45 比速科技集團國際有限公司 Bisu Technology Group International Limited (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立之有限公司) Stock Code 股份代號：1372 Interim Report 中 期 報 告 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 簡明綜合損益及其他全面收入表 Six months ended 30 June 2019 截至二零一九年六月三十日止六個月 The board (the "Board") of directors (the "Directors") of Bisu Technology Group International Limited (the "Company") announce the unaudited condensed consolidated interim results and fin ...

[Director's Statement](index=6&type=section&id=Director's%20Statement) [Financial Highlights](index=6&type=section&id=Financial%20Highlights) The company's FY2018 financial performance sharply deteriorated, shifting from profit to a substantial loss with revenue down 63.3% and gross margin at 1.6%, leading to a net liability position 2018 Financial Highlights (HKD thousands) | Indicator | Year Ended December 31, 2018 | Year Ended December 31, 2017 | | :--- | :--- | :--- | | **Financial Performance** | | | | Revenue | 743,414 | 2,026,599 | | Gross Profit | 11,782 | 188,950 | | Gross Margin | 1.6% | 9.3% | | (Loss)/Profit Attributable to Owners of the Parent | (703,767) | 37,713 | | **Financial Position** | | | | Total Assets | 1,307,390 | 2,509,552 | | Total Liabilities | 1,400,349 | 1,806,938 | | Net (Liabilities)/Assets | (92,959) | 702,614 | | Current Ratio | 1.3 | 1.1 | | Gearing Ratio | Not Applicable | 119.5% | | Return on Equity | Not Applicable | 5.4% | [Business Overview](index=8&type=section&id=Business%20Overview) In 2018, the Group's consolidated revenue fell 63.3% to HK$743 million, resulting in a HK$704 million loss, primarily due to declining automotive engine business, significant asset impairments, and credit loss provisions - The company shifted from profit to loss in 2018, primarily due to a **significant decline in gross profit** from the automotive engine business[16](index=16&type=chunk) - Impairment losses of approximately **HK$606 million** were recognized on goodwill and intangible assets related to the automotive engine business acquired in 2016[16](index=16&type=chunk)[19](index=19&type=chunk) - An expected credit loss provision of approximately **HK$125 million** was recognized for trade receivables and bills from automotive engine business customers[16](index=16&type=chunk)[19](index=19&type=chunk) [Segment Performance](index=8&type=section&id=Segment%20Performance) Automotive engine business revenue sharply declined by 81.3% due to client financial distress, impacting gross margin, while civil engineering and construction revenue decreased by 14.8% with a slight gross margin dip Key Segment Performance Indicators | Business Segment | Indicator | FY2018 | FY2017 | Year-on-Year Change | | :--- | :--- | :--- | :--- | :--- | | **Automotive Engine Business** | Revenue (HKD millions) | 276.5 | 1,478.3 | -81.3% | | | Average Monthly Production (units) | 1,108 | 7,636 | -85.5% | | | Gross Margin (excluding amortization) | 9.4% | 15.8% | -6.4pp | | **Civil Engineering & Construction Business** | Revenue (HKD millions) | 466.9 | 548.3* | -14.8% | | | Gross Margin | 2.6% | 3.1%* | -0.5pp | [Outlook](index=9&type=section&id=Outlook) The automotive engine business expects improved 2019 demand, though below 2017 levels, with the Group cautiously optimistic about mid-term recovery, while the construction business faces challenges, prompting focus on cost control and new growth opportunities - Automotive engine business customers have secured funding agreements with banks and local governments, with demand expected to improve in 2019, though still significantly below 2017 levels[25](index=25&type=chunk)[28](index=28&type=chunk) - Despite short-term challenges, the automotive engine business remains the Group's primary focus for the future, with a cautiously optimistic outlook for its mid-term demand recovery and stability[30](index=30&type=chunk)[33](index=33&type=chunk) - The construction business faces challenges from rising wages, material costs, and labor shortages, but the Group will adopt a prudent bidding strategy and leverage its competitive advantages to capitalize on the increasing trend of civil engineering projects in Hong Kong[32](index=32&type=chunk)[33](index=33&type=chunk) [Summary of Significant Contracts on Hand](index=12&type=section&id=Summary%20of%20Significant%20Contracts%20on%20Hand) [Summary of Significant Contracts on Hand](index=12&type=section&id=Summary%20of%20Significant%20Contracts%20on%20Hand) As of December 31, 2018, the Group held significant civil engineering and