Oi Wah Pawnshop Credit Holdings Limited (Incorporated in the Cayman Islands with limited liability) Stock Code : INTERIM REPORT 2018

Transcription

1 Oi Wah Pawnshop Credit Holdings Limited (Incorporated in the Cayman Islands with limited liability) Stock Code : INTERIM REPORT 2018

2 Contents 目錄 2 Company Information 公司 5 Financial Highlights 6 Management Discussion and Analysis 19 Consolidated Statement of Comprehensive Income 20 Consolidated Statement of Financial Position 22 Consolidated Statement of Changes in Equity 23 Condensed Consolidated Cash Flow Statement Review report to the board of directors 88 Other Information Interim Report 2018 二零一八年中期報告 1

3 Company Information 公司資料 board of directors executive directors Mr. Chan Chart Man Mr. Chan Kai Ho Edward (Chairman and Chief Executive Officer) Ms. Chan Mei Fong Ms. Chan Ying Yu non-executive director Mr. Chan Kai Kow Macksion independent non-executive directors Dr. Leung Shiu Ki Albert Dr. Yip Ngai Mr. Lam On Tai board committees audit committee Dr. Yip Ngai (Chairman) Dr. Leung Shiu Ki Albert Mr. Lam On Tai remuneration committee Mr. Lam On Tai (Chairman) Mr. Chan Kai Ho Edward Dr. Leung Shiu Ki Albert 2 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

4 Company Information 公司資料 nomination committee Dr. Leung Shiu Ki Albert (Chairman) Mr. Chan Kai Ho Edward Mr. Lam On Tai company Secretary Mr. Cheng Yiu Hang HKICPA authorised representatives Mr. Chan Kai Ho Edward Ms. Chan Ying Yu registered office Clifton House, 75 Fort Street, P.O. Box 1350 Grand Cayman, KY Cayman Islands headquarters and PrinciPal Place of business in hong Kong Rooms Kwan Chart Tower No. 6 Tonnochy Road, Wanchai Hong Kong StocK code HKICPA Clifton House, 75 Fort Street, P.O. Box 1350 Grand Cayman, KY Cayman Islands Interim Report 2018 二零一八年中期報告 3

5 Company Information 公司資料 cayman islands Share registrar and transfer office Estera Trust (Cayman) Ltd. Clifton House, 75 Fort Street P.O. Box 1350 Grand Cayman KY Cayman Islands hong Kong Share registrar Boardroom Share Registrars (HK) Limited 2103B, 21/F, 148 Electric Road North Point Hong Kong auditors KPMG legal advisers as to hong Kong law: Keith Lam Lau & Chan as to cayman islands law: Appleby PrinciPal bankers CMB Wing Lung Bank Limited The Bank of East Asia, Limited Fubon Bank (Hong Kong) Limited O-Bank Co., Ltd., Hong Kong Branch company WebSite Estera Trust (Cayman) Ltd. Clifton House, 75 Fort Street P.O. Box 1350 Grand Cayman KY Cayman Islands 有限公司 B Appleby 有限公司 有限公司 有限公司 業 股 有限公司 4 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

6 Financial Highlights 財務摘要 Financial PerForMance Revenue increased by 1.4% to approximately HK$112.0 million Revenue from mortgage loan receivables increased by 1.9% to approximately HK$78.9 million Profit attributable to the equity shareholders slightly decreased by 1.5% to approximately HK$53.6 million Net profit margin slightly decreased by 1.4 percentage points to 47.9% Basic earnings per share is HK$2.7 cents Gross loan receivables increased by 6.1% to approximately HK$1,467.6 million Gross mortgage loan receivables increased by 6.3% to approximately HK$1,331.3 million business PerForMance Total amount of new pawn loans granted increased by 19.0% to approximately HK$330.8 million Total amount of new mortgage loans granted increased by 15.9% to approximately HK$501.3 million Net interest margin for pawn loan increased by 0.4 percentage points to 41.0% Net interest margin for mortgage loan decreased by 1.5 percentage points to 8.9% 1.4%112,000,000 押貸 1.9% 78,900,000 股 1.5% 53,600, % 股 2.7 貸 6.1% 1,467,600,000 押貸 6.3% 1,331,300,000 貸 19.0% 330,800,000 押貸 15.9%501,300,000 貸 % 押貸 % Interim Report 2018 二零一八年中期報告 5

