DINGYI GROUP INVESTMENT LIMITED (Incorporated in Bermuda with limited liability) (Stock Code : 508) Interim Report 2013/14
Contents Page Corporate Information 2 Condensed Consolidated Income Statement 4 Condensed Consolidated Statement of Comprehensive Income 5 Condensed Consolidated Statement of Financial Position 6 Condensed Consolidated Statement of Changes in Equity 7 Condensed Consolidated Statement of Cash Flows 8 Notes to the Condensed Consolidated Financial Statements 9 Management Discussion and Analysis 31 Financial Review 38 Other Information 40 1
Corporate Information BOARD OF DIRECTORS Executive Directors Mr. LI Kwong Yuk (Chairman) Mr. SU Xiaonong (Chief Executive Officer) Mr. CHEUNG Sze Ming Independent Non-Executive Directors Mr. CHENG Xiusheng Mr. SUN Dongsheng Mr. CHOW Shiu Ki COMPANY SECRETARY Mr. CHAN Kwong Leung, Eric AUDITOR PricewaterhouseCoopers Certified Public Accountants, Hong Kong 22nd Floor, Prince s Building Central, Hong Kong LEGAL ADVISERS DLA Piper Hong Kong Norton Rose Fulbright Hong Kong Appleby AUTHORISED REPRESENTATIVES Mr. CHEUNG Sze Ming Mr. CHAN Kwong Leung, Eric AUDIT COMMITTEE Mr. CHOW Shiu Ki (Chairman) Mr. CHENG Xiusheng Mr. SUN Dongsheng REMUNERATION COMMITTEE Mr. CHOW Shiu Ki (Chairman) Mr. SU Xiaonong Mr. CHEUNG Sze Ming Mr. CHENG Xiusheng Mr. SUN Dongsheng Appleby DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14 2
Corporate Information NOMINATION COMMITTEE Mr. LI Kwong Yuk (Chairman) Mr. CHOW Shiu Ki Mr. SUN Dongsheng PRINCIPAL BANKERS Bank of Shanghai (Hong Kong) Limited China Construction Bank (Asia) Corporation Limited Industrial and Commercial Bank of China (Asia) Limited Bank Julius Baer & Co. Ltd. Hang Seng Bank Limited REGISTERED OFFICE Canon s Court 22 Victoria Street Hamilton HM 12, Bermuda PRINCIPAL PLACE OF BUSINESS IN HONG KONG Units 2703-6, 27/F Convention Plaza Office Tower 1 Harbour Road, Wanchai, Hong Kong PRINCIPAL SHARE REGISTRAR AND TRANSFER AGENT IN BERMUDA MUFG Fund Services (Bermuda) Limited 26 Burnaby Street Hamilton HM11 Bermuda BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG Tricor Standard Limited 26th Floor, Tesbury Centre 28 Queen s Road East, Hong Kong SHARE LISTING The Stock Exchange of Hong Kong Limited Stock Code: 508 ADR DEPOSITARY BANK The Bank of New York Mellon American Depositary Receipts 101 Barclay Street, 22nd Floor West New York, NY 10286, USA Stock Symbol: COAZY WEBSITE http://www.dingyi.hk Canon s Court 22 Victoria Street Hamilton HM 12, Bermuda 1 27 2703-6 MUFG Fund Services (Bermuda) Limited 26 Burnaby Street Hamilton HM11 Bermuda 508 The Bank of New York Mellon American Depositary Receipts 101 Barclay Street, 22nd Floor West New York, NY 10286, USA COAZY http://www.dingyi.hk 3
Condensed Consolidated Income Statement For the six months ended 30 September 2013 INTERIM RESULTS The directors (the Directors ) of Dingyi Group Investment Limited (the Company ) hereby announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (collectively, the Group ) for the six months ended 30 September 2013, together with the comparative figures for the corresponding period in 2012 as follows: Unaudited six months ended 30 September 2013 2012 Note HK$ 000 HK$ 000 Revenue 4 26,879 33,254 Cost of sales (6,402) (8,483) Gross profit 20,477 24,771 Realised gain on investments at fair value through profit or loss, net 4 5,192 2,447 Other income, net 5 246 206 Other gains, net 6 568 3,356 Other loss fair value loss on derivative financial liabilities (84,385) Selling and distribution costs (19,635) (25,034) General and administrative expenses (22,241) (8,962) Share-based payment expenses (15,495) Operating loss (115,273) (3,216) Finance income, net 7 3,016 706 Loss before taxation 8 (112,257) (2,510) Income tax credit 9 130 4 Loss for the period (112,127) (2,506) Attributable to: Equity holders of the Company (111,648) (1,496) Non-controlling interests (479) (1,010) (112,127) (2,506) Loss per share 10 Basic loss per share (HK cents) (3.79) (0.06) Diluted loss per share (HK cents) (3.13) (0.06) Dividends 11 DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14 4
Condensed Consolidated Statement of Comprehensive Income For the six months ended 30 September 2013 Unaudited six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Loss for the period (112,127) (2,506) Other comprehensive income for the period, net of tax Exchange difference on translation of operations of overseas subsidiary 147 Other comprehensive income for the period, net of tax 147 Total comprehensive loss for the period (111,980) (2,506) Attributable to: Equity holders of the Company (111,501) (1,496) Non-controlling interests (479) (1,010) Total comprehensive loss for the period (111,980) (2,506) Note: Items shown within other comprehensive income have no tax effect. 5
Condensed Consolidated Statement of Financial Position As at 30 September 2013 Unaudited Audited 30 September 31 March 2013 2013 Note HK$ 000 HK$ 000 Non-current assets Plant and equipment 12 10,023 3,828 Available-for-sale financial assets 35,457 Non-current deposits 3,980 1,838 49,460 5,666 Current assets Inventories 875 873 Debtors, deposits and prepayments 13 201,491 27,882 Amount due from a related company 251 248 Investments at fair value through profit or loss 76,627 50,292 Current income tax recoverable 21 21 Cash and cash equivalents 186,035 189,922 Current liabilities Creditors, deposits and accruals 465,300 269,238 14 9,596 7,831 Amount due to non-controlling interests 24,749 25,586 Amount due to a related company 2 2 Derivative financial liabilities 9,947 Current income tax liabilities 193 Obligation under finance lease 1,356 35,703 43,559 Net current assets 429,597 225,679 Total assets less current liabilities 479,057 231,345 Capital and reserves Share capital 15 33,046 23,751 Reserves 402,550 175,004 Shareholders funds 435,596 198,755 Non-controlling interests (9,021) (8,542) Total equity 426,575 190,213 Non-current liabilities Obligation under finance lease 3,516 Convertible bonds 16 47,989 40,155 Deferred income tax liabilities 977 977 52,482 41,132 Total equity and non-current liabilities 479,057 231,345 DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14 6
