baguio green group limited 碧瑤綠色集團有限公司€¦ · – 4 – results for the year,...
TRANSCRIPT
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Baguio Green Group Limited碧瑤綠色集團有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1397)
ANNOUNCEMENT OF FINAL RESULTSFOR THE YEAR ENDED 31 DECEMBER 2017
FINANCIAL SUMMARY
• Revenue for the year ended 31December 2017 amounted to approximatelyHK$1,207.6million (2016:HK$1,094.8million), representing an increase ofapproximately10.3%ascomparedwiththeprecedingyear.
• Gross profit for the year ended31December 2017was approximatelyHK$97.3million (2016:HK$95.6million), representingan increaseofapproximately1.9%ascomparedwiththeprecedingyear.
• Netprofitfortheyearended31December2017wasapproximatelyHK$20.6million(2016:HK$25.0million), representing a decrease of approximately 17.6% ascomparedwiththeprecedingyear.
• A f inal dividend of HK1.4 cents (2016: HK1.7 cents) per share , to ta l l ingHK$5,810,000 (2016:HK$7,055,000)was recommendedby theBoard for theyearended31December2017.
Theboard (the“Board”)ofdirectors (the“Directors”)ofBaguioGreenGroupLimited (the“Company”) ispleased toannounce theconsolidatedannual resultsof theCompanyand itssubsidiaries(the“Group”or“Baguio”)fortheyearended31December2017(the“Year”).
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MANAGEMENT DISCUSSION & ANALYSIS
BUSINESS REVIEW
Baguio,beingtheindustryleaderinHongKong’sintegratedenvironmentalservices,hasbeenprovidingcomprehensiveenvironmental services ranging fromcleaning, landscaping,pestmanagement,andwastemanagementandrecycling.FortheGroup,theYearmarkedayearofventuringandexpansionintonewbusinesssegments,thankstonewpolicies,changingmarketdemand,aswellasitslatestprojectdevelopment.Undertheincreasinglykeencompetitioninthemarket,theGroupwasabletosolidifyitsleadingmarketpositionthroughitsexperiencesinenvironmental services,highlyeffectivemanagement,and itsdedication in tapping intonewmarkets.
With resources conservation nowbecoming a global trend, theGroup has also firmlyentrenched itself in recyclingservices. InApril2017, theGrouphasentered intoaservicingcontractwithHKJockeyClub,pursuanttowhichtheGroupisresponsibleforcollectinganddeliveringanimalmanuretotheAnimalWasteCompostingPlant(the“AWCP”)atNgauTamMei for composting. In July 2017,Baguio again stretched the boundary of its servicesofferingsandpartneredwithTheJardineEngineeringCorporationLimitedtowinthecontractfromtheElectricalandMechanicalServicesDepartmenttooperateAWCPincompostingthecollectedanimalwasteandturningitintoorganiccompost.Theabovetwocontractsdenotedourquality services and expansive servicesofferings in collecting animalwaste, furtherdemonstratingour ability to serve every stepof the recycling supply chain, fromwastecollectiontodownstreamwastereprocessingandreusing.TheGroupalsosuccessfullygainedthecontract from theEnvironmentalProtectionDepartment (the“EPD”)ofHongKong torecycleyardwastenamelyChristmastreeandpeachblossoms.
Inaddition,Baguiohasagainshowcased itscompetitiveedge,as ithassuccessfullybecomethe firstcontractorbeingawardedaglassmanagementcontract inHongKong.TheGroupobtained twoglassmanagementcontracts from theEPD in respectof the recyclingofglassbottle forHongKong Island (including IslandsDistrict)and theNewTerritories regions inOctober2017,eachforatermof5years.Underthesaidglassmanagementcontracts,Baguiois responsible tocollectwasteglasscontainers,and turn them to reusablematerials,whichwillbeusedlocallyinHongKongorexportedtooverseasmarkets.
Meanwhile, inAugust2017,theGroupwasawardedthetenderleaseoflotT6inEcoPark,a6,500 squaremeterspieceof land, in returnofferingagreatopportunity for theGroup toexpanditsplasticwasterecyclingbusiness.Itisexpectedthattheleasewillcommenceinmid2018foraperiodof20years,andtheGroupaimstoestablisharecyclingplantonthelotfortransforminglocally-generatedplasticPET(Polyethyleneterephthalate)andPE(Polyethylene)bottles, touseful rawmaterials.TheGroupbelieves thatplastic recycling is theglobal trendwithenormousmarketpotential.With theGroup’sextensive industryexperiences,advancedtechnologicalcapabilitiesandstrongtrackrecordsinlargescaletendering,itisexpectedthatBaguiowouldbeabletoenjoyfirst-moveradvantageforfuturetenders,whilecontributingtogovernment’senvironmentaladvocacyandservingthepurposeofcommunityeducation.
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Regardingits landscapingbusiness, theGroupexpectsastrongdemandin thecomingyears,especiallyafter the introductionofgreeningpolicy from thegovernment.Apart frombeingawarded theyardwastecollectioncontract incollectingChristmas treeandpeachblossomsfortheEPD,theGrouphasalsoexpandeditsplantnurseryareasinZhongshan, thePeople’sRepublicofChina(the“PRC”),toatotalof2,850,000sq.ft.,toensurethequality,quantity,andvarietyofplants supplying to its customersandprojects.Coupledwith the supportofBaguio’sexperiencedarboristandhorticulturalist teams, the revenue from the landscapingsegmentenjoyedasignificantincreaseof26.2%duringtheYear.ByridingonBaguio’ssolidbusiness foundationandwell-established reputation inHongKong, theseaccomplishmentswould allow theGroup to further sharpen its capabilities in landscapingwhile furtherexpandingitsmarketshare.
