Sunwah International Announces FY2020 Results

TORONTO, Sept. 24, 2020 /CNW/ - Sunwah International Limited, TSX: SWH ("Sunwah International" or the "Company"), a Hong Kong based investment firm and member of major Asian conglomerate, Sunwah Group, today announced its financial results for the year ended June 30, 2020, reporting a net loss of US$3.41 million as compared with a loss of US$3.38 million in FY2019.  All figures quoted are in U.S. dollars.

Fiscal Year 2020 Highlights:

• Revenues from the Company's investment in restaurant operations (HFL Limited) of $3.11 million for the year (FY2019: $2.0 million for the seven months from HFL's acquisition on November 30, 2018 to year end);
  
  
• A loss before tax from continuing operations of $4.07 million for the year (FY2019: loss of $3.56 million), which includes impairment losses of $0.77 million recognized on HFL's assets due to the uncertain operating environment following the outbreak of COVID-19;
  
  
• A loss attributable to shareholders of the Company from continuing operations amounting to $3.41 million (FY2019: loss of $3.35 million);
  
  
• A share of loss of an associate of $1.22 million for the year, representing results from the Company's primary investment in financial services through Sunwah Kingsway Capital Limited (FY2019: a share of loss of an associate of $1.01 million);
  
  
• Cost of sales for Sunwah International's Restaurant Operations investment, HFL Limited, of $0.95 million (FY2019: $0.58 million from date of acquisition on November 30, 2018 to year end);
  
  
• Selling, general and administrative expenses of $3.82 million in FY2020 with HFL Limited accounting for approximately $2.89 million, including depreciation and amortization (FY2019: $2.87 million total with $1.83 million from the operation of HFL).

"Sunwah International's 2020 fiscal year coincided with what was perhaps one of the most volatile 12-month periods on record for Hong Kong in a long time.  While I am very glad to have Fiscal 2020 in our wake, I am also proud of how the Company's staff and leadership came together to weather the storm within an operating environment of unprecedented uncertainty," said Michael Choi, CEO of Sunwah International.  "Although our business was inevitably negatively impacted, having seen the signs for widespread investor uncertainty leading up to the pandemic, we had the foresight to take pre-emptive and measured actions to prudently control risk.  As a result of this discretion and our track record for successfully managing a variety of market crises in our 30-year history, while we are hopeful that Hong Kong is on the road to recovery we feel we are positioned to effectively navigate what could also be a period of adverse investor sentiment given the compounding effect of numerous antagonistic market forces currently at play."

Sunwah International operated against a backdrop of significant ambiguity throughout the entirety of its 2020 financial year spawned by escalating tensions between the U.S. and China, widespread civil unrest in Hong Kong, the oil price war between Russia and the OPEC countries and, of course, the destructive effects on multiple levels of the COVID-19 pandemic.  As a Hong Kong based investment company with interests in the Financial Services and Restaurant and Food industries, these market influences unavoidably affected the Company's performance.  In particular, the Company's principal investment in Sunwah Kingsway Capital Holdings Limited (SWK), a leading domestic brokerage firm and investment bank in the Hong Kong region, felt the brunt of the past year's investor uncertainty primarily in the way of unrealized trading losses within its proprietary equity portfolio, a decrease in the fair value percentage of its real estate properties, and a decrease in commission and fee income. 

With respect to Sunwah International's restaurant operation investment, while revenues were unavoidably down throughout the second half of Fiscal 2020, the Company was able to generate decent revenue given social distancing and quarantine measures in place in Hong Kong during Q3 and Q4 and the extremely challenging operating conditions of Fiscal 2020 overall.

In terms of the year ahead, Sunwah International will continue to navigate the current environment with caution lead by prudent investment policy and low gearing.  As well, Management will persist with concerted efforts to diversify its income base, including by continuing to adjust the Company's emphasis on financial services and adopting a focus on the food and beverage industry in line with the tactical strengths of its controlling shareholder, Sunwah Group, a major Asian conglomerate employing over 4,000 people worldwide. 

Financial Overview:

In accordance with the Company's refocused investments, Sunwah International now presents its results according to the following main segments:

1. Financial Services Division – This division comprises the results from the Company's remaining interest (26.05%) in Sunwah Kingsway Capital Holdings Limited, its former principal subsidiary and now main investment interest (now accounted for as an associate under the equity method of accounting).
   FY2020 highlights:
1. A loss on the partial disposal of $438,000 in FY2020, representing the results of the partial disposal of SWK in December 2019.  This corresponds with a gain on the partial disposal of $83,000 in FY2019 in respect of a debt settlement transaction in which the Group settled debentures and a loan by transferring shares of SWK in July 2018;
2. A loss on the deemed partial disposal of SWK amounting to $119,000 (FY2019: $117,000) in relation to a scrip dividend arrangement wherein the Company elected to receive a cash dividend, which resulted in further dilution of its interest in SWK from 26.47% to 26.05% (FY2019: 28.36% to 27.90%);
3. Share of losses totaling $1.22 million, which compares year-over-year with $1.01 million;
4. SWK's FY2020 declines in comparison with FY2019 are mainly the result of a decrease in commission and fee income and the impairment losses on financial instruments amid the region's social unrest in Fiscal 2020, geopolitical tensions between the U.S. and China affecting global markets, and fallout from the COVID-19 pandemic during the latter four months of the year.    
   
