(Incorporated in Bermuda with limited liability ) (Stock Code : 970) 2018/2019 Interim Report

Transcription

1 (Incorporated in Bermuda with limited liability ) (Stock Code : 970) 2018/2019 Interim Report

2 Content Page(s) Corporate Information 2 Financial Highlights 4 Management Discussion and Analysis 7 Condensed Consolidated Statement of Comprehensive Income 21 Condensed Consolidated Statement of Financial Position 23 Condensed Consolidated Statement of Changes in Equity 25 Condensed Consolidated Statement of Cash Flows 27 Notes to the Interim Condensed Consolidated Financial Statements 28 Additional Information 69

3 Corporate Information BOARD OF DIRECTORS Zheng Hao Jiang (Chairman and Chief Executive Officer) Zhao Xiaodong (Deputy Chairman and Chief Operating Officer) Zhu Lei Gao Yu* * Qi Jian Wei* * Choy Sze Chung, Jojo** ** Lam Kwok Cheong** ** Lee Thomas Kang Bor** ** * Non-executive Director * ** Independent Non-executive Director ** AUDIT COMMITTEE Choy Sze Chung, Jojo (Chairman) Lam Kwok Cheong Lee Thomas Kang Bor REMUNERATION Lam Kwok Cheong (Chairman) COMMITTEE Choy Sze Chung, Jojo Lee Thomas Kang Bor Zheng Hao Jiang Zhu Lei NOMINATION Lee Thomas Kang Bor (Chairman) COMMITTEE Lam Kwok Cheong Choy Sze Chung, Jojo LEGAL ADVISERS Chiu & Partners F. Zimmern & Co. King & Wood Mallesons FINANCIAL Li Yat Ming, F C P A, M H K S I FC P A, M H K S I CONTROLLER & COMPANY SECRETARY 2 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

4 Corporate Information PRINCIPAL BANKERS Bank of Beijing Co., Ltd. China Minsheng Banking Corp., Ltd China CITIC Bank Corporation Limited OCBC Wing Hang Bank Limited Ping An Bank Co., Ltd Standard Chartered Bank (Hong Kong) Limited AUDITOR Crowe (HK) CPA Limited REGISTERED OFFICE Clarendon House Clarendon House 2 Church Street 2 Church Street Hamilton HM11 Bermuda Hamilton HM11 Bermuda PRINCIPAL OFFICE Rooms , 20/F Sun Hung Kai Centre Harbour Road Wanchai 20 Hong Kong REGISTRAR Tricor Secretaries Limited (in Hong Kong) Level 22, Hopewell Centre 183 Queen s Road East 183 Hong Kong 22 REGISTRAR MUFG Fund Services MUFG Fund Services (in Bermuda) (Bermuda) Limited (Bermuda) Limited The Belvedere Building The Belvedere Building 69 Pitts Bay Road 69 Pitts Bay Road Pembroke HM08 Pembroke HM08 Bermuda Bermuda STOCK CODE WEBSITE SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019 3

5 Financial Highlights Revenue for the six months period ended 30 September 2018 increased by 23.2% from HK$1,428,560,000 to HK$1,759,937,000 when compared with the revenue recorded in the corresponding period last year. 1,428,560, % 1,759,937,000 Gross profit for the six months period ended 30 September 2018 increased from HK$169,857,000 to HK$244,441, ,857, ,441,000 Other income and net gains increased from HK$33,842,000 for the six months period ended 30 September 2017 to HK$52,021,000 for the six months period ended 30 September ,842,000 52,021,000 Selling and administrative expenses amounted to HK$269,718,000 for the six months period ended 30 September 2018, representing an increase of HK$118,556,000 over HK$151,162,000 recorded in the corresponding period of ,718, ,162, ,556,000 The other expenses decreased from HK$14,952,000 for the six months period ended 30 September 2017 to HK$5,720,000 for the six months period ended 30 September ,952,000 5,720,000 Net profit attributable to owners of the Company for the six months period ended 30 September 2018 was HK$9,310,000 as compared with net profit attributable to owners of the Company of HK$4,969,000 recorded in the corresponding period of ,310,000 4,969,000 Earnings per share attributable to owners of the Company were HK0.2 cents for the six months period ended 30 September 2018 as compared with HK0.1 cents in the last financial period No interim dividend was declared for the six months period ended 30 September 2018 (2017: nil). 4 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

6 Financial Highlights Revenue () 2,000,000 1,500,000 1,624,616 1,369,359 1,428,560 1,759,937 1,211,351 1,000, , / / / / /2018 Interim Interim Interim Interim Interim Gross Profit and Gross Profit Margin () 13.9% 350, % 11.9% 300, % 10.8% 250, % 244, % 200, % 169, , % 147, % 100,000 95, , % 50, % / / / / Interim Interim Interim Interim 2018/ Interim 0.0% SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019 5

7 Financial Highlights Financial Position: 2018/2019 interim FY2018 Total Assets 4,056,142 3,907,033 Total Liabilities 1,284, ,853 Net Assets 2,772,033 3,023,180 Net Tangible Worth 2,064,226 2,816,616 Financial Ratios: 2018/2019 interim 2017/2018 interim Gross profit margin 13.9% 11.9% Operating profit margin 1.2% 2.6% 2018/2019 interim FY2018 Current ratio Gearing ratio 31.9% 18.8% 6 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

8 Management Discussion and Analysis PROSPECTS China s second-quarter gross domestic product (GDP) growth in 2018 was 6.7%, slightly lower than 6.8% in the first quarter of 2018 as Beijing has been cracking down on risky credit amid escalating trade tensions with the US, according to data released by the National Bureau of Statistics in July However, the rate is still within Beijing s target of around 6.5% for the year. Such growth could fall even further if a trade war with the United States happens. Morgan Stanley forecasts that 25% US tariffs on US$50 billion worth of Chinese goods could knock 0.1 percentage point off growth, slowing the economy to its lowest level since the first quarter of 2009 when the country s exports were hit hard by the global financial crisis. (GDP) 6.7% 6.8% 6.5% (Morgan Stanley) % 0.1 China s Luxury Goods Market There are multiple ongoing updates and research reports published from reputable authorities, investment banks and global research houses on Chinese Millennials Rule the Global Luxury Market. According to Luxury Goods Worldwide Market Study for Spring 2018 issued by Bain & Company ( Bain ) on 7 July 2018, the Chinese consumer and the millennial generation remain the keys to the growth of an industry that could reach 390 billion globally in sales by In terms of spending trends, Bain finds that China continues to drive the growth of the luxury market. While luxury spending across all regions is likely to be 6-8 percent (at constant exchange rate) higher than last year, reaching billion. China is expected to account for the lion s share of the growth in Bain forecasts that the market will grow by 20 to 22 percent this year. Brands are learning how to cater to local consumers, often those who are young and heavily influenced by social media. Bain & Company 3, ,760 2, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019 7

9 Management Discussion and Analysis The Boston Consulting Group ( BCG ), a global management consulting firm and the world s leading advisor on business strategy and Altagamma, which gathers high-end Italian cultural and creative companies, presented the fifth edition of an annual study named True-Luxury Global Consumer Insight dated 20 February 2018 mentioning luxury brands should devote particular attention to millennials and Chinese consumers in the coming years. Millenials are the generation that will contribute the most to the market s growth (approximately 130%), and is set to account for 50% of the market in Chinese consumers is the main drive to growth (approximately 70%), and is set to account for 40% of the 2024 market. The overall luxury goods industry including products and services, is worth approximately 915 billion today and will reach about 1,260 billion in BCG Altagamma (True-Luxury Global Consumer Insight) 130% 50% 70% 40% 9,150 12,600 BUSINESS REVIEW Automobile Dealerships During the financial period under review, Bentley and Rolls-Royce recorded positive sales results but Lamborghini experienced a drop in revenue. Rolls-Royce performed the best with the largest sales increment, amounting to approximately HK$757.7 million and representing approximately 38.3% increase in sales in the financial period under review from approximately HK$547.8 million during the corresponding financial period last year. A total of 95 units of Rolls-Royce were sold, representing a drop of approximately 2% as compared with 97 units sold in the corresponding financial period last year. 547,800, ,700, % % According to an article issued by the official website of Rolls-Royce titled Rolls-Royce Motor Cars Announces Strong Half-year Sales And Investment Boost on 12 July 2018, Rolls-Royce reported it has enjoyed a strong start in 2018, with the Marque seeing a significant boost to global sales. Worldwide sales for the first six months of 2018 were up 13 percent compared with the same period in 2017, with demand for all Rolls-Royce models holding firm in Europe, the US and other key regions. There are encouraging signs of recovery in the Chinese market; like all luxury brands, however, the Marque faces continued economic headwinds in the Middle East. Torsten Müller-Ötvös, CEO of Rolls-Royce, said, This is a very encouraging half-year results; it is a testament to our incredibly skilled and dedicated team at Goodwood, and underlines the trust and loyalty of our customers worldwide. 8 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/ Torsten Müller- Ötvös

10 Management Discussion and Analysis Bentley recorded an increase in sales during the financial period under review with a total of approximately HK$712.8 million, representing an increase of approximately 19.5% as compared with that of approximately HK$596.2 million recorded in the corresponding financial period last year. At the same time, a total of 206 units of Bentley were sold, representing an increase of approximately 38.3% as compared with 149 units sold in the corresponding financial period last year. 712,800, ,200, % % Lamborghini recorded approximately 59% decrease in unit sales to 9 units sold during the financial period under review, as compared with 22 units sold in the corresponding financial period last year. The brand recorded a drop in sales during the financial period under review with a total of approximately HK$62.3 million, representing a decrease of approximately 34.3% as compared with that of approximately HK$94.8 million recorded in the corresponding financial period last year. 59% ,300,000 94,800, % Gross profit margins of Rolls-Royce and Lamborghini improved while that of Bentley declined, and the Group continued enjoying bonus from the brands. Revenue from after-sales services during the financial period under review has increased. It reached approximately HK$60.7 million, amounting to an increase of approximately 32.5% as compared with the revenue recorded in the corresponding financial period last year. Regarding the gross profit margin, we saw an increase from approximately 40.8% in the corresponding financial period last year to approximately 44.7% in the financial period under review. 60,700, % 40.8% 44.7% Non-auto Dealerships During the financial period under review, the sales performance of our non-auto division recorded a decline of approximately 0.6% to approximately HK$143.1 million, as compared with approximately HK$143.9 million in the corresponding financial period last year. 0.6%143,100, ,900,000 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019 9