Condensed Consolidated Statement of Changes in Equity For the six months ended 30 September 2013 Share capital Share premium Capital redemption reserve Share option reserve Other reserve Exchange fluctuation reserve Convertible bonds-equity conversion reserve Retained profits/ (Accumulated losses) Noncontrolling interests Total equity Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 April 2013 23,751 25,249 14 5,021 146 69,676 74,898 198,755 (8,542) 190,213 Comprehensive income: Loss for the period (111,648) (111,648) (479) (112,127) Other comprehensive income: Exchange difference on translation of operations of overseas subsidiary 147 147 147 Total comprehensive income/(loss) for the period 147 (111,648) (111,501) (479) (111,980) Total contributions by owners of the Company recognised directly in equity Issue of new shares 4,750 137,750 142,500 142,500 Share issuance expenses (1,548) (1,548) (1,548) Issuance of convertible bonds equity conversion component 147,172 147,172 147,172 Issue of new shares on conversion of convertible bonds 4,545 148,602 (108,424) 44,723 44,723 Share-based payment expenses 15,495 15,495 15,495 Total contributions by owners of the Company 9,295 284,804 15,495 38,748 348,342 348,342 At 30 September 2013 33,046 310,053 14 15,495 5,021 293 108,424 (36,750) 435,596 (9,021) 426,575 Convertible Capital Share Exchange bonds-equity Non- Share Share redemption option Other fluctuation conversion Retained controlling Total capital premium reserve reserve reserve reserve reserve profits Total interests equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 April 2012 23,751 25,249 14 5,021 104,989 159,024 (7,420) 151,604 Comprehensive loss: Loss for the period (1,496) (1,496) (1,010) (2,506) At 30 September 2012 23,751 25,249 14 5,021 103,493 157,528 (8,430) 149,098 7
Condensed Consolidated Statement of Cash Flows For the six months ended 30 September 2013 Unaudited six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Net cash used in operating activities (48,349) (31,799) Net cash used in investing activities (195,625) (287) Net cash generated from/(used in) financing activities 239,717 (2) Net decrease in cash and cash equivalents (4,257) (32,088) Cash and cash equivalents at beginning of the period 189,922 103,869 Effect of changes in foreign exchange rates 370 (47) Cash and cash equivalents at end of the period 186,035 71,734 DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14 8
Notes to the Condensed Consolidated Financial Statements 1 BASIS OF PREPARATION The unaudited condensed consolidated financial statements have been prepared in accordance with applicable disclosure requirements of Appendix 16 to the Rules (the Listing Rules ) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) and with Hong Kong Accounting Standard ( HKAS ) 34, Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants. 1 16 34 2 PRINCIPAL ACCOUNTING POLICIES Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2013, as described in those annual financial statements. 2 New standards and amendments to existing standards that are effective for the first time for the financial year beginning 1 April 2013 and are relevant to the Group s operations: HKAS 1 (Amendment) HKAS 19 (2011) Hong Kong Financial Reporting Standards ( HKFRS ) 7 (Amendment) HKFRS 10 HKFRS 12 HKFRS 13 Annual improvements projects (2011) Presentation of items of other comprehensive income Employee benefits Disclosure offsetting financial assets and financial liabilities Consolidated financial statements Disclosure of interests in other entities Fair value measurements Improvements to HKFRSs published in June 2012 1 19 7 10 12 13 Except as described below, the application of the above new and amendment in the current interim period has had no material effect on the amounts reported or disclosed in this condensed consolidated interim financial information. 9
Notes to the Condensed Consolidated Financial Statements 2 PRINCIPAL ACCOUNTING POLICIES (Continued) HKFRS 13 FAIR VALUE MEASUREMENT HKFRS 13 establishes a single source of guidance under HKFRS for all fair value measurements. HKFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under HKFRS when fair value is required or permitted. The application of HKFRS 13 has not materially impacted the fair value measurements carried out by the Group. HKFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including HKFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required in interim financial statements for financial instruments; accordingly, the Group provides these disclosures in note 3.2. 2 13 13 13 13 13 7 3.2 HKAS 1 (AMENDMENT) PRESENTATION OF FINANCIAL STATEMENTS The amendments to HKAS 1 introduce a grouping of items presented in other comprehensive income ( OCI ). Items that could be reclassified to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The adoption of these amendments only affected presentation and had no impact on this condensed consolidated interim financial information. 1 1 DINGYI GROUP INVESTMENT LIMITED 10 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 2 PRINCIPAL ACCOUNTING POLICIES (Continued) HKAS 1 (AMENDMENT) PRESENTATION OF FINANCIAL STATEMENTS (Continued) The following new standards and amendments to existing standards relevant to the Group have been issued but are not effective for the financial year beginning 1 April 2013 and have not been early adopted. 2 1 HKFRS 9 Financial instruments (2) HKFRS 7 and HKFRS 9 Mandatory effective date and (Amendments) transition disclosures (2) Amendments to HKFRS Investment entities (1) 10, HKFRS 12, HKAS 27 (2011) HKAS 32 (Amendment) Financial instruments: Presentation Offsetting financial assets and financial liabilities (1) HKAS 36 (Amendment) Impairment of assets (1) (2) 9 7 (2) 9 (1) 10 12 27 32 (1) (1) 36 (1) Effective for the Group for annual period beginning on 1 April 2014 (2) Effective for the Group for annual period beginning on 1 April 2015 (1) (2) The Group plans to adopt the above new/revised standards and amendments to existing standards when they become effective and are expected to have no material impact to the Group s financial statements. 11