   
2. Restaurant Operations – This division encompasses Sunwah International's activities in the restaurant business following its acquisition of HFL Limited, an Asian food and beverage company operating a premium Chinese seafood restaurant in Hong Kong.  FY2020 highlights:
1. A loss of $1.48 million for the year (FY2019: a loss of $0.74 million), which comprises $0.77 million in impairment charges on HFL's assets due to the uncertain operating environment following the outbreak of COVID-19;
2. Revenues for the year of $3.11 million (FY2019: $2.0 million from HFL's acquisition on November 30, 2018 to year end);
3. Cost of sales of $0.95 million for the year, representing the cost of inventories used (FY2019: $0.56 million for the seven months from HFL's acquisition to year-end);
4. General, selling and administration expenses of $2.11 million for the year (FY2019: $1.62 million for the seven months from HFL's acquisition to year end), which includes staff costs (wages and allowances, pension costs, employee benefits etc.) of approximately $1.41 million for the year  (FY2019: $0.97 million from HFL's acquisition in November through year end);
5. Depreciation and amortization amounted to $0.78 million for the year, against $0.21 million in FY2019. Following the adoption of IFRS 16 "Leases" for FY2020, the Group recognized a right-of-use asset and a corresponding lease liability with respect to its restaurant lease.  Depreciation of right-of-use assets amounted to US$0.44 million in FY2020 and are recognized and included in the depreciation and amortization expenses while the related property lease payments amounting to US$0.26 million were included in the general, selling and distribution expenses in FY2019.
   
   
3. Strategic Investments and other activities – This division includes strategic investments, proprietary investments and other activities of the Group.  FY2020 highlights:
1. A net loss of $0.82 million in FY2020 (FY2019: loss of $1.78 million);
2. A net fair value gain of $81,000 on financial assets at fair value through profit or loss, which compares with a loss of $632,000 in FY2019;
3. Selling, general and administrative expenses of $0.93 million for the year against $1.04 million for FY2019.
   
   
4. Discontinued Operations of Technology Products and Services – This division includes the operations of Pop Electronic Products Limited and DacEasy (H.K.) Limited, two technology investments the Company recently divested itself of in Q4 FY2019.  This segment is included in the Company's results for year-over-year comparison purposes.
1. A loss of $54,000 was recorded in Fiscal 2019 (FY2020: N/A). 

Future Prospects

Sunwah International's investment in the restaurant sector has produced decent results since the division's inception following the acquisition of HFL Limited towards the end of last year's second quarter.  Despite this success, given the high degree of uncertainty in Hong Kong's consumer marketplace at present as a result of the COVID-19 pandemic and associated business shutdowns worldwide, the Company is prepared, if necessary, to alter course by lessening or withdrawing its focus on the food and beverage industry.  As an investment company, it is in the normal course of business to invest and divest in various businesses, and the Company is well prepared to execute on any change in direction should Management determine this to be the best course of action.

For more information on Sunwah International's FY2020 operating results, please see the Management's Discussion and Analysis (MD&A) and the unaudited interim consolidated financial statements, which are filed on SEDAR and also available on the Company's website at www.sunwahinternational.com.

About Sunwah International Limited

Sunwah International Limited is an investment firm and a member of Sunwah Group, one of Hong Kong's most prominent multi-national conglomerates. The Company's current primary investment interest, Hong Kong based Sunwah Kingsway Capital Holdings Limited, is listed on the Stock Exchange of Hong Kong under the stock code 00188. Sunwah Kingsway is licensed to provide a range of financial solutions in Hong Kong and abroad that include award-winning brokerage services and innovative corporate finance offerings.

Leveraging the expansive relationship network and strategic strengths of Sunwah Group, the company is now also focused on the food and beverage industry following the recent acquisition of HFL Limited, which operates a premium Chinese seafood restaurant in Hong Kong.

Forward-Looking Statements

This press release announcing the financial results for Sunwah International's year ended June 30, 2020 should be read in conjunction with the unaudited interim consolidated financial statements and management's discussion and analysis of Sunwah International Limited (the "Company") and its subsidiaries.

This press release contains certain statements that reflect management's expectations and objectives for the Company's future performance, opportunities and growth, which statements constitute "forward–looking information" and "forward-looking statements" (collectively "forward-looking information") under applicable securities laws. Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward-looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward–looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions. Specifically, this press release includes forward-looking information in respect of Sunwah International's 2021 objectives, including its focus on a variety of industries as an investment holding company and its initiative to expand and diversify, and its strategies to achieve those objectives. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.

Except as required by applicable law, management and the board of directors of the Company (the "Board of Directors") undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Sunwah International Limited

Kristen Humphrey, Sunwah International Limited, [phone], [email protected].

Related Links

www.kingswaygroup.ca