马可数字科技(01942) - 2020 - 年度财报

Company Information Company Overview This section provides MOG Holdings Limited's basic company information, including board and committee members, company secretary, authorized representatives, auditors, registered office, principal place of business, share registrar, and principal bankers - The Board of Directors comprises three executive and three independent non-executive directors, chaired by Dato' Ng Kwang Hua[7] - The company has established Audit, Remuneration, and Nomination Committees, chaired by Mr. Ng Chee Hoong, Mr. Ng Kuan Hua, and Dato' Ng Kwang Hua, respectively[7] - The company's joint auditors are ZHONGHUI ANDA CPA Limited (Hong Kong) and Grant Thornton Malaysia[7] Chairman's Statement Chairman's Statement Chairman Dato' Ng Kwang Hua celebrates the Group's successful listing on the HKEX Main Board on April 15, 2020, reviews its market position as a leading optical retailer in Malaysia, addresses COVID-19 challenges, and expresses gratitude to stakeholders - The company successfully listed on the Main Board of The Stock Exchange of Hong Kong on April 15, 2020, stock code 1942[13] - The Group is one of Malaysia's largest optical product retailers, employing a multi-brand strategy covering high-end, mid-range, and mass markets, with a retail network of 83 self-operated stores, 10 franchised stores, and 2 licensed retail stores as of March 31, 2020[14] - The Chairman acknowledges COVID-19 disruptions to business revenue and operations, stating continuous monitoring and response planning[14] Management Discussion and Analysis Business Review As a leading optical product retailer in Malaysia, the Group offers a wide range of products under a multi-brand strategy across 10 retail brands, expanding its network to 83 self-operated stores by March 31, 2020, driven by increased eye care awareness and electronic device usage among youth - The Group employs a multi-brand strategy with 10 retail brands, covering high-end, mid-range, and mass markets in Malaysia's optical retail sector[17] - As of March 31, 2020, the Group's retail network comprised 83 self-operated stores, 10 franchised stores, and 2 licensed retail stores, with a net increase of 8 self-operated stores during the year[17] - Market demand growth is attributed to increased eye care awareness and rising vision problems among youth due to excessive use of electronic devices like smartphones[18] Financial Review For the year ended March 31, 2020, Group revenue grew 10.1% to RM147.1 million, driven by retail network expansion, with gross profit up 15.8% and gross margin at 66.1%; however, net profit decreased 39.5% to RM13.8 million due to increased operating costs and RM9.8 million in one-off listing expenses, while adjusted net profit (excluding listing expenses) was approximately RM23.6 million, up 3.5% Financial Performance Summary (RM million) | Financial Indicator | FY2020 (RM million) | FY2019 (RM million) | YoY Change | Key Reason | | :--- | :--- | :--- | :--- | :--- | | Revenue | 147.1 | 133.6 | +10.1% | Retail network expansion, self-operated retail stores increased from 75 to 83 | | Gross Profit | 97.3 | 84.0 | +15.8% | Increased revenue and improved gross margin | | Gross Margin | 66.1% | 62.8% | +3.3pp | - | | Net Profit | 13.8 | 22.8 | -39.5% | Incurred RM9.8 million in one-off listing expenses | | Net Profit Margin | 9.4% | 17.0% | -7.6pp | - | | Adjusted Net Profit (Excluding Listing Expenses) | 23.6 | 22.8 | +3.5% | - | - Sales and distribution costs increased 21.6% year-on-year to RM56.9 million, primarily due to higher staff costs and increased depreciation from new store openings[24] - Administrative expenses increased 23.5% year-on-year to RM10.5 million, mainly due to an increase in administrative staff numbers and salaries[25] - The effective tax rate increased from 22.9% to 33.5%, primarily due to non-deductible listing expenses[28] Liquidity, Financial Resources and Capital Structure As of March 31, 2020, the Group's bank balances and cash were approximately RM34.1 million, with a debt-to-equity ratio improving from 0.37x to 0.30x, indicating a stronger financial structure, though ROE and ROA significantly declined due to one-off listing expenses - As of March 31, 2020, the Group's bank balances and cash were approximately RM34.1 million, consistent with the prior year, with net cash inflow from operating activities of approximately RM27.9 million[32] Financial Ratios | Financial Ratio | March 31, 2020 | March 31, 2019 | Reason for Change | | :--- | :--- | :--- | :--- | | Debt-to-Equity Ratio | 0.30x | 0.37x | Total equity continued to increase due to accumulated profits | | Current Ratio | 2.20x | 2.15x | Inventory increased due to an increase in the number of self-operated retail stores | | Return on Equity (ROE) | 21.7% | 39.9% | Profit for the year decreased due to one-off listing expenses | | Return on Assets (ROA) | 12.7% | 22.9% | Profit for the year decreased due to one-off listing expenses | - As of March 31, 2020, the Group had