万成环球控股(08309) - 2021 - 中期财报

Company Information The report discloses fundamental company information including board members, committee compositions, registered office, principal place of business, and main bankers - The report discloses fundamental company information including board members, committee compositions, registered office, principal place of business, and main bankers[5][6] Unaudited Condensed Consolidated Financial Statements Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended September 30, 2020, the company's revenue grew by 21.1% year-on-year, gross profit increased by 51.2%, and profit for the period surged by 279.7% to HK$18,141 thousand due to a significant increase in other income from government subsidies, with basic earnings per share reaching 3.02 HK cents Consolidated Statement of Profit or Loss Summary (For the six months ended September 30) | Metric | 2020 (HK$ thousands) | 2019 (HK$ thousands) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 291,852 | 240,987 | +21.1% | | Gross Profit | 37,891 | 25,062 | +51.2% | | Profit Before Tax | 20,878 | 5,408 | +286.1% | | Profit for the Period | 18,141 | 4,778 | +279.7% | | Basic Earnings Per Share (HK cents) | 3.02 | 0.80 | +277.5% | Unaudited Condensed Consolidated Statement of Financial Position As of September 30, 2020, the company's total assets were HK$209,281 thousand and total liabilities were HK$118,248 thousand, with current assets significantly increasing driven by trade receivables and cash, while current liabilities rose due to increased borrowings, leading to a decrease in the current ratio from 1.94x to 1.71x Consolidated Statement of Financial Position Summary | Metric | September 30, 2020 (HK$ thousands) | March 31, 2020 (HK$ thousands) | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 25,856 | 28,326 | | Current Assets | 183,425 | 139,041 | | Total Assets | 209,281 | 167,367 | | Liabilities and Equity | | | | Current Liabilities | 107,211 | 71,516 | | Non-current Liabilities | 11,037 | 22,959 | | Total Liabilities | 118,248 | 94,475 | | Total Equity | 91,033 | 72,892 | Unaudited Condensed Consolidated Statement of Changes in Equity For the six months ended September 30, 2020, total equity increased from HK$72,892 thousand to HK$91,033 thousand, with the increase entirely attributable to the HK$18,141 thousand profit recorded during the period - Total equity increased by HK$18,141 thousand during the period, from HK$72,892 thousand to HK$91,033 thousand, with the increase stemming from profit for the period[11] Unaudited Condensed Consolidated Statement of Cash Flows During the reporting period, the company's net cash and cash equivalents increased by HK$17,194 thousand, with operating cash flow turning positive due to improved profitability, and net cash inflow from financing activities of HK$15,342 thousand supporting business expansion Condensed Consolidated Statement of Cash Flows Summary (For the six months ended September 30) | Metric | 2020 (HK$ thousands) | 2019 (HK$ thousands) | | :--- | :--- | :--- | | Net Cash From Operating Activities | 2,718 | (14,912) | | Net Cash (Used in) Investing Activities | (866) | (33,132) | | Net Cash From Financing Activities | 15,342 | 27,514 | | Net Increase (Decrease) in Cash and Cash Equivalents | 17,194 | (20,530) | | Cash and Cash Equivalents at End of Period | 57,348 | 12,918 | Notes to the Unaudited Condensed Consolidated Financial Statements The notes detail the company's principal accounting policies, revenue composition, other income sources, and expense breakdowns, highlighting significant growth in street cleaning solutions revenue and a substantial increase in other income from government anti-epidemic and employment support subsidies, with no dividends proposed for the period General Information The company is an investment holding company whose subsidiaries primarily provide comprehensive environmental cleaning solutions in Hong Kong, including street, building, bus, and ferry cleaning services - The Group's principal business is providing environmental cleaning solutions, including street cleaning, building cleaning, bus and ferry cleaning, refuse collection and waste disposal, and pest control[15] Revenue During the reporting period, total revenue increased by 21.1% to HK$291,852 thousand, primarily driven by a 31.8% year-on-year growth in the core 'Street Cleaning Solutions' segment, while 'Building Cleaning' and 'Bus and Ferry Cleaning' revenues declined Revenue Composition (For the six