HM INTL HLDGS(08416) - 2018 - 年度财报

Company Information HM International Holdings Limited's board composition, key officers, committee structures, and essential corporate details are presented - The Board comprises 3 executive directors (Yu Chi Ming, Tse Kam Wing, Chan Wai Lim) and 3 independent non-executive directors (Ng Ho Wan, Choi Hon Ting, Wan Chi Wai)[6] - The Audit Committee is chaired by Ng Ho Wan, the Remuneration Committee by Choi Hon Ting, and the Nomination Committee by Wan Chi Wai[6] - The company's stock code is 8416[7] Chairman's Statement The Chairman's Statement highlights 2018 as a challenging year, yet core business remained stable with continued focus on technology, customer service, and talent management - Despite challenges in 2018, core business remained stable, and the company successfully obtained ISO 27001 certification to enhance information security[8] - The company provides financial printing, marketing collateral printing, and new media value-added services (e.g., website design, video production, e-books, and app development)[9] - For 2019, the company plans to maintain core business, focus on IT development, explore new opportunities, and integrate traditional printing with new media services[12] Management Discussion and Analysis This section reviews HM International Holdings Limited's 2018 business and financial performance, noting a 12.0% revenue decrease to HK$130.8 million due to reduced marketing collateral printing, despite a slight increase in gross profit margin - The company primarily provides integrated printing services for Hong Kong's financial and capital markets, including financial printing and marketing collateral printing[15] - Approximately 73.5% of customers were recurring clients in 2018, contributing about 85.3% of total revenue[15] - The company obtained ISO 27001 certification in 2018, enhancing client confidence[32] Business Review The business review indicates stable financial printing revenue in 2018, but a significant 56.9% decline in marketing collateral printing revenue led to a 12.0% overall revenue decrease - In 2018, approximately 73.5% of customers were recurring clients, contributing about 85.3% of total revenue[15] Revenue by Product Line | Product Line | 2018 Revenue (HK$ thousand) | 2017 Revenue (HK$ thousand) | YoY Change | | :--- | :--- | :--- | :--- | | Financial Printing Projects | 113,981 | 112,675 | +1.2% | | Marketing Collateral Printing Projects | 14,017 | 32,531 | -56.9% | | Other Projects | 2,794 | 3,405 | -17.9% | | Total Revenue | 130,792 | 148,611 | -12.0% | Financial Review The financial review shows a 12.0% revenue decrease to HK$130.8 million in 2018, primarily due to reduced marketing collateral printing, while gross profit margin slightly increased to 46.6% and profit for the year decreased by 27.8% - Total revenue in 2018 was HK$130.8 million, a 12.0% decrease from HK$148.6 million in 2017, mainly due to fewer marketing collateral printing projects[23][24] - Gross profit in 2018 was HK$60.9 million, a 9.1% decrease year-on-year, with a gross profit margin of 46.6%, up from 45.1% in 2017[26] Key Financial Indicators | Indicator | 2018 (HK$ thousand) | 2017 (HK$ thousand) | YoY Change | | :--- | :--- | :--- | :--- | | Selling Expenses | 11,979 | 11,152 | +7.4% | | Administrative Expenses | 40,793 | 43,600 | -6.4% | | Income Tax Expense | 985 | 2,517 | -60.9% | | Profit for the Year | 7,162 | 9,922 | -27.8% | Financial Resources, Liquidity, and Gearing Ratio As of December 31, 2018, total assets decreased to HK$107.3 million and total equity to HK$84.9 million, while the current ratio improved to 4.4 times, indicating enhanced liquidity with zero gearing - In 2018, total assets were approximately HK$107.3 million (2017: HK$115.4 million), and total equity was approximately HK$84.9 million (2017: HK$87.9 million)[33] - Current assets were approximately HK$98.7 million and current liabilities approximately HK$22.2 million in 2018, resulting in a current ratio of approximately 4.4 times (2017: 3.8 times)[33] - The gearing ratio was zero in 2018 (2017: 0.3%)[33] Capital Expenditure, Material Investments, and Contingent Liabilities Capital expenditure significantly decreased to approximately HK$1.2 million in 2018, and the Group held no material investments or contingent liabilities as of December 31, 2018 - Capital expenditure in 2018 was approximately HK$1.2 million, a significant decrease from HK$12.1 million in 2017[34] - As of December 31, 2018, the Group held no material investments[35] - As of December 31, 2018, the Group had no material contingent liabilities[36] Employees and Remuneration Policy As of December 31, 2018, the Group employed 119 staff with total staff costs of HK$43.1 million, and remuneration policies are based on performance and market factors, with 1,560,000 share options granted in 2018 - As of December 31, 2018, 116 employees were in Hong Kong and 3 in China, totaling 119 employees[37] - Total staff costs (including directors' emoluments) were approximately HK$43.1 million in 2018, slightly lower than HK$43.4 million in 2017[37] - On March 16, 2018, 1,560,000 share options were granted to employees under the share option scheme[37] Indebtedness and Pledge of Group Assets As of December 31, 2018, assets with a carrying amount of approximately HK$4.0 million were pledged to secure general banking facilities, a reduction from HK$7.6 million in 2017 - As of December 31, 2018, approximately HK$4.0 million of assets were pledged for banking facilities, down from HK$7.6 million in 2017[38] Foreign Exchange Risk The Group's operations are primarily Hong Kong-based with transactions denominated in HKD, leading directors to believe there is no significant foreign exchange risk, thus no hedging arrangements were made in 2018 - Operations are primarily in Hong Kong, with transactions denominated in HKD, and only a small portion of bank deposits are in USD and RMB[41] - Directors believe the Group is not exposed to significant foreign exchange risk, and no hedging arrangements were made in 2018[41] Use of Proceeds from Placing Net proceeds from the January 11, 2017 placing amounted to approximately HK$40.0 million, with HK$25.2 million utilized