Notes to the Condensed Consolidated Financial Statements 3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 3.1 ESTIMATES The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. 3 3.1 In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the six months ended 30 September 2013. 3.2 FAIR VALUE ESTIMATION The Group uses the following hierarchies for determining and disclosing the fair values of financial instruments: 3.2 Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) DINGYI GROUP INVESTMENT LIMITED 12 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) 3.2 FAIR VALUE ESTIMATION (Continued) Assets and liabilities measured at fair value as at 30 September 2013: 3 3.2 Level 1 Level 2 Level 3 HK$ 000 HK$ 000 HK$ 000 Assets Investments at fair value through profit or loss Listed equity investments 51,627 Derivative financial instruments WP Put Option WP 25,000 51,627 25,000 13
Notes to the Condensed Consolidated Financial Statements 3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) 3.2 FAIR VALUE ESTIMATION (Continued) Assets measured at fair value as at 31 March 2013: 3 3.2 Level 1 Level 2 Level 3 HK$ 000 HK$ 000 HK$ 000 Assets Investments at fair value through profit or loss Listed equity investments 25,265 Derivative financial instruments WP Put Options WP 25,000 Convertible bonds conversion option component 27 25,265 25,027 4 REPORTABLE SEGMENTS Reportable segments are identified and reported in the manner consistent with internal reports that are regularly reviewed by the chief operating decision-marker (the Executive Directors collectively) in order to assess performance and allocate resources. The chief operating decision-maker accesses the performance of the reportable segments based on the revenue and profit/loss presented. 4 The Group has two reportable segments (i) food and beverages including restaurants and bars business and (ii) securities trading business. Segment revenue is measured in a manner consistent with that in the consolidated income statement. (i) (ii) DINGYI GROUP INVESTMENT LIMITED 14 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 4 REPORTABLE SEGMENTS (Continued) Reportable segment information is presented below: 4 For the six months ended 30 September 2013 Food and beverages restaurants and bars business Securities trading business Total HK$ 000 HK$ 000 HK$ 000 Segment revenue Group revenue 26,879 26,879 Realised gain on investments at fair value through profit or loss, net 5,192 5,192 Segment (loss)/profit (977) 5,548 4,571 Included in segment (loss)/profit are: Depreciation of plant and equipment (977) (977) Unrealised gain on investments at fair value through profit or loss, net 274 274 Dividends income from investments at fair value through profit or loss 294 294 Segment assets 13,783 59,006 72,789 Included in segment assets are: Additions to non-current assets (other than financial instruments and deferred income tax assets) 1,485 1,485 The Group had no inter-segment sales for the periods ended 30 September 2013 and 2012. 15
Notes to the Condensed Consolidated Financial Statements 4 REPORTABLE SEGMENTS (Continued) For the six months ended 30 September 2012 4 Food and beverages restaurants and bars business Securities trading business Total HK$ 000 HK$ 000 HK$ 000 Segment revenue Group revenue 33,254 33,254 Realised gain on investments at fair value through profit or loss, net 2,447 2,447 Segment (loss)/profit (2,113) 5,785 3,672 Included in segment (loss)/profit are: Depreciation of plant and equipment (2,327) (2,327) Amortisation of trademarks (26) (26) Unrealised gain on investments at fair value through profit or loss, net Dividends income from investments at fair value through profit or loss 2,642 2,642 696 696 Segment assets 16,278 30,303 46,581 Included in segment assets are: Additions to non-current assets (other than financial instruments and deferred income tax assets) 241 241 DINGYI GROUP INVESTMENT LIMITED 16 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 4 REPORTABLE SEGMENTS (Continued) Reconciliation of segment profit to loss before taxation is provided as follows: 4 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Segment profit 4,571 3,672 Unallocated corporate income 18 Unallocated corporate expenses (20,073) (6,906) Fair value loss on derivative financial liabilities (84,385) Share-based payment expenses (15,495) Finance income 9,860 708 Finance costs (6,735) (2) Loss before taxation (112,257) (2,510) GEOGRAPHICAL INFORMATION Both in current and prior period, the Group s operations in food and beverages business and securities trading business are carried out in Hong Kong. 17
Notes to the Condensed Consolidated Financial Statements 5 OTHER INCOME, NET 5 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Sponsorship income from suppliers 36 Others 210 206 246 206 6 OTHER GAINS, NET 6 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Unrealised gain on investments at fair value through profit or loss, net 274 2,642 Dividends income from investments at fair value through profit or loss 294 696 Exchange gain, net 18 568 3,356 DINGYI GROUP INVESTMENT LIMITED 18 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 7 FINANCE INCOME, NET 7 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Interest income from bank deposits 527 6 Interest income from loans receivable 9,038 702 Effective interest income on convertible bond loan receivable component 295 Interest expenses on bank borrowings (1,235) (2) Effective interest expenses on convertible bonds liability component (note 16) 16 (5,609) 3,016 706 19