construction contracts across various categories, including waterworks and road projects, with some lacking specific contract values Significant Contracts on Hand (as of December 31, 2018) | Contract Category | Contract Details | Contract Value (HKD millions) | | :--- | :--- | :--- | | Waterworks | General water main diversion works for subsidized sale flats development at Ma On Shan Road | 14 | | Road and Drainage Works | Provision of barrier-free access facilities for road structures — Phase 3 Contract 8 | 203 | | Road and Drainage Works | Provision of barrier-free access facilities for road structures — Phase 3 Contract 9 | 173 (Total JV amount 340) | | Building Construction and Maintenance | Renovation and new entrance works for Tsuen Wan West Station | 80 | | Building Construction and Maintenance | Early civil engineering works for public housing development projects | 18 | | Multiple Categories | Term contracts for outdoor cable construction, telecommunications network civil engineering, etc | — (No fixed amount) | [Management Discussion and Analysis](index=14&type=section&id=Management%20Discussion%20and%20Analysis) [Business and Financial Review](index=14&type=section&id=Business%20and%20Financial%20Review) The Group's revenue declined 63.3% to HK$743 million, resulting in a HK$704 million loss, primarily due to an 81.3% sales drop in the automotive engine business and related impairments, while civil engineering revenue also decreased FY2018 Performance Overview (HKD millions) | Indicator | FY2018 | FY2017 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | 743.4 | 2,026.6 | -63.3% | | Gross Profit | 11.8 | 189.0 | -93.8% | | (Loss)/Profit Attributable to Owners | (703.8) | 37.7 | Shift from Profit to Loss | - Automotive engine business revenue plummeted from **HK$1,478 million to HK$277 million**, with average monthly production decreasing by **85.5%**, and gross margin (excluding intangible asset amortization) falling from **15.8% to 9.4%**[57](index=57&type=chunk)[58](index=58&type=chunk)[61](index=61&type=chunk) - Civil engineering and construction business revenue was **HK$467 million**, a **14.8% year-on-year decrease**, comprising HK$390 million from civil engineering and HK$77 million from building construction and maintenance[60](index=60&type=chunk)[62](index=62&type=chunk) - As of year-end, the civil engineering and construction business had **13 significant ongoing projects** with a total value of uncompleted works of approximately **HK$311 million**[65](index=65&type=chunk) [Prospect](index=17&type=section&id=Prospect) The Group maintains a cautious 2019 outlook, expecting automotive engine demand to remain below 2017 levels despite client recovery, while the construction business faces ongoing challenges, prompting focus on cost control and diversification - The China Association of Automobile Manufacturers believes the slowdown in the automotive market may require approximately **three years to recover**, with 2019 passenger vehicle sales expected to be similar to 2018[65](index=65&type=chunk) - The Chinese government has introduced several policies to stimulate automotive consumption, including orderly promotion of old vehicle scrapping and replacement, and encouraging vehicle upgrades in rural areas, which are expected to positively impact the automotive engine business[68](index=68&type=chunk)[71](index=71&type=chunk) - The largest automotive manufacturing client signed a five-party agreement, secured funding support, and resumed production on **December 20, 2018**, with full recovery anticipated in the first half of 2019[69](index=69&type=chunk)[71](index=71&type=chunk) - The Group will continue to strengthen cost control, streamline operations, and actively seek opportunities to develop new product lines and focus on R&D to enhance market penetration and brand recognition[75](index=75&type=chunk)[78](index=78&type=chunk) [Capital Structure, Financial Resources, Liquidity and Gearing](index=20&type=section&id=Capital%20Structure%2C%20Financial%20Resources%2C%20Liquidity%20and%20Gearing) By end-2018, the Group's financial position significantly deteriorated, shifting from HK$703 million net assets to HK$93 million net liabilities, with cash down 60.7% and total assets decreasing 47.9%, rendering the gearing ratio inapplicable Financial Position Overview (HKD millions) | Indicator | December 31, 2018 | December 31, 2017 | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 27.0 | 68.6 | -60.7% | | Total Assets | 1,307.4 | 2,509.6 | -47.9% | | Total