Company Information This report details the company's core information, including board members, committee structures, legal advisors, registered office, principal place of business, and share registrar - This report comprehensively lists the company's core information, including its board members, committee compositions, legal advisors, registered office, principal place of business, and share registrar4 Financial Summary In 2019, the company's revenue rebounded to $99.5 million, gross profit turned positive at $5.4 million, and losses significantly narrowed, though total assets and net assets continued to decline, with the equity-to-debt ratio rising to 43% - In 2019, the company's revenue recovered to $99.5 million, and gross profit turned positive to $5.4 million from a negative figure, with operating and pre-tax losses significantly narrowing compared to 20186 - However, the company's total assets and net assets continued to decline, and the equity-to-debt ratio significantly increased to 43%6 Past Five Years Consolidated Results and Balance Sheet Summary (Million USD) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Performance | | | | | | | Revenue | 99.5 | 91.5 | 93.7 | 133.2 | 125.7 | | Gross Profit / (Loss) | 5.4 | (2.3) | 6.1 | 15.7 | 9.1 | | Loss Before Tax | (17.6) | (40.5) | (9.8) | (0.8) | (7.8) | | Loss Attributable to Equity Holders | (17.6) | (41.8) | (9.3) | (0.7) | (8.0) | | Loss Per Share (USD) | (0.020) | (0.050) | (0.010) | (0.001) | (0.009) | | Assets and Liabilities | | | | | | | Total Assets | 109.2 | 115.2 | 161.7 | 178.0 | 177.3 | | Total Liabilities | 44.7 | 33.1 | 35.9 | 43.4 | 41.0 | | Net Assets | 64.6 | 82.1 | 125.8 | 134.6 | 136.3 | | Current Ratio (times) | 2.3 | 3.3 | 3.9 | 3.5 | 3.7 | | Equity-to-Debt Ratio (%) | 43 | 23 | 19 | 19 | 18 | Management Discussion and Analysis Business Overview and Operating Environment The Group is a leading scooter and moped manufacturer in Vietnam, operating under the SYM brand with an annual production capacity of 200,000 units, facing a saturated market, declining sales for major foreign players, and challenges from environmental policies and automotive substitution, holding a 1.87% market share as the third-largest player - The Group is one of Vietnam's leading motorcycle manufacturers, operating under the SYM brand with an annual production capacity of 200,000 units11 - The Vietnamese motorcycle market has gradually entered a saturation phase, with total sales for the top five foreign direct investment manufacturers decreasing by 3.87% in 201912 - The Group ranks third in the Vietnamese market, behind Honda and Yamaha, with a market share of 1.87% in 201913 Business Review In 2019, the Group faced challenges including slower sales growth, production inefficiencies, and increased relocation costs, with Vietnam sales growing 3.6% to 63,400 units while ASEAN exports declined 18.3% to 54,000 units due to competition, leading the Group to prioritize profitability, launch new models, and engage in OEM cooperation - The Group's production facilities in Bien Hoa City, Dong Nai Province, were relocated to Nhon Trach II Industrial Park as per government regulations and commenced operations in December 2019, incurring efficiency losses and additional costs during the process14 2019 Sales Volume Performance | Market | Sales Volume (Thousand Units) | Year-on-Year Change | Primary Reason | | :--- | :--- | :--- | :--- | | Vietnam | 63.4 | +3.6% | Benefited from government policies and marketing targeting the student market, leading to increased sales of entry-level mopeds | | ASEAN Exports | 54.0 | -18.3% | Major export markets Malaysia and the Philippines faced impact from low-priced Chinese models | - The Group launched several new models, including the New Attila 125 scooter for urban women and a 50cc moped series for young students, while also engaging in OEM cooperation with the Lambretta brand through a strategic alliance17 Financial Review For FY2019, the Group's net loss significantly narrowed by 58% to $17.6 million, with total revenue increasing 8.7% to $99.5 million, gross profit turning positive at $5.4 million (a 5.4% margin), and operating expenses decreasing, despite an $8.3 million impairment loss on property, plant, and equipment, while net current assets declined and the debt-to-equity ratio rose from 23% to 43% FY2019 Key Financial Indicators (Million USD) | Indicator | 2019 | 2018 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 99.5 | 91.5 | +8.7% | | Gross Profit / (Loss) | 5.4 | (2.3) | Turned profitable | | Gross Profit Margin | 5.4% | (2.5%) | +7.9 ppt | | Loss from Operating Activities | (11.0) | (23.3) | -53% | | Net Loss | (17.6) | (41.8) | -58% | | Net Loss Margin | 18% | 46% | -28 ppt | 2019 Revenue by Region (Million USD) | Region | 2019 Revenue | 2018 Revenue | Year-on-Year Change | Proportion of Total Revenue (2019) | | :--- | :--- | :--- | :--- | :--- | | Vietnam Domestic Sales | 50.8 | 50.2 | +1.2% | 51% | | Export Sales | 48.7 | 41.3 | +18% | 49% | - Due to unsatisfactory performance, the Group conducted impairment tests on related property, plant, and equipment, recognizing an impairment loss of approximately $8.3 million28 - As of the end of 2019, the Group's net current assets were $57.5 million (2018: $77.7 million), and the debt-to-equity ratio (bank loans/shareholders' equity) increased from 23% to 43%31 Outlook For 2020, the Group anticipates stable Vietnamese economic growth but remains cautious of risks from uncertain Chinese parts supply, intense market competition, and global macroeconomic factors, planning to focus on product innovation with new models, introduce a new corporate identity, improve dealer systems, and explore land development opportunities to diversify revenue streams - Vietnam's economy is expected to grow steadily in 2020, but risks include uncertainty in Chinese parts supply, intense price competition in the motorcycle industry, and global trade frictions39 - Product Strategy: The Group plans to launch several new or revamped scooter, moped, and electric vehicle models to increase the proportion of high-value-added products40 - Market Strategy: The Group will introduce a new corporate identity system, change the SYM brand logo, improve the dealer agency system, and expand sales and maintenance service points40 - Asset Revitalization: The Group will review the land development potential of its old factory in Bien Hoa City, Dong Nai Province, and continue to advance the joint venture land development project in Ha Dong District, Hanoi City, to expand revenue sources40 Other Disclosures As of the end of 2019, $22.8 million of the $76.7 million net proceeds from the 2007 IPO remained unutilized, primarily allocated for production site development and land development, with the company also acquiring a property in Hanoi for VND 70 billion (approximately $3 million) during the year, and the Board not recommending a final dividend Use of IPO Proceeds (As of December 31, 2019, Million USD) | Use | Planned Net Amount | Amount Utilized | Unutilized Balance | | :--- | :--- | :--- | :--- | | R&D Center and Distribution Channels | 30.7 | 30.7 | – | | M&A and Working Capital | 11.7 | 11.7 | – | | Production Site Development and Relocation | 15.0 | 7.3 | 7.7 | | Land Development | 19.3 | 4.2 | 15.1 | | Total | 76.7 | 53.9 | 22.8 | - During the year, the company acquired a property in Tay Ho District, Hanoi City, Vietnam, through a nominee for a total consideration of VND 70 billion (approximately $3 million)46 - The Board does not recommend the payment of a final dividend for the year ended December 31, 201950 Corporate Governance Report Corporate Governance Practices and the Board The company complied with the HKEX Listing Rules' Corporate Governance Code in 2019, with the only deviation being the absence of a Nomination Committee, whose responsibilities were assumed by the Board, which comprises 4 executive, 2 non-executive, and 3 independent non-executive directors, ensuring a balanced structure with separate roles for Chairman and CEO - The company complied with the Corporate Governance Code, with the only deviation being the absence of a Nomination Committee, whose functions were performed by the Board53 - The Board consists of 9 members, including 4 executive directors, 2 non-executive directors, and 3 independent non-executive directors57 - The responsibilities of the Chairman (Mr. Liu Wu-Hsiung) and the Chief Executive Officer (Mr. Lin Chih-Ming) are clearly separated and not held by the same individual61 Board Committees The company has established a Remuneration Committee, comprising two independent non-executive directors and one executive director, responsible for executive compensation, and an Audit Committee, composed of three independent non-executive directors, overseeing financial reporting, risk management, and internal controls, with both committees holding multiple meetings during the year with full attendance - The Remuneration Committee comprises Ms. Lin Ching-Ching (Chairperson), Ms. Wu Kuei-Mei, and Mr. Liu Wu-Hsiung, and held three meetings during the year6667 - The Audit Committee comprises three independent non-executive directors: Ms. Lin Ching-Ching (Chairperson), Mr. Shen Hua-Jung, and Ms. Wu Kuei-Mei, and held four meetings during the year6869 Risk Management and Internal Control The Board is responsible for assessing the Group's risk appetite and ensuring effective risk management and internal control systems, with an internal audit department reviewing financial, operational, and compliance controls at least annually, and management confirming the effectiveness and adequacy of these systems for 2019, alongside established procedures for handling and disseminating inside information - The Board is responsible for ensuring the Group establishes and maintains appropriate and effective risk management and internal control systems, and reviews their effectiveness at least once a year77 - Management has