Financial Performance - Revenue for the year ended June 30, 2022, was HKD 6,966.9 million, an increase of 8.0% from HKD 6,452.7 million in 2021[13] - Gross profit decreased by 12.6% to HKD 992.5 million from HKD 1,135.1 million in the previous year[13] - Adjusted net profit increased by 35.2% to HKD 414.7 million from HKD 306.8 million in 2021[13] - The profit attributable to shareholders was HKD 502.9 million, down 14.3% from HKD 586.9 million in 2021[13] - The adjusted earnings per share decreased to HKD 1.10 from HKD 1.29 in the previous year, a decline of 14.7%[13] - The company’s dividend payout ratio for the year was 41.0%, compared to 48.7% in the previous year[14] - The company reported a 100% increase in consolidated revenue and over 200% growth in attributable profit for the fiscal year ending June 30, 2022, compared to the fiscal year ending June 30, 2016[35] - Attributable profit for the fiscal year was HKD 502.9 million, a decrease of 14% from HKD 586.9 million in the previous fiscal year, but adjusted profit increased by 35% when excluding government subsidies and one-off items[35] - The company maintained a net debt ratio of 0% and proposed a final dividend of HKD 0.241 per share, resulting in a total dividend of HKD 0.450 per share for the year, with a payout ratio of 41%[35] Business Segments - The company operates in three main business segments: property and facility management services, integrated living services, and electromechanical engineering services[11] - The property and facility management services segment reported a profit of HKD 494 million for the year ended June 30, 2022, compared to HKD 368 million in 2021, reflecting a year-on-year increase of 34%[18] - The electromechanical engineering services segment generated revenue of HKD 3,056 million for the year ended June 30, 2022, up from HKD 2,969 million in 2021, representing a growth of 2.9%[21] - The integrated living services segment continued to thrive, supported by the company's strong brand reputation in property and facility management services[37] Government Subsidies and Contracts - The company received government subsidies amounting to HKD 88.2 million for the year ended June 30, 2022, compared to HKD 340 million in the previous year[21] - The company has secured contracts with the Leisure and Cultural Services Department and the Health Department, resulting in a revenue increase of over 40% from government and semi-government sectors[38] - The company secured 29 service contracts in 2022, with a total contract value of HKD 133 million, indicating strong market demand[133] Strategic Initiatives and Partnerships - The company established a strategic partnership with Mingqi Home (Shenzhen) Information Service Co., Ltd. to provide insurance brokerage services through an online platform[30] - The company launched a youth management training and development program to enhance teamwork and leadership skills among young leaders[25] - The company is exploring opportunities in the Greater Bay Area through strategic partnerships and acquisitions in the electromechanical engineering sector[36] - A strategic acquisition of a local competitor is anticipated to enhance service offerings and customer base, expected to be finalized by Q4 2023[47] Sustainability and Corporate Governance - The company is focusing on sustainable development measures, technology applications, and good corporate governance to improve customer satisfaction and operational effectiveness[35] - The management team emphasized a commitment to sustainability, aiming for a 50% reduction in carbon emissions by 2030[47] - The company has implemented the ISO 14001 environmental management system to monitor and improve its environmental performance[175] - The company has committed to establishing carbon reduction targets and implementing carbon reduction strategies as part of its corporate social responsibility[186] Risk Management - The risk management committee identified key risks, including market volatility and supply chain disruptions, and is implementing strategies to mitigate these risks[76] - The company has developed various proactive measures and contingency plans to maintain business operations amid the ongoing impact of the COVID-19 pandemic[104] - The company has established a formal risk management policy to regularly identify, assess, and manage risks faced by the group[97] Employee Development and Community Engagement - A total of 4,600 technical and operational employees received over 28,000 hours of training during the year[177] - The company has been actively involved in over 100 corporate social responsibility activities annually, enhancing its community engagement[200] - The company has received multiple awards for its volunteer services and contributions to community charity activities[181] Market Position and Future Outlook - The company has a strong market position, consistently ranking among the top three in the Hong Kong cleaning services industry[136] - The company plans to expand its market presence in Southeast Asia, targeting a 30% increase in market share by 2025[45] - The company has a strong brand reputation built over 50 years, which is a key indicator for property and facility management selection[200]

Financial Performance - Revenue for the six months ended December 31, 2021, was HKD 3,351.0 million, representing a 6.3% increase from HKD 3,152.7 million in the same period of 2020[20]. - Gross profit decreased by 32.3% to HKD 496.4 million from HKD 733.4 million year-on-year[20]. - Profit attributable to shareholders was HKD 238.5 million, down 49.4% from HKD 471.4 million in the previous year[20]. - Adjusted net profit increased by 16.5% to HKD 226.2 million from HKD 194.2 million year-on-year[20]. - Basic earnings per share decreased by 50.0% to HKD 0.52 from HKD 1.04 in the same period last year[20]. - The company declared an interim dividend of HKD 0.209 per share, down from HKD 0.289 per share in the previous year[20]. - The group recorded revenue of HKD 3.351 billion for the six months ended December 31, 2021, an increase of HKD 198.3 million or 6.3% compared to HKD 3.153 billion for the same period in 2020[34]. - Shareholders' profit for the review period was HKD 238.5 million, a decrease of HKD 232.9 million or 49.4% from HKD 471.4 million in the previous year, primarily due to reduced government subsidies under the Employment Support Scheme[34]. - The company recorded a net profit attributable to shareholders for the six months ended December 31, 2021, was HKD 238.5 million, a decrease of 49.4% compared to HKD 471.4 million in the previous year[64]. - The group's profit decreased by 49.4% from HKD 471.4 million (restated) in the same period last year to HKD 238.5 million, primarily due to a reduction in government subsidies under the Employment Support Scheme[65]. Market Outlook and Strategy - The company expects stable demand for professional and branded services in the market, which may present significant opportunities in the medium to short term[22]. - The company aims to provide comprehensive services to clients, leveraging its extensive network and expertise[22]. - The company plans to leverage its established brand and governance to pursue cost efficiency and utilize innovative technologies, including AI and IoT, to enhance customer satisfaction[25]. - The demand for property management services is expected to grow due to the increasing number of properties in Hong Kong and government policies supporting urban redevelopment[27]. - The company aims to expand its environmental solutions business by providing energy-saving and environmentally friendly solutions, capitalizing on the growing public awareness of environmental issues[29]. - The company is actively investing in talent development through diversified and specialized training to support business growth[25]. - The group is positioned as one of the two main players in the Hong Kong market for electromechanical engineering services, with ongoing large-scale projects such as the Kai Tak Sports Park and the Immigration Department Headquarters[30]. - The group aims to leverage advanced technologies like Building Information Modelling (BIM) and Modular Integrated Construction (MiC) to enhance productivity and construction quality[30]. - The group is focusing on expanding its business in mainland China, particularly in the Guangdong-Hong Kong-Macao Greater Bay Area, supported by over 30 years of experience and a strong brand reputation[31]. - The group anticipates that the economic environment in Macau will remain challenging in 2022 due to ongoing travel restrictions, but sees long-term growth potential driven by infrastructure developments like the Hong Kong-Zhuhai-Macao Bridge[33]. Operational Highlights - The property and facility management services and integrated living services segments contributed over half of the gross profit and net profit during the review period[24]. - The cleaning services segment has seen increased demand due to the government's focus on hygiene and environmental control during the pandemic, with plans to enhance participation in green waste management[28]. - The security and event services segment is expected to benefit from the recovery of the events and exhibitions sector post-pandemic, with new revenue sources being explored[29]. - The group achieved a high renewal rate for existing contracts and successfully acquired multiple new service contracts during the review period[40]. - The group submitted 246 maintenance service