丰盛生活服务(00331) - 2019 - 中期财报

Financial Highlights Financial Highlights 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][149] - 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] Chairman's Statement Market Review and Business Outlook 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] - 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] - 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] - 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][22] Management Discussion and Analysis Business Review 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] 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][27] Financial Review 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] - 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] 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] - 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] - 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] - 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] - 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] Interim Financial Information Review Report on Interim Financial Information 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][62] - The auditor issued a standard unmodified review conclusion, indicating that the interim financial information conforms in all material respects to accounting standards[62] Condensed Consolidated Financial Statements 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 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][93] - 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] 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] Other Information Dividends, Corporate Governance and Shareholder Interests 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][150] - 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] 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]