宏强控股(08262) - 2020 - 年度财报

Company Information The report provides basic corporate information including the board, committees, and key advisors - The report provides basic corporate information including the Board of Directors, committee members, company secretary, auditor, legal advisors, registered office, principal place of business, share registrar, principal bankers, and company website[6][7] Chairman's Statement The Group faces market uncertainty and is strategically transitioning from a contractor to a property developer - Amid market uncertainties from Hong Kong's political situation, Sino-US relations, and COVID-19, property construction orders have sharply declined, intensifying competition; the Group will continue to target projects with reasonable returns[8] - The Group is implementing a business transformation strategy, shifting from a property construction service provider to a developer role, having established a joint venture, Wang Tai Engineering Development Limited, to co-develop land in Sai Kung and a horticultural leisure park, while exploring new property development projects in Fanling[9] - The Group believes it has reached a turning point to actively participate as a developer and will continue to explore new business and investment opportunities to deliver additional shareholder returns[9] Management Discussion and Analysis The Group's financial performance declined due to fewer construction orders, but it maintains a solid financial position while transitioning its business model Business Review and Prospects Revenue and profit fell sharply due to fewer construction orders and the disposal of a subsidiary, prompting a strategic shift towards a developer role - During the year, the Group operated approximately 25 construction projects, most of which were completed in previous years and are now in the preliminary completion stage, with new projects yet to commence[13] - Due to a decrease in construction orders and the disposal of a property management subsidiary, the Group's revenue decreased by approximately 50%, leading to a significant drop in profit after tax[13] - The Group has reached a turning point and will increasingly participate in project investment and take on a developer role, rather than solely undertaking property construction projects[14] Financial Review The Group's revenue and net profit significantly declined by 57.2% and 85.1% respectively, primarily due to fewer construction orders Comparison of FY2020 and FY2019 Results | Indicator | FY2020 (HK$'000) | FY2019 (HK$'000) | Y-o-Y Change | Key Reasons | | :--- | :--- | :--- | :--- | :--- | | Revenue | 217,300 | 507,800 | -57.2% | Decrease in construction orders and disposal of a subsidiary | | Direct Costs | 196,200 | 456,000 | -57.0% | In line with the decrease in revenue and disposal of a subsidiary | | Gross Profit | 21,100 | 51,800 | -59.3% | In line with the decrease in revenue | | Gross Profit Margin | 9.7% | 10.2% | -0.5pp | No significant fluctuation | | Administrative Expenses | 24,600 | 33,900 | -27.4% | Disposal of a subsidiary | | Income Tax Expense | 400 | 4,000 | -90.0% | Decrease in assessable profits | | Profit Attributable to Owners | 2,400 | 16,100 | -85.1% | Decrease in revenue | Liquidity and Financial Resources The Group maintained a healthy financial position with increased cash balances, reduced total liabilities, and a low gearing ratio of 3.1% Summary of Financial Position as at 30 June 2020 | Indicator | 30 June 2020 (HK$'000) | 30 June 2019 (HK$'000) | Change | | :--- | :--- | :--- | :--- | | Bank Balances and Cash | 131,400 | 93,100 | ▲ 41.1% | | Pledged Bank Balances | 15,900 | 64,500 | ▼ 75.4% | | Total Interest-bearing Borrowings | 5,000 | 5,000 | - | | Total Assets | 242,200 | 270,300 | ▼ 10.4% | | Total Liabilities | 82,600 | 106,100 | ▼ 22.1% | | Shareholders' Equity | 159,600 | 164,200 | ▼ 2.8% | | Current Ratio | 2.8 times | 2.4 times | ▲ 0.4 | | Gearing Ratio | 3.1% | 3.0% | ▲ 0.1pp | - All of the Group's business activities and borrowings are transacted in Hong Kong dollars, posing no significant foreign exchange risk, and no foreign currency hedging policy has been formulated[29] Material Acquisitions and Disposals The Group formed a joint venture to develop land and operate a leisure park in Sai Kung, holding a 65% equity interest - On 8 August 2019, a joint venture was established with an independent third party to co-operate in the development of land and a horticultural business in Sai Kung, as well as to operate a leisure park[34] - The Group holds 65% of the equity in the joint venture, which has been accounted for as a subsidiary of the Group[34] Employees and Remuneration Policies The Group employed 53 staff with an annual cost of approximately HK$25.6 million, offering competitive remuneration packages Employee and Cost Overview | Indicator | 30 June 2020 | 30 June 2019 | | :--- | :--- | :--- | | Total Employees | 53 employees | 62 employees | | Annual Staff Costs | Approx. HK$25,600,000 | Approx. HK$95,900,000 | Principal Risks and Uncertainties The Group's primary risks include reliance on successful tenders, subcontractors, and a few major customers, alongside business growth uncertainties - The Group's principal risks include: - Failure to maintain historical growth rates and profit margins - Business reliance on successful tenders, which are non-recurring in nature - Dependence on subcontractors for project completion and machinery supply - Uncertainty in the clear determination of price variations in works - Exposure to credit