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Bright Smart Securities & Commodities Group Limited — Interim / Quarterly Report 2011
Nov 22, 2011
49919_rns_2011-11-22_941c33be-4c5e-4a71-ac7c-3e5df1306d99.pdf
Interim / Quarterly Report
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
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BRIGHT SMART SECURITIES & COMMODITIES GROUP LIMITED 耀才證券金融集團有限公司
(incorporated in the Cayman Islands with limited liability)
(Stock code: 1428)
ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
The board of directors (the “Board”) of Bright Smart Securities & Commodities Group Limited (the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively referred to as the “Group”) for the six months ended 30 September 2011 together with the comparative figures for the six months ended 30 September 2010 as follows:
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2011 — unaudited (Expressed in Hong Kong dollars)
| Note Turnover 2 Other revenue 4 Other net gain/(loss) 5 Staff costs Depreciation Other operating expenses Profit from operations Finance costs 6(a) Profit before taxation 6 Income tax 7 Net profit and total comprehensive income attributable to equity shareholders for the period Earnings per share 8 Basic and diluted (cents) |
Six months ended 30 September 2011 2010 $ $ 122,687,201 72,553,567 17,679,882 8,350,771 364,835 (759,729) (40,765,104) (25,007,716) (5,199,052) (3,120,888) (46,758,342) (37,158,681) 48,009,420 14,857,324 (8,694,819) (2,734,467) 39,314,601 12,122,857 (6,347,058) (2,056,488) 32,967,543 10,066,369 4.85 1.88 |
|---|---|
— 1 —
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September 2011 — unaudited (Expressed in Hong Kong dollars)
| Note Non-current assets Fixed assets Deferred tax assets Other non-current assets Total non-current assets Current assets Accounts receivable 10 Other receivables, deposits and prepayments Taxation recoverable Cash and cash equivalents Total current assets Current liabilities Accounts payable 11 Accrued expenses and other payables Bank loans Amount due to a related company Current taxation Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities NET ASSETS EQUITY Share capital Share premium Merger reserve Share option reserve Retained profits TOTAL EQUITY |
At 30 September 2011 $ 28,315,022 469,358 10,668,646 39,453,026 1,095,698,185 11,042,453 — 272,270,383 1,379,011,021 335,594,866 20,889,953 492,000,000 100,000,000 7,666,828 956,151,647 422,859,374 462,312,400 — 462,312,400 203,904,600 180,021,232 (19,999,991) 2,437,828 95,948,731 462,312,400 |
At 31 March 2011 $ 23,897,559 — 21,868,923 45,766,482 1,344,636,595 12,885,488 1,818,947 349,858,257 1,709,199,287 475,966,075 19,751,202 815,000,000 — 2,154,300 1,312,871,577 396,327,710 442,094,192 515,059 441,579,133 203,904,600 192,255,508 (19,999,991) 2,749,525 62,669,491 441,579,133 |
|---|---|---|
— 2 —
(Expressed in Hong Kong dollars unless otherwise indicated)
Notes:
1. Statement of compliance and basis of preparation
This interim financial report for the six months period ended 30 September 2011 has been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This interim financial report also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The financial information set out in this report does not constitute the Group’s interim financial statements for the period ended 30 September 2011, but is derived from those financial statements.
The accounting policies applied in preparing this interim financial report are the same as those applied in preparing the financial statements for the year ended 31 March 2011, as disclosed in the Annual Report and Financial Statements for 2010/11. A number of new and revised Hong Kong Financial Reporting Standards have become effective in 2011. None has material impact on the Group.
The preparation of an interim financial report in conformity with HKAS 34 “Interim Financial Reporting” 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 condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”).
The interim financial report is unaudited, but has been reviewed by KPMG in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.
— 3 —
2. Turnover
The principal activities of the Group are securities broking, margin financing and commodities and futures broking.
Turnover represents the brokerage commission from securities, commodities and futures broking and interest income from margin and initial public offering (“IPO”) financings as follows:
| Brokerage commission Interest income from margin financing Interest income from IPO financing |
Six months ended 30 September 2011 2010 $ $ 93,423,241 58,239,205 28,564,168 12,321,695 699,792 1,992,667 |
Six months ended 30 September 2011 2010 $ $ 93,423,241 58,239,205 28,564,168 12,321,695 699,792 1,992,667 |
|---|---|---|
2011 |
||
| $ | ||
| 93,423,241 | ||
| 28,564,168 | ||
| 699,792 | ||
| 72,553,567 | ||
| 122,687,201 |
3. Segment reporting
The Group manages its businesses by divisions, which are organised by business lines. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following two reportable segments. No operating segments have been aggregated to form the following reportable segments.
-
Securities broking — provision of broking services in securities traded in Hong Kong and overseas markets and margin financing services to those broking clients.