contract bids with a total bid amount of HKD 2.166 billion, securing 44 projects worth a net contract amount of HKD 465 million[40]. - The group submitted 198 cleaning service contract bids totaling HKD 2.779 billion, winning 55 new service contracts with a total contract amount of HKD 558 million[41]. - The group’s existing government contracts account for approximately 10% of total revenue, with plans to allocate more resources to bid for government service contracts[40]. - The group has identified substantial opportunities for market share expansion within the government sector[40]. Financial Position and Cash Flow - The company maintained a net cash position with a dividend payout ratio of 40.2%, declaring an interim dividend of HKD 0.209 per share for the six months ending December 31, 2021[25]. - As of December 31, 2021, the total cash and bank balance was HKD 608.1 million, an increase from HKD 549.9 million on June 30, 2021[67]. - The net cash balance increased by HKD 58.6 million to HKD 224.7 million, mainly due to net cash inflow from operating activities[67]. - The total debt as of December 31, 2021, was HKD 383.4 million, with HKD 150 million maturing in June 2023 and HKD 233.4 million maturing in December 2024[68]. - The group has maintained a net debt ratio of 0% as of December 31, 2021, indicating a strong liquidity position[67]. - The company reported a total of HKD 233,380,000 in net bank borrowings during the period, compared to no borrowings in the previous year[100]. - Cash generated from operations for the six months ended December 31, 2021, was HKD 247,610 thousand, significantly lower than HKD 546,985 thousand in the previous year, reflecting a decrease of about 54.8%[151]. - The company’s total cash and bank balances, after deducting trust cash, were HKD 608,121,000, down from HKD 983,154,000 in 2020[100]. Employee and Management - The group employed 19,802 staff as of December 31, 2021, compared to 19,013 staff as of December 31, 2020, with employee costs totaling HKD 1.3624 billion, up from HKD 986.5 million in 2020[76]. - The group is committed to providing attractive compensation packages, including competitive fixed salaries and annual performance bonuses, to enhance employee loyalty[76]. - The total remuneration for key management personnel for the six months ended December 31, 2021, was HKD 45,781 thousand, up from HKD 41,310 thousand for the same period in 2020, reflecting an increase of about 10.0%[168]. Corporate Governance and Shareholder Information - The company has maintained compliance with the corporate governance code, except for the absence of the chairman at the annual general meeting due to other commitments[174]. - Dr. Zheng Jiachun was appointed as the Chairman of the Board of Directors of the company effective from November 30, 2021[176]. - The company’s major shareholders have significant interests in various controlled corporations, indicating a concentrated ownership structure[182]. - The total number of issued ordinary shares of the company is 500,000,000 as of December 31, 2021[180]. - The company issued a total of 43,676,379 non-voting redeemable convertible preference shares, which can be converted into ordinary shares[183].

Financial Performance - The company reported a revenue of HKD 6,452.7 million for the year ended June 30, 2021, representing a 14.1% increase from HKD 5,656.1 million in 2020[24]. - The adjusted profit attributable to shareholders for the year was HKD 4,161 million, with a dividend payout ratio of 48.7%[24]. - The company declared a final dividend of HKD 0.161 per share for the fiscal year 2021, up from HKD 0.144 per share in 2020, marking a 20.5% increase[24]. - The company achieved a significant increase in net profit, which rose by 41.8% to HKD 1.29 per share compared to HKD 0.91 per share in the previous year[24]. - Shareholders' profit for the same period was HKD 586.9 million, reflecting a significant growth of over 260% from the previous fiscal year[56]. - The group's revenue for the fiscal year 2021 was HKD 6.453 billion, an increase of HKD 796 million or 14.1% compared to HKD 5.656 billion in 2020[122]. - The profit attributable to shareholders for the fiscal year 2021 was HKD 586.9 million, up HKD 174.7 million or 42.4% from HKD 412.2 million in 2020[122]. - The group's gross profit increased by HKD 192.3 million or 20.4% to HKD 1.1351 billion for the fiscal year 2021, with an overall gross margin rising from 16.7% to 17.6%[154]. - The net profit attributable to shareholders increased by 42.4% or HKD 174.7 million to HKD 586.9 million, with a net profit margin rising from 7.3% to 9.1%[160]. Revenue Segments - The integrated living services segment generated revenue of HKD 2,921 million in 2021, a 20.4% increase from HKD 2,612 million in 2020[33]. - The property and facility management services segment reported revenue of HKD 661 million for the year, reflecting a 14.1% increase from HKD 580 million in 2020[29]. - The electromechanical engineering services segment accounted for 43.7% of total revenue in 2021, with revenue rising to HKD 2,817.7 million from HKD 2,126.2 million in 2020, reflecting an increase of HKD 691.5 million or 32.5%[147]. - The property and facility management services segment generated revenue of HKD 658.2 million, representing 10.2% of total revenue, up from HKD 546.8 million or 9.7% in 2020[147]. - The comprehensive living services segment contributed HKD 2,976.8 million, accounting for 46.1% of total revenue, a slight decrease from HKD 2,983.1 million or 52.7% in 2020[147]. Market Expansion and Strategy - The company plans to continue expanding its market presence in Hong Kong, Macau, and mainland China, leveraging its established network of subsidiaries[13]. - Future growth plans will focus on leveraging established brands, cost efficiency, and innovative technologies[58]. - The company aims to continuously seek new business opportunities to expand and enhance shareholder value despite challenges from the pandemic[64]. - The company is focusing on new business growth areas, including yacht insurance and overseas property insurance plans, to offset declines in group medical insurance premiums[135]. - The company plans to reallocate resources from non-profitable segments to more profitable business divisions following the sale of its loss-making laundry business for HKD 4 million[136]. Corporate Governance and Leadership - The company has a strong leadership team with extensive experience in various industries, including engineering and finance[67][69][70][71]. - The CEO, Mr. Pan, has been with the company since 1989 and oversees daily operations and business performance in Hong Kong, Macau, and China[67]. - The company emphasizes strategic planning and business development, with key executives responsible for overseeing major management decisions[68][69]. - The board includes members with significant qualifications, such as chartered engineers and certified public accountants, enhancing the company's governance[66][69][70]. - The company adheres to high standards of corporate governance to protect shareholder interests and enhance corporate value, complying with all provisions of the corporate governance code[83]. Risk Management - The company is monitoring the overall impact of COVID-19 on its operations and financial risks, implementing proactive measures and contingency plans[113]. - The company has established a formal risk management policy to regularly identify, assess, and manage risks across all departments[108]. - The board maintains an effective risk management system to address significant risks that may impact strategic objectives[111]. - The company is exposed to currency fluctuation risks due to some assets and liabilities being denominated in Renminbi, which may impact financial performance[115]. - The company faces risks related to significant price fluctuations in construction materials, particularly steel and copper, which could affect business performance[115]. Employee and Community Engagement - The company aims to cultivate young talent through diversified and customized training programs[58]. - The company provided necessary pandemic prevention equipment to 18,000 frontline employees to ensure their health and safety[59]. - The total employee count as of June 30, 2021, was 18,460, an increase from 17,889 in the previous year, with employee costs amounting to HKD 2.3905 billion, up from HKD 2.3536 billion[180]. - The company offers competitive salary packages, including fixed salaries and annual performance bonuses, to enhance employee loyalty and facilitate upward mobility[180]. - The company has established an ISO 9001 quality management system to ensure high customer satisfaction and accountability in quality assurance[177]. Sustainability and Environmental Initiatives - The company aims to maintain a strong commitment to community development and sustainable practices as part of its corporate mission[22]. - The company has implemented an integrated management system based on ISO 9001, ISO 14001, and OHSAS 18001 to monitor and manage environmental, social, and governance risks[173]. - The company aims to reduce energy consumption and greenhouse gas emissions, setting specific targets for these reductions[174]. - The company has established a green office guideline to enhance recycling practices across all operations[174]. - The company’s environmental management system is subject to regular audits to ensure effectiveness in achieving continuous improvement[174].

