CORPORATE INFORMATION This chapter provides basic corporate information for Hong Kong Education (International) Investment Group Limited and its subsidiaries, including executive directors, independent non-executive directors, company secretary, and auditor - The company's board members include Tsang Ka Wai and Wong King Hoi (Executive Directors), and Zuo Ying Yi, Leung Kei Chi, Fan Tak Wai (Independent Non-executive Directors); Yip Chung Yin resigned as an Executive Director on February 24, 20206 - The company's auditor is BDO Limited6 - The company's stock code is 1082, and its website is www.hkeduii.com[9](index=9&type=chunk) MANAGEMENT DISCUSSION AND ANALYSIS The Group faced a challenging operating environment in the current year, with a significant revenue decline and expanded loss attributable to owners, primarily due to impairment losses on goodwill, loan receivables, and financial assets Key Financial Performance for FY2020 | Metric | 2020 (HK$ million) | 2019 (HK$ million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 67.24 | 108.94 | -38.28 | | Loss attributable to owners of the Company | 107.19 | 77.44 | +38.42 | | Loss per share (HK$) | 0.20 | 0.14 | +42.86 | - The expanded loss was primarily due to goodwill impairment loss of approximately HK$18.67 million, impairment loss on other loan receivables of approximately HK$18.25 million, impairment loss on loan receivables of approximately HK$6.57 million, and fair value change loss on financial assets at fair value through profit or loss of approximately HK$10.75 million1416 - The Group actively adjusted its business model, shifting more classes to online teaching and closing 6 secondary school tutorial centers to reallocate resources for online learning infrastructure development1921 BUSINESS REVIEW The Group's educational services were severely impacted by social events and the COVID-19 pandemic, leading to significant declines in enrollment and revenue across all segments Provision of Private Educational Services The Group's private educational services segment faced severe challenges this year, with significant revenue declines across all course types, leading to center closures and a shift towards online teaching Overview of Private Educational Services Revenue | Service Type | 2020 Revenue (HK$ million) | 2019 Revenue (HK$ million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Secondary School Tutorial Services | 28.76 | 53.88 | -46.63 | | English Training and Exam Preparation Courses | 2.27 | 9.23 | -75.39 | | Primary School Tutoring Services, Arts & Talents Courses, and Exam Preparation Courses (including franchise income) | 21.28 | 24.26 | -12.30 | | Dance Teaching Services | 10.89 | 17.57 | -38.03 | - Secondary school tutorial services saw a significant decrease in enrollment due to social events and COVID-19, leading to the closure of 6 "Modern Education" tutorial centers and a shift to online teaching1921 - Despite reduced enrollment, the Group remains optimistic about the market demand for primary school tutoring services and plans to expand its network through a franchise program, with 6 new franchisees already signed35363738 - Dance teaching services were severely impacted by the COVID-19 pandemic, resulting in the closure of 5 "Rosanna Wong Ballet & Jazz Schools" to control costs, and the Group is developing a diversified service strategy4143 Significant Investment The Group's cautious diversified investment strategy faced market volatility, resulting in fair value losses on financial assets, while investments in Convoy Global Holdings Limited and China Everbright Financial Holdings Limited presented uncertainties and strategic shifts Overview of Financial Assets at Fair Value Through Profit or Loss (as of June 30, 2020) | Investment Overview | Fair Value (HK$ thousand) | Approximate % of Group's Audited Total Assets | | :--- | :--- | :--- | | Convoy Global Holdings Limited (1019) | 30,321 | 20.15% | | Other Listed Shares* | 18,227 | 12.11% | | Total | 48,548 | 32.26% | - Shares of Convoy Global Holdings Limited have been suspended from trading since December 7, 2017, and face a delisting decision from the Stock Exchange, for which Convoy has filed a review request6063 - The equity interest in China Everbright Financial Holdings Limited was diluted from 9.49% to 8.41%, but its management is actively undergoing business transformation and developing financial service application technologies, with a technical application for the securities brokerage segment expected to launch in the second half of 