ITE HOLDINGS(08092) - 2020 - 年度财报

Corporate Information Corporate Structure The report presents the Group's corporate structure chart, illustrating the hierarchical relationship of ITE (Holdings) Limited as the holding company and its subsidiaries Chairman's Statement Chairman Mr. Lau Hon Kwong reiterated the Group's goal to be a leading global supplier of smart card, RFID, and biometric technology products and solutions, acknowledging strong performance in Hong Kong, Macau, and mainland China, with plans for continued overseas expansion - The Group aims to be a leading global supplier of smart card, Radio Frequency Identification (RFID), biometric technology products, solutions, and services, planning to leverage its R&D capabilities and industry experience to continuously develop innovative products and expand overseas markets[13][16] Biographical Details of Directors and Senior Management This section details the background of the company's executive and independent non-executive directors, highlighting the executive team's founders with over 30 years of experience in their respective fields, including CEO Mr. Lau Hon Kwong, Mr. Cheng Kwok Hung for R&D, and Mr. Lau Hoi Wah for finance - The core members of the executive director team are all Group founders with extensive industry experience: - Mr. Lau Hon Kwong: Chief Executive Officer, responsible for overall strategic planning, with over 33 years of executive management experience - Mr. Cheng Kwok Hung: Responsible for technology management and R&D, with 36 years of R&D and production management experience - Mr. Lau Hoi Wah: Responsible for financial management and corporate development, a member of the Institute of Chartered Accountants in England and Wales[19][20][21] Management Discussion and Analysis Business Review and Future Prospect In FY2019/20, the Group secured new hardware, software, and professional service contracts, including self-service payment kiosks for hospitals and self-service library stations, and successfully implemented a 1 MWh lithium battery system for parking meters, demonstrating contributions to smart city and sustainability initiatives, while the Board remains cautious about future prospects due to geopolitical and pandemic uncertainties - The Group made progress in smart city applications, delivering multiple projects for public sectors, including hospital self-service payment kiosks and self-service libraries[36] - The company successfully deployed a 1 MWh lithium battery system for nearly 10,000 roadside parking meters for the Transport Department to support off-grid energy consumption, expected to save approximately 400,000 D-size alkaline batteries annually, reflecting its sustainability efforts[37] - Due to the impact of US-China conflicts, Hong Kong's political instability, and the COVID-19 pandemic, the Board holds a pessimistic view on future prospects and plans to adopt very cautious measures in operating and developing its business[43] Financial Performance For the fiscal year ended March 31, 2020, the Group's financial performance significantly improved, with total revenue growing 79% to approximately HKD 44 million and a turnaround to a net profit attributable to owners of approximately HKD 1 million from a loss of HKD 3.5 million in the prior year, driven by a 143% increase in core business revenue despite an 11% decline in maintenance services Key Financial Indicators for FY2019/20 | Indicator | FY2020 (HKD) | FY2019 (HKD) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | Approx. HKD 44 million | Approx. HKD 24.8 million | +79% | | Net Profit/(Loss) Attributable to Owners | Approx. HKD 1 million | (Approx. HKD 3.5 million) | Turnaround to Profit | | Gross Profit Margin | 29% | 30% | -1 ppt | Segment Revenue Performance | Revenue Source | FY2020 (HKD) | FY2019 (HKD) | YoY Change | | :--- | :--- | :--- | :--- | | Core Business Services Revenue | 35,204,827 | 14,465,650 | +143% | | Maintenance Services Revenue | 9,140,379 | 10,325,713 | -11% | - The Group's administrative expenses increased by 14% year-on-year to HKD 11.92 million, while R&D costs and related sponsorships significantly increased by 54% to HKD 2.65 million[56] Liquidity, Financial Resources, and Other Matters The Group primarily funds operations through internal cash flow and related party loans, with a stable liquidity ratio of 1.59 and an improved gearing ratio of 0.68 from 0.97 last year, while maintaining prudent financial management and treasury policies, with no significant investments or disposals during the period, and 90 full-time employees incurring approximately HKD 26 million in staff costs Key Financial Ratios | Indicator | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Current Ratio | 1.59 | 1.60 | | Quick Ratio | 1.49 | 1.52 | | Gearing Ratio | 0.68 | 0.97 | - The Group's working capital primarily comes from internally generated cash flow and related party loans; as of March 31, 2020, the outstanding balance of related party loans was HKD 8.8 million at an annual interest rate of 5%[62] - As of March 31, 2020, the Group had 90 full-time employees, a decrease of 24 year-on-year, with staff costs (including directors' emoluments) for the fiscal year approximately HKD 26 million, an increase from HKD 17 million last year[77] Corporate Governance Report Compliance and Board Structure The company strives to maintain high corporate governance standards, largely complying with the GEM Listing Rules' Corporate Governance Code, with minor deviations such as the Chairman and CEO roles being held by the same individual, Mr. Lau Hon Kwong, which the Board believes provides strong unified leadership, while the temporary reduction in independent non-executive directors and audit committee members due to a recent passing is being actively addressed - The company deviates from the Corporate Governance Code's requirement for