TOM Group Limited — Interim / Quarterly Report 2019

Jul 31, 2019

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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(Stock Code: 2383)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019

CHAIRMAN’S STATEMENT

For the six months ended 30 June 2019, TOM Group continued its business focus on high growth potential sectors such as e-commerce, fintech and advanced data analytics.

Gross revenue from the Group’s Technology Platform and Investments was HK$47 million. The Group’s Media Business, comprising its Publishing and Advertising business units, recorded gross revenue of HK$385 million.

During the period under review, revenue and segment profit of the Group from its operations were HK$432 million and HK$21 million respectively. Gross profit margin dropped slightly from 42% to 41%. Including net share of operating losses of HK$50 million from Associates and the higher net finance costs of HK$41 million due to increased market interest rates, the Group’s loss for the period attributable to shareholders increased from HK$64 million to HK$82 million.

Ule, the Group’s e-commerce joint operation with China Post, continued development of rural New Retail and associated B2B business with focus on supply chain innovation during the review period. B2B GMV reached RMB3,648 million. Going forward, Ule will continue to expand its business offerings and drive technology innovation to further elevate its brand awareness and industry competitiveness in China’s rural New Retail arena.

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Pixnet, the Group’s Social Network business, contributed gross revenue of HK$36 million and recorded a segment profit of HK$1 million.

The Publishing Group in Taiwan maintained its leadership position in its markets during the review period. The Publishing Group’s gross revenue was HK$362 million and segment profit increased 1% to HK$28 million.

The Group continued exiting non-performing subsidiaries in its Outdoor Media advertising business.

I would like to take this opportunity to thank our shareholders, business partners, the management and all the staff of the Group for their concerted effort.

Frank John Sixt Chairman

Hong Kong, 31 July 2019

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MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS

MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS
	For the six months ended
	30 June 2019	30 June 2018
	HK$’000	HK$’000
Consolidated revenue	432,257	451,270
Loss before net finance costs and taxation	(33,751)	(36,364)
Loss attributable to equity holders of the Company	(82,079)	(64,453)
Total comprehensive income/(expense) attributable
to equity holders of the Company	191,552	(40,098)
Loss per share (HK cents)	(2.07)	(1.66)
Net assets value	210,872	509

BUSINESS REVIEW

In the first half of 2019, TOM Group made steady progress in optimising its operations in traditional media businesses and aligning its focus on technology-centric strategic investments. The Group’s operating subsidiaries delivered sustainable business performance during the review period. Our Media Business recorded gross revenue of HK$385 million and a 5% increase in segment profit to HK$27 million as a result of continued efforts in improving operational efficiency. Gross revenue from the Group’s Technology Platform and Investments was HK$47 million whilst segment loss was HK$6 million as the Group continued to invest in technology innovation to drive further growth.

Technology Platform and Investments – continuing strong growth

The Group is pleased with the robust growth of several of its investments during the review period.

In 2014, TOM Group invested in WeLab, a leading Asian fintech company, which provides technology enabled consumer lending solutions for individuals and enterprise customers in Hong Kong, China and Indonesia. Using advanced data-powered technologies and risk management expertise, WeLab has over 38 million users, as of 30 June 2019. In April 2019, WeLab was granted a virtual banking license by the Hong Kong Monetary Authority (HKMA), becoming the first homegrown Hong Kong fintech company, and one of only eight companies, to obtain a virtual banking license. WeLab was recognised in a KPMG-sponsored report as one of the top 100 FinTech companies in the world – #7 in China and #23 globally. WeLab is the only Hong Kong fintech company that has been named to the list for three consecutive years. As at 30 June 2019, TOM Group owns 6.35% in WeLab on an issued basis.

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Rubikloud is a Toronto-based AI platform for retail which TOM Group invested in 2015. During the review period, Rubikloud continued to expand its operations from Toronto to cover Hong Kong and London. By the end of 2019, Rubikloud is expected to achieve full growth stage as it grows beyond 150 employees with new tier one clients in grocery, mass drug, and mass beauty. Additionally, they have concluded significant partnerships with Microsoft, Salesforce and Google Cloud. TOM Group owns 4.15% in Rubikloud as at 30 June 2019 on an issued basis.

Ule, the Group’s e-commerce joint operation with China Post, continued development of rural New Retail and associated B2B business with focus on supply chain innovation during the review period. B2B GMV reached RMB3,648 million. During the period under review, the Group and all of Ule’s other shareholders received a written invitation from Ule to participate in a shareholders’ loan proposal as a lender on a pro-rata basis in accordance with the respective shareholding of such shareholder in Ule. The relevant loan amount which was committed and agreed by the Group pursuant to the aforesaid arrangement was pro-rata to its shareholding in Ule. The fair value changes amounting to HK$80 million of the shareholder loan arrangement in TOM and Ule were reflected in “Fair value gain on financial asset at fair value through profit or loss”, and the “Share of fair value losses on financial liabilities at fair value through profit or loss” using the equity method respectively. In the second half of 2019, Ule will continue to expand its business offerings and drive technology innovation to further elevate its brand awareness and industry competitiveness in China’s rural New Retail arena.

Pixnet, the Group’s Social Network business, delivered solid performance during the review period. Gross revenue was HK$36 million and segment profit was HK$1 million as the Group continued to invest in Pixnet, the largest community website in Taiwan. Currently, Pixnet has about 7 million members and an average of over 5 million unique visitors per day, and has always been a preferred supplier and business partner for many multinational and local brands in Taiwan.

Media Business – sustained market leadership

The Group’s Publishing business Cite, the market leader in Taiwan, maintained its leadership position in its markets during the review period. The Publishing Group’s gross revenue recorded a slight 2% drop to HK$362 million and segment profit was HK$28 million amidst gloomy atmosphere in the Taiwan economy. Business Weekly, the Group’s flagship business magazine in Taiwan, continued to adopt a two-pronged strategy in driving both traditional and digital media initiatives to diversify revenue streams.