Market Review
AccordingtotheEPD,thelandfillsinHongKongwereinitiallyintendedtoserveuntil2020,but couldbe exhaustedwayaheadof schedule if there is no immediate action to reducecurrentwasteloads.Totackletheproblem,theHongKongSARGovernmenthasimplementedcorrespondingmeasuresinthepastfewyears,advocatingtheideaofgreenconsumptiontothegeneral publicwith the aimof raising public awareness of properwastemanagement.Specifically,policies suchas theMunicipalSolidWasteChargingScheme(expected tobeintroducedin2019earliest).TheProducerResponsibilitySchemeonGlassBeverageBottlesRecycling,FoodWasteHongKongSchemeandtheupcomingcommissioningof theorganicwaste treatment facility inSiuHoWan, areall encouraging thepublic andcommunity toparticipate in source separation ofwaste, tominimizewaste disposal, and to promoteresources recovery. The aforementionedmeasures demonstrated the government’sdeterminationinadvancingthedevelopmentoftherecyclingindustry,whichhaslaidanidealoperatingenvironmentforBaguio’sone-stopwastemanagementandrecyclingbusiness.
RidingonitsestablishedpresenceinHongKong,BaguioisalsoendeavouredtoseekbusinessopportunitiesintheenvironmentalserviceandrelatedmarketsinthePRC.Inrecentyears,thePRCGovernmenthasbeenstronglyadvocatingtheenvironmentalprotectioninordertobuilda “BeautifulChina”,with an ever-growing emphasis fromvarious dimensions such aslegislation, initiatives and urban planning. Such efforts included the revision of the“EnvironmentalProtectionLaw”(《環境保護法》), theformulationof the“13thFive-Year”Eco-EnvironmentalProtectionPlan(《「十三五」生態環境保護規劃》),andtherollingoutofanactionplanforwastemanagement.InthefaceoftheseverepollutionissuesinthePRC,it represented an untappedmarketwith greatmarket potentials, providing the perfectopportunity for theGroup toestablishastrongfoothold in theenvironmental industry in thePRC.
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Results
FortheYear,theGroup’srevenuewasapproximatelyHK$1,207.6million,indicatingastablegrowth of approximately 10.3% from approximately HK$1,094.8 mil l ion for thecorrespondingperiodof2016,mainlyattributabletotheGroup’sdedicatedeffortsingainingnew and renewal contracts.Gross profit slightly increased by approximately 1.9% toapproximatelyHK$97.3million (2016: approximatelyHK$95.6million) andgrossprofitmargindecreasedby0.6percentagepointstoapproximately8.1%(2016:8.7%),astheriseinstatutoryminimumwage toHK$34.5perhour since1May2017has inevitablyaffected thecost level of theGroup.Profit attributable to shareholdersof theCompanyamounted toapproximatelyHK$20.6million,representingayear-on-yeardeclineofapproximately17.6%(2016:approximatelyHK$25.0million),withnetprofitmargindecreasedby0.6percentagepointstoapproximately1.7%(2016:2.3%).Earningspersharewas5HKcents(2016:6HKcents).
Final Dividend
TheBoard recommends thepaymentofa finaldividend for theYearatHK1.4cents (2016:HK1.7cents)per share, totallingHK$5,810,000 (2016:HK$7,055,000), subject toapprovalby theShareholdersof theCompany (the“Shareholders”)at the forthcomingannualgeneralmeeting (the“AnnualGeneralMeeting”)of theCompany tobeheldon8June2018. If soapprovedby theShareholders, it is expected that the finaldividendwillbepaidoutonoraround3July2018totheShareholderswhosenamesappearontheregisterofmembersoftheCompanyon14June2018.
Revenue breakdown of major business segments
Fortheyearended31December2016 31 December 2017Revenue
(HK$ million)% of total
revenueRevenue
(HK$ million)% of total
revenue Change
Cleaning 803.4 73.4% 903.1 74.8% +12.4%Landscaping 123.4 11.3% 155.7 12.9% +26.2%Pestmanagement 52.5 4.8% 39.5 3.3% -24.8%Wastemanagementandrecycling 115.5 10.5% 109.3 9.0% -5.3%
Total 1,094.8 100.0% 1,207.6 100.0% +10.3%
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Gross profit margin of major business segments
Fortheyearended31December
2016
Forthe year ended
31 December 2017
Gross profit margin
Gross profit margin Change
Cleaning 6.4% 6.2% -0.2p.pLandscaping 17.0% 16.4% -0.6p.pPestmanagement 13.1% 12.6% -0.5p.pWastemanagementandrecycling 14.4% 9.9% -4.5p.pOverall 8.7% 8.1% -0.6p.p
Ridingonourprofessionalmanagement, quality services and stringent control in safetyprecaution,theGroupcontinuedtomaintainahightendersuccessrateatapproximately37%in2017 (2016:35%). In termsofbusiness segment, theGrouphaddeliveredencouragingresults incleaningand landscapingservices.TheGroupsuccessfully renewed fourcontractswith theLeisureandCulturalServicesDepartmentofHongKong forprovisionofcleaningandsupportingservices inMay2017.Other than theprovisionofgeneralcleaningservices,wecontinuously strived for enlargingour services scope toenhanceourcompetitiveness.During theYear, theGroupobtained the new contracts fromhospitals for provision ofdomesticandporteringservicesandanewcontractfromanair-linecompanytoprovidestorepackingservicescoveringthebeveragepacking,deliveryofcartstoloadingbay,stocktaking,anddeboxing. In thewastemanagementand recyclingsegment, in spiteof theexpirationoftwowastecollectioncontractsand initialoperatingexpenses incurred fromnewcontractsaffecting thegrossprofitmargin,wecontinue towidenanddeepenour recyclingbusiness.Other than theprovisionof collection services for three-coloured recyclingbins inall18districtsofHongKong,wecommencedthestablewastecollectionserviceswithJockeyCluband theoperationof theAWCPincomposting thecollectedanimalwasteand turning it intoorganiccompost. Inaddition, theglassmanagementcontracts forHongKongIslandand theNewTerritoriesDistrictshavealsocommencedinNovember2017.
