THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND …€¦ · THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE ... Recruitment cost 1,162

You should read the following discussion and analysis of our Group’s financial condition

and results of operations together with our consolidated financial information as at and for

the three years ended 31 March 2019 and the nine months ended 31 December 2019 and the

accompanying notes included in the Accountants’ Report set out in Appendix I to this

[REDACTED] document. The Accountants’ Report has been prepared in accordance with

HKFRSs. Potential investors should read the whole of the Accountants’ Report set out in

Appendix I to this [REDACTED] document and not rely merely on the information contained

in this section. The following discussion and analysis contains forward-looking statements

that involve risks and uncertainties. For additional information regarding these risks and

uncertainties, please refer to the section headed “Risk factors” in this [REDACTED]document.

OVERVIEW

Established in 1984, we are one of the leading property management services providers inHong Kong primarily targeting residential properties.

According to the F&S Report, we ranked ninth in the property management services marketin Hong Kong in terms of revenue in 2018, with a market share of approximately 0.6%. Inaddition to the provision of property management and related services, we also generatedrevenue from rental services and money lending business.

For our principal operation of property management services and stand-alone securityservices, our property portfolio encompasses a wide variety of properties including residentialbuildings, commercial buildings, industrial buildings, schools and car parks. The largest part ofour property portfolio is residential properties, which accounts for approximately 84.8%, 84.1%,81.7% and 83.4% of the total revenue of our Group’s property management services andstand-alone security services for each of the year ended 31 March 2017, 2018 and 2019 and thenine months ended 31 December 2019, respectively.

As at 31 March 2017, 2018 and 2019, 31 December 2019 and the Latest Practicable Date,we had a total of 431, 434, 437, 444 and 442 property management contracts and stand-alonesecurity services contracts on hand, which had been relatively steady throughout the TrackRecord Period. For each of the year ended 31 March 2017, 2018 and 2019 and the nine monthsended 31 December 2019, from our provision of property management services, we generated arevenue of approximately HK$365.1 million, HK$366.9 million, HK$370.8 million andHK$325.0 million, respectively. This represented approximately 92.3%, 89.0%, 87.1% and89.8% of our total revenue, respectively, during the Track Record Period. Our revenue generatedfrom stand-alone security services amounted to approximately 7.7%, 8.0%, 7.0% and 6.8% ofour total revenue, respectively, during the Track Record Period. We started our propertymanagement consultancy services in 2018 and generated revenue of approximately HK$9.5million, HK$23.3 million and HK$10.2 million for each of the year ended 31 March 2018 and2019 and the nine months ended 31 December 2019, representing approximately 2.3%, 5.5% and2.8% of our total revenue, respectively, for the same period.

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BEREAD IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

FINANCIAL INFORMATION

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During the Track Record Period, in addition to the provision of property managementservices, a portion of our revenue was derived from (i) rental income from investment property;and (ii) loan interest income from money lending business. For each of the year ended 31 March2017, 2018 and 2019 and the nine months ended 31 December 2019, from our investmentproperty, we generated revenue of HK$nil, approximately HK$1.1 million, HK$1.4 million andHK$1.2 million, representing 0%, approximately 0.3%, 0.3% and 0.3% of our total revenue,respectively. Furthermore, for each of the year ended 31 March 2017, 2018 and 2019 and thenine months ended 31 December 2019, from our money lending business, we generated revenueof HK$nil, approximately HK$1.6 million, HK$0.2 million and HK$0.7 million, representing0%, approximately 0.4%, 0.1% and 0.2% of our total revenue, respectively.

FACTORS AFFECTING OUR GROUP’S RESULTS OF OPERATIONS

Our Directors consider the factors set forth below may have affected our business andhistorical financial results and may also affect its future financial results.

Employee benefits expenses and statutory minimum wage

Property management industry is a labour-intensive industry where employee benefitsexpenses constitute the largest component of our operating expenses, and our business is highlyvulnerable to macro-economic conditions and government regulations on employee minimumwage.

As at the Latest Practicable Date, we employed over 1,700 employees. During the TrackRecord Period, our wages and staff cost amounted to approximately HK$293.2 million,HK$299.6 million, HK$303.5 million and HK$250.4 million, representing approximately 93.9%,94.2%, 94.3% and 89.4% of our total cost of services for the same period, respectively.

We generally consider potential changes in labour costs as early as when we estimate ourservice fees during the tendering process. The statutory minimum wage was increased fromHK$32.5 per hour to HK$34.5 per hour effective on 1 May 2017 and was further raised fromHK$34.5 per hour to HK$37.5 per hour on 1 May 2019 during the Track Record Period. Theimpact brought by the increment of the statutory minimum wage affected both our staff cost andrevenue during the Track Record Period, and our financial performance and result of operationmay be adversely affected if we have not been able to pass the increase in our staff costs ontoour customers in a timely manner.

The following sensitivity analysis illustrates the impact of hypothetical fluctuations inemployee benefits expenses on the profit before income tax for the Track Record Period.Fluctuations are assumed to be 10%, 15% and 20% for the same period, which arecommensurate with the historical fluctuations of our employee benefits expenses as confirmedby our Directors.



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Change in wages and staff cost +20% +15% +10% -10% -15% -20%HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Impact on profit before income tax for

FY2017 (58,644) (43,983) (29,322) 29,322 43,983 58,644FY2018 (59,917) (44,938) (29,959) 29,959 44,938 59,917FY2019 (60,709) (45,532) (30,355) 30,355 45,532 60,7099M2020 (50,088) (37,566) (25,044) 25,044 37,566 50,088

Note: The sensitivity analysis above assumes that all other variables remain unchanged. This sensitivity analysisis intended for reference only. Investors should note in particular that this sensitivity analysis is notintended to be exhaustive and is limited to the impact on changes in the relevant item of our cost ofservices.

Our ability to control subcontracting costs

We have our own security staff, however, our Group subcontracted some of the securityservices from our property management contracts to Independent Third Parties during the TrackRecord Period to complement the growth of our business when we do not have sufficientsecurity. We also subcontracted almost all of the cleaning services to Independent Third Parties.During the Track Record Period, our subcontracting costs amounted to approximately HK$17.9million, HK$17.0 million, HK$17.4 million and HK$22.1 million, representing approximately5.7%, 5.3%, 5.4% and 7.9% of our total cost of services for the same period, respectively. In thefuture, we endeavor to minimise our subcontracting costs, but we may still consider tosubcontract some of our work in order to increase our capacity and operational flexibility. If thesubcontracting costs increase in the future and we are unable to control and transfer such costsonto our customers in a timely manner, our financial performance and result of operation may beadversely affected.

The following sensitivity analysis illustrates the impact of hypothetical fluctuations in thesubcontracting costs on the profit before income tax for the Track Record Period. Fluctuationsare assumed to be 6%, 12% and 18% for the same period, which are commensurate with thehistorical fluctuations of our subcontracting costs as confirmed by our Directors.

Change in subcontracting costs +18% +12% +6% -6% -12% -18%HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Impact on profit before income tax for

FY2017 (3,215) (2,144) (1,072) 1,072 2,144 3,215FY2018 (3,060) (2,040) (1,020) 1,020 2,040 3,060FY2019 (3,127) (2,084) (1,042) 1,042 2,084 3,1279M2020 (3,979) (2,653) (1,326) 1,326 2,653 3,979

Note: The sensitivity analysis above assumes that all other variables remain unchanged. This sensitivity analysisis intended for reference only. Investors should note in particular that this sensitivity analysis is notintended to be exhaustive and is limited to the impact on changes in the relevant item of our cost ofservices.



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Our ability to secure contracts through tendering and renewal

During the Track Record Period, most of our revenue was generated from service contracts,which are generally awarded through tendering. Our customers may have specific requirementsfor evaluation to ensure that the service providers are able to meet certain standards relating toindustrial expertise, financial capability, reputation and regulatory compliance. However, ourcustomers’ requirements may change from time to time and there is no assurance that we will beawarded new contracts and that our existing contracts will be extended upon expiry. In acompetitive tendering process, we may have to provide a more competitive fee proposal or offermore favorable terms to win the contract. There is no assurance that we will successfullycompete against our competitors and if we are unable to maintain our market position, ourfinancial performance and result of operation may be adversely affected.

BASIS OF PREPARATION

The financial information for the Track Record Period have been prepared in accordancewith HKFRSs issued by the HKICPA, accounting principles generally accepted in Hong Kongand the applicable disclosures required by the Listing Rules and by the Companies Ordinance.

The financial information for the Track Record Period have been prepared under thehistorical cost convention, as modified by the revaluation of investment property and investmentat fair value through profit or loss which are carried at its fair value.

The preparation of the financial information for the Track Record Period in conformity withHKFRSs requires the use of certain key assumptions and estimates. It also requires the directorsto exercise its judgements in the process of applying the accounting policies. The areasinvolving critical judgements and areas where assumptions and estimates are significant to thefinancial information for the Track Record Period, are disclosed in note 4 of the Accountants’Report in Appendix I to this [REDACTED] document.

CRITICAL ACCOUNTING POLICIES

Our Group has identified certain accounting policies that are significant to the preparationof the consolidated financial statements in accordance with HKFRSs. These significantaccounting policies are important for an understanding of the financial condition and results ofoperation of our Group and are set forth in the Accountants’ Report in Appendix I to this[REDACTED] document. Some of the accounting policies involve subjective assumptions andestimates, as well as complex judgment related to accounting items such as assets, liabilities,income and expenses. Our Group bases its estimates on historical experience and otherassumptions which our management believes to be reasonable under the circumstances. Resultsmay differ under different assumptions and conditions. Our management has identified thefollowing accounting policies that are most critical to the preparation of our Group’sconsolidated financial statements.



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Revenue recognition (Before application of HKFRS 15 on 1 April 2018)

Revenue is measured at the fair value of the consideration received or receivable and isrecognised when it is probable that the economic benefits will flow to our Group and the amountof revenue can be measured reliably.

Revenue from property management services are recognised when services are rendered inaccordance with the terms of the agreements.

Revenue from the provision of other supporting services for the management of theproperty is recognised when the services are rendered.

Revenue from contracts with customers (After application of HKFRS 15 on 1 April 2018)

Revenue is measured based on the consideration specified in a contract with a customerwith reference to the customary business practices and excludes amounts collected on behalf ofthird parties. For a contract where the period between the payment by the customer and thetransfer of the promised product or service exceeds one year, the consideration is adjusted forthe effect of a significant financing component.

Our Group recognises revenue when it satisfies a performance obligation by transferringcontrol over a product or service to our customer. Depending on the terms of a contract and thelaws that apply to that contract, a performance obligation can be satisfied over time or at a pointin time. A performance obligation is satisfied over time if:

– our customer simultaneously receives and consumes the benefits provided by ourGroup’s performance;

– our Group’s performance creates or enhances an asset that our customer controls asthe asset is created or enhanced; or

– our Group’s performance does not create an asset with an alternative use to our Groupand our Group has an enforceable right to payment for performance completed to date.

If a performance obligation is satisfied over time, revenue is recognised by reference to theprogress towards complete satisfaction of that performance obligation. Otherwise, revenue isrecognised at a point in time when our customer obtains control of the product or service.

Other revenue

Revenue from the rental income is recognised on a straight-line basis over the lease term.

Interest income is recognised on a time-proportion basis using the effective interestmethod.



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Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when theyaccrue to employees. A provision is made for the estimated liability for annual leave and longservice leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the timeof leave.

(ii) Pension obligations

Our Group contributes to defined contribution retirement schemes which are available to allemployees. Contributions to the schemes by our Group and employees are calculated as apercentage of employees’ basic salaries. The retirement benefit scheme cost charged to profit orloss represents contributions payable by our Group to the funds.

(iii) Termination benefits

Termination benefits are recognised at the earlier of the dates when our Group can nolonger withdraw the offer of those benefits and when our Group recognises restructuring costsand involves the payment of termination benefits.

(iv) Bonus plan

The expected bonus payments are recognised as a liability when our Group has a presentlegal or constructive obligation as a result of services rendered by employees and a reliableestimate of the obligation can be made. Liabilities for bonus plans are expected to be settledwithin 12 months and are measured at the amounts expected to be paid when they are settled.

(v) Share-based payments

Our Group issues equity-settled share-based payments to certain directors and consultants.

Equity-settled share-based payments to directors are measured at the fair value (excludingthe effect of non market-based vesting conditions) of the equity instruments at the date of grant.The fair value determined at the grant date of the equity-settled share-based payments isexpensed on a straight-line basis over the vesting period, based on our Group’s estimate ofshares that will eventually vest and adjusted for the effect of non market-based vestingconditions.



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Equity-settled share-based payments to consultants are measured at the fair value of theservices rendered or if the fair value of the services rendered cannot be reliably measured, at thefair value of the equity instruments granted. The fair value is measured at the date our Groupreceives the services and is recognised as an expense.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of time to get readyfor their intended use or sale, are capitalised as part of the cost of those assets, until such timeas the assets are substantially ready for their intended use or sale. Investment income earned onthe temporary investment of specific borrowings pending their expenditure on qualifying assetsis deducted from the borrowing costs eligible for capitalisation.

To the extent that funds are borrowed generally and used for the purpose of obtaining aqualifying asset, the amount of borrowing costs eligible for capitalisation is determined byapplying a capitalisation rate to the expenditures on that asset. The capitalisation rate is theweighted average of the borrowing costs applicable to the borrowings of our Group that areoutstanding during the period, other than borrowings made specifically for the purpose ofobtaining a qualifying asset.

All other borrowing costs are recognised in profit or loss in the period in which they areincurred.

Investment properties

Investment properties are land and/or buildings held to earn rentals and/or for capitalappreciation. An investment property is measured initially at its cost including all direct costsattributable to the property.

After initial recognition, the investment property is stated at its fair value based onvaluation by an external independent valuer. Gains or losses arising from changes in fair valueof the investment property are recognised in profit or loss for the period in which they arise.

The gain or loss on disposal of an investment property is the difference between the netsales proceeds and the carrying amount of the property, and is recognised in profit or loss.



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Our Group as leasee

Policy applicable before 1 April 2019

(i) Operating leases

Leases that do not substantially transfer to our Group all the risks and rewards ofownership of assets are accounted for as operating leases. Lease payments (net of any incentivesreceived from the lessor) are recognised as an expense on a straight-line basis over the leaseterm.