by December 31, 2018, mainly for new offices, facility improvements, IT systems, and staff expansion - Net proceeds from the placing were approximately HK$40.0 million[42] Use of Placing Proceeds | Purpose | Intended Use (HK$ thousand) | Actual Use (HK$ thousand) | | :--- | :--- | :--- | | Establishment of new office and improvement of facilities | 17,487 | 15,297 | | Enhancement of IT systems and infrastructure | 14,962 | 6,106 | | Expansion of staff team | 3,817 | 3,794 | | Total | 36,266 | 25,197 | Comparison of Business Objectives with Actual Business Progress The Group will continue to invest in information technology systems and infrastructure to achieve the business objectives outlined in the prospectus - The Group will continue to invest in information technology systems and infrastructure[45] Directors and Senior Management This section details the biographies of HM International Holdings Limited's executive directors, independent non-executive directors, and senior management, highlighting their extensive industry experience and professional backgrounds - Executive Directors include Yu Chi Ming (Chairman, over 30 years of printing experience), Tse Kam Wing (Vice Chairman, over 30 years of printing experience), and Chan Wai Lim (Chief Executive Officer, over 14 years of financial printing experience)[47][49] - Independent Non-Executive Directors include Choi Hon Ting (engineering machinery trade), Ng Ho Wan (accounting, auditing, asset management), and Wan Chi Wai (accounting, legal)[51][53][55] - Senior management includes Chan Wai Chung (Chief Operating Officer), Cheng Shuk Wah (Director of Outsourcing Management), and Yung Shuk Man (Financial Controller)[57][59] Report of the Directors The Directors' Report outlines the Group's principal activities, business review, key risks, environmental policies, compliance, results, and dividend distribution for the 2018 financial year, along with details on share capital, share option scheme, stakeholder relations, and related party transactions - The Company is an investment holding company, with subsidiaries primarily providing financial printing, conceptual and graphic design, IT, and language services[62] - Key risks include fluctuating performance due to non-long-term contracts and potential service quality issues from outsourced production work[64][66] - The Board does not recommend a final dividend for 2018 but paid an interim dividend of HK2.5 cents per share, totaling HK$10 million, on August 31, 2018[70] Principal Activities and Business Review The Company operates as an investment holding entity, with its subsidiaries primarily engaged in financial printing, design, IT, and language services, as detailed in the Management Discussion and Analysis - The Company is an investment holding company[62] - Subsidiaries are primarily engaged in providing financial printing services, conceptual and graphic design, information technology, and language services[62] Key Risks and Uncertainties The Group faces key risks from the inability to secure long-term client contracts, leading to performance volatility, and potential impacts on service quality from outsourcing production work - Failure to secure long-term contracts, with projects often non-recurring, means performance is affected by financial market conditions, potentially hindering client retention or acquisition[64] - Outsourcing printing and binding/packaging work to third parties may affect overall service quality[66] Environmental Policies and Compliance with Laws and Regulations The Group is committed to sustainability, holding FSC Chain of Custody certification and promoting electronic documents, and has complied with all applicable Hong Kong laws and regulations in 2018 - The Group has obtained FSC Chain of Custody certification and encourages the use of electronic documents to reduce paper consumption[67] - For the year ended December 31, 2018, the Group complied with all material applicable Hong Kong laws and regulations concerning its business and operations[69] Results and Appropriations The Group's 2018 financial results are presented in the consolidated statement of profit or loss and other comprehensive income, with no final dividend recommended, but an interim dividend of HK2.5 cents per share, totaling HK$10 million, was paid - The Board does not recommend a final dividend for 2018[70] - An interim dividend of HK2.5 cents per share, totaling HK$10 million, was paid in 2018[70] Financial Summary and Reserves The Group's five-year financial summary is on page 120, and as of December 31, 2018, distributable reserves were approximately HK$62.4 million, a decrease from HK$72.3 million in 2017 - As of December 31, 2018, distributable reserves were approximately HK$62.4 million (2017: HK$72.3 million)[74] Share Capital and Share Option Scheme The Company's share capital remained stable in 2018, and the share option scheme, designed to reward contributors and attract talent, allows for up to 40,000,000 shares, with 1,560,000 options granted in 2018 at HK$0.70, of which 210,000 have lapsed - As of December 31, 2018, 400,000,000 issued and fully paid shares amounted to HK$4,000,000[105] - The share option scheme aims to reward eligible participants and attract and retain high-caliber talent[79] - On March 16, 2018, 1,560,000 share options were granted to employees at an exercise price of HK$0.70, with 210,000 options having lapsed[81] Relationship with Stakeholders The Group values employees as key assets, offering competitive remuneration and development, maintains strong client relationships for project acquisition, and collaborates with suppliers to meet client demands, with the top five clients and suppliers contributing 22.1% and 49.5% of total revenue and purchases, respectively - The Group considers employees a vital asset, offering competitive remuneration and long-term career development[85][89] - Most clients are listed companies and financial institutions, and the Group strives to meet their service needs to secure more large-scale projects[90] Key Stakeholder Contributions | Type | 2018 Percentage | 2017 Percentage | | :--- | :--- | :--- | | Top five clients' contribution to total revenue | 22.1% | 36.6% | | Largest