months ended September 30) | Business Segment | 2020 (HK$ thousands) | 2019 (HK$ thousands) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Street Cleaning Solutions | 211,641 | 160,603 | +31.8% | | Building Cleaning Solutions | 44,397 | 46,007 | -3.5% | | Bus and Ferry Cleaning Solutions | 19,807 | 24,009 | -17.5% | | Others | 16,007 | 10,368 | +54.4% | | Total | 291,852 | 240,987 | +21.1% | Other Income Other income surged from HK$361 thousand to HK$7,333 thousand during the period, primarily due to HK$7,161 thousand in subsidies from the Hong Kong Government's Anti-epidemic Fund and Employment Support Scheme - The significant increase in other income was primarily due to HK$2,331 thousand from the Hong Kong Government's Anti-epidemic Fund and HK$4,830 thousand from the Employment Support Scheme during the reporting period[23] Finance Costs Finance costs slightly increased from HK$1,081 thousand to HK$1,207 thousand year-on-year, primarily due to higher interest on bank borrowings - Finance costs primarily comprise interest on bank borrowings and lease liabilities, with interest on bank borrowings increasing from HK$267 thousand to HK$612 thousand[25] Income Tax Expense Income tax expense increased from HK$630 thousand to HK$2,737 thousand year-on-year, driven by a significant rise in profit before tax, with eligible entities in Hong Kong benefiting from the two-tiered profits tax regime - Hong Kong profits tax adopts a two-tiered system, with a tax rate of 8.25% for the first HK$2 million of assessable profits and 16.5% for profits exceeding this amount[26] Earnings Per Share For the reporting period, profit used for basic earnings per share calculation was HK$18,141 thousand, resulting in basic and diluted earnings per share of 3.02 HK cents based on 600 million weighted average ordinary shares outstanding, a significant increase from 0.80 HK cents in the prior year - Basic and diluted earnings per share were 3.02 HK cents, compared to 0.80 HK cents in the prior period, with no potential dilutive ordinary shares during the reporting period[8][29] Dividends The Board did not recommend the payment of an interim dividend for the six months ended September 30, 2020 - The Group did not recommend the payment of any dividends for the six months ended September 30, 2020, and 2019[30] Trade Receivables As of September 30, 2020, trade receivables significantly increased to HK$79,156 thousand from HK$53,055 thousand as of March 31, 2020, with the majority of receivables aged within 60 days - Trade receivables increased from HK$53,055 thousand to HK$79,156 thousand, with 94.7% of the amounts aged within 60 days[33][34] Trade Payables As of September 30, 2020, trade payables slightly decreased to HK$7,191 thousand from HK$7,979 thousand as of March 31, 2020, with approximately 73.6% of payables aged within 60 days - Trade payables decreased from HK$7,979 thousand to HK$7,191 thousand, with an average credit period of 60 days[36][37] Related Party Transactions During the reporting period, the Group engaged in related party transactions, primarily involving lease payments to Director Mr. Wong Chong Shing and consultancy fees to subsidiary director Mr. Lo Wing Keung, with key management personnel short-term benefits amounting to HK$2,578 thousand - During the reporting period, lease payments of HK$202 thousand were made to Director Mr. Wong Chong Shing, and consultancy fees of HK$180 thousand were paid to a subsidiary director[40] - Short-term benefits for directors and other key management personnel amounted to HK$2,578 thousand, an increase from HK$1,920 thousand in the prior period[41] Management Discussion and Analysis Business Review and Outlook During the reporting period, the company achieved significant sales growth driven by new government street cleaning contracts, with minimal financial impact from the COVID-19 pandemic; however, a major risk emerged as key subsidiary 'Man Shing Cleaning' was suspended from bidding on FEHD contracts for five years, which is expected to adversely affect future revenue and profit, prompting the company to seek legal review and plan for other subsidiaries to participate in tenders Business Review The Group achieved significant contract sales growth driven by several major street cleaning service contracts secured in late 2019 and early 2020, with its business portfolio covering various cleaning sectors, and newly acquired subsidiary 'Kei Tak Yan' contributing revenue and profit, while the COVID-19 pandemic had