(ii) Finance leases

Leases that substantially transfer to our Group all the risks and rewards of ownership ofassets are accounted for as finance leases. At the commencement of the lease term, a financelease is capitalised at the lower of the fair value of the leased asset and the present value of theminimum lease payments, each determined at the inception of the lease.

The corresponding liability to the lessor is included in the statement of financial position asfinance lease payable. Lease payments are apportioned between the finance charge and thereduction of the outstanding liability. The finance charge is allocated to each period during thelease term so as to produce a constant periodic rate of interest on the remaining balance of theliability.

Assets under finance leases are depreciated the same as owned assets.

Policy applicable from 1 April 2019

Leases are recognised as right-of-use assets and corresponding lease liabilities when theleased assets are available for use by our Group. Right-of-use assets are stated at cost lessaccumulated depreciation and impairment losses. Depreciation of right-of-use assets is calculatedat rates to write off their cost over the shorter of the asset’s useful life and the lease term on astraight-line basis. The principal annual rates are as follows:

Land use rights 2%–5%Motor vehicles 30%

Right-of-use assets are measured at cost comprising the amount of the initial measurementof the lease liabilities, lease payments prepaid, initial direct costs and the restoration costs.Lease liabilities include the net present value of the lease payments discounted using the interestrate implicit in the lease if that rate can be determined, or otherwise our Group’s incrementalborrowing rate. Each lease payment is allocated between the liability and finance cost. Thefinance cost is charged to profit or loss over the lease term so as to produce a constant periodicrate of interest on the remaining balance of the lease liability.



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Payments associated with short-term leases and leases of low-value assets are recognised asexpenses in profit or loss on a straight-line basis over the lease terms. Short-term leases areleases with an initial lease term of 12 months or less. Low-value assets are assets of value belowUS$5,000.

Our Group as lessor

(i) Operating leases

Leases that do not substantially transfer to the lessees all the risks and rewards ofownership of assets are accounted for as operating leases. Rental income from operating leasesis recognised on a straight-line basis over the term of the relevant lease.

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when our Group hasa present legal or constructive obligation arising as a result of a past event, it is probable that anoutflow of economic benefits will be required to settle the obligation and a reliable estimate canbe made. Where the time value of money is material, provisions are stated at the present valueof the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or theamount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unlessthe probability of outflow is remote. Possible obligations, whose existence will only beconfirmed by the occurrence or non-occurrence of one or more future events are also disclosedas contingent liabilities unless the probability of outflow is remote.

Financial assets

Financial assets are recognised and derecognised on a trade date basis where the purchaseor sale of an asset is under a contract whose terms require delivery of the asset within thetimeframe established by the market concerned, and are initially recognised at fair value, plusdirectly attributable transaction costs except in the case of investments at fair value throughprofit or loss. Transaction costs directly attributable to the acquisition of investments at fairvalue through profit or loss are recognised immediately in profit or loss.

Financial assets of our Group are classified under the following categories:

– financial assets at amortised cost;

– equity investments at fair value through other comprehensive income; and

– investments at fair value through profit or loss.



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(i) Financial assets at amortised cost

Financial assets (including trade and other receivables) are classified under this category ifthey satisfy both of the following conditions:

– the assets are held within a business model whose objective is to hold assets in orderto collect contractual cash flows; and

– the contractual terms of the assets give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.

They are subsequently measured at amortised cost using the effective interest method lessloss allowance for expected credit losses.

(ii) Equity investments at fair value through other comprehensive income

On initial recognition, our Group can make an irrevocable election (on aninstrument-by-instrument basis) to designate investments in equity instruments that are not heldfor trading as at fair value through other comprehensive income.

Equity investments at fair value through other comprehensive income are subsequentlymeasured at fair value with gains and losses arising from changes in fair values recognised inother comprehensive income and accumulated in the equity investment revaluation reserve. Onderecognition of an investment, the cumulative gains or losses previously accumulated in theequity investment revaluation reserve are not reclassified to profit or loss.

Dividends on these investments are recognised in profit or loss, unless the dividends clearlyrepresent a recovery of part of the cost of the investment.

(iii) Investments at fair value through profit or loss

Financial assets are classified under this category if they do not meet the conditions to bemeasured at amortised cost and the conditions of debt investments at fair value through othercomprehensive income unless our Group designates an equity investment that is not held fortrading as at fair value through other comprehensive income on initial recognition.

Investments at fair value through profit or loss are subsequently measured at fair value withany gains or losses arising from changes in fair values recognised in profit or loss. The fairvalue gains or losses recognised in profit or loss are net of any interest income and dividendincome. Interest income and dividend income are recognised in profit or loss.



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Application of new and revised HKFRSs

During the Track Record Period, except for HKFRS 15 “Revenue from Contracts withCustomers” and HKFRS 16 “Leases”, our Group has adopted all the new and revised HKFRSsissued by the HKICPA that are relevant to its operations and effective for accounting periodsbeginning on or after 1 April 2018. Our Group has adopted HKFRS 9 “Financial instruments” ona consistent basis throughout the Track Record Period. Our Group has adopted HKFRS 15“Revenue from Contracts with Customers” from 1 April 2018 and adopted HKFRS 16 “Leases”from 1 April 2019.

For further details of the adoption of new and revised HKFRSs, please refer to paragraphsbelow and note 2 of the Accountants’ Report in Appendix I to this [REDACTED] document.

Effect of the initial adoption of HKFRS 9 “Financial Instruments” (“HKFRS 9”)

Our Group adopted HKFRS 9 on a consistent basis throughout the Tack Record Period. Theinitial adoption of HKFRS 9 did not have any significant impact on our Group’s financialposition and performance when compared to that of HKAS 39 “Financial Instruments:

Recognition and Measurement”.

Our Group has early adopted HKFRS 9 in the year ended 31 March 2017 when our Groupprepared its annual report for the year ended 31 March 2017. Available-for sale financial asset isthen reclassified as equity investment at fair value through other comprehensive income. HKFRS9 have been applied retrospectively and resulted in changes in the consolidated amounts reportedin the consolidated financial statements as follows:

31 March 2016HK$’000

Decrease in available-for-sale financial asset (4,267)Increase in equity investment at fair value through other comprehensive

income 4,267

Effect of the initial adoption of HKFRS 15 “Revenue from Contracts with Customers”(“HKFRS 15”)

Our Group adopted HKFRS 15 since 1 April 2018. The initial adoption of HKFRS 15 didnot have significant impact on our Group’s financial position and performance when comparedto that of HKAS 18 “Revenue”.

Effect of the initial adoption of HKFRS 16 “Leases” (“HKFRS 16”)

Our Group adopted HKFRS 16 since 1 April 2019. The initial adoption of HKFRS 16 didnot have any significant impact on our Group’s financial position and performance when



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compared to HKAS 17 “Leases”. Details of the effect and changes to previous accountingpolicies were disclosed in note 2 of the Accountants’ Report in Appendix I to this[REDACTED] document.

SELECTED ITEMS OF THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME

Results of operations

The following table sets out the consolidated results of our Group for the periods indicated,which are derived from, and should be read in conjunction with, the consolidated financialinformation set out in the Accountants’ Report set out in Appendix I to this [REDACTED]document.

FY2017 FY2018 FY2019 9M2019 9M2020HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Revenue 395,514 412,271 425,661 316,748 361,804Cost of services (312,206) (317,872) (322,013) (242,446) (280,114)

Gross profit 83,308 94,399 103,648 74,302 81,690Interest revenue 303 1,997 3,400 2,865 388Other income/(loss) 35 6,387 26,729 219 (1,267)Share of profit of an associate – 4,999 5,249 5,009 241Administrative expenses (51,958) (49,983) (52,198) (38,589) (42,274)Other operating expenses (17,984) (18,144) (21,030) (15,196) (14,745)[REDACTED] expenses – – – – (10,648)Finance costs (196) (1,329) (565) (426) (774)

Profit before tax 13,508 38,326 65,233 28,184 12,611Income tax expense (3,320) (7,363) (7,853) (5,471) (6,360)

Profit for the year/period 10,188 30,963 57,380 22,713 6,251



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DESCRIPTION OF SELECTED ITEMS FROM THE CONSOLIDATED STATEMENT OFPROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue

We generated revenue of approximately HK$395.5 million, HK$412.3 million, HK$425.7million and HK$361.8 million for each of the three years ended 31 March 2019 and the ninemonths ended 31 December 2019, respectively. During the Track Record Period, propertymanagement services contributed the majority of our revenue.

By business segment

Revenue for property management services represents the total contractual service feeincome received from our customers. As our Group also performs stand-alone security servicesto customers, our revenue also includes service fee income for our security services. Revenuefrom services is recognised when services have been performed. The following table sets out ourGroup’s revenue by different segment for the periods indicated:

FY2017 FY2018 FY2019 9M2019 9M2020HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %

(unaudited)

Property management and related services 395,514 100.0 409,577 99.3 424,053 99.6 315,519 99.6 359,939 99.5Rental services – – 1,101 0.3 1,448 0.3 1,081 0.3 1,187 0.3Money lending business – – 1,593 0.4 160 0.1 148 0.1 678 0.2

395,514 100.0 412,271 100.0 425,661 100.0 316,748 100.0 361,804 100.0

The table below sets out the breakdown of revenue generated from the propertymanagement and related services for the periods indicated:


(unaudited)

Property management andrelated services– Property management

services 365,110 92.3 366,919 89.6 370,793 87.4 279,823 88.7 324,964 90.3– Stand-alone security

services 30,404 7.7 33,160 8.1 29,933 7.1 22,781 7.2 24,776 6.9– Property management

consultancy services – – 9,498 2.3 23,327 5.5 12,915 4.1 10,199 2.8

395,514 100.0 409,577 100.0 424,053 100.0 315,519 100.0 359,939 100.0



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The below table sets out the breakdown of revenue generated from the propertymanagement services by different types of customers under our property portfolio for the periodsindicated:


(unaudited)

Public sector– Housing Authority 47 0.0 – – 6,122 1.7 3,712 1.3 7,266 2.2– Others 1,329 0.4 1,174 0.3 837 0.2 617 0.2 3,229 1.0

1,376 0.4 1,174 0.3 6,959 1.9 4,329 1.5 10,495 3.2

Private sector– Owners’ corporations 341,336 93.5 339,955 92.7 335,169 90.4 252,541 90.3 273,173 84.1– Owners’ committees 9,231 2.5 13,222 3.6 13,782 3.7 14,061 5.0 16,579 5.1– Sole owners 9,897 2.7 9,743 2.7 11,849 3.2 6,225 2.2 22,368 6.9– Others 3,270 0.9 2,825 0.7 3,034 0.8 2,667 1.0 2,349 0.7

363,734 99.6 365,745 99.7 363,834 98.1 275,494 98.5 314,469 96.8

Total 365,110 100.0 366,919 100.0 370,793 100.0 279,823 100.0 324,964 100.0

Note: Others entities under the public sector comprise schools and under the private sector comprise the DMCmanagers.

The below table sets out the breakdown of revenue generated from the stand-alone securityservices contracts by different types of customers under our property portfolio for the periodsindicated:


(unaudited)

– Owners’ corporations 27,599 90.8 29,567 89.2 26,000 86.9 19,855 87.2 19,155 77.3– Owners’ committees 1,043 3.4 1,114 3.4 1,338 4.5 974 4.3 1,121 4.5– Sole owners 1,566 5.1 2,256 6.8 2,371 7.9 1,785 7.8 4,312 17.4– Others 196 0.7 223 0.6 224 0.7 167 0.7 188 0.8

Total 30,404 100.0 33,160 100.0 29,933 100.0 22,781 100.0 24,776 100.0

Note: Others comprise the DMC managers.



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By property types

Our Group is a property management service company and the majority of our revenue isderived from our property management services contracts from residential properties. Thefollowing table sets out the revenue generated from property management service andstand-alone security services for different types of properties for the periods indicated:


(unaudited)

Residential properties 335,290 84.8 336,470 84.1 327,512 81.7 245,406 81.1 291,560 83.4Non-residential

properties– commercial buildings 13,064 3.3 15,127 3.8 19,459 4.9 15,814 5.2 11,779 3.4– industrial buildings 35,289 8.9 36,315 9.1 41,914 10.5 32,232 10.7 34,173 9.8– schools 1,329 0.3 1,174 0.3 837 0.2 617 0.2 145 0.0– car parks 607 0.2 718 0.2 744 0.2 553 0.2 597 0.2– arcade 8,564 2.2 9,584 2.4 9,256 2.3 6,953 2.3 7,793 2.2– government 47 0.0 – – – – – – 3,085 0.9– others 1,324 0.3 691 0.2 1,004 0.3 1,030 0.3 608 0.1

60,224 15.2 63,609 15.9 73,214 18.3 57,199 18.9 58,180 16.6

395,514 100.0 400,079 100.0 400,726 100.0 302,605 100.0 349,740 100.0

During the Track Record Period, residential properties remained as our major revenuestream.

By geographical locations

During the year ended 31 March 2018, we commenced property management andconsultancy services in the PRC. The revenue contribution from our PRC operation has beenincreasing since its commencement, which amounted to approximately HK$9.5 million, HK$27.1million and HK$36.2 million for each of the two years ended 31 March 2019 and the ninemonths ended 31 December 2019, respectively. The following table sets out our revenuegenerated from property management and related services by geographical segment for theperiods indicated:



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(unaudited)

Hong Kong 395,514 100.0 400,079 97.7 396,923 93.6 298,914 94.7 323,783 90.0PRC – – 9,498 2.3 27,130 6.4 16,605 5.3 36,156 10.0

395,514 100.0 409,577 100.0 424,053 100.0 315,519 100.0 359,939 100.0



– 168-a –

Cost of services

Our cost of services during the Track Record Period comprised of (i) wages and staff costs;(ii) subcontracting costs; and (iii) other direct costs. Wages and staff costs were incurred for ourfront-line property management and security staff, including wages, discretionary bonus andother staff benefits. Subcontracting costs represented cost of cleaning services paid to third-partycleaning service companies or cost of security services paid to third-party security servicecompanies. Other direct costs primarily included sponsorship fees and performance bondexpense. Sponsorship fees was incurred as marketing expenses when we sponsored ourcustomers’ social or recreational activities such as annual dinner. Some of our customersdeposited certain amount with us for payment of their operating expenses, and these customersmay request us to present performance bonds issued by a bank in favour of such customers. Theperformance bond expense was the fixed commission charged by the banks for the issuance ofperformance bonds.

