绿色经济(01315) - 2020 - 年度财报

Chairman's Report Performance and Business Review In FY2019, the Group's total turnover slightly increased by 2% to approximately HKD 1.237 billion, but loss attributable to shareholders significantly expanded to HKD 145.5 million; the Board does not recommend a dividend, while construction-related businesses faced market decline and COVID-19 challenges, and the graphene business was divested following an unauthorized deposit pledge Key Financial Indicators for FY2019 | Indicator | FY2019 | FY2018 | | :--- | :--- | :--- | | Total Turnover | Approx. HKD 1.237 billion | Approx. HKD 1.209 billion | | Loss Attributable to Shareholders | Approx. HKD 145.5 million | Approx. HKD 22.4 million | | Basic Loss Per Share | Approx. HKD 2.42 cents | Approx. HKD 0.37 cents | | Dividend | Not Recommended | Nil | - Construction Business Outlook: The Hong Kong construction market declined in 2019, exacerbated by the COVID-19 pandemic, with a continued downturn expected in 2020; the Group will control costs and actively seek business opportunities, and in Singapore, it has developed prevention and business continuity plans to address the pandemic[11] - Significant Changes in Graphene Business: Due to former executive director Mr. Dai Jialong's unauthorized pledge of RMB 100 million in bank deposits of subsidiary Wuxi Taike, the company focused on investigation and release of the pledge; the pledged deposit was released in August 2019, and Wuxi Taike was sold to an independent third party in February 2020[12][14] Management Discussion and Analysis Overall Group Performance In FY2019, the Group's total turnover was approximately HKD 1.237 billion, a slight year-on-year increase; gross profit decreased from HKD 68.7 million to HKD 57.7 million, and loss attributable to shareholders significantly expanded to HKD 145.5 million, primarily due to increased impairment losses on property, plant and equipment and trade receivables, higher administrative expenses, and reduced gross profit - Loss attributable to shareholders significantly expanded from HKD 22.4 million in FY2018 to HKD 145.5 million in FY2019, primarily due to an increase of approximately HKD 101.4 million in impairment losses on property, plant and equipment and trade receivables, an increase of approximately HKD 15.4 million in administrative expenses due to higher rental and staff costs, and a decrease of approximately HKD 11 million in gross profit[19] Segment Operating Results Business segment performance varied, with alteration and addition works and property maintenance segments showing revenue growth but the former's profit declining due to increased costs, while the building construction segment saw slight revenue and profit decreases, and the graphene production and material trading segment's revenue sharply declined, leading to a significant loss of HKD 140.9 million due to substantial impairment losses FY2019 Segment Results (HKD Thousand) | Business Segment | FY2019 Revenue | FY2018 Revenue | FY2019 Profit/(Loss) | FY2018 Profit/(Loss) | | :--- | :--- | :--- | :--- | :--- | | Building Construction | 278,000 | 285,000 | 25,800 | 28,700 | | Alteration and Addition Works | 422,000 | 245,000 | 7,100 | 13,300 | | Property Maintenance | 538,000 | 433,000 | 31,300 | 29,700 | | Graphene Production and Material Trading | 66 | 246,500 | (140,900) | (19,200) | - The substantial loss in the graphene segment was primarily due to the recognition of approximately HKD 49.9 million in impairment losses on property, plant and equipment, and approximately HKD 62.5 million in impairment losses on trade receivables[25] Liquidity and Financial Resources The Group maintained a sound financial position with a current ratio of 2.09 times and total cash and bank balances of approximately HKD 258.5 million as at March 31, 2019, while the gearing ratio slightly increased to 33.8%, and HKD 117 million in bank deposits were pledged as collateral for a related party's bank financing Financial Position Indicators (as at March 31) | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Current Assets (HKD Million) | 669.1 | 718.9 | | Current Liabilities (HKD Million) | 320.2 | 263.7 | | Current Ratio | 2.09 times | 2.73 times | | Cash and Bank Balances (HKD Million) | 258.5 | 303.3 | | Total Interest-bearing Loans (HKD Million) | 248.0 | 273.3 | | Gearing Ratio | 33.8% | 32.6% | - As at March 31, 2019, bank deposits totaling HKD 116.96 million were pledged as collateral for bank financing obtained by a related party (a company controlled by former director Mr. Dai); this pledged deposit was subsequently released on August 23, 2019[39][56] Significant Acquisitions and Disposals The Group had no significant acquisitions or disposals during the reporting period, but subsequent to the period, on February 28, 2020, it completed the disposal of Wuxi Taike, a subsidiary primarily engaged in graphene production, to an independent third party - Wuxi Taike, a subsidiary primarily engaged in graphene production, was sold to an independent third party on January 20, 2020, with the transaction completed on February 28, 2020[41] Use of Proceeds The Group completed share and convertible bond subscriptions in 2016, raising net proceeds of approximately HKD 289 million, of which HKD 172 million had been utilized by March 31, 2019, primarily for the graphene business, with the remaining HKD 117 million reallocated as working capital following the graphene business entity's disposal Use of Net Proceeds (as at March 31, 2019) | Intended