TORONTO, May 14, 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 third quarter ended March 31, 2020, reporting a net loss of US$1.62 million. All figures quoted are in U.S. dollars.
Q3 FY2020 Highlights:
- Total revenues, mainly from the Company's Restaurant Operations, of $0.67 million for the quarter, totaling $2.37 million for the first nine months of FY2020 (Q3 FY2019: $0.91 million; $1.24 million from November 30, 2018 (date of acquisition) to March 31, 2019)
- A loss attributable to shareholders of the Company from continuing operations amounting to $1.50 million and a year-to-date loss for FY2020 of $2.89 million (Q3 FY2019: loss of $0.25 million; loss of $2.30 million for the nine months of FY2019).
- A loss before tax from continuing operations of $1.62 million for the quarter and $3.18 million for the year-to-date (Q3 FY2019: a loss of $0.32 million; a loss of $2.35 million for the nine months of FY2019)
- A share of loss of an associate of $1.10 million for the current quarter and $1.48 million for the year-to-date, representing results from the Company's primary investment in financial services through Sunwah Kingsway Capital Limited (Q3 FY2019: a share of gain of an associate of $0.61 million; a share of loss of an associate of $0.82 million for the nine months of FY2019)
- Cost of sales for Sunwah International's Restaurant Operations of $0.21 million in Q3 FY2020 and $0.70 million for the year-to-date (Q3 FY2019: $0.26 million; $0.36 million from November 30, 2018 (date of acquisition) to March 31, 2019)
- Selling, general and administrative expenses to $0.84 million for the quarter and $2.83 million for the nine-month period (Q3 FY2019: $1.05 million; $1.69 million for the nine months of FY2019).
"In the 30 years Sunwah International has been operational, we've experienced many regional and global financial crises. Through 9/11 and SARS to the financial meltdown of 2008 and last year's social unrest in Hong Kong, we've proven our ability to weather even the most daunting of economic adversity – and we firmly believe in our ability to do so again with the COVID-19 pandemic," said Michael Choi, CEO of Sunwah International. "While our operations have undeniably been affected, having foreseen business uncertainty amid the unfavourable macroeconomic and geopolitical outlook leading up to the pandemic, we were fortunate to have taken proactive and deliberate measures to prudently control risk. Combined with a considerably more diversified business model than in the past, we believe this will help us to continue to mitigate loss and thrive in the crisis' wake."
Following significant social and political unrest in Hong Kong in 2019, the region's stock markets rebounded at the beginning of 2020 in line with global market gains, although this positive investor sentiment was short-lived as uncertainty related to the spread of the novel coronavirus ("COVID-19") began to take hold. Markets were sent into further turmoil as a fuller picture of the pandemic's potential for economic destruction began to emerge in conjunction with widespread quarantine measures and business shutdowns in Hong Kong. These unprecedented developments came together with the oil price war between Russia and the OPEC countries to wipe out the year's gains before driving markets to their biggest single-day declines in March 2020.
As a Hong Kong based investment company focused mainly on the region's financial services and restaurant/hospitality industries, Sunwah International's business was inevitably impacted by these extenuating circumstances. Nevertheless, prudent management policy combined with Management's 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—have proven successful, and the Company was not nearly as impacted as it would have been prior to this strategic realignment. Further, with respect to Sunwah International's Restaurant Operations, while revenues were unavoidably down relative to previous quarters, the Company is pleased with what it views as respectable income given social distancing and quarantine measures in place in Hong Kong during Q3 and the overall extremely challenging operating conditions of Fiscal 2020 to date.
Sunwah International recently decreased its equity interest in Hong Kong based Sunwah Kingsway Capital Limited ("SWK"), one of the region's leading domestic corporate finance and brokerage firms, to expand and diversify its investment base across different industry sectors. This change in focus was designed to open up investment opportunities in other sectors in line with the core strengths of its majority shareholder, Sunwah Group, a major Asian conglomerate employing over 4,000 people worldwide, while continuing to allow the Company to participate in the financial services sector and SWK's success.
In accordance with the Company's refocused operations, Sunwah International now presents its results according to the following main segments:
- 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).
Q3 FY2020 highlights:
- A loss on the deemed partial disposal of SWK amounting to $119,000 (Q3 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% (Q3 FY2019: 28.36% to 27.90%)
- Share of losses of $1.10 million for the quarter and $1.48 million for the year-to-date, representing a 26.05% - 27.90% equity interest in SWK during Fiscal 2020. This corresponds with a share of gain of $0.61 million and loss of $0.82 million in the third quarter and nine months of FY2019 respectively (representing a 27.90% - 28.36% equity interest in SWK during Fiscal 2019).
- SWK's third quarter and FY2020 year-to-date declines are mainly the result of trading losses within its proprietary investment portfolio, which primarily comprise Hong Kong equities, as well as a decrease in commission and fee income stemming from the region's social unrest in Fiscal 2020 and fallout from the COVID-19 pandemic in the current quarter.
- A loss of $0.25 million for the quarter and $0.60 million for the nine months of Fiscal 2020 ($0.56 million for Q3 and nine months of Fiscal 2019)
- Revenues for the quarter of $0.67 million and $2.37 million for the nine months of Fiscal 2020 (Q3 FY2019: $0.91 million; $1.24 million for nine months of Fiscal 2019)
- Cost of sales of $0.21 million and $0.70 million for the quarter and year-to-date respectively, representing the cost of inventories used (Q3 FY2019: $0.26 million; $0.36 million for nine months of Fiscal 2019)
- General, selling and administration expenses of $0.50 million for the quarter and $1.65 million for the nine months of Fiscal 2020 (Q3 FY2019: $0.72 million; $0.94 million for the nine months of Fiscal 2019), which includes staff costs (wages and allowances, pension costs, employee benefits etc.) of approximately $0.34 million for the quarter and $1.14 million for the year-to-date (Q3 FY2019: $0.45 million; $0.57 million for the nine months of Fiscal 2019)
- Depreciation and amortization amounted to $0.20 million for the quarter and $0.59 million for the nine months of Fiscal 2020 while property related management expenses total $0.04 million and $0.12 million for the quarter and the nine months of Fiscal 2020 respectively. This corresponds with depreciation and amortization amounted to $0.08 million in Q3 of FY2019 and $0.11 million for the nine months of Fiscal 2019 while property lease payments and related management expenses total $0.15 million and $0.20 million in Q3 of FY2019 and or the nine months of Fiscal 2019 respectively).
- A net loss of $0.15 million in Q3 FY2020 (Q3 FY2019: loss of $0.25 million) and $0.55 million for the nine months of FY2020 (nine months of FY2019: loss of $0.93 million)
- A net fair value loss on financial assets at fair value through profit or loss of $21,000 for the quarter and a net fair value gain of $20,000 for the nine month of FY2020
- Selling, general and administrative expenses of $0.14 million in Q3 and $0.60 million for the year-to-date against $0.25 million and $0.65 million for the corresponding periods of FY2019
- A loss of $33,000 was recorded in last year's third quarter (Q3 FY2020: N/A), resulting in a small loss of $39,000 for the nine months of Fiscal 2019 (nine months of FY2020: N/A).
Sunwah International's Restaurant Operations have 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 Q3 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.
This press release announcing the financial results for Sunwah International's quarter ended March 31, 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 2020 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
For further information: Kristen Humphrey, Sunwah International Limited, (416) 888-2323, [email protected]