520) 8,746 (250,774) 208, ,766 (211) (211) (211) (4,910) (4,910) (4,910) 1,260 (1,969) (1,969) (14) (14) 30,445 2, , ,525 38,614 (11,839) 439,300 19

21 3B. SEGMENT INFORMATION (continued) Segment revenue and results (continued) The following is an analysis of the Group s revenue and results by reportable and operating segment. Property Property Property investment development management For the six months ended 30 June 2017 Segment revenue 179, ,436 15,749 Comprising: revenue from customers 177, ,436 9,634 inter-segment transactions (note) 2,064 6,115 Operating expenses (72,642) (191,950) (10,335) Gain on changes in fair value of investment properties 183,218 Gain on changes in fair value of financial assets at FVTPL Impairment loss recognised in respect of available-for-sale investments Net exchange (losses) gains (1,447) 11,257 (130) Segment profit (loss) 288,257 80,743 5,284 Finance costs Profit before tax Note: Inter-segment transactions are charged at prevailing market prices. Segment profit/loss represents the profit earned by/loss from each segment without allocation of share of results of a joint venture and finance costs. In addition, the Group s administrative costs are allocated to respective operating segments on the basis of revenues earned by individual operating segments. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment. Since the CODM does not review assets and liabilities of the Group s reportable segments for performance assessment and resource allocation purpose, the Group has not included total asset information as part of segment information. 20

22 Treasury Trading and Hotel investment manufacturing operation Total Eliminations Consolidated 23,308 35,365 5, ,378 (8,179) 512,199 23,308 35,365 5,392 (6,007) (32,924) (5,185) (319,043) 8,179 (310,864) 183, ,218 2,732 2,732 2,732 (30,579) (30,579) (30,579) 604 (8) 10,276 10,276 (9,942) 2, , ,982 (10,708) 356,274 21

23 4. OTHER GAINS AND LOSSES Six months ended 30 June Gain on changes in fair value of investment properties 208, ,218 (Loss) gain on changes in fair value of financial assets at FVTPL (211) 2,732 Loss on changes in fair value of derivative financial instruments (4,910) Impairment loss recognised in respect of available-for-sale investments (30,579) Net exchange (losses) gains (1,969) 10,276 Loss on disposal of property, plant and equipment (14) 201, , INCOME TAX EXPENSE Six months ended 30 June The charge comprises: Current tax: Hong Kong Profits Tax 7,911 8,843 PRC Enterprise Income Tax 15,348 7,071 23,259 15,914 Under(over)provision in prior years: Hong Kong Profits Tax (10) PRC Enterprise Income Tax (10) PRC Land Appreciation Tax ( LAT ) 4,200 6,317 Deferred taxation 2,076 5,186 29,675 27,407 Notes: (a) (b) (c) Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods. Under the Law of the People s Republic of China on Enterprise Income Tax (the EIT Law ) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%. The Group has estimated the tax provision for PRC LAT according to the requirements set forth in the relevant PRC tax laws and regulations. The actual LAT liabilities are subject to the determination by the tax authorities upon completion of the property development projects and the tax authorities might disagree with the basis on which the provision for LAT is calculated. 22

24 6. PROFIT FOR THE PERIOD Six months ended 30 June Profit for the period has been arrived at after charging: Staff costs including directors emoluments 48,863 45,369 Depreciation of property, plant and equipment 5,727 5,326 Operating lease rentals in respect of land and buildings 3,814 3, BASIC EARNINGS PER SHARE The calculation of the basic earnings per share attributable to the owners of the Company is based on the profit for the period attributable to owners of the Company of HK$403,714,000 (six months ended 30 June 2017: HK$319,726,000) and on 378,583,440 (30 June 2017: 378,583,440) ordinary shares in issue during the period. No diluted earnings per share has been presented as there were no potential ordinary shares in issue during both periods. 8. DIVIDENDS Six months ended 30 June Dividends recognised as distribution during the period: Final dividend declared and paid for 2017 HK$0.42 per share (2017: declared and paid for 2016 HK$0.30 per share) 159, ,575 Dividend declared in respect of current period: Interim dividend declared for 2018 HK$0.22 per share (2017: HK$0.18 per share) 83,288 68,145 On 8 August 2018, the Board of Directors has approved an interim cash dividend of HK$0.22 per share (2017: HK$0.18 per share), which will be paid to the Company s shareholders whose names appear on the Register of Members on 6 September MOVEMENTS IN INVESTMENT PROPERTIES On 30 June 2018 and 31 December 2017, independent valuations were undertaken by Vigers Appraisal & Consulting Ltd., an independent qualified professional valuer not connected to the Group which has appropriate professional qualifications and recent experience in the valuations of similar properties in the relevant locations. The valuations have been arrived at using direct comparison method by reference to market evidence of transaction prices for similar properties in the same locations and conditions or, where appropriate, by capitalising the market rentals of all lettable units of the properties by reference to the rentals achieved in the lettable units as well as other lettings of similar properties in the neighbourhood. The capitalisation rate adopted is made by reference to the yield rates observed by the valuer for the similar properties in the locality and adjusted based on the valuer s knowledge of the factors specific to the respective properties. The resulting gain on changes in fair value of investment properties of approximately HK$208,766,000 (six months ended 30 June 2017: HK$183,218,000) has been recognised directly in profit or loss. 23