risk of customers - Reliance on a few major customers[41] Biographical Details of Directors and Senior Management This section details the professional backgrounds, qualifications, and responsibilities of the executive directors, independent non-executive directors, and senior management - This section provides detailed biographies of the executive directors, independent non-executive directors, and senior management, including their age, position, responsibilities, industry experience, academic background, and professional qualifications[47][48][51][52][55][56] Corporate Governance Report The company outlines its governance structure, including the board and its committees, risk management framework, and shareholder rights policies The Board of Directors The Board comprises five directors, meeting GEM Listing Rules for independence and qualifications, and held seven meetings during the year - The Board consists of two Executive Directors (Mr Kwok Tung Keung and Mr Ko Chun Hay) and three Independent Non-executive Directors (Ms Wong Suk Fong, Mr Shiu Ting Man and Mr Ng Man Lei), in compliance with the Listing Rules[64] - During the year ended 30 June 2020, seven Board meetings were held, with most directors attending all meetings[67][68] Board Committees The company has established Audit, Remuneration, and Nomination Committees to assist the Board in fulfilling its duties - The Audit Committee, chaired by Ms Wong Suk Fong, comprises three Independent Non-executive Directors and is responsible for overseeing financial reporting, internal control, and risk management systems; it held four meetings during the year[78][81][83] - The Remuneration Committee, chaired by Ms Wong Suk Fong, consists of five members and is responsible for recommending remuneration policies and structures to the Board; it held two meetings during the year[86] - The Nomination Committee, chaired by Mr Ng Man Lei, consists of five members and is responsible for reviewing the Board's composition and nominating director candidates; it held two meetings during the year[89] Risk Management and Internal Control The Board oversees the risk management and internal control systems, which it has reviewed and deemed effective and adequate - The Board is collectively responsible for monitoring the design, implementation, and effectiveness of the risk management and internal control systems, and has reviewed all material controls, including financial, operational, and compliance controls[98] - The Board has conducted an annual review of the effectiveness of the Group's risk management and internal control systems and considers them to be effective and adequate[99] Shareholders' Rights Shareholders holding at least 10% of voting shares can convene a special general meeting, with procedures outlined for director nominations - Shareholders holding not less than one-tenth of the paid-up capital of the Company carrying the right of voting at general meetings may request to convene a special general meeting[107] - Shareholders may nominate a candidate for directorship by following the prescribed procedures, which require submitting a written notice to the Company's head office within a specified period[109] Environmental, Social and Governance Report The report details the Group's performance in workplace quality, environmental protection, operational practices, and community involvement A) Workplace Quality%20Workplace%20Quality) The Group employed 53 staff, maintained a safe work environment with no work-related fatalities, and adhered to fair labor standards Workforce Structure (as at 30 June 2020) | Category | Breakdown | Number of Employees | | :--- | :--- | :--- | | Total | | 53 | | By Gender | Male | 40 | | | Female | 13 | | By Function | Senior Management | 13 | | | Operations Team | 28 | | | Back Office | 12 | | By Age | Below 30 | 5 | | | 30 - 50 | 23 | | | Above 50 | 25 | - During the reporting period, there was one case of minor deviation from construction site safety regulations resulting in a fine of HK$13,000, with no work-related fatalities or injuries[133] B) Environment%20Environment) The Group reduced its environmental footprint, with lower greenhouse gas emissions and construction waste, supported by its ISO 14001 certification Key Environmental Performance Indicators | Indicator | Unit | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total GHG Emissions | Tonnes CO2e | 80 | 89 | | Construction Waste | Tonnes | 4,073 | 4,988 | | Electricity Consumption | kWh | 60,772 | 73,607 | | Water Consumption | m³ | 577 | 758 | - The Company has established an Integrated Management System and is certified with ISO 14001:2004 (Environmental Management) and OHSAS 18001:2007 (Occupational Health and Safety)[152] C) Operating Practices%20Operating%20Practices) The Group maintains strict supply chain monitoring, ensures product quality through its ISO 9001 system, and upholds anti-corruption policies - The Company has established a quality management system compliant with ISO 9001:2008 standards to ensure the quality of its works[160] - The Company has formulated an anti-fraud policy and a whistle-blowing policy, and implements internal controls to prevent and detect fraudulent activities, ensuring business integrity[164][165] D) Community Involvement%20Community%20Involvement) The Group demonstrated its commitment to social responsibility by donating approximately HK$1.04 million to support students in need - During the reporting period, the Company donated approximately HK$1,036,000 to charitable organizations