Financial Performance - The Group's total revenue for the year ended December 31, 2019, decreased to HK$84.7 million, representing a decline of approximately 24.3% compared to the previous year[15]. - The net profit for the year ended December 31, 2019, decreased to HK$3.1 million, showing a decrease of approximately 74.9% compared to the previous year[15]. - For the year ended December 31, 2019, the Group recorded revenue of approximately HK$84.7 million, showing a decrease of approximately 24.3% compared to revenue of approximately HK$111.9 million for the same period in 2018[36]. - The net profit for the year ended December 31, 2019, decreased by HK$9.4 million to HK$3.1 million, from HK$12.5 million for the year ended December 31, 2018, representing a decline of approximately 74.9%[36][37]. - The gross profit margin of the Group decreased to 25.5% for the year ended December 31, 2019, compared to 28.5% for the preceding year[36]. - Other income dropped significantly from HK$2.8 million for the year ended December 31, 2018 to HK$0.6 million for the year ended December 31, 2019, mainly due to decreased sample sales income and financial guarantee income[49]. - Selling and distribution expenses increased from HK$7.0 million in 2018 to HK$8.3 million in 2019, primarily due to an increase in design fees[51]. - Administrative expenses rose from HK$7.8 million in 2018 to HK$8.5 million in 2019, attributed to increased professional fees and property depreciation[53]. - The Group's revenue decreased by 24.3% from HK$111.9 million for the year ended 31 December 2018 to HK$84.7 million for the year ended 31 December 2019[45]. - Cost of sales decreased by 21.2% from HK$80.0 million for the year ended 31 December 2018 to HK$63.1 million for the year ended 31 December 2019, aligning with the decrease in revenue[45]. - Gross profit was HK$31.9 million and HK$21.6 million for the years ended 31 December 2018 and 2019, respectively, with gross profit margin decreasing from 28.5% to 25.5%[45]. Impact of External Factors - The decrease in sales was primarily due to social unrest in Hong Kong during the second half of 2019, which affected overseas customers' willingness to visit the showroom and place orders[15]. - The Group's revenue and profitability have been severely impacted since the second half of 2019 due to social unrest and the subsequent outbreak of COVID-19, leading to pessimistic sentiment regarding the macroeconomic environment[16]. - The decline in revenue and profitability was primarily due to social unrest in Hong Kong in the second half of 2019, which affected overseas customers' willingness to visit the Group's showroom and place sales orders[36][19]. - The COVID-19 outbreak has disrupted the logistics of the supply chain, leading to lower production output from suppliers in the People's Republic of China due to restrictions on production resumption and movement[22][25]. - The COVID-19 outbreak has intensified in Europe, impacting retail markets and leading to lower average selling prices, which may reduce gross profit[68][72]. - Supply chain logistics have been disrupted due to COVID-19, resulting in lower production output from suppliers in China due to raw material shortages and workforce reductions[69][71]. Strategic Initiatives - The Group expects the business environment to remain challenging in the first half of 2020 due to ongoing US-China trade tensions and soft global economic growth[23][26]. - The Group is actively maintaining long-term cooperation with major customers while developing new customer bases and markets[24][26]. - As a short-term measure, the Group will consider implementing more stringent cost-control measures to cope with the recent downturn in business[24][26]. - The management team is confident in overcoming challenges due to their extensive experience in the apparel supply chain management market[24][26]. - The Group's strategy includes solidifying relationships with existing customers and exploring new customers to continue growth[40]. - The Group has successfully commenced business relationships with several new customers located in Europe and Asia[42]. - A new showroom was acquired on 10 September 2018 to showcase the Group's product offerings[42]. - The company plans to solidify relationships with existing customers and explore new customers, allocating HK$3.3 million for this strategy, with actual usage of HK$1.2 million and unutilized funds of HK$2.1 million[78]. - A new showroom was established to showcase product offerings, with an allocation of HK$17.5 million fully utilized[78]. - The company strengthened its design and development capabilities with an allocation of HK$2.2 million, of which HK$1.4 million was used, leaving HK$0.8 million unutilized[78]. - The quality control process was enhanced with an allocation of HK$0.8 million, which was fully utilized[78]. Financial Position - As of 31 December 2019, the total equity of the Group was HK$62.5 million, down from HK$82.4 million as of December 31, 2018[82]. - The Group's cash and cash equivalents as of December 31, 2019, were HK$30.5 million, compared to HK$37.8 million as of December 31, 2018[82]. - The bank borrowings of the Group as of December 31, 2019, were HK$10.3 million, slightly decreased from HK$10.9 million as of December 31, 2018[82]. - The current ratio was 2.8 times as of December 31, 2019, down from 3.0 times as of December 31, 2018[82]. - The trade receivables turnover days were 47.6 days for the year ended December 31, 2019, compared to 45.0 days for the previous year[82]. - The trade payables turnover days increased to 27.3 days for the year ended December 31, 2019, from 22.9 days in 2018[82]. - The gearing ratio was 16.5% as of December 31, 2019, compared to 13.2% as of December 31, 2018, due to a decrease in equity from dividend payments[82]. - HK$5.2 million of bank borrowings has been repaid as part of the Group's financial strategy[45]. - Finance costs increased to approximately HK$0.5 million for the year ended December 31, 2019, up from HK$0.2 million in 2018, primarily due to higher average bank borrowing balances[58]. - Income tax expense for the year ended December 31, 2019 was HK$0.9 million, a decrease from HK$3.2 million in 2018, reflecting the impact of the two-tiered profits tax rates regime introduced in 2018[58]. - Profit attributable to owners of the Group for the year ended December 31, 2019 was HK$3.1 million, a significant decrease from HK$12.5 million in 2018, mainly due to reduced revenue from social unrest in Hong Kong[58]. Corporate Governance - The Company has complied with all code provisions as set out in the Corporate Governance Code during the year ended 31 December 2019[120]. - The Board consists of at least three independent non-executive Directors, representing one-third of the Board, with one possessing appropriate professional qualifications or accounting expertise[128]. - The independent non-executive directors are responsible for providing independent judgment on the group's resources and operational strategies[111]. - The company emphasizes independent oversight from its non-executive directors to ensure high standards of conduct and performance[109]. - The independent directors play a crucial role in maintaining the integrity and transparency of the company's operations[108]. - The Board is committed to maintaining high corporate governance standards to safeguard shareholder interests and enhance corporate value[118]. - The Company has established a governance framework to ensure sound internal control and risk management systems are in place[137]. - The Audit Committee held five meetings during the year ended December 31, 2019, to review quarterly, interim, and annual financial results, audit planning, and risk management[164]. - The Remuneration Committee met once during the year ended December 31, 2019, to review the remuneration policy and structure of the Company[169]. - The Nomination Committee met once during the year ended December 31, 2019, to review the structure, size, and composition of the Board[177]. - The Company has adopted a Board Diversity Policy to achieve diversity at the Board level, recognizing its importance for maintaining competitive advantage[178]. - The Nomination Committee is committed to diversity at all levels and will consider various aspects, including gender, age, and professional experience, in its assessments[179]. - The terms of reference for all Board committees are posted on the Company's website and the Stock Exchange's website[164]. - The Company has adopted a Director Nomination Policy to ensure a balance of skills, experience, and diversity on the Board[188]. - The Board is responsible for reviewing corporate governance policies and practices annually[192]. - The attendance record of Directors at meetings indicates full participation, with all Directors attending 100% of board meetings[197].
细叶榕科技(08107) - 2019 - 年度财报