Financial Performance - Revenue for the six months ended December 31, 2020, was HKD 2,758.8 million, representing a 14.0% increase from HKD 2,420.3 million in 2019[21] - Gross profit increased by 48.5% to HKD 553.9 million, up from HKD 372.9 million in the previous year[21] - Profit attributable to shareholders reached HKD 329.1 million, a significant increase of 128.5% compared to HKD 144.0 million in 2019[21] - Basic earnings per share rose to HKD 0.72, reflecting a 125.0% increase from HKD 0.32 in the prior year[21] - The group recorded revenue of HKD 27.588 billion for the six months ended December 31, 2020, an increase of HKD 3.385 billion or 14.0% compared to HKD 24.203 billion for the same period last year[34] - Shareholders' profit attributable to the group was HKD 3.291 billion, up 128.5% from HKD 1.440 billion in the previous year, primarily due to new contracts in facilities/property management and temporary cleaning and disinfection projects related to COVID-19[34] - The total comprehensive income for the period was HKD 16.8 million, compared to a loss of HKD 4 million in the same period last year, reflecting favorable exchange rate changes[55] - The company reported a total comprehensive income of HKD 345,863 thousand for the period, compared to HKD 140,045 thousand in 2019[85] - The company reported a net profit of HKD 444,623,000 for the six months ended December 31, 2020, compared to HKD 144,034,000 for the same period in 2019, representing a significant increase of 208%[88] - Operating profit increased to HKD 353,836 thousand, representing a 102% rise from HKD 174,898 thousand in the previous year[84] Dividends and Shareholder Returns - The interim dividend declared is HKD 0.289 per share, an increase of 125.8% from HKD 0.128 per share in the previous period, with a payout ratio of 40.0%[22] - The company paid dividends of HKD 64,800,000 to ordinary shareholders during the period, an increase from HKD 53,550,000 in the previous year[89] - The company declared an interim dividend of HKD 0.289 per ordinary share, totaling HKD 130.05 million, compared to HKD 57.6 million for the same period last year[121] Strategic Acquisitions and Business Expansion - The company has completed two strategic acquisitions in the past five years, enhancing its revenue diversity and strengthening its profit base[25] - The company acquired Legend Success Investments Limited for a total consideration of HKD 743.4 million, with an initial cash payment of HKD 564.0 million[62] - The company is in the process of acquiring Business Investments Limited, which operates in security and event services, with the transaction details outlined in the interim financial statements[64] - The group is focusing on expanding its business in mainland China, leveraging its status as one of the few Hong Kong enterprises with Class A qualifications for electromechanical engineering contracting[29] - The group plans to explore and accelerate expansion in the Greater Bay Area through internal growth, strategic partnerships, and acquisitions[32] Operational Efficiency and Cost Management - The management has implemented immediate measures to mitigate the adverse effects of the pandemic, including project reviews and cost management[26] - General and administrative expenses decreased by 14.5% to HKD 1.709 billion, reflecting successful cost-saving measures and reduced depreciation[48] - The company has invested in innovative construction technologies to reduce energy consumption and carbon emissions, enhancing operational efficiency and project management[35] - The group aims to focus on large projects, including government design and build contracts, public infrastructure projects, and private residential developments to ensure business growth and profitability[35] Market Trends and Future Outlook - The group anticipates strong growth in property management services due to increasing demand for comprehensive property and facility management amid rapid land supply growth and strong housing demand in Hong Kong[32] - The group is adopting advanced technologies such as Building Information Modelling (BIM) and Modular Integrated Construction (MiC) to enhance productivity and service quality[28] - The group is committed to providing comprehensive energy-saving and environmental solutions in response to rising public concern about environmental issues[28] - The group anticipates continued demand for maintenance services due to over 65% of existing buildings in Hong Kong being over 20 years old, including 1,700 commercial buildings and 24,000 residential buildings[72] COVID-19 Impact and Response - Despite challenges from the COVID-19 pandemic, the company maintained a resilient profit of HKD 329.1 million, demonstrating its capacity for sustainable business growth[26] - The group has implemented and continuously updated preventive measures against COVID-19 to ensure effective management of construction projects[70] - There has been an increased temporary demand for intensive disinfection cleaning services due to the pandemic, providing additional work for existing contracts[79] - The pandemic has caused minor financial impacts on the group's electromechanical engineering business, despite some project delays[79] Financial Position and Liquidity - Cash and bank balances totaled HKD 822 million, up from HKD 700.9 million, with a debt total of HKD 263.7 million, down from HKD 463.2 million[56] - The group maintained a debt-to-equity ratio of 0% as of December 31, 2020, indicating a strong liquidity position[56] - The company recognized government subsidies totaling HKD 236,900 for the six months ended December 31, 2020, as part of employee costs[116] - The company reported a cash flow from operating activities of HKD 484,900,000 for the six months ended December 31, 2020, compared to HKD 58,684,000 for the same period in 2019, indicating a substantial improvement[133] Corporate Governance and Compliance - The company has established an audit committee composed of four independent non-executive directors to review and supervise financial reporting procedures and internal controls[158] - The company adhered to all provisions of the corporate governance code as stipulated in the Hong Kong Stock Exchange Listing Rules for the six months ending December 31, 2020[159] - The company’s audit was conducted by an external auditor in accordance with the Hong Kong Institute of Certified Public Accountants' standards[161]

[Financial Highlights](index=4&type=section&id=Financial%20Highlights) [Financial Highlights](index=4&type=section&id=Financial%20Highlights) In FY2020, the company's revenue decreased by 10.0% to HKD 4.882 billion, while profit attributable to shareholders slightly increased by 0.7% to HKD 310 million, with basic earnings per share remaining at HKD 0.68 Key Financial Data for FY2020 | Metric | 2020 (Million HKD) | 2019 (Restated, Million HKD) | Change % | | :--- | :--- | :--- | :--- | | Revenue | 4,882.1 | 5,422.7 | -10.0% | | Gross Profit | 760.4 | 769.5 | -1.2% | | Profit Attributable to Company Shareholders | 309.6 | 307.4 | +0.7% | | Basic Earnings Per Share | 0.68 HKD | 0.68 HKD | 0.0% | - The Board recommended a final dividend of **14.4 HK cents** per share, bringing the total annual dividend to **27.2 HK cents** per share, a **23.6% increase** from last year, with a payout ratio of **45.7%**[6](index=6&type=chunk) Revenue by Region (For the year ended June 30) | Region | 2020 (Million HKD) | 2019 (Million HKD) | | :--- | :--- | :--- | | Hong Kong | 4,171.0 | 4,430.4 | | Mainland China | 382.3 | 792.6 | | Macau | 328.8 | 199.7 | [Major Milestones and Accolades](index=6&type=section&id=Major%20Milestones%20and%20Accolades) [Major Milestones and Accolades](index=6&type=section&id=Major%20Milestones%20and%20Accolades) During FY2019-2020, FSE Services Group and its subsidiaries received extensive recognition across various fields, including corporate governance, facility management, corporate social responsibility, and talent development - The company received the '2019 Listed Company of the Year Award' from the Hong Kong Stock Analysts' Association for the fourth consecutive year, affirming its high transparency and sustainable business performance[14](index=14&type=chunk) - Multiple properties managed by the Group's Urban Group received awards in the 'IFMA Asia Pacific Awards of Excellence 2019' and the Hong Kong Institute of Facility Management's 'Excellence in Facility Management Awards', demonstrating its outstanding capabilities in property and facility management[18](index=18&type=chunk)[19](index=19&type=chunk) - The Group demonstrated outstanding performance in corporate social responsibility, winning awards in both the volunteer team and corporate categories of the '10th Hong Kong Outstanding Corporate Citizen Awards'[22](index=22&type=chunk) - FSE Engineering Group