During the review period, the Group accelerated its restructuring efforts on its Outdoor Media business and exited from certain non-performing business units.

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For the six months ended 30 June 2019, the Group broadly maintained its revenue level from operations and recorded revenue of HK$432 million with a gross profit margin of 41%. Including net share of operating losses of HK$50 million from Associates, and the higher net finance costs of HK$41 million due to increased market interest rates, the Group’s loss for the period attributable to shareholders was HK$82 million.

Going forward, the Group will continue to unlock value of its investments and create long term benefits for shareholders.

Group Capital Resources and Other Information

As at 30 June 2019, TOM Group had cash and bank balances, excluding pledged deposits, of approximately HK$372 million. A total of HK$3,417 million financing facilities were available, of which HK$3,117 million, or 91%, had been utilised as at 30 June 2019, to finance the Group’s investments, capital expenditures and for working capital purposes.

The principal of the total borrowings of TOM Group amounted to approximately HK$3,117 million as at 30 June 2019, of which HK$2,977 million and HK$140 million equivalent is denominated in Hong Kong dollar and New Taiwan dollar respectively. The borrowings included long-term bank loans of approximately HK$3,079 million (including portion repayable within one year) and short-term bank loans of approximately HK$38 million. All bank loans bore floating interest rates. The gearing ratio (Total principal amount of bank borrowings/(Total principal amount of bank borrowings + Equity)) of TOM Group was 94% as at 30 June 2019, compared to 100% as at 31 December 2018. The net assets were approximately HK$211 million as at 30 June 2019, compared to HK$0.5 million as at 31 December 2018. The increase was mainly attributable to revaluation surplus of financial assets at fair value through other comprehensive income such as investment in WeLab.

As at 30 June 2019, the Group had net current assets of approximately HK$299 million, compared to the balance of approximately HK$357 million as at 31 December 2018. As at 30 June 2019, the current ratio (Current assets/Current liabilities) of TOM Group was 1.42, compared to 1.52 as at 31 December 2018.

For the period under review, net cash from operating activities after interest and taxation paid increased to HK$37 million, 131% higher than HK$16 million in the same period of 2018. Net cash outflow used in investing activities was HK$200 million, mainly included the shareholders loan to Ule of approximately HK$138 million and capital expenditure of approximately HK$62 million. The convertible loan to Ule amounting to RMB155 million, which had been granted in 2014, was expired during the period and extended for a further 3 years period on terms that are substantially the same as the previous arrangement. As a result, no cashflow effect was aroused from the expiry of the convertible loan.

Financial Asset at Fair Value through Profit or Loss

On 10 May 2019, the Group entered into a shareholders loan arrangement with Ule to grant a shareholder loan of approximately US$18 million (the “Facility”) at an interest per annum of 2.0% over 3-month Hong Kong Interbank Offered Rate. The Facility is expiring in two years and the Group has an option to demand early repayment from Ule commencing from six months after the first drawdown of the Facility by way of a transfer of the charged unlisted equity instruments to the Group. None of the option had been exercised up to 30 June 2019. During the period, the fair value movement amounted to HK$80 million to the Facility recognised in the Group under “Fair value gain on financial asset at fair value through profit or loss” and the Group’s share of Ule’s fair value movement on the Facility amounted to HK$80 million recognised under “Share of fair value losses on financial liabilities at fair value through profit or loss” using the equity method.

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Charges on Group Assets

As at 30 June 2019, the Group had restricted cash amounting to HK$7 million, being bank deposits mainly pledged in favour of certain publishing distributors as retainer fee for potential sales return, and banks as security for credit card and advance receipt in Taiwan, and also the courts for legal proceedings in Mainland China.

Contingent Liabilities

As at 30 June 2019, the Group had no significant contingent liabilities.

Subsequent Events

There is no subsequent event after the reporting period which has material impact to the condensed consolidated interim financial information of the Group.

Foreign Exchange Exposure

The Group’s operations principally locate in Mainland China and Taiwan, with transactions and related working capital denominated in Renminbi and New Taiwan dollar respectively. In general, it is the Group’s policy for each operating entity to borrow in their local currencies, where necessary, to minimise currency risk. Overall, the Group is not exposed to significant foreign exchange risk; however, the Group will monitor this risk on an ongoing basis.

Employee Information

As at 30 June 2019, TOM Group had approximately 1,400 full-time employees (excluding approximately 500 full-time employees of Ule, an associated company of TOM). For the first six months of the year, employee costs, including Directors’ emoluments, totalled HK$171 million. The Group’s employment and remuneration policies remained the same as detailed in the Annual Report for the year ended 31 December 2018.

Disclaimer:

Non-GAAP measures

Certain non-GAAP (generally accepted accounting principles) measures, such as profit/(loss) before net finance costs and taxation including share of results of investments accounted for using the equity method and segment profit/(loss) are used for assessing the Group’s performance. These non-GAAP measures are not expressly permitted measures under GAAP in Hong Kong and may not be comparable to similarly titled measures for other companies. Accordingly, such non-GAAP measures should not be considered as an alternative to operating income as an indicator of the operating performance of the Group or as an alternative to cash flows from operating activities as a measure of liquidity. The use of non-GAAP measures is provided solely to enhance the overall understanding of the Group’s current financial performance. Additionally, since the Group has historically reported certain non-GAAP results to investors, it is considered the inclusion of non-GAAP measures provides consistency in the Group’s financial reporting.