client's contribution to total revenue | 6.9% | 13.3% | | Top five suppliers' contribution to total purchases | 49.5% | 71.6% | | Largest supplier's contribution to total purchases | 17.3% | 30.7% | Connected Transactions and Exempt Continuing Connected Transactions In 2018, the Group entered into a director's residence rental expense transaction with Tong Nian Development Limited, totaling HK$100,000, which constituted an exempt continuing connected transaction - In 2018, a director's residence rental expense of HK$100,000 occurred with Tong Nian Development Limited (controlled by Mr. Yu)[95][116] - This tenancy agreement constitutes an exempt continuing connected transaction under the GEM Listing Rules[95] Directors' and Chief Executive's Interests As of December 31, 2018, executive directors Yu Chi Ming, Tse Kam Wing, and Chan Wai Lim collectively held 74.25% of the Company's shares through HM Ultimate Holdings Limited - Yu Chi Ming, Tse Kam Wing, and Chan Wai Lim collectively held 297,000,000 shares, representing 74.25% of the issued shares, through HM Ultimate Holdings Limited[99] - Yu Chi Ming, Tse Kam Wing, and Chan Wai Lim beneficially owned 53%, 24.5%, and 22.5% interests in HM Ultimate, respectively[100] Substantial Shareholders' and Other Persons' Interests As of December 31, 2018, HM Ultimate Holdings Limited held 74.25% of the Company's shares, controlled by Yu Chi Ming, Tse Kam Wing, and Chan Wai Lim, whose spouses are also deemed to have interests in the same shares - HM Ultimate Holdings Limited held 297,000,000 shares, representing 74.25% of the Company[102] - The spouses of Yu Chi Ming, Tse Kam Wing, and Chan Wai Lim are deemed to have interests in the same shares by virtue of spousal interests[103][104][105] Directors' Remuneration and Service Agreements Details of directors' remuneration and the five highest-paid individuals are disclosed in the notes to the consolidated financial statements, with independent non-executive directors serving three-year terms and executive directors having automatically renewable three-year service contracts - Details of directors' remuneration and the five highest-paid individuals are disclosed in Notes 10 and 11 to the consolidated financial statements[106] - Independent non-executive directors serve for a term of three years[108] - Executive directors' service contracts are for a term of three years from January 13, 2016, automatically renewable for successive one-year terms thereafter[143] Non-Competition Undertaking from Controlling Shareholders The controlling shareholders (HM Ultimate, Yu Chi Ming, Tse Kam Wing, Chan Wai Lim) entered into a non-competition undertaking on December 15, 2016, which independent non-executive directors confirmed was complied with during the 2018 financial year - Controlling shareholders entered into a non-competition undertaking, which independent non-executive directors confirmed was complied with during the 2018 financial year[114] Employees and Remuneration Policy As of December 31, 2018, the Group employed 116 staff in Hong Kong and 3 in China, with total staff costs of approximately HK$43.1 million, and remuneration policies are based on operational results and individual performance - As of December 31, 2018, 116 employees were in Hong Kong and 3 in China[117] - Total staff costs in 2018 were approximately HK$43.1 million[117] Auditor The consolidated financial statements were audited by National Accountants (HK) CPA Limited, and the Board, adopting the Audit Committee's recommendation, will propose their re-appointment at the upcoming Annual General Meeting - The auditor is National Accountants (HK) CPA Limited[127] - The Board has adopted the Audit Committee's recommendation to propose the re-appointment of the existing auditor[127] Corporate Governance Report This report details HM International Holdings Limited's 2018 corporate governance practices, covering board composition, director responsibilities, committee functions, risk management, and shareholder communication - The Board is committed to high corporate governance standards and has complied with all code provisions of the GEM Listing Rules Appendix 15 Corporate Governance Code[129][131] - The Board comprises 3 executive directors and 3 independent non-executive directors, meeting GEM Listing Rules requirements[135][142] - The Board is responsible for establishing, maintaining, and reviewing the Group's risk management and internal control systems, adhering to the COSO Integrated Framework 2013 principles[175] Corporate Governance Practices The Company is committed to high corporate governance standards, having established a framework and policies to ensure compliance with all code provisions of the GEM Listing Rules Appendix 15 Corporate Governance Code, with directors confirming adherence to securities dealing standards - For the year ended December 31, 2018, the Company complied with all code provisions of the Corporate Governance Code[131] - Directors confirmed compliance with the required standard for securities dealings, and the company established written guidelines for employees who may possess price-sensitive information[132][133] Board of Directors The Board consists of 3 executive and 3 independent non-executive directors, with distinct roles for the Chairman and CEO, meeting at least quarterly to lead, monitor, and ensure sound internal controls and risk management - The Board comprises 3 executive directors (Yu Chi Ming, Tse Kam Wing, Chan Wai Lim) and 3 independent non-executive directors (Choi Hon Ting, Ng Ho Wan, Wan Chi Wai)[135] - Chairman Yu Chi Ming is responsible for overall financial and strategic planning, while CEO Chan Wai Lim handles overall business management and operational decisions, ensuring segregation of duties[140] - Independent non-executive directors meet GEM Listing Rules requirements, with at least three members constituting one-third of the Board, possessing professional qualifications or financial management knowledge[142] - The Board is responsible for leading and overseeing the Company, supervising business matters, strategic decisions, and overall performance, and ensuring robust internal control and risk management systems[145] Directors' Continuous