The following table sets out the summary of our cost of services by nature for the periodsindicated:


(unaudited)

Wages and staff costs 293,219 93.9 299,586 94.2 303,546 94.3 227,095 93.7 250,441 89.4Subcontracting costs 17,863 5.7 17,001 5.3 17,370 5.4 14,706 6.1 22,106 7.9Other direct costs 1,124 0.4 1,285 0.5 1,097 0.3 645 0.2 7,567 2.7

312,206 100.0 317,872 100.0 322,013 100.0 242,446 100.0 280,114 100.0

The following table sets out the breakdown of wages and staff costs for the periodsindicated:


(unaudited)

Wages, salaries and otherallowances 285,253 97.3 292,167 97.5 297,021 97.9 222,336 97.9 244,448 97.6

Retirement benefitsscheme contribution 7,966 2.7 7,419 2.5 6,525 2.1 4,759 2.1 5,993 2.4

Total 293,219 100.0 299,586 100.0 303,546 100.0 227,095 100.0 250,441 100.0



– 169 –

The following table sets out the breakdown of wages and staff costs by staff functions forthe periods indicated:


(unaudited)

Security 258,576 88.2 269,099 89.8 274,874 90.6 207,421 91.3 228,928 91.4Estate management 32,690 11.1 27,229 9.1 24,433 8.0 18,126 8.0 19,663 7.9Others 1,953 0.7 3,258 1.1 4,239 1.4 1,548 0.7 1,850 0.7

Total 293,219 100.0 299,586 100.0 303,546 100.0 227,095 100.0 250,441 100.0

The following table sets out the breakdown of subcontracting costs for the periodsindicated:


(unaudited)

Cleaning 17,267 96.7 16,022 94.2 16,440 94.6 12,407 84.4 17,949 81.2Security 596 3.3 979 5.8 930 5.4 2,299 15.6 4,046 18.3Others – – – – – – – – 111 0.5

Total 17,863 100.0 17,001 100.0 17,370 100.0 14,706 100.0 22,106 100.0

Sensitivity analysis on major items in cost of services

For the sensitivity analysis illustrating the impact of hypothetical fluctuations in our wageand staff costs and subcontracting costs on the profit before tax for the Track Record Period,please refer to the paragraphs headed “Factors affecting our Group’s results of operations –Employee benefits expenses and statutory minimum wage” and “Factors affecting our Group’sresults of operations – Our ability to control subcontracting costs” in this section.

Gross profit and gross profit margin

During the Track Record Period, our gross profit was approximately HK$83.3 million,HK$94.4 million, HK$103.6 million and HK$81.7 million, respectively; while our gross profitmargin was approximately 21.1%, 22.9%, 24.3% and 22.6% for the same period.



– 170 –

The following table sets out the breakdown of gross profit and gross profit margin bygeographical locations for the periods indicated:

FY2017 FY2018 FY2019 9M2019 9M2020

Grossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginHK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %

(unaudited)

Hong Kong 83,308 21.1 86,019 21.4 78,919 19.8 59,466 19.8 65,826 20.2PRC – – 8,379 88.2 24,729 91.2 14,836 89.3 15,864 43.9

83,308 21.1 94,399 22.9 103,648 24.3 74,302 23.5 81,690 22.6

The gross profit margin of our Group’s business in the PRC was significantly higher thanthat in Hong Kong mainly due to (i) the provision of property management consultancy services,having a higher gross profit margin than property management services due to the nature ofconsultancy services, which is not labour intensive and mainly based on the knowledge and theexperience of our professionals; (ii) the lower staff and labour costs in the PRC, resulting in alower cost of services; and (iii) the staff cost of our Group’s Hong Kong team, who directed,supervised and supported our Group’s PRC team to provide property management services toZibo Yue’s PRC customers, was recorded under our Group’s Hong Kong segment. The decreasein gross profit margin in the PRC for the nine months ended 31 December 2019 was due to thegross profit margin from property management services in the PRC, having only commencedduring the nine months ended 31 December 2019, was lower than that of property managementconsultancy services in the PRC.



– 170-a –

Interest revenue

Our interest revenue comprised of bank interest income, interest income from investmentsat fair value through profit or loss and interest income from deposits placed for life insurancepolicies. The following table sets out the components of our interest revenue during the TrackRecord Period:


(unaudited)

Bank interest income 9 21 64 37 180Interest income from

investments at fairvalue through profit orloss – 1,677 3,048 2,610 –

Interest income fromdeposits placed for lifeinsurance policies 294 299 288 218 208

303 1,997 3,400 2,865 388

Other income/(loss)

Our other income mainly comprised of (i) gain on disposal of property, plant andequipment; (ii) consultancy income; (iii) fair value gain or loss on an investment property; (iv)fair value gain on investments at fair value through profit or loss (“FVTPL”); (v) managementservices income; (vi) compensation income; (vii) commission income; and (viii) exchange gain.



– 171 –

The following table sets out the components of our other income during the Track RecordPeriod:


(unaudited)

Gain on disposal ofproperty, plant andequipment 5 33 103 – –

Consultancy income 30 1,733 – – –Fair value gain/(loss) on

an investment property – 3,183 400 – (2,100)Fair value gain on

investments at fairvalue through profit orloss – 1,348 – – 149

Management servicesincome – 90 – – –

Compensation income – – 26,000 – –Commission income – – 226 140 –Exchange gain – – – – 125Others – – – 79 559

35 6,387 26,729 219 (1,267)

The following table sets out the reconciliation of the value of investment property betweenour Group’s consolidated financial statements and the property valuation report:

As at 31 MarchAs at

31 December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

As at 1 April/January – 28,817 32,000 32,400Acquisition of a subsidiary 28,817 – – –Fair value gain/(loss) on

investment property – 3,183 400 (2,100)

As at 31 March/December 28,817 32,000 32,400 30,300



– 171-a –

The consultancy income recorded for the year ended 31 March 2018 were consultancy feesreceived by a PRC subsidiary of our Group, Zibo Yue, for provision of consultancy services totwo PRC companies which were not related to property management consultancy and thereforeincluded as other income in the consolidated financial statements. As confirmed by ourDirectors, the consultancy income under other income is by nature different from the revenuefrom property management consultancy services as they mainly represented fees for businessreferral and advisory services on escalators and business referral and research and advisoryservices on health products. The revenue from property management consultancy services isrevenue for consultancy services provided to the various property management companies in thePRC.

The compensation income recorded for the year ended 31 March 2019 amounting toHK$26.0 million was the settlement sum pursuant to the Subscription and Shareholders’Agreement entered into between our Company, Capital Creation (BVI) Limited and All Profit on21 June 2015.

All Profit was principally engaged in (i) the development of a mobile application, namely,“Yes Master!”, which aims to provide one-stop household support to its users (the “MobileApps”); and (ii) the setup of a two-way communication internet platform among the propertymanagement companies, incorporated owners, service providers and its users in any building orproperty estates in Hong Kong (the “Internet Platform”). Pursuant to the Subscription andShareholders’ Agreement, our Group was provided with the opportunity to participate in AllProfit’s principal activity as well as the promotion and marketing of the Mobile Apps and theInternet Platform to other property estates in Hong Kong.

The salient terms of the Subscription and Shareholders’ Agreement are summarised asbelow:

Subscription price: HK$13 million

Subscription shares: 10 ordinary shares, representing 10% of the enlargedissued share capital of All Profit immediatelyfollowing the completion of subscription

Right of nomination of ourCompany:

Our Company has the right to nominee one out ofthree directors, non-chairman role, of All Profit.

First right of refusal: Subject to the terms of the Subscription andShareholders’ Agreement, no transfer of shares of AllProfit to a third party unless the non-sellingshareholder does not accept to purchase such shareson the same terms.



– 172 –

Tag along rights: If a shareholder intends to sell shares to third party,which would result the purchaser holding more than30% shares of All Profit, the non-selling shareholderhas the option to sell all its shares on the same termsto the purchaser.

Pre-emptive right of our Company: All Profit shall first offer to our Company if AllProfit proposes to issue and sell new shares or othersecurities to its shareholders or third party.

Profit guarantee: All Profit guarantees to our Group about the netprofits after tax for the period from 20 March 2015to 30 June 2016 and the period for the year ended 30June 2017. For the details of the calculation of theprofit guarantee and the relevant compensation,please refer to our Company’s announcement dated22 June 2015.

Termination: The Subscription and Shareholders’ Agreement maybe terminated by written agreement of all parties ortheir successors in title.

Under the Subscription and Shareholders’ Agreement, All Profit guaranteed to our Companya level of profit during the respective financial period and compensation mechanism wasprovided in the event that the guaranteed profit was not met. Our Directors expected that certainprofit of All Profit was derived from (i) the commissions earned through any purchase ofmerchandises via the Internet Platform or the Mobile Apps; and (ii) the listing fees payable bythe vendors or merchants who list their products for sale in the Internet Platform or the MobileApps. To the best knowledge of our Directors, at the time of considering to invest into AllProfit, our Company believed that the mobile application would also be used by some of thelargest property companies in Hong Kong; while our Group managed around 400 properties witharound 80,000 households, at the time, and if the Mobile Apps was adequately promoted by thesales team of All Profit, it was estimated of at least 160,000 users of the Mobile Apps assumingan average household of 2 to 3 persons. In view of the potential trend of property managementbusiness in Hong Kong, our Directors were of the view that All Profit would at least generateHK$10.0 million annual profit when the Mobile Apps became successful and our investmentwould appreciate as a result. Consequently, to the best knowledge of our Directors, the profitguarantee was made by All Profit to our Group on 21 June 2015 as All Profit was very confidenton its future operation and profitability. However, to the best knowledge of our Directors, thebusiness of All Profit also involved significant initial investment and there were a limitednumber of users for the Mobile Apps and the Internet Platform, and as a result, the level ofprofit guaranteed to our Company was not met by All Profit. According to the audited financialstatements for the period from March 2015 to June 2017 and the management accounts for theperiod from July 2017 to January 2018 of All Profit, the revenue of All Profit during the periodfrom 20 March 2015 to 30 June 2016, the year ended 30 June 2017 and the period from July



– 172-a –

2017 to January 2018 was approximately HK$1.0 million, HK$1.0 million, HK$0.2 million,respectively, which, to the best knowledge of our Directors, was mainly derived from the sale ofmerchandises via the Internet Platform or the Mobile Apps; while its loss for the same periodwas approximately HK$3.9 million, HK$7.3 million and HK$2.6 million, respectively. To thebest knowledge of our Directors, as our Company was a passive investor, we had limited accessto the exact number of users of the Mobile Apps and the Internet Platform during the profitguarantee period and the details of marketing activities conducted by All Profit. In view of theloss making business, we commenced settlement negotiation with the other shareholder of AllProfit in and reached compensation agreement on 29 January 2018 and received the settlementsum of HK$26.0 million from the controlling shareholder of All Profit on 8 January 2019, whichwas made on behalf of All Profit in accordance with the compensation mechanism under theSubscription and Shareholders’ Agreement, which was recorded in the profit and loss for theyear ended 31 March 2019. The settlement sum of HK$26.0 million was calculated based on theformula of HK$10.0 million x 13 x 20% where the multiple of 13 in the formula is applied withreference to the price to earnings ratio and the fraction of 20% represents the proportion of theshares of All Profit allotted to our Company under the Subscription and Shareholders’Agreement.

On 26 January 2018 and as a result of All Profit failing to meet the profit guarantee, wealso received the allotment and issuance of the additional shares of All Profit, representing 10%of the then issued share capital of All Profit. Due to repeated failure of meeting the profitguarantee and unsatisfactory operating performance of All Profit, we disposed all our Company’sequity interest in All Profit to Capital Creation (BVI) Limited, an immediate holding companyof All Profit and Independent Third Party, on 16 January 2019 for a total consideration ofHK$10,000 with reference to (i) the preliminary valuation of equity interest in All Profit carriedout by an independent valuer; and (ii) the cash flows forecast of All Profit, which was on normalcommercial terms. For further information, please refer to note 9 of the Accountants’ Report inAppendix I to this [REDACTED] document. The investment in 10% interest in All Profit wasinitially recognised as “available-for-sale financial assets” in the year ended 31 March 2016 andupon the early adoption of HKFRS 9 “Financial Instruments” in the year ended 31 March 2017,reclassified as equity investment at fair value through other comprehensive income. To the bestknowledge of our Directors, Ms. Cheung Ka Man, being the sole shareholder and director of AllProfit, is a third party independent from our Group, our Directors, members of the seniormanagement of our Group, our Controlling Shareholders, and any of their respective associates,whether past or present.

Share of profit of an associate

For each of the three years ended 31 March 2019 and the nine months ended 31 December2019, our share of profit of an associate was HK$nil, approximately HK$5.0 million, HK$5.2million and HK$0.2 million, respectively.



– 172-b –

Administrative expenses

Administrative expenses mainly comprised staff costs and staff welfare (includingDirectors’ remuneration), rental expenses and building management fees and cleaning, electricityand water expenses. Staff costs and staff welfare included salaries and staff benefits foradministrative staff. Rental expenses and building management fees mainly comprised rent andrates of premises that were leased for our storage and offices.

The table below sets out the summary of our administrative expenses by nature during theTrack Record Period:


(unaudited)

Staff costs and staff welfareincluding Directors’remuneration 45,372 43,925(Note 1) 45,842 33,670 37,160

Rental expenses and buildingmanagement fees 4,083 3,706 4,032 2,920 280

Cleaning, electricity and water 614 699 664 525 506Recruitment cost 1,162 778 616 437 432Repair and maintenance 106 129 237 209 236Depreciation of right-of-use

assets – – – – 2,906Others 621 746(Note 2) 807 828 754

51,958 49,983 52,198 38,589 42,274

Notes:

1. HK$567,000 was recorded for the payment for the consultants in relation to the investment activitiesduring the financial year ended 31 March 2018.

2. HK$273,000 of the withholding tax and profit tax were recorded for the investment activities during thefinancial year ended 31 March 2018.