confirmed to the Board that, as of the end of 2019, the company's risk management and internal control systems were effective and adequate77 - The Group has established procedures for handling and disseminating inside information to ensure timely public disclosure of inside information whenever reasonably practicable81 Shareholder Relations and Rights The Group maintains transparent communication with shareholders and investors through annual reports, announcements, and its website, clearly outlining shareholder rights, including the procedure for calling an extraordinary general meeting by shareholders holding at least 10% of the paid-up capital and the process for nominating director candidates - The Group is committed to maintaining high transparency, ensuring investors and shareholders receive timely company information88 - Shareholders holding not less than 10% of the company's paid-up capital may request the Board in writing to convene an extraordinary general meeting90 Biographies of Directors and Senior Management This section provides detailed biographies of the company's executive, non-executive, and independent non-executive directors, as well as senior management, including their age, position, professional experience, educational background, and tenure within the Group and affiliated companies like Sanyang Industry, with most core management possessing over 20 years of experience in the motorcycle industry - This chapter details the personal resumes of the company's executive directors, non-executive directors, independent non-executive directors, and senior management, including their age, position, professional experience, educational background, and tenure within the Group and affiliated companies (such as Sanyang Industry)93949596 - Most core management personnel possess over 20 years of senior experience in the motorcycle industry100 Directors' Report Principal Activities and Performance The company's principal activity is investment holding, with its subsidiaries primarily engaged in manufacturing and selling motorcycles, parts, engines, and providing maintenance services, and while the Group's 2019 performance is detailed in the financial statements, the Board does not recommend a final dividend for the year, having adopted a dividend policy to share profits while retaining sufficient reserves for future growth - The Group's principal activities are the manufacturing and sale of motorcycles, parts, and engines, as well as providing motorcycle maintenance services104 - The Board does not recommend the payment of a final dividend for the year ended December 31, 2019105 Major Customers and Suppliers In FY2019, the Group exhibited high customer concentration, with the largest customer accounting for 24.4% of total revenue and the top five customers collectively representing 49.5%, while its supplier base was more diversified, with the top five suppliers accounting for less than 30% of total purchases FY2019 Customer Concentration | Customer Category | Percentage of Total Revenue | | :--- | :--- | | Largest Customer | 24.4% | | Top Five Customers | 49.5% | - As of the end of 2019, the total purchases from the Group's top five suppliers accounted for less than 30% of total purchases113 Directors' and Major Shareholders' Interests This report discloses the share interests of directors and chief executives in an associated corporation, Sanyang Industry Co., Ltd., and identifies Sanyang Industry Co., Ltd., through its wholly-owned subsidiary SY International Ltd., as the company's major controlling shareholder, holding 608,818,000 ordinary shares, representing 67.07% of the total share capital - Several directors hold shares in the ultimate holding company, Sanyang Industry Co., Ltd., with non-executive director Ms. Wu Kuei-Mei holding the highest proportion at approximately 1.997%129 Major Shareholder Holdings (As of December 31, 2019) | Major Shareholder Name | Capacity | Number of Shares Held | Approximate Percentage of Total Share Capital | | :--- | :--- | :--- | :--- | | Sanyang Industry Co., Ltd. | Interest in controlled corporation | 608,818,000 | 67.07% | | SY International Ltd. | Beneficial owner | 608,818,000 | 67.07% | Connected Transactions The Group engages in multiple continuing connected transactions with its indirect major shareholder, Sanyang Group, primarily involving the purchase and sale of motorcycle parts, distribution agency, technical licensing, and R&D services, with all transactions in 2019 remaining within their approved annual caps and confirmed as fair and reasonable by independent non-executive directors and auditors 2019 Major Continuing Connected Transactions (USD) | Transaction Agreement | Nature of Transaction | 2019 Actual Amount | 2019 Annual Cap | | :--- | :--- | :--- | :--- | | Master Purchase Agreement | Purchase of parts from Sanyang Group | 10,826,883 | 11,100,000 | | Distribution Agreement | Acting as distributor for Sanyang Group | 2,304,048 | 3,301,000 | | Technical License