-
Commodities and futures broking — provision of broking services in commodities and futures contracts traded in Hong Kong and selected overseas markets.
For the purposes of assessing segment performance and allocating resources between segments, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:
Segment assets include all tangible assets and current assets with the exception of taxation recoverable, deferred tax assets and other corporate assets. Segment liabilities include trade creditors and accruals attributable to the activities of the individual segments.
The measure used for reporting segment profit is earnings before finance costs and taxes (“EBIT”). To arrive at EBIT, the Group’s earnings are further adjusted for items not specifically attributed to individual segments, such as corporate administration costs.
— 4 —
(a) Segment information
| Revenue from external customers: — Brokerage commission — Interest income from margin financing — Interest income from IPO financing |
Six months ended 30 September 2011 Securities broking Commodities and futures broking Total $ $ $ 61,813,389 31,609,852 93,423,241 28,564,168 — 28,564,168 699,792 — 699,792 |
Six months ended 30 September 2011 Securities broking Commodities and futures broking Total $ $ $ 61,813,389 31,609,852 93,423,241 28,564,168 — 28,564,168 699,792 — 699,792 |
Six months ended 30 September 2011 Securities broking Commodities and futures broking Total $ $ $ 61,813,389 31,609,852 93,423,241 28,564,168 — 28,564,168 699,792 — 699,792 |
Six months ended 30 September 2011 Securities broking Commodities and futures broking Total $ $ $ 61,813,389 31,609,852 93,423,241 28,564,168 — 28,564,168 699,792 — 699,792 |
Six months ended 30 September 2011 Securities broking Commodities and futures broking Total $ $ $ 61,813,389 31,609,852 93,423,241 28,564,168 — 28,564,168 699,792 — 699,792 |
|
|---|---|---|---|---|---|---|
| Consolidated turnover Handling and settlement fees |
91,077,349 11,784,447 |
31,609,852 9,499 |
122,687,201 11,793,946 |
|||
| Reportable segment revenue | 102,861,796 | 31,619,351 | 134,481,147 | |||
| Reportable segment profit (EBIT) | 25,669,962 | 23,872,508 | 49,542,470 | |||
| Depreciation for the period Other interest income Finance costs Additions to non-current segment assets during the period |
(4,995,446) 5,506,370 (8,694,819) 9,392,980 |
(7,904) 180,485 — — |
(5,003,350) 5,686,855 (8,694,819) 9,392,980 |
|||
| Reportable segment assets Reportable segment liabilities |
At Securities broking $ 1,217,396,743 (839,475,994) |
30 September 2011 Commodities and futures broking Total $ $ 197,387,982 1,414,784,725 (109,791,823) (949,267,817) |
||||
| Six months ended 30 September 2010 | ||||||
| Commodities | ||||||
| Securities | and futures | |||||
| broking | broking | Total | ||||
| $ | $ | $ | ||||
| Revenue from external customers: | ||||||
| — Brokerage commission | 41,701,254 | 16,537,951 | 58,239,205 | |||
| — Interest income from margin financing | 12,321,695 | — | 12,321,695 | |||
| — Interest income from IPO financing | 1,992,667 | — | 1,992,667 | |||
| Consolidated turnover | 56,015,616 | 16,537,951 | 72,553,567 | |||
| Handling and settlement fees | 6,279,391 | — | 6,279,391 | |||
| Reportable segment revenue | 62,295,007 | 16,537,951 | 78,832,958 | |||
| Reportable segment profit (EBIT) | 3,283,456 | 11,970,477 | 15,253,933 | |||
| Depreciation for the period | (3,112,420) | (8,468) | (3,120,888) | |||
| Other interest income | 1,562,282 | 11,060 | 1,573,342 | |||
| Finance costs | (2,734,314) | (153) | (2,734,467) | |||
| Additions to non-current segment assets | ||||||
| during the period | 19,560,637 | 6,500 | 19,567,137 | |||
| Reportable segment assets Reportable segment liabilities |
At 31 March 2011 Securities broking Commodities and futures broking Total $ $ $ 1,552,541,809 194,923,040 1,747,464,849 (1,186,660,201) (123,899,390) (1,310,559,591) |
— 5 —
(b) Reconciliation of reportable segment profit, assets and liabilities
| Profit Reportable segment profit (EBIT) Finance costs Unallocated corporate expenses Consolidated profit before taxation Assets Reportable segment assets Elimination of inter-segment receivables Deferred tax assets Taxation recoverable Unallocated corporate assets Consolidated total assets Liabilities Reportable segment liabilities Elimination of inter-segment payables Current taxation Deferred tax liabilities Unallocated corporate liabilities Consolidated total liabilities Other revenue Interest income from — Authorised institutions — Others Handling and settlement fees Sundry income |