11 Management Discussion and Analysis Gross profit margin of non-auto division slightly decreased from 33.2% in the previous financial period to 32.9% in the financial period under review. 33.2% 32.9% During the financial period under review, the sales performance of our super deluxe branded watch division recorded a decline. The revenue decreased by approximate 94.6% to approximately HK$2.7 million, as compared with approximately HK$49.7 million in the previous financial period. Sales of top-tier branded jewellery division decreased in terms of quantity and sales amount, recording sales revenue of approximately HK$1.4 million as compared with approximately HK$4.7 million in the previous financial period. The decreases were due to the keen competition and the weakening market. 94.6% 2,700,000 49,700,000 1,400,000 4,700,000 Among all brands under this division including watch, jewellery, fine wine, audio equipment, menswear apparel and accessories and cigars and smoker s accessories, B&O PLAY performed the best in terms of revenue contribution. B&O PLAY Others During the financial period under review, our others division, which includes the new businesses of provision of property management services and catering services, recorded revenue of approximately HK$23.3 million. 23,300,000 Investments In order to make use of the idle cash of the Group and enhance the capital return, the Group had allocated certain resources on various types of investments. The total amount employed represented approximately 26.9% of the total assets of the Group as at 30 September 2018 (31 March 2018: 47.6%). 26.9% 47.6% 10 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

12 Management Discussion and Analysis The status of the Group s investment portfolios was set out as below: Balance at book value As at 30 September 2018 Approximately (HK$) Balance at book value As at 31 March 2018 Approximately (HK$) Bang & Olufsen A/S ( B&O ) shares Bang & Olufsen A/SB&O 1,086 million 1,291 million Senior notes 440 million P2P financing portfolios P2P 86 million Other loan receivables 41 million Other wealth management products 7 million Total 1,093 million 1,858 million As at 30 September 2018, the Group owned approximately 13.89% of the total shareholding in B&O. The Group sold 519,358 shares in B&O and hence realized approximately HK$96.7 million during May to August B&O 13.89% B&O 519,358 96,700,000 During the financial period under review, the Group disposed of the 6% senior note in the principal amount of HK$440,000,000 due on 3 June 2018 issued by Shanghai Huaxin Group (Hong Kong) Limited to the Group to a third party in two tranches, at a total consideration of HK$446,160,000. The transactions were completed during the financial period under review. 446,160, ,000,000 6% The P2P financing portfolios and the other loan receivables were fully settled during the financial period under review. P2P The other wealth management products represented subscription of money market funds. The source of such investments came from surplus cash from property management business which had adopted this investment strategy before its acquisition by the Group. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

13 Management Discussion and Analysis FINANCIAL REVIEW Revenue The revenue of the Group for the six months ended 30 September 2018 was approximately HK$1,759.9 million, representing an increase of approximately 23.2% as compared with that of approximately HK$1,428.6 million recorded in the corresponding financial period last year. Such increase was mainly due to the increase in sales of automobiles, provision of after-sales services and audio products. The table below sets out the Group s revenue for the period indicated: 1,759,900,000 1,428,600, % Six months ended 30 September Changes Contribution Contribution Revenue Source (%) (%) % (%) (%) % Automobile segment Sales of automobiles 1,532, % 1,238, % 293, % Provision of after-sales services 60, % 45, % 14, % Sub-total 1,593, % 1,284, % 308, % Non-automobile dealership segment 143, % 143, % (810) (0.6%) Others 23, % Total 1,759, % 1,428, % 331, % Gross Profit and Gross Profit Margin The gross profit of the Group for the six months ended 30 September 2018 increased by approximately 43.8% to approximately HK$244.4 million (30 September 2017: HK$169.9 million) while the gross profit margin of the Group for the six months ended 30 September 2018 increased from 11.9% to 13.9%. 43.8%244,400, ,900, % 13.9% 12 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

14 Management Discussion and Analysis Such increase in the gross profit was mainly due to the increase in gross profit from sales of automobiles and increase in incentive bonuses offered by automobile suppliers in this financial period under review which were deducted from the cost of sales. The gross profit of the sales of automobiles increased from approximately HK$103.3 million for the six months ended 30 September 2017 to approximately HK$153.1 million for the six months ended 30 September ,300, ,100,000 The gross profit of the provision of after-sales services for the six months ended 30 September 2018 increased by approximately 44.9% to approximately HK$27.1 million (30 September 2017: HK$18.7 million). 44.9%27,100,000 18,700,000 Other Income and Net Gains Other income and net gains increased from approximately HK$33.8 million for the six months ended 30 September 2017 to approximately HK$52.0 million for the six months ended 30 September Such increase was mainly due to increase in investment income and other service income. 33,800,000 52,000,000 Selling and distribution costs The selling and distribution costs increased by approximately 59% which were mainly due to the increase in marketing expenses and the additional consumption levy but such increment was covered partially by the decrease in rental expenses of the Group. 59% Administrative expenses The administrative expenses increased by approximately HK$46 million. The changes were mainly due to the expenses in relation to the acquisitions and investment in debt securities and exchange losses but such increment was covered partially by the decrease in rental expenses of the Group. 46,000,000 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

15 Management Discussion and Analysis Other Expenses The other expenses represented the loss on disposal of investment in debt securities which arose from the direct attributable expenses of approximately HK$5.7 million in relation to the disposal of the debt securities. 5,700,000 The Group recorded other expenses of approximately HK$15.0 million for the six months ended 30 September 2017, mainly arising from the provision made for the possible liquidated damages for the litigations. No such provision was recognised for the six months ended 30 September ,000,000 Finance Costs The finance costs of the Group increased by approximately 58.5% from approximately HK$8.2 million for the six months ended 30 September 2017 to approximately HK$13.0 million for the six months ended 30 September ,200, % 13,000,000 MAJOR AND CONNECTED TRANSACTION Completion of acquisition of a property holding company Reference is made to the Company s announcements dated 6 March 2018, 3 September 2018 and the circular dated 24 April On 31 August 2018, the acquisition of Beijing Wenfu Hengye Technology Development Co., Ltd ( Wenfu ) was completed. 14 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

16 Management Discussion and Analysis SIGNIFICANT ACQUISITIONS On 25 June 2018, Sparkle Roll Fine Wine Limited, an indirect wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with Mr. Wang Qiang and Reliable Intelligence International Limited, which is principally engaged in the business of property management and provision of tenancy and subtenancy services in the PRC. The directors of the Company (the Directors ) were of the view that such acquisition can expand the scope of business of the Group and shall bring in a source of stable income and profits of the Group in the long run. Pursuant to the sale and purchase agreement, the consideration was paid at RMB428,000,000 and the acquisition was completed during the financial period under review. 428,000,000 OUTLOOK Luxury automakers are expected to be the significant drivers of sales gains in China in The Chinese luxury car market is expected to witness a CAGR of around 11.3% by the year Despite the government s austerity drive, sales of superluxury and supercar sales have not slowed down in China. One of our automobile brands, Lamborghini, has already launched and delivered its SUV, Urus, in the second half of the year, which will be contributing considerable revenue to our automobile segment. 11.3% Urus Looking ahead, notwithstanding the challenging environment of the luxury goods markets in China, the Group will remain cautiously optimistic and committed to continue our leading roles as a luxury goods manager. The Group will make use of its resources to develop new businesses, including the rapidly growing film industry in the PRC as referred to in the announcement of the Company dated 29 October 2018 relating to a conditional acquisition of a company together with the right of investments in certain movies, such acquisition has not been completed as the date hereof. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

17 Management Discussion and Analysis LIQUIDITY AND FINANCIAL RESOURCES The Group s total assets as at 30 September 2018 were approximately HK$4,056.1 million (31 March 2018: HK$3,907.0 million) which were supported by the total equity and total liabilities of approximately HK$2,772 million (31 March 2018: HK$3,023.2 million) and HK$1,284.1 million (31 March 2018: HK$883.9 million) respectively. 4,056,100,000 3,907,000,000 2,772,000,000 3,023,200,000 1,284,100, ,900,000 Cash Flow The Group s bank balances and cash in hand as at 30 September 2018 were approximately HK$114.6 million (31 March 2018: HK$155.7 million) which were mainly denominated in Hong Kong dollars ( HK$ ) and Renminbi ( RMB ). 114,600, ,700,000 The Group s primary uses of cash are to repay the Group s borrowings, to pay for purchases of inventories and to fund the Group s working capital and normal operating costs. Such decrease was mainly attributable to loans receivables including the investment of subscribing financial products during the financial period under review. The Directors consider that the Group will have sufficient working capital for its existing operations and financial resources for financing future business expansion and capital expenditures. Borrowings The Group s borrowings as at 30 September 2018 were approximately HK$882.9 million, representing an increase of approximately 55.5% from approximately HK$567.7 million as at 31 March The Group s borrowings were mainly denominated in RMB. The increase was mainly due to a new borrowing used for acquisition of Wenfu. 882,900, ,700, % Gearing Ratio The Group s gearing ratio computed as total borrowings over the total equity increased to approximately 31.9% as at 30 September 2018 (31 March 2018: 18.8%). 31.9% 18.8% 16 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

18 Management Discussion and Analysis Inventories As at 30 September 2018, the Group s inventories decreased by approximately 6.9% from approximately HK$1,061.4 million as at 31 March 2018 to approximately HK$987.9 million. Such decrease was primarily due to the decrease in automobile inventories which comprised approximately 54.7% of the inventories of the Group. 1,061,400, % 987,900, % The Group s average inventory turnover days decreased from 138 days for the six months ended 30 September 2017 to 124 days for the six months ended 30 September Exposure to Foreign Exchange Risks The revenue and expenses of the Group are mainly denominated in RMB and HK$ while the production cost and purchases are mainly denominated in RMB, HK$, Euro ( EUR ), Swiss Franc ( CHF ) and United States Dollar ( USD ). The Group did not enter into any foreign currency forward contract for the financial period under review. As at 30 September 2018, the Group did not have any unrealised gain or loss in respect of the foreign currency forward contracts (30 September 2017: nil). Contingent Liabilities and Capital Commitment The Group did not have any significant capital commitment as at 30 September 2018 (31 March 2018: nil) in respect of acquisition of property, plant and equipment. The Board considered that other than the possible obligations arising from the litigations as mentioned in the section headed Litigations Updates below, the Group had no material contingent liabilities as at 30 September SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