Use | Intended Amount (HKD Million) | Utilized Amount (HKD Million) | Unutilized Amount (HKD Million) | | :--- | :--- | :--- | :--- | | Establishment of Graphene Production Plant and Facilities | 210 | 84 | 126 | | Recruitment of Professionals and Establishment of Laboratories | 20 | 8 | 12 | | General Working Capital | 79 | 79 | 0 | | Total | 289 | 172 | 117 | - As Wuxi Taike, the principal subsidiary engaged in graphene production, was sold in early 2020, approximately HKD 117 million of unutilized net proceeds have been reallocated and fully used as the Group's working capital[47] Principal Risks and Uncertainties The Group faces principal risks including rising labor costs, inaccurate project cost estimations, and non-recurring revenue in construction-related businesses, as well as financial risks such as foreign exchange fluctuations, interest rate changes, and related party guarantees, with risks from the graphene production segment reduced due to its disposal - Construction-related segment risks: - Labor-intensive nature leads to risks of rising labor and subcontracting costs[52] - Inaccurate project time and cost estimations may impact profit margins[53] - Revenue primarily derived from individual contracting projects, which are non-recurring, requiring new projects to be secured through competitive bidding[53] - Financial risks: - The Group faces foreign exchange risks from currencies such as HKD, USD, SGD, and RMB[55] - The Group has not adopted an interest rate hedging policy and needs to monitor interest rate risks[55] - A bank deposit guarantee of HKD 117 million was previously provided for a related party, which was released in August 2019[56] Contract Progress As at the end of FY2019, the Group's total outstanding contracts amounted to approximately HKD 3.479 billion, with HKD 1.459 billion in new contracts secured and HKD 1.626 billion completed during the year, and an additional HKD 1.732 billion in new contracts secured subsequent to the reporting period Construction-Related Business Contract Progress (HKD Thousand) | Business Segment | Outstanding Contracts as at March 31, 2018 | Contracts Secured in FY2019 | Contracts Completed in FY2019 | Outstanding Contracts as at March 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Building Construction | 920,264 | 392,741 | (308,847) | 1,004,158 | | Property Maintenance | 2,139,873 | 923,625 | (1,008,852) | 2,054,646 | | Alteration, Renovation, etc. | 585,895 | 142,682 | (308,214) | 420,363 | | Total | 3,646,032 | 1,459,048 | (1,625,913) | 3,479,167 | - Subsequent to March 31, 2019, and up to the report date, the Group secured new contracts totaling approximately HKD 1.732 billion, demonstrating its continued ability to acquire new business[82] Employees and Remuneration Policy As at March 31, 2019, the Group employed 261 staff with total remuneration of approximately HKD 90 million, and its remuneration policy is market-referenced and performance-linked to attract, retain, and motivate talent, while the Board's dividend policy considers financial performance, capital requirements, and economic conditions Employee Information | Indicator | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Total Employees | 261 | 248 | | Total Employee Remuneration | Approx. HKD 90 million | Approx. HKD 87 million | Biographies of Directors and Senior Management Biographies of Directors and Senior Management This section details the personal biographies of the company's executive directors, independent non-executive directors, and senior management members, including their age, position, educational background, professional qualifications, and extensive experience in finance, construction, and management Report of the Directors Summary of the Report of the Directors This report outlines the Group's principal activities, financial performance, and dividend recommendations for FY2019, detailing high customer concentration, changes in directors, their interests, and the unauthorized deposit pledge incident related to former director Mr. Dai Jialong, while also addressing the independent auditor's "disclaimer of opinion" with remedial actions taken by the Board - High concentration of major customers and suppliers: - The top five customers accounted for approximately 78.5% of total sales, with the largest customer accounting for approximately 51.2%[119] - The top five suppliers accounted for approximately 40.5% of total purchases, with the largest supplier accounting for approximately 13.1%[119] - Shareholding of Directors and Major Shareholders: Executive Director Mr. Zhou Zhe holds 10.00% of the company's shares through his wholly-owned company, Mega Start Limited[146][148] - Significant Connected Transactions: The report disclosed that former executive director Mr. Dai Jialong unauthorizedly used RMB 100 million in bank deposits of the company's subsidiary, Wuxi Taike, to provide debt guarantees for Jiangyin Youjia Company, which he controlled; this incident led to the suspension of trading in the company's shares and triggered a series of investigations and remedial actions[163][166] - Response to Auditor's Opinion: In response to the "disclaimer of opinion" issued by the auditor regarding Wuxi Taike-related matters, the Board detailed the countermeasures taken, including conducting forensic review, internal control review, releasing the pledged deposit, initiating legal proceedings against customers, and ultimately disposing of Wuxi Taike; the Board believes the relevant audit issues have been