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CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

Note Revenue 2 Cost of sales Selling and marketing expenses Administrative expenses Other operating expenses Other gains, net Fair value gain on financial asset at fair value through profit or loss 4 Share of profits less losses of investments accounted for using the equity method 3 – Share of operating losses – Share of fair value losses on financial liabilities at fair value through profit or loss Loss before net finance costs and taxation 5 Finance income Finance costs Finance costs, net 6 Loss before taxation Taxation 7 Loss for the period Attributable to: – Non-controlling interests – Equity holders of the Company Loss per share attributable to equity holders of the Company during the period Basic and diluted 9

Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 432,257 451,270 (254,614) (261,411) (69,360) (75,702) (35,279) (49,221) (77,564) (71,490) 20,667 8,594 80,302 – 96,409 2,040 (49,858) (38,404) (80,302) – (130,160) (38,404) (33,751) (36,364) 2,196 1,691 (43,279) (30,742) (41,083) (29,051) (74,834) (65,415) (6,884) 217 (81,718) (65,198) 361 (745) (82,079) (64,453) HK(2.07) cents HK(1.66) cents

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2019

Loss for the period Other comprehensive income/(expenses) for the period, net of tax – Items that will not be reclassified subsequently to income statement: Revaluation surplus of financial assets at fair value through other comprehensive income Share of revaluation surplus through other comprehensive income from an associated company Revaluation surplus of properties – Item that may be subsequently reclassified to income statement: Exchange translation differences Total comprehensive income/(expense) for the period Total comprehensive income/(expense) for the period attributable to: – Non-controlling interests – Equity holders of the Company

Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 (81,718) (65,198) 224,042 – 86,127 – – 14,625 310,169 14,625 (5,515) 9,923 304,654 24,548 222,936 (40,650) 31,384 (552) 191,552 (40,098)

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

Note ASSETS AND LIABILITIES Non-current assets Fixed assets Right-of-use assets Investment properties Goodwill Other intangible assets Investments accounted for using the equity method 3 Financial assets at fair value through other comprehensive income Financial asset at fair value through profit or loss 4 Deferred tax assets Pension assets Other non-current assets Current assets Inventories Trade and other receivables 10 Restricted cash Cash and cash equivalents Current liabilities Trade and other payables 11 Taxation payable Long-term bank loans – current portion Short-term bank loans Lease liabilities – current portion Net current assets Total assets less current liabilities	Unaudited 30 June 2019 HK$’000 41,798 61,747 21,649 578,305 129,047 1,239,890 670,817 218,035 46,778 2,066 1,841 3,011,973 100,982 526,009 7,469 372,142 1,006,602 575,917 20,907 43,539 37,860 29,876 708,099 298,503 3,310,476	Audited 31 December 2018 HK$’000 44,297 – 21,649 578,363 128,120 1,259,461 446,984 – 48,369 2,066 3,428 2,532,737 103,198 544,610 5,282 386,064 1,039,154 584,845 21,532 38,130 38,130 – 682,637 356,517 2,889,254

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS AT 30 JUNE 2019

Non-current liabilities Deferred tax liabilities Long-term bank loans – non-current portion Lease liabilities – non-current portion Pension obligations Net assets EQUITY Equity attributable to the Company’s equity holders Share capital Deficits Own shares held Non-controlling interests Total equity	Unaudited 30 June 2019 HK$’000 15,955 3,024,393 33,284 25,972 3,099,604 210,872 395,852 (542,980) (6,244) (153,372) 364,244 210,872	Audited 31 December 2018 HK$’000 14,326 2,845,813 – 28,606 2,888,745 509 395,852 (733,307) (6,244) (343,699) 344,208 509

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					Total	equity/	(deficit)	HK$’000	509	(1,245)	(736)		(81,718)			224,042			86,127	(5,515)		222,936		(4,349)	(6,979)	(11,328)	210,872
					Non-	controlling	interests	HK$’000	344,208	(20)	344,188		361			23,430			8,611	(1,018)		31,384		(4,349)	(6,979)	(11,328)	364,244
					Total	shareholders’	deficits	HK$’000	(343,699)	(1,225)	(344,924)		(82,079)			200,612			77,516	(4,497)		191,552		–	–	–	(153,372)
						Accumulated	losses	HK$’000	(5,601,919)	(1,225)	(5,603,144)		(82,079)			–			–	–		(82,079)		–	–	–	(5,685,223)
						Other	reserve	HK$’000	6,096	–	6,096		–			–			–	–		–		–	–	–	6,096
						Exchange	reserve	HK$’000	684,211	–	684,211		–			–			–	(4,497)		(4,497)		–	–	–	679,714
Unaudited	Attributable to equity holders of the Company	Fair value	through	other	Capital comprehensive Properties	redemption General income revaluation	reserve reserve reserve reserve	HK$’000 HK$’000 HK$’000 HK$’000	776 165,847 327,679 14,625	– – – –	776 165,847 327,679 14,625		– – – –			– – 200,612 –			– – 77,516 –	– – – –		– – 278,128 –		– – – –	– – – –	– – – –	776 165,847 605,807 14,625
						Capital	reserve	HK$’000	(75,079)	–	(75,079)		–			–			–	–		–		–	–	–	(75,079)
						Share	premium	HK$’000	3,744,457	–	3,744,457		–			–			–	–		–		–	–	–	3,744,457
					Own	shares	held	HK$’000	(6,244)	–	(6,244)		–			–			–	–		–		–	–	–	(6,244)
						Share	capital	HK$’000	395,852	–	395,852		–			–			–	–		–		–	–	–	395,852
									Balance at 31 December 2018	Change in accounting policies (note 1(b))	Restated balance at 1 January 2019	Comprehensive income:	Loss for the period	Other comprehensive income:	Revaluation surplus of financial assets at fair	value through other comprehensive income	Share of revaluation surplus through other	comprehensive income from an associated	company	Exchange translation differences	Total comprehensive income/(expense)	for the period ended 30 June 2019	Transactions with equity holders:	Dividends paid to non-controlling interests	Disposal of subsidiaries	Transactions with equity holders	Balance at 30 June 2019