Six months ended 30 September 2011 2010 $ $ 49,542,470 15,253,933 (8,694,819) (2,734,467) (1,533,050) (396,609) 39,314,601 12,122,857 At 30 September 2011 At 31 March 2011 $ $ 1,414,784,725 1,747,464,849 (5,150,724) (3,856,365) 469,358 — — 1,818,947 8,360,688 9,538,338 1,418,464,047 1,754,965,769 (949,267,817) (1,310,559,591) 908,984 40,000,000 (7,666,828) (2,154,300) — (515,059) (125,986) (40,157,686) (956,151,647) (1,313,386,636) Six months ended 30 September 2011 2010 $ $ 1,669,342 134,606 4,018,117 1,438,736 5,687,459 1,573,342 11,793,946 6,279,391 198,477 498,038 17,679,882 8,350,771 |
|---|---|
2011 |
|
| $ | |
| 1,669,342 | |
| 4,018,117 | |
| 5,687,459 | |
| 11,793,946 | |
| 198,477 | |
| 17,679,882 |
4. Other revenue
— 6 —
5. Other net gain/(loss)
| Error trades arising from securities, commodities and futures dealing Net foreign exchange gain 6. Profit before taxation Profit before taxation is arrived at after charging: (a) Finance costs Interest expense on Bank loans for IPO financing Other bank loans and overdrafts Loans from related companies (b) Other operating expenses Auditors’ remuneration Advertising and promoting expenses Handling and settlement expenses Commission expense to overseas brokers Information and communication expenses Legal and professional fees Operating lease charges in respect of properties Rates and building management fees |
Six months ended 30 September 2011 2010 $ $ (435,270) (792,406) 800,105 32,677 364,835 (759,729) Six months ended 30 September 2011 2010 $ $ (307,697) (1,131,641) (6,104,235) (1,602,826) (2,282,887) — (8,694,819) (2,734,467) (663,000) (330,000) (3,282,375) (5,015,445) (9,466,086) (4,760,605) (2,221,039) (1,261,035) (10,352,642) (6,117,326) (1,430,860) (4,591,668) (12,924,058) (8,388,236) (1,551,617) (923,003) |
|---|---|
2011 |
|
| $ | |
| (307,697) | |
| (6,104,235) | |
| (2,282,887) | |
| (8,694,819) | |
| (663,000) | |
| (3,282,375) | |
| (9,466,086) | |
| (2,221,039) | |
| (10,352,642) | |
| (1,430,860) | |
| (12,924,058) | |
| (1,551,617) |
— 7 —
7. Income tax
| Current tax — Hong Kong Profits Tax Provision for the period Deferred tax Origination and reversal of temporary differences Actual tax expense |
Six months ended 30 September 2011 2010 $ $ (7,331,475) (1,993,166) 984,417 (63,322) |
Six months ended 30 September 2011 2010 $ $ (7,331,475) (1,993,166) 984,417 (63,322) |
|---|---|---|
2011 |
||
| $ | ||
| (7,331,475) | ||
| 984,417 | ||
| (2,056,488) | ||
| (6,347,058) |
Hong Kong Profits Tax has been provided at the rate of 16.5% (2010: 16.5%) on the estimated assessable profits for the current period.
8. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to ordinary equity shareholders of the Company of $32,967,543 (six months ended 30 September 2010: $10,066,369) and the weighted average number of shares in issue during the period ended 30 September 2011 of 679,682,000 (six months ended 30 September 2010: 534,710,098).
There were no dilutive potential ordinary shares for the six months ended 30 September 2010 and 2011, therefore basic earnings per share equals to diluted earnings per share.
9. Dividend
The Board does not recommend the payment of an interim dividend in respect of the six months ended 30 September 2011 (six months ended 30 September 2010: Nil).
10. Accounts receivable
| Accounts receivable from — Cash clients — Margin clients — Clearing houses — Brokers and dealers |
At 30 September 2011 |
At 31 March 2011 $ 62,895,693 997,367,347 266,424,169 17,949,386 |
|---|---|---|
| $ | ||
| 95,333,587 | ||
| 786,977,396 | ||
| 194,480,084 | ||
| 18,907,118 | ||
| 1,344,636,595 | ||
| 1,095,698,185 |
— 8 —
The aging analysis of accounts receivable from cash clients as at the end of the reporting period is as follows:
| Current Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due Amount past due |
At 30 September 2011 |
At 31 March 2011 $ 35,656,590 |
|---|---|---|
| $ | ||
| 45,188,481 | ||
| 17,229,566 6,073,729 3,935,808 |
||
| 24,998,885 | ||
| 17,255,601 | ||
| 7,890,620 | ||
| 27,239,103 | ||
| 50,145,106 | ||
| 62,895,693 | ||
| 95,333,587 |
Accounts receivable from cash clients relate to a wide range of customers for whom there was no recent history of default. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable.