– 172-c –

Other operating expenses

Other operating expenses mainly comprised legal and professional charges, depreciationand amortisation, exchange difference, travelling and entertainment expenses, insurance fee,office expenses, consultancy fee, auditors’ remuneration, and registration, licence andsubscription fee. The following table sets out other operating expenses by nature for the periodsindicated:


(unaudited)

Legal and professionalcharges 4,722(Note 1) 26.3 3,654(Note 3) 20.1 3,984(Note 5) 18.9 2,128 14.0 2,808 19.0

Depreciation andamortisation 1,881 10.5 3,513 19.4 3,494 16.6 2,602 17.1 2,521 17.1

Exchange difference – – – – 3,337(Note 6) 15.9 2,678 17.6 36 0.2Travelling and

entertainment expenses 4,209 23.4 2,407 13.3 2,985 14.2 2,181 14.3 2,877 19.5Insurance fee 2,803 15.6 2,556 14.1 2,348 11.2 1,756 11.6 2,771 18.8Office expenses 2,441(Note 2) 13.6 2,457(Note 4) 13.5 2,328 11.1 1,806 11.9 1,675 11.4Consultancy fee 794 4.4 601 3.3 834 4.0 602 4.0 753 5.1Auditors’ remuneration 540 3.0 640 3.5 670 3.2 524 3.5 654 4.4Registration, licence and

subscription fee 143 0.8 214 1.2 243 1.2 196 1.3 142 1.0Loss on early settlement

of promissory note – – 1,685 9.3 262 1.2 262 1.7 – –Others 451 2.4 417 2.3 545 2.5 461 3.0 508 3.5

Total 17,984 100.0 18,144 100.0 21,030 100.0 15,196 100.0 14,745 100.0

Notes:

1. A professional fee of HK$577,000 was incurred in relation to the investment activities during financialyear ended 31 March 2017.

2. A printing fee of HK$9,000 was incurred in relation to the investment activities during financial yearended 31 March 2017.

3. A professional fee of HK$313,000 was incurred in relation to the investment activities and a professionalfee of HK$1,236,000 was incurred in relation to the 2018 General [REDACTED] during financial yearended 31 March 2018.

4. A printing fee of HK$17,000 was incurred in relation to the investment activities and a printing fee ofHK$235,000 was incurred in relation to the 2018 General [REDACTED] during financial year ended 31March 2018.



– 173 –

5. A professional fee of HK$221,000 was incurred in relation to the investment activities and a professionalfee of HK$550,000 was incurred in relation to the [REDACTED] during financial year ended 31 March2019.

6. An exchange difference loss of HK$3,016,000 was recorded in relation to the convertible bond investmentin Australia during financial year ended 31 March 2018.

Legal and professional charges represented charges related to legal actions including,among other things, legal costs and annual legal retainer fees. Depreciation and amortisationrepresented depreciation expenses for property, plant and equipment and amortisation expensesfor intangible assets. Our intangible assets mainly include (i) customer contracts ofapproximately HK$2,054,000 arisen from acquisition of Yorkshire during the year ended 31March 2017 and approximately HK$94,000 from acquisition of Shi Shi Property Cayman duringthe year ended 31 March 2019; and (ii) computer softwares at a cost of approximatelyHK$6,550,000 acquired during the year ended 31 March 2017, which is an internal managementsystem which functions address book management for office usage, office communication andoffice bulletin for property management business. Insurance expenses were premiums paidmainly for insurance policies of our Group such as professional indemnity insurance. Officeexpenses mainly represented printing, uniforms, stationaries, telephone, postage expenses andcomputer service expenses etc. Consultancy fee represented charges paid for various consultancyservices in relation to repair and maintenance and security services. Registration, licence andsubscription fees were incurred annually for business registration, renewal of security licenceand membership of The Hong Kong Association of Property Management Companies.



– 173-a –

Finance costs

Finance cost represented (i) interest expenses on bank borrowings and promissory notes;(ii) finance lease charges; and (iii) interest on lease liabilities. Bank borrowing facilities boreinterest rates of (i) 1.25% per annum over HKD Best Lending Rate and 1.5%–2.5% per annumover HIBOR; (ii) 1.5% per annum over HKD Best Lending Rate and (iii) overnight HIBOR or1% per annum over HKD Best Lending Rate (whichever is higher). For the three years ended 31March 2019, finance lease charges were related to certain of our motor vehicles held underfinance lease arrangements. For the nine months ended 31 December 2019, interest on leaseliabilities were related to our leases on certain premises, motor vehicles and office equipmentdue to the adoption of HKFRS 16 “Leases”.

Income tax expenses

Our revenue was substantially derived in Hong Kong, and our Group was subject to profitstax in Hong Kong. Hong Kong profits tax was provided (i) at the rate of 16.5% on the estimatedassessable profits for each of the year ended 31 March 2017 and 2018; and (ii) at the rate of8.25% on first HK$2 million of estimated assessable profits and at the rate of 16.5% onremaining assessable profits for the year ended 31 March 2019 and the nine months ended 31December 2019. For our PRC operation, we were subject to the PRC corporate income tax rateof 25% on the estimated assessable profits during the Track Record Period. The effective taxrate for each of the three years ended 31 March 2019 and the nine months ended 31 December2019 were approximately 24.6%, 19.2%, 12.0% and 50.4%, respectively. The effective tax ratefor the year ended 31 March 2017 was higher that the Hong Kong tax rate of 16.5% asnon-deductible expenses of approximately HK$7.8 million was recorded. Such expenses mainlyincluded non-deductible legal and professional fee. For the year ended 31 March 2018,non-deductible expenses of approximately HK$6.8 million (mainly included non-deductible legaland professional fee) was recorded. For the nine months ended 31 December 2019, the effectivetax rate was affected by non-deductible [REDACTED] expenses of approximatelyHK$[REDACTED] million and non-deductible expenses of approximately HK$5.4 million(mainly included directors’ emoluments and legal and professional fee) incurred by the holdingcompany. In addition, the effective tax rate was affected by the PRC tax rate, of which a tax ratedifference of approximately HK$1.2 million was recorded.

REVIEW OF HISTORICAL RESULTS OF OPERATIONS

Nine months ended 31 December 2018 compared with nine months ended 31 December 2019

Revenue

Our revenue grew from approximately HK$316.7 million for the nine months ended 31December 2018 to approximately HK$361.8 million for the nine months ended 31 December2019, representing an annual growth rate of approximately 14.2%. The increase was primarilyattributed to (i) the increase of the revenue from the property management and related servicesin Hong Kong which was resulted from the increase of number of customers; and (ii) the



– 174 –

increase of the revenue from the property management services in the PRC through theacquisition of Shi Shi Property Cayman, the ultimate holding company of each of HS Propertyand Shandong HS, which brought in more customers.

Cost of services

Our cost of services has increased from approximately HK$242.4 million for the ninemonths ended 31 December 2018 to approximately HK$280.1 million for the nine months ended31 December 2019. The annual growth is approximately 15.5%. Such increase was mainly due tothe increase of wages and staff costs by approximately HK$23.3 million and the increase ofsubcontracting costs by approximately HK$7.4 million.



– 174-a –


Our gross profit increased from approximately HK$74.3 million for the nine months ended31 December 2018 to approximately HK$81.7 million for the nine months ended 31 December2019, representing an annual growth of approximately 9.9%. Such growth was driven by theincrease in gross profit arising from the increase of revenue generated from the propertymanagement and related services in Hong Kong.

Our overall gross profit margin decreased slightly from approximately 23.5% for the ninemonths ended 31 December 2018 to approximately 22.6% for the nine months ended 31December 2019 mainly due to the decrease of the gross profit margin of the propertymanagement and related services in the PRC.

Interest revenue

Our interest revenue decreased from approximately HK$2.9 million for the nine monthsended 31 December 2018 to approximately HK$0.4 million for the nine months ended 31December 2019. Such decrease was mainly due to that the convertible notes under theconvertible bond investment in Australia was fully redeemed on 1 March 2019 and no interestincome was recorded from this investment for the nine months ended 31 December 2019.

Other income/(loss)

We recorded other loss of approximately HK$1.3 million for the nine months ended 31December 2019 as compared to other income of approximately HK$0.2 million for the ninemonths ended 31 December 2018, which was due to the fair value loss on an investmentproperty for the nine months ended 31 December 2019. For further details of the investmentproperty, please refer to note 19 of the Accountants’ Report as set out in Appendix I to this[REDACTED] document.


Share of profit of an associate decreased from approximately HK$5.0 million for the ninemonths ended 31 December 2018 to approximately HK$0.2 million for the nine months ended 31December 2019, which was due to the decrease in profit of Dakin Holdings for the nine monthsended 31 December 2019.


Our administrative expenses increased by approximately HK$3.7 million or 9.6% fromapproximately HK$38.6 million for the nine months ended 31 December 2018 to approximatelyHK$42.3 million for the nine months ended 31 December 2019. Such increase was attributed bythe increase in staff costs and staff welfare during the period.



– 175 –


Our other operating expenses slightly decreased by approximately HK$0.5 million or 3.0%from approximately HK$15.2 million for the nine months ended 31 December 2018 toapproximately HK$14.7 million for the nine months ended 31 December 2019. Such decreasewas primarily attributed by the smaller exchange difference as compared to the nine monthsended 31 December 2018. The decrease in other operating expenses was partially offset by theincrease in insurance fee.

[REDACTED] expenses

We recorded [REDACTED] expenses of approximately HK$[REDACTED] million for thenine months ended 31 December 2019. For further details, please refer to the paragraph headed“[REDACTED] expenses” in this section.

Finance costs

Our finance costs increased by approximately HK$0.4 million or 81.7% from approximatelyHK$0.4 million for the nine months ended 31 December 2018 to approximately HK$0.8 millionfor the nine months ended 31 December 2019. The increase in finance costs was principally dueto the recognition of interest on lease liabilities relating to our Group’s leases on certainpremises, motor vehicles and office equipment as a result of adoption of HKFRS 16 “Leases”.

Income tax expenses

Our income tax expenses increased by approximately HK$0.9 million or 16.3% fromapproximately HK$5.5 million for the nine months ended 31 December 2018 to approximatelyHK$6.4 million for the nine months ended 31 December 2019, which was generally in line withthe growth in taxable income of our Group’s Hong Kong business for the nine months ended 31December 2019 as compared to the nine months ended 31 December 2018.

Profit for the period

As a result of the foregoing, our profit for the period decreased by approximately HK$16.5million or 72.5% from approximately HK$22.7 million for the nine months ended 31 December2018 to approximately HK$6.3 million for the nine months ended 31 December 2019.

Year ended 31 March 2018 compared with year ended 31 March 2019

Revenue

Our revenue grew slightly from approximately HK$412.3 million for the year ended 31March 2018 to approximately HK$425.7 million for the year ended 31 March 2019, representingan annual growth rate of approximately 3.3%. The increase was primarily attributed to thegrowth of revenue generated from property management and related services, resulting from the



– 176 –

increase of the revenue from the property management and consultancy service in the PRC. Theincrease of the revenue from the property management and consultancy service in the PRC wasmainly due to the increase of number of customers.

Cost of services

Our cost of services has remained stable and increased slightly from approximatelyHK$317.9 million for the year ended 31 March 2018 to approximately HK$322.0 million for theyear ended 31 March 2019. The annual growth is approximately 1.3%.



– 176-a –


Our gross profit increased from approximately HK$94.4 million for the year ended 31March 2018 to approximately HK$103.6 million for the year ended 31 March 2019, representingan annual growth of approximately 9.7%. Such growth was driven by the increase in gross profitarising from the property management and consultancy service in the PRC.

Our overall gross profit margin increased slightly from approximately 22.9% for the yearended 31 March 2018 to approximately 24.3% for the year ended 31 March 2019 mainly due tothe growth of the revenue from the property management and consultancy service in the PRC,which had a higher gross profit margin than that of Hong Kong.

Interest revenue

Our interest revenue increased from approximately HK$2.0 million for the year ended 31March 2018 to approximately HK$3.4 million for the year ended 31 March 2019, representing anannual growth of approximately 70.0%. Such increase was mainly due to the increase of theinterest from the convertible bond investment in Australia.

Other income

Other income increased from approximately HK$6.4 million for the year ended 31 March2018 to approximately HK$26.7 million for the year ended 31 March 2019, representing anannual growth of approximately 317.2%. Such increase was mainly due to the compensationincome recorded for the year ended 31 March 2019, details of which are set out in the paragraphheaded “Financial information – Description of selected items from the consolidated statementof profit or loss and other comprehensive income – Other income/(loss)” in this [REDACTED]document.


Share of profit of an associate has remained stable and slightly increased fromapproximately HK$5.0 million for the year ended 31 March 2018 to approximately HK$5.2million for the year ended 31 March 2019.


Our administrative expenses increased by approximately HK$2.2 million or 4.4% fromapproximately HK$50.0 million for the year ended 31 March 2018 to approximately HK$52.2million for the year ended 31 March 2019. Such increase was attributed by the increase in staffcosts and staff welfare during the period.


Our other operating expenses increased by approximately HK$2.9 million or 16.0% fromapproximately HK$18.1 million to approximately HK$21.0 million for the year ended 31 March



– 177 –

2018 and 2019, respectively. The increase was mainly attributable to the exchange differencebetween Australian Dollar and Hong Kong Dollar amounting to approximately HK$3.3 millionfor the year ended 31 March 2019, which was mainly due to exchange loss on redemption of theCN upon its maturity date on 1 March 2019. This increase in other operating expenses wasslightly offset by the decrease in loss on early settlement of promissory notes fromapproximately HK$1.7 million for the year ended 31 March 2018 to approximately HK$0.3million for the year ended 31 March 2019.

Finance costs

Our finance costs decreased by approximately HK$0.7 million or 53.8% fromapproximately HK$1.3 million for the year ended 31 March 2018 to approximately HK$0.6million for the year ended 31 March 2019. The decrease in finance costs was principally due tothe decrease in finance costs relating to the two promissory notes issued in March 2017 and thepromissory note issued in October 2017. On 31 March 2017, our Company issued twopromissory notes of HK$7,000,000 each to settle part of the consideration in the acquisitions ofthe entire equity interest in More Rise and Fortune Trend, which were unsecured and interestfree. The sum of HK$14,000,000 was to be repaid on the date following 18 months after the dateof issuance. These two promissory notes were fully repaid in July 2018. On 12 October 2017,our Company issued a promissory note of HK$20,000,000 to settle part of the consideration inacquisition of the convertible notes in a company listed on the Australian Stock ExchangeLimited. The sum of HK$20,000,000 under the promissory note was to be repaid on the datefollowing 18 months after the date of issuance. On 30 November 2017, this promissory note wasearly settled. For detailed information, please refer to note 37 of the Accountants’ Report inAppendix I to this [REDACTED] document.

Income tax expenses

Our income tax expenses increased by approximately HK$0.5 million or 6.8% fromapproximately HK$7.4 million for the year ended 31 March 2018 to approximately HK$7.9million for the year ended 31 March 2019. The increase in the amount of income tax expenseswas mainly due to the increase of taxable profit for the year.