interest-bearing borrowings of approximately RM1.4 million and total lease liabilities of approximately RM17.8 million[33] Employees and Remuneration Policy The Group prioritizes attracting and retaining qualified employees, with total staff increasing from 516 to 567 as of March 31, 2020, and staff costs rising from RM30.3 million to RM36.6 million due to retail network expansion and annual salary increments - As of March 31, 2020, the Group's total number of employees was 567, an increase from 516 in the prior year[46] - Staff costs for the year were approximately RM36.6 million, an increase from RM30.3 million last year, primarily due to the hiring of additional employees and increased salaries and allowances[46] Significant Events After Reporting Date Post-reporting period, the company successfully listed on the HKEX on April 15, 2020, and temporarily closed all self-operated retail stores from March 18 due to Malaysia's COVID-19 movement control order, gradually resuming operations from May 5, with the Board confident in sufficient working capital - The company's shares were listed on the Main Board of The Stock Exchange of Hong Kong on April 15, 2020[53] - In response to COVID-19, the Group temporarily closed all self-operated retail stores from March 18, 2020, gradually resuming operations from May 5, with all stores reopened by May 13[54] - The Board believes the Group has sufficient working capital to meet future needs for the next 12 months, supported by approximately RM34.1 million in cash balances and proceeds from the listing[55] Key Risks and Uncertainties The Group faces significant risks from the ongoing COVID-19 pandemic, potentially leading to substantial and prolonged reductions in customer traffic, alongside supply chain disruptions and supplier price increases due to the absence of long-term agreements - The COVID-19 pandemic and related movement control orders may lead to a significant and prolonged reduction in customer traffic, with no guarantee of quick recovery even after restrictions are lifted[58] - Outbreaks in product manufacturing countries could disrupt the supply chain, causing product shortages or delays, and without long-term supplier agreements, the Group faces the risk of price increases that cannot be passed on to customers[59] Outlook and Future Prospects Amid challenging global and Malaysian economic outlooks due to COVID-19, management anticipates a 50% revenue decrease for the three months ending June 30, 2020, but the Board remains optimistic about long-term growth, continuing its strategies of retail network expansion, store upgrades, and brand awareness enhancement - Due to temporary store closures, management estimates a revenue loss of approximately RM5.7 million for the period from March 18 to March 31, 2020[63] - Management anticipates a revenue decrease of approximately 50% for the three months ending June 30, 2020, compared to the three months ended March 31, 2020[63] - Future business strategies include continued retail network expansion, upgrading and renovating self-operated retail stores, enhancing brand awareness, increasing customized lens production capacity, and upgrading IT systems[64] Use of Proceeds The company's net listing proceeds were approximately HKD91.1 million (RM50.3 million), with RM3.8 million utilized by June 30, 2020, primarily for IT system upgrades and general working capital, while original plans for new store openings and optical lab development may be delayed due to COVID-19 Use of Proceeds (RM million) | Purpose | Planned Amount (RM million) | Amount Utilized (RM million) | Unutilized Amount (RM million) | | :--- | :--- | :--- | :--- | | Establishment of 36 self-operated retail stores | 28.1 | - | 28.1 | | Upgrading and renovation of 25 self-operated retail stores | 5.1 | - | 5.1 | | Enhancing brand awareness and marketing | 4.7 | (0.1) | 4.6 | | Development of optical laboratory | 5.5 | - | 5.5 | | Upgrading IT systems | 4.3 | (1.2) | 3.1 | | General working capital | 2.6 | (2.5) | 0.1 | | Total | 50.3 | (3.8) | 46.5 | - Due to COVID-19 uncertainties, plans to establish 6 self-operated retail stores and develop an optical laboratory within the six months ending September 30, 2020, may be delayed[69] Corporate Governance Report Board and Committees The company has adopted and complied with the Corporate Governance Code since its listing, with a six-member Board, including three independent non-executive directors, and established Audit, Remuneration, and Nomination Committees with defined terms of reference, all of which have convened meetings post-reporting period - The Board of Directors comprises six members, including Chairman Dato' Ng Kwang Hua and CEO Datin Low Lay Choo, with three independent non-executive directors, complying with Listing Rules requirements[75][78] - The Audit Committee, chaired by Mr. Ng Chee Hoong, consists of three independent non-executive directors, responsible for overseeing financial reporting, internal controls, and external audit[96] - The