separation of Chairman and Chief Executive Officer roles; Mr. Lau Hon Kwong holds both positions, which the Board believes provides strong and consistent leadership[94][95][137] - Due to the passing of Independent Non-Executive Director Dr. Lee Peng Fee on May 15, 2020, the number of independent non-executive directors and Audit Committee members temporarily fell to two, below the GEM Listing Rules' minimum requirement of three, and the company will fill the vacancy as soon as practicable[113] Board Committees The company has established Audit, Remuneration, and Nomination Committees, with the Audit Committee reviewing financial reporting and internal controls, the Remuneration Committee determining executive and senior management compensation, and the Nomination Committee reviewing board structure and recommending candidates, all predominantly chaired or composed of independent non-executive directors to ensure independence and effectiveness - Audit Committee: Composed of two independent non-executive directors, primarily responsible for reviewing financial reporting, internal control, and risk management systems, and communicating with external auditors[143][144] - Remuneration Committee: Composed of two independent non-executive directors and one executive director, responsible for determining the remuneration packages of executive directors and senior management[148] - Nomination Committee: Composed of two independent non-executive directors and one executive director, responsible for the appointment and removal of directors, and reviewing the board's composition[150][151] Internal Control and Shareholder Communication The Board is responsible for establishing and reviewing the Group's risk management and internal control systems, covering financial, operational, and compliance aspects, and assessed the existing internal controls as effective, despite the absence of an internal audit function, while the company maintains transparent shareholder communication through various channels and has clear procedures for shareholders to convene extraordinary general meetings and nominate directors - The Board is responsible for the Group's risk management and internal control systems, which have undergone annual review and are deemed effective; however, the Group currently does not have an internal audit function[165][167] - The company has established procedures for shareholders to convene extraordinary general meetings: shareholders holding not less than 10% of the share capital may make a written request to the Board to convene a meeting[186] - The company communicates with shareholders through various channels, including annual reports, quarterly reports, announcements, and the company website (http://www.hkite.com)[194](index=194&type=chunk) Environmental, Social and Governance Report Environmental The Group is committed to environmental protection, implementing measures such as using an electric vehicle fleet to reduce emissions, managing waste by deploying rechargeable energy systems to minimize alkaline battery chemical waste from parking meters, and promoting energy conservation through LED lighting and paperless operations, despite an increase in total greenhouse gas emissions to 99.29 tonnes of CO2 equivalent in FY2020 due to business expansion and increased electricity consumption Greenhouse Gas Emissions and Resource Consumption | Indicator | Unit | FY2020 | FY2019 | | :--- | :--- | :--- | :--- | | Total Electricity Consumption | kWh | 185,990 | 90,928 | | Greenhouse Gas Emissions | tonnes of CO2 equivalent | 99.29 | 49.10 | | Non-hazardous Waste (Alkaline Batteries) | tonnes | 37.63 | 8.4 | - To fulfill the parking meter system management contract, the company established a fleet of 5 electric vans to reduce vehicle emissions[212] - The company aims to reduce the quantity of alkaline battery chemical waste generated by parking meter systems through the deployment of rechargeable energy products and systems[238] Social The Group actively engages in community activities, including sponsoring the PolyU Chinese Orchestra and supporting charities, earning the 'Caring Company Logo' for over a decade, while adhering to labor laws, providing equal opportunities, and accepting over 20 university interns this year, emphasizing employee health, safety, and continuous training, and implementing ISO 9001:2015 quality management, intellectual property protection, and anti-corruption policies - The Group actively fulfills its social responsibilities, continuously participates in charitable activities, and has been awarded the 'Caring Company Logo' for over ten consecutive years[245][247] - The company supports youth development, providing work opportunities for over 20 interns from various universities and disciplines this year[248] Workforce Structure (As of March 31) | Category | 2020 | 2019 | | :--- | :--- | :--- | | Full-time Employees | 90 | 98 | | Part-time Employees | 4 | 1 | | Interns | 15 | 15 | | Total (Hong Kong) | 107 | 112 | | Total (Macau) | 2 | 2 | - The company implements an ISO 9001:2015 Quality Management System and has established strict intellectual property protection and anti-corruption policies to ensure operational compliance[277][280] Directors' Report Business and Financial Summary This section outlines the company's principal business activities, customer and supplier concentration, and dividend policy, with the main business being investment holding through subsidiaries focused on smart card systems, RFID, and IT services, noting high customer concentration where the largest customer accounts for 62% of total revenue and the top five for 91%, while supplier concentration is relatively low, and no dividend is recommended for the fiscal year Major Customer and Supplier Concentration | Category | Percentage of Group Total | | :--- | :--- | | Largest Customer | 62% (Revenue) | | Top