Profit for the year

As a result of the foregoing, our profit for the year increased by approximately HK$26.4million or 85.2% from approximately HK$31.0 million for the year ended 31 March 2018 toapproximately HK$57.4 million for the year ended 31 March 2019.

Year ended 31 March 2017 compared with year ended 31 March 2018

Revenue

Our revenue grew from approximately HK$395.5 million for the year ended 31 March 2017to approximately HK$412.3 million for the year ended 31 March 2018, representing an annual



– 178 –

growth rate of approximately 4.2%. The increase was primarily attributed to (i) the increase ofthe revenue generated from the property management and related services resulting from thecommencement of the property management and consultancy services in the PRC; (ii), therevenue of approximately HK$1.1 million generated from the rental services during the yearended 31 March 2018 after the acquisition of our investment property in Hung Hom, Hong Kongin February 2017; and (iii) the generated revenue of approximately HK$1.6 million after thecommencement of our money lending business during the year ended 31 March 2018.



– 178-a –

Cost of services

Our cost of services has increased from approximately HK$312.2 million for the year ended31 March 2017 to approximately HK$317.9 million for the year ended 31 March 2018. Theannual growth was approximately 1.8%, which was mainly due to the increase in wages and staffcosts.


Our gross profit increased from approximately HK$83.3 million for the year ended 31March 2017 to approximately HK$94.4 million for the year ended 31 March 2018, representingan annual growth of approximately 13.3%. Such growth was driven by the increase in grossprofit arising from the property management and consultancy services in PRC.

The overall gross profit margin increased slightly from approximately 21.1% for the yearended 31 March 2017 to 22.9% for the year ended 31 March 2018 mainly due to thecommencement of the property management and consultancy service in PRC, which had a highergross profit margin than that of Hong Kong.

Interest revenue

Our interest revenue increased from approximately HK$0.3 million for the year ended 31March 2017 to approximately HK$2.0 million for the year ended 31 March 2018, representing anannual growth of approximately 566.7%. Such increase was mainly due to the interest from theconvertible bond investment in Australia.

Other income

Other income increased from approximately HK$0.0 million for the year ended 31 March2017 to approximately HK$6.4 million for the year ended 31 March 2018. Such increase wasmainly due to the increase of consultancy income and the recognition of fair value gain on aninvestment property and investments at convertible notes for the year ended 31 March 2018.


Share of profit of an associate increased from HK$nil for the year ended 31 March 2017 toapproximately HK$5.0 million for the year ended 31 March 2018, which was due to theacquisition of 30% of the share interests in Dakin Holdings in April 2017.



– 179 –


Our administrative expenses decreased by approximately HK$2.0 million or 3.8% fromapproximately HK$52.0 million for the year ended 31 March 2017 to approximately HK$50.0million for the year ended 31 March 2018. Such decrease was attributed by (i) the decrease inrental payment of approximately HK$0.4 million, as a result of the acquisition of an unit of theinvestment property during the year ended 31 March 2017; and (ii) the decrease in staff cost andstaff welfare including Directors’ remuneration of approximately HK$1.5 million.


Our other operating expenses increased by approximately HK$0.2 million or 0.6% fromapproximately HK$18.0 million to approximately HK$18.1 million for the year ended 31 March2017 and 2018, respectively. The increase was attributable to the loss on early settlement ofpromissory notes of approximately HK$1.7 million and the increase in depreciation andamortisation of approximately HK$1.6 million recorded between the two years ended 31 March2017 and 2018. Meanwhile, these increases were significantly offset by the decrease in legal andprofessional charges of approximately HK$1.1 million and the decrease in travelling andentertainment expenses of approximately HK$1.8 million between the two years ended 31 March2017 and 2018.

Finance costs

Our finance costs increased by approximately HK$1.1 million or 550.0% fromapproximately HK$0.2 million for the year ended 31 March 2017 to approximately HK$1.3million for the year ended 31 March 2018. The increase in finance costs was principally due tothe finance costs relating to promissory notes, issued in March 2017 and October 2017. Fordetailed information, please refer to note 37 of the Accountants’ Report in Appendix I to this[REDACTED] document.

Income tax expenses

Our income tax expenses increased by approximately HK$4.1 million or 124.2% fromapproximately HK$3.3 million for the year ended 31 March 2017 to approximately HK$7.4million for the year ended 31 March 2018. The increase in the amount of income tax expenseswas mainly due to the increase of taxable profit for the year, which was partially offset by thedecrease of the effective tax rate.

Profit for the year

As a result of the foregoing, our profit for the year increased by approximately HK$20.8million or 203.9% from approximately HK$10.2 million for the year ended 31 March 2017 toapproximately HK$31.0 million for the year ended 31 March 2018.



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DISCUSSION OF SELECTED ITEMS FROM CONSOLIDATED STATEMENTS OFFINANCIAL POSITION

The following table below sets forth our consolidated statements of financial position as atthe dates indicated:

As at 31 March

As at31

DecemberAs at

31 March2017 2018 2019 2019 2020

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Non-current assetsProperty, plant and

equipment 12,654 11,764 11,248 21,642 22,183Investment property 28,817 32,000 32,400 30,300 30,300Intangible assets 7,887 5,838 3,902 2,595 2,143Right-of-use assets – – – 7,543 6,487Goodwill 785 785 3,232 3,232 3,232Deposits placed for life

insurance policies 8,170 8,382 8,576 8,713 8,758Deposits for acquisition

of an associate 28,350 – – – –Deferred tax assets 2,547 2,554 2,849 2,628 2,868Investment in an

associate – 36,499 41,748 41,989 39,593

89,210 97,822 103,955 118,642 115,564

Current assetsTrade and other

receivables 61,914 72,501 120,170 124,999 134,961Investments at FVTPL – 37,794 10,668 – –Pledged bank deposits 7,106 10,176 1,722 1,722 1,629Cash and cash

equivalents 45,165 54,165 142,200 139,767 139,747

114,185 174,636 274,760 266,488 276,337



– 181 –

As at 31 March

As at31

DecemberAs at

31 March2017 2018 2019 2019 2020

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Current liabilitiesTrade and other payables 64,006 54,553 68,341 67,561 67,880Contract liabilities – – 4,546 3,657 4,679Bank borrowings –

secured 9,371 9,870 12,140 11,852 11,671Finance leases payables 219 140 247 – –Lease liabilities – – – 4,224 4,205Promissory notes

payables – 7,675 – – –Amount due to a related

company – – 2,105 – –Current tax liabilities 999 3,840 1,740 2,292 3,250

74,595 76,078 89,119 89,586 91,685

Net current assets 39,590 98,558 185,641 176,902 184,652

Investment property

Investment property represented the property located at Workshop A1 on 1st Floor, HangFung Industrial Building Phase 1, Nos. 2G Hok Yuen Street, Kowloon, which was acquired byour Group on 31 March 2017 for generate rental income.

Investment in associate

Investment in associate represented 30% equity interest of Dakin Holdings, which wasacquired in April 2017.

Goodwill

Goodwill of approximately HK$785,000 and HK$2,447,000 was recognised from theacquisition of Yorkshire in June 2016 and Shi Shi Property Cayman in March 2019, respectively.

Goodwill of approximately HK$785,000 as at 30 June 2016 was acquired through thebusiness combination of Yorkshire. Goodwill of approximately HK$2,447,000 and intangibleassets of approximately HK$94,000 was acquired through acquisition of Shi Shi Property



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Cayman on 29 March 2019. The goodwill belongs to the cash generating unit (“CGU”) ofprovision of property management services.

Contract liabilities

Contract liabilities represented property management fee received in advance fromcustomers.

Intangible assets

Our intangible assets mainly include (i) customer contracts of approximately HK$2,054,000arisen from acquisition of Yorkshire during the year ended 31 March 2017 and approximatelyHK$94,000 from acquisition of Shi Shi Property Cayman during the year ended 31 March 2019;and (ii) computer softwares at a cost of approximately HK$6,550,000 acquired during the yearended 31 March 2017, which is an internal management system which functions address bookmanagement for office usage, office communication and office bulletin for property managementbusiness. Intangible asset (customer contract) of approximately HK$2,054,000 as at 30 June2016 was acquired through the business combination of Yorkshire. Intangible assets (customercontract) of approximately HK$94,000 was acquired through acquisition of Shi Shi PropertyCayman on 29 March 2019. These customer contracts belong to the CGU of provision ofproperty management services.

Impairment review

Customer contract/goodwill

The recoverable amounts of the CGU are determined on the basis of their value in useusing discounted cash flow method. The key assumptions for the discounted cash flow methodare those regarding the discount rates, growth rates and budgeted gross margin and revenueduring the period. Our Group estimates discount rates using pre-tax rates that reflect currentmarket assessments of the time value of money and the risks specific to the CGU. The growthrates are based on long-term average economic growth rate of the geographical area in which thebusinesses of the CGU operate. Budgeted gross margin and revenue are based on past practicesand expectations on market development. Our Group prepares cash flow forecasts derived fromthe most recent financial budgets approved by the directors for the next five years. Therecoverable amount of the relevant assets has been determined based on a value in usecalculation using cash flow projections based on the financial budgets approved by themanagement covering a five year period. Key assumptions used by the management in the valuein use calculations of the cash-generating unit include budgeted gross profit margin. The pre-taxdiscount rate used for estimating the value in use for Yorkshire is 19.97%, and 28.11% for ShiShi Property Cayman.

The assumptions have been determined based on past performance and management’sexpectation in respect of the property management market in Hong Kong and the PRC.



– 181-b –

The key parameters are revenue, gross profit margin, administrative and operatingexpenses, and discount rate.

To ascertain the impact on the recoverable amount of the CGUs upon deviation from itsestimate, a sensitivity analysis has been performed by taking into account the factor offluctuation in the gross profit margin and operating and administrative expenses, which ourDirectors assume would be the most important factors to affect the recoverable amounts of theCGUs.

For Yorkshire, the impact of adverse changes in the above factors (i.e. 10% decrease inprofit margin and 10% increase in operating and administrative expenses) on the recoverableamounts of Yorkshire would be decreased of the recoverable amount by approximatelyHK$977,000, HK$892,000, HK$818,000 and HK$885,000 as at 31 March 2017, 2018, 2019 and31 December 2019, respectively. In the base case scenario, the recoverable amount would exceedthe carrying amount of the CGU by approximately HK$4,084,000, HK$3,798,000, HK$3,608,000and HK$4,410,000 as at 31 March 2017, 31 March 2018, 31 March 2019 and 31 December 2019,respectively.

For Shi Shi Property Cayman, the impact of adverse changes in the above factors (i.e. 10%decrease in profit margin and 10% increase in operating and administrative expenses) on therecoverable amounts of Shi Shi Property Cayman would be decreased of the recoverable amountby approximately HK$1,787,000 and HK$2,055,000 as at 31 March 2019 and 31 December2019, respectively. In the base case scenario, the recoverable amount would exceed the carryingamount of the CGU by approximately HK$3,499,000 and HK$3,439,000 as at 31 March 2019and 31 December 2019, respectively.

The sensitivity analysis would not cause the carrying amount of the CGU to exceed itsrecoverable amount.

Computer software

Our Group acquired computer software with cost of approximately HK$6,550,000 duringthe year ended 31 March 2017, mainly used for property management business. Our Group’sproperty management business recorded profits throughout the Track Record Period. There is noindication of impairment.

Our net current assets increased from approximately HK$39.6 million as at 31 March 2017to approximately HK$98.6 million as at 31 March 2018 primarily due to convertible bondinvestment in Australia, the increase of trade and other receivables, the increase of cash and cashequivalent, and the decrease of trade and other payables of approximately HK$9.5 million,which was partially offset by the issuance of promissory notes issued in March 2017.



– 181-c –

Our net current assets increased from approximately HK$98.6 million as at 31 March 2018to approximately HK$185.6 million as at 31 March 2019 primarily due to the increase of tradeand other receivables of approximately HK$47.7 million and the increase of cash and cashequivalents of approximately HK$88.0 million derived from the proceeds from placing of newShares completed in November 2018 and compensation income of HK$26.0 million recorded forthe year ended 31 March 2019, which was partially offset by the redemption of convertible bondinvestment in Australia in March 2019 and the increase of trade and other payables ofapproximately HK$13.8 million.

Our net current assets decreased from approximately HK$185.6 million as at 31 March2019 to approximately HK$176.9 million as at 31 December 2019 primarily due to the decreaseof investments at fair value through profit or loss of approximately HK$10.7 million and therecognition of the current portion of the lease liabilities of approximately HK$4.0 million, whichwas partially offset by the increase of trade and other receivables of approximately HK$4.8million.

Our net current assets increased slightly from approximately HK$176.9 million as at 31December 2019 to approximately HK$184.7 million as at 31 March 2020 primarily due to theincrease of trade and other receivables of approximately HK$10.0 million.

Trade and other receivables

The following table sets forth the breakdown of trade and other receivables as at the end ofeach reporting period:

As at 31 March

As at31

December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

Trade receivables 47,009 50,222 73,607 81,118Loan receivables – 3,627 18,012 18,690Prepayments, deposits and other

receivables 14,905 18,652 28,551 25,191

61,914 72,501 120,170 124,999



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Trade receivables

Trade receivable mainly represented the amounts due from our customers of propertymanagement and related services and property rental services for our revenue. The increase intrade receivable from approximately HK$47.0 million as at 31 March 2017 to approximatelyHK$50.2 million as at 31 March 2018, and increased to approximately HK$73.6 million as at 31March 2019 and further increased to approximately HK$81.1 million as at 31 December 2019,mainly due to the delay of payment by a number of independent customers for whom there is norecent history of default.