Agreement | Use of Sanyang technology | 1,276,535 | 2,580,000 | | Parts Sales Agreement | Sale of parts to Sanyang Group | 1,188,103 | 1,550,000 | - Both the independent non-executive directors and the company's auditors have reviewed the continuing connected transactions during the year and confirmed that the transaction terms are fair and reasonable, in the overall interest of the company and its shareholders, and did not exceed the annual caps144 Environmental, Social and Governance Report Environment and Safety The Group adheres to ISO 14001 environmental management and 5S safety systems, with primary environmental risks from VOC emissions during painting, which decreased by 0.76% in 2019, though total waste significantly increased to 682,246 kg due to factory relocation, while maintaining robust wastewater treatment and energy/water conservation efforts, with no major environmental violations reported - The Group adheres to the ISO 14001 environmental management system and the 5S safety management system, with a Safety and Health Committee led by the General Manager159160 2019 Emissions Data | Emission | Emission Volume | | :--- | :--- | | Carbon Dioxide | 9,490,534 tonnes | | Volatile Organic Compounds (VOC) | 29,099 tonnes | | Hazardous Waste | 448,552 kg | | Non-Hazardous Waste | 233,724 kg | - The Group provides annual physical examinations and environmental safety and health training for employees, with special positions undergoing occupational disease examinations, and no occupational diseases were found among employees in 2019178 Product Responsibility Guided by 'Focus on Core Business, Quality First, Customer Satisfaction,' the Group implements ISO 9001 quality management, conducts regular quality, technical, and environmental audits of suppliers, prioritizing local procurement in Vietnam, and engages with dealers and consumers through satisfaction surveys and communication, reporting no major quality violations or product recalls in 2019 - The Group establishes quality control procedures in accordance with ISO 9001 quality management system requirements and has a "Product Quality Defect Recall and Correction Measures" in place, with no major quality violations or product recalls during the year180181 - Supplier management adopts a global procurement principle while prioritizing local procurement in Vietnam whenever possible, and the Group conducts regular on-site audits of suppliers181 - The Group conducts annual customer satisfaction surveys and comprehensive product surveys for the Vietnamese market to understand end-consumer needs184185 Employee Care The Group upholds diversity and non-discrimination, offering salaries approximately 17% above the legal minimum wage, along with year-end bonuses and other incentives, with a welfare committee providing subsidies, group insurance, health checks, and recreational activities, strictly prohibiting child and forced labor, establishing a labor union, and offering comprehensive training programs, including opportunities for Vietnamese executives at Sanyang Taiwan - The Group's standard employee salaries are approximately 17% higher than the government's statutory minimum wage, and it provides year-end bonuses and holiday bonuses188 - The Group has legally established a labor union, which holds regular quarterly meetings, and an annual "Labor Conference" to ensure smooth labor-management communication191 - A comprehensive employee training system and training center are in place, offering diverse courses, and providing opportunities for Vietnamese executives to intern at the Taiwan headquarters191192 Anti-Corruption and Community Engagement The Group strictly prohibits corruption, adhering to a 'Code of Professional Ethics' and maintaining a robust internal audit system to prevent fraud, with no significant non-compliance or corruption issues identified in 2019, and annually invests approximately VND 1 billion (around $42,500) in environmental, social, and educational community initiatives, such as supporting underprivileged students and improving living conditions - The Group has a strict "Code of Professional Ethics" prohibiting corruption, bribery, and other misconduct, and has established an internal audit unit, reporting directly to the Board, for supervision194195 - The Group annually invests approximately VND 1 billion (around $42,500) in community welfare activities, covering three major areas: environmental protection, social participation, and education and culture199 Independent Auditor's Report Audit Opinion KPMG, the auditor, issued an unmodified opinion, stating that the consolidated financial statements fairly present the Group's financial position as of December 31, 2019, and its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance - KPMG, the auditor, issued an unmodified audit opinion on the company's consolidated financial statements for the year 2019202 Key Audit Matters A key audit matter was the impairment assessment of property, plant, and