was recognized and upgraded to 'Super MD (Manpower Development)' by the Employees Retraining Board for its continuous achievements in talent training and development[33](index=33&type=chunk) [Chairman's Statement](index=10&type=section&id=Chairman%27s%20Statement) [Chairman's Statement](index=10&type=section&id=Chairman%27s%20Statement) Chairman Dr. Henry Cheng highlights the Group's resilient performance in FY2020 despite COVID-19 and social unrest, attributing success to cost management, business diversification, and the strategic acquisition of property and facility management businesses - The Group's laundry services were impacted by reduced tourist numbers due to COVID-19 and social unrest, while some E&M engineering projects faced delays from work suspensions and funding deferrals[35](index=35&type=chunk) - The successful acquisition of Urban Group and P&T (property and facility management services) in December 2019 contributed **HKD 81 million** in profit, accounting for **26.2%** of the Group's total profit, effectively diversifying revenue streams[35](index=35&type=chunk) - Despite challenges, the Group's profit attributable to shareholders reached **HKD 309.6 million** in FY2020, with a proposed full-year dividend of **27.2 HK cents** per share, representing a **23.6% increase** year-on-year[35](index=35&type=chunk) - Looking ahead, the Group is optimistic about increased infrastructure investment by the Hong Kong government, development in the Greater Bay Area, and the long-term potential of the Macau market, leveraging its strengths in E&M engineering and property management to expand business[36](index=36&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk) [Board of Directors and Senior Management](index=13&type=section&id=Board%20of%20Directors%20and%20Senior%20Management) [Board of Directors and Senior Management](index=13&type=section&id=Board%20of%20Directors%20and%20Senior%20Management) This section details the backgrounds of FSE Services Group's Board of Directors and senior management team, comprising professionals with diverse expertise in corporate governance, finance, law, and engineering - This report provides detailed personal resumes, professional backgrounds, and key responsibilities of the company's Board members (including executive, non-executive, and independent non-executive directors) and senior management[42](index=42&type=chunk)[54](index=54&type=chunk) [Corporate Governance Report](index=20&type=section&id=Corporate%20Governance%20Report) [Corporate Governance Structure](index=20&type=section&id=Corporate%20Governance%20Structure) The company maintains high corporate governance standards, complying with all code provisions, with a diverse 12-member Board supported by five specialized committees and a clear separation of Chairman and CEO roles - The company has complied with all code provisions set out in Appendix 14 of the Listing Rules, 'Corporate Governance Code', during the year[59](index=59&type=chunk) - The Board comprises **12 directors**, including **6 executive**, **2 non-executive**, and **4 independent non-executive directors**, demonstrating diversity in age and expertise such as financial accounting, law, E&M engineering, and general management[62](index=62&type=chunk)[63](index=63&type=chunk) - The Board has established five key committees: Executive, Audit, Risk Management, Remuneration, and Nomination Committees, to assist in fulfilling its responsibilities[72](index=72&type=chunk) [Risk Management and Internal Control](index=27&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board is responsible for the Group's risk management and internal control systems, reviewed semi-annually, addressing key risks such as COVID-19, social instability, economic shifts, labor shortages, currency fluctuations, and operational challenges - The Board is collectively responsible for maintaining sound risk management and internal control systems, reviewed semi-annually, covering financial, operational, and compliance controls[87](index=87&type=chunk) - The Group has identified and is monitoring several key risks, including: - **COVID-19**: Impacting global economy and Group operations - **Social and Political Instability**: Hong Kong's social conditions potentially affecting financial performance - **Global Economy and Government Policies**: Construction markets in Hong Kong, Macau, and Mainland China influenced by policies and economic trends - **Labor Shortage**: Aging workforce and rising labor costs in the construction industry - **Currency Fluctuations**: RMB exchange rate volatility posing risks to HKD-reported results - **Other Risks**: Including material price volatility, safety incidents, project delays, contract renewals, environmental regulations, and cybersecurity[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Shareholder Rights](index=31&type=section&id=Shareholder%20Rights) This section outlines core shareholder rights and communication mechanisms, including the shareholder communication policy, procedures for convening extraordinary general meetings by shareholders holding at least 10% voting shares, and processes for shareholder inquiries and proposals - The company has established a shareholder communication policy, ensuring timely disclosure of information to shareholders through various channels, including interim and annual reports, announcements, and circulars[105](index=105&type=chunk) - Shareholders holding not less than one-tenth of the company's paid-up share capital have the right to request the Board to convene an extraordinary general meeting[106](index=106&type=chunk) [Management Discussion and Analysis](index=33&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=33&type=section&id=Business%20Review) This fiscal year, the Group's operations were divided into E&M Engineering and Environmental Services, and Integrated Property and Facility Services, with E&M maintaining market leadership, cleaning services growing due to pandemic-related demand, laundry services severely impacted, and newly acquired property management businesses performing robustly - **E&M Engineering and Environmental Services**: - Total contract value awarded in FY2020 was **HKD 4.578 billion**, including **8 large projects** exceeding HKD 100 million each - As of June 30, 2020, total outstanding contracts amounted to **HKD 7.681 billion**[113](index=113&type=chunk)[114](index=114&type=chunk) - **Integrated Property and Facility Services**: - **Cleaning Services (Wellcome)**: Awarded service contracts totaling **HKD 1.571 billion**, with increased demand for disinfection and cleaning post-COVID-19 - **Laundry Services (New China Laundry)**: Business severely impacted by social unrest and COVID-19 in Hong Kong, leading to a sharp decline in laundry volume - **Property and Facility Management (Urban Group and P&T)**: Awarded **20 service contracts** with a total value of **HKD 1.063 billion**[115](index=115&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) [Financial Review](index=36&type=section&id=Financial%20Review) In FY2020, total revenue decreased by 10.0% to HKD 4.882 billion, primarily due to lower E&M engineering revenue, yet gross profit remained stable at HKD 760 million, and profit attributable to shareholders slightly increased by 0.7% to HKD 310 million, with a robust financial position and zero net gearing Revenue by Business Segment (For the year ended June 30) | Business Segment | 2020 (Million HKD) | % of Total Revenue | 2019 (Restated, Million HKD) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | E&M Engineering and Environmental Services | 3,085.5 | 63.2% | 3,736.9 | 68.9% | | Integrated Property and Facility Services | 1,796.6 | 36.8% | 1,685.8 | 31.1% | | **Total** | **4,882.1** | **100.0%** | **5,422.7** | **100.0%** | Gross Profit by Business Segment (For the year ended June 30) | Business Segment | 2020 Gross Profit (Million HKD) | Gross Profit Margin % | 2019 Gross Profit (Restated, Million HKD) | Gross Profit Margin % | | :--- | :--- | :--- | :--- | :--- | | E&M Engineering and Environmental Services | 434.9 | 14.1% | 462.1 | 12.4% | | Integrated Property and Facility Services | 325.5 | 18.1% | 307.4 | 18.2% | | **Total** | **760.4** | **15.6%** | **769.5** | **14.2%** | - Profit attributable to shareholders slightly increased by **0.7%** to **HKD 309.6 million**, primarily due to reduced general and administrative expenses and income tax, partially offset by a slight decrease in gross profit, asset impairment in laundry business, and acquisition-related costs; net profit margin improved from **5.7%** to **6.3%**[131](index=131&type=chunk) - As of June 30, 2020, the Group's cash and bank balances stood at **HKD 700.9 million**, total borrowings at **HKD 463.2 million**, and net gearing ratio remained at **0%**[133](index=133&type=chunk) - In October 2019, the