Annual Report 2017-2018

FSE Services Group Limited (Incorporated in the Cayman Islands with limited liability) Stock Code: 331 豐盛服務集團有限公 Annual Report 司 2017-2018 (Incorporated in the Cayman Islands with limited liability) Annual Report 2017-2018 Units 801– 810, 8th Floor Chevalier Commercial Centre No. 8 Wang Hoi Road, Kowloon Bay Kowloon, Hong Kong Tel: (852) 2733 4188 Fax: (852) 2722 5587 Email: [email protected] Website: http://www.fseservices.com.hk About FSE Services Group Limited FSE Services Group Limited (Hong Kong Stock Code: 331) is one of the leading diversified service providers in Hong Kong, which has 4 major competences: electrical and mechanical (“E&M”) engineering, environmental management, cleaning and waste management as well as professional laundry services. FSE Services’ competences are being delivered through 4 major groups of companies which have all been the market leaders in the respective industry. They include FSE Engineering Group, FSE Environmental Technologies Group, Waihong Environmental Service Group (“Waihong”) and New China Laundry Group (“NCL”). With their professionalism and expertise, together with the extensive synergies generated among the companies under FSE Services, the Group is able to build up a strong network and offer a full range of professional services to renowned clients and main contractors who are often engaged in property developments, public infrastructures, education and transportation facilities as well as entertainment and travel industries in Hong Kong, Macau and the Mainland China. Our Vision Our Mission Our Core Values • To be a leading diversified • To provide comprehensive • Teamwork service provider in Hong Kong, E&M engineering services, • Cost-effectiveness covering E&M engineering environmental management services, environmental services and facility services • Relentless quest for success management services and (including cleaning and • Entrepreneurship facility services (including laundry services) with zenith cleaning and laundry services), quality and safety. • Professionalism with industry leading position • To deliver our services • Continuous improvement in respective area. with innovation and professionalism. • To care for the environment of our stakeholders. Contents Financial Highlights 2 Major Events and Accolades 4 Chairman’s Statement 8 Board of Directors and Senior Management 11 Corporate Governance Report 20 Management Discussion and Analysis 31 Report of the Directors 55 Independent Auditor’s Report 72 Consolidated Income Statement 77 Consolidated Statement of Comprehensive Income 78 Consolidated Statement of Financial Position 79 Consolidated Statement of Changes in Equity 81 Consolidated Statement of Cash Flows 82 Notes to the Consolidated Financial Statements 83 Five-Year Financial Summary 154 Corporate Information 156 This annual report is printed on environmental paper 本年報經由環保紙印製 Financial Highlights 2018 2017 % Change (restated)(i) HK$M HK$M Revenue 4,926.5 4,829.6 +2.0% Gross profit 591.0 555.6 +6.4% Profit attributable to equity holders of the Company 236.8 225.4 +5.1% Basic earnings per share HK$0.53 HK$0.50 +6.0% The Board recommended the declaration of a final dividend of HK13.3 cents (2017: HK8.1 cents) per share for the year ended 30 June 2018(ii). Note (i) Comparative figures have been restated for the Group’s application of merger accounting for business combinations under common control. Details of the restatements are set out in Note 2.1(iii) to the consolidated financial statements. Note (ii) Together with the interim dividend of HK7.8 cents (2017: HK7.4 cents) per share paid in March 2018, total distribution of dividends made by the Company for the year ended 30 June 2018 will be HK21.1 cents (2017: HK15.5 cents) per share, representing a dividend payout ratio of 50.2% (2017: 40.1%). 2018’s dividend payout ratio is calculated based on the Group’s 2018 profit for the year attributable to equity holders of the Company of HK$189.3M, after excluding the profit of HK$47.5M made by the facility services business during the period from 1 July 2017 to 11 April 2018, the day of completion of the Group’s acquisition of the facility services business as described in Note 2.1(iii) to the consolidated financial statements (2017: based on the Group’s 2017’s profit for the year attributable to equity holders of the Company of HK$173.8M as previously reported in the Group’s 2017 consolidated financial statements, which does not include the profit of HK$51.6M made by the facility services business during the year ended 30 June 2017). 