Management Discussion and Analysis

RESULTS

Net profit of the Group for the Period increased by 5% to approximately HK$392 million (30 September 2015: approximately HK$372 million). For the Period, the Group recorded a revenue of approximately HK$43 million (30 September 2015: approximately HK$57 million), representing a decrease of approximately 25%. The decrease was mainly attributable to the decline in recognized revenue from the sales of residential properties in Phase One of Fortune Heights during the Period. The sales of such properties were approximately HK$7 million (30 September 2015: approximately HK$27 million) during the Period. The property sales accounted for 15% of the total revenue for the Period (30 September 2015: 47%).

Apart from that, the Group achieved remarkable results on contracted sales during the Period, reflecting that Goldin Properties’ luxurious and all-rounded property project is highly recommended by the market. Given the conflagrant property market in Tianjin, Goldin successfully grabbed this opportunity to boost the sales of Fortune Heights. It is
expected that the recognized revenue from the sales of residential properties would be encouraging in coming months. Apart from the high-end residential property, construction of the other parts of the Project is progressing on schedule, and we look forward to greater success after the completion of the entire flagship project.

The Group will take the opportunities presented by the closer cooperation among Beijing, Tianjin and Hebei and will capitalize on China’s steady economic development. It is optimistic about the prospects of Goldin Metropolitan and will continue to create value for society and the shareholders.

 
LIQUIDITY AND FINANCIAL RESOURCES
 
Working capital and debts

The Group’s working capital as of 30 September 2016 was approximately HK$5,701,713,000, representing an increase of 494% when compared with the approximately HK$959,613,000 as of 31 March 2016. The substantial increase is mainly due to the reclassification of certain investment properties at the amount of HK$13,472,235,000 from non-current assets to current assets. It is because the Directors consider that the Proposed Disposal is highly probable and will be completed within one year from the date of the general meeting approving this transaction, the relevant investment properties to be disposed of and its associates liabilities were therefore classified as held for sale and current as at 30 September 2016.

The current ratio of the Group maintained at healthy level of 1.29 times as of 30 September 2016 and 1.1 times as of 31 March 2016.

The loan advanced from Goldin Special Situations Limited, a related company in which Mr. Pan Sutong has a beneficial interest, has been fully repaid during the Period (31 March 2016: HK$8,508,114,000).

During the period, being part of the arrangement related to the Proposed Disposal, the Group obtained a new bank loan of RMB6,000,000,000 (equivalent to HK$6,970,200,000) under an entrusted loan arrangement in which the bank acted as the trustee on behalf of the Investment Company (the “Entrusted Loan A”). The Entrusted Loan A carries zero interest effectively and is repayable in 2017 for one year. The proceeds from the Entrusted Loan A were used for the repayment of loans owned by the Group in relation to the development of the Goldin Metropolitan project of the Group at the amount of RMB6 billion. The Entrusted Loan A was secured by certain investment properties of the Group according to the pledge agreement.

In addition, the Group obtained another new bank loan of RMB700,000,000 (equivalent to HK$813,190,000) under an entrusted loan arrangement during the Period, in which the bank acted as the trustee on behalf of the entrusting party, which was an independent third party (the “Entrusted Loan B”). The Entrusted Loan B carries interest at fixed rate of 7.15% per annum and is repayable in instalments over a period of 3 years to 2019. The proceeds from the Entrusted Loan B were used to finance the payments of construction costs and project development of the Group.

In relation to the Proposed Disposal, the conditions for the first instalment of the consideration in accordance with the relevant agreements were fulfilled and the first instalment at the amount of RMB6 billion (equivalent to approximately HK$6,970,200,000) was received by the Group during the Period.

Gearing ratio (total debt to total assets) of the Group was decreased and maintained at a healthy level of 21.1% (31 March 2016: 24.3%). On the other hand, as at 30 September 2016, the ratio of total liabilities (including total trade and construction cost payables, bank borrowing, entrusted loans, obligations under finance leases and loan from a related company) to total equity was 71.7% (31 March 2016: 100.7%).

Pledge of assets

As at 30 September 2016, certain investment properties and properties for sale of the Group with an aggregate carrying values of approximately HK$23.6 billion (31 March 2016: Nil) have been pledged to secure credit facilities granted to the Group. It was mainly for the arrangement of the transaction of the Proposed Disposal during the Period.
 

FOREIGN EXCHANGE RISK

The Group’s transactions and assets are primarily denominated in Renminbi. The Group does not expect any materially adverse effects of the exchange rate fluctuation. Nevertheless, the Group continues to monitor closely its exposure to the exchange rate risk, and is prepared to manage against its exchange rate risk, if necessary. The Group continues to exercise a strict control policy and did not engage in any speculative trading in debt securities or financial derivatives during the Period.

 
COMMITMENTS

As of 30 September 2016, the Group had commitments of approximately HK12,497,383,000 (31 March 2016: HK$12,432,065,000).

For the commitments, the future committed capital expenditures which are to be incurred mainly for properties for sale and investment properties under construction up to 2018 are HK$5,019,724,000 and HK$7,361,789,000 respectively (31 March 2016: HK$4,679,941,000 and HK$7,737,916,000 respectively).

 
DIVIDEND

The Board does not recommend the payment of an interim dividend for the Period (30 September 2015: Nil).

 
EMPLOYMENT AND REMUNERATION POLICY

As of 30 September 2016, the Group had 621 employees (30 September 2015: 943 employees). Staff costs for the Period (including directors’ emoluments) amounted to approximately HK$107,857,000 (30 September 2015: approximately HK$150,637,000). The Group offers competitive remuneration to its employees. Subject to the performance of the employees, the Group may provide discretionary bonuses and/or grant share options to the employees as an incentive for their continued contribution. In addition to using an industry average as reference for setting remuneration, other benchmarks which are being considered include the prevailing market conditions within the general framework of the Group’s remuneration system.