company entered into a financing agreement for the acquisition of the target group (property and facility management business) for a total consideration of **HKD 743.4 million**, paid through cash and issuance of convertible preference shares[140](index=140&type=chunk) [Outlook](index=45&type=section&id=Outlook) The Group holds a cautiously optimistic outlook for its business segments, with E&M engineering benefiting from government infrastructure investments, cleaning services seeing increased demand, laundry services facing a challenging recovery, and property management poised for growth due to market demand for independent professional services - **E&M Engineering and Environmental Services**: The Hong Kong government's long-term housing strategy, 10-year hospital development plan, major infrastructure projects like Kai Tak Sports Park, and Greater Bay Area development will provide continuous business opportunities for this segment[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) - **Cleaning Services**: The COVID-19 pandemic has increased demand for professional disinfection services, and government job creation schemes may bring additional contracts; the Group plans to introduce innovative technologies like robotics to enhance efficiency[156](index=156&type=chunk) - **Laundry Services**: The outlook for laundry business remains bleak and uncertain due to the severe impact of the pandemic on tourism and hospitality sectors; the company will focus on key clients and strictly control costs[158](index=158&type=chunk) - **Property and Facility Management Services**: Increased market demand for professional management companies independent of property developers, coupled with the implementation of the Property Management Services Ordinance, presents significant development opportunities for Urban Group and P&T with their strong professional teams[159](index=159&type=chunk)[160](index=160&type=chunk) [Report of the Directors](index=53&type=section&id=Report%20of%20the%20Directors) [Report of the Directors](index=53&type=section&id=Report%20of%20the%20Directors) This statutory report by the Board for FY2020 covers the Group's principal activities, performance, distributions, reserve movements, key customer and supplier information, director changes and interests, related party transactions, and compliance with the controlling shareholder's non-compete undertaking - The Board recommended a final dividend of **14.4 HK cents** per share, bringing the total annual dividend to **27.2 HK cents** per share, equivalent to a payout ratio of **45.7%**[167](index=167&type=chunk) - For the year, the Group's top five customers accounted for **38.6%** of total revenue, with the largest customer contributing **15.3%**; the top five suppliers accounted for **8.5%** of total purchases[174](index=174&type=chunk) - The report details continuing connected transactions with New World Development Group, NWS Holdings Limited, and other related parties, confirming all transactions were conducted in the ordinary course of business on normal commercial terms and reviewed by independent non-executive directors[201](index=201&type=chunk)[247](index=247&type=chunk) - The controlling shareholder confirmed compliance with the non-compete undertaking, and independent non-executive directors found no breaches upon review[248](index=248&type=chunk) [Independent Auditor's Report](index=77&type=section&id=Independent%20Auditor%27s%20Report) [Independent Auditor's Report](index=77&type=section&id=Independent%20Auditor%27s%20Report) PricewaterhouseCoopers issued an unqualified opinion on FSE Services Group's consolidated financial statements for the year ended June 30, 2020, affirming their fair presentation and compliance with accounting standards, with 'Revenue Recognition for Engineering Contracts' highlighted as a key audit matter due to significant management judgment - The auditors believe the consolidated financial statements fairly and accurately reflect the Group's consolidated financial position as of June 30, 2020, and its financial performance and cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards[256](index=256&type=chunk) - A key audit matter is 'Revenue Recognition for Engineering Contracts', considered most significant due to its reliance on management's substantial judgments in estimating total contract revenue, total contract costs, and percentage of completion[258](index=258&type=chunk)[259](index=259&type=chunk) [Consolidated Financial Statements](index=81&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss](index=81&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) The Consolidated Statement of Profit or Loss presents the company's operating results for FY2020, showing revenue of HKD 4.882 billion, gross profit of HKD 760 million, and profit attributable to company shareholders of HKD 309.6 million, largely consistent with the prior year Consolidated Statement of Profit or Loss Summary (For the year ended June 30) | Metric (Thousand HKD) | 2020 | 2019 (Restated) | | :--- | :--- | :--- | | Revenue | 4,882,119 | 5,422,713 | | Gross Profit | 760,376 | 769,465 | | Operating Profit | 367,019 | 363,081 | | Profit Before Income Tax | 363,474 | 368,591 | | **Profit for the Year** | **309,589** | **307,448** | | Profit Attributable to Company Shareholders | 309,563 | 307,374 | [Consolidated Statement of Financial Position](index=83&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) The Consolidated Statement of Financial Position as of June 30, 2020, shows total assets of HKD 3.191 billion and total liabilities of HKD 2.747 billion, with total equity decreasing to HKD 445 million due to the acquisition of property and facility management businesses, while net current assets remain robust at HKD 438 million Consolidated Statement of Financial Position Summary (As of June 30) | Metric (Thousand HKD) | 2020 | 2019 (Restated) | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 546,726 | 529,960 | | Current Assets | 2,644,523 | 2,422,925 | | **Total Assets** | **3,191,249** | **2,952,885** | | **Equity and Liabilities** | | | | Total Equity | 444,716 | 854,334 | | Non-current Liabilities | 540,297 | 61,264 | | Current Liabilities | 2,206,236 | 2,037,287 | | **Total Liabilities** | **2,746,533** | **2,098,551** | | **Total Equity and Liabilities** | **3,191,249** | **2,952,885** | [Consolidated Statement of Cash Flows](index=86&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Consolidated Statement of Cash Flows for FY2020 shows strong net cash generated from operating activities of HKD 469 million, net cash used in investing activities of HKD 614 million primarily for acquisitions, and net cash from financing activities of HKD 287 million, resulting in a net increase in cash and cash equivalents of HKD 142 million Consolidated Statement of Cash Flows Summary (For the year ended June 30) | Metric (Thousand HKD) | 2020 | 2019 (Restated) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 469,450 | 207,575 | | Net Cash Used in Investing Activities | (614,200) | (24,092) | | Net Cash Generated From/(Used In) Financing Activities | 287,064 | (130,300) | | **Net Increase in Cash and Cash Equivalents for the Year** | **142,314** | **53,183** | | Cash and Cash Equivalents at Beginning of Year | 562,205 | 514,126 | | **Cash and Cash Equivalents at End of Year** | **700,946** | **562,205** | [Five-Year Financial Summary](index=180&type=section&id=Five-Year%20Financial%20Summary) [Five-Year Financial Summary](index=180&type=section&id=Five-Year%20Financial%20Summary) This section provides a comprehensive overview of the Group's key financial data and ratios for the past five fiscal years (2016-2020), indicating relatively stable revenue, steady growth in profit attributable to shareholders, healthy return rates, and a consistent zero net gearing ratio Five-Year Financial Data Summary (For the year ended June 30) | Metric (Thousand HKD) | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 4,904,824 | 5,294,225 | 5,400,547 | 5,422,713 | 4,882,119 | | Profit Attributable to Shareholders | 276,764 | 283,623 | 293,050 | 307,374 | 309,563 | | Total Assets | 3,379,191 | 3,316,630 | 2,826,685 | 2,952,885 | 3,191,249 | | Total Liabilities | 2,272,017 | 2,112,257 | 2,049,752 | 2,098,551 | 2,746,533 | | Total Equity | 1,107,174 | 1,204,373 | 776,933 | 854,334 | 444,716 | Five-Year Key Ratios | Ratio | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Return on Assets | 8.2% | 8.6% | 10.4% | 10.4% | 9.7% | | Return on Equity | 25.0% | 23.6% | 37.7% | 36.0% | 69.6% | | Current Ratio (times) | 1.4 | 1.3 | 1.1 | 1.2 | 1.2 | | Net Gearing Ratio | 0% | 0% | 0% | 0% | 0% |