7 Management Discussion and Analysis 管理層討論及分析 business review Oi Wah Pawnshop Credit Holdings Limited (the company or our company ), and its subsidiaries (together with the Company collectively referred to as the group or our group ) is a financing service provider in Hong Kong operating under the brand name of Oi Wah, principally engaged in providing secured financing, including mortgage loans and pawn loans. Mortgage loan business For the six months ended 31 August 2018 ( FP2019 ), the mortgage loan business remained a major source of income of the Group. During the period, the interest income increased by approximately HK$1.5 million or 1.9% from approximately HK$77.4 million for the six months ended 31 August 2017 ( FP2018 ) to approximately HK$78.9 million in FP2019. The gross mortgage loans receivables increased from approximately HK$1,252.1 million as at 28 February 2018 to approximately HK$1,331.3 million as at 31 August An increase in the amount of loans from the immediate holding company and other loans in the same period for funding our expansion of mortgage loan portfolios contributed to the overall increase of the gross mortgage loans receivables. In FP2019, the Group continued to implement a prudent lending strategy to ensure that the mortgage loan portfolio of the Group remained healthy. The loan-to-value ratio for first mortgage is around 52.4%, while the overall loan-to-value ratio for subordinary mortgage was around 44.9%, of which, loan-to-value ratio of subordinate mortgage that the Group participate in was around 14.8%. 靄華押業信貸控股有限公司 公司 公司 靄華 有 押 押貸 貸 業 押貸 業 77,400,000 1,500,0001.9% 78,900,000 押貸 1,252,100,000 1,331,300,000 押貸 控股公司 貸 貸 押貸 貸 押貸 貸 52.4% 貸 44.9% 貸 14.8% 6 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

8 Management Discussion and Analysis 管理層討論及分析 PaWn loan business During FP2019, pawn loan business remained stable. The revenue from pawn business reached HK$33.1 million, with HK$29.2 million interest income from pawn loan receivables and HK$3.9 million from gain on disposal. The aggregate new loan amounts increased by 19.0% to HK$330.8 million (FP2018: HK$278.1 million). The US-China trade war has created some distress in Hong Kong s financial market as well as affected the local stock market s volatilities. The Group believes that these macroeconomic factors have increased the demand for funds. On the other hand, the luxurious market has experienced an increased in pricing and the Group will continue to remain cautious and maintain its focus on collaterals diversification. industry overview For pawn loan business, the demand and prices of luxurious goods in FP2019 have both experienced an upside trend. Being one of the core businesses, the Group remains positive and optimistic about the stability of this segment and a steady growth can be anticipated. The Hong Kong Monetary Authority announced an uplift in its base lending rate with the pace of federal funds rate move in the United States and major money lenders in the city followed the increment in September The rise in interest rate has shown some pressure on Hong Kong s property market as the private home prices marked their first decline in 28 貸 業 業 33,100,000 29,200,000 貸 3,900,000 貸 19.0% 330,800, ,100,000 股 押 貸 業 業 貸 業 28 Interim Report 2018 二零一八年中期報告 7

9 Management Discussion and Analysis 管理層討論及分析 months only days after the announcement according to data by the Rating and Valuation Department. Meanwhile, the on-going trade conflict between US and China has also created instabilities and uncertainties in local financial markets. As such, the Group remains exposed to mark-to-market volatilities which might in turn affect our short term results. To cope with the fluctuated situation, the management will continue to run the business in a prudent manner whilst to seek growth and control the risk. Additionally, the Hong Kong Monetary Authority ordered all banks to tighten their property lending to developers to guard lenders from risk since June While the purpose of this new regulation is to dampen developers from offering generous mortgage schemes, the management believes that it also brings new business opportunities for non-banking money lenders. Hence, the Group will continue to capture such opportunities to further expand existing loan portfolios. Financial review revenue Our Group s revenue increased from approximately HK$110.5 million in FP2018 to approximately HK$112.0 million in FP2019, representing an increase of approximately HK$1.5 million or 1.4%. The increase was mainly attributable to an increase in our interest income from mortgage business by approximately HK$1.5 million or 1.9% from approximately HK$77.4 million in FP2018 to approximately HK$78.9 million 業 業 控 有 貸 貸 信 有貸 110,500,000 1,500, % 112,000,000 押業 77,400,000 1,500, % 78,900,000 8 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

10 Management Discussion and Analysis 管理層討論及分析 in FP2019, which was mainly due to the continuous expansion of our mortgage loan portfolio in FP2019. The average month end balance for the gross mortgage loans receivables from March to August increased from approximately HK$1,136.7 million in FP2018 to approximately HK$1,292.6 million in FP2019 with total new mortgage loans granted of approximately HK$501.3 million during FP2019. Our pawn loan business remained stable during FP2019. Revenue from our pawn loan business maintained at HK$33.1 million in both FP2018 and FP2019. This was attributable to the decrease in our interest income earned on our loan receivables by approximately HK$0.8 million or 2.7% from approximately HK$30.0 million in FP2018 to approximately HK$29.2 million in FP2019 and the increase in gain on disposal of repossessed assets by approximately HK$0.8 million or 25.8% from approximately HK$3.1 million in FP2018 to approximately HK$3.9 million in FP2019. The decrease in our interest income earned on our pawn loan receivables was primarily attributable to a slightly decrease in the average month end balance for the gross pawn loan receivables from March to August from approximately HK$147.4 million in FP2018 to approximately HK$141.8 million in FP2019. Revenue from disposal of repossessed assets represents the gain/(loss) we received as we sold the repossessed assets in the event of default in repayment of our pawn loans. The increase in our gain on disposal of repossessed 押貸 押貸 1,136,700,000 1,292,600,000 押貸 501,300,000 貸 業 貸 業 33,100,000 貸 30,000, ,0002.7% 29,200,000 3,100, , % 3,900,000 貸 貸 147,400, ,800,000 貸 (i) Interim Report 2018 二零一八年中期報告 9