Nomination Committee, chaired by Dato' Ng Kwang Hua, comprises two independent non-executive directors, responsible for reviewing Board structure and nominating directors[98] - The Remuneration Committee, chaired by Mr. Ng Kuan Hua, includes one executive director and one independent non-executive director, responsible for formulating remuneration policies for directors and senior management[102] Risk Management and Internal Control The Board is fully responsible for overseeing the Group's risk management and internal control systems, reviewing their effectiveness at least annually, and has delegated review to the Audit Committee, with an external consultant to be appointed for internal audit functions, confirming no significant deficiencies were found during the reporting period - The Board is fully responsible for overseeing the risk management and internal control systems, reviewing their effectiveness at least annually[121] - The company will appoint an external consultant to undertake internal audit functions, continuously monitor the internal control system, and report to the Audit Committee[122] - The Board is satisfied and confirms that the Group's risk management and internal control systems were effective and adequate during the reporting period[122] Shareholders' Rights This report clarifies key shareholder rights, including procedures for convening extraordinary general meetings, proposing resolutions at general meetings, and specific processes and requirements for nominating director candidates, aiming to safeguard shareholder interests and participation - Shareholders holding not less than one-tenth of the company's paid-up share capital may request to convene an extraordinary general meeting[132] - Shareholders may nominate individuals for election as directors according to prescribed procedures, requiring written notice to the company within specified timeframes[134] Biographical Details of Directors and Senior Management Biographical Details of Directors and Senior Management This section details the personal biographies of the company's executive directors, independent non-executive directors, and senior management, including their age, positions, responsibilities, industry experience, educational backgrounds, and other company appointments - Executive Directors include founder and Chairman Dato' Ng Kwang Hua, CEO Datin Low Lay Choo, and Dato' Ng Chin Kee, all possessing over 20 years of extensive experience in the optical retail industry[142][144][145] - Independent Non-Executive Directors Mr. Ng Kuan Hua, Mr. Ng Chee Hoong, and Ms. Jiao Jie possess profound professional backgrounds in accounting, auditing, finance, and corporate legal affairs[148][150][154] - Senior management includes Chief Financial Officer Mr. Ooi Guan Hoe and General Manager Mr. Lee Ben Keong, who possess professional management experience in finance, marketing, business development, and human resources[159][160][165][166] Directors' Report Principal Activities and Dividends The company's principal activity is investment holding, with its subsidiaries engaged in optical product sales and franchise management, and the Board does not recommend a final dividend for the reporting period - The company is an investment holding company, with subsidiaries primarily engaged in the sale of optical products and franchise and license management[173] - The Board does not recommend the payment of a final dividend for the year ended March 31, 2020[175] Share Option Scheme The company adopted a share option scheme on March 23, 2020, to incentivize contributors, valid for ten years, with total shares issuable not exceeding 10% of issued shares at listing, and no options granted as of the reporting period end - The Share Option Scheme was approved on March 23, 2020, aiming to incentivize employees, directors, and consultants[210] - The maximum number of shares issuable under the scheme is 50,000,000 shares, representing 10% of the issued share capital[212][213] - Since its adoption, no share options have been granted, exercised, cancelled, or lapsed[222] Major Shareholders' and Directors' Interests The report discloses directors' and major shareholders' interests, with controlling shareholders Dato' Frankie Ng, Datin Bernice Low, and Dato' Henry Ng acting in concert, collectively holding 75% of the company's shares, and confirms no material interests of directors in significant contracts Directors' and Major Shareholders' Interests | Director Name | Capacity | Number of Ordinary Shares | Approximate Percentage of Issued Shares | | :--- | :--- | :--- | :--- | | Dato' Frankie Ng | Interest in controlled corporations and spouse's interest | 375,000,000 | 75% | | Datin Bernice Low | Interest in controlled corporations and spouse's interest | 375,000,000 | 75% | | Dato' Henry Ng | Interest in controlled corporations | 375,000,000 | 75% | - The controlling shareholders (Dato' Frankie Ng, Dato' Henry Ng, and Datin Bernice Low) have entered into a confirmation deed, acting in concert, collectively