Financial Performance - Revenue for the six months ended December 31, 2019, was HKD 2,420.3 million, a decrease of 4.4% compared to HKD 2,532.6 million in 2018[19]. - Gross profit for the same period was HKD 372.9 million, reflecting a slight increase of 0.2% from HKD 372.2 million[19]. - Profit attributable to shareholders was HKD 144.0 million, up 3.7% from HKD 138.9 million in the previous year[19]. - Basic earnings per share increased by 3.2% to HKD 0.32 from HKD 0.31[19]. - The group recorded a net profit of HKD 144.0 million, a 3.7% increase from HKD 138.9 million in the previous year, with a net profit margin of 6.0%[54]. - The company reported a total comprehensive income of HKD 140,045 for the period, compared to HKD 131,666 in 2018, marking a growth of 6.5%[84]. - The company reported a net cash outflow from investing activities of HKD 570,154 thousand, compared to an outflow of HKD 7,784 thousand in the previous year[89]. - The company reported a total of 493,676,379 shares issued and fully paid as of December 31, 2019, unchanged from June 30, 2019[148]. Dividends and Shareholder Returns - The company declared an interim dividend of HKD 0.128 per share, representing a payout ratio of 54.1% based on adjusted profit[19]. - The interim dividend declared was HKD 0.128 per share, totaling HKD 57.6 million, up from HKD 0.101 per share and HKD 45.45 million in 2018, representing an increase of 26.7%[140]. - The company expresses gratitude to shareholders, customers, and business partners for their support, emphasizing its commitment to creating long-term value for shareholders[33]. Market Conditions and Challenges - The company anticipates challenges in the market due to external factors such as political uncertainties and economic slowdowns, impacting overall performance[23]. - The company is facing labor shortages in the environmental hygiene services sector, which may lead to increased costs[30]. - The company anticipates that the construction industry will face challenges due to rising costs and an aging skilled workforce, but it aims to leverage opportunities from the government's "Construction 2.0" initiative[67]. Strategic Initiatives and Growth Opportunities - The acquisition of property and facility management services group was completed on December 16, 2019, positioning the company as a leading independent service provider in Hong Kong[22]. - The company plans to explore and accelerate expansion in the Greater Bay Area through internal growth, strategic partnerships, and acquisitions[32]. - The company aims to enhance operational efficiency and develop innovative products and services through advanced technologies such as Building Information Modeling (BIM) and Modular Integrated Construction (MiC)[25]. - The company is actively supporting the government's initiatives to enhance innovation and technology, particularly in the Lok Ma Chau Loop area[67]. Operational Performance - The maintenance services business showed strong performance driven by increased demand for medical and system upgrade projects[23]. - The company aims to enhance customer satisfaction and ensure sustainable business growth and profitability by focusing on large-scale projects, including government contracts and public infrastructure[35]. - The company is investing in innovative construction technologies to reduce energy consumption and carbon emissions, including Building Information Modelling and Robotic Total Solutions[35]. - The company continues to upgrade its laundry equipment to improve operational efficiency in response to challenges posed by the COVID-19 pandemic[30]. Financial Position and Debt Management - As of December 31, 2019, the group's cash and bank balances totaled HKD 502.7 million, down from HKD 562.2 million as of June 30, 2019[56]. - The group's total debt increased from HKD 30 million as of June 30, 2019, to HKD 562.8 million as of December 31, 2019[57]. - The group's asset-liability ratio rose to 17.8% as of December 31, 2019, compared to 0% as of June 30, 2019[56]. - The group incurred financial costs of HKD 2.5 million, significantly higher than HKD 0.2 million in the previous year, due to new lease liabilities and interest expenses from bank loans[50]. Employee and Talent Management - The company has 13,326 employees as of December 31, 2019, an increase from 12,662 in 2018, reflecting a rise in full-time staff primarily in the cleaning services division[65]. - Employee costs for the review period amounted to HKD 834.3 million, up from HKD 777.9 million in the same period of 2018, indicating a growth driven by increased headcount and inflation[65]. - The company emphasizes talent development as a key factor for sustainable growth, investing in training and development opportunities for employees[23]. Related Party Transactions - The company engaged in transactions with related parties, including various management and development firms, during the six months ending December 31, 2018, and 2019[156]. - The company maintains a diverse portfolio of related parties across various sectors, including real estate, hospitality, and logistics[161][163]. - The transactions with related parties are disclosed in the interim financial statements, ensuring transparency[158]. Environmental and Social Responsibility - Increased demand for intensive disinfection cleaning services has been noted in the property and facility management sector due to the pandemic[78]. - The company has established effective health and safety protocols for workers, suppliers, and subcontractors on construction sites[78]. - The company continues to ensure adequate supplies of essential protective equipment for employees and frontline workers amid supply shortages[78].

Financial Performance - Total revenue for the fiscal year ended June 30, 2019, was HKD 4,930.5 million, representing a slight increase of 0.1% compared to HKD 4,926.5 million in 2018[7]. - Gross profit for the same period was HKD 599.8 million, up 1.5% from HKD 591.0 million in the previous year[7]. - Profit attributable to equity holders of the company increased by 4.5% to HKD 247.5 million, compared to HKD 236.8 million in 2018[7]. - Basic earnings per share rose to HKD 0.55, reflecting a 3.8% increase from HKD 0.53 in the prior year[7]. - The total dividend for the fiscal year was HKD 0.22 per share, which includes a final dividend of HKD 0.119 and an interim dividend of HKD 0.101, resulting in a payout ratio of 40.0%[7]. - The group reported a profit attributable to equity holders of HKD 247.5 million, reflecting the resilience and capability to drive business growth despite challenges[39]. - The total dividend for the year is HKD 0.22 per share, with a payout ratio of 40.0%[39]. - The company reported a significant increase in revenue, achieving a total of $1.2 billion for the fiscal year, representing a 15% year-over-year growth[61]. - The company reported a significant increase in revenue, achieving a total of HKD 1.2 billion, representing a year-on-year growth of 15%[78]. - The company has set a future outlook with a revenue guidance of HKD 1.5 billion for the next fiscal year, reflecting an expected growth of 25%[78]. Market and Business Strategy - The company has established a strong network to provide comprehensive professional services to well-known clients in property development, public infrastructure, education, and tourism sectors across Hong Kong, Macau, and mainland China[2]. - The group is one of the two major players in the Hong Kong electromechanical engineering market, preparing to undertake large-scale infrastructure and building projects[40]. - The group aims to expand its market share in mainland China, leveraging its status as one of the few Hong Kong companies with Class 1 qualifications for electromechanical engineering contracting[42]. - The company plans to expand its market presence in Southeast Asia, targeting a 30% increase in market share within the next two years[61]. - Strategic acquisitions are being considered to enhance service offerings, with potential targets identified in the engineering sector[78]. - The company aims to continue seeking business opportunities to expand operations and maximize shareholder value[48]. Operational Efficiency and Innovation - The group plans to enhance its focus on key clients and implement efficient cost management measures to ensure customer satisfaction and sustainable growth in the laundry services sector[47]. - The group is investing in advanced innovative laundry equipment to improve operational efficiency and provide value-added services to customers[47]. - The company plans to implement cost-saving measures aimed at reducing operational expenses by 5% over the next year[61]. - The company is exploring partnerships with key industry players to drive innovation and expand service offerings[61]. - The company has adopted advanced technology to enhance operational efficiency in response to changing government policies and economic conditions[138]. Corporate Governance and Compliance - The company has maintained compliance