Notes to the Condensed Consolidated Financial Statements 8 LOSS BEFORE TAXATION 8 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Loss before taxation has been arrived at after charging/(crediting) the following: Cost of inventories recognised as expenses 6,402 8,483 Depreciation of plant and equipment 994 2,335 Amortisation of trademarks 26 Gain on disposal of plant and equipment (262) Staff costs 10,370 11,541 Operating lease payments in respect of leasing of Premises under minimum lease payments 5,383 5,588 under contingent rent 772 975 Equipment 94 90 DINGYI GROUP INVESTMENT LIMITED 20 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 9 INCOME TAX CREDIT 9 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Current income tax Overseas 30 Over-provision in prior periods (160) (130) Deferred income tax Origination and reversal of temporary differences (4) Income tax credit (130) (4) Hong Kong profits tax is calculated at the rate of 16.5% (2012: 16.5%) on the estimated assessable profits after offsetting losses brought forward of each individual company. 16.5% 16.5% Overseas taxation in prior period including Australia and Mainland China taxation was calculated based on the rates applicable in the relevant jurisdiction on the estimated assessable profits. 21
Notes to the Condensed Consolidated Financial Statements 10 LOSS PER SHARE (A) BASIC LOSS PER SHARE Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company as set out below by the weighted average number of ordinary shares in issue during the period. 10 (A) Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Loss attributable to owners of the Company (111,648) (1,496) Number of shares Number of shares 000 000 Weighted average number of ordinary shares in issue (thousands) 2,943,078 2,375,095 Basic loss per share (HK cents) (3.79) (0.06) (B) DILUTED LOSS PER SHARE Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: share options and convertible bonds. (B) DINGYI GROUP INVESTMENT LIMITED 22 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 10 LOSS PER SHARE (Continued) (B) DILUTED LOSS PER SHARE (Continued) During the period ended 30 September 2013, share options were granted by the Company which have potential dilutive effect on its ordinary shares. During the period ended 30 September 2013, the Company issued convertible bonds which have potential dilutive effect on its ordinary shares (note 16). The convertible bonds are assumed to have been converted into ordinary shares, and the net loss is adjusted to eliminate the interest expense less the tax effect. 10 (B) 16 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Loss attributable to owners of the Company (111,648) (1,496) Interest expense on convertible bonds (net of tax) 4,684 (106,964) (1,496) Number of shares Number of shares 000 000 Weighted average number of ordinary shares in issue (thousands) 2,943,078 2,375,095 Adjustments for: Assumed conversion of convertible bonds (thousands) 380,030 Assumed share options exercised 93,952 Weighted average number of ordinary shares for diluted loss per share (thousands) 3,417,060 2,375,095 Diluted loss per share (HK cents) (3.13) (0.06) 23
Notes to the Condensed Consolidated Financial Statements 11 DIVIDENDS The board ( Board ) of Directors has resolved not to declare any interim dividend for the six months ended 30 September 2013 (2012: nil). 11 12 PLANT AND EQUIPMENT For the six months ended 30 September 2013, the Group acquired plant and equipment at a cost of HK$7,190,000 (HK$241,000 for the six months ended 30 September 2012), including the acquired motor vehicle with a net carrying value amounted to HK$5,667,000 (For the six months ended 30 September 2012: nil) held under a finance lease. This asset is pledged to secure the Group s obligation under a finance lease. 12 7,190,000 241,000 5,667,000 13 DEBTORS, DEPOSITS AND PREPAYMENTS 13 As at 30 September As at 31 March 2013 2013 HK$ 000 HK$ 000 Trade debtors (A) (A) 284 636 Loans receivable (B) (B) 176,694 1,581 Other debtors, deposits and prepayments 24,513 12,984 Convertible bond loan receivable component 12,681 201,491 27,882 (A) TRADE DEBTORS The Group has established different credit policies for customers in each of its core businesses. The credit period granted to trade debtors ranges from 30 45 days except for sales of food and beverages at restaurants and bars, which are mainly on cash basis. As at 30 September 2013 and 31 March 2013, all the trade debtors are aged under 60 days based on due date. (A) 30 45 60 DINGYI GROUP INVESTMENT LIMITED 24 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 13 DEBTORS, DEPOSITS AND PREPAYMENTS (Continued) (B) LOANS RECEIVABLE The loans receivable are due from independent third parties, which are unsecured. The carrying amounts are denominated in HK$ and approximate their fair values. 13 (B) 14 CREDITORS, DEPOSITS AND ACCRUALS 14 As at 30 September As at 31 March 2013 2013 HK$ 000 HK$ 000 Trade creditors 2,061 2,198 Other creditors, deposits and accruals 7,535 5,633 9,596 7,831 As at 30 September 2013 and 31 March 2013, all the trade creditors are aged under 60 days based on invoice date. 60 25