Liabilities | 1,400.3 | 1,806.9 | -22.5% | | Net Current Assets | 130.7 | 171.3 | -23.7% | | Net (Liabilities)/Assets | (93.0) | 702.6 | Shift from Positive to Negative | | Current Ratio | 1.3 | 1.1 | +0.2 | | Gearing Ratio | Not Applicable | 119.5% | - | - The maturity dates for both convertible bonds and promissory notes have been extended to **February 4, 2020**; as of year-end, the carrying value of convertible bonds was approximately **HK$728 million**, and promissory notes approximately **HK$512 million**[84](index=84&type=chunk) [Convertible Bonds](index=23&type=section&id=Convertible%20Bonds) In 2016, the company issued HK$390 million zero-coupon convertible bonds for an acquisition, with maturity extended to February 2020, and all escrowed bonds released to the vendor after the automotive engine business met its profit guarantee - The zero-coupon convertible bonds, with a principal amount of **HK$390 million**, had their maturity date extended to **February 4, 2020**, with a conversion price of **HK$2.00 per share**[89](index=89&type=chunk)[90](index=90&type=chunk) - All bonds held in escrow were released to the vendor on **August 6, 2018**, as the acquired automotive engine business achieved its guaranteed profit target of **HK$400 million** (actual profit approximately HK$449 million)[93](index=93&type=chunk) [Biographical Details of Directors and Senior Management](index=27&type=section&id=Biographical%20Details%20of%20Directors%20and%20Senior%20Management) [Directors and Senior Management](index=27&type=section&id=Directors%20and%20Senior%20Management) This section details the personal resumes, professional backgrounds, and industry experience of the company's board members and senior management team, comprising seasoned professionals across various fields - Executive Directors Mr. Lam Wah and Mr. Xing Bin possess extensive experience in accounting, finance, and financial fields, respectively[110](index=110&type=chunk) - Non-executive Director Mr. Wong Hin Shing has over **24 years of experience** in investment banking and holds positions in several listed companies[112](index=112&type=chunk) - Independent Non-executive Directors Mr. Yip Tai Him, Mr. Leung Tsz Wing, and Mr. Cheung Kwok Cheong possess professional qualifications and deep backgrounds in accounting, asset management, and law, respectively[114](index=114&type=chunk)[116](index=116&type=chunk) - The senior management team comprises Mr. Lai Kon Ting (Contracts Manager), Mr. Wong Kin Sang (Project Manager), and Mr. Wong Kin Yan (Environmental and Quality Manager), all with over **10 years of experience** in the construction and engineering sectors[119](index=119&type=chunk) [Corporate Governance Report](index=32&type=section&id=Corporate%20Governance%20Report) [Corporate Governance Practices and The Board](index=32&type=section&id=Corporate%20Governance%20Practices%20and%20The%20Board) The company adheres to high corporate governance standards, largely complying with the Stock Exchange's Code, though deviations included temporary Chairman/CEO vacancies and non-executive directors without fixed terms, with the six-member board meeting independence and professional qualification requirements - Deviations from the Corporate Governance Code during the reporting period included: - **Code Provision A.2.1**: The positions of Chairman and Chief Executive Officer were vacant for part of the period, with their functions jointly performed by all executive directors[123](index=123&type=chunk)[124](index=124&type=chunk) - **Code Provision A.4.1**: Non-executive directors and independent non-executive directors did not have specific terms of appointment[123](index=123&type=chunk)[124](index=124&type=chunk) - **Code Provision E.1.2**: The then-Chairman of the Board did not attend the 2018 Annual General Meeting[129](index=129&type=chunk) - The Board comprises **2 executive directors, 1 non-executive director, and 3 independent non-executive directors**, meeting the Listing Rules' requirements for the number of independent non-executive directors and their representation of at least one-third of the Board[133](index=133&type=chunk)[141](index=141&type=chunk) [Board Committees](index=40&type=section&id=Board%20Committees) The company established Audit, Remuneration, and Nomination Committees, all composed of independent non-executive directors, to oversee financial reporting, internal controls, compensation policies, and board structure and appointments - The Audit Committee, composed of **three independent non-executive