19 Management Discussion and Analysis Charges on Assets As at 30 September 2018, land and building, pledged deposits and inventories of the Group with aggregate carrying amounts of approximately HK$700.6 million (31 March 2018: nil), HK$84.2 million (31 March 2018: HK$91.4 million) and HK$430.4 million (31 March 2018: HK$484.1 million) respectively were pledged to secure general banking facilities granted to the Group. In addition, inventories of approximately HK$5.2 million (31 March 2018: 17.0 million) and bank balances of approximately HK$21.7 million (31 March 2018: 5.3 million) are subject to certain freeze orders by a court in China. 700,600,000 84,200,000 91,400, ,400, ,100,000 5,200,000 17,000,000 21,700,000 5,300,000 Human Resources As at 30 September 2018, the Group had 523 employees (31 March 2018: 474). Staff costs (including directors emoluments) charged to profit or loss amounted to approximately HK$26.3 million for the six months ended 30 September 2018 (30 September 2017: HK$24.6 million) ,300,000 24,600,000 The Group provided benefits, which included basic salary, commission, discretionary bonus, medical insurance and retirement funds, to employees to sustain the competitiveness of the Group. The package was reviewed on an annual basis based on the Group s performance and employees performance appraisal. The Group also provided training to the employees for their future advancement. 18 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

20 Management Discussion and Analysis LITIGATION UPDATES Reference was made to the Company s announcement dated 10 July 2018 in relation to certain updates on the litigation involved by the Group in the PRC (the Announcement ). On 4 July 2018, the Second Intermediate People s Court of Tianjin City ( ) handed down the Appeal Judgment (as defined in the Announcement) in respect of the Third Litigation (as defined in the Announcement), which ruled in favour of the plaintiffs, and held that, among others, (1) the sales and purchase contract is rescinded; (2) the plaintiff shall return the purchased good to TJXC (as defined in the Announcement) within 5 days after the judgment becomes effective; (3) TJXC shall pay to the plaintiff a sum of RMB8,520,000 as liquidated damages within 5 days after the judgment becomes effective; (4) TJXC shall return the purchase price in the sum of RMB2,300,000 to the plaintiff within 5 days after the Appeal Judgment becomes effective; and (5) the plaintiff s other claims made in the first trial be dismissed. (1) (2) 5 (3) 5 8,520,000 (4) 5 2,300,000 (5) As advised by the Group s PRC legal advisers, the Appeal Judgment is final and binding on the parties. Having taken into account that the amount of damages payable under the Appeal Judgment does not exceed the provision previously made for the possible liquidated damages for the First and the Third Litigations, the Board is of the view that the Appeal Judgment will not have any material adverse impact on the Group s ordinary operations and financial position. The Group will make further announcement(s) to inform its shareholders and potential investors of development of the remaining case as and when appropriate. PRINCIPAL ACTIVITIES The Company is an investment holding company. Its subsidiaries are principally engaged in distributorships of luxury goods. The operations are mainly based in Hong Kong, China and Malaysia. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

21 Management Discussion and Analysis INTERIM DIVIDEND The Board has resolved not to recommend the payment of an interim dividend for the six months ended 30 September 2018 (six months ended 30 September 2017: nil) as the Group would like to reserve more capital to capture opportunities and meet the challenges ahead. SHARE OPTION SCHEME The Company s share option scheme (the Scheme ) was adopted pursuant to an ordinary resolution passed at the special general meeting of the Company held on 7 October 2002 for the primary purpose of providing incentives to directors and eligible employees. The Scheme was expired on 6 October Pursuant to an ordinary resolution passed at the annual general meeting of the Company held on 20 August 2012, the Company s new share option scheme (the New Scheme ) was adopted and the Scheme was terminated. The New Scheme shall be valid and effective for a term of ten years commencing on 20 August There was approximately 4 years remaining life of the New Scheme. The total number of shares in respect of which options may be granted under the New Scheme as at 30 September 2018 was 297,982,885 shares (including options for nil share that have been granted but not yet lapsed or exercised), representing 10% of the issued share capital of the Company as at the date of approval of the adoption of the New Scheme initially. 297,982,885 10% The Company operates the New Scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s business. Eligible participants of the New Scheme include any director (including executive, non-executive and independent non-executive director), any employee, or any consultant, advisor, customer and business associates. There was no outstanding share to be issued under the New Scheme as at 30 September 2018 (as at 31 March 2018: nil). 20 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

22 Condensed Consolidated Statement of Comprehensive Income For the six months ended 30 September 2018 Six months ended 30 September Notes (Unaudited) (Unaudited) Revenue 4 1,759,937 1,428,560 Cost of sales (1,515,496) (1,258,703) Gross profit 244, ,857 Other income and net gains 4 52,021 33,842 Selling and distribution costs (195,950) (123,185) Administrative expenses (73,768) (27,977) Other expenses (5,720) (14,952) Operating profit 5 21,024 37,585 Share of loss of an associate 6 (23,370) Finance costs 7 (13,008) (8,186) Profit before income tax 8,016 6,029 Income tax expense 8 (240) (675) Profit for the period 7,776 5,354 Other comprehensive (loss)/income, net of tax Items that will not be reclassified to profit or loss: Financial assets at fair value through other comprehensive income Net movement in fair value reserves (non-recycling) (108,585) SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

23 Condensed Consolidated Statement of Comprehensive Income (Continued) For the six months ended 30 September 2018 Six months ended 30 September Notes (Unaudited) (Unaudited) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of foreign operations Share of other comprehensive loss of an associate (71,880) 108,302 (6,594) Other comprehensive (loss)/income for the period, net of tax (180,465) 101,708 Total comprehensive (loss)/income for the period (172,689) 107,062 Profit/(loss) for the period attributable to: Owners of the Company 9,310 4,969 Non-controlling interests (1,534) 385 7,776 5,354 Total comprehensive (loss)/income attributable to: Owners of the Company (171,022) 106,547 Non-controlling interests (1,667) 515 (172,689) 107,062 Earnings per share attributable to owners of the Company during the period 10 Basic and diluted earnings per share HK0.2 cent HK0.1 cent 22 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

24 Condensed Consolidated Statement of Financial Position As at 30 September September 31 March Notes (Unaudited) (Audited) ASSETS AND LIABILITIES Non-current assets Property, plant and equipment ,420 92,527 Prepaid lease payments ,496 Goodwill , ,171 Other intangible assets , Available-for-sale investment 15 1,291,321 Financial assets at fair value through other comprehensive income 15 1,085,625 Deposits paid for acquisition of a property holding company 135,802 Rental deposits paid to a related party 16(a) 6,988 15,812 2,570,336 1,742,026 Current assets Prepaid lease payments 12 16,349 Inventories ,944 1,061,407 Trade receivables 19 20,430 5,342 Deposits, prepayments and other receivables 226, ,995 Amounts due from related parties 16(b) 6,767 8,576 Investments in debt securities ,000 Short-term investment 7,386 Loans receivables ,376 Pledged deposits 84,231 91,357 Restricted bank balances 21,671 5,304 Cash at banks and in hand 114, ,650 1,485,806 2,165,007 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

25 Condensed Consolidated Statement of Financial Position (Continued) As at 30 September September 31 March Notes (Unaudited) (Audited) Current liabilities Trade payables 21 31,165 14,501 Receipts in advance, accrued charges and other payables 358, ,370 Amounts due to non-controlling interests 16(b) 6,433 4,538 Amounts due to related parties 16(b) 2,424 Provision for taxation 4,096 5,386 Borrowings , ,652 1,001, ,871 Net current assets 484,140 1,282,136 Total assets less current liabilities 3,054,476 3,024,162 Non-current liabilities Other payables Borrowings ,773 Deferred tax liabilities , NET ASSETS 2,772,033 3,023,180 EQUITY Share capital 23 9,358 9,882 Reserves 24 2,747,312 2,996,268 Equity attributable to owners of the Company 2,756,670 3,006,150 Non-controlling interests 15,363 17,030 TOTAL EQUITY 2,772,033 3,023, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

26 Condensed Consolidated Statement of Changes in Equity For the six months ended 30 September 2018 Share capital Share premium* Capital reserve* Special reserve* Contributed surplus* Attributable to owners of the Company Exchange reserve* Other reserve* Statutory reserve* Fair value reserve (recycling)* Retained profits* Total Fair value reserve (nonrecycling)* Noncontrolling interests * * * * * * * * * * At 1 April ,282 1,482,243 3,508 (36,810) 28,844 (21,405) 7,401 12, ,274 1,773,994 13,833 1,787,827 Total equity Profit for the period 4,969 4, ,354 Other comprehensive income Exchange differences on translation of finacial statements of foreign operations 108, , ,302 Share of other comprehensive income of an associate (6,594) (6,594) (6,594) Total comprehensive income for the period 108,172 (6,594) 4, , ,062 Reduction of share premium (note 24) 24 (500,000) 500,000 Elimination of contributed surplus against accumulated loss of the Company (note 24) 24 (88,818) 88,818 Share of other reserve of an associate (257) (257) (257) Non-controlling interest arising from acquisition of a subsidiary At 30 September 2017 (Unaudited) 8, ,243 3,508 (36,810) 440,026 86, , ,061 1,880,284 14,878 1,895,162 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