						Total	equity	HK$’000	77,484	–	77,484		(65,198)		14,625	9,923		(40,650)		(7,917)	(7,917)	28,917
					Non-	controlling	interests	HK$’000	354,196	–	354,196		(745)		–	193		(552)		(7,917)	(7,917)	345,727
					Total	shareholders’	deficits	HK$’000	(276,712)	–	(276,712)		(64,453)		14,625	9,730		(40,098)		–	–	(316,810)
						Accumulated	losses	HK$’000	(5,459,790)	18,392	(5,441,398)		(64,453)		–	–		(64,453)		–	–	(5,505,851)
						Other	reserve	HK$’000	6,096	–	6,096		–		–	–		–		–	–	6,096
						Exchange	reserve	HK$’000	716,197	–	716,197		–		–	9,730		9,730		–	–	725,927
					Properties	revaluation	reserve	HK$’000	–	–	–		–		14,625	–		14,625		–	–	14,625
Unaudited	Attributable to equity holders of the Company	Fair value	through Available-	other for-sale	comprehensive financial	General income assets	reserve reserve reserve	HK$’000 HK$’000 HK$’000	161,668 – 364,355	– 345,963 (364,355)	161,668 345,963 –		– – –		– – –	– – –		– – –		– – –	– – –	161,668 345,963 –
					Capital	redemption	reserve	HK$’000	776	–	776		–		–	–		–		–	–	776
						Capital	reserve	HK$’000	(75,079)	–	(75,079)		–		–	–		–		–	–	(75,079)
						Share	premium	HK$’000	3,625,981	–	3,625,981		–		–	–		–		–	–	3,625,981
					Own	shares	held	HK$’000	(6,244)	–	(6,244)		–		–	–		–		–	–	(6,244)
						Share	capital	HK$’000	389,328	–	389,328		–		–	–		–		–	–	389,328
									Balance at 31 December 2017	Change in accounting policies	Restated balance at 1 January 2018	Comprehensive income:	Loss for the period	Other comprehensive income:	Revaluation surplus of properties	Exchange translation differences	Total comprehensive income/(expense)	for the period ended 30 June 2018	Transactions with equity holders:	Dividends paid to non-controlling interests	Transactions with equity holders	Balance at 30 June 2018

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 Basis of preparation and accounting policies

This financial information is extracted from the Group’s unaudited condensed consolidated interim financial information for the six months ended 30 June 2019 which has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and applicable disclosure requirements of the Listing Rules.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2018, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”).

In preparing this unaudited condensed consolidated interim financial information, the Group has taken into account all information that could reasonably be expected to be available and has ascertained that the Group has obtained adequate financial resources to support the Group to continue in operational existence for the foreseeable future. The Group also has undrawn banking facilities guaranteed by one of its substantial shareholders. Accordingly, the Group has prepared this unaudited condensed consolidated interim financial information on a going concern basis.

The accounting policies and methods of computation used in the preparation of this unaudited condensed consolidated interim financial information are consistent with those used in 2018 annual financial statements, except for the adoption of new standard and amendments to standards and accounting policy not yet applied which are relevant to the operations of the Group and mandatory for annual periods beginning 1 January 2019.

(a) New standard and amendments to standards

A number of new standard and amendments to standards became applicable for the current reporting period. The Group has changed its accounting policies as a result of adopting HKFRS 16 Leases.

The impact of the adoption of this standard and the new accounting policies are disclosed in note 1(b) below. The adoption of other amendments to standards does not have a significant impact on the Group’s accounting.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

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1 Basis of preparation and accounting policies (Continued)

(b) Effect of the adoption of HKFRS 16 Leases

The following tables show the impact on each individual line item. Line items that were not affected by the changes have not been included.

Condensed consolidated interim statement of financial position (extract)

	As at
	31 December	Impact	As at
	2018	on initial	1 January
	As originally	adoption of	2019
	presented	HKFRS 16	Restated
	HK$’000	HK$’000	HK$’000
Non-current assets
Right-of-use assets	–	73,862	73,862
Current liabilities
Trade and other payables	584,845	(52)	584,793
Lease liabilities – current portion	–	31,892	31,892
Non-current liabilities
Lease liabilities – non-current portion	–	43,267	43,267
Equity
Deficits	(733,307)	(1,225)	(734,532)
Non-controlling interests	344,208	(20)	344,188

Condensed consolidated interim income statement (extract)

	Six months
	ended
	30 June
	2019		Six months
	without	Impact on	ended
	adoption of	adoption of	30 June
	HKFRS 16	HKFRS 16	2019
	HK$’000	HK$’000	HK$’000
Cost of sales	254,883	(269)	254,614
Administrative expenses	49,093	(13,814)	35,279
Other operating expenses	64,337	13,227	77,564
Finance costs	42,432	847	43,279

(c) Accounting policy not yet applied in 2018 annual financial statements

Financial asset at fair value through profit or loss (“FVPL”)

Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income (“FVOCI”), or designated as FVPL using fair value option, are measured at FVPL. A gain or loss on a debt instrument that is subsequently measured at FVPL is recognised in profit or loss in the period in which it arises.

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2 Turnover, revenue and segment information

The Group has five reportable operating segments:

• E-Commerce Group – provision of services to users using the mobile and Internet-based marketplace and provision of technical services for e-commerce operations.

• Mobile Internet Group – provision of mobile Internet services, online advertising and commercial enterprise solutions.