11 Management Discussion and Analysis 管理層討論及分析 assets in FP2019 was mainly due to (i) the rebound in the second-hand market in luxury items like diamond and branded watches; and (ii) a stable environment for the gold price per ounce during FP2019 which ranged from approximately US$1,230 to US$1,300. Since every pawn loan has a loan term of four lunar months, the revenue increase with the appreciation of luxury goods in FP2019 and thus a better result in gain on disposal of repossessed assets in FP2019. other revenue Other revenue increased from approximately HK$1.9 million in FP2018 to approximately HK$3.7 million in FP2019, representing an increase of approximately HK$1.8 million or 94.7%, which was mainly due to the increase in our credit-related fee income by approximately HK$1.2 million representing early repayment fees and handling charges from our mortgage loan customers. operating expenses Operating expenses slightly increased by approximately HK$0.3 million or 1.0% from approximately HK$28.7 million in FP2018 to approximately HK$29.0 million in FP2019. During FP2019, staff costs slightly increased by approximately HK$0.8 million or 7.3% from approximately HK$11.0 million in FP2018 to approximately HK$11.8 million in FP2019. The increase was mainly due to the increase in the staff cost and long service payment by approximately HK$0.4 million and HK$0.3 million respectively. (ii) 司 1,230 1,300 貸 貸 限 有 1,900,000 1,800, % 3,700,000 信貸 押貸 1,200,000 28,700,000300, % 29,000,000 11,000, ,0007.3% 11,800, , , Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

12 Management Discussion and Analysis 管理層討論及分析 Rental expenses increased by approximately HK$0.3 million or 4.9% from approximately HK$6.1 million in FP2018 to approximately HK$6.4 million in FP2019. The increase was mainly due to the effect for the increase in the rental expenses under the terms in the rental agreements for several pawnshops during FP2019. Excluding the staff costs and rental expenses of approximately HK$17.1 million and HK$18.2 million in FP2018 and FP2019 respectively as mentioned above, other operating expenses decreased by approximately HK$0.8 million or 6.9% from approximately HK$11.6 million in FP2018 to approximately HK$10.8 million in FP2019, which was mainly due to the decrease in advertising expenses by approximately HK$2.3 million, offset by the increase of legal and professional fee by approximately HK$1.1 million. charged for/credited to impairment losses on loan receivables For FP2019 The charge for impairment losses on loan receivables of HK$0.8 million in FP2019 was measured based on the new impairment requirement under HKFRS 9. The charge for impairment losses was attributable to an overdue mortgage loan which the management considered there is an increasing possibility which the valuation of the collateral of the respective loan cannot fully cover the outstanding amount. 6,100, , % 6,400,000 17,100,000 18,200,000 11,600, ,0006.9% 10,800,000 2,300,000 業 1,100,000 貸 800,000 9 押貸 貸 押 Interim Report 2018 二零一八年中期報告 11

13 Management Discussion and Analysis 管理層討論及分析 For FP2018 Based on HKAS 39, the impairment losses on loan receivables released to profit or loss in FP2018 of approximately HK$141,000 was attributable to the net effect of (i) the subsequent reassessment on the recoverability of previously impaired loan receivables that were individually assessed being charged to profit or loss of approximately HK$8,000; and (ii) the impairment losses on loan receivables that were collectively assessed being released to profit or loss of approximately HK$149,000. Finance costs The finance costs increased by approximately HK$3.1 million or 16.8% from approximately HK$18.5 million in FP2018 to approximately HK$21.6 million in FP2019 after netting off with the decrease in bank loans and overdrafts by approximately HK$5.1 million in FP2019. The increase was mainly due to the increase in other loans and loans from the immediate holding company in FP2019 for funding our mortgage loan portfolios. income tax expenses Our Group s effective tax rate was approximately 16.5% in FP2018 and FP2019. No material change is noted. Profit and total comprehensive income for the period Our Group s profit for FP2019 slightly decreased to approximately HK$53.6 million from approximately HK$54.4 million in FP2018, representing an decrease of approximately HK$0.8 million or 1.5%. The decrease was 39 貸 141,000 (i) 貸 8,000 (ii) 貸 149,000 貸 5,100,000 18,500,000 3,100, % 21,600,000 押貸 貸 控股公司 貸 16.5% 54,400,000800, % 53,600, Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