resolved[183][196][198] Corporate Governance Report Summary of the Corporate Governance Report During the reporting period, the company maintained high corporate governance standards, complying with Listing Rules, though it deviated from the code by having the Chairman and CEO roles combined for a period, and acknowledged deficiencies in financial reporting, risk management, and internal controls due to the Wuxi Taike deposit pledge incident, while detailing the composition and responsibilities of its audit, remuneration, and nomination committees - Deviation from Corporate Governance Code: The report acknowledged a deviation from Code Provision A.2.1, which states that the roles of Chairman and Chief Executive Officer should be separate; from September 7, 2018, to March 31, 2019, Mr. Zhou Zhe concurrently held both positions, but the Board believes this structure does not impair the balance of power and authority[206] - Internal Control Deficiencies: The report acknowledged that due to the unauthorized deposit pledge incident involving Wuxi Taike, the Board was unable to make an informed assessment of the financial information, and the Group had deficiencies in establishing and maintaining its risk management and internal control systems[207][210] - Board and Committees: The Board comprises three executive directors and three independent non-executive directors; the company has established an Audit Committee, Remuneration Committee, and Nomination Committee, with the report detailing each committee's composition, terms of reference, and annual meeting attendance[212][223][227][232] Independent Auditor's Report Summary of the Independent Auditor's Report Auditor Ernst & Young issued a "disclaimer of opinion" on the Group's consolidated financial statements for the year ended March 31, 2019, primarily due to insufficient audit evidence regarding significant matters of principal subsidiary Wuxi Taike, which had a material impact on the Group's net assets and annual loss, preventing an opinion on the financial statements' true and fair view - The auditor issued a "disclaimer of opinion" due to the inability to obtain sufficient audit evidence regarding the accounts of the principal subsidiary, Wuxi Taike[261] - The basis for the disclaimer of opinion primarily included the following scope limitations: - Potential Undisclosed Related Party Transactions: Inability to determine if multiple unusual transactions between Wuxi Taike and Jiangyin Youjia, Wuxi Taiaoyi, Xin Chaoshun, Wuxi Qikai, and other companies should be disclosed as related party transactions[263] - Impairment of Property, Plant and Equipment: Inability to determine if the impairment provision of approximately HKD 49.9 million was properly measured[277] - Pledged Deposits in Prior Years: Inability to determine if the classification of pledged time deposits in the 2018 statement of financial position was appropriate[278] Consolidated Financial Statements Summary of Financial Statements This section presents the Group's consolidated financial statements, including the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows, along with detailed notes disclosing accounting policy changes, segment information, related party transactions, and post-reporting period events, showing stable FY2019 revenue but increased net loss and decreased total equity due to significant impairment losses Key Consolidated Financial Statement Data (HKD Thousand) | Financial Statement Item | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Consolidated Statement of Profit or Loss | | | | Revenue | 1,237,444 | 1,209,103 | | Gross Profit | 57,709 | 68,746 | | Loss for the Year | (145,451) | (22,372) | | Consolidated Statement of Financial Position | | | | Non-current Assets | 64,166 | 118,721 | | Current Assets | 669,060 | 718,934 | | Total Assets | 733,226 | 837,655 | | Current Liabilities | 319,708 | 263,725 | | Non-current Liabilities | 262,235 | 259,883 | | Total Liabilities | 581,943 | 523,608 | | Total Equity | 151,283 | 314,047 | | Consolidated Statement of Cash Flows | | | | Net Cash Flows Used in Operating Activities | (11,800) | (214,472) | | Net Cash Flows From/(Used in) Investing Activities | 19,474 | (7,357) | | Net Cash Flows Used in Financing Activities | (28,004) | (14,696) | - Post-Reporting Period Events: - In August 2019, the RMB 100 million pledged deposit of Wuxi Taike was released[732] - In February 2020, the Group completed the disposal of Wuxi Taike[734] - The outbreak of Novel Coronavirus (COVID-19) in 2019 may affect the Group's business in the coming year[735] Five-Year Financial Summary Five-Year Financial Summary This section summarizes the Group's key financial data for five consecutive fiscal years from 2015 to 2019, indicating that revenue fluctuated downwards after peaking in 2016, profitability was volatile with FY2019 recording the largest loss, and total equity significantly declined in 2019 after a substantial increase in 2016 Five-Year Financial Summary (HKD Thousand) | Fiscal Year | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,776,238 | 2,502,744 | 1,507,561 | 1,209,103 | 1,237,444 | | Profit/(Loss) Before Tax | (115,787) | 20,997 | 1,088 | (18,760) | (142,220) | | Profit/(Loss) Attributable to Owners of the Parent | (117,263) | 19,918 | (145) | (22,372) | (145,451) | | Total Assets | 774,791 | 968,660 | 1,039,077 | 837,655 | 733,226 | | Total Liabilities | (748,802) | (644,374) | (734,415) | (523,608) | (581,943) | | Total Equity | 25,989 | 324,286 | 304,662 | 314,047 | 151,283 |