Notes to the Condensed Consolidated Financial Statements 15 SHARE CAPITAL 15 Number of shares 000 HK$ 000 Authorised ordinary shares: At 31 March 2013, 1 April 2013 of HK$0.01 per share Increase on 3 September 2013 (note (i)) At 30 September 2013 of HK$0.01 per share 0.01 3,500,000 35,000 (i) 7,000,000 70,000 0.01 10,500,000 105,000 Issued and fully paid ordinary shares: At 31 March 2013 and 1 April 2013 of HK$0.01 per share 0.01 2,375,095 23,751 Issue of shares (note (ii)) (ii) 475,000 4,750 Issue of shares on conversion of convertible bonds (note (iii)) (iii) 454,545 4,545 At 30 September 2013 of HK$0.01 per share 0.01 3,304,640 33,046 DINGYI GROUP INVESTMENT LIMITED 26 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 15 SHARE CAPITAL (Continued) Notes: 15 (i) On 3 September 2013, the authorised share capital of the Company was increased from HK$35 million to HK$105 million by the creation of an additional 7,000,000,000 ordinary shares of HK$0.01 each which rank pari passu with the existing shares in all respects. (i) 7,000,000,000 0.01 35,000,000 105,000,000 (ii) The Company allotted and issued 475,000,000 new shares to independent third parties on 28 May 2013. The proceeds of the issue of shares before expenses amounted to HK$142,500,000. The net proceeds of the issue of shares amounted to HK$140,953,000 after deducting the expenses of the issue. (ii) 475,000,000 142,500,000 140,953,000 (iii) On 26 June 2013, the convertible bonds in the aggregate amounted to HK$100,000,000 were converted into 454,545,454 ordinary shares of HK$0.01 each at the fixed conversion price of HK$0.22 per share. (iii) 100,000,0000.22 454,545,454 0.01 16 CONVERTIBLE BONDS The Group issued convertible bonds with a coupon rate of 2% per annum at a total principal value of HK$100,000,000 on 28 March 2013 and at a total principal value of HK$100,000,000 on 31 May 2013 to four independent third parties (the bondholders ). The convertible bonds will mature at 27 March 2018 and 30 May 2018 respectively at its principal amount or can be converted into 909,090,908 shares at the bondholder s option at rate of HK$0.22 per share. 16 100,000,000 100,000,0002% 0.22 909,090,908 On 26 June 2013, 454,545,454 conversion shares were allotted and issued to two bondholders pursuant the exercise of conversion rights attaching to the convertible bonds issued on 28 March 2013 and 31 May 2013 respectively. 454,545,454 The fair values of the remaining convertible bonds was HK$156,413,000 based on the valuations by an independent valuer as at 28 March 2013 and 31 May 2013 respectively. The convertible bonds comprise a liability component and an equity conversion component. 156,413,000 27
Notes to the Condensed Consolidated Financial Statements 16 CONVERTIBLE BONDS (Continued) The fair values of the unlisted bond component were calculated by using a market interest rate of similar non-extendable and non-convertible bonds. The fair values of the convertible bonds were valued by using the Binomial Option Pricing Model. The residual amount, representing the value of the equity conversion component, is included in the convertible bond-equity conversion reserve under equity attributable to equity holders of the Company. 16 Equity Liability component conversion component Total HK$ 000 HK$ 000 HK$ 000 Cash received on 28 March 2013 100,000 100,000 Fair values of derivative financial liabilities 9,939 9,939 Fair values of convertible bonds issued on 28 March 2013 109,939 109,939 Legal and professional fee paid (212) (212) Equity conversion component (69,676) 69,676 Fair value at 28 March 2013 (note) 40,051 69,676 109,727 Effective interest expenses 104 104 At 31 March 2013 40,155 69,676 109,831 DINGYI GROUP INVESTMENT LIMITED 28 INTERIM REPORT 2013/14
Notes to the Condensed Consolidated Financial Statements 16 CONVERTIBLE BONDS (Continued) 16 Equity Liability component conversion component Total HK$ 000 HK$ 000 HK$ 000 Cash received on 31 May 2013 Fair values of derivative financial liabilities 100,000 100,000 94,332 94,332 Fair values of convertible bonds issued on 31 May 2013 194,332 194,332 Legal and professional fee paid (212) (212) Equity conversion component (147,172) 147,172 Fair value at 31 May 2013 (note) 46,948 147,172 194,120 Total fair values before effective interest expenses and ordinary shares conversion 87,103 216,848 303,951 Effective interest 7 expenses (note 7) 5,609 5,609 Converted into ordinary shares (44,723) (108,424) (153,147) At 30 September 2013 47,989 108,424 156,413 Note: As at the 30 September 2013, the fair value of the unlisted bond component of the convertible bonds that were issued on 28 March 2013 and 31 May 2013 are calculated using cash flows discounted at a rate based on the discount rate of 23.5% and 20% respectively (31 March 2013: 23.7%). 23.5% 20% 23.7% The convertible bonds liability component are classified under non-current liabilities. The carrying amounts of convertible bonds liability component are denominated in HK$. 29
Notes to the Condensed Consolidated Financial Statements 17 CONTINGENT LIABILITIES As at 30 September 2013, the Group had no contingent liabilities (31 March 2013: nil). 17 18 RELATED PARTY TRANSACTIONS 18 Six months ended 30 September 2013 2012 HK$ 000 HK$ 000 Ultimate holding company Management fee paid (465) (465) Non-controlling interest Management fee paid (1,606) (1,993) Purchase of food and beverages (1,932) DINGYI GROUP INVESTMENT LIMITED 30 INTERIM REPORT 2013/14
Management Discussion and Analysis BUSINESS REVIEW The Group s revenue from its continuing operations amounted to HK$27 million during the six months ended 30 September 2013. This represents a decrease of 18% on HK$33 million achieved in the same period last year. There was a loss attributable to the Company s equity holders of HK$112 million, compared to HK$1 million in last year. The loss during the period was mainly due to the fair value loss on derivative financial liabilities and the share-based payment expenses. 