Professional Development Board members actively engage in continuous professional development through training, seminars, and relevant publications to update their knowledge and skills for effective duty performance - Directors engage in professional development through training courses (e.g., briefings, seminars) and by reviewing relevant news and journals[150] Board Committees The Board has established Audit, Remuneration, and Nomination Committees with defined written terms of reference; the Audit Committee reviews financial information and controls, the Remuneration Committee reviews director and senior management compensation, and the Nomination Committee reviews board structure and director nominations - The company has an Audit Committee, Remuneration Committee, and Nomination Committee, all with clear written terms of reference[151] - The Audit Committee, comprising three independent non-executive directors with Ng Ho Wan as Chairman, is responsible for reviewing financial information, risk management, and internal controls[154] - The Remuneration Committee, comprising Choi Hon Ting (Chairman), Wan Chi Wai (Independent Non-Executive Director), and Yu Chi Ming (Executive Director), is responsible for reviewing the remuneration of directors and senior management[158] - The Nomination Committee, comprising Wan Chi Wai (Chairman), Ng Ho Wan (Independent Non-Executive Director), and Chan Wai Lim (Executive Director), is responsible for reviewing board structure, nominating directors, and assessing independence[163] - In 2018, 3 senior management personnel had remuneration between HK$500,000 and HK$1,000,000[162] Board Diversity Policy and Nomination Policy The Company has adopted Board Diversity and Nomination Policies to ensure a diverse range of perspectives, skills, and experiences on the Board, and to establish transparent procedures for director nomination and appointment, considering factors like gender, age, and professional background - A Board Diversity Policy has been adopted to support the company's strategic objectives and sustainable development, considering factors such as gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge, and length of service[166][169] - A Director Nomination Policy has been adopted, outlining selection criteria and procedures to ensure a balanced board in terms of skills, experience, and diverse perspectives[168][169] Corporate Governance Functions and Directors' Attendance Records The Board performs corporate governance functions, reviewing company policies, director training, legal compliance, and corporate governance report disclosures, with attendance records for Board and committee meetings in 2018 provided - The Board reviews corporate governance policies and practices, director training, legal compliance, and adherence to securities dealing standards[172] Directors' Attendance at Meetings (2018) | Director Name | Board | Audit Committee | Remuneration Committee | Nomination Committee | Annual General Meeting | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Yu Chi Ming | 4/4 | – | 1/1 | – | 1/1 | | Mr. Tse Kam Wing | 4/4 | – | – | – | 1/1 | | Mr. Chan Wai Lim | 4/4 | – | – | 1/1 | 1/1 | | Mr. Choi Hon Ting | 4/4 | 4/4 | 1/1 | – | 1/1 | | Mr. Ng Ho Wan | 4/4 | 4/4 | – | 1/1 | 0/1 | | Mr. Wan Chi Wai | 3/4 | 3/4 | 0/1 | 0/1 | 0/1 | Risk Management and Internal Control The Board is responsible for establishing, maintaining, and reviewing the Group's risk management and internal control systems, adhering to the COSO Integrated Framework 2013 principles, which aim to manage rather than eliminate risk, providing reasonable assurance - The Board is responsible for establishing, maintaining, and reviewing risk management and internal control systems to safeguard shareholders' interests and company assets[175] - Risk management and internal control systems adhere to the COSO Integrated Framework 2013 principles, aiming to manage rather than eliminate risk, providing reasonable rather than absolute assurance[175] - Each department is responsible for identifying, assessing, and managing risks, with management oversight and Board review and approval of system effectiveness[178] Directors' Responsibilities for the Consolidated Financial Statements and Auditor's Remuneration Directors confirm responsibility for preparing the 2018 consolidated financial statements, finding no material uncertainties regarding the Company's going concern, and the auditor's remuneration for 2018 was HK$860,000 for audit services - Directors confirm responsibility for preparing the consolidated financial statements and found no material uncertainties casting significant doubt on the company's ability to continue as a going concern[179][180] - Remuneration paid to the external auditor for audit services in 2018 was HK$860,000[183] Company Secretary and Shareholders' Rights and Communication Ms. Chan Sau Ling serves as Company Secretary, having completed the required professional training, and the Company effectively communicates with shareholders through various channels, including dividend policy, general meetings, and its website, ensuring their rights are protected - Ms. Chan Sau Ling serves as Company Secretary and has completed no less than 15 hours of professional training as required by the GEM Listing Rules[184][185] - Shareholders can exercise their rights by requesting extraordinary general meetings and submitting written inquiries[188][189] - The company communicates with shareholders through its website and general meetings, and has established a dividend policy[192][193] Independent Auditor's Report National Accountants (HK) CPA Limited issued an unmodified opinion on HM International Holdings Limited's consolidated financial statements for the year ended December 31, 2018, confirming a true and fair view in accordance with HKFRS and the Hong Kong Companies Ordinance, with key audit matters focusing on revenue recognition - National Accountants (HK) CPA Limited issued an unmodified opinion on the consolidated financial statements, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows[196] - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants[197] - Key audit matters primarily focused on revenue