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Contracts on-hand
Asof31December2017,theGrouphasatotalamountofapproximatelyHK$2,246.4millionworthofunexpiredcontractsonhand,ofwhich,approximatelyHK$1,133.0millionwillberecognisedby theendof2018,approximatelyHK$661.2millionwillbe recognised in2019andtherestofapproximatelyHK$452.2millionwillberecognisedin2020andbeyond.
Backlog contract value
Contract value to be
recognised by 31 December
2018
Contract value to be
recognised by31 December
2019
Contract value to be
recognised in 2020 and
beyond (HK$ million) (HK$ million) (HK$ million) (HK$ million)
Cleaningservices 1,380.7 873.0 421.8 85.9Landscapingservices 276.6 130.2 97.9 48.5Pestmanagementservices 55.7 34.3 21.4 –Wastemanagementandrecyclingservices 533.4 95.5 120.1 317.8
Total 2,246.4 1,133.0 661.2 452.2
PROSPECTS
Looking into2018, theGroupwillendeavour tomaterialise itsexpansion in thePRCwhilepursuingastablegrowthinitscorebusinessesinHongKong.Baguio,asthemarketleaderinenvironmentalservicesinHongKong,willcontinuetoupholditscorephilosophyofcreatinga “Green&Clean” environment for the society, contributing to thepromotionofwasterecycling inHongKong,while striving tocaptureopportunitiesarisingunder the schemespromulgatedbytheHongKongSARGovernment.
TheGroupwillcontinue to look into thepotentials toestablishprocessing facilitiesand tofurtherexpanditsfootprintsintherecyclingbusiness.Byseekingcollaborationwithindustryexperts,theGroupwillbeabletoadvanceintherecyclingmarketbyincorporatingindustry-forward technologies and experiences, and accelerate the development ofHongKong’srecyclingindustry.
Atthesametime,theGroupaimstofurtheradvancetheestablishmentoftherecyclingplantinEcoPark,withakeeneyeonthemarkettrendanddemandforrecyclables,includingglass,plastic rawmaterial and relevant products, and other recyclables, in order to bewell-positioned toparticipate in thesoon-vibrant resource recyclingmarket inHongKong.Withhigherdegreeof automationandmoreexperiences in suchbusiness,weexpect that therewouldbeagradualincreaseoftheweightofourrecyclingsegmentintermsoftheproportionofrevenueandcontributionamongstourbusinesssegments.
RidingonBaguio’s strong track recordof quality services, theGroupbelieves that thesynergiesbetween the fourbusiness segmentsprovide a solid foundation for sustainabledevelopment.Looking forward to2018, theGroupwill remainprudent,yetoptimistic, inexploringnewbusinessopportunitiesinordertofurthercementitsleadingmarketposition.
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FINANCIAL REVIEW
Revenue
TheGroup’s revenue for theyearsended31December2017and2016wasapproximatelyHK$1,207.6million andHK$1,094.8million, respectively, representing an increase ofapproximately10.3%.The increasewasmainlydue tomore renewedcontracts andnewcontractsgainedduringtheYearinourservicessegmentsofcleaningandlandscaping.Ontheotherhand, revenue inourpestmanagementandwastemanagementand recyclingservicesegmenthaddroppedas somecontractsof thesesegmentshadexpiredduring theYearwithothernewcontractscommencingneartheendofYear.
Cost of Services
Fortheyearsended31December2017and2016,thecostofservicesoftheGroupamountedto approximatelyHK$1,110.3million andHK$999.2million respectively, representingapproximately91.9%and91.3%oftheGroup’srevenueforthecorrespondingyears.Ourcostofservicesprimarilycompriseddirectwages,directoverheadexpenses,consumablesandsub-contracting fees.Thecostof services inproportion to theGroup’s revenuehas increasedslightlyduetotheriseinstatutoryminimumwageduringtheYear.
Gross Profit
TheGroup’sgrossprofit for theYearwasapproximatelyHK$97.3million, representinganincreaseofapproximately1.9%fromapproximatelyHK$95.6million for theyearended31December2016.TheincreasewasmainlyduetotheincreaseintheGroup’srevenue.
Gross Profit Margin
ThegrossprofitmarginsoftheGroupfortheyearsended31December2017and2016wereapproximately8.1%and8.7%respectively.Asmentionedabove,thedecreaseingrossprofitmarginwasmainlyduetotheriseinstatutoryminimumwageduringtheYear.
Change in Fair Value of Biological Assets
TheGroup’sbiologicalassetsare representedby the trees,plantsand flowers locatedat theGroup’snurseriesinthePRCandHongKong.ThegaininfairvalueoftheGroup’sbiologicalassets foreachof theyearsended31December2017and2016wereapproximatelyHK$2.0millionandHK$1.7million respectively, representingan increaseofapproximately17.2%.Thisisduetothecontinuingaccumulationandgrowthofthebiologicalassetsinthenurseries.
Selling and Marketing Expenses
Thesellingandmarketingexpenses incurredby theGroupfor theyearsended31December2017 and 2016were approximatelyHK$1.8million andHK$2.0million respectively,representingadecreaseofapproximately12.4%,andaccounting forapproximately0.1%ofeachyear’stotalrevenue.