directors**, is responsible for overseeing the integrity of financial reporting, reviewing financial controls, internal controls, and risk management systems, and advising the Board on the appointment of external auditors[175](index=175&type=chunk) - The Remuneration Committee, composed of **three independent non-executive directors**, primarily advises the Board on the remuneration policy and structure for directors and senior management[182](index=182&type=chunk)[183](index=183&type=chunk) - The Nomination Committee, composed of **three independent non-executive directors**, is responsible for reviewing the Board's structure, size, composition, and diversity at least annually, and identifying suitable candidates for directorships[187](index=187&type=chunk)[188](index=188&type=chunk) [Risk Management and Internal Control](index=48&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board is responsible for maintaining sound risk management and internal control systems, conducting annual effectiveness reviews covering all material controls, and deemed the Group's systems effective and adequate after the 2018 review - The Board is responsible for maintaining and reviewing the effectiveness of the Group's risk management and internal control systems at least annually[213](index=213&type=chunk)[217](index=217&type=chunk) - Following the review for the 2018 financial year, the Board concluded that the Group's risk management and internal control systems were effective and adequate, and that the resources, qualifications, and experience of staff in accounting and financial reporting functions were sufficient[214](index=214&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Shareholders' Rights and Communication](index=49&type=section&id=Shareholders'%20Rights%20and%20Communication) The company prioritizes effective shareholder communication through various channels, outlining rights including the procedure for calling an EGM by shareholders holding at least 10% of paid-up capital, and has adopted a dividend policy balancing returns with future funding needs - Shareholders holding not less than **one-tenth of the company's paid-up capital** have the right to request the Board to convene an extraordinary general meeting[228](index=228&type=chunk)[232](index=232&type=chunk) - The company has adopted a dividend policy aimed at allowing shareholders to share in the company's profits while ensuring sufficient reserves are retained to support future growth, with dividend declarations considering the Group's financial position, liquidity, and capital needs[236](index=236&type=chunk)[239](index=239&type=chunk) [Report of the Directors](index=52&type=section&id=Report%20of%20the%20Directors) [Principal Activities and Business Review](index=52&type=section&id=Principal%20Activities%20and%20Business%20Review) The company primarily engages in investment holding, with subsidiaries in automotive engine business and civil engineering, adhering to regulations and stakeholder relations, and the Board does not recommend a final dividend for FY2018 - The Group's core businesses are the development, production, and sale of automotive engines, as well as civil engineering and building construction and maintenance[244](index=244&type=chunk) - The Board does not recommend the payment of a final dividend for the 2018 financial year[249](index=249&type=chunk)[254](index=254&type=chunk) [Major Customers and Suppliers](index=54&type=section&id=Major%20Customers%20and%20Suppliers) The Group exhibits high customer and supplier concentration, with the largest customer accounting for 22.3% of total revenue and the top five for 74.4% in 2018, indicating potential risks Customer and Supplier Concentration | Concentration Indicator | FY2018 | FY2017 | | :--- | :--- | :--- | | Largest Customer as % of Total Revenue | 22.3% | 36.2% | | Top Five Customers as % of Total Revenue | 74.4% | 84.8% | | Largest Supplier as % of Total Cost of Sales | 20.7% | 2.8% | | Top Five Suppliers as % of Total Cost of Sales | 46.6% | 9.5% | [Share Capital and Substantial Shareholders](index=56&type=section&id=Share%20Capital%20and%20Substantial%20Shareholders) This section outlines the company's share capital structure, share option scheme, and substantial shareholder holdings, with 200 million issued shares and no outstanding options, and Youth Force holding 75% while Power Expert holds a potential 97.5% via convertible bonds - The company adopted a share option scheme in **March 2016**, valid until **March 2026**; as of the