14 Management Discussion and Analysis 管理層討論及分析 mainly attributable to the increase in rental expense, staff cost, legal and professional fee, impairment losses on loan receivables and finance costs amounted to HK$0.3 million, HK$0.8 million, HK$1.1 million, HK$0.8 million and HK$3.1 million respectively, netting off with increase in revenue and other revenue amounted to approximately HK$1.5 million and HK$1.8 million respectively and decrease in advertising expenses amounted to approximately HK$2.3 million. liquidity and Financial resources As at 31 August 2018, cash and cash equivalents, after netting off with the bank overdraft, amounted to approximately HK$47.6 million, representing a net increase of approximately HK$7.8 million as compared to the position as at 28 February For FP2019, net cash outflow from operating activities of our Group amounted to approximately HK$1.4 million. It is mainly due to the cash inflow from the revenue amounted to approximately HK$87.0 million, offset by the increase in loan receivables amounted to approximately HK$85.8 million and payment for Hong Kong Profit Tax amounted to approximately HK$6.7 million, during FP2019. The net cash inflow from financing activities of our Group amounted to approximately HK$10.1 million for FP2019 which was mainly due to the proceeds from other loans and loans from immediate holding company during FP2019 amounted to approximately HK$57.4 million and HK$25.2 million respectively, offset by repayment for bank loans and overdrafts, 1,500,0001,800,000 2,300,000 業 貸 300,000800,000 1,100,000800,000 3,100,000 47,600,000 7,800,000 業 1,400,000 87,000,000 貸 85,800,000 6,700,000 業 10,100,000 貸 控股公司 貸 57,400,00025,200,000 貸 Interim Report 2018 二零一八年中期報告 13

15 Management Discussion and Analysis 管理層討論及分析 payment for purchase of own shares and finance cost paid which amounted to approximately HK$5.2 million, HK$46.0 million and HK$21.1 million respectively. Pledge of assets As at 31 August 2018, the Group had pledged its mortgage loan receivables with net book value of HK$501.3 million (28 February 2018: HK$498.5 million) for the purpose of obtaining facilities from a bank and an independent third party. contingent liabilities There were no significant contingent liabilities for the Group as at 31 August ProSPectS During the period under review, Hong Kong s financial market is facing various risk factors that cast uncertainties over its future development. Major banks have increased their lending rates after Hong Kong Monetary Authority lifted its base lending rate in June 2018, formally ending decades of unchanged rates in the city. Higher rates are also believed to increase the pressure to Hong Kong s property market. Moreover, the escalating trade tensions between US and China increase global volatilities of asset prices in the financial market as well. To prepare for the uncertainty and possible future fluctuations in domestic interest rate and property market, the Group strives to implement a more cautious and prudent strategy when reviewing and granting mortgage loans to manage the risk. Furthermore, the Group will continue to 股 5,200,00046,000,000 21,100,000 押 501,300, ,500,000 押貸 貸 貸 押貸 14 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

16 Management Discussion and Analysis 管理層討論及分析 leverage on the team s professionalism and profound experience in mortgage loan business to maintain a healthy loan portfolio and therefore, a steady growth can be expected. Looking forward, as the Group foresees that the market condition is likely to remain unpredictable and volatile, it is of utmost importance for the Group to continue to put efforts on developing sustainable competitive advantage to enhance long term business value and shareholder returns. In mortgage business, the Group will focus on net interest margin improvement by actively seeking diversified and affordable financing channels to maintain abundant capital reserve and expand its market share as well as to compensate the potential impact from the uncertainty. The Group will also take cautious and prudent approach to maintain the current loan to valuation ratio and be more careful on customer selection for a better risk management. In regard to the pawn loan business, the Board is of the view that this business segment will remain stable. The Group will continue to provide differentiated offering to the customers and grow its customer base by diversifying its collaterals to other luxurious items such as automobiles and yachts. 押貸 業 業 貸 有 業 股 押業 貸 貸 業 業 押 Interim Report 2018 二零一八年中期報告 15

17 Management Discussion and Analysis 管理層討論及分析 Key Financial ratios as at 31 august 2018 As at 28 February 2018 Current ratio (1) (1) 2.4x 2.7x Gearing ratio (2) 貸 (2) 93.3% 84.4% For the six months ended 31 august 2018 For the six months ended 31 August 2017 Return on total assets (3) (3) 6.9% 7.8% Return on equity (4) (4) 13.5% 14.1% Net profit margin (5) (5) 47.9% 49.3% Net interest margin (6) (6) 12.1% 13.8% pawn loan services 貸 41.0% 40.6% mortgage loan services 押貸 8.9% 10.4% Notes: (1) Current ratio is calculated by dividing current assets by current liabilities as at the respective period/year end. (2) Gearing ratio is calculated by dividing total borrowings (summation of bank loans, bank overdrafts, loans from immediate holding company, obligations under finance leases, other loans and debt securities issued) by total equity as at the respective period/year end. (1) (2) 貸 貸 貸 控股公司 貸 貸 16 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