Margin loans due from margin clients are current and repayable on demand. Margin clients are required to pledge securities collateral to the Group in order to obtain credit facilities for securities trading. The amount of credit facilities granted to them is determined by the discounted value of securities accepted by the Group. At 30 September 2011 and 31 March 2011, the total market value of securities pledged as collateral in respect of the loans to margin clients was approximately $1,832,099,521 and $3,573,187,167 respectively.
Accounts receivable from clearing houses, brokers and dealers are current. These represent (1) pending trades arising from the business of dealing in securities, which are normally due within a few days after the trade date and (2) margin deposits arising from the business of dealing in futures contracts.
Subsequent to the end of the reporting period, one of the group’s trade debtors, MF Global Hong Kong Limited, appointed provisional liquidators on 2 November 2011. At the end of the reporting period, $4,656,523 was due from this debtor. The Group expects to recover the whole amount. No allowance for doubtful debts has been made in these interim financial reports in this regard.
11. Accounts payable
| Accounts payable — Cash clients — Margin clients — Clearing houses |
At 30 September 2011 |
At 31 March 2011 $ 182,796,758 270,682,039 22,487,278 |
|---|---|---|
| $ | ||
| 76,904,025 | ||
| 212,415,204 | ||
| 46,275,637 | ||
| 475,966,075 | ||
| 335,594,866 |
All of the accounts payable are due within one month or on demand.
— 9 —
MANAGEMENT DISCUSSION AND ANALYSIS
Market overview
In the six months ended 30 September 2011 (the “Period”), the stock market in Hong Kong has been in a slump. The European debt crisis has escalated, while the US and other major developed countries have started showing the signs of a slow-down in the economy since the third quarter. On the other hand, in the Mainland, the real estate prices and demand have been weakened upon further tightening of monetary policies that were promulgated by the central government to curb inflation. The market sentiment has also been affected by the debt concern of local governments. The abundance of uncertainties have caused the Hang Seng Index to go down from 23,664 points as at 1 April 2011 to 17,592 points as at 30 September 2011, representing an accumulated decrease of 25.7%.
Despite the disappointing performance of the Hang Seng Index during the Period, the securities and derivatives markets recorded brisk trading and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) reported an average daily value of transactions of HK$71.87 billion, representing an increase of 15.4% as compared with the six months ended 30 September 2010 (the “Same Period 2010”). In respect of the initial public offering (“IPO”) market, based on the HKEx Securities and Derivatives Markets Quarterly Report of the second and third quarters of 2011 issued by Hong Kong Exchanges and Clearing Limited (“HKEx”), there were 45 companies (including Main board and Growth Enterprise Market (“GEM”) board but excluding companies which have transferred their listing from GEM board to Main board) newly listed with total raised funds of HK$176.24 billion, representing an increase of 39.3% compared to HK$126.49 billion in the Same Period 2010.
During the Period, HKEx consulted on a number of financial reforms and has continued to develop new financial products. Of these, the HKEx has been promoting the “Dual Tranche, Dual Counter” (“DTDC”) trading model (in RMB and Hong Kong dollars) to issuers and intermediaries, and has finalised the trading arrangements and completed system upgrade for securities trading in the DTDC model. To complement secondary market trading in RMB-denominated securities, HKEx has launched the “RMB Equity Trading Support Facility” for brokers and custodians. However, as the RMB equity products are still in the early stage and the RMB remains under-circulated in Hong Kong, it is expected that trading is not expected to be active upon the initial launch of the RMBdenominated securities.
Looking ahead, the Hong Kong equity market will be exposed to additional uncertainties in the face of the unresolved debt crisis in Europe, the risk of further economic deceleration in Europe and the US and the fund chain concern in the Mainland. Notwithstanding these issues, the formulation of a preliminary market rescue plan by the European Union in mid-October has stimulated the risk appetite on the market, and has in turn pushed the Hang Seng Index back to a closing of 19,865 points on 31 October 2011, marking a monthly increase of 12.9%. With the capital flowing back to China and Hong Kong, coupled with the possible hold-down of inflation and the sound fundamentals of the Hong Kong economy, we are cautiously optimistic on the outlook for the Hong Kong equity market.
— 10 —
Business review
Operating results
During the Period, the Group reported inspiring results with strong growth in both turnover and profits. Turnover for the Period amounted to HK$122.7 million (Same Period 2010: HK$72.6 million), representing a significant increase of 69.1% compared to the Same Period 2010; whereas the net profits amounted to HK$33.0 million (Same Period 2010: HK$10.1 million), escalating by 226.7% from the Same Period 2010. The Group’s outstanding performance during the Period was mainly attributable to the efficacy of the branch network expansion which has resulted in a rapid increase in the customer base and in turn a significant increase in the brokerage commissions. The expansion of the branch network has brought the full play of economies of scale, powering the increase in profits. Basic earnings per share were HK4.85 cents (Same Period 2010: HK1.88 cents).