2 FSE Services Group Limited Financial Highlights FSE SERVICES GROUP — CONSOLIDATED Revenue by Region Profit Attributable to Equity Holders of the Company For the year ended 30 June For the year ended 30 June HK$ million HK$ million 5,000 250 237 380 354 225 214 477 659 4,000 699 200 199 405 218 880 3,000 150 142 595 383 2,000 3,973 3,914 100 3,384 2,611 2,556 1,000 50 0 0 2014* 2015* 2016* 2017* 2018 2014* 2015* 2016* 2017* 2018 Hong Kong Mainland China Macau E&M ENGINEERING AND ENVIRONMENTAL MANAGEMENT SERVICES SEGMENTS Revenue by Region Profit for the Year For the year ended 30 June For the year ended 30 June HK$ million HK$ million 4,000 200 180 354 174 380 163 152 3,000 699 477 659 150 131 405 218 880 2,000 595 100 383 2,843 2,744 2,368 1,000 50 1,742 1,562 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Hong Kong Mainland China Macau FACILITY SERVICES SEGMENT Revenue by Region Profit for the Year For the year ended 30 June For the year ended 30 June HK$ million HK$ million 1,171 1,200 1,130 60 57 994 1,017 51 51 1,000 50 47 870 800 40 600 30 400 20 11 200 10 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Hong Kong * Restated for the Group’s application of merger accounting for business combinations under common control. Annual Report 2017-2018 3 Major Events and Accolades SEPTEMBER 2017 FSE Services Group Limited (the “Company”, together with its subsidiaries, the “Group”) was honoured as “Good MPF Employer” by the Mandatory Provident Fund Schemes Authority and received the “e-Contribution Award” and “Support for MPF Management Award” at the 2016-17 Award Presentation Ceremony, in recognition of its efforts in building solid foundation for employees’ retirement protection and enhancing the retirement benefits by providing assistance in investment management. OCTOBER 2017 The Company received the “Appreciation Certificate of the Commendation” from Evangelical Lutheran Church Social Service — Hong Kong for its unconditional support on their community service projects. NCL was recognised as one of the excellent businesses in Asia and was honoured with the “Asia Business Achiever Awards” organized by Asia Business Consultancy Association. 4 FSE Services Group Limited Major Events and Accolades NOVEMBER 2017 The Company received the “IFAPC Outstanding Listed Company Award 2017” from The Hong Kong Institute of Financial Analysts and Professional Commentators Limited (IFAPC) for the second consecutive year, affirming the Group’s dedication in maintaining high level of transparency and delivering sustainable business performance throughout the year. Majestic Engineering Company Limited was awarded the “Hong Kong Most Valuable Companies 2018 — Trophy of Excellence” by Mediazone Ltd. DECEMBER 2017 The Company and FSE Engineering Group received two awards under the “Volunteer Team” and “Enterprise” categories and Waihong and NCL received an award under the “Enterprise” category at “The 8th Hong Kong Outstanding Corporate Citizenship Awards Presentation Ceremony” for their outstanding achievements in implementing and promoting corporate social responsibility. The Company earned the “Gold Award for Volunteer Service (Organization)” from the Social Welfare Department in appreciation of its contribution of over 1,000 hours of volunteer services to the community in 2017. Annual Report 2017-2018 5 Major Events and Accolades JANUARY 2018 Waihong was awarded the Video Champion of “Airfield and Baggage Hall Safety Campaign” by the Hong Kong International Airport. MARCH 2018 The Company received the “Caring Company Logo”, FSE Engineering Group, Waihong and NCL received the “10 Years Plus Caring Company Logo” from the Hong Kong Council of Social Service in appreciation of their continuous endeavours and devotions in creating harmonious society. NCL received the “Friendly Employment Award” and “Outstanding Inclusive Team Award” of “Talent-Wise Employment Charter and Inclusive Organizations Recognition Scheme” which were jointly organised by the Labour and Welfare Bureau, the Hong Kong Joint Council for People with Disabilities and the Hong Kong Council of Social Service. 6 FSE Services Group Limited Major Events and Accolades MAY 2018 FSE Engineering Group has been accredited again as the “Manpower Developers 1st” for the 10th consecutive year by the Employees Retaining Board (ERB), in recognition of its outstanding achievements in the aspects of “Leading a learning Culture”, “Resources Planning”, “Training and Development System”, “Performance Management” and “Shouldering Corporate Social Responsibilities”. Waihong and NCL have also been accredited as the “Manpower Developers” in recognition of their outstanding accomplishments in manpower training and development. Young’s Engineering Company Limited was awarded the Merit Award of “Public Works — RMAA Works” by Development Bureau and Construction Industry Council at the 24th Considerate Contractors Site Award Scheme Award Presentation Ceremony on 29 May 2018. Annual Report 2017-2018 7 Chairman’s Statement To Our Shareholders: On behalf of the board of directors (the “Board”) of FSE Services Group Limited (the “Company”, together with our subsidiaries, the “Group”), I am pleased to present the annual report of the Company for the year ended 30 June 2018 (“FY2018” or the “Year”). ACQUISITION OF WAIHONG CLEANING AND NEW CHINA STEAM LAUNDRY The Company has been exploring opportunities to expand its service scope in order to add momentum to the growth of the Group.

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