18 Management Discussion and Analysis 管理層討論及分析 (3) Return on total assets is calculated by dividing annualised profit for the period by the total assets as at the respective period end. (4) Return on equity is calculated by dividing annualised profit for the period by the total equity as at the respective period end. (5) Net profit margin is calculated by dividing profit for the period by the revenue for the respective period. (6) Net interest margin during the period refers to our interest income in respect of our pawn loans and mortgage loan less our finance costs, divided by the average of monthend gross loan receivables balances of the corresponding loans during the period. (3) (4) (5) (6) 有 貸 押貸 貸 貸 current ratio Our Group s current ratio slightly decreased from 2.7 times as at 28 February 2018 to 2.4 times as at 31 August 2018, which was mainly due to the increase in other loans and loans from the immediate holding company amounting to HK$57.4 million and HK$25.2 million respectively, offset by the increase in current loan receivables from approximately HK$1,316.4 million as at 28 February 2018 to approximately HK$1,389.0 million as at 31 August 2018 or by approximately 5.5% 貸 控股公司 貸 57,400,00025,200,000 貸 1,316,400, % 1,389,000,000 Interim Report 2018 二零一八年中期報告 17

19 Management Discussion and Analysis 管理層討論及分析 gearing ratio Our Group s gearing ratio slightly increased from approximately 84.4% as at 28 February 2018 to approximately 93.3% as at 31 August 2018, which was mainly due to the increase in other loans and loans from immediate holding company amounted to approximately HK$57.4 million and HK$25.2 million respectively as the result of expansion of our mortgage loan portfolio. return on total assets and return on equity Our return on total assets and return on equity slightly decreased from approximately 7.8% and 14.1% in FP2018 to 6.9% and 13.5% in FP2019 respectively, which was mainly due to the decrease in net interest margin from 13.8% in FP2018 to 12.1% in FP2019. net profit margin and net interest margin There was a decrease in our net profit margin and net interest margin from approximately 49.3% and 13.8% in FP2018 to 47.9% and 12.1% in FP2019. The reason for the decrease was mainly due to the result of obtaining more mortgage loans with lower loan-to-value ratio and better credit rating during FP2019, which led to relatively lower interest rates charged as compared to those in FP2018. 貸 84.4% 93.3% 押貸 貸 控股公司 貸 57,400,000 25,200, % 14.1% 6.9% 13.5% 13.8% 12.1% 49.3% 13.8% 47.9% 12.1% 貸 信貸 押貸 18 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

20 Consolidated Statement of Comprehensive Income 綜合全面收入表 for the six months ended 31 August 2018 unaudited (Expressed in Hong Kong dollars) Six months ended 31 august Note $ 000 $ 000 revenue 5 112, ,472 Other revenue 6 3,662 1,942 operating income 115, ,414 Operating expenses (28,982) (28,799) (Charge for)/release of impairment losses on loan receivables 貸 7 (771) 141 Profit from operations 85,919 83,756 Finance costs 7(a) (21,600) (18,543) Profit before taxation 64,319 65,213 Income tax 8 (10,673) (10,778) Profit and total comprehensive income for the period 53,646 54,435 Profit and total comprehensive income for the period attributable to shareholders 53,646 54,435 earnings per share (in hk cents) The notes on pages 25 to 85 form part of this interim financial report Interim Report 2018 二零一八年中期報告 19

21 Consolidated Statement of Financial Position 綜合財務狀況表 as at 31 August 2018 unaudited (Expressed in Hong Kong dollars) 31 august February 2018 Note $ 000 $ 000 non-current assets Property, plant and equipment 業 1, Loan receivables 貸 10 98,406 85,861 Trade and other receivables 11 1,780 2,402 Deferred tax assets ,728 89,242 current assets Repossessed assets 6,256 8,108 Loan receivables 貸 10 1,388,968 1,316,428 Trade and other receivables 11 7,199 7,523 Cash and cash equivalents 12 52,649 44,833 1,455,072 1,376,892 current liabilities Accruals and other payables 14 8,366 6,699 Bank loans and overdrafts 貸 13 79,983 85,097 Obligations under finance leases Loans from the immediate holding company 控股公司 貸 , ,000 Current taxation 9,744 5,837 Other loans 貸 , , , , Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

22 Consolidated Statement of Financial Position 綜合財務狀況表 as at 31 August 2018 unaudited (Expressed in Hong Kong dollars) 31 august February 2018 Note $ 000 $ 000 net current assets 856, ,415 total assets less current liabilities 958, ,657 non-current liabilities Debt securities issued , ,452 Obligations under finance leases , ,528 net assets 795, ,129 capital and reserves 18 Capital 股 19,508 20,874 Reserves 776, ,255 total equity 795, ,129 The notes on pages 25 to 85 form part of this interim financial report Interim Report 2018 二零一八年中期報告 21