27 Condensed Consolidated Statement of Changes in Equity (Continued) For the six months ended 30 September 2018 Share capital Share premium* Capital reserve* Special Contributed reserve* surplus* Attributable to owners of the Company Exchange reserve* Other reserve* Statutory reserve* Fair value reserve (recycling)* Retained earnings* Fair value reserve (nonrecycling)* Noncontrolling interest Total * * * * * * * * * * At 31 March ,882 1,421,488 3,508 (36,810) 440,026 41,028 7,283 12,922 64,243 1,042,580 3,006,150 17,030 3,023,180 Impact on initial application of HKFRS 9 9 (64,243) 64,243 Total equity At 1 April ,882 1,421,488 3,508 (36,810) ,028 7,283 12,922 64,243 1,042,580 3,006,150 17,030 3,023,180 Profit for the period 9,310 9,310 (1,534) 7,776 Other comprehensive income Exchange differences on translation of financial statements of foregin operations (71,747) (71,747) (133) (71,880) Changes in fair value of financial assets at fair value through other comprehensive income (108,585) (108,585) (108,585) Transfer of fair value changes on disposal of financial assets at fair value through other comprehensive income (71,747) (108,585) 9,310 (171,022) (1,667) (172,689) 642 (642) Transfer to statutory reserve 84 (84) Repurchase of shares (524) (77,934) (78,458) (78,458) At 30 September 2018 (Unaudited) 9,358 1,421,488 3,508 (36,810) 362,092 (30,719) 7,283 13,006 (43,700) 1,051,164 2,756,670 15,363 2,772,033 * These reserve accounts comprise the consolidate reserves of HK$2,747,312,000 (31 March 2018: HK$2,976,268,000) in the condensed consolidated statement of financial position as at 30 September * 2,747,312,000 2,976,268, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

28 Condensed Consolidated Statement of Cash Flows For the six months ended 30 September 2018 Six months ended 30 September (Unaudited) (Unaudited) Net cash generated from operating activities 110, ,292 Cash flows from investing activities Increase in pledged bank deposits (148) (8,077) Decrease/(increase) in loans receivables 126,349 (181,960) Purchases of property, plant and equipment (6,330) (6,810) Proceeds from disposals of property, plant and equipment 8, Acquisition of short-term investment (7,386) Proceeds from disposal of debt investments 447,260 Proceeds from disposal of equity investments 97,111 Acquisition of a property holding company (614,981) Acquisition of subsidiaries (note 29) 29 (483,801) (1,150) Interest received 2, Net cash used in investing activities (430,391) (197,152) Cash flows from financing activities Advances from/(repayment to) from a noncontrolling interest of a subsidiary 1,895 (1,632) New borrowings raised 1,797,793 1,187,507 Repayments of borrowings (1,420,556) (1,228,593) Bank interest paid (13,008) (8,186) Repurchase of the Company s own shares (78,458) Net cash used in financing activities 287,666 (50,904) Net decrease in cash and cash equivalents (32,222) (104,764) Cash and cash equivalents at beginning of the period 155, ,103 Effect of foreign exchange rate changes, net (8,853) 8,168 Cash and cash equivalents at end of the period, comprising cash at banks and in hand 114,575 95,507 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

29 Notes to the Interim Condensed Consolidated Financial Statements For the six months ended 30 September BASIS OF PREPARATION This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with Hong Kong Accounting Standard (HKAS) 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). It was authorised for issue on 30 November (HKICPA) (HKAS) 34 The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2018 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2019 annual financial statements. Details of any changes in accounting policies are set out in Note 2. 2 The preparation of an interim financial report in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. 34 This interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2018 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with HKFRSs. The interim financial report has not been audited nor reviewed by the external auditors of the Company but has been reviewed by the Company s audit committee. 28 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

30 For the six months ended 30 September CHANGES IN ACCOUNTING POLICIES The HKICPA has issued a number of new HKFRSs and amendments to HKFRSs that are first effective for the current accounting period of the Group. Of these, the following developments are relevant to the Group s financial statements: 2. HKFRS 9, Financial instruments 9 HKFRS 15, Revenue from contracts with customers 15 The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period, except for the amendments to HKFRS 9, Prepayment features with negative compensation which have been adopted at the same time as HKFRS The following explains the impact of the adoption of HKFRS 9 Financial instruments and HKFRS 15 Revenue from contracts with customers on the Group s condensed consolidated interim financial statements and also discloses the new accounting policies that have been applied from 1 April 2018, where they are different to those applied in prior periods (a) Impact on condensed consolidated interim financial (a) statements The Group elects to adopt HKFRS 9 and HKFRS 15 without restating comparatives. The classification and 9 15 the adjustments arising from the adoption of HKFRS 9 and HKFRS 15 are therefore not reflected in the 9 consolidated statement of financial position as at March 2018, but are recognised in the opening of the condensed consolidated interim statement of financial position on 1 April SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

31 For the six months ended 30 September CHANGES IN ACCOUNTING POLICIES (Continued) 2. (b) HKFRS 9 Financial instruments Impact on adoption (b) 9 HKFRS 9 replaces the provisions of HKAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting The adoption of HKFRS 9 Financial instruments from 1 April 2018 resulted in changes in accounting policies. 9 (i) Classification and measurement (i) On 1 April 2018 (the date of initial application of HKFRS 9), the Group s management has assessed which business models apply to the financial assets held by the Group and has classified its financial instruments into the appropriate HKFRS 9 categories. The Group elected to present changes in the fair value of all its previously classified as available-for-sale financial assets ( AFS ) in other comprehensive income. As a result, AFS with aggregated fair value of HK$1,291,321,000 and AFS fair value reserve of HK$64,243,000 were reclassified to financial assets at fair value through other comprehensive income ( FVOCI ) and FVOCI fair value reserve, respectively on 1 April Other classes of financial assets and financial liabilities had the same carrying amounts in accordance with HKAS 39 and HKFRS 9 on 1 April 2018, and there is no change in the measurement categories of each material class of financial assets and liabilities ,291,321,000 64,243, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

32 For the six months ended 30 September CHANGES IN ACCOUNTING POLICIES (Continued) 2. (b) HKFRS 9 Financial instruments Impact on adoption (Continued) (b) 9 (ii) Impairment of financial assets (ii) The Group s significant financial assets which are subject to the new expected credit loss model include cash at banks, pledged deposits, trade and other receivables. The Group was required to revise its impairment methodologies under HKFRS 9 for these classes of financial assets. 9 The Group applies the HKFRS 9 simplified approach to measure expected credit losses which 9 uses a lifetime expected loss allowance for trade receivables based on credit risk characteristics and the days past due. For other financial assets, expected credit losses are assessed according to change in credit quality since initial recognition. Financial assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group. The Group has assessed the expected credit loss model applied as at 1 April 2018 and the change in impairment methodologies has no significant impact to the Group s allowance for impairment as at 1 April SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

33 For the six months ended 30 September CHANGES IN ACCOUNTING POLICIES (Continued) 2. (c) HKFRS 15 Revenue from contracts with (c) 15 customers Impact of adoption The Group has adopted HKFRS 15 Revenue from contracts with customers from 1 April which resulted in changes in accounting policies and adjustments to the amounts recognised in the condensed consolidated interim financial statements. As such, receipt in advance from customers which was previously included in receipts in advance, 197,469,000 accrued charges and other payables, amounting to HK$197,469,000 as at 1 April 2018, are now recognised as contract liabilities (as included in receipts in advance, accrued charges and other payables) to reflect the 15 terminology of HKFRS 15. Except for the above, the directors consider the adoption of HKFRS 15 does not 15 have a material impact to the opening balance of equity as at 1 April SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

34 For the six months ended 30 September SEGMENT INFORMATION Operating segments are reported in a manner consistent with internal reporting provided to executive directors of the Company who are responsible for allocating resources and assessing performance of the operating segments. In prior years, the executive directors have identified the reportable and operating segments by major product and service lines. During the year ended 31 March 2018, the Group reorganised its internal reporting structure by simplifying the segmental classification based on revenue contribution from its product and service lines so as to enhance operational efficiency, and the executive directors of the Company consider that segments having similar economic characteristics are aggregated for financial reporting purposes. Accordingly, the comparative segment information has been re-presented to conform to current year s presentation. The Group s reportable and operating segments for financial reporting purposes have been reorganised as follows: The executive directors have identified the following reportable operating segments: 3. (i) Auto dealership this segment includes distribution of (i) branded automobiles, namely Bentley, Lamborghini and Rolls-Royce and provision of related after-sales services; (ii) Non-auto dealership this segment includes distribution (ii) of branded watches, namely Richard Mille, DeWitt, Richard Mille DeWitt Parmigiani Parmigiani, DeLaCour and Buben & Zorweg, distribution DeLaCour Buben & Zorweg of branded jewelleries, namely Boucheron and Royal Boucheron Royal Asscher, distribution of certain brands of fine wines, Asscher audio equipment, menswear apparels and accessories and cigars and smoker s accessories; (iii) Others this segment includes provision of property (iii) management services and catering services. Each of these operating segments is managed separately as each of the product and service lines requires different resources as well as marketing approaches. Inter-segment transactions, if any, are priced with reference to prices charged to external parties for similar transaction. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

35 For the six months ended 30 September SEGMENT INFORMATION (Continued) Segment revenue and results For the six months ended 30 September Non-auto Auto dealership dealership (Re-presented) Others Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue from external customers 1,593, ,102 23,340 1,759,937 Other income and net gains 24,827 12,427 37,254 Reportable segment revenue 1,618, ,529 23,340 1,797,191 Reportable segment results 105,300 (25,244) 7,687 87,743 For the six months ended 30 September 2017 Non-auto Auto dealership dealership (Re-presented) Others Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue from external customers 1,284, ,912 1,428,560 Other income and net gains 29,270 1,565 30,835 Reportable segment revenue 1,313, ,477 1,459,395 Reportable segment results 49,103 4,426 53, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

36 For the six months ended 30 September SEGMENT INFORMATION (Continued) Segment assets and liabilities 3. As at 30 September 2018 Non-auto Auto dealership dealership (Re-presented) Others Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) Reportable segment assets 1,064, , ,370 2,206,869 Investment in an equity investment at fair value through other comprehensive income 1,085,625 Deposits, prepayments and other receivables 36,116 Loans receivables 2,612 Corporate assets: financial assets 20,670 non-financial assets 704,250 Consolidated total assets 4,056,142 Reportable segment liabilities 275,747 52,739 63, ,244 Borrowings 882,944 Corporate liabilities: financial liabilities 2,150 non-financial liabilities 6,771 Consolidated total liabilities 1,284,109 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

37 For the six months ended 30 September SEGMENT INFORMATION (Continued) Segment assets and liabilities (Continued) 3. As at 31 March 2018 Non-auto Auto dealership dealership (Re-presented) Others Total (Audited) (Audited) (Audited) (Audited) Reportable segment assets 1,244, ,569 1,833,952 Avaliable-for-sale investment 1,291,321 Investment in debt securities 440,000 Loans receivables 127,376 Deposits, prepayments and other receivables 198,011 Cash of banks and in hand 7,421 Corporate assets: financial assets 4,172 non-financial assets 4,780 Consolidated total assets 3,907,033 Reportable segment liabilities 263,667 42, ,254 Borrowings 567,652 Corporate liabilities: financial liabilities 3,812 non-financial liabilities 6,135 Consolidated total liabilities 883, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