equipment, right-of-use assets, and prepayments for these assets, given the Group's sustained losses, which involved significant management judgment; the auditors evaluated management's assessment process, challenged key assumptions in cash flow forecasts, performed sensitivity analyses, and utilized internal valuation experts to assess reasonableness - A key audit matter was the impairment assessment of non-current assets related to the motorcycle business, as its determination involves significant management judgment and inherent uncertainty206207 - The auditor's procedures included evaluating management's assessment process, challenging key assumptions in cash flow forecasts, performing sensitivity analyses, and assessing the independence and methodology of external valuation experts207 Consolidated Financial Statements and Notes Consolidated Statement of Profit or Loss and Other Comprehensive Income For FY2019, the Group's revenue increased 8.7% to $99.5 million, gross profit turned positive to $5.37 million from a prior-year loss, operating loss narrowed to $10.99 million, and after an $8.29 million impairment loss and $1.65 million net finance income, the pre-tax loss was $17.57 million, resulting in a significantly reduced loss attributable to equity holders of $17.59 million (from $41.84 million), with basic loss per share at $0.02 Consolidated Income Statement Summary (USD) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 99,499,318 | 91,546,757 | | Gross Profit / (Loss) | 5,371,492 | (2,330,403) | | Result from Operating Activities | (10,989,394) | (23,315,513) | | Loss Before Tax | (17,570,369) | (40,508,754) | | Loss for the Year After Tax | (17,594,249) | (41,842,673) | | Loss Attributable to Equity Holders of the Company | (17,594,257) | (41,842,673) | | Loss Per Share (Basic and Diluted) | (0.02) | (0.05) | Consolidated Statement of Financial Position As of December 31, 2019, the Group's total assets decreased to $109.2 million from $115.2 million, while total liabilities increased to $44.73 million due to higher bank loans, leading to a reduction in net assets (total equity) from $82.12 million to $64.57 million, with net current assets at $57.5 million and the current ratio declining from 3.3 to 2.3 Consolidated Statement of Financial Position Summary (USD) | Item | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Non-Current Assets | 7,988,584 | 4,435,924 | | Current Assets | 101,232,034 | 110,775,290 | | Total Assets | 109,220,618 | 115,211,214 | | Liabilities and Equity | | | | Current Liabilities | 43,729,879 | 33,078,444 | | Non-Current Liabilities | 925,636 | 13,037 | | Total Liabilities | 44,655,515 | 33,091,481 | | Total Equity | 64,565,103 | 82,119,733 | Consolidated Statement of Cash Flows In 2019, net cash used in operating activities improved to $12.42 million from $26.78 million, net cash outflow from investing activities was $5.10 million primarily for property, plant, and equipment, and net cash inflow from financing activities was $7.95 million mainly from new bank loans, resulting in a net decrease of $9.56 million in cash and cash equivalents, with an ending balance of $19.02 million Consolidated Statement of Cash Flows Summary (USD) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (12,417,076) | (26,777,591) | | Net Cash (Used in) / Generated from Investing Activities | (5,101,491) | 46,810,150 | | Net Cash Generated from / (Used in) Financing Activities | 7,953,813 | (4,623,650) | | Net (Decrease) / Increase in Cash and Cash Equivalents | (9,564,754) | 15,408,909 | | Cash and Cash Equivalents at January 1 | 28,578,446 | 13,356,314 | | Cash and Cash Equivalents at December 31 | 19,016,628 | 28,578,446 | Notes to the Consolidated Financial Statements The notes detail the company's significant accounting policies, estimates, and judgments, providing comprehensive classifications and explanations for financial statement items, including the impact of IFRS 16 adoption, segment information by business and geography, specifics of asset impairment losses, related party transactions, and financial risk management policies - The company adopted IFRS 16 "Leases" from January 1, 2019, choosing the modified retrospective approach, with adjustments made to the opening balances and comparative information not restated251 - Note 4 provides detailed disclosure of revenue and segment results by business (manufacturing and sales of motorcycles, parts and engines, molds, and maintenance services) and by region (Vietnam, Malaysia, Philippines, etc)336339345 - Note 11(c) details the $8.29 million asset impairment loss recognized during the year, attributed to intense competition in the motorcycle industry and increased manufacturing costs leading to sustained operating losses373374 - Note 26 provides specific amounts for continuing connected transactions with the ultimate holding company, Sanyang, and its subsidiaries, including sales, purchases, and technology transfers462
越南制造加工出口(00422) - 2019 - 年度财报