27,000,000 33,000,000 18% 112,000,000 1,000,000 Loss per share amounted to HK3.79 cents during the six months ended 30 September 2013, compared with HK0.06 cents for the same period last year. 3.790.06 FOOD AND BEVERAGES The food and beverages segment generated a revenue of HK$27 million during the period under review. This was 18% lower than the amount for the corresponding period last year. The segment reported a decrease of loss to HK$1 million (2012: HK$2 million) for the six months period ended 30 September 2013. The restaurants and bars and kiosks of the Group are operated by 3 subsidiaries (collectively, the World Pointer Group ). As of 30 September 2013, the World Pointer Group operated five restaurants and bars and three kiosks including but not limited to Watermark, The Boathouse, Pier 7 Café & Bar and Café de Paris (Soho) in Hong Kong. 27,000,000 18% 1,000,0002,000,000 3 World Pointer World Pointer 5 3 Watermark The Boathouse Pier 7 Café & Bar Café de Paris (Soho) Cafe Deco Holdings Limited, a former subsidiary of the Group, provides general administrative and management services to the restaurants and bars and kiosks under the World Pointer Group such as operation management, preparation of books of account, maintenance of premises of restaurants and bars, and repairs and decorations up to 15 February 2014 under a management agreement. Cafe Deco Holdings Limited World Pointer SECURITIES TRADING During the period, the Group has substantial performance in the securities trading business. The Group recorded a realised gain on investments at fair value through profit or loss of HK$5 million (2012: HK$2 million) and reported a profit of HK$6 million (2012: HK$6 million) during the period under review. 5,000,000 2,000,0006,000,000 6,000,000 31
Management Discussion and Analysis COMPLETION OF THE ISSUE OF HK$200 MILLION 2% CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND ALLOTMENT AND ISSUE OF CONVERSION SHARES On 12 October 2012, after trading hours, each of Mr. Li Xuan (the Subscriber 1 ), Mr. Leung Chiu (the Subscriber 2 ) and Mr. Yang Dongjun (the Subscriber 3 ) entered into a subscription agreement with the Company in respect of the issue of and subscription for the convertible bonds in the aggregate principal amount of HK$150 million (the First Subscription Agreements ). On 17 October 2012, after trading hours, Mr. Lei Chong (the Subscriber 4 ) entered into a subscription agreement with the Company in respect of the issue of and subscription for the convertible bond in a principal amount of HK$50 million (the Second Subscription Agreement ). 200,000,000 2 12 3 150,000,000 4 50,000,000 Completion of the issue of and subscription for the convertible bonds in the principal amount of HK$50 million each by the Subscriber 2 and the Subscriber 3 under the First Subscription Agreements took place on 28 March 2013 (the First Completion ). 23 50,000,000 On 31 May 2013, the issue of and subscription for the convertible bonds in the principal amount of HK$50 million each by the Subscriber 1 under the First Subscription Agreements and by the Subscriber 4 under the Second Subscription Agreement was completed (the Second Completion ). The net proceeds from the issue of the convertible bonds to the Subscriber 1 and the Subscriber 4, are approximately HK$99.95 million, which are placed in an interest bearing account with a financial institution pending for funding the partial payment of the Proposed Offer (as defined below) or other possible future investments, for financing the development of the Group and for using as the general working capital of the Group. 1 4 50,000,000 14 99,950,000 Details of the First Subscription Agreements, the Second Subscription Agreement, the First Completion and the Second Completion were disclosed in the announcements of the Company dated 12 October 2012, 17 October 2012, 20 November 2012, 31 December 2012, 31 January 2013, 28 March 2013 and 31 May 2013 respectively and the circular issued by the Company dated 2 November 2012. On 26 June 2013, 227,272,727 conversion shares were allotted and issued to each of the Subscriber 1 and the Subscriber 2 pursuant the exercise of conversion rights attaching to the convertible bonds issued on 28 March 2013 and 31 May 2013 to the Subscriber 2 and the Subscriber 1 respectively. 227,272,727 21 1 2 DINGYI GROUP INVESTMENT LIMITED 32 INTERIM REPORT 2013/14
Management Discussion and Analysis GRANT OF SHARE OPTIONS On 19 April 2013 and 26 April 2013, the board of the Directors (the Board ) granted 85,050,000 share options and 20,000,000 share options respectively to the eligible employees/eligible participants as defined in the share option scheme adopted by the Company on 21 September 2012 (the Share Option Scheme ) at an exercise price of HK$0.375 per share. 0.375 85,050,000 20,000,000 Details of the above grant of share options were disclosed in the announcements of the Company dated 19 April 2013, 26 April 2013 and 3 May 2013 respectively. PLACING OF NEW SHARES UNDER GENERAL MANDATE On 25 April 2013, after trading hours, Kingston Securities Limited (the Placing Agent ) and the Company entered into a placing agreement (the Placing Agreement ), pursuant to which the Company has conditionally agreed to place, through the Placing Agent on a best effort basis, a maximum of 475,000,000 placing shares at a price of HK$0.30 per placing share to not fewer than six placees who and whose ultimate beneficial owners, if any, are third parties independent of and are not connected with the Company and its connected persons (as defined in the Listing Rules) (the Placing ). The net proceeds from the Placing, after deducting related placing commission and other related expenses in connection with the Placing, is approximately HK$140.9 million, which are placed in an interest bearing account with a financial institution pending for funding the partial payment of the Proposed Offer or other possible future investments. The Placing was successfully completed on 28 May 2013. 0.30 475,000,000 140,900,000 Details of the Placing were disclosed in the announcements of the Company dated 25 April 2013, 2 May 2013 and 28 May 2013 respectively. 33