end of 2018, no share options were granted or remained unexercised[292](index=292&type=chunk)[299](index=299&type=chunk)[303](index=303&type=chunk) Substantial Shareholder Holdings (as of December 31, 2018) | Shareholder Name | Nature of Interest | Number of Ordinary Shares/Relevant Shares Held | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Youth Force (controlled by Mr. Jiang Jianhui and Ms. Wu Peici) | Beneficial Owner | 150,000,000 | 75.0% | | Power Expert (controlled by Ms. Weng Guangmin) | Shares related to Convertible Bonds | 195,000,000 | 97.5% | [Environmental, Social and Governance Report](index=65&type=section&id=Environmental%2C%20Social%20and%20Governance%20Report) [Environmental Responsibility](index=68&type=section&id=Environmental%20Responsibility) The Group is committed to environmentally responsible operations, focusing on its Chongqing automotive engine production and Hong Kong civil engineering businesses, complying with regulations and implementing various environmental measures, resulting in reduced GHG emissions and resource consumption - The Group's civil engineering and construction business has established an environmental management system compliant with **ISO 14001 certification**[339](index=339&type=chunk)[342](index=342&type=chunk) - Greenhouse gas emissions (Scope 3) related to business travel from the Hong Kong head office decreased by **56% year-on-year** through measures like encouraging video conferencing and carpooling[351](index=351&type=chunk)[352](index=352&type=chunk)[355](index=355&type=chunk) - Electricity consumption-related greenhouse gas emissions (Scope 2) at the Hong Kong head office and engineering business head office decreased by **8% and 5%**, respectively, through energy-saving measures[364](index=364&type=chunk) - The Group promoted paperless office practices, resulting in a **2% year-on-year reduction** in total paper consumption at the Hong Kong head office and engineering business head office[371](index=371&type=chunk)[372](index=372&type=chunk) [Social Responsibility](index=78&type=section&id=Social%20Responsibility) The Group values employees, providing a fair, non-discriminatory work environment, adhering to labor laws, and prohibiting child/forced labor, with total employees decreasing to 611, and its construction business achieving OHSAS 18001 certification, reporting zero fatalities at Chongqing and reduced injuries in Hong Kong - As of the end of 2018, the Group's total number of employees was **611**, a significant decrease from **896** at the end of 2017[377](index=377&type=chunk)[385](index=385&type=chunk) - The Group's occupational health and safety management system has obtained **OHSAS 18001 certification**, and comprehensive safety training is provided to employees and subcontractor workers[395](index=395&type=chunk)[397](index=397&type=chunk) Safety Performance Summary | Business Location | Indicator | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Chongqing Production Base** | Fatalities | 0 | 0 | | | Lost Time Injury Cases | 0 | 1 | | **Hong Kong Civil Engineering & Construction Business** | Fatalities | 0 | 1 | | | Lost Time Injury Cases | 7 | 10 | - The Group strictly adheres to labor standards, prohibiting child labor and forced labor, with no related violations reported in both 2017 and 2018[408](index=408&type=chunk)[413](index=413&type=chunk)[416](index=416&type=chunk) [Operating Practices](index=87&type=section&id=Operating%20Practices) The Group emphasizes supply chain management, product quality, and anti-corruption, implementing strict supplier screening, rigorous quality control for automotive engines and ISO 9001 for civil engineering, and has an anti-corruption policy with no reported cases - In the automotive engine supply chain, purchases from **7 major suppliers** accounted for **35%** of total procurement in 2018[422](index=422&type=chunk) - The civil engineering and construction business's quality management system complies with **ISO 9001 standards**, ensuring the delivery of high-quality projects to clients[441](index=441&type=chunk)[445](index=445&type=chunk) - The Group is committed to protecting the personal data and intellectual property of its customers and suppliers[443](index=443&type=chunk)[445](index=445&type=chunk) - The Group has implemented an anti-corruption policy and reported no bribery or corruption cases in both 2017 and 2018[444](index=444&type=chunk)[446](index=446&type=chunk) [Independent Auditor's Report](index=94&type=section&id=Independent%20Auditor's%20Report) [Auditor's