recognition, involving significant management judgment and estimates regarding performance progress and budgeted costs[200] Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2018, the Group reported revenue of HK$130,792 thousand, a decrease from 2017, with gross profit of HK$60,944 thousand and profit for the year of HK$7,162 thousand, representing a 27.8% decline, and basic and diluted earnings per share of HK1.79 cents Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Revenue | 130,792 | 148,611 | | Cost of Sales | (69,848) | (81,548) | | Gross Profit | 60,944 | 67,063 | | Profit Before Tax | 8,147 | 12,439 | | Income Tax Expense | (985) | (2,517) | | Profit for the Year | 7,162 | 9,922 | | Total Comprehensive Income for the Year | 7,127 | 9,922 | | Basic and Diluted Earnings Per Share | HK1.79 cents | HK2.50 cents | Consolidated Statement of Financial Position As of December 31, 2018, the Group's total assets decreased to HK$107,312 thousand, with non-current assets primarily comprising property, plant, and equipment, while net current assets stood at HK$76,512 thousand and total equity at HK$84,936 thousand Consolidated Statement of Financial Position | Indicator | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Non-current Assets | 8,590 | 12,117 | | Current Assets | 98,722 | 103,287 | | Total Assets | 107,312 | 115,404 | | Current Liabilities | 22,210 | 26,856 | | Non-current Liabilities | 166 | 693 | | Net Assets | 84,936 | 87,855 | | Total Equity | 84,936 | 87,855 | Consolidated Statement of Changes in Equity For the year ended December 31, 2018, equity attributable to owners of the Company decreased from HK$87,855 thousand to HK$84,931 thousand, primarily due to profit for the year, share option scheme recognition, lapsed options, and dividend payments - Total equity as of December 31, 2018, was HK$84,936 thousand, compared to HK$87,855 thousand as of December 31, 2017[217] Changes in Equity (2018) | Change Item | 2018 (HK$ thousand) | | :--- | :--- | | Profit and Total Comprehensive Income for the Year | 7,127 | | Equity-settled share-based payments recognised | 149 | | Lapsed share options | (21) | | Dividends paid | (10,000) | Consolidated Statement of Cash Flows For the year ended December 31, 2018, net cash from operating activities was HK$4,284 thousand, net cash from investing activities was HK$2,363 thousand, and net cash used in financing activities was HK$10,264 thousand, mainly due to dividend payments, resulting in a net decrease in cash and cash equivalents of HK$3,617 thousand, with an ending balance of HK$58,761 thousand Consolidated Statement of Cash Flows | Activity Type | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Net cash from operating activities | 4,284 | 8,625 | | Net cash from/(used in) investing activities | 2,363 | (13,073) | | Net cash (used in)/from financing activities | (10,264) | 52,430 | | Net (decrease)/increase in cash and cash equivalents | (3,617) | 47,982 | | Cash and cash equivalents at end of year | 58,761 | 62,283 | - Net cash outflow from financing activities in 2018 was primarily due to dividend payments of HK$10,000 thousand[222] Notes to the Consolidated Financial Statements The notes provide detailed accounting information for HM International Holdings Limited's 2018 financial year, including general information, the impact of new HKFRS standards, significant accounting policies, key estimation uncertainties, revenue and segment data, and various financial statement line item breakdowns - The Company is an investment holding company, primarily engaged in providing integrated printing services[225] - In 2018, the company first applied HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers), leading to adjustments in the opening consolidated statement of financial position[226][228][236] - From 2018, revenue is recognized under HKFRS 15, measuring progress towards satisfying performance obligations using the input method[272][277] General Information HM International Holdings Limited, incorporated in the Cayman Islands on January 13, 2016, is an investment holding company primarily offering integrated printing services, with its ultimate holding company being HM Ultimate Holdings Limited, and its consolidated financial statements are presented in HKD - The Company was incorporated in the Cayman Islands on January 13, 2016[225] - The Company is an investment holding company, primarily engaged in providing integrated printing services[225] Application of New and Revised Hong Kong Financial Reporting Standards In 2018, HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers) were first applied retrospectively, leading to the recognition of contract assets and liabilities under HKFRS 15 and the introduction of an expected credit loss model under HKFRS 9, which impacted the opening consolidated statement of financial position - In 2018, HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers) were first applied[226] - HKFRS 15 introduced contract assets and contract liabilities, reclassifying previous advances from customers to contract liabilities[230][231][235] - HKFRS 9 introduced an expected credit loss model, leading to the remeasurement of impairment provisions for trade receivables[236][241][242] Impact of New HKFRS on Opening Consolidated Statement of Financial Position | Item | December 31, 2017 (HK$ thousand) | HKFRS 15 Impact (HK$ thousand) | HKFRS 9 Impact (HK$ thousand) | January 1, 2018 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | | Deferred tax assets | – | – | 1 | 1 | | Trade and other receivables | 29,650 | – | (180) | 29,470 | | Amounts due from customers for service contracts | 1,849 | (1,849) | – | – | | Contract assets | – | 765 | – | 765 | | Trade and other payables | 26,257 | (5,494) | – | 20,763 | | Contract liabilities | – | 4,410 | – | 4,410 | | Retained earnings | 34,708 | – | (179) | 34,529 | - HKFRS 16 (Leases), effective January 1, 2019, will eliminate the distinction between operating and finance leases for lessees, requiring recognition of right-of-use assets and corresponding liabilities[250][251] Significant Accounting Policies This section details the Group's significant accounting policies for preparing consolidated financial