202067697174 - Early education joint venture, Wealthy Harvest Hong Kong Development Limited, experienced a revenue decrease of approximately 28.20% compared to the previous fiscal year due to COVID-19 class suspensions7376 Money Lending Business The Group's money lending business, operated by a wholly-owned subsidiary, generated stable loan interest income of approximately HK$4.05 million, with total loan receivables of approximately HK$33.85 million as of June 30, 2020 Key Data for Money Lending Business | Metric | 2020 (HK$ million) | 2019 (HK$ million) | | :--- | :--- | :--- | | Loan Interest Income | 4.05 | 4.01 | | Total Principal Amount of Loan Receivables (period-end) | 33.85 | 40.30 | - The Group's money lending business is operated by its indirect wholly-owned subsidiary, Honford Finance Limited, which holds a money lender's license and complies with relevant regulations7984 FINANCIAL REVIEW The Group's total revenue significantly decreased by 38.28% to approximately HK$67.24 million, primarily due to reduced private educational services income, leading to an expanded loss attributable to owners of approximately HK$107.19 million Overview of Revenue and Loss for FY2020 | Metric | 2020 (HK$ million) | 2019 (HK$ million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 67.24 | 108.94 | -38.28 | | Other income, gains and losses, net | -42.66 | 0.41 | N/A (from gain to loss) | | Staff costs | 41.10 | 51.29 | -19.87 | | Tutor subcontracting fees | 12.61 | 22.34 | -43.56 | | Lease payments | 25.55 | 42.00 | -39.17 | | Marketing and promotion expenses | 2.50 | 5.27 | -52.45 | | Finance costs | 1.52 | 0.04 | +3700.00 | | Loss attributable to owners of the Company | 107.19 | 77.44 | +38.42 | - Other income, gains and losses, net recorded a net loss of approximately HK$42.66 million, primarily due to goodwill impairment loss of approximately HK$18.67 million, impairment loss on other loan receivables of approximately HK$18.25 million, impairment loss on loan receivables of approximately HK$6.57 million, and loss on write-off of property, plant and equipment of approximately HK$4.60 million95 - Finance costs significantly increased to approximately HK$1.52 million, with approximately HK$0.88 million attributed to finance costs recognized on lease liabilities upon initial adoption of HKFRS 16114117 - Other loan receivables, including balance payments and convertible bonds issued by Junefield Department Store Group Limited, both recognized impairment losses, and legal action is being considered to recover overdue amounts121122123124125129130132 OUTLOOK The private education sector faces ongoing challenges, prompting the Group to adapt business strategies, strengthen core operations, and accelerate the transition to online learning, while exploring new business collaborations and M&A opportunities - The Group will accelerate its transition from traditional face-to-face teaching to online courses, focusing on strengthening online services for long-term sustainability135139 - Secondary school tutorial and primary school tutoring services remain the Group's primary revenue sources, with primary school tutoring services continuing to explore new potential franchisees and expand its business network135139 - The Group's management team will explore potential education-related business partnerships and M&A opportunities to achieve business diversification and maximize returns136140 LIQUIDITY AND FINANCIAL RESOURCES As of June 30, 2020, the Group's cash and cash equivalents decreased to approximately HK$5.44 million, with a lower current ratio of 2.99 times and an increased gearing ratio of 28.20% Overview of Liquidity and Financial Resources | Metric | June 30, 2020 (HK$ million) | June 30, 2019 (HK$ million) | | :--- | :--- | :--- | | Cash and cash equivalents | 5.44 | 6.84 | | Current Ratio (times) | 2.99 | 5.26 | | Gearing Ratio (%) | 28.20 | 14.03 | - Other borrowings from independent third parties, amounting to approximately HK$7.82 million, are unsecured, repayable within one year, and bear an annual interest rate of 12%142148 Impairment Assessment on Other Loan Receivables and Other Receivables The Group recognized impairment losses of approximately HK$18.25 million on other loan receivables and a net impairment loss of approximately HK$1.26 million on other receivables, based on expected credit loss assessments under HKFRS 9 Impairment Losses on Receivables for FY2020 | Impairment Type | Amount (HK$ million) | | :--- | :--- | | Impairment loss on other loan receivables | 18.25 | | - Balance