with all corporate governance codes except for the attendance of the chairman at the annual general meeting, which was led by the vice chairman[89]. - The board consists of 12 members, including 6 executive directors, 4 independent non-executive directors, and 2 non-executive directors, ensuring a diverse skill set and perspectives[92]. - The company has adopted a securities trading code for directors, confirming compliance with the standards set forth in the listing rules[90]. - The board has established a nomination policy to ensure a transparent process for appointing and reappointing directors, considering factors such as integrity, qualifications, and commitment[98]. - All independent non-executive directors have been assessed for independence, confirming they do not participate in daily management and have no relationships that could impair their judgment[100]. - The company encourages continuous professional development for directors, maintaining records of their participation in various training programs[101]. - The chairman, vice chairman, and CEO roles are held by different individuals to ensure effective separation of duties[104]. Risk Management - The company has established a formal risk management policy to regularly identify, assess, and manage risks faced by the group[130]. - The board conducts biannual reviews of the risk management and internal control systems to ensure effectiveness[127]. - The company faces currency fluctuation risks due to some assets and liabilities being denominated in Renminbi, which may affect financial performance[140]. - The company is exposed to significant price volatility in construction materials, particularly steel and copper, which could impact business performance[141]. - Labor shortages in the construction industry are expected to persist, affecting the company's ability to maintain stable human resources for timely project completion[139]. Corporate Social Responsibility - The company has received multiple awards for its commitment to transparency and sustainable business performance, including the "2018 Annual Award for Listed Companies" from the Hong Kong Stock Analysts Association[20]. - The company is focused on continuous development and community care, striving for sustainable growth[3]. - The company has been recognized for its corporate social responsibility efforts, including over 1,000 hours of volunteer service in 2018[30]. - The company is committed to sustainability, with plans to invest HKD 20 million in eco-friendly technologies over the next three years[78]. - The implementation of the ISO 14001 environmental management system is a core part of the group's strategy to enhance environmental performance[196]. Employee Relations and Development - The company aims to enhance its service quality and maintain a balanced work-life environment for employees, fostering a sense of belonging[3]. - The company emphasizes the importance of providing a competitive salary and benefits aligned with employees' experience and responsibilities[199]. - Employee training programs are being enhanced, with a budget increase of 15% to improve workforce skills and capabilities[78]. - The company has implemented OHSAS 18001 occupational health and safety management systems for its Hong Kong operations and GB/T28001–2011/OHSAS 18001:2007 for its mainland China operations[199]. - There were no work-related fatalities reported during the year, highlighting the company's commitment to safety[199].

[Financial Highlights](index=4&type=section&id=Financial%20Highlights) [Financial Highlights](index=4&type=section&id=Financial%20Highlights) For the six months ended December 31, 2018, the Group's revenue decreased by 3.8% to HK$2.2917 billion year-on-year, and profit attributable to equity holders decreased by 6.1% to HK$113.5 million. Despite the decline in performance, the Board declared an interim dividend of HK10.1 cents per share, an increase from HK7.8 cents per share in the prior period Financial Highlights for the Six Months Ended December 31 | Metric | 2018 | 2017 (Restated) | Change % | | :--- | :--- | :--- | :--- | | Revenue (HKD Million) | 2,291.7 | 2,381.8 | -3.8% | | Gross Profit (HKD Million) | 291.7 | 288.2 | +1.2% | | Profit Attributable to Equity Holders (HKD Million) | 113.5 | 120.9 | -6.1% | | Basic Earnings Per Share (HKD) | 0.25 | 0.27 | -7.4% | - The Board declared an interim dividend of **HK10.1 cents per share** for the six months ended December 31, 2018, with a payout ratio of **40.0%**, higher than HK7.8 cents per share in the prior period[11](index=11&type=chunk)[149](index=149&type=chunk) - Comparative figures were restated due to the Group's application of merger accounting for a common control business combination, which included the profit from the facilities services business; excluding this, current period profit increased by **30.8%** compared to the HK$86.8 million reported in the prior period[11](index=11&type=chunk) [Chairman's Statement](index=5&type=section&id=Chairman%27s%20Statement) [Market Review and Business Outlook](index=5&type=section&id=Market%20Review%20and%20Business%20Outlook) Despite challenges such as global economic slowdown, US-China trade tensions, and intense local market competition, the Group recorded a profit of **HK$113.5 million**, and will leverage its market position in E&M engineering, environmental management, and facilities services to capitalize on infrastructure and development opportunities in Hong Kong, Macau, and the Greater Bay Area, while continuously investing in new technologies to enhance efficiency and competitiveness - Despite global economic slowdown, US-China trade tensions, and local labor shortages, the Group recorded a profit attributable to equity holders of **HK$113.5 million**[14](index=14&type=chunk) - The E&M engineering business has optimistic prospects, benefiting from the Hong Kong government's continuous investment in major infrastructure projects such as public housing, hospital redevelopment (second ten-year plan), and Kai Tak Sports Park, with the Group focusing on applying Building Information Modeling (BIM) and Modular Integrated Construction (MiC) to enhance competitiveness[15](index=15&type=chunk) - The development of the Guangdong-Hong Kong-Macao Greater Bay Area is considered a major growth driver, positioning the Group, as one of the few Hong Kong enterprises with a Class 1 qualification for E&M engineering general contractors in mainland China, to expand its market share[17](index=17&type=chunk) - The facilities services business (cleaning and laundry) faces labor shortage challenges, but growth in Hong Kong's property market and public emphasis on hygiene standards will drive stable demand, with the Group planning to invest in advanced equipment to enhance operational efficiency in its laundry business[20](index=20&type=chunk)[22](index=22&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=8&type=section&id=Business%20Review) During the review period, the Group's total revenue was **HK$2.2917 billion**, a year-on-year decrease of **3.8%**, and profit attributable to equity holders was **HK$113.5 million**, a year-on-year decrease of **6.1%**, primarily due to reduced finance income after the acquisition of the facilities services business, with E&M engineering remaining core and facilities services gradually recovering after contract adjustments - The primary reason for the profit decline was the reduction in finance income after the Group used cash to acquire the facilities services business in April 2018[23](index=23&type=chunk) Contract Status by Business Segment (As of December 31, 2018) | Business Segment | Total Outstanding Contracts | Total New Contracts Awarded During Review Period | | :--- | :--- | :--- | | E&M Engineering | HK$5.531 billion | HK$1.480 billion | | Environmental Management Services | HK$59 million | HK$42 million | | Facilities Services (Cleaning) | HK$1.049 billion | HK$349 million | | Facilities Services (Laundry) | - | HK$7 million | - The cleaning services business was affected by the termination of a contract with a transportation company, but revenue loss was partially offset by new contracts, while the business also faces cost pressure from labor shortages and increased statutory minimum wage[26](index=26&type=chunk)[27](index=27&type=chunk) [Financial Review](index=10&type=section&id=Financial%20Review) This period's financial review shows a **3.8%** decrease in total revenue, primarily due to reduced E&M engineering revenue in Hong Kong and Macau, partially offset by a strong **48.8%** growth in mainland China business, with overall gross margin slightly increasing from **12.1%** to **12.7%** mainly due to improved E&M engineering segment margins, and net profit decline attributed to reduced finance income and increased administrative expenses Revenue by Business