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----- Start of picture text -----
HK$’M Turnover
200
150
122.7
100
72.6
50
0
2010 2011
6 months ended 30 September
HK$’M Net profit
50
40
33.0
30
20
10.1
10
0
2010 2011
6 months ended 30 September
69.1%
226.7%
----- End of picture text -----
— 11 —
Turnover
In 2010, 10 new branches went into operation, with their operation gathering momentum during the Period and stimulating remarkable increase in the number of clients. Consequently, the Group generated a turnover of HK$122.7 million in the Period (Same Period 2010: HK$72.6 million), significantly up by 69.1% from the Same Period 2010.
During the Period, the turnover from the branches grew astonishing over 6-fold to HK$52.0 million (Same Period 2010: HK$7.1 million); whereas the turnover from the head office also recorded a steady increase to HK$70.7 million (Same Period 2010: HK$65.5 million), representing an increase of 7.9% from the Same Period 2010. The branches contributed 42.4% of the total turnover (Same Period 2010: 9.8%), representing a substantial increase of 32.6 percentage points from the Same Period 2010.
Turnover distribution from head office and branches
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----- Start of picture text -----
9.8%
Branches
42.4%
Head office
90.2% 57.6%
2010 2011
6 months ended 30 September
----- End of picture text -----
Amid intensive competition in the securities brokerage industry, the Group continued to adopt aggressive marketing strategies, including providing commission-free offers to new accounts in order to secure the Group’s market share. Also, the Group has launched a multi-channel trading platform during the Period to facilitate iPhone, iPad and Android users to trade online.
— 12 —
A summary of the revenue from different business segments of the Group is set out below:
| 6 months | ended 30 September | ended 30 September | |||
|---|---|---|---|---|---|
| Proportion | Proportion | ||||
| of total | of total | Increase/ | |||
| 2011 | turnover | 2010 | turnover | (decrease) | |
| HK$’000 | % | HK$’000 | % | % | |
| Commission income from: | |||||
| — Securities brokerage | 57,681 | 46.9% | 39,487 | 54.4% | 46.1% |
| — Hong Kong futures and options | |||||
| brokerage | 23,780 | 19.4% | 13,167 | 18.2% | 80.6% |
| — Global futures brokerage | 7,830 | 6.4% | 3,371 | 4.6% | 132.3% |
| — IPO brokerage | 2,710 | 2.2% | 2,214 | 3.1% | 22.4% |
| — Stock options brokerage | 1,422 | 1.2% | — | — | — |
| Interest income from margin | |||||
| financing | 28,564 | 23.3% | 12,322 | 17.0% | 131.8% |
| Interest income from IPO financing | 700 | 0.6% | 1,993 | 2.7% | (64.9%) |
| 122,687 | 100% | 72,554 | 100% | 69.1% |
Turnover breakdown by business segments
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----- Start of picture text -----
Securities brokerage
Hong Kong futures and options brokerage
Global futures brokerage 6 months ended 30 September 2011
IPO brokerage
6 months ended 30 September 2010
Stock options brokerage
Interest income from margin financing
Interest income from IPO financing HK$’000
0 10,000 20,000 30,000 40,000 50,000 60,000
----- End of picture text -----
— 13 —
I. Securities brokerage
- The Group’s commission income from securities brokerage for the Period amounted to HK$57.7 million (Same Period 2010: HK$39.5 million), representing an increase of approximately 46.1% as compared to the Same Period 2010, and which accounted for 46.9% of the total turnover. During the Period, the total value of transactions recorded by the Stock Exchange was HK$8,768.6 billion, representing an increase of 13.5% as compared to HK$7,726.2 billion for the Same Period 2010. In comparison, the Group’s securities brokerage segment significantly outperformed the market, recording a growth in commission income that far exceeded the growth (in terms of percentage) in market turnover.
==> picture [301 x 146] intentionally omitted <==
----- Start of picture text -----
HK$’M Turnover from securities brokerage
80
70
57.7
60
50
39.5
40
30
20
10
0
2010 2011
6 months ended 30 September
46.1%
----- End of picture text -----
==> picture [318 x 148] intentionally omitted <==
----- Start of picture text -----
HK$’B Value of transactions of the Hong Kong stock market
12,000
8,768.6
8,000 7,726.2
4,000
0
2010 2011
6 months ended 30 September
13.5%
----- End of picture text -----
During the Period, the Group launched brokerage services for China B shares and Taiwan securities, however the global securities brokerage business is still in its infancy. In November 2011, the Group launched Singapore securities trading services. To promote the internationalisation of its products, the Group will continue to roll out securities brokerage services of other countries. It is expected that the global securities brokerage business will have desirable growth potential under the trend of globalisation.