payments | 18.00 | | - Outstanding balance of convertible bonds | 0.25 | | Net impairment loss on other receivables | 1.26 | | - Reversal for private educational services | -2.49 | | - Accrued interest on balance payments | 3.12 | | - Accumulated default interest on convertible bonds | 0.73 | - Impairment losses were recognized based on the Expected Credit Loss (ECL) assessment under HKFRS 9, with management deeming the recoverability of certain outstanding balances to be minimal146147149 Impairment Assessment on Goodwill The Group recognized an impairment loss of approximately HK$18.67 million on goodwill for the dance teaching services cash-generating unit, determined by an independent valuation using the discounted cash flow method Goodwill Impairment Loss | Cash Generating Unit (CGU) | 2020 Impairment Loss (HK$ million) | 2019 Impairment Loss (HK$ million) | | :--- | :--- | :--- | | Dance Teaching Services (CGU 2) | 18.67 | 1.67 | - Goodwill recoverability assessment is based on future business prospects and projected performance, using the discounted cash flow method to calculate value in use, considering the volatility of the dance teaching services business in Hong Kong's current economic environment153156 - Key assumptions used in calculating the recoverable amount include an estimated weighted average growth rate of 3% after the five-year period and a pre-tax discount rate of 14%1531561370 CAPITAL STRUCTURE AND TREASURY POLICIES The Group maintains a prudent treasury policy, funding operations through internal resources and equity/debt financing, while regularly reviewing its capital structure to balance costs and risks - The Group primarily funds its operations and business development through internally generated resources and equity/debt financing activities154157 - Management regularly reviews the capital structure, considering the cost of capital and risks associated with various capital categories to balance the overall capital structure154157 EXPOSURE TO FOREIGN EXCHANGE RISK The Group's foreign exchange risk is minimal as its income and expenses are primarily denominated in Hong Kong Dollars, with no hedging arrangements currently in place - The Group's income and expenses are primarily settled in Hong Kong Dollars, resulting in extremely low foreign exchange risk158 - No hedging or other arrangements have been implemented to mitigate currency risk158 EMPLOYEE AND REMUNERATION POLICIES As of June 30, 2020, the Group had 136 employees, offering competitive remuneration, comprehensive benefits, and professional development opportunities, with no share options granted during the year Number of Employees | Year | Total Employees | | :--- | :--- | | 2020年6月30日 | 136 | | 2019年6月30日 | 216 | - The Group offers competitive remuneration packages, including discretionary bonuses, along with comprehensive benefits and career development opportunities160167 - No share options were granted under the share option scheme during the current year161167 CONTINGENT LIABILITIES As of June 30, 2020, and 2019, the Group had no significant contingent liabilities - As of June 30, 2020, and 2019, the Group had no significant contingent liabilities162168 CAPITAL COMMITMENTS As of June 30, 2020, and 2019, the Group had no contracted capital commitments not provided for in the consolidated financial statements - As of June 30, 2020, and 2019, the Group had no contracted capital commitments not provided for in the consolidated financial statements163169 CHARGES ON THE GROUP'S ASSETS As of June 30, 2020, and 2019, the Group had not pledged any assets or any general banking facilities - As of June 30, 2020, and 2019, the Group had not pledged any assets or any general banking facilities164170 Purchase, Sale or Redemption of the Company's Listed Securities During the current year, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the current year, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities165171 Material Acquisitions and Disposals The Group had no material acquisitions or disposals of subsidiaries, associates, or joint ventures during the year, but is considering legal action to recover an outstanding loan receivable from 2018 - During the current year, the Group had no material acquisitions or disposals of subsidiaries, associates, or joint ventures166172 - Of the loan sold in 2018, approximately HK$28 million in balance payments and accrued interest remained outstanding as of June 30, 2020, with an impairment loss of HK$18 million recognized, and the Group is considering legal