• Social Network Group – provision of services of online community and social networking websites and related online advertising.

• Publishing Group – magazine and book publishing and circulation, sales of advertising and other related products.

• Advertising Group – advertising sales of outdoor media assets and provision of outdoor media services; provision of media sales, event production and marketing services.

Sales between segments are carried out at arm’s length.

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2 Turnover, revenue and segment information (Continued)

The segment results for the six months ended 30 June 2019 are as follows:

Gross segment revenue Inter-segment revenue Net revenue from external customers Timing of revenue recognition: At a point in time Over time Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material items: Fair value gain on financial asset at FVPL Gain on dilution of shareholding in associated companies Loss on disposal of subsidiaries Share of profits less losses of investments accounted for using the equity method – Share of operating (losses)/profits – Share of fair value losses on financial liabilities at FVPL Finance costs: Finance income (note a) Finance expenses Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non-current assets Total expenditure for non-current assets		Unaudited Six months ended 30 June 2019	Unaudited Six months ended 30 June 2019	Unaudited Six months ended 30 June 2019	Unaudited Six months ended 30 June 2019	Unaudited Six months ended 30 June 2019
		Technology Platform and Investments E-Commerce Group Mobile Internet Group Social Network Group Sub-total HK$’000 HK$’000 HK$’000 HK$’000 4,649 6,797 35,999 47,445 – – (483) (483) 4,649 6,797 35,516 46,962 71 2,165 35,516 37,752 4,578 4,632 – 9,210 4,649 6,797 35,516 46,962 (1,888) (2,213) 2,926 (1,175) – (2,678) (2,222) (4,900) (1,888) (4,891) 704 (6,075) 80,302 – – 80,302 26,320 – – 26,320 – – – – (50,526) (447) – (50,973) (80,302) – – (80,302) (24,206) (447) – (24,653) 639 1,014 53 1,706 – (110) (22) (132) 639 904 31 1,574 (25,455) (4,434) 735 (29,154) – 132 11,657 11,789			Media Business		Sub-total HK$’000 385,461 (166) 385,295 333,197 52,098 385,295 96,679 (69,831) 26,848 – – (5,081) 1,115 – (3,966) 2,295 (1,694) 601 23,483 61,479	Total HK$’000 432,906 (649)
		E-Commerce Group HK$’000 4,649 – 4,649 71 4,578 4,649 (1,888) – (1,888) 80,302 26,320 – (50,526) (80,302) (24,206) 639 – 639 (25,455) –	Mobile Internet Group HK$’000 6,797 – 6,797 2,165 4,632 6,797 (2,213) (2,678) (4,891) – – – (447) – (447) 1,014 (110) 904 (4,434) 132	Social Network Group HK$’000 35,999 (483) 35,516 35,516 – 35,516 2,926 (2,222) 704 – – – – – – 53 (22) 31 735 11,657	Publishing Group HK$’000 362,063 – 362,063 330,021 32,042 362,063 95,589 (67,473) 28,116 – – – 1,115 – 1,115 1,961 (1,529) 432 29,663 59,988	Advertising Group HK$’000 23,398 (166) 23,232 3,176 20,056 23,232 1,090 (2,358) (1,268) – – (5,081) – – (5,081) 334 (165) 169 (6,180) 1,491
								432,257
								370,949 61,308
								432,257
								95,504 (74,731)
								20,773
								80,302 26,320 (5,081) (49,858) (80,302)
								(28,619)
								4,001 (1,826)
								2,175
								(5,671) (69,163)
								(74,834)
								73,268 –
								73,268

Note (a):

Inter-segment interest income amounted to HK$1,807,000 was included in the finance income.

16

2 Turnover, revenue and segment information (Continued)

The segment results for the six months ended 30 June 2018 are as follows:

Gross segment revenue Inter-segment revenue Net revenue from external customers Timing of revenue recognition: At a point in time Over time Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material item: Share of profits less losses of investments accounted for using the equity method Finance costs: Finance income (note a) Finance expenses (note a) Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non-current assets Total expenditure for non-current assets		Unaudited Six months ended 30 June 2018	Unaudited Six months ended 30 June 2018	Unaudited Six months ended 30 June 2018	Unaudited Six months ended 30 June 2018	Unaudited Six months ended 30 June 2018
		Technology Platform and Investments E-Commerce Group Mobile Internet Group Social Network Group Sub-total HK$’000 HK$’000 HK$’000 HK$’000 4,451 12,980 39,161 56,592 – – (561) (561) 4,451 12,980 38,600 56,031 141 10,939 38,600 49,680 4,310 2,041 – 6,351 4,451 12,980 38,600 56,031 582 (2,090) 4,243 2,735 – (506) (1,123) (1,629) 582 (2,596) 3,120 1,106 (39,258) (6) – (39,264) – 1,041 3 1,044 – – (2) (2) – 1,041 1 1,042 (38,676) (1,561) 3,121 (37,116) – 41 1,562 1,603			Media Business		Sub-total HK$’000 395,503 (264) 395,239 335,292 59,947 395,239 83,931 (58,258) 25,673 860 2,798 (1,497) 1,301 27,834 56,312	Total HK$’000 452,095 (825)
		E-Commerce Group HK$’000 4,451 – 4,451 141 4,310 4,451 582 – 582 (39,258) – – – (38,676) –	Mobile Internet Group HK$’000 12,980 – 12,980 10,939 2,041 12,980 (2,090) (506) (2,596) (6) 1,041 – 1,041 (1,561) 41	Social Network Group HK$’000 39,161 (561) 38,600 38,600 – 38,600 4,243 (1,123) 3,120 – 3 (2) 1 3,121 1,562	Publishing Group HK$’000 369,673 – 369,673 330,393 39,280 369,673 84,736 (56,809) 27,927 860 2,314 (1,497) 817 29,604 56,251	Advertising Group HK$’000 25,830 (264) 25,566 4,899 20,667 25,566 (805) (1,449) (2,254) – 484 – 484 (1,770) 61
								451,270
								384,972 66,298
								451,270
								86,666 (59,887)
								26,779
								(38,404)
								3,842 (1,499)
								2,343
								(9,282) (56,133)
								(65,415)
								57,915 –
								57,915

Note (a):

Inter-segment interest income and inter-segment interest expenses amounted to HK$2,160,000 and HK$3,000 were included in the finance income and finance expenses respectively.