25 10. INVESTMENTS IN SECURITIES Financial assets at FVTPL Equity instruments at FVTOCI Total 30 June 2018 Listed equity securities 16, , ,386 Unlisted equity securities 262, ,922 Structured products 7,747 7,747 Investment funds 79,423 79,423 Perpetual capital securities 51,625 51,625 24, , ,103 Analysed as: Listed in Hong Kong 16, , ,011 Unlisted 7, , ,092 24, , ,103 Analysed for reporting purpose as: Non-current assets 655,705 Current assets 24, ,103 Financial assets at FVTPL Availablefor-sale Held for trading Designated at fair value investments Total 31 December 2017 Listed equity securities 16, , ,073 Unlisted equity securities 269, ,922 Structured products 7,737 7,737 Investment funds 72,308 72,308 Perpetual capital securities 52,239 52,239 16,693 7, , ,279 Analysed as: Listed in Hong Kong 16, , ,312 Unlisted 7, , ,967 16,693 7, , ,279 Analysed for reporting purpose as: Non-current assets 690,486 Current assets 16, ,279 24

26 11. TRADE AND OTHER RECEIVABLES 30 June December 2017 Trade receivables 30,020 24,990 Deposits paid 42,919 27,751 Loan receivables 6,706 9,347 Prepayments and other receivables 100,431 53, , ,285 The Group s credit policy allows its trade customers an average credit period of days, other than proceeds from sales of properties which are settled in accordance with the terms of the sale and purchase agreements. The aged analysis of trade receivables presented based on the invoice date at the end of the reporting period is as follows: 30 June December 2017 Within 30 days 8,501 9,089 Between 31 days to 90 days 16,032 13,859 Over 90 days 5,487 2,042 30,020 24, TRADE AND OTHER PAYABLES 30 June December 2017 Trade payables 10,784 8,828 Construction costs and retention payables 447, ,909 Deposits received and receipt in advance in respect of rental of investment properties 75,753 41,278 Receipt in advance on properties sold 475,327 Other payables 20,872 30, ,474 1,001,766 The following is an aged analysis of trade payables based on the invoice date: 30 June December 2017 Within 30 days 10,784 8,828 25

27 13. BORROWINGS 30 June December 2017 Amounts due within one year Bank borrowings 98, ,682 Amounts due to non-controlling interests shareholders 47,271 46, , ,655 Amounts due after one year Bank borrowings 825, , ,204 1,248,000 During the current period, the Group obtained bank loans of approximately HK$nil (31 December 2017: HK$193,406,000) and repaid bank loans of approximately HK$274,386,000 (31 December 2017: HK$162,250,000). The proceeds were used for general working capital purposes. 14. CAPITAL COMMITMENTS 30 June December 2017 Capital expenditure contracted for but not provided in the consolidated financial statements in respect of: Property, plant and equipment/properties under development/investment properties 27,337 38,953 Contribution to the capital of investment funds 22,845 22, FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS Fair value of the Group s financial assets that are measured at fair value on a recurring basis Some of the Group s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements are observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 26