action122125177180 Advance to an Entity The Group sold a loan receivable in September 2018, but approximately HK$28 million in balance payments and accrued interest remained outstanding as of June 30, 2020, leading to an HK$18 million impairment loss and consideration of legal action - In September 2018, the Group sold a loan receivable for a consideration of HK$48 million, of which HK$43 million was for balance payments175176179180 - As of June 30, 2020, HK$28 million of the balance payments and accrued interest remained unpaid, and an impairment loss of HK$18 million was recognized122125177180 - Due to the borrower's impaired repayment ability affected by Hong Kong social events and COVID-19, the Group is considering legal action to recover the overdue amounts123125 Future Plans for Material Investment or Capital Assets As of June 30, 2020, the Group had no other plans for material investments or capital assets beyond those disclosed in this annual report - As of June 30, 2020, the Group had no other plans for material investments or capital assets beyond those disclosed in this annual report178181 PROFILES OF DIRECTORS AND SENIOR MANAGEMENT This chapter provides biographical details of the Group's executive directors, independent non-executive directors, and senior management, highlighting their extensive experience and professional qualifications in finance, investment, accounting, and law - Executive Directors Mr. Tsang Ka Wai and Mr. Wong King Hoi, both 33 years old, hold Bachelor's degrees in Economics and Finance and Bachelor's degrees in Nursing, respectively, with years of experience in finance and investment184185188 - Independent Non-executive Directors Ms. Zuo Ying Yi, Mr. Leung Kei Chi, and Mr. Fan Tak Wai possess professional qualifications and extensive experience in Chartered Financial Analysis, Chartered Accountancy, and law, respectively186187189192194 - Company Secretary and Financial Controller Mr. Lam Yik Tung holds a Bachelor of Arts and a Master of Business degree, with over 18 years of experience in accounting and finance193195 REPORT OF THE DIRECTORS The Directors' Report outlines the Group's business performance, key risks, environmental policies, legal compliance, stakeholder relationships, and financial position for the year, with no final dividend recommended due to a recorded loss - The Company's principal business is investment holding, with its main subsidiaries engaged in providing private educational services, securities investment, and money lending business199203 - The Group faces key risks and uncertainties including talent acquisition, business interruption, competition, intellectual property infringement, and COVID-19 health risks201205207210211212215219 - The Group is committed to environmental sustainability, promoting environmental awareness and green office initiatives217218221 - The Group has complied with relevant laws and regulations, including the Listing Rules, Securities and Futures Ordinance, Personal Data (Privacy) Ordinance, Copyright Ordinance, Education Ordinance, Trade Descriptions Ordinance, and Employment Ordinance224225226228 - The Group recorded a loss for the current year, and the Board does not recommend the payment of a final dividend246239 - As of June 30, 2020, the Group's total number of employees was 136, a decrease from 216 in 2019160167 - During the current year, tutor subcontracting fees paid/payable to the Group's top five tutors accounted for 64.17% of the total, with the top tutor accounting for 32.21%258263 - No share options were granted, exercised, cancelled, or lapsed during the current year304310 - Subsequent to the reporting period, the Company completed the placement of 33,500,000 new shares on August 14, 2020, raising net proceeds of approximately HK$29.40 million15901592 Principal Activities The Company's principal business is investment holding, with its main subsidiaries primarily engaged in providing private educational services, investing in securities, and money lending business as of June 30, 2020 - The Company's principal business is investment holding199203 - Its main subsidiaries are engaged in providing private educational services, investing in securities, and money lending business199203 Business Review This section reviews the Group's business performance for the year, discussing significant factors affecting financial performance and business prospects, including talent acquisition, business interruption, competition, infringement risks, and COVID-19 health risks - The Group faces talent acquisition