23 Consolidated Statement of Changes in Equity 綜合權益變動表 for the six months ended 31 August 2018 unaudited (Expressed in Hong Kong dollars) Paid-in capital/ share capital Share premium capital reserve capital redemption reserve other reserve retained profits total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 at 1 March , ,573 44,963 12, , ,436 changes in equity for the six months ended 31 august 2017 Profit and total comprehensive income 54,435 54,435 Dividends declared and paid in respect of the previous year 股 (14,750) (14,750) Purchase of own shares 股 (98) (4,050) 98 (4,050) at 31 august , ,773 44, , , ,071 at 1 September , ,773 44, , , ,071 changes in equity for the six months ended 28 February 2018 Profit and total comprehensive income 46,473 46,473 Interim dividends declared and paid in respect of the current year 股 (16,401) (16,401) Purchase of own shares 股 (404) (16,014) 404 (16,014) at 28 February , ,358 44, , , ,129 at 1 March , ,358 44, , , ,129 Impact on initial application of HKFRS adjusted balance at 1 March 2018 changes in equity for the six months ended 31 august , ,358 44, , , ,207 Profit and total comprehensive income 53,646 53,646 Purchase of own shares 股 (1,366) (46,036) 1,366 (46,036) at 31 august , ,322 44,963 1,868 12, , ,817 The notes on pages 25 to 85 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

24 Condensed Consolidated Cash Flow Statement 簡明綜合現金流量表 for the six months ended 31 August 2018 unaudited (Expressed in Hong Kong dollars) Six months ended 31 august Note $ 000 $ 000 operating activities Operating profit before changes in working capital (Increase)/decrease in loan receivables Other cash flows generated from operations 86,993 83,890 貸 (85,765) 13,799 業 4, cash generated from operations 5,277 97,921 Hong Kong Profits Tax paid (6,678) (20,476) net cash (used in)/ generated from operating activities investing activities Payment for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Other cash flows generated from investing activities net cash used in investing activities (1,401) 77,445 業 (1,029) (8) 業 60 業 2 1 (967) (7) Interim Report 2018 二零一八年中期報告 23

25 Condensed Consolidated Cash Flow Statement 簡明綜合現金流量表 for the six months ended 31 August 2018 unaudited (Expressed in Hong Kong dollars) Six months ended 31 august Note $ 000 $ 000 Financing activities Increase/(decrease) in loans from the immediate holding company 控股公司 貸 25,200 (22,000) Proceeds from debt securities issued, net of issuing expenses 14,925 Finance costs paid (21,124) (17,940) Proceeds from/(repayment of) other loans 貸 57,372 (34,888) (Repayments of)/proceeds from bank loans 貸 (5,189) 44,096 Dividends paid 股 (14,750) Payments for purchase of 股 own shares Other cash flows used in financing activities (46,036) (4,050) 業 (114) (114) net cash generated from/ (used in) financing activities net increase in cash and cash equivalents 10,109 (34,721) 7,741 42,717 cash and cash equivalents at the beginning of period cash and cash equivalents at the end of period 39,836 22, ,577 64,757 The notes on pages 25 to 85 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

26 (Expressed in Hong Kong dollars unless otherwise indicated) 有 1 general information Oi Wah Pawnshop Credit Holdings Limited (the company ) was incorporated in the Cayman Islands and is listed on the Main Board of The Stock Exchange of Hong Kong Limited (the Stock exchange ). The Company and its subsidiaries (together referred to as the group ) are principally engaged in secured financing business in Hong Kong, including pawn loans and mortgage loans. 2 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, 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 29 October The interim financial report has been prepared in accordance with the same accounting policies adopted in the year ended 28 February 2018 annual financial statements, except for the accounting policy changes that are expected to be reflected in the year ending 28 February 2019 annual financial statements. Details of any changes in accounting policies are set out in note 3. 1 靄華押業信貸控股有限公司 有限公司 公司 公司 有 押 貸 押貸 業 2 公 34 3 Interim Report 2018 二零一八年中期報告 25

27 (Expressed in Hong Kong dollars unless otherwise indicated) 有 2 basis of PreParation (continued) 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. The 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 year ended 28 February 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 Hong Kong Financial Reporting Standards ( hkfrss ) 有 有 26 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

28 (Expressed in Hong Kong dollars unless otherwise indicated) 有 2 basis of PreParation (continued) The interim financial report for the period ended 31 August 2018 is unaudited, but has been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity, issued by the HKICPA. KPMG s independent review report to the Board of Directors is included on page 86 and 87. The financial information relating to the financial year ended 28 February 2018 that is included in the interim financial report as comparative information does not constitute the Company s statutory annual consolidated financial statements for that financial year but is derived from those financial statements. Statutory financial statements for the year ended 28 February 2018 are available from the Company s registered office. The Company s auditor has reported on those financial statements. The auditor s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report. 2 公 有 公司 有 公司 公司 有 Interim Report 2018 二零一八年中期報告 27