statements, covering consolidation, revenue recognition (pre and post-HKFRS 15), leases, foreign currency, borrowing costs, retirement benefits, share-based payments, taxation, property, plant and equipment, intangible assets, impairment, provisions, financial instruments (pre and post-HKFRS 9), and related party definitions - Under HKFRS 15, revenue is recognized when performance obligations are satisfied, meaning when "control" of the goods or services is transferred to the customer[272] - Under HKFRS 9, loss allowances for expected credit losses are recognized, with lifetime expected credit losses applied to trade receivables and contract assets[331] - The definition of related parties details situations involving control, joint control, significant influence, and key management personnel[351] Key Sources of Estimation Uncertainty The Group faces significant estimation uncertainties in revenue recognition, trade and other receivables, and contract asset impairment, involving judgments on performance progress, contract revenue, costs, and credit risk assessment - Revenue recognition involves significant judgment and estimation regarding the progress of service contracts, contract revenue, and costs[356] - Financial asset impairment involves assessing credit risk and expected credit losses for trade and other receivables and contract assets, potentially leading to significant impairment losses or reversals[358] Revenue and Segment Information The Group's revenue primarily stems from integrated printing services, totaling HK$130,792 thousand in 2018, operating as a single segment with most revenue, assets, and liabilities located in Hong Kong - Revenue primarily derives from providing financial printing services, marketing collateral printing services, and other services[359][360] - The Group operates in a single operating segment, providing integrated printing services[364] - In 2018, no single customer contributed more than 10% of total revenue[365] Other Income and (Losses)/Gains In 2018, net other income and losses amounted to (HK$23) thousand, primarily comprising bank interest income, sundry income, net gains from disposal of property, plant and equipment, and net foreign exchange losses Other Income and (Losses)/Gains | Item | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Bank interest income | 25 | 18 | | Sundry income | 8 | 58 | | Net gains/(losses) on disposal of property, plant and equipment | 138 | (91) | | Net foreign exchange (losses)/gains | (194) | 180 | | Total | (23) | 165 | Finance Costs Finance costs in 2018 were HK$2 thousand, a significant reduction from HK$37 thousand in 2017, primarily consisting of finance lease charges Finance Costs | Item | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Interest on bank overdrafts | – | 4 | | Interest on bank borrowings | – | 14 | | Finance lease charges | 2 | 19 | | Total | 2 | 37 | Income Tax Expense Income tax expense in 2018 was HK$985 thousand, a 60.9% decrease from 2017, mainly due to lower profit before tax, with Hong Kong introducing a two-tiered profits tax rate and the PRC subsidiary taxed at 25% - Income tax expense in 2018 was HK$985 thousand, a 60.9% decrease year-on-year[29][369] - Hong Kong introduced a two-tiered profits tax rate from 2018, with the first HK$2 million of assessable profits taxed at 8.25% and the remainder at 16.5%[371] - The PRC subsidiary's corporate income tax rate is 25%[372] Profit for the Year The 2018 profit for the year is stated after deducting employee benefit expenses (HK$43,070 thousand), auditor's remuneration (HK$860 thousand), depreciation and amortization (HK$4,355 thousand), donations (HK$86 thousand), and operating lease rental expenses (HK$10,799 thousand) Profit for the Year Deductions | Item | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Total employee benefit expenses | 43,070 | 43,384 | | Auditor's remuneration | 860 | 860 | | Amortisation of intangible assets | 209 | 307 | | Depreciation of property, plant and equipment | 4,146 | 2,854 | | Donations | 86 | 49 | | Operating lease rental expenses | 10,799 | 11,181 | Directors' and Chief Executive's Emoluments Total emoluments for directors and the chief executive in 2018 amounted to HK$3,961 thousand, a decrease from HK$5,487 thousand in 2017, with Executive Director Chan Wai Lim receiving the highest remuneration of HK$1,485 thousand - Total emoluments for directors and the chief executive in 2018 were HK$3,961 thousand, compared to HK$5,487 thousand in 2017[378] - Executive Director Chan Wai Lim's 2018 remuneration was HK$1,485 thousand, including salary, allowances, and other benefits in kind of HK$1,120 thousand and discretionary bonus of HK$347 thousand[378] Employees' Emoluments Excluding the three directors, the remaining two highest-paid employees of the Group received total emoluments of HK$2,514 thousand - Non-director highest-paid employees' total emoluments in 2018 were HK$2,514 thousand, compared to HK$2,444 thousand in 2017[381] - In 2018, 1 employee's remuneration was between HK$0 and HK$1,000,000, and 1 employee's remuneration was between HK$1,000,001 and HK$1,500,000[381] Dividends An interim dividend of HK2.50 cents per share, totaling HK$10,000 thousand, was declared and paid in 2018, with no final dividend proposed for the year - An interim dividend of HK$10,000 thousand (HK2.50 cents per share) was paid in 2018[384] - No final dividend was proposed for 2018[384] Earnings Per Share Basic and diluted earnings per share for 2018 were HK1.79 cents, a decrease from HK2.50 cents in 2017 Earnings Per Share | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Profit attributable to owners of the Company (HK$ thousand) | 7,162 | 9,922 | | Weighted average number of ordinary shares (thousand shares) | 400,000 | 397,260 | | Basic earnings per share (HK cents) | 1.79 | 2.50 | Property, Plant and Equipment As of December 31, 2018, the carrying amount of property, plant and equipment was HK$8,471 thousand, a decrease from HK$11,825 thousand in 2017, with depreciation expense of HK$4,146 thousand - As of December 31, 2018, the carrying amount of property, plant and equipment was HK$8,471 thousand[387] - Depreciation expense in 2018 was HK$4,146 