Five Customers Combined | 91% (Revenue) | | Largest Supplier | 10% (Purchases) | | Top Five Suppliers Combined | 43% (Purchases) | - The Board does not recommend the payment of any dividend for the year ended March 31, 2020[298] Directors' Interests and Share Option Scheme This section discloses the interests of the company's directors and chief executives in the company's shares, related shares, and debentures as of March 31, 2020, with Executive Directors Mr. Lau Hon Kwong and Mr. Cheng Kwok Hung holding 26.82% and 12.39% respectively of the issued shares, including personal and corporate interests, and details outstanding share options held by directors, noting no share repurchases, sales, or redemptions during the reporting period Major Directors' Shareholdings (As of March 31, 2020) | Director Name | Capacity | Number of Ordinary Shares Held (L) | Percentage of Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Lau Hon Kwong | Executive Director | 248,210,348 | 26.82% | | Mr. Cheng Kwok Hung | Executive Director | 114,672,000 | 12.39% | - The company has a share option scheme, with several directors holding outstanding share options at various exercise prices[321][322] - During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's shares[339] Financial Report Independent Auditor's Report Independent auditor BDO Limited issued an unmodified opinion on the Group's consolidated financial statements for the year ended March 31, 2020, affirming that they present a true and fair view of the Group's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards, highlighting revenue recognition for service contracts and impairment assessment of trade receivables and contract assets as key audit matters - The auditor concluded that the consolidated financial statements present a true and fair view of the Group's financial position and performance in accordance with Hong Kong Financial Reporting Standards, issuing an unmodified opinion[366] - Key audit matters include: - Revenue recognition for service contracts: Significant judgment is required as the recognition method (percentage of completion method) necessitates management's estimation of total contract costs - Impairment assessment of trade receivables and contract assets: These assets constitute 25% of total assets, and their impairment assessment is based on a forward-looking expected credit loss model, requiring significant management judgment[372][374] Consolidated Financial Statements The Group's performance significantly improved this fiscal year, achieving a turnaround to profit with total revenue growing 79% to HKD 44.35 million, gross profit increasing 69% to HKD 12.71 million, and net profit attributable to owners reaching HKD 1.02 million, while total assets slightly increased to HKD 32.64 million and net assets grew 9% to HKD 12.95 million, with operating cash flow turning from a net outflow of HKD 5.5 million to a net inflow of HKD 6.82 million Consolidated Statement of Profit or Loss Summary (HKD) | Indicator | FY2020 | FY2019 | | :--- | :--- | :--- | | Revenue | 44,345,206 | 24,791,363 | | Gross Profit | 12,707,652 | 7,514,526 | | Profit/(Loss) Before Tax | 1,023,284 | (3,455,685) | | Net Profit/(Loss) Attributable to Owners | 1,023,284 | (3,455,685) | | Basic Earnings/(Loss) Per Share | 0.11 HK cents | (0.37) HK cents | Consolidated Statement of Financial Position Summary (HKD) | Indicator | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Total Assets | 32,643,007 | 31,603,782 | | Total Liabilities | 19,695,752 | 19,679,811 | | Net Assets (Total Equity) | 12,947,255 | 11,923,971 | Consolidated Statement of Cash Flows Summary (HKD) | Indicator | FY2020 | FY2019 | | :--- | :--- | :--- | | Net Cash Inflow/(Outflow) from Operating Activities | 6,820,680 | (5,500,149) | | Net Cash Inflow from Investing Activities | 71,252 | 1,721,919 | | Net Cash (Outflow)/Inflow from Financing Activities | (6,873,138) | 1,496,890 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 18,794 | (2,281,340) | Notes to the Consolidated Financial Statements The notes to the financial statements provide detailed explanations of key accounting policies, estimates, and judgments, highlighting the first-time application of HKFRS 16 Leases and its impact, revenue segmentation by business type, segment reporting indicating a primary focus on Hong Kong, and detailed disclosures on trade receivables, related party transactions, and the share option scheme - The Group first applied HKFRS 16 Leases from April 1, 2019, using the modified retrospective approach, recognizing lease liabilities and right-of-use assets previously classified as operating leases, without restating comparative information[619][624] Revenue and Non-current Assets by Geographical Location (HKD) | Region | FY2020 Revenue | FY2019 Revenue | 2020 Non-current Assets | 2019 Non-current Assets | | :--- | :--- | :--- | :--- | :--- | | Hong Kong | 43,203,552 | 21,498,921 | 3,826,567 | 3,715,933 | | Macau | 1,141,654 | 3,292,442 | – | 205 | - As of March 31, 2020, there were 38,900,000 outstanding share options under the company's share option scheme[777][780] Five Year Summary The report provides a summary of key financial data for the past five fiscal years (2016-2020), showing that the Group's revenue remained relatively stable over the last five years but experienced significant growth in FY2020, with a successful turnaround to profit in FY2020 after a loss in FY2019, and net assets fluctuating but remaining generally stable over the five-year period Five-Year Financial Data Summary (HKD) | Fiscal Year | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 44,345,206 | 24,791,363 | 25,435,931 | 22,348,653 | 24,169,306 | | Net Profit/(Loss) Attributable to Owners | 1,023,284 | (3,455,685) | 1,321,854 | 382,539 | 329,315 | | Net Assets | 12,947,255 | 11,923,971 | 14,812,656 | 13,143,060 | 12,342,783 |