29 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (a) overview 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 development is relevant to the Group s financial statements: The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. hkfrs 9, Financial instruments The Group has been impacted by HKFRS 9 in relation to classification of financial assets and measurement of credit losses. Details of the changes in accounting policies are discussed in note 3 for HKFRS 9. 3 (a) 公 9 信貸 9 有 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

30 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (a) overview (continued) Under the transition methods chosen, the Group recognises cumulative effect of the initial application of HKFRS 9 as an adjustment to the opening balance of equity at 1 March Comparative information is not restated. The following table gives a summary of the opening balance adjustments recognised for each line item in the consolidated statement of financial position that has been impacted by HKFRS 9: 3 (a) 9 9 at 28 February 2018 impact on initial application of hkfrs 9 9 at 1 March 2018 (Note 3) 3 $ 000 $ 000 $ 000 Deferred tax assets 221 (16) 205 total non-current assets 89,242 (16) 89,226 Loans receivables 貸 1,296, ,297,070 total current assets 1,376, ,376,986 net current assets 861, ,509 net assets 788, ,207 Reserves 767, ,333 total equity 788, ,207 Interim Report 2018 二零一八年中期報告 29

31 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (a) overview (continued) Further details of these changes are set out in sub-section of this note. 3 (a) 有 hkfrs 9, Financial instruments 9 HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement. It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell nonfinancial items The Group has applied HKFRS 9 retrospectively to items that existed at 1 March 2018 in accordance with the transition requirements. The Group has recognised the cumulative effect of initial application as an adjustment to the opening equity at 1 March Therefore, comparative information continues to be reported under HKAS Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

32 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) hkfrs 9, Financial instruments (continued) The following table summarises the impact of transition to HKFRS 9 on retained earnings and the related tax impact at 1 March $ 000 retained earnings Release of collective impairment allowance on loan receivables reclassified to be measured at FVPL 公 貸 79 Decrease of expected credit losses on loan receivables measured at amortised cost 貸 信貸 15 Related tax (16) Net increase in retained earnings at 1 March Further details of the nature and effect of the changes to previous accounting policies and the transition approach are set out below: 有 Interim Report 2018 二零一八年中期報告 31

33 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities HKFRS 9 categories financial assets into three principal classification categories: measured at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVPL). These supersede HKAS 39 s categories of held-to-maturity investments, loans and receivables, available-for-sale financial assets and financial assets measured at FVPL. The classification of financial assets under HKFRS 9 is based on the business model under which the financial asset is managed and its contractual cash flow characteristics. Non-equity investments held by the Group are classified into one of the following measurement categories: amortised cost, if the investment is held for the collection of contractual cash flows which represent solely payments of principal and interest. Interest income from the investment is calculated using the effective interest method; 3 (i) 9 9 公 公 公 公 39 有 貸 公 9 業 有 股 有 32 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

34 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities (Continued) FVOCI recycling, if the contractual cash flows of the investment comprise solely payments of principal and interest and the investment is held within a business model whose objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognised in other comprehensive income, except for the recognition in profit or loss of expected credit losses, interest income (calculated using the effective interest method) and foreign exchange gains and losses. When the investment is derecognised, the amount accumulated in other comprehensive income is recycled from equity to profit or loss; or FVPL, if the investment does not meet the criteria for being measured at amortised cost or FVOCI (recycling). Changes in the fair value of the investment (including interest) are recognised in profit or loss. 3 (i) 9 公 業 有 公 信貸 公 公 公 Interim Report 2018 二零一八年中期報告 33

35 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities (Continued) An investment in equity securities is classified as FVPL unless the equity investment is not held for trading purposes and on initial recognition of the investment the Group makes an election to designate the investment at FVOCI (non-recycling) such that subsequent changes in fair value are recognised in other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may only be made if the investment meets the definition of equity from the issuer s perspective. Where such an election is made, the amount accumulated in other comprehensive income remains in the fair value reserve (nonrecycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the fair value reserve (nonrecycling) is transferred to retained earnings. It is not recycled through profit or loss. Dividends from an investment in equity securities, irrespective of whether classified as at FVPL or FVOCI (non-recycling), are recognised in profit or loss as other income. 3 (i) 9 股 公 股 公 公 公 公 股 公 公 股 34 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

36 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities (Continued) Under HKFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are not separated from the host. Instead, the hybrid instrument as a whole is assessed for classification. 3 (i) 9 9 Interim Report 2018 二零一八年中期報告 35