holding 75% interest in the company[203] Continuing Connected Transactions During the reporting period, the Group engaged in continuing connected transactions, primarily leasing office properties and staff quarters from controlling shareholders and their associates, and trademark licensing agreements with associated companies, all disclosed under Listing Rules and exempted from certain reporting and shareholder approval requirements - The Group leased office properties from Directors Dato' Frankie Ng and Dato' Henry Ng, with an annual rent of RM36,000[248][253] - The Group leased office properties and staff quarters from Ms. Ng Mui Quee, sister of the Directors, with a total annual rent of RM58,800[254][257] - The Group entered into a trademark 'OOPPA' license agreement with a Thai company 30% owned by Dato' Frankie Ng, with transaction amounts of approximately RM49,000 during the year[257][260][261] Independent Joint Auditors' Report Audit Opinion Joint Auditors ZHONGHUI ANDA CPA Limited (Hong Kong) and Grant Thornton Malaysia confirm the Group's consolidated financial statements fairly present its financial position and performance in accordance with IFRS and Hong Kong Companies Ordinance disclosure requirements, issuing an unmodified opinion - The auditors believe the consolidated financial statements fairly present the Group's consolidated financial position as of March 31, 2020, and its financial performance and cash flows for the year then ended[279] - The auditors issued a standard unmodified audit opinion[279] Key Audit Matters Auditors identified two key audit matters: the recognition of initial listing expenses, involving significant management judgment in cost allocation, and inventory impairment provisions, requiring substantial judgment and estimation of net realizable value, for which appropriate audit procedures were performed - Recognition of Initial Listing Expenses: Auditors identified this as a key audit matter due to significant management judgment in classifying and allocating related costs between profit or loss and equity; approximately RM9.77 million of costs were recognized in profit or loss for the year ended March 31, 2020[285] - Inventory Impairment Provision: Auditors focused on this matter due to the significant inventory balance (approximately 28.5% of total assets) and the substantial management judgment involved in estimating net realizable value[287] Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the Group's operating results for FY2020, showing total revenue of RM147.1 million, a 10.1% year-on-year increase, but net profit for the year decreased from RM22.8 million to RM13.8 million due to listing expenses, with basic earnings per share at RM2.91 cents Consolidated Statement of Profit or Loss and Other Comprehensive Income (RM thousand) | Item (RM thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 147,126 | 133,615 | | Gross Profit | 97,309 | 83,960 | | Listing Expenses | (9,765) | - | | Profit Before Tax | 20,782 | 29,498 | | Profit for the Year | 13,827 | 22,751 | | Profit for the Year Attributable to Owners of the Company | 10,900 | 20,641 | | Basic and Diluted Earnings Per Share | 2.91 RM cents | 5.50 RM cents | Consolidated Statement of Financial Position This statement reflects the Group's financial position as of March 31, 2020, with total assets of RM109.1 million, total liabilities of RM45.5 million, and total equity of RM63.6 million, indicating growth in assets and equity and a stable financial structure compared to the prior year Consolidated Statement of Financial Position (RM thousand) | Item (RM thousand) | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Total Assets | 109,143 | 99,242 | | Non-current Assets | 28,744 | 28,657 | | Current Assets | 80,399 | 70,585 | | Total Liabilities | 45,540 | 42,200 | | Current Liabilities | 36,479 | 32,905 | | Non-current Liabilities | 9,061 | 9,295 | | Total Equity | 63,603 | 57,042 | | Equity Attributable to Owners of the Company | 56,684 | 51,910 | | Non-controlling Interests | 6,919 | 5,132 | Consolidated Statement of Changes in Equity This statement details changes in shareholders' equity during the reporting period, with total equity increasing from RM57.0 million at the beginning to RM63.6 million at the end, primarily driven by profit for the year but partially offset by dividends declared of RM8.7 million - Total equity increased from RM57,042 thousand as of April 1, 2019, to RM63,603 thousand as of March 31, 2020[359] - The primary driver for the increase in equity was total comprehensive income for the year of RM13,662 thousand[359] - During the year, the Group paid dividends totaling RM8,726 thousand to then-shareholders, resulting in a reduction in equity[359] Consolidated Statement of Cash Flows This statement summarizes cash inflows and outflows for the reporting period, showing net cash from operating activities of RM27.9 million, net cash used in investing activities of RM2.4 million, and net cash used in financing activities of RM25.7 