— 14 —
II. Hong Kong futures and options brokerage
- During the Period, the Group’s Hong Kong futures and options brokerage segment delivered a commission income of HK$23.8 million (Same Period 2010: HK$13.2 million), representing a significant increase of 80.6% as compared to the Same Period 2010, and which accounted for 19.4% of the total turnover.
III. Global futures brokerage
Global futures trading has been stimulated by wavering in the global market, and during the Period commission income from global futures brokerage increased by 132.3% from the Same Period 2010 to HK$7.8 million (Same Period 2010: HK$3.4 million), accounting for 6.4% of the total turnover. During the Period, the Group introduced 13 new global futures products, extending the total number of global futures products to 50 as at 30 September 2011.
IV. Stock options brokerage
To meet customer needs, the Group also provides stock options trading services. During the Period, the stock options brokerage recorded an income of HK$1.4 million (Same Period 2010: Nil), accounting for 1.2% of the total turnover. As stock options are highly leveraged investment products, the Group stringently monitors the deposit level in the stock option accounts and makes adjustments according to the market situation in order to implement sound risk control.
V. Margin financing
The Group has been offering competitive margin rates to its clients. During the Period, the interest income generated from margin financing was HK$28.6 million (Same Period 2010: HK$12.3 million), representing a significant increase of 131.8% from the Same Period 2010, and which accounted for 23.3% of the total turnover.
VI. IPO brokerage and IPO financing
During the Period, although the amount of funds raised through IPO of newly listed companies increased by 39.3% compared to the Same Period 2010, there has been a shrinkage in the scale of new share subscription by customers. This is as a result of the sluggish response to Hong Kong public offering under the impact of the market sentiment, and the interest income from IPO financing decreased by 64.9% to HK$0.7 million (Same Period 2010: HK$2.0 million). However, due to an increase in the total value of new shares allotted to customers during the Period, the commission income from IPO brokerage amounted to HK$2.7 million (Same Period 2010: HK$2.2 million), representing an increase of 22.4% from the Same Period 2010.
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Overview of branch network and clientele
The Mong Kok Second Branch commenced operation in May 2011. The total number of branches therefore has increased to 12 (excluding the head office in Central), covering the populationdense areas in Hong Kong. To enhance its customer service level, the Group implemented sevenday operation at selected branches in July 2011, making it more convenient for customers to open accounts, participate in seminars and have access to account services seven days a week even on Sundays.
Benefiting from the Group’s expanded branch network, and the attraction of new customers by different promotion campaigns launched during the Period, the total number of net new client accounts opened (after deducting the number of client accounts closed) reached 11,143 (Same Period 2010: 5,515), representing a growth of 102.1% from the Same Period 2010. Among the new client accounts opened, 755 and 10,388 were attributable to the head office and the branches respectively, accounting for 6.8% and 93.2% of total number of new client accounts opened respectively (Same Period 2010 — head office: 16.1%; branches: 83.9%). As at 30 September 2011, the Group’s total number of client accounts amounted to 43,524, representing an inspiring growth of 34.4% from 32,381 accounts as at 31 March 2011.
Number of new client accounts opened*
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12,000 11,143
8,000
5,515
4,000
after deducting the number
of client accounts closed
0 during the respective periods
2010 2011
6 months ended 30 September
102.1%
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Total number of client accounts
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50,000
43,524
40,000
32,381
30,000
22,030
20,000
9/10 3/11 9/11
Month / Year
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Operating expenses
During the Period, the Group recorded operating expenses of HK$101.4 million (Same Period 2010: HK$68.0 million), representing an increase of 49.1% from the Same Period 2010. The increase in operating expenses was mainly attributable to the increase in business and the operation of new branches during the Period, leading to increased staff costs and business-related expenses. However, advertising and promotion expenses as well as legal and professional fees, have decreased by 34.6% and 68.8% respectively during the Period, due to the one-off nature of the promotion expenses, and professional fees payable in relation to the listing of the Company in August 2010. Details of the operating expenses are set out below:
| 6 months | ended | ||
|---|---|---|---|
| 30 September | Increase/ | ||
| 2011 | 2010 | (decrease) | |
| HK$’000 | HK$’000 | % | |
| Staff costs | 40,765 | 25,008 | 63.0% |
| Depreciation | 5,199 | 3,121 | 66.6% |
| Finance costs | 8,695 | 2,734 | 218.0% |
| Advertising and promotion expenses | 3,282 | 5,015 | (34.6%) |
| Handling and settlement expenses | 9,466 | 4,761 | 98.8% |
| Commission expenses to overseas brokers | 2,221 | 1,261 | 76.1% |
| Information and communication expenses | 10,353 | 6,117 | 69.3% |
| Rentals, rates and building management fees | 14,476 | 9,311 | 55.5% |
| Legal and professional fees | 1,431 | 4,592 | (68.8%) |
| Miscellaneous expenses | 5,529 | 6,102 | (9.4%) |
| 101,417 | 68,022 | 49.1% |
Future plans
HKEx’s launch of various reform measures to enhance the Hong Kong financial market, such as the extension of trading hours, the development of RMB structural products, the enhancement of the trading system, the alliance with overseas financial markets and the proposed night-time trading of futures, positively contributes to the investment environment in Hong Kong and to increasing the competitiveness of the Hong Kong financial market. Notwithstanding the uncertainties in the global economic prospects, the Group is optimistic about the long-term development of the financial market in Hong Kong.