38 For the six months ended 30 September SEGMENT INFORMATION (Continued) Segment assets and liabilities (Continued) 3. A reconciliation between the total presented for the Group s operating segments and the Group s key financial figures as presented in these interim condensed consolidated financial statements is as follows: Six months ended 30 September (Unaudited) (Unaudited) Reportable segment results 87,743 53,529 Bank interest income Interest income from investments, debt securities and loan receivables 9,168 Unallocated corporate income 4,677 2,343 Unallocated corporate expenses (81,484) (18,951) Share of loss of an associate (23,370) Finance costs (13,008) (8,186) Profit before income tax 8,016 6,029 Unallocated corporate income mainly comprised gain on disposals of property, plant and equipment, certain income from advertising, exhibitions and other services and administrative fee income. Unallocated corporate expenses mainly comprised certain employee benefit expenses (including directors emoluments), certain operating lease expenses, auditors remuneration and other centralised administrative costs of the Group s headquarter which are not directly attributable to the business activities of any operating segment. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

39 For the six months ended 30 September REVENUE, OTHER INCOME AND NET GAINS 4. Six months ended 30 September (Unaudited) (Unaudited) Revenue Revenue from contracts with customers within the scope of HKFRS Disaggregated by major products or service lines Sales of automobiles 1,532,778 1,238,822 Sales of other mechandised goods 151, ,912 Income from provision of after-sales services 60,717 45,826 1,745,214 1,428,560 Revenue from other sources Rental income from property subleasing 14,723 1,759,937 1,428,560 Other income and net gains Bank interest income Income from investments, debt securities and loan receivables 9,168 Bonuses from suppliers 981 Compensation income 1,628 Gain on disposals of property, plant and equipment 2, Income from advertising, exhibitions and other services 8,396 1,227 Income from insurance brokerage 23,076 24,106 Management fee income 7, Others 1,285 4,236 52,021 33, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

40 For the six months ended 30 September OPERATING PROFIT Operating profit is arrived at after charging/(crediting): 5. Six months ended 30 September (Unaudited) (Unaudited) Amortisation of other intangible asset # # Amortisation of prepaid lease payments (note 12) 12 1,383 Cost of inventories recognised as expense 1,507,043 1,164,529 Provision for litigation and claims (note 30)^ 30 ^ 14,952 Direct costs attributable to disposal of debt securities^ (see note 17) ^ 17 5,720 Depreciation of property, * plant and equipment* 11,308 10,878 Exchange differences, net 5,870 (766) Gain on disposals of property, plant and equipment (2,058) (69) Operating lease payments in respect of rented premises 28,423 42,114 Employee costs, including directors emoluments Defined retirement benefits scheme contributions for employees 20,651 19,820 5,620 4,775 Employee benefit expenses 26,271 24,595 # ^ Included in administrative expenses. Included in other expenses. * Depreciation of approximately HK$10,732,000 and HK$576,000 (six months ended 30 September 2017: HK$10,062,000 and HK$816,000) have been included in selling and distribution costs and administrative expenses, respectively. # ^ * 10,732, ,000 10,062, ,000 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

41 For the six months ended 30 September SHARE OF LOSS OF AN ASSOCIATE The Group completed its acquisition of approximately 15.09% shareholding in Bang & Olufsen A/S ( B&O ) on 16 December B&O is incorporated in Denmark with limited liability and is an entity listed in Denmark. During the year ended 31 March 2018, the Group ceased to have significant influence over B&O as a result of loss of representation by the Group in the board of directors of B&O due to the resignation of Mr. Tong Kai Lap as the chairman and executive director of the Company (who holds the position of director and audit committee member of B&O) (the Resignation ) which was effective from 1 January The directors of the Company announced on 15 January 2018 that in accordance with Hong Kong Accounting Standard 28 Investments in Associates and Joint Ventures ( HKAS 28 ), as a result of the loss of significant influence over B&O due to the change of circumstances including the Resignation, the consequential loss of representation by the Group in the board of directors of B&O and that the Group has no intention to recommend any person to the board of directors and senior management of B&O, B&O ceased to be an associate of the Group and thus the Group discontinued the use of the equity method on its investment in B&O, and accordingly, the investment in B&O at the date when significant influence is lost was recognised at fair value and this amount was regarded as the fair value on initial recognition of available-for-sale investment (see Note 15). 6. Bang & Olufsen A/SB&O 15.09% B&O B&O B&O B&O B&O B&O B&O B&O B&O B&O SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

42 For the six months ended 30 September SHARE OF LOSS OF AN ASSOCIATE (Continued) 6. The results of the Group for the six months ended 30 September 2017 included B&O s most recently available and published financial information drawn up to 31 August In applying the equity method to prepare the interim condensed consolidated financial statements, the Group has used the financial information of B&O for the six months ended 31 August 2017 as contained in B&O s published interim reports dated 12 July 2017 and 4 October 2017 ( B&O interim financial information ). As noted in these interim reports, B&O s interim financial information was prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as endorsed by the European Union. In the application of the equity method, the Company s management has assessed whether there should be adjustments for differences in accounting policies as adopted by the Company and B&O, and for any significant events or transactions of B&O in March 2017 as included in B&O s interim financial information and in September 2017 which is not reflected in B&O s interim financial information. As such, the Group has taken advantage of the provision contained in HKAS 28 Investments in Associates and Joint Ventures whereby it is permitted to include the attributable share of associates results based on accounts drawn up to a non-coterminous period end where the difference must be no greater than three months. B&O B&O B&O B&O B&O 34 B&O B&O B&O B&O B&O FINANCE COSTS 7. Six months ended 30 September (Unaudited) (Unaudited) Interest on bank loans and overdraft 7,903 6,194 Interest on other loans 5,105 1,992 13,008 8,186 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

43 For the six months ended 30 September INCOME TAX EXPENSE Hong Kong Profits Tax is provided at the rate of 16.5% (six months ended 30 September 2017: 16.5%) on estimated assessable profit derived in Hong Kong for the period % 16.5% The Group s subsidiaries in Mainland China are subject to income tax at the rate of 25% except that a subsidiary is entitled to tax exemption. 25% Income tax of certain subsidiaries of the Company in Malaysia is charged at 3% on the assessable profit for the period or a fixed amount of Malaysian Ringgit 20,000, whichever is lower. 3% 20,000 Six months ended 30 September (Unaudited) (Unaudited) Current tax Hong Kong Charge for the period Other jurisdictions: Charge for the period Under-provision in prior years Total current tax Deferred tax (137) Total income tax expense SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

44 For the six months ended 30 September DIVIDENDS No dividend was paid or proposed during the six months ended 30 September 2018 and 2017, nor has any dividend been proposed since the end of reporting period EARNINGS PER SHARE 10. (a) Basic (a) The calculation of basic earnings per share is based on the profit attributable to owners of the Company 9,310,000 of HK$9,310,000 (six months ended 30 September 2017: HK$4,969,000) and on the weighted average of 4,969,000 3,879,061,447 (six months ended 30 September 2017: 3,879,061,447 4,141,237,447) ordinary shares in issue during the period. 4,141,237,447 (b) Diluted (b) The diluted earnings per share for the six months ended 30 September 2018 and 2017 are the same as basic earnings per share as there were no dilutive potential ordinary shares in existence during the periods. 11. PROPERTY, PLANT AND EQUIPMENT During the six months ended 30 September 2018, the Group acquired items of property, plant and equipment at a total cost of HK$139,577,000 (six months ended 30 September 2017: HK$6,810,000) including the acquisition of buildings of HK$130,657,000 through acquisition of a property holding company. Items of property, plant and equipment with a net carrying amount of HK$6,446,000 (six months ended 30 September 2017: HK$96,000) were disposed of during the six months ended 30 September ,577,000 6,810, ,657,000 6,446,000 96,000 Details of property, plant and equipment pledged are set out in note SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

45 For the six months ended 30 September PREPAID LEASE PAYMENTS September 2018 (Unaudited) Prepaid lease payments related to land use rights are analysed for reporting purposes as: Non-current assets 554,496 Current assets 16, ,845 The Group s interests in land use rights represent prepaid operating lease payments and the movements in their net carrying amounts are analysed as follows: 30 September 2018 (Unaudited) Opening net carrying amount Acquisition of a propery holding company 575,915 Amortisation (1,383) Exchange alignments (3,687) Closing net carrying amount 570,845 The amount represents the prepayment of rentals for land use rights in the People s Republic of China ( PRC ) under medium-term leases for 35 years. 35 Details of land use rights pledged are set out in note SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

46 For the six months ended 30 September GOODWILL 13. As at As at 30 September 31 March HK 000 HK 000 (Unaudited) (Audited) Cost At the beginning of the period 580, ,679 Additional amount recognised from business combinations occurring 29 during the period (Note 29) 63,403 At the end of the period 644, ,679 Accumulated impairment loss At the beginning and end of the period (374,508) (374,508) Carrying amount at the end of period 269, ,171 The carrying amount of goodwill allocated to each of the cash-generating units is as follows: Auto dealership 206, ,171 Property management services 61,116 Catering services 2, , ,171 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

47 For the six months ended 30 September OTHER INTANGIBLE ASSETS During the six months ended 30 September 2018, the Group acquired intangible assets of HK$437,879,000 in relation to the acquisition of subsidiaries under property management services segment (see Note 29) ,879, FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME/AVAILABLE-FOR-SALE INVESTMENT 15. As at As at 30 September 31 March HK 000 HK 000 (Unaudited) (Audited) Financial assets at fair value through other comprehensive income 1,085,625 Available-for-sale investment 1,291,321 1,085,625 1,291,321 Financial assets at fair value through other comprehensive income as at 30 September 2018 and available-for-sale investment as at 31 March 2018 both represent investment in Bang & Olufsen A/S ( B&O ) which is a listed equity in Denmark. As at 30 September 2018, the Group held approximately 13.89% of the total shareholding in B&O (31 March 2018: 15.09%). Bang & Olufsen A/S B&O B&O 13.89% 15.09% 46 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