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Administrative Expenses
TheadministrativeexpensesincurredbytheGroupfortheyearsended31December2017and2016wereapproximatelyHK$68.8millionandHK$63.1millionrespectively,representinganincreaseofapproximately9.0%,andapproximately5.7%and5.8%of the respectiveyear’stotal revenue.The increasewasmainlyattributable to the increase inwagesandallowancesandotherofficeoverheadexpensesduring theYear.TheGroupcontinues to implement itsbudgetedcostcontrolmeasures foradministrativeexpenses.Asdisclosed innote13 to theannual resultsonpage20, aprovisionof approximatelyHK$2.3millionwasmadeat31December2017.
Finance Costs
The finance costsof theGroupamounted to approximatelyHK$4.3million andHK$5.3million for the years ended 31December 2017 and 2016 respectively, representingapproximately0.4%andapproximately0.5%of theGroup’s revenue in the respectiveyear.ThedecreasewasmainlyduetothedecreaseintheaveragelevelofbankborrowingsandthecompetitiveborrowingsratesobtainedbytheGroupduringtheYear.
Profit for the Year Attributable to Equity Shareholders of The Company
TheGroup’sprofitattributabletotheShareholdersoftheCompanyforeachoftheyearended31December2017and2016was theapproximatelyHK$20.6millionandHK$25.0millionrespectively,representingadecreaseofapproximately17.6%.Thedecreasewasprimarilyduetothefactorsdescribedabove.
FOREIGN CURRENCY EXPOSURE
TheGroup’s foreign currency exposure is limited asmostof its transactions, assets andliabilitiesaredenominatedinHongKongdollars.DuringtheYear,themainforeigncurrencyexposurearosefromthefluctuationinRenminbi(“RMB”).DuetotheGroup’sPRCoperation,theGroup possessed RMB bank balances and a small portion of transactionsweredenominatedinRMB.
LIQUIDITY AND FINANCIAL RESOURCES
TheGroup derives cash flow from operating activities principally from rendering acomprehensiverangeofenvironmentalservices.FortheYear,wehadnetcashgeneratedfromoperatingactivitiesofapproximatelyHK$27.4million(2016:HK$64.2million).TheGrouphadavailable cash andbankbalances amounting to approximatelyHK$48.0million as at 31December 2017 (31December 2016:HK$55.7million), representing a decrease ofapproximately13.9%from31December2016.TheGroup’sbankborrowingsamounted toapproximatelyHK$108.7millionas at 31December2017 (31December2016:HK$82.5million), representingan increaseofapproximately31.8%from31December2016.Asat31December2017, theGroup’sfinance leasepayableswereapproximatelyHK$42.4million(31December2016:HK$56.9million)forfinancingtheacquisitionofmotorvehiclesforoperationuse.DuringtheYear,nofinancialinstrumentswereusedforhedgingpurposes(2016:nil).
As at 31December 2017, theGroup’s total current assets and current liabilitieswereapproximatelyHK$369.4million (31December2016:HK$348.9million) andHK$280.4million (31December2016:HK$247.0million) respectively,while the current ratiowasapproximately1.3times(31December2016:approximately1.4times).
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Thegearing ratioof theGroupwasapproximately0.6 timesas at31December2017 (31December2016:0.6 times),whichwascalculatedbasedon the total interest-bearingbankborrowingsandobligationsunderfinanceleasesovertotalequityoftheGroup.
CAPITAL EXPENDITURES AND CAPITAL COMMITMENT
For theYear,ourcapitalexpenditureswhichmainly includedadditions inmotorvehicles,equipmentandofficepremisesamountedtoapproximatelyHK$38.3million(2016:HK$26.2million).These capital expenditureswere fundedbyborrowings frombanks and financecompanies, fundsgenerated fromouroperatingactivitiesandcapitalcontributions fromourshareholdersthroughtheinitialpublicofferingoftheCompany.
Asat31December2017,theGrouphadcapitalcommitmentcontractedforofapproximatelyHK$3.3million(31December2016:HK$0.7million)andcapitalcommitmentauthorisedbutnotcontractedforofapproximatelyHK$100.0million(31December2016:Nil).
CONTINGENT LIABILITIES
Asat31December2017,theGroupdidnothaveanymaterialcontingentliabilities.
USE OF PROCEEDS
Thesharesof theCompanywere listedonTheStockExchangeofHongKongLimited (the“StockExchange”)on22May2014and theCompany raisednetproceedsofapproximatelyHK$90.0million.The plans for the use of net proceedswere stated in theCompany’sprospectusdated12May2014(the“Prospectus”)andsubsequentlychangedin2015asstatedintheCompany’sannouncementdated31December2015.DuringtheperiodbetweenthedateofthelistingofthesharesoftheCompanyto31December2017,thenetproceedswereusedforthefollowingpurposes:
Summary of use of proceeds
Available Utilised Unutilised(HK$ million) (HK$ million) (HK$ million)
Acquisitionofvehiclesandequipment forexpandingandbroadeningfor existingservices 18.4 18.4 –Developmentandexpansionofwaste managementandrecyclingservices 9.9 9.9 –Enhancingoperationefficiencyand qualityservices 11.7 11.7 –Workingcapitalandothergeneral purposes 35.0 35.0 –Developmentinglassandplastic managementprojects 15.0 8.6 6.4
90.0 83.6 6.4
Asat31December2017, theunutilisedproceedsweredeposited in licensedbanks inHongKong.
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CHARGES ON THE GROUP’S ASSETS
Asat31December2017,theamountspayableunderfinanceleaseswithinoneyearamountedtoapproximatelyHK$18.3million(31December2016:HK$21.6million),andthatafteroneyearbutwithin fiveyearsamounted toapproximatelyHK$24.1million (31December2016:HK$35.3million).