The following table sets forth the breakdown of our group’s trade receivables bysubsidiaries for the dates indicated:

As at 31 March

As at31

December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

KSU 44,810 46,926 53,581 57,829Q&V 1,294 1,457 1,204 2,818Yorkshire 893 1,068 1,592 1,910Fortune Trend 12 19 0 35Zibo Yue – 752 10,676 10,739Shi Shi Property Cayman – – 6,553 7,787

Total: 47,009 50,222 73,606 81,118

Our trade receivables experienced the most significant increase from approximatelyHK$50.2 million as at 31 March 2018 to HK$73.6 million as at 31 March 2019 mainly due tothe increase of trade receivables from KSU, Zibo Yue and Shi Shi Property Cayman. Thecustomers of KSU are mainly owners’ corporation in Hong Kong and the primary reasons for thedelay of payment by these customers from the year ended 31 March 2018 to the year ended 31March 2019 are mainly that (i) the owners’ corporations have to issue the cheques after theyhave held the regular meetings yet the payment due date frequently occurs before the date ofsuch regular meetings; or (ii) the payment due dates fell during the period when the owners’corporations discussed the new contract amount with KSU. The customers of Zibo Yue aremainly property management companies or property developers in the PRC and the primaryreason for the increase in trade receivables from the year ended 31 March 2018 to the yearended 31 March 2019 is that Zibo Yue was established in the end of 2017 with little business forthe year ended 31 March 2018. Its business substantially increased in the year ended 31 March2019, resulting in greater amount of trade receivable balance as at 31 March 2019. Thecustomers of Shi Shi Property Cayman are mainly property owners or government bodies in thePRC and the primary reason for the increase in trade receivables is that we acquired Shi ShiPropery Cayman in March 2019 and the trade receivable of Shi Shi Propery Cayman was thusconsolidated into our Group’s total balance as at 31 March 2019. The amount of subsequentsettlement of trade receivables since 31 December 2019 and up to the Latest Practicable Date



– 183 –

was approximately HK$66.9 million, representing approximately 82.5% of the trade receivablesas at 31 December 2019.

The following table sets forth the debtors’ turnover days of the trade receivables (calculatedas the average of beginning and ending trade receivable balances for the period divided byrevenue for the period, multiplied by the number of the days in the period) for the periodsindicated:

FY2017 FY2018 FY2019 9M2020

Debtors’ turnover day 41.2 days 43.0 days 53.1 days 58.8 days

The debtors’ turnover day increased from approximately 41.2 days for the year ended 31March 2017 to approximately 43.0 days for the year ended 31 March 2018 and further increasedto approximately 53.1 days for the year ended 31 March 2019 and approximately 58.8 days forthe nine months ended 31 December 2019 mainly due to the delay of payment by a number ofindependent customers for whom there is no recent history of default. No credit term isgenerally granted in the service agreements with customers. Our Group usually issues monthlyinvoices to our customers with a breakdown of the fee and within a few weeks our accountsdepartment will send a reminder for our customers to settle the service fee. If the outstandingservice fee has not been settled in two months, our accounts department will send a secondreminder urging our customers to settle the outstanding amount. If the outstanding services feeis not settled in three months, we may send formal letters to our customers demanding paymentand consider taking legal action to recover the outstanding amounts.

The following table illustrates the aging analysis of trade receivable as at the datesindicated:

As at 31 March As at 31 December2017 2018 2019 2019

HK$’000 % HK$’000 % HK$’000 % HK$’000 %

1–30 days 10,194 21.7 11,400 22.7 15,297 20.8 34,541 42.631–60 days 28,261 60.1 33,115 65.9 40,312 54.8 19,490 24.061–90 days 3,925 8.3 2,311 4.6 9,026 12.2 8,607 10.6Over 90 days 4,629 9.9 3,396 6.8 8,972 12.2 18,480 22.8

47,009 100.0 50,222 100.0 73,607 100.0 81,118 100.0

The circumstances leading to the increase in debtors’ turnover days and trade receivablesaged over 60 days are mainly due to the following reasons:

1. the bank accounts of the owners’ corporation were frozen in some incidents where theowners’ corporation failed to respond in a timely manner to the bank’s request toverify all the account holders’ identities and update their personal data in personbecause one of the account holders passed away;



– 183-a –

2. the owners’ corporations took a long time to process debit notes and/or auditattendance record of security guards prior to the payments;

3. as a common practice, the owners’ corporations issue the cheques after they have heldthe regular meetings yet the payment due date frequently occurs before the date oftheir regular meetings;

4. the payment due dates fell during the period when the owners’ corporations discussedthe new contract amount with KSU;

5. the significant increase of the business of Zibo Yue for the year ended 31 March 2018;and

6. the acquisition of Shi Shi Propery Cayman was completed in March 2019 and thus itstrade receivable was consolidated into our Group’s total balance as at 31 March 2019.

Notwithstanding of the above circumstances, our Directors are of the view that our Group’scredit policy is effective for the reasons that our Group recorded a positive cash flows fromoperating activities and the bad debt is minimal during the Track Record Period.



– 183-b –

Impairment of trade receivables are evaluated by the value of each customer account’sunderlying collateral and the latest financial position of those customers in default of settlement.Based on the past experience, our Directors are of the view that the credit risk from tradereceivables are minimal as they have good settlement records with our Group in the past andthere has not been a significant change in credit quality and the balances are still consideredfully recoverable. As such, as at 31 March 2017, 2018 and 2019, no impairment of tradereceivable was made. Up to the Latest Practicable Date, approximately 82.5% of our tradereceivable as at 31 December 2019 has been subsequently settled. As at the Latest PracticableDate, the unsettled amount of our Group’s trade receivable against the balance as at 31December 2019 was approximately HK$14.2 million. The following table sets out the subsequentsettlement by aging group as at the Latest Practicable Date:

As at theLatest

PracticableDate

HK$’000

1–30 days 31,68631–60 days 17,62961–90 days 7,04290 days 10,562

66,919

Loan receivables

Our loan receivables represent the money we loaned out to independent third parties underour money lender licence, which was first granted to us on 15 June 2017. As 31 March 2017,2018 and 2019 and 31 December 2019, our loan receivables amounted to nil, approximatelyHK$3.6 million, HK$18.0 million and HK$18.7 million, respectively. As at 31 December 2019,the loan receivables of approximately HK$18.7 million comprising of our only current loan wassecured by a second mortgage of a private residential property in Hong Kong. Our loanreceivables included interest receivables of approximately HK$128,000, HK$12,000 andHK$690,000 as at 31 March 2018, 31 March 2019 and 31 December 2019, respectively. Asconfirmed by our Directors, there was no overdue for the loan receivables as at 31 December2019.



– 184 –

Prepayments, deposits and other receivables

Details of the prepayments, deposits and other receivables are as follows as at the datesindicated:

As at 31 March

As at31

December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

Prepayments (Note 1) 1,077 2,940 6,632 6,078Deposits (Note 2) 3,632 1,490 5,878 3,125Other receivables (Note 3) 10,196 14,222 16,041 15,988

14,905 18,652 28,551 25,191

Notes:

1. Prepayments mainly included prepaid annual listing fee, insurance, performance bonds, rent and rates, etc.Prepayment as at 31 March 2019 also included prepaid construction cost and design fees for constructionin progress.

2. Deposits mainly included building deposit from incorporated owners of the buildings, rental, andelectricity and water deposits.

3. Other receivables mainly included amounts paid on behalf of incorporated owners of buildings for propertymanagement. The amounts and expenses paid by our Group on behalf of the incorporated owners of thebuildings (namely our customers) are lift and other repair and maintenance fee, water and electricity feeand cleaning fee, which usually will charge back to these customers within next two months. As at theLatest Practicable Date, 88.0% of the balance of amounts paid on behalf of incorporated owners underother receivables as at 31 December 2019 was settled.



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Investments at Fair Value through Profit or Loss

Our Group’s treasury policy is principally based on the money lending policy adopted bythe credit committee. We have no written investment policy and the investment policy of ourGroup was discussed and determined from time to time by our Board if and as the investmentshall be deemed it to be in the best interest of our Company to do so. Save as our Group’sunlisted convertible notes, all other investments made during the Track Record Period are notprincipal protected. As at the Latest Practicable Date, our Group has no investment plan.

The following table sets out the breakdown of investments at fair value through profit orloss as at the dates indicated:

As at 31 March

As at31

December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

Equity securities, at fair valueUnlisted – convertible notes – 37,794 – –Unlisted – investment funds – – 10,668 –

– 37,794 10,668 –

On 14 July 2017, Oceanic Alliance Investments Limited (the “Seller”), and Lucky StoneInvestments Limited, a wholly-owned subsidiary of our Company (the “Buyer”), entered into anagreement in relation to the acquisition of convertible notes of the principal amount ofAUD6,000,000 (the “CN”) (for the agreement, the “CN Agreement”).

Subject to the satisfaction (or waiver) of the conditions precedent as set out in the CNAgreement, the Buyer conditionally agrees to acquire the CN from the Seller at a totalconsideration of HK$36,000,000 (equivalent to AUD6,000,000, using an agreed exchange rate ofAUD1=HK$6 and being the face value of the aggregate principal amount of the CN) (the “CNAcquisition”). The CN of the principal amount of AUD6,000,000 with a maturity date on 1March 2019 are issued by ASF Group Limited, a public company limited by shares, incorporatedand domiciled in Australia, with its issued shares being listed on the Australian Stock ExchangeLimited (CAN 008 624 691) (the “Issuer”). The CN are unsecured and not listed on any stockexchange. Further, the Buyer agrees to pay to the Seller an accrued interest of the CN from 1April 2017 and up to the completion date specified under the CN Agreement (both dateinclusive) to be calculated at an interest rate of 10% per annum in accordance with terms of adeed of CN entered into between the Seller and the Issuer. For the year ended 31 March 2019,the exchange difference of approximately HK$3.3 million arose from the fluctuations of AUDagainst HKD on the CN Agreement. For further details, please refer to note 31 of theAccountants’ Report set out in Appendix I to this [REDACTED] document.



– 185 –

The acquisition of the CN was completed on 12 October 2017. For details, please refer toour Company’s announcement dated 13 October 2017. The CN was fully redeemed by the ASFGroup Limited on 1 March 2019.

During the year ended 31 March 2019, our Group invested RMB9,000,000 in investmentfunds (the “Funds”) which are managed by the fund management companies and the Fundsinvested in several PRC incorporated companies and high liquid money market instruments,respectively. These Funds were fully disposed in April 2019 at principal amounts plusinvestment income. The cost of the Funds approximated their fair value as at 31 March 2019.



– 185-a –

Trade and other payables

The following table sets forth the breakdown of trade and other payables as at the datesindicated:

As at 31 March

As at31

December2017 2018 2019 2019

HK$’000 HK$’000 HK$’000 HK$’000

Trade payables 1,148 1,139 2,581 2,679Building management deposits

received 4,298 4,349 4,799 5,017Accruals and other payables 58,560 49,065 60,961 59,865

64,006 54,553 68,341 67,561

Other payables mainly comprised of expenses (mainly utilities and lift repair andmaintenance fee) of certain incorporated owners in Hong Kong payable by our Group on behalfof these incorporated owners, management security deposit payable to certain incorporatedowners in Hong Kong, rental deposits received for rental services and security deposits receivedfrom sole owners of properties for carrying out decoration of respective premises located in ourGroup’s PRC property management projects and payables for design fee and construction costsof construction in progress for one of our Group’s PRC subsidiaries. The balances were stable asat 31 March 2017 and 2018. The following table sets forth the creditors’ turnover day(calculated as the average of beginning and ending total trade payable balances for the perioddivided by subcontracting costs in respect of cleaning services, for the period, multiplied by thenumber of the days in the period) for the periods indicated:

FY2017 FY2018 FY2019 9M2020

Creditors’ turnover day 25.0 days 26.0 days 41.3 days 44.1 days

Our Group generally settles the monthly subcontracting fees in the following month. Theincrease in the creditors’ turnover day for the year ended 31 March 2019 was due to the fullyutilisation of the credit period offered by some of the creditors. Up to the Latest PracticableDate, 100% of the trade payables as at 31 December 2019 has been subsequently settled.



– 186 –

Details of the accruals and other payables during the Track Record Period are as follows:

FY2017 FY2018 FY2019 9M2020HK$’000 HK$’000 HK$’000 HK$’000

Accrued staff cost and staffbenefits 35,850 39,338 36,308 32,316

Accrued expenses 1,269 1,117 3,038 4,829Amount due to a director 5,500 – – –Amount due to a related party 5,500 – – –Other payables 10,441 8,610 21,615 22,720

58,560 49,065 60,961 59,865

Promissory notes payables

Promissory note (A)

On 31 March 2017, our Company issued two promissory notes of HK$7,000,000 each tosettle part of the consideration in the acquisition of the 100% equity interest in More Rise andFortune Trend. The amount is unsecured and interest free. The sum of HK$14,000,000 is to berepaid on the date following 18 months after the date of issuance. In September 2017, ourCompany repaid HK$6,000,000 of the promissory note and recorded a loss on early settlementof approximately HK$561,000. In April 2018, our Company repaid HK$6,000,000 of thepromissory note and recorded a loss on early settlement of approximately HK$262,000. In July2018, the promissory notes were repaid fully. Imputed interest of HK$nil, HK$956,000 andHK$63,000 was charged to the consolidated profit or loss for the years ended 31 March 2017,2018 and 2019, respectively.

Promissory note (B)

On 12 October 2017, our Company issued a promissory note of HK$20,000,000 to settlepart of the consideration in acquisition of the convertible notes in a company listed on theAustralian Stock Exchange Limited. The amount is unsecured and interest free. The sum ofHK$20,000,000 is to be repaid on the date following 18 months after the date of issuance. On 30November 2017, the promissory note was early settled. We recorded a loss of approximatelyHK$1,124,000 on early settlement of this promissory note.

During the year ended 31 March 2018, imputed interest of HK$107,000 for this promissorynote was charged to the consolidated profit or loss.



– 186-a –

At 31 March At 31 December2017 2018 2019 2019

PromissoryNote (A)

PromissoryNote (B)

PromissoryNote (A)

PromissoryNote (B)

PromissoryNote (A)

PromissoryNote (B)

PromissoryNote (A)

PromissoryNote (B)

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At beginning of year/period – – 12,158 – 7,675 – – –Initial recognition 12,158 – – 18,769 – – – –Loss on early settlement of

promissory notes – – 561 1,124 262 – – –Interest charged – – 956 107 63 – – –Repayment – – (6,000) (20,000) (8,000) – – –

At end of year/period 12,158 – 7,675 – – – – –

For further details of the promissory notes payables, please refer to note 37 of Accountants’Report as set out in Appendix I to this [REDACTED] document.