17

2 Turnover, revenue and segment information (Continued)

The segment assets and liabilities at 30 June 2019 are as follows:

Segment assets Investments accounted for using the equity method Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities	Unaudited As at 30 June 2019	Unaudited As at 30 June 2019
	Technology Platform and Investments E-Commerce Group Mobile Internet Group Social Network Group Sub-total HK$’000 HK$’000 HK$’000 HK$’000 305,117 877,864 56,770 1,239,751 1,230,912 4,937 – 1,235,849 22,585 56,174 29,086 107,845	Media Business Publishing Group Advertising Group Sub-total HK$’000 HK$’000 HK$’000 1,312,053 129,616 1,441,669 4,041 – 4,041 416,827 57,078 473,905	Total HK$’000 2,681,420 1,239,890 97,265
			4,018,575
			581,750 83,299 20,907 15,955 3,105,792
			3,807,703

The segment assets and liabilities at 31 December 2018 are as follows:

Segment assets Investments accounted for using the equity method Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities	Audited As at 31 December 2018	Audited As at 31 December 2018
	Technology Platform and Investments E-Commerce Group Mobile Internet Group Social Network Group Sub-total HK$’000 HK$’000 HK$’000 HK$’000 85,985 636,930 46,379 769,294 1,249,762 5,386 – 1,255,148 22,369 48,175 19,198 89,742	Media Business Publishing Group Advertising Group Sub-total HK$’000 HK$’000 HK$’000 1,298,605 146,730 1,445,335 4,313 – 4,313 397,879 48,717 446,596	Total HK$’000 2,214,629 1,259,461 97,801
			3,571,891
			536,338 77,113 21,532 14,326 2,922,073
			3,571,382

The unallocated assets represent the corporate assets. The unallocated liabilities represent the corporate liabilities in addition to operating segment taxation payable, deferred tax liabilities and borrowings which are managed on a central basis.

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3 Investments accounted for using the equity method

The amounts recognised in the condensed consolidated interim statement of financial position are as follows:

	Unaudited	Audited
	30 June	31 December
	2019	2018
	HK$’000	HK$’000
Associated companies	1,239,890	1,259,461

The share of net losses recognised in the condensed consolidated interim income statement are as follows:

Associated companies – Share of operating losses – Share of fair value losses on financial liabilities at FVPL (note b)	Unaudited Six months ended 30 June 2018 2018 HK$’000 HK$’000 (49,858) (38,404) (80,302) – (130,160) (38,404)

Notes:

• (a) In June 2016, the shareholders of Ule Holdings Limited (“Ule Holdings”), a material associated company of the Group, resolved the launch of share incentive options of Ule Holdings (“Ule Share Incentive Options”). Under the Ule Share Incentive Options, a total of 100,000,000 ordinary shares (based on the current par value of US$0.00001 each) were reserved, of which 43.71% of the Ule Share Incentive Options representing 43,711,860 shares (“Ule Major Shareholder Options”) were approved to be granted to one of Ule Holdings’ major shareholders (“Ule Major Shareholder”), subject to the completion of a deed (“Deed”) signed by Ule Holdings and all of its shareholders, and the remaining 56.29% of the Ule Share Incentive Options representing 56,288,140 shares (“Ule Other Options”) were approved to be granted to directors, employees and consultants of Ule and such other persons contributing to Ule, subject to determination of the details of Ule Other Options by the Ule remuneration committee (“Ule Committee”).

As at 30 June 2019, as if the Ule Share Incentive Options were all granted, fully vested and exercised, Ule Holdings would be held as to 43.71%, 38.32%, 13.04% and 4.93% by Ule Major Shareholder, a non-wholly owned subsidiary of the Group, certain investors and holders of Ule Other Options respectively on a fully diluted basis.

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3 Investments accounted for using the equity method (Continued)

Notes (Continued):

• (a) (Continued)

In June 2016, the Deed was signed by Ule Holdings, the Ule Major Shareholder and remaining shareholders of Ule Holdings, under which it was mutually agreed that Ule Holdings granted Ule Major Shareholder Options to the Ule Major Shareholder for its contributions to Ule’s business over the past years. The Ule Major Shareholder Options granted to the Ule Major Shareholder are only exercisable upon the completion of a qualified initial public offering (“Qualified IPO”) of Ule Holdings. The exercise price of each Ule Major Shareholder Option is at the par value of each share on the exercise date. The Deed will be terminated if the Qualified IPO of Ule Holdings is not completed within 10 years from the date of the Deed. As at 30 June 2019 and 2018, Ule Major Shareholder Options are not yet exercisable as the Qualified IPO has not occurred.

In October 2017, a total of 4,765,000 options under the Ule Other Options were granted. The options that were granted carried a Qualified IPO performance of Ule Holdings and service condition that affect vesting. As at 30 June 2019, the Qualified IPO performance condition is yet to be satisfied. As the options only vest upon a Qualified IPO, Ule Holdings did not recognise any share-based compensation expense for the period then ended. No outstanding options granted under the Ule Other Options were vested as at 30 June 2019. All the outstanding options will be expired in October 2027.