Asat31December2017, theobligationsunder finance leasesof theGroupwereguaranteedbytheCompanyandasubsidiaryoftheCompany.
Inaddition,wehave (i)pledgedbankdepositsof approximatelyHK$5.1millionas at31December2017(31December2016:HK$5.1million);(ii)mortgageoftheGroup’sleaseholdlandandbuildingsofapproximatelyHK$29.9millionasat31December2017(31December2016:HK$17.2million); (iii) pledgeof theGroup’s available-for-sale financial assetsofapproximatelyHK$13.6million as at 31December 2017 (31December 2016:HK$13.3million);and(iv)pledgeof theGroup’s tradereceivablesofapproximatelyHK$37.8millionasat31December2017(31December2016:HK$72.1million).
Saveasmentionedabove,wedidnothaveanyoutstandingmortgagesorcharges,borrowingsorindebtednessincludingbankoverdrafts,loansordebentures,loancapital,debtsecuritiesorothersimilarindebtedness,financeleaseorhirepurchase.
ACQUISITION, DISPOSAL AND SIGNIFICANT INVESTMENT HELD
During theYear, theGroupdidnotmakeanymaterialacquisition,disposalnor significantinvestment.
INTELLECTUAL PROPERTIES
During theYear, theGroup registered the trademark inHongKong foraperiodof10years.
HUMAN RESOURCES
Asat31December2017,theGroupemployed8,853employees,includingbothfulltimeandpart time employees (31December 2016: 7,967).Remunerationpackages are generallystructuredbyreferencetomarketterms,individualqualificationsandexperience.
During theYear, various training activities, suchas trainingonoperational safety, teambuildingadministrativeandmanagement skills,wereconducted to improve thequalityoffront-end services, office support andmanagement. In addition, employees are alsoencouraged,subsidisedandsponsoredtoattendjob-relatedseminarsandcoursesorganisedbyprofessionaland/oreducationalinstitutiontoensurethesmoothandeffectivemanagementoftheGroup’sbusiness.
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Theconsolidatedannual resultsof theGroupfor theyearended31December2017 togetherwiththecomparativefiguresof2016areasfollows:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the year ended 31 December 2017
2017 2016Note HK$’000 HK$’000
Revenue 5 1,207,640 1,094,788Costofservices (1,110,294) (999,234)
Gross profit 97,346 95,554Otherincome 6 1,046 3,933Changeinfairvaluelesscoststosellof biologicalassets 2,026 1,729Sellingandmarketingexpenses (1,774) (2,025)Administrativeexpenses (68,800) (63,092)
Profit from operations 29,844 36,099Financecosts 7 (4,293) (5,340)
Profit before taxation 8 25,551 30,759Incometax 9 (4,935) (5,748)
Profit for the year attributable to equity shareholders of the Company 20,616 25,011
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss, net of nil tax;Exchangedifferencesontranslationof financialstatementsofsubsidiaries 134 (120)Changeinfairvalueofavailable-for-sale financialassets 310 345
Other comprehensive income 444 225
Total comprehensive income for the year attributable to equity shareholders of the Company 21,060 25,236
Earnings per share
Basicanddiluted(HK$) 11 0.05 0.06
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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 December 2017
2017 2016Note HK$’000 HK$’000
Non-current assetsProperty,plantandequipment 167,210 156,628Interestinassociate – 150Available-for-salefinancialassets 13,596 13,286Prepaymentsanddeposits 5,764 –
186,570 170,064
Current assetsInventories 4,539 4,942Tradereceivables 12 285,889 251,905Prepayments,depositsandotherreceivables 13 13,830 21,521Biologicalassets 12,031 9,700Pledgedbankdeposits 5,141 5,140Cashandcashequivalents 47,983 55,735
369,413 348,943
Current liabilitiesTradepayables 14 21,125 26,979Accruals,depositsreceivedandotherpayables 131,051 114,473Bankborrowings 108,712 82,499Obligationsunderfinanceleases 18,289 21,601Taxpayable 1,218 1,471
280,395 247,023
Net current assets 89,018 101,920
Total assets less current liabilities 275,588 271,984
Non-current liabilitiesObligationsunderfinanceleases 24,067 35,306Deferredtaxliabilities 10,630 10,507
34,697 45,813
Net assets 240,891 226,171
Capital and reservesSharecapital 15 4,150 4,150Reserves 236,741 222,021
Total equity 240,891 226,171
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NOTES
1. GENERAL INFORMATION
TheCompanywasincorporatedasanexemptedcompanywithlimitedliabilityintheCaymanIslandson8November2013.TheultimateholdingcompanyoftheCompanyisBaguioGreen(Holding)Limited,whichwasincorporatedintheBritishVirginIslands(“BVI”).TheregisteredofficeoftheCompanyislocatedatCricketSquare,HutchinsDrive,POBox2681,GrandCaymanKY1-1111,CaymanIslandsanditsprincipalplaceofbusiness inHongKong is locatedatUnitA,4/F.,Dragon IndustrialBuilding,No.93KingLamStreet,LaiChiKok,Kowloon,HongKong.
TheprincipalactivityoftheCompanyisinvestmentholding.Theprincipalactivitiesofitssubsidiariesareengagedintheprovisionofenvironmentalandrelatedservice.
2. BASIS FOR PREPARATION
Thefinancial informationsetout in thisannouncementdoesnotconstitute theGroup’sstatutory financialstatementsfortheyearended31December2017,butisderivedfromthosefinancialstatements.
Thefinancialstatementshavebeenpreparedinaccordancewiththesameaccountingpoliciesadoptedinthe2016annualfinancialstatements,exceptforthechangesinaccountingpoliciessetoutinnote3.