The Group will continue to strive for a bigger market share by implementing aggressive marketing strategies, and the launch of new products in response to market conditions to meet the diverse needs of its customers. To further extend the success of the low-commission strategy in the past, the Group launched new fee schedules for the trading of callable bull/bear contracts (“CBBCs”) and warrants at a flat rate of HK$4.88 for each transaction in October 2011. The new “HK$4.88” fee has broken the lowest commission fee level for trading CBBCs and warrants among securities companies in Hong
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Kong, further fortified the Group’s leading position as the “King of Low Commission”. Moreover, in view of more investors engaging in short-term trading, the Group launched the “Day Trade” （壹 開拾） margin financing services for securities trading in the same month. Since their launch, the new “HK$4.88” fee and the “Day Trade” （壹開拾） margin accounts have received heated market response. The Group believes that these new campaigns have helped to further broaden its customer base and rapidly increase its market share, lifting the Group to new heights.
In July 2011, the Group’s wholly-owned subsidiary, Bright Smart Futures & Commodities Company Limited, was approved as a broker member of the Hong Kong Mercantile Exchange (“HKMEx”) to provide futures products launched by HKMEx. The Group will also continue to enrich its portfolio of global investment products, and Singapore securities trading services were launched in November 2011.
The Group is currently identifying opportunities to enter the Mainland market and is exploring feasible business models. The Group is negotiating possible co-operation with different Mainland financial websites, with the aim of increasing the Group’s presence through the live broadcast of the “Bright Smart Finance Channel” （耀才財經台） on Mainland websites. The Group is also preparing for the launch of assets management business.
In terms of branch development, the Group plans to open a new branch in Quarry Bay, scheduled to be completed early 2012, in the pursuit of further enhancing its branch network. The Group will continue to implement seven-day operation in selected branches in an effort to enhance their customer service level and at the same time attract new customers with extended service hours.
As for internal management, the Group will continue to adopt stringent risk and credit control as well as prompt response measures in accordance with market changes, in order to ensure the sound management of capital risks and accounts receivable from margin clients. The Group will also proactively enhance its management efficiency and cost control efforts with the objective of further raising its profitability.
CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES
As at 30 September 2011, the net current assets of the Group increased by HK$26.6 million or 6.7% to HK$422.9 million (31 March 2011: HK$396.3 million). The Group’s current ratio, which is current assets divided by current liabilities, was 1.44 as at 30 September 2011 (31 March 2011: 1.30).
The Group’s bank deposits, bank balances and cash amounted to HK$272.3 million as at 30 September 2011 (31 March 2011: HK$349.9 million), decreased by 22.2% compared with that as at 31 March 2011. The decrease was mainly attributable to the combined effect of the net repayment of bank borrowings of HK$323.0 million, loan proceeds from a related company of HK$100.0 million, the decrease in accounts payable of HK$140.4 million and the decrease in accounts receivable of HK$248.9 million.
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As at 30 September 2011, the Group had bank borrowings and a loan from a related company worth a total of HK$592.0 million (31 March 2011: HK$815.0 million) which are primarily at fixed rates. The bank borrowings were primarily collateralised by the Group’s margin clients’ securities pledged to the Group. The Group’s gearing ratio, which is the total borrowings divided by the total shareholders’ equity, was 128.1% as at 30 September 2011 (31 March 2011: 184.6%).
CAPITAL MANAGEMENT
The Group actively and regularly reviews and manages its capital structure and make adjustments to the capital structure in light of changes in economic conditions. The Group ensures each licensed subsidiary maintains an adequate liquid capital level to support the level of activities, with a sufficient buffer to accommodate increases in liquidity requirements arising from potential increases in the level of business activities. During the Period, all the licensed subsidiaries complied with the liquid capital requirements under the Securities and Futures (Financial Resources) Rules (“FRR”).