• (b) During the period ended 30 June 2019, Ule Holdings recognised financial liabilities at FVPL in relation to loan facilities from certain shareholders and also recognised the change in fair value of the financial liabilities. Accordingly, the Group has shared the losses from the fair value change of the financial liabilities amounting to HK$80,302,000 in the condensed consolidated interim income statement.

4 Financial asset at fair value through profit or loss

Loan with option to an associated company Fair value change during the period	Unaudited 30 June 2019 HK$’000 137,733 80,302 218,035	Audited 31 December 2018 HK$’000 – – –

During the period ended 30 June 2019, the Group was offered a shareholder loan proposal by Ule Holdings to subscribe for its shareholding pro-rata amount of US$17,658,100 (equivalent to HK$137,733,000) loan to Ule Holdings for a period of up to 24 months with interest bearing at 3 months Hong Kong Interbank Offered Rate plus 2% per annum. Pursuant to the loan facility, the Group has an option, commencing from 6 months after the drawdown date, to demand early repayment from Ule Holdings by way of transfer of collateral, which is an unlisted equity instrument. Accordingly, the loan with option was recognised as a financial asset at FVPL and a fair value gain of the loan with option during the period ended 30 June 2019 amounting to HK$80,302,000 was recognised in the condensed consolidated interim income statement.

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5 Loss before net finance costs and taxation

Loss before net finance costs and taxation is stated after charging/crediting the following:

Charging: Depreciation of fixed assets Depreciation of right-of-use assets Amortisation of other intangible assets Loss on disposal of subsidiaries (note a) Exchange loss, net Crediting: Dividend income from financial assets at FVOCI Recovery from a previously fully written off receivable of discontinued operations Gain on dilution of shareholding in associated companies (note b) Gain on disposal of a former subsidiary (note c) Gain on disposal of fixed assets Exchange gain, net	Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 9,038 9,765 16,987 – 51,869 51,013 5,081 – 659 – – 511 – 2,736 26,320 – – 3,660 87 20 – 1,667	Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 9,038 9,765 16,987 – 51,869 51,013 5,081 – 659 – – 511 – 2,736 26,320 – – 3,660 87 20 – 1,667
		511 2,736 – 3,660 20 1,667

Notes:

• (a) In April 2019, a subsidiary of the Advertising Group entered into an agreement to dispose its entire interests in two subsidiaries engaging in outdoor media business, at a total consideration of RMB5,000,000 (approximately HK$5,650,000). The disposal of equity interests in the two subsidiaries was completed in June 2019. Accordingly, a loss on disposal of approximately HK$5,081,000 was recognised in the condensed consolidated interim income statement for the period ended 30 June 2019.

• (b) In April 2019, Ule Major Shareholder subscribed certain Series A Preferred Shares of Ule Holdings. Following the subscription by Ule Major Shareholder, the equity interest in Ule Holdings held by the non-wholly owned subsidiary of the Group decreased from 42.52% to 42.00%. Accordingly, a gain on dilution of shareholding in Ule Holdings of approximately HK$26,320,000 was recognised in the condensed consolidated interim income statement for the period ended 30 June 2019.

• (c) In December 2017, a subsidiary of the Advertising Group entered into an agreement to dispose its entire interests in a former subsidiary (“Entity”) which engages in outdoor media business at a consideration of RMB3,000,000 (approximately HK$3,660,000). The disposal of the entire equity interest in the Entity was completed in January 2018. Accordingly, a gain on disposal of approximately HK$3,660,000 was recognised in the condensed consolidated interim income statement for the period ended 30 June 2018.

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6 Finance costs, net

Interest and borrowing costs on bank loans Interest costs on lease liabilities Bank interest income Interest income on loan to an associated company	Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 (42,432) (30,742) (847) – 1,560 1,691 636 – (41,083) (29,051)

7 Taxation

Hong Kong profits tax has been provided for at the rate of 16.5% (2018: 16.5%) on the estimated assessable profits for the period. Taxation on overseas profits has been calculated on the estimated assessable profits for the period at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged/(credited) to the condensed consolidated interim income statement represents:

Overseas taxation Under-provision in prior years Deferred taxation Taxation charge/(credit)	Unaudited Six months ended 30 June 2019 2018 HK$’000 HK$’000 2,575 4,074 1,393 719 2,916 (5,010) 6,884 (217)

8 Dividends

No dividends had been paid or declared by the Company for the six months ended 30 June 2019 (2018: Nil).

9 Loss per share

(a) Basic

The calculation of basic loss per share is based on consolidated loss attributable to equity holders of the Company of HK$82,079,000 (2018: HK$64,453,000) and the weighted average of 3,958,510,558 (2018: 3,893,270,558) ordinary shares in issue during the period.

(b) Diluted

Diluted loss per share is equal to the basic loss per share for the period ended 30 June 2019 (2018: Same).

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10 Trade and other receivables

Trade receivables Prepayments, deposits and other receivables	Unaudited 30 June 2019 HK$’000 259,186 266,823 526,009	Audited 31 December 2018 HK$’000 274,998 269,612 544,610

The Group has established credit policies for customers in each of its businesses. The average credit period granted for trade receivables ranges from 30 to 180 days. The Group’s turnover is determined in accordance with terms specified in the contracts governing the relevant transactions. The carrying values of trade and other receivables approximate their fair values.

The ageing analyses of the Group’s trade receivables are as follows:

Current 31 – 60 days 61 – 90 days Over 90 days Less: Provision for impairment	Unaudited 30 June 2019 HK$’000 116,717 59,248 34,667 104,225 314,857 (55,671) 259,186	Audited 31 December 2018 HK$’000 116,765 70,587 42,009 105,280 334,641 (59,643) 274,998

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11 Trade and other payables

Trade payables Other payables and accruals, and receipt in advance Contract liabilities	Unaudited 30 June 2019 HK$’000 136,621 280,728 158,568 575,917	Audited 31 December 2018 HK$’000 137,971 310,306 136,568 584,845

The carrying values of trade and other payables approximate their fair values.