Themeasurementbasisused in thepreparationof the financial statements is thehistorical costs.ThefinancialstatementshavebeenpreparedinaccordancewithallapplicableHongKongFinancialReportingStandards,which collective term includes all applicable individualHongKongFinancialReportingStandards,HongKongAccountingStandardsand Interpretations issuedby theHongKong InstituteofCertifiedPublicAccountants(“HKICPA”),accountingprinciplesgenerallyacceptedinHongKongandthedisclosure requirementsof theHongKongCompaniesOrdinance.These financial statementsalsocomplywiththeapplicabledisclosureprovisionsoftheRulesGoverningtheListingofSecuritiesonTheExchangeofHongKongLimited(“ListingRules”).
3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
TheHKICPAhasissuedseveralamendmentstoHKFRSsthatarefirsteffectiveforthecurrentaccountingperiodof theGroup.Noneof these impacton theaccountingpoliciesof theGroup.However,additionaldisclosure has been included in the financial statements to satisfy the newdisclosure requirementsintroducedby theamendments toHKAS7,Statement of cash flows: Disclosure initiative,which requireentities toprovidedisclosures thatenableusersof financial statements toevaluatechanges in liabilitiesarisingfromfinancingactivities,includingbothchangesarisingfromcashflowsandnon-cashchanges.
TheGrouphasnot applied anynewstandardor interpretation that isnotyet effective for the currentaccountingperiod.
4. SEGMENT INFORMATION
Informationreportedtotheexecutivedirectors,beingthechiefoperatingdecisionmaker,forthepurposesof resourceallocationandassessmentofsegmentperformancefocuseson typesofservicesprovided.TheGrouphas identified four reportable segments.Nooperatingsegmentshavebeenaggregated to form thefollowingreportablesegments:
— Cleaningservicesbusiness
— Landscapingservicesbusiness
— Pestmanagementbusiness
— Wastemanagementandrecyclingbusiness
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InformationregardingtheGroup’sreportablesegmentsispresentedbelow.
Segment revenue and results
Segment results represent theearnings fromeach segmentbefore interest, taxationandadministrativeexpenses includingdirectors’emolumentsandexcludeother incomeandchangeinfairvalue lesscosts tosellofbiological assets.The following is ananalysisof theGroup’s revenueand resultsby reportablesegments.
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagement
and recyclingbusiness Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Year ended 31 December 2017
Revenuefromexternalcustomers andreportablesegmentrevenue 903,107 155,700 39,469 109,364 1,207,640
Segmentresults 54,420 25,580 4,958 10,614 95,572
Otherincome 1,046Changeinfairvaluelesscosts tosellofbiologicalassets 2,026Administrativeexpenses (68,800)Financecosts (4,293)
Profitbeforetaxation 25,551
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagementandrecycling
business TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Yearended31December2016
Revenuefromexternalcustomers andreportablesegmentrevenue 803,365 123,395 52,488 115,540 1,094,788
Segmentresults 49,239 20,917 6,899 16,474 93,529
Otherincome 3,933Changeinfairvaluelesscosts tosellofbiologicalassets 1,729Administrativeexpenses (63,092)Financecosts (5,340)
Profitbeforetaxation 30,759
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Segment assets and liabilities
Segmentassetsincludeallassetsattributabletotheactivitiesoftheindividualsegments,withtheexceptionofintercompanyreceivablesandothercorporateassets.Segmentliabilitiesincludeallliabilitiesattributableto theactivitiesof the individual segments,with theexceptionof intercompanypayablesandcorporateliabilities.Thesegmentassetsandliabilitiesattheendofthereportingperiodbyreportablesegmentsareasfollows:
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagement
and recyclingbusiness Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 31 December 2017
Segmentassets 345,560 78,296 30,059 96,711 550,626Unallocated 5,357
Totalassets 555,983
Segmentliabilities 233,587 25,827 17,426 37,201 314,041Unallocated 1,051
Totalliabilities 315,092
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagementandrecycling
business TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Asat31December2016
Segmentassets 305,119 64,346 33,923 105,213 508,601Unallocated 10,406
Totalassets 519,007
Segmentliabilities 187,954 29,634 21,993 50,792 290,373Unallocated 2,463
Totalliabilities 292,836
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Other segment information
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagement
andrecyclingbusiness Unallocated Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended 31 December 2017
Depreciationofproperty, plantandequipment 10,583 1,186 1,844 10,265 147 24,025Additionstonon-currentassets 33,003 2,043 261 3,941 32 39,280Loss/(gain)ondisposalof property,plantandequipment 67 73 (133) 42 215 264
Cleaningservicesbusiness
Landscapingservicesbusiness
Pestmanagement
business
Wastemanagement
andrecyclingbusiness Unallocated Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Fortheyearended 31December2016
Depreciationofproperty, plantandequipment 9,620 992 2,362 10,462 143 23,579Additionstonon-currentassets 6,552 2,564 184 16,673 250 26,223Lossondisposalof property,plantandequipment 156 248 112 184 1 701
Geographical information
NogeographicalinformationispresentedasalloftheGroup’sbusinessesarecarriedoutinHongKongandtheGroup’s revenue fromexternal customers is generated inHongKongduring the years ended31December2017and2016.