operational impacts but no material financial repercussions as of the reporting date - Business growth was primarily driven by street cleaning service contracts secured for Kowloon City and Wong Tai Sin districts in October 2019 and March 2020[43] - Kei Tak Yan Property Management Limited, a wholly-owned subsidiary acquired in October 2019, contributed approximately HK$4,129 thousand in revenue and HK$1,144 thousand in profit before tax for the six months ended June 30, 2020[45] Latest Business Development The company disclosed a significant adverse development: its wholly-owned subsidiary 'Man Shing Cleaning Services Limited' was suspended from bidding on FEHD cleaning service contracts for five years starting June 19, 2020, due to a breach of the Occupational Safety and Health Ordinance, which the Board expects to adversely impact the Group's revenue and profit given its status as a major revenue contributor - Core subsidiary 'Man Shing Cleaning' was suspended by the Hong Kong Food and Environmental Hygiene Department (FEHD) from bidding on cleaning service contracts for five years due to a breach of safety regulations[47] - The company is seeking a review of the bidding suspension decision and may consider legal action, while also planning for other subsidiaries to participate in future FEHD tenders to mitigate the impact[47][48] Outlook Facing the challenge of its key subsidiary's bidding suspension, the company will strive to secure new FEHD tenders through other subsidiaries, actively explore new business opportunities from various government departments and private sectors to expand its client base, and continue to seek diversified investment opportunities to maximize shareholder returns - Future strategies include: 1) continuing to bid for FEHD contracts through other subsidiaries; 2) expanding clients to other government departments and private sectors; and 3) seeking diversified investment opportunities[49] Financial Review During the reporting period, the Group demonstrated strong financial performance with revenue growing by 21.1% year-on-year, primarily from new street cleaning contracts, gross margin improving from 10.4% to 13.0% due to higher-margin projects and efficiency gains, and a substantial increase in other income from government subsidies, collectively leading to a 280% year-on-year surge in net profit Revenue Revenue increased by 21.1% year-on-year to HK$291,852 thousand, primarily driven by new street cleaning contracts for Kowloon City and Wong Tai Sin districts, which commenced in October 2019 and March 2020, contributing approximately HK$87,000 thousand in revenue during the period and offsetting the impact of some expired contracts - Revenue increased by approximately HK$50,865 thousand (+21.1%) year-on-year, primarily due to several new FEHD street cleaning contracts[50] Gross Profit and Gross Margin Gross profit increased by 51.2% year-on-year to HK$37,891 thousand, with gross margin improving from 10.4% to 13.0%, primarily due to increased contributions from higher-margin private and government projects, enhanced team efficiency, and cost control - Gross margin improved from 10.4% to 13.0%, primarily due to increased contributions from higher-margin projects and enhanced efficiency[52] Other Income Other income significantly increased from HK$361 thousand to HK$7,333 thousand, primarily driven by approximately HK$2,331 thousand from the Hong Kong Government's Anti-epidemic Fund and HK$4,830 thousand from the Employment Support Scheme - The increase in other income primarily stemmed from two Hong Kong Government subsidies, totaling approximately HK$7,161 thousand[53] Administrative Expenses Administrative expenses increased by HK$4,205 thousand year-on-year to HK$23,139 thousand, primarily due to higher staff costs, vehicle depreciation and related expenses, and increased insurance premiums for new contracts, driven by business expansion - The increase in administrative expenses primarily resulted from higher staff costs, vehicle depreciation and related motor expenses, and increased insurance premiums for new contracts[54] Net Profit Driven by revenue growth, improved gross margin, and government subsidies, net profit attributable to owners of the company reached HK$18,141 thousand, a significant increase of approximately 280% from HK$4,778 thousand in the prior period - Net profit for the reporting period was approximately HK$18,141 thousand, an increase of approximately 280% from HK$4,778 thousand in the prior