thousand[387] - As of December 31, 2018, property, plant and equipment with a total carrying amount of HK$nil were pledged to banks[387] Intangible Assets As of December 31, 2018, intangible assets, primarily computer software, had a carrying amount of HK$83 thousand, a decrease from HK$292 thousand in 2017, with amortization expense of HK$209 thousand - As of December 31, 2018, the carrying amount of intangible assets was HK$83 thousand[389] - Amortization expense in 2018 was HK$209 thousand[389] Contract Assets and Contract Liabilities As of December 31, 2018, net contract assets were HK$2,554 thousand and contract liabilities were HK$3,961 thousand, with contract assets primarily related to completed but unbilled printing services and contract liabilities to customer prepayments - As of December 31, 2018, net contract assets were HK$2,554 thousand[390] - As of December 31, 2018, contract liabilities were HK$3,961 thousand[390] - Of the revenue recognized in 2018, HK$4,346 thousand was included in the opening balance of contract liabilities, and HK$765 thousand was recognized from performance obligations satisfied in prior periods[396] Amounts Due from Customers for Service Contracts As of December 31, 2017, amounts due from customers for service contracts totaled HK$1,849 thousand, which were reclassified in 2018 due to the application of HKFRS 15 - As of December 31, 2017, amounts due from customers for service contracts were HK$1,849 thousand[397] - This item was reclassified in 2018 due to the application of HKFRS 15[245] Trade and Other Receivables As of December 31, 2018, total trade and other receivables amounted to HK$32,307 thousand, including trade receivables of HK$25,421 thousand (net of impairment allowance of HK$35 thousand), with credit terms generally ranging from 30 to 90 days - As of December 31, 2018, total trade and other receivables amounted to HK$32,307 thousand[399] Trade Receivables by Ageing | Ageing | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | 0 to 30 days | 12,030 | 11,041 | | 31 to 60 days | 4,161 | 3,094 | | 61 to 90 days | 756 | 3,220 | | 91 to 365 days | 6,517 | 5,370 | | Over 365 days | 1,992 | 888 | | Total | 25,456 | 23,613 | - Impairment loss allowance for trade receivables in 2018 was HK$35 thousand[403] Cash and Bank Balances/Pledged Bank Deposits As of December 31, 2018, cash and bank balances totaled HK$58,761 thousand, with pledged bank deposits of HK$4,008 thousand, and a portion of bank balances denominated in RMB are not freely convertible - As of December 31, 2018, cash and bank balances were HK$58,761 thousand[407] - As of December 31, 2018, pledged bank deposits were HK$4,008 thousand, used to secure banking facilities[407] - Approximately HK$1,596 thousand of bank balances are denominated in RMB and are not freely convertible[407] Trade and Other Payables As of December 31, 2018, total trade and other payables amounted to HK$18,035 thousand, a decrease from 2017, with advances from customers reclassified to contract liabilities - As of December 31, 2018, total trade and other payables amounted to HK$18,035 thousand[408] Trade Payables by Ageing | Ageing | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | 0 to 30 days | 5,729 | 6,531 | | 31 to 60 days | 3,665 | 3,970 | | 61 to 90 days | 1,727 | 2,938 | | 91 to 365 days | 345 | 1,004 | | Total | 11,466 | 14,443 | - As of January 1, 2018, approximately HK$5,494 thousand of advances from customers were reclassified as contract liabilities[410] Finance Lease Commitments As of December 31, 2018, the Group had no finance lease commitments, as all outstanding finance leases were fully settled - As of December 31, 2018, finance lease commitments were zero[413] - All outstanding finance leases have been fully settled, and no new finance lease borrowings have been drawn thereafter[415] Deferred Taxation As of December 31, 2018, net deferred tax liabilities amounted to HK$130 thousand, primarily arising from accelerated tax depreciation and loss allowances for trade receivables - As of December 31, 2018, net deferred tax liabilities were (HK$130) thousand (2017: (HK$693) thousand)[417] - Deferred taxation primarily consists of loss allowances for trade receivables and accelerated tax depreciation[417] Share Capital As of December 31, 2018, the Company's authorized share capital was HK$50,000,000, with issued and fully paid share capital of HK$4,000,000, comprising 400,000,000 ordinary shares - As of December 31, 2018, 400,000,000 ordinary shares were issued and fully paid, amounting to HK$4,000,000[420] Reserves The Group's reserve amounts and their movements are presented in the consolidated statement of changes in equity - Details of reserve amounts and their movements can be found in the consolidated statement of changes in equity[422] Share-based Payment Transactions The Company adopted a share option scheme on December 15, 2016, to reward employees; on March 16, 2018, 1,560,000 share options were granted at an exercise price of HK$0.70, of which 210,000 lapsed due to employee resignations, and a total expense of approximately HK$128 thousand was recognized in 2018 - On March 16, 2018, 1,560,000 share options were granted to employees at an exercise price of HK$0.70[425][427] - In 2018, 210,000 share options lapsed due to employee resignations[427] - A total share option expense of approximately HK$128 thousand was recognized in 2018[429] Retirement Benefit Schemes The Group provides a Mandatory Provident Fund Scheme for Hong Kong employees and a state-managed retirement benefit scheme for PRC subsidiary employees, with total expenses of approximately HK$1,593 thousand recognized in 2018 - Hong Kong employees are members of the Mandatory Provident Fund Scheme, while PRC subsidiary employees are members of a state-managed retirement benefit scheme[430] - Total expenses recognized for retirement benefit schemes in 2018 were approximately HK$1,593 thousand[430] Capital Management The Group manages capital to ensure continuous operation and maximize shareholder returns by optimizing the balance between debt and equity, with its capital structure comprising net debt and equity attributable to owners of the Company - Capital management aims to ensure