Information about major customers
Fortheyearended31December2017, theGroup’srevenueofHK$678,335,000(2016:HK$646,680,000)for various segmentswas derived from two customers (2016: two), each ofwhomhas individuallyaccountedforover10%oftheGroup’stotalrevenue,whicharedisclosedasfollows:
2017 2016HK$’000 HK$’000
CustomerA 288,075 286,846CustomerB 390,260 359,834
678,335 646,680
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5. REVENUE
Theprincipalactivityof theGroup isenvironmentaland relatedservice.Theamountofeachsignificantcategoryofrevenuerecognisedisasfollows:
2017 2016HK$’000 HK$’000
Cleaningservices 903,107 803,365Landscapingservices 155,700 123,395Pestmanagementservices 39,469 52,488Wastemanagementandrecyclingservices 109,364 115,540
1,207,640 1,094,788
6. OTHER INCOME
2017 2016HK$’000 HK$’000
Governmentgrants* 622 3,593Interestincome 92 136Sundryincome 332 204
1,046 3,933
* GovernmentgrantsofHK$622,000 (2016:HK$3,593,000)weregrantedduring theyearended31December2017inrespectofphasingoutcertaindieselcommercialvehiclesbytheGroup.Therewerenounfulfilledconditionsandothercontingenciesattached to the receiptof thosegrants.There isnoassurancethattheGroupwillcontinuetoreceivesuchgrantinthefuture.
7. FINANCE COSTS
2017 2016HK$’000 HK$’000
Interest on: Bankoverdrafts 310 2 Bankloans 2,295 3,124 Obligationsunderfinanceleases 1,688 2,214
4,293 5,340
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8. PROFIT BEFORE TAXATION
Profitbeforetaxationhasbeenarrivedataftercharging:
2017 2016HK$’000 HK$’000
Auditors’remuneration: Auditservices 1,260 1,200 Otherservices 102 80Depreciationofproperty,plantandequipment: OwnedbytheGroup 12,094 11,508 Heldunderfinanceleases 11,931 12,071Lossondisposalofproperty,plantandequipment 264 701Costofconsumablegoods 45,451 44,443
Staffcosts(includingdirectors’remuneration): Wages,salariesandotherbenefits 945,837 836,884 Provisionforlongservicepayments 422 2,559 Provisionforuntakenpaidleave 7,900 9,622 Contributionstodefinedcontributionretirementscheme 30,634 28,516 Equity-settledshare-basedpayments 715 986
985,508 878,567
Operatingleaserentals:minimumleasepayments Hireofmachineryandmotorvehicles 25,763 19,597 Landandbuildings 5,550 4,909
31,313 24,506
9. INCOME TAX
(a) Income tax charged to profit or loss represents:
2017 2016HK$’000 HK$’000
Currenttax—HongKongProfitsTax Provisionfortheyear 4,812 4,929Deferredtax Originationandreversaloftemporarydifferences 123 819
4,935 5,748
TheprovisionforHongKongProfitsTaxfortheyearended31December2017iscalculatedat16.5%(2016:16.5%)oftheestimatedassessableprofitsfortheyear.
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10. DIVIDENDS
(a) Dividends payable to equity shareholders of the Company attributable to the year
2017 2016HK$’000 HK$’000
Finaldividendproposedaftertheendofthereportingperiodof HK1.4cents(2016:HK1.7cents)perordinaryshare 5,810 7,055
Thefinaldividendproposedaftertheendofthereportingperiodhasnotbeenrecognisedasaliabilityattheendofthereportingperiod.
(b) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year
2017 2016HK$’000 HK$’000
Finaldividendinrespectofthepreviousfinancialyear, approvedandpaidduringtheyear,ofHK1.4cents (2016:HK1.7cents)perordinaryshare 5,810 7,055
11. EARNINGS PER SHARE
(a) Basic earnings per share
Thecalculationofthebasicearningspersharefortheyearended31December2017isbasedontheprofit for theyearattributable toordinaryequity shareholdersof theCompanyofHK$20,616,000(2016:HK$25,011,000) and theweighted averagenumber of 415,000,000 (2016: 415,000,000)ordinarysharesinissueduringtheyear.
(b) Diluted earnings per share
Dilutedearningspersharefortheyearsended31December2017and2016arethesameasthebasicearningsper shareas therewerenopotentialdilutiveordinaryshares inexistenceduring theyearspresented.
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12. TRADE RECEIVABLES
Theageinganalysisoftradereceivablesbasedontheinvoicedate(ordateofrevenuerecognition,ifearlier)attheendofthereportingperiodisasfollows:
2017 2016HK$’000 HK$’000
Within60days 212,469 189,624Over60daysbutwithin120days 63,016 53,575Over120daysbutwithin365days 9,273 7,651Over365days 1,131 1,055
285,889 251,905
Ingeneral, for thecontractswith somequasi-governmentorganisationsandTheGovernmentof theHongKongSpecialAdministrativeRegion,theGrouphasnospecificcredittermsinaccordancewiththetenderterms.Forothercontracts,theGroupnormallyallowsacreditperiodrangingfrom30to60daysdependingonthecustomers’creditworthinessandthelengthofbusinessrelationship.
13. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
Included inprepayments,deposits andother receivablesas at31December2017 is agrossamountofHK$4,500,000(2016:HK$5,000,000)duefromShanghaiGenyuanEnvironmentalCo.,Limited(“ShanghaiGenyuan”,acompanyprincipallyengagedinharmlesstreatmentoforganicwastesandresourcesutilisationin thePRC) in respectof a refundabledeposit in relation to theproposedacquisitionofcertainequityinterest inShanghaiGenyuan.Theproposedacquisitionwas terminatedduringyearended31December2016as theGroupcouldnot reachanagreementwith theselleroncertaincrucial terms.During theyearended31December2017, theGroupagreedwithShanghaiGenyuanon the repayment scheduleof theoutstandingbalancebutcertain scheduledpaymentswere subsequentlydefaulted.TheGrouphas takenlegalactionagainstShanghaiGenyuanandtheguarantors,andaprovisionofHK$2,250,000wasmadeinthecurrentyear.