28 15. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued) Fair value of the Group s financial assets that are measured at fair value on a recurring basis (continued) Fair value hierarchy Level 1 Level 2 Level 3 Total 30 June 2018 Financial assets at FVTPL Listed equity securities 16,472 16,472 Structured products 7,747 7,747 Equity instruments at FVTOCI Listed equity securities 261, ,914 Unlisted equity securities 262, ,922 Investment funds 79,423 79,423 Perpetual capital securities 51,625 51,625 Total 278,386 59, , ,103 Financial liabilities at FVTPL Derivative financial instruments 5,700 5,700 Fair value hierarchy Level 1 Level 2 Level 3 Total 31 December 2017 Financial assets at FVTPL Listed equity securities 16,693 16,693 Structured products 7,737 7,737 Derivative financial instruments Available-for-sale financial assets Listed equity securities 288, ,380 Unlisted equity securities 269, ,922 Investment funds 72,308 72,308 Perpetual capital securities 52,239 52,239 Total 305,073 60, , ,305 Financial liabilities at FVTPL Derivative financial instruments There were no transfers between Levels 1, 2 and 3 during the period. 27

29 15. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued) Fair value of the Group s financial assets that are measured at fair value on a recurring basis (continued) The fair values of listed equity securities are determined with reference to quoted market bid prices from relevant stock exchanges. The fair values of unlisted equity securities are determined with reference to market values of underlying assets, which mainly comprise investment properties located in Hong Kong held by the investee company and take into account the discount for lack of marketability. The valuation of the properties was principally arrived at using the comparison method, in which property is valued on the assumption that the property can be sold with the benefit of vacant possession. Comparison based on prices realised on actual sales of comparable properties is made for similar properties in the similar location. The fair values of investment funds are determined by using valuation technique of market approach, which included some assumptions that are not supportable by observable market prices or rates. The inputs used in estimating the value of investment funds include the original transaction price, recent transactions and market multiple of the same or similar instruments, completed or pending third-party transactions in the underlying investments. The fair values of perpetual capital securities are determined based on indicative prices provided by the dealers and brokers. The key inputs used in the valuation models are the interest rate data, which are observable at the end of the reporting period. The objective of valuation models is to arrive at a fair value estimation that reflects the price of the financial instrument at the reporting date, which would have been determined by market participants acting at arm s length. The fair values of structured products are calculated using discounted cash flows analysis derived from quoted interest rates, which are observable at the end of the reporting period. The fair values of derivative financial instruments represent cross currency swap contract and currency forward contracts are measured by the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates and foreign exchange rates between JPY and HK$, which is observable at the end of the reporting period. The directors of the Company consider that the carrying amounts of the Group s other financial assets recorded at amortised cost in the condensed consolidated financial statements approximate their fair values. Reconciliation of Level 3 fair value measurements of financial assets Equity instruments at FVTOCI Balance at 1 January ,230 Total net gains recognised in other comprehensive income 2,503 Purchases 221 Disposals (2,609) Balance at 30 June ,345 Available-for-sale investments Balance at 1 January ,646 Total net gains recognised in other comprehensive income 1,100 Purchases 258 Balance at 30 June ,004 28

30 15. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued) Reconciliation of Level 3 fair value measurements of financial assets (continued) The majority of the Group s investments are valued based on quoted market information or observable market data. A small percentage, 2.3% (31 December 2017: 2.4%), of total assets of the Group, is based on estimates and recorded as Level 3 investments. Whilst such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions would not have a significant impact on the Group s financial position. Fair value measurements and valuation process The management performs regular reviews to determine the appropriate valuation techniques and inputs for fair value measurement. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers or other service providers to perform the valuation. The management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model. The respective management team reports the findings to the Board of Directors of the Company regularly to explain the cause of fluctuations in the fair value of the assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed above. 16. RELATED PARTY DISCLOSURES (a) Related party transactions Six months ended 30 June Expenses paid and payable to directors of the Company or its affiliates Rental expenses 450 3,186 Architecture and other consultancy service fee 420 The Group had no other material significant transactions with related parties. (b) Compensation of key management personnel The emoluments of key management personnel of the Group during the period were as follows: Six months ended 30 June Short-term benefits 23,976 31,161 Post-employment benefits 1,440 1,486 25,416 32,647 The emoluments of directors and key executives are determined by the remuneration committee having regard to the performance of individuals and market trends. 29