risks, requiring continuous recruitment and retention of quality tutors to reduce revenue concentration201205 - Business interruption risks primarily stem from education center lease renewals and relocations; the Group will promptly renew leases and prepare contingency plans207210 - Increased competitor risk is addressed by maintaining a high-quality teaching team and strong brand image to enhance competitive advantage208211 - Intellectual property infringement risk is managed by monitoring legal matters and updating internal policies to prevent violations209212 - The COVID-19 pandemic posed health risks, leading to education center closures; the Group implemented measures such as temperature checks, hygiene guidelines, enhanced cleaning, and mask provision to combat the pandemic215219 - The Group is committed to environmental sustainability, promoting green office initiatives such as smart electricity use, resource conservation, waste reduction, and recycling217218221 - The Group has complied with various laws and regulations, including the Listing Rules, Securities and Futures Ordinance, Personal Data (Privacy) Ordinance, Copyright Ordinance, Education Ordinance, Trade Descriptions Ordinance, and Employment Ordinance224225226228 - The Group values its relationships with employees, customers, and suppliers, offering competitive remuneration, quality services, and fostering long-term cooperation230231234235237244 Results and Dividends The Group's results for the current year are disclosed in the consolidated financial statements, and the Board does not recommend the payment of a final dividend - The Group's results for the current year are disclosed in the consolidated financial statements on pages 103 to 104 of this annual report246239 - The Board does not recommend the payment of a final dividend for the current year (2019: nil)246239 Five-Year Financial Summary The five-year financial summary, presented on page 240 of this annual report, provides an overview of the Group's published consolidated results, assets, and liabilities for the past five financial years - An overview of the Group's published consolidated results and assets and liabilities for the past five financial years is presented on page 240 of this annual report247240 - This summary does not form part of the audited consolidated financial statements in this annual report247240 Donations During the current year, the Group's total charitable donations amounted to HK$23,688, a decrease from HK$31,950 in 2019 Charitable Donations | Year | Amount (HK$) | | :--- | :--- | | 2020 | 23,688 | | 2019 | 31,950 | Major Customers and Suppliers Revenue from the Group's top five customers accounted for less than 30% of total revenue, while tutor subcontracting fees showed high concentration, with the top five tutors accounting for 64.17% of the total - Revenue from the Group's top five customers collectively accounted for less than 30% of total revenue for the current year257262 Tutor Subcontracting Fee Concentration | Metric | 2020 (%) | 2019 (%) | | :--- | :--- | :--- | | Top five tutors' subcontracting fees as % of total | 64.17 | 56.47 | | Top tutor's subcontracting fees as % of total | 32.21 | 27.02 | - No directors, their close associates, or substantial shareholders were among the top five tutors258263 - The total contract value with the Group's other top five suppliers (excluding independent tutors) accounted for less than 30% of the total value of goods purchased for the current year265268 Directors The Board comprises executive directors Mr. Tsang Ka Wai and Mr. Wong King Hoi, and independent non-executive directors Ms. Zuo Ying Yi, Mr. Leung Kei Chi, and Mr. Fan Tak Wai, with Mr. Leung and Mr. Fan due for re-election at the upcoming AGM - Executive Directors include Mr. Tsang Ka Wai and Mr. Wong King Hoi; Mr. Yip Chung Yin resigned on February 24, 2020266269 - Independent Non-executive Directors include Ms. Zuo Ying Yi, Mr. Leung Kei Chi, and Mr. Fan Tak Wai266269 - Mr. Leung Kei Chi and Mr. Fan Tak Wai will retire by rotation at the upcoming Annual General Meeting and are eligible for re-election266269 Independence of Independent Non-Executive Directors The Company has received annual confirmations of independence from all independent non-executive directors, confirming their independent status in accordance with Listing Rule 3.13 - The Company has received annual confirmation letters from Ms. Zuo Ying Yi, Mr. Leung Kei Chi, and Mr. Fan Tak Wai regarding their independence267270 - The Company considers these directors