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14. TRADE PAYABLES
Asoftheendofthereportingperiod,theageinganalysisoftradepayables,basedontheinvoicedate,isasfollows:
2017 2016HK$’000 HK$’000
Within30days 12,413 15,906Over30daysbutwithin60days 6,634 6,635Over60daysbutwithin90days 805 535Over90days 1,273 3,903
21,125 26,979
Thecreditperiodonpurchasesofcertaingoodsandservicesisgenerallywithin30to60days.
15. SHARE CAPITAL
Number of shares
Nominalvalue
’000 HK$’000
Authorised:Ordinary shares of HK$0.01 eachAsat1January2016,31December2016,1January2017and 31December2017 1,000,000 10,000
Issued and fully paid:Ordinary shares of HK$0.01 eachAsat1January2016,31December2016,1January2017and 31December2017 415,000 4,150
Theholdersofordinary sharesareentitled to receivedividendsasdeclared from time to timeandareentitledtoonevotepershareatmeetingsoftheCompany.AllordinarysharesrankequallywithregardtotheCompany’sresidualassets.
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POST BALANCE SHEET EVENTS
TheGrouphadnomaterialeventsubsequenttotheendoftheYearanduptothedateofthisannouncement.
CLOSURE OF REGISTER OF MEMBERS
TheregisterofmembersoftheCompanywillbeclosedtentativelyfromTuesday,5June2018toFriday, 8 June 2018, both days inclusive, duringwhich no transfer of shares of theCompanywillberegistered.TobeeligibletoattendandvoteattheAnnualGeneralMeeting,all transfer formsaccompaniedby the relevant sharecertificatesmustbe lodgedwith theCompany’sHongKongBranchShareRegistrar,TricorInvestorServicesLimitedofLevel22,HopewellCentre,183Queen’sRoadEast,HongKongforregistrationnotlaterthan4:30p.m.onMonday,4June2018oratanothertimeand/ordateasadvised.
The registerofmembersof theCompanywillbeclosed tentatively fromThursday,14June2018 toFriday,15June2018,bothdays inclusive,duringwhichno transferofsharesof theCompanywillbe registered. Inorder for theShareholders toqualify for theproposed finaldividend,all transfer formsaccompaniedby the relevant sharecertificatesmustbe lodgedwiththeCompany’sHongKongBranchShareRegistrar,TricorInvestorServicesLimitedofLevel22,HopewellCentre,183Queen’sRoadEast,HongKongforregistrationnotlaterthan4:30p.m.onWednesday,13June2018.
CORPORATE GOVERNANCE
TheCompany is committed tomaintaining high standards of corporate governance tosafeguardtheinterestsoftheShareholdersandtoenhancecorporatevalueandaccountability.TheCompany has compliedwith all applicable code provisions under theCorporateGovernanceCode(the“CGCode”)assetoutinAppendix14totheListingRulesthroughouttheYear.TheCompanywill continue to review and enhance its corporate governancepracticestoensurecompliancewiththeCGCode.
InformationonthecorporategovernancepracticesadoptedbytheCompanywillbesetoutintheCorporateGovernanceReport in theGroup’s2017annual report tobepublished induecourse.
AUDIT COMMITTEE
Theaudit committeehas reviewedwith themanagementof theCompany theconsolidatedfinancial statementsof theGroup for theYear, and reviewed theeffectivenessof the riskmanagement and internal control systemof theCompanywith themanagement of theCompany.
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MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
TheCompanyhasadoptedtheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers(the“ModelCode”)assetoutinAppendix10totheListingRulesasitsowncodeofconduct regardingdirectors’ securities transactions.HavingmadespecificenquirieswithallDirectors, eachof theDirectorsconfirmed thathe/shehascompliedwith theModelCodethroughouttheYear.
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY
Neither theCompanynor anyof its subsidiariespurchased, redeemedor sold anyof theCompany’slistedsecuritiesduringtheYear.
SCOPE OF WORK OF KPMG
The financial figures in respectof theGroup’sconsolidatedstatementof financialposition,consolidatedstatementofprofitorlossandothercomprehensiveincomeandtherelatednotesthereto for theYear as setout in this announcementhavebeencomparedby theGroup’sauditor,KPMG,CertifiedPublicAccountants, to theamounts setout in theGroup’sdraftconsolidatedfinancialstatementsfortheYearandtheamountswerefoundtobeinagreement.TheworkperformedbyKPMGin this respectdidnotconstituteanaudit, revieworotherassuranceengagement inaccordancewithHongKongStandardsonAuditing,HongKongStandardsonReviewEngagementsorHongKongStandardsonAssuranceEngagementsissuedby theHKICPAandconsequentlynoassurancehasbeenexpressedby theGroup’sauditor.
PUBLICATION OF FINAL RESULTS AND ANNUAL REPORT
ThisfinalresultsannouncementwillbepublishedonthewebsitesofTheStockExchangeofHongKongLimited(www.hkex.com.hk)andtheCompany(www.baguio.com.hk).Theannualreport of theCompany for theYearwill be despatched to the Shareholders aswell aspublishedonthewebsitesofTheStockExchangeofHongKongLimitedandtheCompanyinduecourse.
ByorderoftheBoardofBaguio Green Group Limited
Ng Wing HongChairman
HongKong,28March2018
As at the date of this announcement, the Board comprises Mr. Ng Wing Hong, Ms. Ng Yuk Kwan Phyllis, Mr. Ng Wing Chuen, Ms. Leung Shuk Ping, Ms. Chan Shuk Kuen and Ms. Cheung Siu Chun as executive Directors and Mr. Sin Ho Chiu, Dr. Law Ka Hung and Mr. Lau Chi Yin Thomas as independent non-executive Directors.
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