48 For the six months ended 30 September BALANCES WITH RELATED PARTIES/ NON-CONTROLLING INTERESTS 16. (a) Rental deposits paid to a related party (a) The Group entered into several agreements with Mr. Qi Jian Hong ( Mr. Qi ), a controlling shareholder of the Company, for leasing of properties as office premises, warehouse and showrooms in Mainland China to the Group. The rental deposits paid to Mr. Qi of HK$6,988,000 (31 March 2018: HK$15,812,000) have been recognised as non-current assets as at 30 September ,988,000 15,812,000 (b) Balances with related parties and non-controlling interests (b) 30 September March 2018 Notes (Unaudited) (Audited) Mr. Qi (i) 6,767 6,847 ( BJHYDY ) (ii) 1,111 ( BJFBTS ) (ii) 618 Total amounts due from related parties 6,767 8,576 (i) The amount due from Mr. Qi, resulting from prepaid rental expenses for leasing of properties as office premises, warehouse and showrooms in Mainland China to the Group is unsecured, interest-free and will be utilised through setting off future rental expenses payable to Mr. Qi within one year. (i) (ii) The amounts due from BJHYDY and BJFBTS (both companies controlled by Mr. Qi) are unsecured, interest-free and repayable on demand. (ii) The amounts due to related parties and non-controlling interests are unsecured, interest-free and repayable on demand. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

49 For the six months ended 30 September INVESTMENT IN DEBT SECURITIES The Group s investment in debt securities as at 31 March 2018 represented unlisted senior notes (the Senior Notes ) issued by Shanghai Huaxin Group (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. Details of the Senior Notes are set out in the announcements by the Company on 4 December 2017 and 2 March During the current period, the Group disposed of the Senior Notes in the principal amount of HK$440,000,000 to an independent third party at a total consideration of approximately HK$447,260,000 in which HK$7,260,000 was included in the income from debt securities. The direct costs attributable to the disposal of Senior Notes of approximately HK$5,720,000 have been charged to other expenses in the condensed consolidated statement of comprehensive income during the period ended 30 September 2018 (see Note 5). Details of the disposal of the Senior Notes are set out in the announcement by the Company on 31 May ,260, ,000,000 7,260,000 5,720, INVENTORIES September 31 March (Unaudited) (Audited) Raw materials and consumables 58,938 36,959 Merchandised goods 929,006 1,024, ,944 1,061,407 As at 30 September 2018, merchandised goods of approximately HK$430,442,000 (31 March 2018: HK$484,121,000) have been pledged to secure the loan facilities (note 27). 430,442, ,121, As at 30 September 2018, merchandised goods of approximately HK$5,160,000 (31 March 2018: HK$16,975,000) are subject to a freeze order by a court in Mainland China following a legal proceeding as detailed in Note 30. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/ ,160,000 16,975,000

50 For the six months ended 30 September TRADE RECEIVABLES An ageing analysis of trade receivables as at the reporting dates, based on the invoice dates, is as follows: September 31 March (Unaudited) (Audited) 0-30 days ,643 5, days , Over 120 days ,430 5,342 The Group s trading terms with its retail customers are mainly receipts in advance from customers or cash on delivery, except for certain transactions with creditworthy customers where the credit period is extendable up to three months, whereas the trading terms with wholesale customers are generally one to two months. In addition, the Group generally provides a credit term of two to three months to automobile manufacturers for the in-warranty after-sale services. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

51 For the six months ended 30 September LOAN RECEIVABLES September March 2018 Notes (Unaudited) (Audited) Loans to independent third parties through internet finance platform (i) 86,420 Other loans receivable (ii) 40, ,376 Notes: (i) Amounts represented loans to certain independent third parties which were facilitated through the internet finance platform of independent financial services companies and are unsecured. The principal of these loans (with maturity due within 30 to 90 days) and the related interest (bearing 6.00% or 6.10% per annum) are insured by an independent insurance company based in Mainland China. (i) % 6.10% (ii) The loans are made to independent third parties and are unsecured, bearing interest rate ranging from 2.65% to 7.36% per annum and repayable within one year. (ii) 2.65% 7.36% 50 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

52 For the six months ended 30 September TRADE PAYABLES The following is an ageing analysis of trade payables as at the reporting dates based on the invoice dates: September 31 March (Unaudited) (Audited) 0-30 days ,029 10, days , days ,290 Over 90 days 90 5,860 1,555 31,165 14,501 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

53 For the six months ended 30 September BORROWINGS September 31 March (Unaudited) (Audited) Current portion: Bank loans, secured and guaranteed 177, ,327 Bank loans, secured 87, ,416 Bank loans, guaranteed 7,636 9,565 Other loans, secured and guaranteed 329, , , ,652 Non-current portion: Bank loans, secured and guaranteed 281, , ,652 Effective interest rates per annum in the range of: fixed rate borrowings 1% to 8.50% 1% to 8.50% variable rate borrowings 2.97% to 3.69% 2.16% to 5.22% As at the reporting date, all the current borrowings were repayable on demand or scheduled to be repaid on demand or within one year and none of the non-current bank loans is expected to be settled within one year. As at 31 March 2018, the Group s land and building of HK$700,616,000 (31 March 2018: HK$nil) (note 12), inventories of HK$430,442,000 (31 March 2018: HK$484,121,000) (note 14) and bank deposits of HK$84,231,000 (31 March 2018: HK$91,357,000) were pledged to secure the loan facilities granted to the Group. 700,616, ,442, ,121, ,231,000 91,357, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

54 For the six months ended 30 September BORROWINGS (Continued) The borrowings were also subject to corporate guarantees executed by the Company and certain subsidiaries during the six months ended 30 September 2018 and the year ended 31 March SHARE CAPITAL 23. Number of ordinary shares Amount Issued and fully paid: Ordinary shares of HK$0.002 each At 1 April 2017 and 30 September ,141,237,447 8,282 At 1 April ,941,237,447 9,882 Shares repurchased (note (i)) (i) (262,176,000) (524) At 30 September ,679,061,447 9,358 Note (i): The Company repurchased 262,176,000 of its shares on the Stock Exchange for a total consideration of HK$78,457,713. The shares repurchases resulted in the decrease of the issued shares of HK$524,000 and contributed surplus of HK$77,934,000. (i) 78,457, ,176, ,000 77,934, RESERVES Pursuant to a special resolution passed at the annual general meeting of the Company on 6 September 2017, the Company reduced its share premium by an amount of HK$500,000,000 and transferred the same amount to the contributed surplus account of the Company. On the same date, the Company applied an amount of approximately HK$88,818,000 from the contributed surplus account against its accumulated loss ,000,000 88,818,000 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

55 For the six months ended 30 September RELATED PARTY DISCLOSURES 25. (a) Related party transactions (a) During the period, save as disclosed elsewhere in these interim condensed consolidated financial statements, the Group also had the following significant transactions with related parties: Six months ended 30 September (Unaudited) (Unaudited) Rental expense to Mr. Qi* * 14,032 30,603 Management fees income from related companies^ ^ Administrative fees income from a related company Marketing fees to related companies 1,965 Rental income from a related company 372 Purchase of goods from ^ a related company^ 119 Purchases of goods from an associate 64,214 * Mr. Qi is a controlling shareholder of the Company ^ These related companies are controlled by Mr. Qi * ^ 54 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

56 For the six months ended 30 September RELATED PARTY DISCLOSURES (Continued) 25. (a) Related party transactions (Continued) (a) The above related party transactions are conducted in the ordinary course of business with reference to the terms mutually agreed between the parties. Remunerations of key management of the Group, being the directors of the Company, during the period was as follows: Six months ended 30 September (Unaudited) (Unaudited) Salaries and other benefits 1,849 2,430 Contributions to retirement benefits schemes ,865 2,448 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

57 For the six months ended 30 September RELATED PARTY DISCLOSURES (Continued) 25. (b) Operating lease commitment to a related party (b) As at the reporting date, the total future minimum lease payments payable by the Group to Mr. Qi under non-cancellable operating leases were as follows: 30 September 2018 (Unaudited) 31 March 2018 (Audited) Within one year 30,409 66,370 In the second to fifth years inclusive 89, ,593 After five years 119, , SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

58 For the six months ended 30 September OPERATING LEASE COMMITMENTS 26. (a) Group as lessor (a) As at the reporting date, the total future minimum lease receivable under non-cancellable operating lease is as follows: 30 September 2018 (Unaudited) 31 March 2018 (Audited) Within one year 86, In the second to fifth years inclusive 187,224 After five years 53, , SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

59 For the six months ended 30 September OPERATING LEASE COMMITMENTS (Continued) 26. (b) Group as lessee (b) As at the reporting date, the total future minimum lease payments payable by the Group under non-cancellable operating leases, including operating lease commitment to a related party (see Note 25(b)), are as follows: 25(b) 30 September 2018 (Unaudited) 31 March 2018 (Audited) Within one year 89,978 85,343 In the second to fifth years inclusive 245, ,607 After five years 183,478 23, , ,663 The Group leases a number of office premises, warehouse, showrooms and staff quarters under operating leases. The leases run for an initial period of one to ten years (31 March 2018: one to eleven years). The actual payments in respect of certain operating leases are calculated at the higher of the minimum commitments as noted in the table above and the amounts determined based on certain percentage of sales of the related retail shops. 58 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

60 For the six months ended 30 September PLEDGE OF ASSETS At the end of the reporting period, certain of the Group s assets were pledged to secure banking facilities granted to the Group. The aggregate carrying amount of the assets of the Group pledged at the end of the reporting period is as follows: September March 2018 Buildings 129,771 Prepaid lease payments 570,845 Inventories 430, ,121 Restricted bank deposits 84,231 91,357 1,215, , FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS 28. (i) Financial instruments measured at fair value (i) Fair value hierarchy HKFRS 13 Fair Value Measurement categorises fair value measurements into a three-level hierarchy. 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: 13 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 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