The ageing analyses of the Group’s trade payables are as follows:

Current 31 – 60 days 61 – 90 days Over 90 days	Unaudited 30 June 2019 HK$’000 54,749 12,055 7,246 62,571 136,621	Audited 31 December 2018 HK$’000 50,987 14,601 8,627 63,756 137,971

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REVIEW OF INTERIM FINANCIAL INFORMATION

The unaudited condensed consolidated interim financial information of the Company and its subsidiary companies for the six months ended 30 June 2019 have been reviewed by the Company’s auditor, PricewaterhouseCoopers, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. The auditor’s independent review report will be included in the Interim Report to shareholders. The unaudited condensed consolidated interim financial information of the Company and its subsidiary companies for the six months ended 30 June 2019 have been reviewed by the Audit Committee of the Company.

CORPORATE GOVERNANCE CODE

The Company has complied with all the code provisions of the Corporate Governance Code throughout the six months ended 30 June 2019, save and except Code Provision A.5 which is with respect to the nomination committee.

The Company has considered the merits of establishing a nomination committee but is of the view that it is in the best interests of the Company that the Board collectively reviews, deliberates on and approves the structure, size and composition of the Board and the appointment of any new Director. The Board is tasked with ensuring that it has a balanced composition of skills, experience and expertise appropriate for the requirements of the businesses of the Group, with due regard to the benefits of diversity on the Board, and that appropriate individuals with the relevant expertise and leadership qualities are appointed to the Board to complement the capabilities of the existing Directors. In addition, the Board as a whole is also responsible for reviewing the succession plan for the Directors.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code as the Group’s code of conduct regarding Directors’ securities transactions. In response to specific enquiry made with the Directors, all Directors confirmed that they have complied with the required standard as set out in the Model Code during the six months ended 30 June 2019.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 June 2019, neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed shares. In addition, the Company has not redeemed any of its listed shares during the period.

25

PAST PERFORMANCE AND FORWARD-LOOKING STATEMENTS

The performance and the results of operations of the Group contained in this announcement are historical in nature, and past performance is no guarantee of the future results of the Group. Any forward-looking statements and opinions contained in this announcement are based on current plans, estimates and projections, and therefore involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements and opinions. The Group, the Directors, employees and agents of the Group assume (a) no obligation to correct or update the forward-looking statements or opinions contained in this announcement; and (b) no liability in the event that any of the forward-looking statements or opinions do not materialise or turn out to be incorrect.

26

DEFINITIONS

• “Associate(s)” has the meaning ascribed to it in the Listing Rules “B2B” means business-to-business “Board” means the board of Directors “China Post” means China Post Group Limited, a state-owned enterprise of the PRC, and its subsidiaries (its subsidiary Telpo Philatelic Company Limited is the entity that is the shareholder of Ule)

• “CKH” means Cheung Kong (Holdings) Limited, a company incorporated in Hong Kong with limited liability, whose listing status on the Stock Exchange was replaced by CKHH on 18 March 2015

• “CKHH” means CK Hutchison Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange on 18 March 2015 (Stock Code: 0001)

• “Company” or “TOM” means TOM Group Limited, an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 2383)

• “Corporate Governance Code” means the Corporate Governance Code as set out in Appendix 14 to the Listing Rules

• “Director(s)” means the director(s) of the Company

• “GMV” means Gross Merchandise Value, the total value of all orders handled or processed through Ule Group’s platform which includes multiple websites, mobile applications and PC applications, regardless of whether the orders are consummated, goods and services returned or not

• “Group” or “TOM Group” means the Company and its subsidiaries

• “HWL”

• means Hutchison Whampoa Limited, a company incorporated in Hong Kong with limited liability, whose shares ceased to be listed on the Stock Exchange on 3 June 2015

“Listing Rules” means the Rules Governing the Listing of Securities on the Stock Exchange

27

“Main Board”

means the main board of the Stock Exchange

• “Mainland” or “PRC” means The People’s Republic of China, excluding Hong Kong, Macau and Taiwan

• “Media Business” means two reportable operating segments of Publishing Group and Advertising Group

• “Model Code” means Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules

• “Rubikloud” means Rubikloud Technologies Inc., a corporation incorporated in Canada

• “SFO” means the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

• “Stock Exchange” means The Stock Exchange of Hong Kong Limited

• “Technology Platform and means three reportable operating segments of Investments” E-Commerce Group, Social Network Group and Mobile Internet Group; and investments in Fintech and Advanced Data Analytics sectors

• “Ule” or “Ule Holdings” means Ule Holdings Limited, a material associate of the Company which undertakes an e-Commerce business in PRC and from time to time raises funds for its growing business

• “Ule Group” means Ule or Ule Holdings and its subsidiaries

• “WeLab” means WeLab Holdings Limited, a BVI business company incorporated in the British Virgin Islands with limited liability

To the extent that there are any inconsistencies between the English version and the Chinese version of this announcement, the English version shall prevail.

As at the date hereof, the directors of the Company are:

Executive Director: Non-executive Directors: Independent Non-executive Directors: Mr. Yeung Kwok Mung Mr. Frank Sixt (Chairman) Mr. Henry Cheong Ms. Debbie Chang Mr. James Sha Mrs. Angelina Lee Mr. Albert Ip

Executive Director: Non-executive Directors:

Alternate Director: Mr. Dominic Lai (Alternate to Mr. Frank Sixt)

28