Management Discussion and Analysis PROPOSED ISSUE OF 5% CONVERTIBLE BONDS AND WARRANTS DUE 2015 UNDER SPECIFIC MANDATE On 20 June 2013, after trading hours, Hantang Resources Investment Limited( Hantang ) as the subscriber and the Company entered into a subscription agreement (the Subscription Agreement ) in respect of the issue of and subscription for the convertible bonds in the aggregate principal amount not exceeding HK$620,000,000 at an initial conversion price of HK$0.33 per conversion share and the warrants in the aggregate principal amount of HK$155,000,000 at an exercise price of HK$0.35 per warrant share, respectively (the Proposed Issue of the New Convertible Bonds and the Warrants ). The Subscription Agreement and the transactions contemplated thereunder, including the allotment and issue of the conversion shares and the warrant shares under a specific mandate of the Company, are subject to the approval by the shareholders (the Shareholders ) at a special general meeting of the Company. 5 0.33 620,000,000 0.35 155,000,000 The estimated net proceeds of the issue of the convertible bonds (after deducting the fees and expenses) will be approximately HK$619.5 million and the exercise in full of the warrants will result in further net proceeds of approximately HK$155 million. The total net proceeds are intended to be used for funding the partial payment of the Proposed Offer or other possible further investments. 619,500,000 155,000,000 A circular containing, among other things, details about the Proposed Issue of the New Convertible Bonds and the Warrants is expected to be despatched to the Shareholders on or before 31 December 2013. Details of the Proposed Issue of the New Convertible Bonds and the Warrants were disclosed in the announcements of the Company dated 20 June 2013, 19 July 2013, 30 August 2013, 30 September 2013 and 14 November 2013 respectively. DINGYI GROUP INVESTMENT LIMITED 34 INTERIM REPORT 2013/14
Management Discussion and Analysis CONNECTED TRANSACTION PROPOSED ISSUE OF CONVERTIBLE BONDS AND WARRANTS UNDER SPECIFIC MANDATE On 28 June 2013, after trading hours, Wincon Capital Investment Limited ( Wincon ), the controlling shareholder (as defined in the Listing Rules) of the Company, as the subscriber and the Company entered into a subscription agreement (the Wincon Subscription Agreement ) in respect of the issue of and subscription for the convertible bonds in the aggregate principal amount not exceeding HK$620,000,000 at an initial conversion price of HK$0.33 per conversion share and the warrants in the aggregate principal amount of HK$155,000,000 at an exercise price of HK$0.35 per warrant share, respectively (the Proposed Issue of the New Wincon Convertible Bonds and the Wincon Warrants ). The Wincon Subscription Agreement and the transactions contemplated thereunder, including the allotment and issue of the conversion shares and the warrant shares under a specific mandate of the Company, are subject to the approval by the Shareholders at a special general meeting of the Company. 0.33 620,000,000 0.35 155,000,000 The estimated net proceeds of the issue of the convertible bonds (after deducting the fees and expenses) will be approximately HK$619.5 million and the exercise in full of the warrants will result in further net proceeds of approximately HK$155 million. The total net proceeds are intended to be used for funding the partial payment of the Proposed Offer or other possible further investments. 619,500,000 155,000,000 A circular containing, among other things, details about the Proposed Issue of the New Wincon Convertible Bonds and the Wincon Warrants is expected to be despatched to the Shareholders on or before 31 December 2013. Details of the Proposed Issue of the New Wincon Convertible Bonds and the Wincon Warrants were disclosed in the announcements of the Company dated 28 June 2013, 19 July 2013, 30 August 2013, 30 September 2013 and 14 November 2013 respectively. 35
Management Discussion and Analysis PROPOSED OFFER MADE BY THE COMPANY TO ELEMENTAL MINERALS LIMITED AND THE ELEMENTAL LEAD INVESTMENT On 1 July 2013, the Company entered into (1) a bid implementation agreement with Elemental Minerals Limited ( Elemental ) pursuant to which the Company agreed to make an off-market takeover offer to acquire all the issued shares of Elemental (the Elemental Shares ) at AUD0.66 per Elemental share (the Proposed Offer ); and (2) pre-bid purchase agreements with the key shareholders of Elemental (together, the Proposed Acquisition ), together with other documents including documents relating to the financing of the Proposed Acquisition. The Company also announced that on 1 July 2013, the Company and Elemental entered into the Elemental Share Placement Agreement and the Dingyi Convertible Note Facility (i.e. the Elemental Lead Investment, as defined and mentioned with details in the Company s announcements dated 13 August 2013, 12 September 2013, 15 October 2013 and 15 November 2013, respectively (the Elemental Lead Investment Announcements )) pursuant to which the Company agreed to make a lead investment in Elemental to provide Elemental with interim working capital for its business during the offer period for the Proposed Offer. The completion of the Elemental Share Placement took place on 30 August 2013. 14,676,163 Elemental Placement Shares have been issued to the Company at a price of AUD0.3407 (approximately HK$2.41) per Elemental Placement Share pursuant to the terms and conditions of the Elemental Share Placement Agreement. The Elemental Placement Shares issued to the Company represent approximately 4.84% of the total issued share capital of Elemental as enlarged by such issue. ELEMENTAL MINERALS LIMITED ELEMENTAL (1) Elemental Minerals LimitedElemental Elemental0.66Elemental Elemental (2) Elemental Elemental Elemental Elemental Elemental Elemental Elemental Elemental 14,676,163 ElementalElemental Elemental0.3407 2.41 Elemental Elemental4.84% As set out in the Elemental Lead Investment Announcements, the circular in respect of the Elemental Lead Investment containing, among other things, (i) further details of the Elemental Lead Investment; (ii) the Competent Person s Report; and (iii) the Valuation Report (together, the Circular ) is expected to be despatched to the Shareholders on or before 31 December 2013. Elemental (i) Elemental (ii) (iii)elemental DINGYI GROUP INVESTMENT LIMITED 36 INTERIM REPORT 2013/14