61 For the six months ended 30 September FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (Continued) 28. (i) Financial instruments measured at fair value (i) (Continued) 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 Valuation techniques and inputs used in Level 1 fair value measurement At 30 September 2018, the Group s investments in equity securities in Level 1 comprise investments in B&O shares of approximately HK$1,085,625,000 (at 31 March 2018: approximately HK$1,291,321,000) which are listed in Denmark. The fair values of the listed securities are determined based on the quoted market prices at the end of reporting period. B&O 1,085,625,000 1,291,321,000 Valuation techniques and inputs used in Level 2 fair value measurement At 30 September 2018, the Group s debt investments in Level 2 comprise short-term investment in wealth management products of approximately HK$7,386,000 purchased from banks. The Group benchmarks the costs against fair values of comparable investments as of the end of reporting period, and categorised all fair value measures of bank financial products as Level 2 of the fair value hierarchy because they are valued using directly or indirectly observable inputs in the market place. 7,386, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

62 For the six months ended 30 September FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (Continued) 28. (i) Financial instruments measured at fair value (i) (Continued) During the six months ended 30 September 2018, there were no transfers between Level 1 and Level 2, or transfers into or out of 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. (ii) Fair value of financial instruments carried at other (ii) than fair value The carrying amounts of the Group s assets and liabilities carried at cost or amortised cost were not materially different from their fair values as at 30 September 2018 and 31 March SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

63 For the six months ended 30 September BUSINESS COMBINATIONS 29. (a) Acquisition of ( ZQYJG ) (a) In July 2018, the Group entered into a sale and purchase agreement for the acquisition of 100% of the equity interest in ZQYJG, which is principally engaged in provision of catering service management in Mainland China, at a purchase consideration of RMB7,000,000 (equivalent to approximately HK$8,046,000) which has been settled by cash. 100% 7,000,000 8,046,000 Acquisition-related costs had been excluded from the consideration transferred. The costs were insignificant and have been expensed and are included in administrative expenses in the condensed consolidated statement of comprehensive income. The fair values of identifiable assets and liabilities of the acquired subsidiary as at the date of acquisition and the goodwill arising therefrom were as follows: Fair value at date of acquisition (unaudited) Property, plant and equipment 8,902 Inventories 32 Trade receivables 288 Amounts due from fellow subsidiaries 3 Deposits, prepayment and other receivables 1,076 Cash at banks and in hand 6,007 Trade payables (2,406) Accruals and other payables (8,043) Amounts due to related companies (100) Total identifiable net assets at fair value 5,759 Goodwill 2,287 Satisfied by cash 8, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

64 For the six months ended 30 September BUSINESS COMBINATIONS (Continued) 29. (a) Acquisition of (a) ( ZQYJG ) (Continued) The fair value of assets acquired and liabilities assumed approximated the gross contractual amounts. The goodwill arose in the above acquisition because the consideration included benefit of enhancing the sales channels of fine wines through the two restaurants and the chain of other restaurants under the same brand. None of the goodwill arising on these acquisition is expected to be deductible for tax purposes. An analysis of the cash flows in respect of the acquisition of ZQYJG is as follows: (unaudited) Cash consideration paid (8,046) Cash at banks and in hand 6,007 Net cash outflows (2,039) Since the acquisition, the acquired business contributed revenue of approximately HK$4,355,000 and profit of approximately HK$912,000 to the Group s consolidated profit for the six months ended 30 September ,355, ,000 The Group s revenue and profit would have been approximately HK$14,291,000 and HK$6,140,000 respectively for the period if the acquisition had been completed on 1 April These pro forma information are for illustrative purpose only and are not necessarily indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2018 nor are they intended for projection of future results. 14,291,000 6,140,000 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

65 For the six months ended 30 September BUSINESS COMBINATIONS (Continued) 29. (b) Acquisition of Reliable Intelligence Internatioal Limited ( RII ) and its subsidiaries (together RII Group ) (b) On 25 June 2018, Sparkle Roll Fine Wine Limited ( SRFW ), an indirectly wholly-owned subsidiary of the Company, has entered into an equity transfer agreement in relation to the acquisition of the entire equity interest of RII Group from Mr. Wang Qiang. Further details of the said transaction were set out in the announcement of the Company dated 25 June This transaction was completed on 31 July 2018, and accordingly, RII Group since then become wholly-owned subsidiaries of SRFW. The purchase consideration of RMB428,000,000 (equivalent to approximately HK$497,674,000) has been settled by cash. 428,000, ,674,000 The fair values of identifiable assets and liabilities of the acquired RII Group as at the date of acquisition and the goodwill arising therefrom were as follows: Fair value at date of acquisition (unaudited) Property, plant and equipment 18 Trade receivables 7,194 Intangible assets 437,879 Deposits, prepayment and other receivables 14,750 Amounts due from fellow subsidiaries 59,698 Cash at banks and in hand 15,912 Trade payables (10,738) Accruals and other payables (43,777) Amounts due to fellow subsidiaries (44,378) Total identifiable net assets at fair value 436,558 Goodwill 61,116 Satisfied by cash 497, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

66 For the six months ended 30 September BUSINESS COMBINATIONS (Continued) 29. (b) Acquisition of Reliable Intelligence Internatioal (b) Limited ( RII ) and its subsidiaries (together RII Group ) (Continued) Acquisition-related costs of HK$22,659,000 have 22,659,000 been charged to administrative expenses in the interim condensed consolidated statement of comprehensive income during the period ended 30 September The goodwill arose in the above acquisition because the consideration included benefit of revenue growth, future market development of the Group and synergies on retail store expansion. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes. Intangible assets of HK$437,879,000 in relation to the 437,879,000 acquisition of subsidiaries under property management services segment have been recognised by the Group. An analysis of the cash flows in respect of the acquisition of a subsidiary is as follows: (unaudited) Cash consideration paid (497,674) Cash at banks and in hand 15,912 Net cash outflows (481,762) SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

67 For the six months ended 30 September BUSINESS COMBINATIONS (Continued) 29. (b) Acquisition of Reliable Intelligence Internatioal (b) Limited ( RII ) and its subsidiaries (together RII Group ) (Continued) Since the acquisition, the acquired business contributed revenue of approximately HK$18,985,000 and profit of approximately HK$11,961,000 to the Group s consolidated profit for the six months ended 30 September The Group s revenue and profit would have been approximately HK$62,372,000 and HK$37,699,000 respectively for the period if the acquisition had been completed on 1 April These pro forma information are for illustrative purpose only and are not necessarily indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2018 nor are they intended for projection of future results. 18,985,000 11,961,000 62,372,000 37,699, LITIGATIONS During the current period, the Group was involved in two lawsuits and claims, all of which relate to disputes over the sale and purchase agreements on automobiles with its customers. These claims amounted to approximately HK$24.3 million in aggregate, being (i) refund of purchase price of automobiles amounting to approximately HK$5.9 million upon rescission of the respective sale and purchase agreements, (ii) compensation for relevant tax and expenses of approximately HK$0.7 million; and (iii) compensation equaling to three times of the purchase price of automobiles amounting to approximately HK$17.7 million. References were made to the Company s announcement dated 3 October 2017, 17 November 2017, 19 December 2017 and 3 April 2018 in relation to the first litigation against Tianjin Xin Chang Tai Fu Trading Development Limited* ( ) ( TJXC ) (the First Litigation ) and 12 October 2017, 17 November 2017, 29 December 2017 and 10 July 2018 in relation to the second litigation against TJXC (the Second Litigation ) ,300,000 (i) 5,900,000 (ii) 700,000 (iii) 17,700, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

68 For the six months ended 30 September LITIGATIONS (Continued) In respect of the First Litigation, after the retrial of the First Litigation, the Jinghai District People s Court of Tianjin City* () handed down a judgment on 19 March 2018 (the Appeal Judgment ), which reinstated the judgment of the First Litigation. On 30 March 2018, TJXC filed an appeal application to the First Intermediate People s Court of Tianjin City* ( ) against the Appeal Judgment. As at 30 November 2018, the relevant appeal application was still in progress. 30. In respect of the Second Litigation, TJXC had received a judgment handed down by the Jinnan District People s Court of Tianjin City* ( ) dated 28 September On 12 October 2017, TJXC filed an appeal application to the Second Intermediate People s Court of Tianjin City* ( ) against the judgment of the Third Litigation. After the appeal hearing, the Second Intermediate People s Court of Tianjin City* handed down a judgment on 4 July 2018 (the Appeal Judgment ). As advised by the Group s PRC legal advisers, the Appeal Judgment is final and binding on the parties. Based on the legal opinion obtained from the Group s PRC legal adviser, the Group had made a provision of approximately HK$13 million in aggregate for the probable liquidated damages for the First and Second Litigation. The Group recorded such provision in other expenses in the consolidated statement of comprehensive income for the year ended 31 March Having taken into account that the probable liquidated damages do not exceed the provision previously made for the First and Second Litigation, the directors are of the view that the no further provision is required during the current period. 13,000,000 In addition, pursuant to applications made by a plaintiff in one of the above lawsuits to freeze and preserve certain assets of the Group including inventories of approximately HK$5,160,000 and bank balances of approximately HK$21,671,000, several orders were granted by the court in September 2017 to freeze and preserve these assets. 5,160,000 21,671,000 * For identification purposes only * SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

69 For the six months ended 30 September EVENTS AFTER THE REPORTING DATE Save as disclosed elsewhere in this report, the following significant events took place subsequent to 30 September 2018: 31. On 29 October 2018, the Group entered into a sale and purchase agreement (the Acquisition ) with Ms. Tam Cho Wai Josephine (the Vendor ) and Cheer Summit Investment Limited (the Target Company ), pursuant to which the Group had conditionally agreed to purchase the entire issued share capital of Target Company (the Sale Share ). The initial consideration for the Sale Share shall be HK$102,000,000 and the maximum consideration payable by the Group to the Vendor for the Acquisition shall be HK$252,000,000. The initial consideration shall be satisfied by way of allotment and issuance of 340,000,000 consideration shares at HK$0.3 each by the Company to the Vendor on the date of the completion of the Acquisition. Details of the transaction are set out in the announcement of the Company dated 29 October Such transaction has not been completed as the date hereof. 102,000, ,000, ,000, SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