RISK MANAGEMENT
Credit risk
The Group’s credit risk is primarily attributable to accounts receivable due from clients, brokers and clearing houses. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
In respect of accounts receivable due from clients, individual credit evaluations are performed on all clients including cash and margin clients. Cash clients are required to place deposits before the execution of any purchase transactions, as prescribed by the Group’s credit policy. Receivables due from cash clients are due within the settlement period commonly adopted by the relevant market convention, which is usually within a few days from the trade date. Because of the prescribed deposit requirements and the short settlement period involved, the credit risk arising from the accounts receivable due from cash clients is considered small. The Group normally obtains liquid securities and/or cash deposits as collateral for providing margin financing to its clients. Margin loans due from margin clients are repayable on demand. For commodities and futures broking, an initial margin is required before opening a trading position. Market conditions and the adequacy of securities collateral and margin deposits of each margin account and futures account are monitored by the management on a daily basis. Margin calls and forced liquidation are made where necessary.
In respect of accounts receivable from brokers and clearing houses, credit risks are considered low as the Group normally enters into transactions with brokers and clearing houses which are registered with regulatory bodies and which have a sound reputation in the industry.
The Group has no significant concentration of credit risk as credits are granted to a large population of clients.
The Group does not provide any other guarantees which would expose it to credit risk.
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Liquidity risk
Individual operating entities within the Group are responsible for their own cash management, including the raising of loans to cover expected cash demands, and ensuring compliance with FRR. The Group’s policy is to regularly monitor its liquidity requirement and its compliance with lending covenants, to ensure that it maintains sufficient cash reserves and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and long term.
Interest rate risk
The Group charges interest to its margin clients on the basis of its cost of funding plus a markup. Financial assets such as margin loans and deposits with banks, and financial liabilities such as bank loans and loans from related companies are primarily at fixed rates. The Group’s income and operating cash flows are not subject to significant interest rate risk.
Foreign currency risk
The Group’s business is principally conducted in Hong Kong dollars (“HKD”) and United States dollars (“USD”), and most of the Group’s monetary assets and liabilities are denominated in HKD. As the HKD is pegged to the USD, the Group considers the risk of movements in exchange rates between the HKD and the USD to be insignificant. Accordingly, the directors consider the Group’s exposure to foreign currency risk as minimal.
EMPLOYEES AND REMUNERATION POLICIES
As at 30 September 2011, the Group had a work force of 224 employees (31 March 2011: 228 employees). Remuneration packages for the Group’s employees are determined with reference to the personal performance and experience of individuals. In order to ensure the reasonableness and competitiveness of the employee remuneration and stay in line with market trends, the Group reviews its employee remuneration on a regular basis. In addition to basic salary, the Group also provides a bonus scheme which is based on the Group’s performance, and a share option scheme, to motivate its employees for the Group’s long-term growth and development. The Group also provides appropriate training and development programmes to its employees to enhance the staff’s work ability and personal effectiveness.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SHARES
Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed shares during the Period, other than as an agent for clients of the Company or its subsidiaries.
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COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE
The Board is committed to maintaining a high standard of corporate governance. During the Period, the Company had fully complied with the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules.
COMPLIANCE WITH THE MODEL CODE
The Company has adopted the Model Code as set out in Appendix 10 of the Listing Rules regarding securities transactions by the Directors. The Company has made a specific enquiry to all Directors regarding any non-compliance with the Model Code. All Directors confirmed that they have fully complied with the required standard set out in the Model Code during the Period.
AUDIT COMMITTEE
The primary duties of the Audit Committee of the Company are to review and supervise the financial reporting process and internal control procedures of the Group. The Audit Committee, together with the external auditor of the Group, KPMG, has reviewed the accounting principles and practices adopted by the Group and discussed internal controls and financial reporting matters concerning the unaudited consolidated results of the Group for the six months ended 30 September 2011.
PUBLICATION OF THE RESULTS ANNOUNCEMENT AND INTERIM REPORT
This results announcement is published on the website of Hong Kong Exchanges and Clearing Limited at www.hkexnews.hk and the website of the Company at www.bsgroup.com.hk. The Interim Report 2011/12 will be despatched to the shareholders of the Company and published on the above websites in due course.
By order of the Board
Bright Smart Securities & Commodities Group Limited Chan Kai Fung Chief Executive Officer and Executive Director
Hong Kong, 22 November 2011
As at the date of this announcement, the Executive Directors are Mr. Yip Mow Lum (Chairman), Mr. Chan Kai Fung (CEO), Mr. Kwok Sze Chi and Mr. Chan Wing Shing, Wilson; and the Independent non-executive Directors are Mr. Yu Yun Kong, Mr. Szeto Wai Sun and Mr. Ling Kwok Fai, Joseph.
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