Segment (For the Six Months Ended December 31) | Business Segment | 2018 (HKD Million) | 2017 (HKD Million) | Change | | :--- | :--- | :--- | :--- | | E&M Engineering | 1,676.1 | 1,729.3 | -3.1% | | Environmental Management Services | 35.2 | 33.8 | +4.1% | | Facilities Services | 580.4 | 618.7 | -6.2% | | **Total** | **2,291.7** | **2,381.8** | **-3.8%** | Revenue by Geographical Region (For the Six Months Ended December 31) | Region | 2018 (HKD Million) | 2017 (HKD Million) | Change % | | :--- | :--- | :--- | :--- | | Hong Kong | 1,863.5 | 1,945.0 | -4.2% | | Mainland China | 371.3 | 249.6 | +48.8% | | Macau | 56.9 | 187.2 | -69.6% | Gross Profit and Gross Margin by Business Segment (For the Six Months Ended December 31) | Business Segment | 2018 Gross Profit (HKD Million) | 2018 Gross Margin | 2017 Gross Profit (HKD Million) | 2017 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | E&M Engineering | 214.0 | 12.8% | 198.2 | 11.5% | | Environmental Management Services | 9.6 | 27.3% | 8.7 | 25.7% | | Facilities Services | 68.1 | 11.7% | 81.3 | 13.1% | | **Total** | **291.7** | **12.7%** | **288.2** | **12.1%** | - The Group maintained a sound financial position, holding cash and bank balances of **HK$521.9 million** at period-end, with no bank borrowings and a zero net debt-to-equity ratio[39](index=39&type=chunk) - The Group's primary foreign exchange risk is from RMB; a **5.2%** appreciation/depreciation of HKD against RMB would decrease/increase other comprehensive income by **HK$9.4 million**[40](index=40&type=chunk) [Prospects](index=15&type=section&id=Prospects) Looking ahead, the Group remains optimistic about its core business prospects, with the E&M engineering segment benefiting from the Hong Kong government's substantial infrastructure, housing, and healthcare development plans, environmental management services demand growing with increased environmental awareness, and the facilities services segment capitalizing on opportunities from new property completions and outsourcing trends while planning technology upgrades to address labor cost pressures - The Hong Kong government's substantial engineering expenditure in the coming years is expected to provide ample opportunities for the E&M engineering business, including the Ten-Year Hospital Development Plan (**HK$200 billion**), Kai Tak Sports Park (over **HK$30 billion**), and the Long Term Housing Strategy (**450,000 units** over ten years)[48](index=48&type=chunk) - The E&M engineering industry faces challenges of severe skilled labor shortages and an aging workforce, potentially leading to increased labor wages and construction costs[49](index=49&type=chunk) - Environmental management services will benefit from the continued implementation of the Buildings Energy Efficiency Ordinance and the growing societal demand for energy-saving and environmentally friendly solutions[53](index=53&type=chunk) - Facilities services (cleaning) will focus on newly completed large-scale infrastructure, commercial, and residential building markets, leveraging its brand advantage to secure government and quasi-government projects[56](index=56&type=chunk) - The laundry services market is expected to grow moderately, with New China Laundry planning to invest in upgrading advanced equipment to enhance efficiency and explore energy-saving methods for green laundry[58](index=58&type=chunk) [Interim Financial Information](index=21&type=section&id=Interim%20Financial%20Information) [Review Report on Interim Financial Information](index=21&type=section&id=Review%20Report%20on%20Interim%20Financial%20Information) The Group's interim financial information for the six months ended December 31, 2018, has been reviewed by external auditor PricewaterhouseCoopers, and based on the review, the auditor found no matters that cause them to believe the interim financial information is not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting' - The review was conducted by PricewaterhouseCoopers in accordance with Hong Kong Standard on Review Engagements 2410[61](index=61&type=chunk)[62](index=62&type=chunk) - The auditor issued a standard unmodified review conclusion, indicating that the interim financial information conforms in all material respects to accounting standards[62](index=62&type=chunk) [Condensed Consolidated Financial Statements](index=22&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section includes the Group's unaudited condensed consolidated income statement, statement of comprehensive income, statement of financial position, statement of changes in equity, and cash flow statement, comprehensively reflecting the financial performance, financial position, and cash flows during the review period Key Financial Statement Data (For the Six Months Ended December 31, 2018) | Metric (HKD Thousand) | 2018 | 2017 (Restated) | | :--- | :--- | :--- | | **Income Statement:** | | | | Revenue | 2,291,720 | 2,381,758 | | Operating Profit | 134,015 | 137,849 | | Profit for the Period Attributable to Equity Holders of the Company | 113,548 | 120,869 | | **Cash Flow Statement:** | | | | Net Cash from Operating Activities | 182,114 | (90,157) | | Net Cash Used in Investing Activities | (3,150) | (82,963) | | Net Cash Used in Financing Activities | (59,850) | (53,189) | Key Statement of Financial Position Data (HKD Thousand) | Metric | As of December 31, 2018 | As of June 30, 2018 | | :--- | :--- | :--- | | Total Assets | 2,412,926 | 2,567,760 | | Total Liabilities | 1,727,865 | 1,930,410 | | Total Equity | 685,061 | 637,350 | | Cash and Bank Balances | 521,883 | 407,561 | [Notes to the Condensed Consolidated Interim Financial Statements](index=27&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Statements) The notes to the financial statements detail key matters such as accounting policies, segment information, and related party transactions, with Note 2(c) explaining the accounting treatment for common control business combinations due to the acquisition of the target group and the restatement of comparative figures, Note 6 providing detailed revenue and balance sheet information by business segment and geographical region, and Note 18 disclosing significant transactions with the controlling shareholder and other related parties - The Group adopted Hong Kong Financial Reporting Standard 9 (Financial Instruments) and 15 (Revenue from Contracts with Customers) effective July 1, 2018, and made corresponding changes to its accounting policies[71](index=71&type=chunk)[93](index=93&type=chunk) - On April 11, 2018, the Group completed the acquisition of the facilities services business (Target Group), which was treated as a common control business combination, leading to the restatement of 2017 comparative financial data to reflect the combined entity's status[88](index=88&type=chunk) Summary of Related Party Transactions (For the Six Months Ended December 31, 2018) | Transaction Type | Amount (HKD Thousand) | | :--- | :--- | | Contract Revenue | 802,119 | | Facilities Services Revenue | 141,852 | | Insurance Brokerage Service Expenses | 17,341 | | Rental Expenses | 10,850 | - The Board declared an interim dividend of **HK10.1 cents per share**, totaling approximately **HK$45.45 million**[121](index=121&type=chunk) [Other Information](index=60&type=section&id=Other%20Information) [Dividends, Corporate Governance and Shareholder Interests](index=60&type=section&id=Dividends%2C%20Corporate%20Governance%20and%20Shareholder%20Interests) This section discloses interim dividend arrangements, corporate governance compliance, and major shareholder holdings, with the Group declaring an interim dividend of **HK10.1 cents per share**, complying with all Corporate Governance Code provisions except for the Chairman's absence from the 2018 AGM, and FSE Holdings Limited being the controlling shareholder with a **75%** stake - Interim dividend of **HK10.1 cents per share**, with a record date of March 13, 2019, and payment date around March 20, 2019[149](index=149&type=chunk)[150](index=150&type=chunk) - During the reporting period, the Company complied with the Corporate Governance Code in the Listing Rules, with the sole exception of Code Provision E.1.2 due to Dr. Henry Cheng Kar-shun, the Chairman, being unable to attend the 2018 Annual General Meeting[153](index=153&type=chunk) Major Shareholder Holdings (As of December 31, 2018) | Shareholder Name | Capacity | Number of Shares Held | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | FSE Holdings Limited | Beneficial Interest | 337,500,000 | 75.00% | | Mr. David Doo Wai-hoi | Interest in Controlled Corporation | 337,500,000 | 75.00% | | Value Partners Group Limited | Interest in Controlled Corporation | 26,855,000 | 5.96% | - No share options have been granted by the Company since the adoption of the Share Option Scheme on November 20, 2015[164](index=164&type=chunk)