70 Additional Information For the six months ended 30 September 2018 DIRECTORS INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS As at 30 September 2018, the interests and short positions of the Directors and/or the chief executives of the Company in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) which were required to be (i) notified to the Company and The Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he or she was taken or deemed to have under such provisions of the SFO); or (ii) as recorded in the register required to be maintained by the Company pursuant to Section 352 of the SFO; or (iii) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules (the Listing Rules ) Governing the Listing of Securities on the Stock Exchange, were as follows: XV (i)xv 78 (ii) 352 (iii) Long position in the Shares, underlying shares and debentures of the Company Approximate Name of director Capacity Number of shares held percentage of interest (Note 2) 2 Mr. Zheng Hao Jiang Interest of controlled corporation (Note 1) 10,640, % 1 Mr. Choy Sze Chung, Jojo Beneficial owner 1,000, % Mr. Lee Thomas Kang Bor Beneficial owner 1,680, % Notes: (1) These 10,640,000 Shares were held by Keyking Mission Group Co., Ltd, a company is wholly owned by Mr. Zheng Hao Jiang. Accordingly, Mr. Zheng Hao Jiang was deemed to be interested in these Shares. (1) 10,640,000 Keyking Mission Group Co., Ltd (2) The denominator used is 4,682,061,447 Shares, being the total number of Shares in issue as at 30 September (2) 4,682,061,447 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

71 Additional Information For the six months ended 30 September 2018 SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at 30 September 2018, the register maintained by the Company pursuant to Section 336 of the SFO shows that, other than a Director or chief executive of the Company, the following shareholders had notified the Company of relevant interests and short positions in the Shares and underlying Shares of the Company: 336 Long position in the Shares and underling Shares of the Company Approximate Name of shareholder Capacity Number of shares percentage of interest (Note 1) (Note 2) 1 2 Sparkle Roll Holdings Limited Beneficial owner 2,321,012,630 (L) 49.57% Mr. Qi Jian Hong alias Mr. Kei Kin Hung ( Mr. Qi ) (Notes 3 & 4) 3 4 Beneficial owner 307,224,000 (L) 6.56% Interest of controlled corporation (Notes 3 & 4) 2,321,012,630 (L) 49.57% 3 4 2,628,236, % Ms. Zhu Shuang (Note 3) Interest of spouse (Note 3) 2,628,236,630 (L) 56.13% 3 3 Able Honour Holdings Limited Person having a security interest in shares (Note 4) 1,200,000,000 (L) 25.63% 4 70 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

72 Additional Information For the six months ended 30 September 2018 Ms. Xu Jiaying Interest of controlled corporation (Note 4) 1,200,000,000 (L) 25.63% 4 Beneficial owner 4,208,000 (L) 0.09% 1,204,208, % UBS Group AG Person having a security interest in shares 300,288,000 (L) 6.41% Interest of controlled corporation (Note 5) 420,000 (L) 0.01% 5 Interest of controlled corporation (Note 5) 420,000 (S) 0.01% 5 301,128, % Mr. Lam Chi Kin Beneficial owner 100,000,000 (L) 2.14% Person having a security interest in shares 300,000,000 (L) 6.41% 400,000, % Mr. Lin Peng Person having a security interest in shares 300,000,000 (L) 6.41% Notes: (1) The letter L denotes a person s long position in such Shares and the letter S denotes a person s short position in such Shares. (1) L S (2) The percentage of shareholding is calculated on the basis of 4,682,061,447 Shares in issue as at 30 September (2) 4,682,061,447 (3) These 2,321,012,630 Shares were held by Sparkle Roll Holdings Limited. Sparkle Roll Holdings Limited is a company wholly owned by Mr. Qi. Accordingly, Mr. Qi was deemed to be interested in the Shares held by Sparkle Roll Holdings Limited. Ms. Zhu Shuang is the wife of Mr. Qi. Accordingly, Ms. Zhu Shuang was deemed to be interested in the Shares held by Sparkle Roll Holdings Limited and Mr. Qi. (3) 2,321,012,630 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

73 Additional Information For the six months ended 30 September 2018 (4) Among these 2,321,012,630 Shares, 1,200,000,000 Shares have been charged to Able Honour Holdings Limited as security interest. Able Honour Holdings Limited is 100% controlled by Ms. Xu Jiaying. Accordingly, Ms. Xu Jiaying is deemed to be interested in all the Shares in which Able Honour Holdings Limited is interested. (4) 2,321,012,630 1,200,000,000 Able Honour Holdings Limited Able Honour Holdings Limited 100% Able Honour Holdings Limited (5) These Shares were held by UBS Securities LLC which is a company 100% controlled by UBS Group AG. Accordingly, UBS Group AG was deemed to be interested in the Shares and short position held by UBS Securities LLC. (5) 420,000420,000 UBS Securities LLC UBS Securities LLC UBS Group AG 100% UBS Group AG UBS Securities LLC Save as disclosed above, as at 30 September 2018, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the shares or underlying shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group. XV 23 5% DIRECTORS BIOGRAPHICAL DETAILS UPDATE Directors biographical details update since the date of the 2018 Annual Report of the Company, which are required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules, are set out below: 13.51B(1) Name of Director Biographical details update since 2018 Annual Report Effective Date Zhao Xiaodong Appointed as a Director, Deputy Chairman and Chief Operating Officer of the 3 September 2018 Company Save for the information disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules B(1) 72 SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

74 Additional Information For the six months ended 30 September 2018 PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY The Company repurchased a total of 262,176,000 Shares on the Hong Kong Stock Exchange at an aggregate consideration of HK$78,457, from July 2018 to September As at 30 September 2018, all the repurchased Shares have been cancelled except for the shares repurchased on 13 September 2018 (which have already been cancelled on 5 October 2018). 78,457, ,176,000 Date of repurchased Highest price Lowest price Average price Number of shares repurchased Total paid HK$ HK$ HK$ HK$ 9 July ,712,000 5,564, July ,000, , July ,200,000 6,638, July ,800, , July ,400,000 9,051, July ,000,000 7,774, July ,000,000 6,540, August ,000,000 7,767, August ,000,000 1,770, August ,400, , August ,000,000 2,312, August ,000,000 3,300, August ,000,000 2,999, August ,400,000 2,505, August ,520,000 1,330, August ,720, , August ,048,000 2,103, August ,976,000 11,992, August ,000 60, September ,600,000 1,714, September ,040,000 1,330, September ,000 52, September ,000,000* 990, Total 262,176,000 78,457, * Repurchased but not yet cancelled as at 30 September 2018 (which have already been cancelled on 5 October 2018). * SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

75 Additional Information For the six months ended 30 September 2018 Save as disclosed above, neither the Company nor any of its subsidaries purchased, sold or redeemed any Shares during the Reporting Period. PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company s Bye-laws or the laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to the existing shareholders. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted the Model Code for Securities Transaction by Directors of Listed Issuers (the Model Code ) contained in Appendix 10 to the Listing Rules to govern securities transactions by the Directors. After having made specific enquiry of all Directors, all Directors confirmed that they have complied with the Model Code throughout the six months ended 30 September The Company also adopted the Model Code as guidelines for its relevant employees who are likely to be in possession of unpublished inside information of the Company in respect of their dealings in securities of the Company. No incident of noncompliance of the Model Code by the relevant employees was noted by the Company. CORPORATE GOVERNANCE PRACTICES The Group is committed to maintaining a high standard of corporate governance. The Board agrees that corporate governance practices are increasingly important for maintaining and promoting investor confidence. Corporate governance requirements keep changing, therefore the Board reviews its corporate governance practices from time to time to ensure that all practices can be met with legal and statutory requirements. Throughout the six months ended 30 September 2018, the Group has adopted the principles and code provisions in the Corporate Governance Code and Corporate Governance Report (the CG Code ) contained in Appendix 14 to the Listing Rules. The Company has been in compliance with the CG Code throughout the six months ended 30 September 2018 except for the deviation from provision A.2.1 of the CG Code since 1 January A SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019

76 Additional Information For the six months ended 30 September 2018 According to provision A.2.1 of the CG Code, the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. Mr. Zheng Hao Jiang is the Chairman and the Chief Executive Officer of the Company with effect from 1 January 2018, responsible for overall strategic development, project management and client management of the Group. The Board believes that vesting the roles of both chairman and chief executive officer in the same person has the benefit of ensuring consistent leading within the Group and will enable the Company to make and implement decisions promptly and effectively; and considers that such arrangement will not impair the balance of power and authority between the Board and the management and that the Company has sufficient internal controls to provide checks and balances on the functions of the chairman and the chief executive officer. Nevertheless, the Board will review such arrangement from time to time in light of the prevailing circumstances. A.2.1 Audit Committee The Audit Committee comprises three Independent Non-executive Directors, namely Mr. Choy Sze Chung, Jojo (Chairman of the Audit Committee), Mr. Lam Kwok Cheong and Mr. Lee Thomas Kang Bor with written terms of reference in line with the code provisions set out in the CG Code. The Audit Committee has reviewed and approved the interim condensed consolidated financial statements for the six months ended 30 September Remuneration Committee The Remuneration Committee comprises three independent nonexecutive directors, namely, Mr. Lam Kwok Cheong (Chairman of the Remuneration Committee), Mr. Choy Sze Chung, Jojo, Mr. Lee Thomas Kang Bor, and two executive directors, namely Mr. Zheng Hao Jiang (Chairman of the Board and Chief Executive Officer) and Mr. Zhu Lei. SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/

77 Additional Information For the six months ended 30 September 2018 The principal responsibilities of the Remuneration Committee include making recommendations to the Board on the Company s policy and structure in relation to the remuneration of directors and senior management and reviewing the specific remuneration packages of all executive directors and senior management by reference to corporate goals and objectives resolved by the Board from time to time. Nomination Committee The Nomination Committee comprises three independent nonexecutive directors, namely, Mr. Lee Thomas Kang Bor (Chairman of the Nomination Committee), Mr. Choy Sze Chung, Jojo and Mr. Lam Kwok Cheong. The principal responsibilities of the Nomination Committee include reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board on a regular basis and make recommendations to the board regarding any proposed changes, identifying individuals suitably qualified to become Board members, and select or make recommendations to the Board on the selection of individuals nominated for directorships, assessing the independence of independent non-executive directors; and making recommendations to the Board on relevant matters relating to the appointment or re-appointment of directors and succession planning for directors in particular the chairman and the chief executive officer. Sufficiency of Public Float The Company has maintained a sufficient public float throughout the six months ended 30 September By order of the Board Zheng Hao Jiang Chairman Hong Kong, 30 November SPARKLE ROLL GROUP LIMITED INTERIM REPORT 2018/2019