Opinion and Key Matters](index=94&type=section&id=Auditor's%20Opinion%20and%20Key%20Matters) The auditor issued an unmodified opinion on the Group's 2018 financial statements but highlighted a 'material uncertainty related to going concern' due to substantial loss and net liabilities, with key audit matters including asset impairment, receivables recoverability, and construction revenue recognition - The auditor issued an **unmodified opinion**, stating that the financial statements present a true and fair view of the Group's financial position[456](index=456&type=chunk) - **Material Uncertainty Related to Going Concern**: The report draws attention to the Group's net loss of **HK$704 million** and net liabilities of **HK$93 million** in 2018, which may cast significant doubt on the Group's ability to continue as a going concern, though the auditor's opinion was not modified in respect of this matter[459](index=459&type=chunk)[463](index=463&type=chunk) - Key audit matters included: - **Asset Impairment Assessment**: Evaluation of impairment for goodwill, intangible assets, and property, plant, and equipment related to the automotive engine business, involving significant management judgment[466](index=466&type=chunk)[471](index=471&type=chunk)[476](index=476&type=chunk) - **Recoverability of Receivables**: Assessment of the recoverability of trade and bills receivables, which constitute a significant portion of total assets[466](index=466&type=chunk)[471](index=471&type=chunk)[476](index=476&type=chunk) - **Revenue Recognition for Construction Contracts**: Auditing of construction contract revenue recognized over time using the output method, involving significant estimates of budgeted costs[466](index=466&type=chunk)[471](index=471&type=chunk)[476](index=476&type=chunk) [Consolidated Financial Statements](index=106&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=106&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In FY2018, the Group's revenue significantly decreased by 63.3% to HK$743 million, with gross profit plummeting, resulting in a pre-tax loss of HK$770 million and a loss attributable to owners of HK$704 million, with basic loss per share at HK$351.9 cents Consolidated Statement of Profit or Loss Summary (HKD thousands) | Item | FY2018 | FY2017 | | :--- | :--- | :--- | | Revenue | 743,414 | 2,026,599 | | Gross Profit | 11,782 | 188,950 | | Impairment of Goodwill | (174,933) | — | | Impairment of Intangible Assets | (430,928) | — | | (Loss)/Profit Before Tax | (769,826) | 69,892 | | (Loss)/Profit Attributable to Owners of the Parent | (703,767) | 37,713 | | Basic (Loss)/Earnings Per Share (HK cents) | (351.9) | 18.9 | [Consolidated Statement of Financial Position](index=108&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) By end-2018, the Group's financial position significantly deteriorated, with total assets shrinking from HK$2,510 million to HK$1,307 million due to impairments, and critically shifting from HK$703 million net assets to HK$92.96 million net liabilities, indicating insolvency Consolidated Statement of Financial Position Summary (HKD thousands) | Item | December 31, 2018 | December 31, 2017 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 681,157 | 1,099,955 | | Current Assets | 626,233 | 1,409,597 | | **Total Assets** | **1,307,390** | **2,509,552** | | **Liabilities and Equity** | | | | Current Liabilities | 495,519 | 1,238,327 | | Non-current Liabilities | 904,830 | 568,611 | | **Total Liabilities** | **1,400,349** | **1,806,938** | | **Net (Liabilities)/Assets** | **(92,959)** | **702,614** | [Consolidated Statement of Cash Flows](index=111&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In FY2018, the Group's operating activities resulted in a net cash outflow of HK$44.29 million, contrasting with last year's net inflow, leading to a net decrease in cash and cash equivalents of HK$28.22 million for the year, with an ending balance of HK$21.71 million Consolidated Statement of Cash Flows Summary (HKD thousands) | Item | FY2018 | FY2017 | | :--- | :--- | :--- | | Net Cash Flows (Used in)/Generated from Operating Activities | (44,292) | 15,403 | | Net Cash Flows Used in Investing Activities | (2,486) | (2,132) | | Net Cash Flows Generated from Financing Activities | 18,557 | 26,433 | | Net (Decrease)/Increase in Cash and Cash Equivalents | (28,221) | 39,704 | | Cash and Cash Equivalents at Year-End | 21,706 | 68,623 | [Notes to Financial Statements](index=113&type=section&id=Notes%20to%20Financial%20Statements) The