period[56] Liquidity, Financial Resources and Capital Structure The Group maintains a sound financial position and healthy liquidity, with cash and bank balances increasing to HK$57,348 thousand and a current ratio of 1.71x as of September 30, 2020; bank borrowings increased to support business expansion, leading to a rise in the gearing ratio from 27.7% to 41.0% Key Financial Ratios | Metric | September 30, 2020 | March 31, 2020 | | :--- | :--- | :--- | | Cash and Bank Balances (HK$ thousands) | 57,348 | 40,154 | | Current Ratio | 1.71x | 1.94x | | Gearing Ratio | 41.0% | 27.7% | - Bank borrowings increased by approximately 84.9% from HK$20,181 thousand to HK$37,322 thousand, primarily for business expansion[59] Other Financial Information The Group utilizes bank credit facilities, such as bank guarantees, to support service contract fulfillment, collateralizing certain deposits for this purpose; directors believe existing insurance adequately covers personal injury claims, posing no material contingent liabilities, and there were no significant investments or capital commitments during the reporting period, with minimal foreign exchange risk Contingent Liabilities The Group issued bank guarantees for service contract fulfillment, collateralizing approximately HK$30,119 thousand in deposits; additionally, while facing personal injury claims, directors believe most are covered by insurance, posing no material liabilities - As of September 30, 2020, deposits pledged for bank guarantees and other financing amounted to approximately HK$30,119 thousand[62] Material Investments, Acquisitions and Disposals During the reporting period, the Group did not undertake any material investments, acquisitions, or disposals, nor does it have any related future plans - The Group had no material investments, acquisitions, or disposals during the reporting period, and currently has no plans for any significant investments or capital assets[66][67] Charges on the Group's Assets As of September 30, 2020, the Group's total interest-bearing debts amounted to approximately HK$55,881 thousand; general bank facilities are secured by company guarantees, cash deposits of subsidiaries, and trade receivables, while lease liabilities are secured by charges over leased assets and company guarantees - As of September 30, 2020, the Group's total interest-bearing debts amounted to approximately HK$55,881 thousand, with general bank facilities totaling HK$196.6 million[69] Other Disclosures Employees and Remuneration Policy As of September 30, 2020, the Group had approximately 2,716 employees, with total staff costs for the reporting period amounting to approximately HK$228 million, an increase from the prior year; the company's remuneration policy is based on qualifications, position, and seniority, supplemented by discretionary bonuses and share option schemes to incentivize staff - As of September 30, 2020, the Group had approximately 2,716 employees, with total staff costs (including directors' emoluments) for the reporting period amounting to approximately HK$228 million[71] Interim Dividend The Board did not recommend the payment of an interim dividend for the six months ended September 30, 2020 - The Board did not recommend the payment of an interim dividend, consistent with no dividend payment in the prior period[72] Disclosure of Interests Controlling shareholders Mr. Wong Chong Shing, Mr. Wong Man Shing, and Mr. Wong Chi Ho, acting in concert, collectively hold 61.50% of the company's shares, with the report detailing the shareholding interests of directors and substantial shareholders - Mr. Wong Chong Shing, Mr. Wong Man Shing, and Mr. Wong Chi Ho are parties acting in concert and are deemed to jointly hold 369,000,000 shares of the company, representing 61.50% of the total share capital[74][75] Corporate Governance The company has adopted and complied with the Corporate Governance Code in the GEM Listing Rules; the Audit Committee, comprising three independent non-executive directors, has reviewed the interim financial statements, and directors confirm continuous compliance with the Model Code for Securities Transactions by Directors during the reporting period - The company has established an Audit Committee, comprising three independent non-executive directors, which has reviewed the unaudited condensed consolidated financial statements[88] - Directors confirm that as of the reporting date, the company's issued shares maintained sufficient public float of not less than 25%[87]