to support the education of students in need[167] Directors' Report The report covers the Group's principal activities, dividend policy, major customer and supplier dependencies, and directors' interests in shares - The Group is principally engaged in general building works, specialised building works, and property development in Hong Kong, with no significant changes in the nature of its principal activities during the year[171] - The Board does not recommend the payment of a final dividend for the year ended 30 June 2020 (2019: HK2.5 cents per share)[174] Major Customer and Supplier Concentration | Category | Concentration | FY2020 | FY2019 | | :--- | :--- | :--- | :--- | | Major Customers | Top 5 customers' share of total revenue | 84.4% | 87.8% | | | Largest customer's share of total revenue | 34.6% | 38.5% | | Major Suppliers | Top 5 suppliers & subcontractors' share of total direct costs | 32.4% | 22.2% | | | Largest subcontractor's share of total direct costs | 9.8% | 7.5% | - As at 30 June 2020, Chairman Mr Kwok Tung Keung held a total interest of approximately 32.88% through controlled corporations and personal beneficial ownership, while CEO Mr Ko Chun Hay beneficially owned approximately 23.69% of the shares[184] Independent Auditor's Report The auditor issued an unqualified opinion, stating the financial statements give a true and fair view, with key audit matters identified - The auditor concluded that the consolidated financial statements give a true and fair view of the Group's financial position as at 30 June 2020, and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[218] - Key audit matters included: 1. Revenue and profit recognition from construction services and contract assets: due to significant judgment involved in their estimation and their material impact on the financial statements 2. Trade receivables and contract assets: impairment testing involves judgment and estimation[221][225] Consolidated Financial Statements The statements present the Group's financial performance, position, equity changes, and cash flows for the fiscal year Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group's revenue was HK$217 million and profit for the year was HK$2.0 million, representing significant year-over-year declines FY2020 Income Statement Summary | Indicator (HK$'000) | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 217,287 | 507,796 | | Gross Profit | 21,075 | 51,805 | | Operating Profit | 2,721 | 20,559 | | Profit Before Tax | 2,477 | 20,009 | | Profit and Total Comprehensive Income for the Year | 2,034 | 16,003 | | Profit Attributable to Owners of the Company | 2,363 | 16,120 | | Basic Earnings Per Share (HK cents) | 0.30 | 2.02 | Consolidated Statement of Financial Position As of 30 June 2020, the Group had total assets of HK$242 million and net assets of HK$160 million Summary of Statement of Financial Position as at 30 June 2020 | Indicator (HK$'000) | 2020 | 2019 | | :--- | :--- | :--- | | Non-current Assets | 16,076 | 14,003 | | Current Assets | 226,133 | 256,270 | | Total Assets | 242,209 | 270,273 | | Current Liabilities | 81,644 | 106,094 | | Non-current Liabilities | 979 | – | | Total Liabilities | 82,623 | 106,094 | | Net Assets | 159,586 | 164,179 | | Total Equity | 159,586 | 164,179 | Consolidated Statement of Changes in Equity Total equity decreased from HK$164 million to HK$160 million, mainly due to the payment of a HK$20 million dividend - During the year, total equity decreased from HK$164 million to HK$160 million, primarily due to the payment of a HK$20 million dividend, partially offset by the profit for the year of HK$2.03 million and capital injection from non-controlling interests[240] Consolidated Statement of Cash Flows The Group's cash and cash equivalents increased by HK$38.4 million, reaching a year-end balance of HK$131.4 million FY2020 Cash Flow Statement Summary | Indicator (HK$'000) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 25,174 | 15,477 | | Net Cash from Investing Activities | 34,348 | 8,760 | | Cash Used in Financing Activities | (21,175) | (20,713) | | Net Increase in Cash and Cash Equivalents | 38,347 | 3,524 | | Cash and Cash Equivalents at Beginning of Year | 93,097 | 89,573 | | Cash and Cash Equivalents at End of Year | 131,444 | 93,097 | Notes to the Financial Statements This section provides detailed supplementary information on accounting policies, financial risk management, and segment data for the consolidated financial statements - This section provides detailed explanations and supplementary information for the consolidated financial statements, covering general corporate information, adoption of new and revised accounting standards (such as HKFRS 16 'Leases'), significant accounting policies, key accounting estimates, financial risk management, segment information, and breakdowns of various assets, liabilities, income, and expense items[246][248][253][313] Financial Summary A five-year overview of the Group's key financial results, assets, and liabilities is presented Five-Year Financial Summary | For the year ended 30 June (HK$'000) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Results | | | | | | | Revenue | 217,287 | 507,796 | 498,638 | 651,426 | 560,280 | | Profit for the Year | 2,034 | 16,003 | 8,340 | 5,905 | 6,010 | | Assets and Liabilities | | | | | | | Total Assets | 242,209 | 270,273 | 283,681 | 304,701 | 277,683 | | Total Liabilities | (82,623) | (106,094) | (111,751) | (150,847) | (129,734) | | Total Equity | 159,586 | 164,179 | 171,930 | 153,854 | 147,949 |