million, with cash and cash equivalents at period-end of RM34.1 million, largely consistent with the beginning of the period Consolidated Statement of Cash Flows (RM thousand) | Item (RM thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 27,915 | 36,036 | | Net Cash (Used in) from Investing Activities | (2,362) | (2,540) | | Net Cash Used in Financing Activities | (25,657) | (33,997) | | Net (Decrease) Increase in Cash and Cash Equivalents | (104) | (501) | | Cash and Cash Equivalents at Beginning of Period | 34,149 | 25,596 | | Cash and Cash Equivalents at End of Period | 34,087 | 34,149 | Notes to the Consolidated Financial Statements This section provides detailed explanations and supplementary information for the consolidated financial statements, covering the company's reorganization background, significant accounting policies, accounting estimates and judgments, and detailed breakdowns of statement items such as segment information, revenue, assets, liabilities, related party transactions, and financial risk management Note 4. Segment Information The Group's operations are divided into two reportable segments: sales of optical products, and franchise and license management, with optical product sales being the core contributor to revenue and performance, and the vast majority of revenue geographically originating from Malaysia FY2020 Segment Performance (RM thousand) | FY2020 Segment Performance (RM thousand) | Sales of Optical Products | Franchise and License Management | Total | | :--- | :--- | :--- | :--- | | Segment Revenue | 146,627 | 499 | 147,126 | | Segment Results | 33,358 | 447 | 33,805 | - Geographically, of the RM147.1 million revenue in FY2020, RM147.0 million originated from Malaysia[536] Note 34. Related Party Transactions This note discloses details of the Group's related party transactions, primarily including rental expenses for properties leased from controlling shareholders and their associates, and license, bookkeeping, and management fee income from associated companies, along with the total remuneration of key management personnel - Rental expenses of RM36,000 paid to controlling shareholders Dato' Ng Kwang Hua and Dato' Ng Chin Kee[807] - Total remuneration for the Group's key management personnel (including directors) was RM2,806 thousand[808] Note 36. Financial Risk Management This note outlines the Group's primary financial risks and management policies, including interest rate, foreign currency, credit, and liquidity risks, noting floating interest rate exposure on borrowings, foreign currency exposure on certain financial assets and liabilities, credit risk concentration in trade receivables managed by a provision matrix, and liquidity risk management aimed at maintaining funding continuity and flexibility - Interest Rate Risk: Primarily arises from approximately RM1.37 million in floating-rate interest-bearing borrowings; a 1% change in interest rates would impact profit before tax by approximately RM14 thousand[816] - Credit Risk: Concentrated risk exists, with approximately 79% of trade receivables from the top five trade debtors; the Group has fully provided for loss allowances of approximately RM244 thousand for receivables overdue by more than 90 days[828][832] - Liquidity Risk: As of March 31, 2020, total undiscounted financial liabilities due within one year were approximately RM35.8 million, primarily comprising trade and other payables and lease liabilities[841] Note 40. Events After Reporting Period The most significant post-reporting event is the global COVID-19 pandemic and Malaysia's movement control order, leading to temporary store closures and an anticipated adverse impact on revenue in the next fiscal half-year, with management continuously assessing future financial implications due to ongoing uncertainties - The Malaysian government issued a Movement Control Order on March 16, 2020, causing business disruptions for the Group[849] - Management estimates the Movement Control Order will adversely impact the Group's revenue in the first half of the next financial year, but the specific financial impact cannot be reasonably predicted due to uncertain pandemic developments[850] Financial Summary Four-Year Financial Summary This section provides a summary of the Group's key performance and financial position for the four fiscal years from 2017 to 2020, showing continuous revenue growth, a decline in profit in FY2020 due to listing expenses, and steady growth in total assets and equity over the four-year period Four-Year Financial Summary (RM thousand) | Item (RM thousand) | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | | Results | | | | | | Revenue | 101,911 | 115,462 | 133,615 | 147,126 | | Profit Before Tax | 15,171 | 20,255 | 29,498 | 20,782 | | Profit for the Year | 11,490 | 15,617 | 22,751 | 13,827 | | Assets and Liabilities | | | | | | Total Assets | 91,416 | 96,261 | 99,242 | 109,143 | | Total Liabilities | 53,182 | 48,232 | 42,200 | 45,540 | | Total Equity | 38,234 | 48,029 | 57,042 | 63,603 |