Management Discussion and Analysis Elemental is an advanced mining exploration and development company dual listed on the Australian Stock Exchange and the Toronto Stock Exchange. It is currently developing the Sintoukola potash project located in the Republic of Congo. Elemental Sintoukola The Proposed Acquisition constitutes a very substantial acquisition for the Company and is therefore subject to the approval by the Shareholders at a special general meeting of the Company by way of poll under the Listing Rules. The announcement relating to the Proposed Acquisition has been submitted to the Stock Exchange for vetting and will be published by the Company as soon as practicable. STRATEGY AND OUTLOOK Apart from the existing businesses of food and beverages and securities trading, the Group will continue to explore other potential investment opportunities with reasonable returns that meet the Company s criteria. This will not only strengthen our core business but also increase the Company s equity holders values. The Group has been exploring a few investment opportunities. Since early 2012, the Company has been negotiating with a mining company (i.e. Elemental) with principal place of business in Africa in respect of the possible acquisition of a strategic shareholding interest by stages in this mining company and its potash project and is actively proceeding the aforesaid possible acquisition, details of which are set out in the paragraph headed Proposed offer made by the Company to Elemental Minerals Limited and the Elemental Lead Investment in this report. The Company is also exploring the investment opportunities in other mining projects. Elemental Elemental Minerals Limited Elemental 37
Financial Review SHAREHOLDERS EQUITY AND FINANCIAL RATIOS As at 30 September 2013, the Group s net assets attributable to equity holders of the Company amounted to HK$436 million (31 March 2013: HK$199 million), an increase of HK$237 million. Such increases were mainly caused by issued of new shares of HK$141 million, the issuance of convertible bonds equity conversion component of HK$147 million, granted of share options of HK$16 million, issued of new shares on conversion of convertible bonds of HK$45 million less the loss attributable to equity holders of HK$112 million. 436,000,000 199,000,000 237,000,000 141,000,000 147,000,000 16,000,000 45,000,000 112,000,000 As at 30 September 2013, total debt to equity ratio was 0.12 (31 March 2013: 0.21) and net debt to equity ratio were zero (31 March 2013: nil) which were expressed as a percentage of total convertible bonds and finance lease obligations and net convertible bonds and finance lease obligations respectively, over the total equity of HK$427 million (31 March 2013: HK$190 million). 0.12 0.21 427,000,000 190,000,000 BORROWINGS As at 30 September 2013, the Group s finance lease obligations amounted to HK$5 million, of which most of them was repayable more than one year. The finance lease obligations are denominated in Hong Kong dollars and subject to fixed interest rate (31 March 2013: nil). Cash and deposits at bank amounted to HK$186 million (31 March 2013: HK$190 million). 5,000,000 186,000,000 190,000,000 TREASURY POLICIES The Group adopts conservative treasury policies in cash and financial management. To achieve better risk control and minimise cost of funds, the Group s treasury activities are centralised. Cash is generally placed in short-term deposits mostly denominated in Hong Kong dollars or US dollars or Renminbi or Australian dollars. The Group s liquidity and financing requirements are frequently reviewed. In anticipating new investments, the Group will consider new financing while maintaining an appropriate level of gearing. 38 DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14
Financial Review CONTINGENT LIABILITIES At the end of the reporting period, the Group had no contingent liabilities. CAPITAL COMMITMENT At the end of the reporting period, the Group had no capital commitments. CHARGES ON THE GROUP S ASSETS The Group had pledged its asset with net book value of HK$5.67 million (31 March 2013: nil) to secure finance lease obligations. 5,670,000 INCREASE IN AUTHORISED SHARE CAPITAL Pursuant to an ordinary resolution passed by the Shareholders at the annual general meeting held on 3 September 2013, the authorized share capital of the Company was increased from HK$35 million to HK$105 million by the creation of an additional 7,000,000,000 ordinary shares of HK$0.01 each which rank pari passu with the existing shares in all respects. 7,000,000,000 0.01 35,000,000 105,000,000 39
Other Information INTERIM DIVIDEND The Board has resolved not to declare any interim dividend for the six months ended 30 September 2013 (2012: nil). DIRECTORS AND CHIEF EXECUTIVE S INTERESTS IN SECURITIES As at 30 September 2013, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations, within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the SFO ), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have taken under such provisions of the SFO), or which were required to be recorded in the register to be kept by the Company pursuant to Section 352 of the SFO or as otherwise were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 to the Listing Rules were as follows: 571 XV XV78 352 Long positions in ordinary shares and underlying shares of the Company Name of Directors Capacity Number of ordinary shares Number of underlying shares Total Approximate percentage of issued share capital of the Company % (Note 1) 1 Mr. Li Kwong Yuk ( Mr. Li ) Interest of controlled corporation 1,662,882,530 (Note 2) 2,321,645,020 (Note 3) 2 3 Beneficial owner 13,300,000 (Note 4) 4 3,984,527,550 13,300,000 3,997,827,550 120.98% 40 DINGYI GROUP INVESTMENT LIMITED INTERIM REPORT 2013/14