– 186-b –

LIQUIDITY AND CAPITAL RESOURCES

Cash flows

The following table sets forth the cash flows for the periods indicated:


(unaudited)

Operating profit before changes inworking capital 15,357 33,380 60,496 26,428 20,567

Changes in working capital (749) (19,935) (35,293) (23,861) (13,955)Cash generated from operations 14,608 13,445 25,203 2,567 6,612Interest and tax paid (3,973) (4,863) (10,819) (3,019) (6,356)Net cash flows generated from/(used

in) operating activities 10,635 8,582 14,384 (452) 256Net cash flows generated from/(used

in) investing activities (52,748) (22,568) 42,723 7,774 3,015Net cash flows generated/(used in)

from financing activities 20,021 27,048 27,917 33,049 (3,242)

Net increase/(decrease) in cash andcash equivalents (22,092) 13,062 85,024 40,371 29

Cash and cash equivalents atbeginning of the year 63,127 41,035 54,165 54,165 139,559

Effect of foreign exchange ratechanges – 68 370 (887) (2,452)

Cash and cash equivalents at end ofthe year 41,035 54,165 139,559 93,649 137,136

Net cash flows generated from operating activities

Our cash inflow from operating activities was mainly derived from the receipt of paymentsfrom our customers for our provision of property management and related services. Our cashoutflow from operating activities principally arose from our payment for our employee benefitsexpenses, subcontracting fees and other operating expenses.

FY2017

For the year ended 31 March 2017, we recorded net cash generated from operatingactivities of approximately HK$10.6 million. This was mainly the result of positive operatingprofit before tax of approximately HK$13.5 million, tax paid of approximately HK$3.8 million,increase in trade and other receivables of approximately HK$6.3 million, and increase in tradeand other payables of approximately HK$5.6 million.



– 187 –

FY2018

For the year ended 31 March 2018, we recorded net cash generated from operatingactivities of approximately HK$8.6 million. This was mainly the result of positive operatingprofit before tax of approximately HK$38.3 million, tax paid of approximately HK$4.6 million,increase in trade and other receivables of approximately HK$10.6 million, and decrease in tradeand other payables of approximately HK$9.4 million.

FY2019

For the year ended 31 March 2019, we recorded net cash generated from operatingactivities of approximately HK$14.4 million. This was mainly the result of positive operatingprofit before tax of approximately HK$65.2 million, tax paid of approximately HK$10.3 million,increase in trade and other receivables of approximately HK$41.6 million, and increase in tradeand other payables of approximately HK$6.3 million.

9M2020

For the nine months ended 31 December 2019, we recorded net cash generated fromoperating activities of approximately HK$0.3 million. This was mainly the result of positiveoperating profit before tax of approximately HK$12.6 million, tax paid of approximately HK$5.6million and increase in trade and other receivables of approximately HK$10.3 million.

Net cash flows generated from/(used in) investing activities

FY2017

Our net cash used in investing activities was approximately HK$52.7 million for the yearended 31 March 2017, primarily attributable to the net effect of the deposit for acquisition ofDakin Holdings as associate of approximately HK$28.4 million and the acquisition ofsubsidiaries of approximately HK$17.3 million.

FY2018

Our net cash used in investing activities was approximately HK$22.6 million for the yearended 31 March 2018, primarily attributable to the investment at convertible bond in cash ofapproximately HK$16.0 million.

FY2019

Our net cash generated from investing activities was approximately HK$42.7 million forthe year ended 31 March 2019, primarily attributable to the redemption of investment atconvertible bond of approximately HK$42.8 million.



– 188 –

9M2020

Our net cash generated from investing activities was approximately HK$3.0 million for thenine months ended 31 December 2019, primarily attributable to the disposal of investment funds,which was partially offset by the purchase of property, plant and equipment of approximatelyHK$7.0 million.

Net cash flows generated from/(used in) financing activities

During the Track Record Period, our cash inflow from financing activities mainlyrepresented proceeds raised from placing of our Shares and bank loans, and our cash outflowfrom financing activities mainly represented repayment of bank loans, repayment of promissorynotes, dividend paid and interest paid.

FY2017

Our net cash generated from financing activities was approximately HK$20.0 million forthe year ended 31 March 2017, primarily attributable to the proceeds from placing of our Sharesof approximately HK$22.8 million.

FY2018

Our net cash generated from financing activities was approximately HK$27.0 million forthe year ended 31 March 2018, primarily attributable to the net effect of the proceeds fromplacing of our Shares of approximately HK$49.2 million and the repayment of promissory notesof approximately HK$26.0 million.

FY2019

Our net cash generated from financing activities was approximately HK$27.9 million forthe year ended 31 March 2019, primarily attributable to the net effect of the proceeds fromplacing of our Shares of approximately HK$41.0 million, the repayment of promissory notes ofapproximately HK$8.0 million and the payment of dividend to non-controlling interests ofapproximately HK$5.0 million.

9M2020

Our net cash used in financing activities was approximately HK$3.2 million for the ninemonths ended 31 December 2019, primarily attributable to the repayment of lease liabilities ofapproximately HK$3.0 million.



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KEY FINANCIAL RATIOS

The following table sets out our key financial ratios for the periods and as at the balancesheet dates indicated:

For the year ended/As at 31 March

For theperiod

ended/As at31 December

2017 2018 2019 2019

Return on equity(Note 1) 10.0% 20.0% 23.9% N/AReturn on total assets(Note 2) 5.9% 13.0% 17.6% N/ACurrent ratio(Note 3) 1.53 times 2.30 times 3.08 times 2.97 timesNet debt to equity ratio(Note 4) cash in hand cash in hand cash in hand cash in handGearing ratio(Note 5) 18.8% 9.1% 4.4% 6.7%Gross profit margin(Note 6) 21.1% 22.9% 24.3% 22.6%Net profit margin(Note 7) 2.6% 7.5% 13.5% 1.7%

Notes:

1. Return on equity is calculated by dividing net profit for the year by the average of the total equityattributable to owners of our Company as at the beginning and as at the end of the relevant year andmultiplied by 100%.

2. Return on total assets is calculated by dividing net profit for the year by the average of the total assets asat the beginning and as at the end of the relevant year and multiplied by 100%.

3. Current ratio is calculated by dividing current assets by current liabilities as at the end of the relevantyear/period.

4. Net debt to equity ratio is calculated by dividing net debt by total equity attributable to owners of ourCompany as at the end of the relevant year/period. Net debt is defined as the sum of bank borrowings,finance lease payables, lease liabilities and promissory notes payables minus cash and cash equivalents(including pledged bank deposits). Our Group was in net cash position as at 31 March 2017, 2018 and2019 and 31 December 2019.

5. Gearing ratio is calculated by dividing total debt by total equity attributable to owners of our Company asat the end of the relevant year/period. Total debt is defined as the sum of bank borrowings, finance leasepayables, lease liabilities and promissory notes payables.

6. Gross profit margin is calculated by dividing the gross profit for the year/period by the total revenue forthe relevant year/period.

7. Net profit margin is calculated by dividing net profit for the year/period by the total revenue for therelevant year/period.



– 190 –

Return on equity

Our return on equity increased from approximately 10.0% for the year ended 31 March2017 to approximately 20.0% for the year ended 31 March 2018. Such increase was primarilyattributable to the increase in net profit from approximately HK$10.2 million for the year ended31 March 2017 to approximately HK$31.0 million for the year ended 31 March 2018. Our returnon equity increased from approximately 20.0% for the year ended 31 March 2018 toapproximately 23.9% for the year ended 31 March 2019. Such increase was primarilyattributable to the increase in net profit for the year from approximately HK$31.0 million for theyear ended 31 March 2018 to approximately HK$57.4 million for the year ended 31 March 2019.



– 190-a –

Return on total assets

Our return on total assets increased from approximately 5.9% for the year ended 31 March2017 to approximately 13.0% for the year ended 31 March 2018. Such increase was primarilyattributable to the increase in net profit for the year ended 31 March 2018. Our return on totalassets increased from approximately 13.0% for the year ended 31 March 2018 to approximately17.6% for the year ended 31 March 2019. Such increase was primarily attributable to theincrease in net profit for the year ended 31 March 2019.

Current ratio

Our current ratio increased from approximately 1.53 times as at 31 March 2017 toapproximately 2.30 times as at 31 March 2018 mainly due to the acquisition of convertible noteduring the year and the increased in cash and cash equivalents which enlarged our Company’sassets. Our current ratio increased from approximately 2.30 times as at 31 March 2018 toapproximately 3.08 times as at 31 March 2019 mainly due to the increase in cash and cashequivalents and trade and other receivables. Our current ratio decreased from approximately 3.08times as at 31 March 2019 to approximately 2.97 times as at 31 December 2019 mainly due tothe decrease in current assets, which was resulting from the purchase of property, plant andequipment.

Net debt to equity ratio

We were in net cash position as at 31 March 2017, 2018 and 2019 and 31 December 2019which indicates that our Group’s has sufficient cash and bank balances for debts repayment.

Gearing ratio

Our gearing ratio as at 31 March 2018 was approximately 9.1%, which had decreased ascompared to that as at 31 March 2017 of approximately 18.8%. The decrease was primarilyattributable to the significant increase in our Group’s total equity during the year ended 31March 2018 due to issuance of Shares upon placing of Shares as well as earnings for the yearduring the year. Such decrease was partially offset by our increase in our total secured bankborrowings from approximately HK$9.4 million as at 31 March 2017 to approximately HK$9.9million as at 31 March 2018, our promissory notes payables of approximately HK$7.7 million asat 31 March 2018. Our gearing ratio as at 31 March 2019 was approximately 4.4%, which haddecreased as compared to that as at 31 March 2018 of approximately 9.1%, which was mainlydue to the significant increase in our Group’s total equity resulting from issuance of Shares uponplacing of Shares as well as earnings for the year and the decrease of our Group’s total debtprimarily resulting from the settlement of our promissory notes payables. Our gearing ratio as at31 December 2019 was approximately 6.7%, which had increased as compared to that as at 31March 2019 of approximately 4.4%.



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Gross profit margin

Our overall gross profit margin increased slightly from approximately 21.1% for the yearended 31 March 2017 to approximately 22.9% for the year ended 31 March 2018, then furtherincreased to approximately 24.3% for the year ended 31 March 2019 mainly due to thecommencement of the property management and consultancy services in the PRC, which had ahigher gross profit margin than that of Hong Kong. Our overall gross profit margin decreasedslightly from approximately 24.3% for the year ended 31 March 2019 to approximately 22.6%for the nine months ended 31 December 2019 mainly due to the decrease of the gross profitmargin of the property management and related services in the PRC.

Net profit margin

Our net profit margin increased from approximately 2.6% for the year ended 31 March2017 to approximately 7.5% for the year ended 31 March 2018 mainly because our Grouprecognised a significant amount of other income and share of profit of an associate for the yearended 31 March 2018. Our net profit margin increased by approximately 6.0% fromapproximately 7.5% for the year ended 31 March 2018 to approximately 13.5% for year ended31 March 2019 mainly due to the significant increase of other income resulting from thecompensation income recorded for the year ended 31 March 2019. Our net profit margindecreased from approximately 13.5% for the year ended 31 March 2019 to approximately 1.7%for the nine months ended year ended 31 December 2019 mainly due to the recognition of[REDACTED] expenses and the decrease in share of profit of an associate for the nine monthsended year ended 31 December 2019.



– 191-a –

RELATED PARTY TRANSACTIONS

With respect to the related party transactions set forth in note 47 of the Accountants’Report in Appendix I to this [REDACTED] document, our Directors confirm that thesetransactions were conducted on normal commercial terms and/or such terms were no lessfavourable to our Group than terms available to Independent Third Parties and were fair andreasonable and in the interest of our Shareholders as a whole.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any outstanding off-balance sheet guarantees, interest rate swaptransactions, foreign currency and commodity forward contracts or other off-balance sheetarrangements during the Track Record Period. We do not engage in trading activities involvingnon-exchange traded contracts. In the course of our normal business, we do not enter intotransactions involving, or otherwise form relationships with, unconsolidated entities or financialpartnerships that are established for the purpose of facilitating off-balance sheet arrangements orother contractually narrow or limited purposes.

INDEBTEDNESS

Pledged bank deposits

As at each of 31 March 2017, 2018 and 2019, 31 December 2019 and 31 March 2020, wehad deposits pledged to banks amounting to approximately HK$7.1 million, HK$10.2 million,HK$1.7 million, HK$1.7 million and HK$1.6 million, respectively. Our pledged deposits bankdeposits represented deposits pledged to banks to secure banking facilities granted to our Group.

Bank borrowings and performance bonds

As at each of 31 March 2017, 2018 and 2019, 31 December 2019 and 31 March 2020, wehad obtained banking facilities of approximately HK$58.5 million, HK$52.9 million, HK$48.5million, HK$48.5 million and HK$48.5 million, respectively, of which approximately HK$29.8million, HK$25.6 million, HK$16.6 million, HK$16.4 million and HK$16.2 million has beenutilised by bank borrowings and performance bonds, respectively. The performance bonds mainlyinclude the terms of the identity of surety, bond amount and performance undertakings. OurGroup monitors the cash inflow and outflow from our business operation regularly anddetermines the drawdown and repayment of bank loans.



– 192 –

The following table sets out the breakdown of the bank borrowings and performance bondsfor the dates indicated:

As at 31 March 2017 As at 31 March 2018 As at 31 March 2019 As at 31 December 2019 As at 31 March 2020Amountgranted

Utilisedamount

Unutilisedamount

Amountgranted

Utilisedamount

Unutilisedamount

Amountgranted

Utilisedamount

Unutilisedamount

Amountgranted

Utilisedamount

Unutilisedamount

Amountgranted

Utilisedamount

Unutilisedamount

(HK$ million) (HK$ million) (HK$ million) (HK$ million) (HK$ million)

Bank borrowings 15.9 9.4 6.5 20.0 9.9 10.1 27.6 12.1 15.5 27.6 11.9 15.7 27.6 11.7 15.9Performance

bonds 42.5 20.4 22.1 32.9 15.7 17.2 20.9 4.5 16.4 20.9 4.5 16.4 20.9 4.5 16.4

Total: 58.4 29.8 28.6 52.9 25.6 27.3 48.5 16.6 31.9 48.5 16.4 32.1 48.5 16.2 32.3

As at the Latest Practicable Date, the unutilised bank borrowings and performance bondswas in sum of HK$34.9 million.

Lease liabilities

As at 31 December 2019 and 31 March 2020, we had lease liabilities of approximatelyHK$7,532,000 and HK$6,491,000, respectively. Lease liabilities as at 31 December 2019 and 31March 2020 arose from the recognition of right-of-use assets and relevant lease liabilities underHKFRS 16 “Leases”.