37 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities (Continued) The following table shows the original measurement categories for each class of the Group s financial assets under HKAS 39 and reconciles the carrying amounts of those financial assets determined in accordance with HKAS 39 to those determined in accordance with HKFRS 9. 3 (i) hkas 39 carrying amount at 28 February 2018 reclassification remeasurement 39 hkfrs 9 carrying amount at 1 March $ 000 $ 000 $ 000 $ 000 Financial assets carried at amortised cost Cash and cash equivalents 44,833 44,833 Trade and other receivables 9,925 9,925 Loan receivables 貸 1,402,289 (111,439) 94 1,290,944 1,457,047 (111,439) 94 1,345,702 Financial assets carried at FVPl Loan receivables 貸 111, , Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

38 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (i) hkfrs 9, Financial instruments (continued) classification of financial assets and financial liabilities (Continued) The measurement categories for all financial liabilities remain the same. The carrying amounts for all financial liabilities at 1 March 2018 have not been impacted by the initial application of HKFRS 9. The Group did not designate or de-designate any financial asset or financial liability at FVPL at 1 March (i) 9 有 有 9 公 Interim Report 2018 二零一八年中期報告 37

39 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses HKFRS 9 replaces the incurred loss model in HKAS 39 with the expected credit loss ( ecl ) model. The ECL model requires an ongoing measurement of credit risk associated with a financial asset and therefore recognises ECLs earlier than under the incurred loss accounting model in HKAS 39. The Group applies the new ECL model to the following item: financial assets measured at amortised cost (including cash and cash equivalents, loan receivables measured at amortised cost and trade and other receivables); loan commitments issued, which are not measured at FVPL. Loan receivables measured at FVPL are not subject to the ECL assessment. 3 (ii) 9 9 信貸 39 信貸 信貸 39 信貸 信貸 貸 公 貸 公 貸 信貸 38 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

40 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). For undrawn loan commitments, expected cash shortfalls are measured as the difference between (i) the contractual cash flows that would be due to the Group if the holder of the loan commitment draws down on the loan and (ii) the cash flows that the Group expects to receive if the loan is drawn down. 3 (ii) 9 信貸 信貸 信貸 信貸 有 貸 (i) 貸 有 貸 (ii) 貸 Interim Report 2018 二零一八年中期報告 39

41 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Measurement of ECLs (Continued) The expected cash shortfalls are discounted using the following discount rates where the effect of discounting is material: fixed-rate financial assets, trade and other receivables: effective interest rate determined at initial recognition or an approximation thereof; variable-rate financial assets: current effective interest rate; loan commitments: current risk-free rate adjusted for risks specific to the cash flows. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. 3 (ii) 9 信貸 貸 信貸 信貸 40 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

42 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Measurement of ECLs (Continued) In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions. ECLs are measured on either of the following bases: 12-month ECLs: these are losses that are expected to result from possible default events within the 12 months after the reporting date; and lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies. 3 (ii) 9 信貸 信貸 信貸 12 信貸 12 信貸 信貸 有 Interim Report 2018 二零一八年中期報告 41

43 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Measurement of ECLs (Continued) Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date. For all other financial instruments (including loan commitments issued), the Group recognises a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs. 3 (ii) 9 信貸 信貸 信貸 信貸 貸 12 信貸 信貸 信貸 42 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

44 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Significant increases in credit risk In assessing whether the credit risk of a financial instrument (including a loan commitment) has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs when (i) the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or (ii) the financial asset is 90 days past due. The Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. 3 (ii) 9 信貸 貸 信貸 有 (i) 押 有 信貸 (ii) 90 Interim Report 2018 二零一八年中期報告 43

45 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Significant increases in credit risk (Continued) In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition: failure to make payments of principal or interest on their contractually due dates; an actual or expected significant deterioration in a financial instrument s external or internal credit rating (if available); an actual or expected significant deterioration in the operating results of the debtor; and existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor s ability to meet its obligation to the Group. 3 (ii) 9 信貸 信貸 有 信貸 有 業 有 有 44 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司

46 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Significant increases in credit risk (Continued) For loan commitments, the date of initial recognition for the purpose of assessing ECLs is considered to be the date that the Group becomes a party to the irrevocable commitment. In assessing whether there has been a significant increase in credit risk since initial recognition of a loan commitment, the Group considers changes in the risk of default occurring on the loan to which the loan commitment relates. Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings. 3 (ii) 9 信貸 貸 信貸 貸 信貸 有 貸 貸 信貸 信貸 信貸 Interim Report 2018 二零一八年中期報告 45

47 (Expressed in Hong Kong dollars unless otherwise indicated) 有 3 changes in accounting PolicieS (continued) (ii) hkfrs 9, Financial instruments (continued) credit losses (Continued) Significant increases in credit risk (Continued) ECLs are remeasured at each reporting date to reflect changes in the financial instrument s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. Basis of calculation of interest income on credit-impaired financial assets Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset. 3 (ii) 9 信貸 信貸 信貸 信貸 有 信貸 信貸 46 Oi Wah Pawnshop Credit Holdings Limited 靄華押業信貸控股有限公司