to be independent267270 Directors' Service Contracts Executive Directors have three-year service contracts, and Independent Non-executive Directors have three-year appointment letters, all subject to retirement by rotation, with no director having a service contract terminable without compensation within one year Directors' Service Contracts/Letters of Appointment | Name | Contract Type | Director's Term | Prior Notice for Termination | | :--- | :--- | :--- | :--- | | Mr. Tsang Ka Wai | Service Contract | Fixed term of three years from October 24, 2017 | Two months' written notice | | Mr. Wong King Hoi | Service Contract | Fixed term of three years from November 10, 2017 | Two months' written notice | | Ms. Zuo Ying Yi | Letter of Appointment | Fixed term of three years from November 10, 2017 | Two months' written notice | | Mr. Leung Kei Chi | Letter of Appointment | Fixed term of three years from January 19, 2018 | Two months' written notice | | Mr. Fan Tak Wai | Letter of Appointment | Fixed term of three years from May 10, 2018 | Two months' written notice | - All appointments are subject to the provisions for retirement and rotation of directors under the Company's Bye-laws276278 - No director proposed for re-election at the upcoming Annual General Meeting has a service contract with the Company or any of its subsidiaries that is not terminable by the Company within one year without payment of compensation (other than statutory compensation)276278 Emolument Policy of the Group The Group's emolument policy for employees is based on performance, qualifications, and market data, while directors' remuneration is determined by the Remuneration Committee, with both eligible for share options - The Group's emolument policy for employees is set by management based on their performance, qualifications, capabilities, and comparable market statistics290293 - Directors' fees and other emoluments are determined by the Remuneration Committee, which is authorized to do so, with reference to the directors' duties, responsibilities, performance, and the Group's results290293 - Group employees and directors may be granted share options to subscribe for the Company's securities under the share option scheme290293 Share Option Scheme The Company's share option scheme, adopted in 2011 and expiring in 2021, aims to attract and retain talent by offering options with a subscription price based on market rates, with no options granted, exercised, cancelled, or lapsed this year - The share option scheme was adopted on June 11, 2011, aiming to attract and retain the best employees and provide additional incentives292295 - The scheme has a ten-year validity period, effective from July 4, 2011, and expiring on June 10, 2021292295 - The subscription price for share options must be at least the highest of the closing price on the grant date, the average closing price for the preceding five business days, and the nominal value297300 - The total number of shares available for issue under the share option scheme shall not exceed 10% of the issued shares on the effective date, and no single participant shall exceed 1% within a 12-month period298301 - No share options were granted, exercised, cancelled, or lapsed during the current year304310 Events After the Reporting Period Subsequent to the reporting period, the Company completed a share placement raising approximately HK$29.40 million, while the ongoing COVID-19 pandemic continues to adversely affect private educational services, with its full financial impact yet to be reliably measured - The Company completed the placement of 33,500,000 new shares on August 14, 2020, raising net proceeds of approximately HK$29.40 million15901592 - The COVID-19 pandemic continues to adversely affect the Group's private educational services business, leading to course suspensions, shifts to online formats, or cancellations, impacting tuition fee income15941598 - Due to the uncertainty of the pandemic's spread, the estimated financial impact of COVID-19 on the Group cannot currently be reliably measured15941598 Auditors The consolidated financial statements for the year ended June 30, 2020, were audited by BDO Limited, which will retire at the upcoming AGM but is eligible and willing to be re-appointed - The consolidated financial statements for the year ended June 30, 2020, were audited by BDO Limited319322 - BDO Limited will retire at the upcoming Annual General Meeting but is eligible and willing to be re-appointed319322 - BDO Limited was appointed on
源宇宙教育(01082) - 2020 - 年度财报