notes to the financial statements detail accounting policies, key estimates, and items, highlighting management's going concern basis despite losses and net liabilities, the impact of HKFRS 9 and 15 adoption, significant impairment of automotive engine-related assets, and disclosure of highly concentrated credit risk [Note 2: Basis of Presentation (Going Concern)](index=115&type=section&id=Note%202%3A%20Basis%20of%20Presentation%20%28Going%20Concern%29) - Despite recording a net loss of **HK$704 million** and having net liabilities of **HK$92.96 million** in 2018, the directors believe the Group can continue as a going concern, based on measures including: - Loan extensions obtained after the reporting period[535](index=535&type=chunk)[537](index=537&type=chunk) - Commitment of continuous financial support from the major shareholder[535](index=535&type=chunk)[537](index=537&type=chunk) - A **5-year procurement plan** signed with a major customer[535](index=535&type=chunk)[537](index=537&type=chunk) - The largest customer of the automotive engine business securing funding to resume normal production[535](index=535&type=chunk)[537](index=537&type=chunk) - Implementation of various cost control measures[535](index=535&type=chunk)[537](index=537&type=chunk) [Note 15 & 16: Impairment of Goodwill and Intangible Assets](index=191&type=section&id=Note%2015%20%26%2016%3A%20Impairment%20of%20Goodwill%20and%20Intangible%20Assets) - The Group conducted impairment tests on the automotive engine business cash-generating unit due to its financial performance being significantly below expectations[836](index=836&type=chunk) Asset Impairment Details (HKD thousands) | Asset Category | Impairment Amount | | :--- | :--- | | Goodwill (Note 15) | 174,933 | | Intangible Assets (Customer Contracts) (Note 16) | 430,928 | [Note 21: Accounts and Bills Receivables](index=199&type=section&id=Note%2021%3A%20Accounts%20and%20Bills%20Receivables) - Total trade and bills receivables (net of impairment) amounted to **HK$517 million**, a significant decrease from **HK$1,193 million** last year, with **HK$256 million** reclassified as non-current assets due to renegotiated repayment plans with customers[864](index=864&type=chunk)[867](index=867&type=chunk) - The Group recognized an impairment provision of **HK$144 million** based on the newly adopted HKFRS 9 expected credit loss model[876](index=876&type=chunk) - Credit risk is highly concentrated, with the largest customer accounting for **46%** of total receivables and the top five customers for **85%**[990](index=990&type=chunk) [Note 41: Financial Risk Management](index=224&type=section&id=Note%2041%3A%20Financial%20Risk%20Management) - The Group's primary financial risks include foreign currency risk, credit risk, and liquidity risk; management considers foreign currency risk not significant, credit risk mainly arises from trade receivables and is highly concentrated, and liquidity risk is managed by monitoring cash flows and maintaining financing facilities[985](index=985&type=chunk)[990](index=990&type=chunk) - The gearing ratio was not applicable as the Group was in a net liability position at the end of 2018, compared to **119%** in 2017[1019](index=1019&type=chunk) [Five-Year Financial Summary](index=233&type=section&id=Five-Year%20Financial%20Summary) [Five-Year Financial Summary](index=233&type=section&id=Five-Year%20Financial%20Summary) The five-year financial summary illustrates the Group's performance and financial position changes since 2015, showing revenue peaks in 2016-2017, a sharp decline and substantial loss in 2018, and the first instance of asset deficiency Five-Year Performance Summary (HKD thousands) | Fiscal Period | Revenue | (Loss)/Profit Before Tax | (Loss)/Profit for the Year/Period | | :--- | :--- | :--- | :--- | | **2018** | 743,414 | (769,826) | (703,767) | | **2017** | 2,026,599 | 69,892 | 37,713 | | **2016 (9 months)** | 2,145,926 | 124,783 | 90,152 | | **2016** | 609,335 | (32,349) | (33,123) | | **2015** | 702,856 | 19,052 | 15,874 | Five-Year Assets, Liabilities and Equity Summary (HKD thousands) | Year-End Date | Total Assets | Total Liabilities | (Asset Deficiency)/Total Equity | | :--- | :--- | :--- | :--- | | **December 31, 2018** | 1,307,390 | (1,400,349) | (92,959) | | **December 31, 2017** | 2,509,552 | (1,806,938) | 702,614 | | **December 31, 2016** | 2,594,815 | (2,043,443) | 551,372 | | **March 31, 2016** | 1,702,936 | (1,169,985) | 532,951 | | **March 31, 2015** | 376,040 | (149,913) | 226,127 |