continuous operation and maximize shareholder returns by optimizing the balance between debt and equity[431] - The capital structure comprises net debt (including cash and cash equivalents) and equity attributable to owners of the Company[431] Financial Instruments This section details the Group's financial instrument classification, financial risk management objectives, and policies, including foreign exchange, interest rate, price, and credit risks, with key instruments comprising trade and other receivables, pledged bank deposits, cash and bank balances, trade and other payables, and finance lease commitments - In 2018, financial assets were measured at amortized cost, and financial liabilities were measured at amortized cost[435] - The Group continuously monitors market risks (foreign exchange, interest rate, price), credit risk, and liquidity risk[436] - Lifetime loss allowances are applied to trade receivables and contract assets, assessed by grouping based on credit risk characteristics[451] - Liquidity risk management involves maintaining sufficient cash and bank financing levels, with approximately HK$14,000,000 in bank facilities obtained in 2018[457] Operating Lease Commitments As of December 31, 2018, the Group's future minimum operating lease payments amounted to HK$6,124 thousand, primarily for office property leases with terms of two to three years - As of December 31, 2018, operating lease commitments were HK$6,124 thousand[461] - Office property lease terms are for two to three years[461] Reconciliation of Liabilities Arising from Financing Activities This section details the changes in the Group's liabilities arising from financing activities, including accrued interest and cash outflows for finance lease commitments - As of January 1, 2018, finance lease commitments were HK$262 thousand, with accrued interest of HK$2 thousand and cash outflow from financing of HK$264 thousand, resulting in a year-end balance of zero[463] Related Party Transactions In 2018, the Group engaged in a director's residence rental expense transaction with Tong Nian Development Limited (controlled by Mr. Yu), totaling HK$100 thousand - In 2018, a director's residence rental expense of HK$100 thousand occurred with Tong Nian Development Limited[465] - Directors' emoluments are disclosed in Note 10[465] Pledge of Assets As of December 31, 2018, the carrying amount of pledged assets was HK$4,008 thousand, primarily consisting of pledged bank deposits Pledged Assets | Item | 2018 (HK$ thousand) | 2017 (HK$ thousand) | | :--- | :--- | :--- | | Pledged bank deposits | 4,008 | 7,000 | | Property, plant and equipment | – | 556 | | Total | 4,008 | 7,556 | List of Subsidiaries This section lists all of the Company's subsidiaries as of December 31, 2018, including their place of incorporation, share capital, percentage of equity attributable to the Company's owners, and principal activities and places of business - Key subsidiaries include HM Immediate Holdings Limited (investment holding), Honesty Information Services (integrated printing services), Honesty Information Technology Limited (IT services), Honesty Corporate Information Solutions Limited (commercial printing services), Honesty (Asia) Limited (procurement services), Honesty Language Services Limited (translation services), Honesty Information Services (Beijing) Co., Ltd. (integrated printing services), HM Investment Limited (investment holding), WordFlow Limited (inactive), and Talesis Limited (inactive)[468] - Most subsidiaries are indirectly wholly-owned by the Company, with Talesis Limited being 51% indirectly owned[468] Litigation Honesty Information Services is involved in a client lawsuit alleging unauthorized publication of false announcements and seeking damages, which Honesty Information Services firmly denies, counter-claiming for service fees, with directors believing no material adverse impact will arise - Honesty Information Services is involved in a client lawsuit where the plaintiff alleges unauthorized publication of false announcements and seeks damages[470] - Honesty Information Services denies the allegations and counter-claims for approximately HK$163 thousand in service fees and HK$33 thousand in interest[470] - Directors believe the event will not have a material adverse impact, and no provision has been made[470] Approval of Financial Statements The consolidated financial statements for the year ended December 31, 2018, were approved for issue by the Board of Directors on March 11, 2019 - The consolidated financial statements for the year ended December 31, 2018, were approved for issue by the Board of Directors on March 11, 2019[471] Statement of Financial Position and Reserves of the Company As of December 31, 2018, the Company's total assets and total equity both amounted to HK$66,446 thousand, with total reserves of HK$62,446 thousand - As of December 31, 2018, the Company's total assets were HK$66,446 thousand[473] - As of December 31, 2018, the Company's total reserves were HK$62,446 thousand[473][475] Financial Summary The financial summary presents the Group's performance, assets, and liabilities over the past five financial years, with 2018 revenue at HK$130,792 thousand, profit for the year at HK$7,162 thousand, total assets at HK$107,312 thousand, total liabilities at HK$22,376 thousand, and total capital and reserves at HK$84,936 thousand Five-Year Summary of Results | Indicator | 2018 (HK$ thousand) | 2017 (HK$ thousand) | 2016 (HK$ thousand) | 2015 (HK$ thousand) | 2014 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 130,792 | 148,611 | 160,036 | 160,369 | 125,343 | | Gross Profit | 60,944 | 67,063 | 68,133 | 64,470 | 47,248 | | Profit Before Tax | 8,147 | 12,439 | 18,747 | 18,965 | 13,074 | | Profit for the Year | 7,162 | 9,922 | 14,969 | 14,998 | 11,283 | Five-Year Summary of Assets and Liabilities | Indicator | 2018 (HK$ thousand) | 2017 (HK$ thousand) | 2016 (HK$ thousand) | 2015 (HK$ thousand) | 2014 (HK$ thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 107,312 | 115,404 | 59,888 | 83,194 | 90,000 | | Total Liabilities | 22,376 | 27,549 | 34,964 | 64,739 | 62,211 | | Total Capital and Reserves | 84,936 | 87,855 | 24,924 | 18,455 | 27,789 |