CONTINGENT LIABILITIES

In carrying out ordinary course of business, our Group is subject to the risk of being namedas a defendant in legal actions, claims and disputes in connection with our business activities.The nature of the legal proceedings initiated against us mainly includes claims for compensationby our Group’s existing or former employees for work related injuries. Our Group maintainsinsurance cover and in the opinion of our Directors, based on available evidence, any such



– 192-a –

existing claims and legal proceedings against our Group have no material financial impact to ourGroup as at 31 March 2017, 2018 and 2019 and 31 December 2019.

Save as aforesaid or as otherwise disclosed herein and apart from intra-group liabilities, ourGroup did not have any loan capital issued and outstanding or agreed to be issued, bankoverdrafts loans or other similar indebtedness, debentures, mortgages, charges, finance lease orhire purchases, commitments, guarantees, material covenants or other material contingentliabilities.

CAPITAL COMMITMENT

As at the close of business on the Latest Practicable Date, we had no material capitalcommitments contracted for but not provided for in our consolidated financial statements.

CAPITAL EXPENDITURES

The following table sets out our capital expenditures for the periods indicated. Save for theinvestment in certain motor vehicles under finance leases, the capital expenditures were fundedout of our internal resources.

FY2017 FY2018 FY2019 9M2020HK$’000 HK$’000 HK$’000 HK$’000

Leasehold improvements 138 86 8 –Furniture and fixtures 109 1 9 22Motor vehicle – 172 745 7Office equipment 598 316 76 436Construction in progress – – – 11,624Plant and machinery – – – 6

845 575 838 12,095

Please refer to page I-54 of Appendix I to this [REDACTED] document for further details.

As at 31 December 2019, our Group’s construction in progress amounted to approximatelyHK$11.6 million, which were related to the constructions of value-added property serviceexperience centre (增值物業服務體驗中心) in Beijing, the PRC (the “Beijing ExperienceCentre”) and community value-added property service centre (社區增值物業服務中心) inHengtai County, Zibo City, Shandong Province, the PRC (the “Zibo Community Centre”). Aswe principally engage in the provision of property management and related services, ourDirectors also pay attention to the development of the PRC property management market. Withthe rapid development of the real estate market in the PRC and the increase of owners’awareness of property management services, the demand for property management levels andproperty services in the PRC continues to increase. As part of our Group’s development in thePRC property management market, the Beijing Experience Centre and the Zibo Community



– 193 –

Centre were being constructed during the Track Record Period for value-added services for ourcustomers. Our Directors intended the Beijing Experience Centre to present and market thebusiness models, scenes and experience of property management services in the community lifeof the future, and the Zibo Community Centre to exhibit and market the range of digital andintelligent community life offered by property management service such as elderly in-home careservices. For details of our plans subsequent to the Track Record Period, please refer to theparagraph headed “Recent development” in this section.

SUFFICIENCY OF WORKING CAPITAL

Our Directors confirm that we have sufficient working capital for our requirements for atleast the next 12 months from the date of this [REDACTED] document, taking into account ourcash and cash equivalent and cash flows from operations.



– 193-a –

Credit risk

The carrying amount of our cash and bank balances, pledged bank deposits and trade andother receivables included in the consolidated statements of financial position represents ourmaximum exposure to credit risk in relation to our financial assets.

Our Group has no significant concentrations of credit risk. We have policies in place toensure that services are provided to customers with an appropriate credit history.

The credit risk on pledged bank deposits and bank and cash balances is limited because thecounterparties are banks with high credit-ratings assigned by international credit-rating agencies.

Liquidity risk

Our Group’s policy is to regularly monitor current and expected liquidity requirements toensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the shortand long term.

The maturity analysis of our financial liabilities is as follows:

On demandLess than 1

yearBetween 1

and 5 years

Totalcontractual

undiscountedcash flow

Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March2017

Trade and otherpayables – 64,006 – 64,006 64,006

Finance leasepayables – 226 85 311 303

Promissory notespayable – – 14,000 14,000 12,158

Bank borrowings– secured 9,371 – – 9,371 9,371

9,371 64,232 14,085 87,688 85,838



– 194 –


yearBetween 1

and 5 years

Totalcontractual


Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March2018



Promissory notespayable – 8,000 – 8,000 7,675


9,870 62,701 90 72,661 72,322


yearBetween 1

and 5 years

Totalcontractual


Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March2019




12,140 68,610 302 81,052 81,021



– 195 –


yearBetween 1

and 5 years

Totalcontractual


Carryingamount

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 December 2019Trade and other payables – 67,561 – 67,561 67,561Lease liabilities – 4,503 3,392 7,895 7,532Bank borrowings

– secured 11,852 – – 11,852 11,852

11,852 72,064 3,392 87,308 86,945

Interest rate risk

Our exposure to interest rate risk arises from its pledged bank deposits and bankborrowings. These deposits and borrowings bear interest at variable rates varied with the thenprevailing market condition. Our Group does not consider that it has any significant exposure tothe risk of change in market interest rates from its bank deposits and borrowings as a reasonablypossible change of 50 base points in the interest rates would have no material impact on ourconsolidated profit or loss during the Track Record Period.

Foreign currency risk

Our Group has certain exposure to foreign currency risk as our Group’s deposits placed forlife insurance policies are denominated in US dollars. We have minimal exposure to foreigncurrency risk as most of our business transactions, assets and liabilities are principallydenominated in the functional currencies of our entities. Our Group currently does not have aforeign currency hedging policy in respect of foreign currency assets and liabilities. We willmonitor our foreign currency exposure closely and will consider hedging significant foreigncurrency exposure should the need arise.

DIVIDEND POLICY

Dividends may be paid out by way of cash or by other means that our Group considersappropriate. Declaration and payment of any dividends would require the recommendation of ourBoard and will be at their discretion. In addition, any final dividend for a financial year will besubject to Shareholders’ approval. A decision to declare or to pay any dividend in the future, andthe amount of any dividends, depends on a number of factors, including results of operations,financial condition, the payment by our Group’s subsidiaries of cash dividends to our Company;and other factors our Board may deem relevant.



– 196 –

No dividend was paid or proposed for the year ended 31 March 2017, 2018, 2019 and thenine months ended 31 December 2019, nor has any dividend been proposed since 1 January 2020and up to the Latest Practicable Date. There will be no assurance that our Company will be ableto declare or distribute any dividend in the amount set out in any plan of our Board or at all.The dividend distribution record in the past may not be used as a reference or basis to determinethe level of dividends that may be declared or paid by our Board in the future.

RESERVES

The amounts of our Company’s reserves and the movements therein during the TrackRecord Period are as follows:

Sharepremium

Shareoption

reserveContributed

surplus

Equityinvestmentrevaluation

reserveAccumulated

losses TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2016 74,983 3,872 4,750 (8,733) (20,534) 54,338Issue of shares on placement 21,017 – – – – 21,017Total comprehensive loss

for the year – – – (4,267) (7,760) (12,027)

At 31 March 2017 and1 April 2017 96,000 3,872 4,750 (13,000) (28,294) 63,328

Issue of shares on placement 45,056 – – – – 45,056Total comprehensive loss

for the year – – – – (6,746) (6,746)

At 31 March 2018 and1 April 2018 141,056 3,872 4,750 (13,000) (35,040) 101,638

Transfer – (3,872) – 12,990 (9,118) –Issue of shares on placement 38,919 – – – – 38,919Total comprehensive income for the

year – – – 10 33,796 33,806

At 31 March 2019 and 1 April 2019 179,975 – 4,750 – (10,362) 174,363Total comprehensive loss for the

period – – – – (15,802) (15,802)

At 31 December 2019 179,975 – 4,750 – (26,164) 158,561



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[REDACTED] EXPENSES

We have incurred [REDACTED] expenses in connection with the [REDACTED], whichinclude professional fees and other related expenses. The total amount of [REDACTED]expenses is estimated to be approximately HK$[REDACTED] million, of which (i)approximately HK$[REDACTED] million was charged to our consolidated statements of profitor loss and other comprehensive income for the nine months ended 31 December 2019; and (ii)approximately HK$[REDACTED] million is expected to be charged to our consolidatedstatements of profit or loss and other comprehensive income for the year ending 31 March 2020and the year ending 31 March 2021.

Our Directors expect that our financial performance for the years ending 31 March 2020and 2021 will be adversely affected by such expenses in relation to the [REDACTED].

PROFIT ESTIMATE FOR THE YEAR ENDED 31 MARCH 2020

Our Directors have prepared the consolidated profit estimate of our Group for the yearended 31 March 2020 based on the audited consolidated results of our Group for the ninemonths ended 31 December 2019, the unaudited consolidated results based on the managementaccounts of our Group for the three months ended 31 March 2020. The estimate has beenprepared on the basis of the accounting policies consistent in all material aspects with thosecurrently adopted by our Group as summarised in the Accountants’ Report, the text of which isset out in Appendix I to this [REDACTED] document.

Estimated consolidated profit attributable to owners ofour Company for the year ended 31 March 2020

[REDACTED]

Note: The estimated consolidated profit attributable to owners of our Company for the year ended 31 March2020, which has taken into account of the [REDACTED] expenses incurred during the year ended 31March 2020 of approximately HK$[REDACTED] million. Had the effect of such [REDACTED] expensesnot been taken into account, the estimated consolidated profit attributable to owners of our Company forthe year ended 31 March 2020 would have been approximately HK$[REDACTED] million.

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

Please refer to the section headed “Statement of unaudited pro forma adjusted consolidatednet tangible assets” in Appendix II to this [REDACTED] document.



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DISCLOSURE RELATING TO RULES 13.13 to 13.19 OF THE LISTING RULES

Our Directors have confirmed that as at the Latest Practicable Date, they were not aware ofany circumstances which would give rise to a disclosure requirement under Rules 13.13 to 13.19of the Listing Rules.

RECENT DEVELOPMENT

Our Directors confirm that subsequent to 31 December 2019 and up to the date of this[REDACTED] document, there is no unfavourable trend or development, including the recentoutbreak of COVID-19, which may have a material adverse impact on our Group’s business andfinancial performance. Based on the management accounts of our Group, the profit for the yearended 31 March 2020 declined due to the non-recurring compensation income recognised for theyear ended 31 March 2019 and the [REDACTED] expenses recorded for the year ending ended31 March 2020. Based on our unaudited consolidated financial statements for the three monthsended 31 March 2020, our Group’s revenue increased for the three months ended 31 March 2020as compared to the same period in 2019, which was mainly due to the expansion of our propertymanagement and related services in the year ended 31 March 2020, which were not adverselyaffected by the outbreak of COVID-19. Our Directors confirm that during the Track RecordPeriod and up to the Latest Practicable Date, our Group had not encountered and is not expectedto experience any shortage in labour (including our own staff or our subcontractors) ordisruption to the supply of labour-intensive services. We will continue to regularly monitor thefluctuation of labour supply and the performance of our staff and subcontractors.

Further, the property management services are considered as community-necessitiesservices, therefore, our services had not been adversely affected by the COVID-19. Meanwhile,we have implemented precautionary measures to ensure that a hygienic work environment ismaintained. Please refer to the section headed “Business – Work safety” in this [REDACTED]document for further details.

As advised by Frost & Sullivan, the market demand for the overall property managementservices industry in Hong Kong and the PRC has not been adversely affected by the COVID-19outbreak due to the fact that property management services are consideredcommunity-necessities services. In addition, cleaning services, which is part of propertymanagement services, have seen a growing demand due to the increase in environmental hygieneawareness and requirement of sanitisation as a pre-cautionary measures in the midst ofCOVID-19 outbreak, and the property management services providers have not been requested tosuspend operation under the order or advice issued by the government in Hong Kong. On theother hand, the business segment for provision of value-added property management servicesindustry in the PRC, such as pre-delivery and sales offices services, have been affected by thelockdown of cities and social distancing measures involved, and the slowdown of propertydevelopment may hinder the growth of demand for property management services in the PRC.However, the negative impact of COVID-19 outbreak on the property management servicesindustry in Hong Kong and the PRC is considered temporary due to the declining trend ofconfirmed cases of COVID-19 since March 2020 with a subsequent resumption and



– 198-a –

normalisation of economic and business activities, and operations of enterprises are resuminggradually. The growing environmental hygiene awareness due to the COVID-19 outbreak willalso drive the increasing and sustained demand for property management services in future.Please refer to the section headed “Industry overview – Impact of COVID-19 outbreak onproperty management services industry in Hong Kong and the PRC” in this [REDACTED]document for further details.

Notwithstanding the above, our Directors confirm that our plans to start piloting services inrelation to health information consultancy and elderly care services in one community underShishi Network and officially launch our value-added property service experience centre (增值物業服務體驗中心) in Beijing, the PRC (the “Beijing Experience Centre”) and communityvalue-added property services centre (社區增值物業服務中心) in Hengtai County, Zibo City,Shandong Province, the PRC (the “Zibo Community Centre”) have been put on hold as at theLatest Practicable Date due to the recent outbreak of COVID-19. According to the currentsituation of the outbreak and the declining trend of confirmed cases of COVID-19 since March2020 with a subsequent resumption and normalisation of economic and business activities,operations of enterprises are resuming gradually and our Directors are of the view that,construction of the Beijing Experience Centre and the Zibo Community Centre will becompleted by the end of December 2020. For more details of our business strategies, please referto the section headed “Business – Business strategies – We plan to take on additional propertymanagement projects and expand our coverage” in this [REDACTED] document.

Save as disclosed, to the best knowledge, information and belief of our Directors, ourDirectors are of the view that COVID-19 is not expected to cause any material adverse impacton our operations. Our cash and cash equivalents amounted to approximately HK$139.7 millionas at 31 March 2020, which our Directors believe to be sufficient working capital to satisfy ourrequirements in the unlikely event that our operations are temporarily suspended. Our Directorsbelieve that our Group will be able to discharge its obligations under all existing contracts. Wewill continue to assess the impact of the outbreak and closely monitor the risks and uncertaintiesin connection with the pandemic. For further details, please refer to the section headed “Riskfactors – Risks relating to our business and industry – Our financial performance might vary dueto factors that are beyond our control” in this [REDACTED] document.

NO MATERIAL ADVERSE CHANGE

Our Directors confirm that, save as disclosed in the paragraphs headed “Recentdevelopment” or “[REDACTED] expenses” in this section, there has been no material adversechange in business and financial or trading position of our Group since 31 December 2019(being the date to which the latest audited consolidated financial statements of our Group weremade up) up to the date of this [REDACTED] document.



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